Wednesday, 1 August 2007

The property crash is coming!

The Property Crash Is Coming – everybody run! Like headless chickens, the buy to let owners are retreating, and the joy (okay then schadenfreude) is unconfined. I first noticed this phenomenon when my own landlord paid lip service to wanting to keep me on as a tenant.

Prospective tenants have cautiously bargained down local rents. One landlord placed a notice on the front of my building, offering his vacant flat. The initial rent required was comically optimistic, but gradually fell to a reasonable level. Eventually a free parking space was included. Nobody wants to live in one bedroom new build dovecots. As investment properties, they are the one property option failing to swell in worth, resulting in negative equity, making this, for the first time, a tenants’ market.

Owners will be grateful for good tenants (well any tenant) willing to live in the pigeon holes they’ve chosen as their investment. Instead of tedious dinner conversations of how much their property has increased, it will be the shame of negative equity, and they’ll have the gall to feel sorry for themselves.

Oh, it’s like knowing that Wall Street is going to crash, and selling all your stock beforehand. Buy to let owners are nervous, but might learn to treat tenants with a little more respect, and perhaps become more reasonable about deposits, decorating and repairs.

Perhaps building quality will improve. You’d like to think that more houses, and two (or even three!) bedroom flats will be commissioned. Future developments could feature larger living areas, and (am I being crazy here?) might include some space gobbling creature comforts, like separate kitchens, and cupboards.

One thing is for sure: rents won’t spiral downwards at the same rate they increased. Landlords need to pay the mortgage, and that’s the problem of negative equity; owners pay a mortgage on property worth less than they gave for it, leaving rental as a desirable solution. But with a glut of one bed flats, landlords might become less pernickety and capricious.

The main drawback for tenants is insecurity: renters must be aware that in cases of insolvency, their home could be sold underneath them. They might be able to remain as sitting tenants, but this is the economic climate where property magnates swoop and establish a portfolio of property. Wouldn’t it be nice if ethical social housing trusts intervened, and bought up some housing while the market is favourable?

I know my gloating is unseemly, but over the years, I’ve been provoked. Even if smug property owners stop being so self righteousness, their whining about negative equity will replace the boasting about the rise in value. I’m sure it won’t be good for landlords owning flats with negative equity, but they’ll have the likes of me to tide them over and pay their mortgage. They might even appreciate landless peasant scum such as myself.

Cities like Brighton and London enjoyed a huge property boom. The inevitable bust gave tenants a brief window of security. But when the boom came round again, many tenants returned home to find a ‘For Sale’ sign in the garden. Happy days were here again, and they were out.

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