UK: BTL implosion

[Green_Bear]

LONDON (Reuters) - A growing number of private tenants are falling behind on their rent, potentially damaging the ability of landlords to pay creditors, insurance group AXA said on Saturday.
AXA said a survey conducted by YouGov on its behalf showed buy-to-let landlords hoping to hike rents to offset higher mortgage costs could be in for a shock as the economic downturn leaves tenants cash-strapped.
It said 7 percent of private tenants had slipped into arrears in the last three months – just over half the number that had done so in the last 12 months.

More tenants said falling behind on rent
uk.news.yahoo.com/rtrs/20080808/ … 6b408.html

The number of buy-to-let mortgages has plummeted by 93 per cent in the past year leaving tens of thousands of novice landlords struggling to find affordable deals.
Figures revealed to The Daily Telegraph show there were 4,384 mortgages available to landlords 12 months ago compared with just 307 deals today.
Experts said the sharp fall in the number of buy-to-let loans available will hit the estimated 110,000 novice landlords with only one buy-to-let mortgage because they do not have a portfolio of properties to help cushion the blow of a slowing market. Landlords are also having to cope with higher interest rates on those mortgage deals that are still available.
The research, by price comparison website Moneysupermarket.com, revealed that buy-to-let mortgage rates have jumped 0.63 per cent to 7.46 per cent during the past year for landlords looking to borrow 85 per cent of the value of their property.

Buy-to-let mortgages plummet 93pc in a year

By Myra Butterworth, Personal Finance Correspondent
telegraph.co.uk/money/main.j … amp109.xml

There can be no doubt that the buy to let market is a challenging environment particularly for the amateur landlord relying on rental income in order to meet mortgage payments. This type of landlord often has several buy to let properties and may be receiving income from some of the properties but not be able to cover empty periods in others. The credit crunch has stretched landlords further especially those on fixed rate mortgages that are expiring where attractive alternative products are not available.

Managing buy to let arrears

drydenslaw.com/PDF_library/l … ne2008.pdf [adobe acrobat required]

Too many people jumped in feet first and did not do due diligent research, while the initial consequences for tenants are favourable (lower rents) the long term consequences are less supply and higher rents as the under capitalised speculators get flushed out.

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From Davys this morning

Supply of UK rental accommodation outstripped rental demand in Q2

The latest data from RICS show that the supply of rental accommodation rose at its
fastest pace on record in the three months to July. The growth outstripped
demand from tenants, which is sure to pose a test to the counter-cyclical theory
posed by supporters of the buy-to-let (BTL) industry.
Supply of rental accommodation grew as homeowners were unable to sell their
properties and let them out instead. This outweighed the effect of would-be
home-owners who are unable to secure mortgage finance and seek rental
accommodation instead. Rental yields have come under pressure in London and
the south-east, with sharp price declines of almost 10% recorded already in some
areas.
IPM’s interim results are out on August 27th, which should provide some useful
insights into how the Irish players are faring in the BTL mortgage market.