If you are looking for a sign that the buy-to-let market is in trouble, look no further than the state of buy-to-let promotion company Inside Track. The Guardian reports it is about to suspend its educational seminars and “cut 40 jobs”.
And for the background as to why the biggest cheerleaders of the property bubble are finally being forced to scale back, look to the latest gloomy figures from the Royal Institution of Chartered Surveyors: 64.1% more surveyors reported falls than rises in house prices in February. That makes the current property market nearly as bad as that of June 1990, when 64.5% reported price drops.
The Council of Mortgage Lenders has added to the gloom, with figures showing how the mortgage market is shrinking as the credit crunch takes hold. New loans for home buyers fell to 50,300 in January, the lowest level for nine years.
These horrible numbers seem to have cleared out the last of the optimists. “It is not clear yet whether we are headed for a full-blown property crash, or just a prolonged slowdown, but it is clear the boom is over,” says Jo Thornhill in The Mail on Sunday. Capital gains are a thing of the past for everyone in property and rising mortgage rates are hurting the cash flows of all those hoping to pay for their futures by letting out their property investments. If we owned any buy-to-lets, we’d sell them.
But The Observer has other ideas: in their property section – sponsored by property developer Crosby Homes – they suggest you turn it into a holiday let instead. “In the right location, such residences can command rents twice as high as conventional long-term rental agreements,” says Andrew Moody, who claims that city-centre apartments are seeing rising interest from tourists put off hotels by the high prices.
It is hard to be convinced on this one. Think of the cost of providing items, from shampoo to television – to say nothing of cleaning. But by far the biggest problem is keeping the property tenanted. Another bad summer like the one Britain saw last year and you could find yourself seriously out of pocket. “With holiday letting, it’s a higher return for a higher risk. You are very dependent on the tourist market and you have to carefully monitor your void periods,” says Lucian Cook of Savills. So with house prices falling, why cling to these straws? A better idea would be to sell and get out of a market that – whatever Alistair Darling says about stability – is heading for a nasty crash.