Singing Pig

cbs7:

Pod:

CBS,

1st ... i don;t think you appreciate that it is only an option for a small % of tenants to move in with mum and dad or to get a council house.  i would say 90% of my tenants (no .... 99%!) would not consider that option except in the most dire circumstances.  in fact, a tenant of mine recently did this ... 2 kids and pregant mum plus boyfriend, moved back in with her mum and dad ... called me a week later to move back in!  no problem i say, exept the rent is now £595, not £520.  no problem she says!  it simply isn't an option for the majority of my family tenants to bunk up with another family / move into mum and dads / move country!

2nd ... you have a view that price will fall 40-50% in 3-5 years.  personally i feel that is not going to happen.  each person on this forum needs to think about how likely THEY feel it is, and then make their decisions based on that view.  clearly, if 40% falls are imminent, buying houses at anything less then 40% less than what they are worth NOW is madness.  however, what if prices fall only 10-15%, and you are able to buy at 25% BMV with +ve cashflow ... why not?  it depends on your view. 

3rd ... (gurus) every house has a value at a point in time, plus or minus (say) 5% after taking into account location/condition etc.  it is nonsense to suggest because the best offer is £20 that the prop is worth £20 ... utter tripe.  at the minute, there are lots of willing buyers, but not many able buyers. there is a world of difference between the two.

4th ... banks are rationing funds becasue they have little to lend.  not becasue they fear a house price crash.  (read that again!)

5 ... er, thats it>!

Pod

I'm not saying tenants will want to move back home/share, etc. It's just that they may not have any other option when they lose their job, can't take out another credit card. Many will do everything they can to avoid this, which includes looking for lower rents again putting downward pressure on rents. This is what happens in a severe recession - it isn't very nice - but people don't tighten their belts through choice but because they have to.

Remember we are only just starting into the coming recession and things do not look pretty. Of course I could be wrong and like the government says there is nothing to worry about, we have a strong economy, low inflation, low interest rates, low unemployment, blah blah blah

I don't know exactly what % house prices will fall by - those figures are my best guess at this point in time. The best thing is to review every 6 months and see where things are at that point. My guess is prices in 6 months time will be 5-10% lower than where they are now. 6 months after that I don't know, but if pushed to guess I would say another 5-10% lower again.

I didn't say there would be offers of £20, you are putting words into my mouth. I said that actual sales whether below or above the current market value generally end up becoming the new market value after a period of time. How else did house prices move upwards? Simple because prices were paid over asking prices during the boom years, so gradually these paid prices became the new market value, until they were bid up again over that price and these even higher prices became the market value, and so on. Exactly the same applies on the way down. How do you define market value otherwise? Is is a price which only moves upwards and can't fall?

Yes I said banks don't have many funds, and they won't do for a very long time, because there are so many losses they still haven't disclosed. But the fact that house prices are falling will make them even more reticent to lend. How much money would you lend to someone who wanted to go out and buy something that (without taking an extreme view) is likely to be worth 10% less in a year's time?

CBS,

in a recession, of course rents will be challenged by tenants, as all other day to day costs are ... but whether that actually results in lower rents will depend on local supply and demand.  It really depends on local conditions … I am seeing upward pressure on rents.  It is a very hard decision for most families to move house to save themselves £50-100 per month … and most mums would veto the move.  It is a different story with singles and young couples ... they have that flexibility, that families don’t have.  This is another example of sweeping generalisations being made … there are different types of tenants, who have different needs and constraints.  

i have reviewed countless tenancy applications and credit checks & have found (in my chosen market of small family houses) that most tenants massively prioritise the quality of the home they live in from a financial perspective.  by that, i mean that they seem to want to pay that bit extra for better quality, even if they can't really afford it.  When money is tight, many will still pay the extra to live somewhere nice … in the same way that food is usually prioritised, and as we are seeing at the moment, people are very reluctant to give up their summer holiday.

The other massive factor that will come into play is the impact of the credit crunch on landlords.  Many will need to inject large amounts of capital into their investments over the next 1-2 years, and few have the income or capital to do that.  This will result in a reduced supply of rental props … as although SVR rates are often lower than current BTL deals (or, at least, it’s not worth remortgaging after fees etc) rental yields are insufficient to generate a rental profit for many props.  Eventually, cash is needed to reduce the mortgage balance, or the rental yield needs to rise.  If neither happens, many landlords will have to sell (the extent to which this happens will have an impact on house prices) … many amateurs have little financial room to manoeuvre & will bail out soon.

This means that the golden decade for tenants is about to end.  As the rental sector shrinks, rents will rise.  Tenants will feel the full force of the credit crunch … and will suffer as mortgage-holders are suffering now.  A good example is my brother … landlord tried to increase rent to 700 (from 600) … he refused.  Landlord issues s21, brother leaves.  Then, finds that the world is fast moving on & rents are rising fast …. His 600 a month now buys him a 2-bed, whereas once he had a 3-bed top-end house.  

the long-term equilibrium is that landlords need to be adequately compensated for providing property for rent … the good times for tenants are coming to an end!

Pod:

cbs7:

Pod:

CBS,

1st ... i don;t think you appreciate that it is only an option for a small % of tenants to move in with mum and dad or to get a council house.  i would say 90% of my tenants (no .... 99%!) would not consider that option except in the most dire circumstances.  in fact, a tenant of mine recently did this ... 2 kids and pregant mum plus boyfriend, moved back in with her mum and dad ... called me a week later to move back in!  no problem i say, exept the rent is now £595, not £520.  no problem she says!  it simply isn't an option for the majority of my family tenants to bunk up with another family / move into mum and dads / move country!

2nd ... you have a view that price will fall 40-50% in 3-5 years.  personally i feel that is not going to happen.  each person on this forum needs to think about how likely THEY feel it is, and then make their decisions based on that view.  clearly, if 40% falls are imminent, buying houses at anything less then 40% less than what they are worth NOW is madness.  however, what if prices fall only 10-15%, and you are able to buy at 25% BMV with +ve cashflow ... why not?  it depends on your view. 

3rd ... (gurus) every house has a value at a point in time, plus or minus (say) 5% after taking into account location/condition etc.  it is nonsense to suggest because the best offer is £20 that the prop is worth £20 ... utter tripe.  at the minute, there are lots of willing buyers, but not many able buyers. there is a world of difference between the two.

4th ... banks are rationing funds becasue they have little to lend.  not becasue they fear a house price crash.  (read that again!)

5 ... er, thats it>!

Pod

I'm not saying tenants will want to move back home/share, etc. It's just that they may not have any other option when they lose their job, can't take out another credit card. Many will do everything they can to avoid this, which includes looking for lower rents again putting downward pressure on rents. This is what happens in a severe recession - it isn't very nice - but people don't tighten their belts through choice but because they have to.

Remember we are only just starting into the coming recession and things do not look pretty. Of course I could be wrong and like the government says there is nothing to worry about, we have a strong economy, low inflation, low interest rates, low unemployment, blah blah blah

I don't know exactly what % house prices will fall by - those figures are my best guess at this point in time. The best thing is to review every 6 months and see where things are at that point. My guess is prices in 6 months time will be 5-10% lower than where they are now. 6 months after that I don't know, but if pushed to guess I would say another 5-10% lower again.

I didn't say there would be offers of £20, you are putting words into my mouth. I said that actual sales whether below or above the current market value generally end up becoming the new market value after a period of time. How else did house prices move upwards? Simple because prices were paid over asking prices during the boom years, so gradually these paid prices became the new market value, until they were bid up again over that price and these even higher prices became the market value, and so on. Exactly the same applies on the way down. How do you define market value otherwise? Is is a price which only moves upwards and can't fall?

Yes I said banks don't have many funds, and they won't do for a very long time, because there are so many losses they still haven't disclosed. But the fact that house prices are falling will make them even more reticent to lend. How much money would you lend to someone who wanted to go out and buy something that (without taking an extreme view) is likely to be worth 10% less in a year's time?

CBS,

in a recession, of course rents will be challenged by tenants, as all other day to day costs are ... but whether that actually results in lower rents will depend on local supply and demand.  It really depends on local conditions … I am seeing upward pressure on rents.  It is a very hard decision for most families to move house to save themselves £50-100 per month … and most mums would veto the move.  It is a different story with singles and young couples ... they have that flexibility, that families don’t have.  This is another example of sweeping generalisations being made … there are different types of tenants, who have different needs and constraints.  

i have reviewed countless tenancy applications and credit checks & have found (in my chosen market of small family houses) that most tenants massively prioritise the quality of the home they live in from a financial perspective.  by that, i mean that they seem to want to pay that bit extra for better quality, even if they can't really afford it.  When money is tight, many will still pay the extra to live somewhere nice … in the same way that food is usually prioritised, and as we are seeing at the moment, people are very reluctant to give up their summer holiday.

The other massive factor that will come into play is the impact of the credit crunch on landlords.  Many will need to inject large amounts of capital into their investments over the next 1-2 years, and few have the income or capital to do that.  This will result in a reduced supply of rental props … as although SVR rates are often lower than current BTL deals (or, at least, it’s not worth remortgaging after fees etc) rental yields are insufficient to generate a rental profit for many props.  Eventually, cash is needed to reduce the mortgage balance, or the rental yield needs to rise.  If neither happens, many landlords will have to sell (the extent to which this happens will have an impact on house prices) … many amateurs have little financial room to manoeuvre & will bail out soon.

This means that the golden decade for tenants is about to end.  As the rental sector shrinks, rents will rise.  Tenants will feel the full force of the credit crunch … and will suffer as mortgage-holders are suffering now.  A good example is my brother … landlord tried to increase rent to 700 (from 600) … he refused.  Landlord issues s21, brother leaves.  Then, finds that the world is fast moving on & rents are rising fast …. His 600 a month now buys him a 2-bed, whereas once he had a 3-bed top-end house.  

the long-term equilibrium is that landlords need to be adequately compensated for providing property for rent … the good times for tenants are coming to an end!

 

Those are all very good points and I'm sure many landlords will successfully be able to increase rents if they are providing better quality housing - that makes perfect sense. However as you point out a major crunch is coming for landlords who don't have any available cash to support their negative cashflows. This doesn't mean that all landlords will be successful in increasing rents, only those ones who are providing a better product.

What happens to the landlords who have their houses repossessed I don't know, but I doubt the houses will be left empty permanently. If they are sold at distressed prices (e.g. 30-40% below current values) because of a huge supply coming online say at auction, then many tenants looking to buy will step in and take these, so tenant demand will fall. One way or another the housing stock taken offline by forced repossessions will be recycled and become available again, so I wouldn't expect the rental sector to contract beyond a short-term effect of the initial wave of repossessions.

Pete Franklin -

speedything: I don't think I suggested that monetary inflation would be 100% over the next few years any more than our friend CBR7 suggested that house prices would drop 100% over this period. but anyone who really believes that inflation is running at 3-4% really needs to get out more. like to the supermarket. or the petrol station.#

Err.. yes that is what you said. CBS7 said "50% drop" which if I am correct inflation would have to be at 100% to match...

Inflation at 50% = what was valued at £10,000 is now worth £15,000. The orginal purchasing power of  £1 is now 66p (the purchasing power drops by 33% with 50% inflation)

Inflation at 100% =what was valued at £10,000 is now worth £20,000 and the pound has now halved in value (£1 = 50p and a purchasing power drop of 50% with 100% inlation)

It may seem a little counter-intuitive but these are important calculations for any serious investor to be able to do. The number of times I see these fairly simple calculations cause confusion (especially amongst 'professionals') is quite frankly horrendous. How on earth are you meant to know where you stand when you can't work out the changing value of your assets?!

And no, I don't for one second think that inflation is running at 3-4%. I just don't think it is running at 33% and will continue to do so for 3 years!

Edited to rephrase example as was a little abstractly described.

"Those are all very good points and I'm sure many landlords will successfully be able to increase rents if they are providing better quality housing - that makes perfect sense. However as you point out a major crunch is coming for landlords who don't have any available cash to support their negative cashflows. This doesn't mean that all landlords will be successful in increasing rents, only those ones who are providing a better product.

What happens to the landlords who have their houses repossessed I don't know, but I doubt the houses will be left empty permanently. If they are sold at distressed prices (e.g. 30-40% below current values) because of a huge supply coming online say at auction, then many tenants looking to buy will step in and take these, so tenant demand will fall. One way or another the housing stock taken offline by forced repossessions will be recycled and become available again, so I wouldn't expect the rental sector to contract beyond a short-term effect of the initial wave of repossessions."

i don't think repo's are going to be the end-point for most amateur landlords ... i expect most will simply reach a point (6 months on the SVR of 7% with rental yield of 5%?) where they decide enough is enough.  don;t forget that while many amateurs have made poor investment decisions, most are middle-aged with substantial PPR equity and have good incomes ... they will not allow things to reach repo stage (there will be a few who do, but a very small %). 

also, it amuses me to hear about tenants that are going to snap up props as they fall in price .... not many of my tenants could do that even with 20-30% falls!  with increasing deposits and tightening lending criteria i wouldn;t expect a lot of tenants to be in a position to buy.  again, it depends on tenant type ... families vs. singles & couples.  contrary to what some bears think, the vast, vast majority of tenants are tenants because they have no choice ... no deposit, insufficient income to qualify for anywhere near the mortgage needed, and house prices too high. 

as prices fall and lenders squeeze landlords, rental supply will fall, across the board.  the best rental props will command premium rates ... as they should.  we are now moving to a state where landlords that can afford to reduce their borrowings & spend money on their props, will reap the rewards as the skint newbies continue paying top-whack rates on 85% LTV stock with poor yields ...... i really sell this aspect to my tenants ... do yuo want to rent from an experienced local landlord with many props & good cashflow or do you want to rent from an inexperineced newbie who is teetering on the financial edge?!

Pod:

"Those are all very good points and I'm sure many landlords will successfully be able to increase rents if they are providing better quality housing - that makes perfect sense. However as you point out a major crunch is coming for landlords who don't have any available cash to support their negative cashflows. This doesn't mean that all landlords will be successful in increasing rents, only those ones who are providing a better product.

What happens to the landlords who have their houses repossessed I don't know, but I doubt the houses will be left empty permanently. If they are sold at distressed prices (e.g. 30-40% below current values) because of a huge supply coming online say at auction, then many tenants looking to buy will step in and take these, so tenant demand will fall. One way or another the housing stock taken offline by forced repossessions will be recycled and become available again, so I wouldn't expect the rental sector to contract beyond a short-term effect of the initial wave of repossessions."

i don't think repo's are going to be the end-point for most amateur landlords ... i expect most will simply reach a point (6 months on the SVR of 7% with rental yield of 5%?) where they decide enough is enough.  don;t forget that while many amateurs have made poor investment decisions, most are middle-aged with substantial PPR equity and have good incomes ... they will not allow things to reach repo stage (there will be a few who do, but a very small %). 

also, it amuses me to hear about tenants that are going to snap up props as they fall in price .... not many of my tenants could do that even with 20-30% falls!  with increasing deposits and tightening lending criteria i wouldn;t expect a lot of tenants to be in a position to buy.  again, it depends on tenant type ... families vs. singles & couples.  contrary to what some bears think, the vast, vast majority of tenants are tenants because they have no choice ... no deposit, insufficient income to qualify for anywhere near the mortgage needed, and house prices too high. 

as prices fall and lenders squeeze landlords, rental supply will fall, across the board.  the best rental props will command premium rates ... as they should.  we are now moving to a state where landlords that can afford to reduce their borrowings & spend money on their props, will reap the rewards as the skint newbies continue paying top-whack rates on 85% LTV stock with poor yields ...... i really sell this aspect to my tenants ... do yuo want to rent from an experienced local landlord with many props & good cashflow or do you want to rent from an inexperineced newbie who is teetering on the financial edge?!

 

of course many tenants won't be able to buy and many will be suffering from the recession, but like I say it won't be a matter of choice for many. Economic pressure will put downward pressure on rents, not upwards (as a general rule). Good landlords with quality properties will of course get better rents, just like they would in any market.

The outcomes will become apparent as time progress. My big assumption in all of this is that wages (generally) will come under pressure and will NOT be able to keep up with price inflation in essential goods. This puts pressure on everything, number one on anything that isn't 100% essential will be cut out, secondly anything that is essential consumers will hunt out cheaper prices (see how Aldi, LIDL and Iceland are gaining greater market share over the likes of Tesco). They will also be forced to look for cheaper rents whether they like it or not.

Now, if I am wrong about wage inflation, then yes it's likely that rents could rise along with wage increases, but I don't expect it. I personally think the UK is very poorly prepared to cope with recession, with a huge over-reliance in the financial sector and other service industries, and an overall near-zero savings rate. Unemployment is about to sky-rocket but don't expect it to show up in official figures, because these will be massaged even more than they ate currently. Pound sterling will weaken further causing even greater inflation in the price of imported goods.

But I fully understand that most completely disagree with my viewpoint and I understand why, I just don't agree.

"of course many tenants won't be able to buy and many will be suffering from the recession, but like I say it won't be a matter of choice for many. Economic pressure will put downward pressure on rents, not upwards (as a general rule). Good landlords with quality properties will of course get better rents, just like they would in any market.

The outcomes will become apparent as time progress. My big assumption in all of this is that wages (generally) will come under pressure and will NOT be able to keep up with price inflation in essential goods. This puts pressure on everything, number one on anything that isn't 100% essential will be cut out, secondly anything that is essential consumers will hunt out cheaper prices (see how Aldi, LIDL and Iceland are gaining greater market share over the likes of Tesco). They will also be forced to look for cheaper rents whether they like it or not.

Now, if I am wrong about wage inflation, then yes it's likely that rents could rise along with wage increases, but I don't expect it. I personally think the UK is very poorly prepared to cope with recession, with a huge over-reliance in the financial sector and other service industries, and an overall near-zero savings rate. Unemployment is about to sky-rocket but don't expect it to show up in official figures, because these will be massaged even more than they ate currently. Pound sterling will weaken further causing even greater inflation in the price of imported goods.

But I fully understand that most completely disagree with my viewpoint and I understand why, I just don't agree"

i don;t completely disagree with you, but i do think you have a slightly one-dimensional view of how rents operate .... you are not factoring in the unique nature of providing homes to families, the nature of l;ocal supply and demand, or the massive impact that the credit crunch is having, and will continue to have, on the supply of rental property.  the next few years will not be good ones for many tenants as landlords are squeezed & maintenance is neglected, as rental props are sold & the supply reduces, as more landlords increase rents to offset their costs.

since BTL opened up in 1996, tenants have had a bonanza ... massive increase in supply of all props, and in particular good props.  rents have reduced as supply has increased.  plenty of choice plus lower rents = happy times for tenants.  those times are now ending. 

many tenants are not in a position to reduce their spend on rent ... they need a 3-bed house (say), and cannot comtemplate a 2-bed.  they have a choice to down-grade to a lower standard or size property, but few will choose to.  this is my actual experience so far ... not my "thoughts" or "expectations".  it is an almost universal approach, akin to people stretching themselves to buy the best/most expensive prop they can.

"the buy to let boom is over"? ... it most certainly is.  but, for pro landlords, this is a welcome relief from the amateurs who are able to get cheap high-LTV finance to buy props that don;t stack up ,,, we are now moving back to a position where there has to be a profit in the prop in order for a landlord to provide it ... as it should be.  sadly, this will mean that there are a lot of tenants who are living on borrowed time.  my next door neighbour is a prime example ... house bought for £165k rented at £600pcm .... the guy (who I know well) is facing a £30k capital injection to reduce his mortgage down to a level that will fit the new ledning criteria ... he doesn't have £30k.  he will pop on to the SVR of 7.25% & be looking at about £280 per month loss after insurance & gas cert.  how long his missus will allow that is anyone's guess!  that prop should rent at £900-1000pcm to justify itself ... otherwise he will have about 55k tied up in a house that makes zero rental profit .... i wouldn;t want to be his tenant ..... !

Pod:

"of course many tenants won't be able to buy and many will be suffering from the recession, but like I say it won't be a matter of choice for many. Economic pressure will put downward pressure on rents, not upwards (as a general rule). Good landlords with quality properties will of course get better rents, just like they would in any market.

The outcomes will become apparent as time progress. My big assumption in all of this is that wages (generally) will come under pressure and will NOT be able to keep up with price inflation in essential goods. This puts pressure on everything, number one on anything that isn't 100% essential will be cut out, secondly anything that is essential consumers will hunt out cheaper prices (see how Aldi, LIDL and Iceland are gaining greater market share over the likes of Tesco). They will also be forced to look for cheaper rents whether they like it or not.

Now, if I am wrong about wage inflation, then yes it's likely that rents could rise along with wage increases, but I don't expect it. I personally think the UK is very poorly prepared to cope with recession, with a huge over-reliance in the financial sector and other service industries, and an overall near-zero savings rate. Unemployment is about to sky-rocket but don't expect it to show up in official figures, because these will be massaged even more than they ate currently. Pound sterling will weaken further causing even greater inflation in the price of imported goods.

But I fully understand that most completely disagree with my viewpoint and I understand why, I just don't agree"

i don;t completely disagree with you, but i do think you have a slightly one-dimensional view of how rents operate .... you are not factoring in the unique nature of providing homes to families, the nature of l;ocal supply and demand, or the massive impact that the credit crunch is having, and will continue to have, on the supply of rental property.  the next few years will not be good ones for many tenants as landlords are squeezed & maintenance is neglected, as rental props are sold & the supply reduces, as more landlords increase rents to offset their costs.

since BTL opened up in 1996, tenants have had a bonanza ... massive increase in supply of all props, and in particular good props.  rents have reduced as supply has increased.  plenty of choice plus lower rents = happy times for tenants.  those times are now ending. 

many tenants are not in a position to reduce their spend on rent ... they need a 3-bed house (say), and cannot comtemplate a 2-bed.  they have a choice to down-grade to a lower standard or size property, but few will choose to.  this is my actual experience so far ... not my "thoughts" or "expectations".  it is an almost universal approach, akin to people stretching themselves to buy the best/most expensive prop they can.

"the buy to let boom is over"? ... it most certainly is.  but, for pro landlords, this is a welcome relief from the amateurs who are able to get cheap high-LTV finance to buy props that don;t stack up ,,, we are now moving back to a position where there has to be a profit in the prop in order for a landlord to provide it ... as it should be.  sadly, this will mean that there are a lot of tenants who are living on borrowed time.  my next door neighbour is a prime example ... house bought for £165k rented at £600pcm .... the guy (who I know well) is facing a £30k capital injection to reduce his mortgage down to a level that will fit the new ledning criteria ... he doesn't have £30k.  he will pop on to the SVR of 7.25% & be looking at about £280 per month loss after insurance & gas cert.  how long his missus will allow that is anyone's guess!  that prop should rent at £900-1000pcm to justify itself ... otherwise he will have about 55k tied up in a house that makes zero rental profit .... i wouldn;t want to be his tenant ..... !

I also don't completely disagree either and I think times are going to get really tough for tenants and landlords alike. Professional landlords like you Pod will of course survive with only minor problems, but you aren't like the majority of the population because you take into account all costs, cashflow, potential interest rate rises, etc. The majority unfortunately are completely unprepared for any of these things, and it's something evidenced by the near-zero savings rate in the UK and huge levels of personal debt.

I also agree that eventually property will return to price levels where landlords can make a good profit after taking into account all costs, but yields will have be several points above general mortgage rates which if we assume are around 7% at the moment, rental yields really need to go to 10%+. Now of course I'm sure you can come up with plenty of examples where you are achieving these yields, but by and large these yields are not anywhere near achievable in most of the UK.

The case you point is a very interesting one and how it resolves itself will be a good example of what might happen. Yes, your neighbour needs to get the rent up so that he doesn't keep losing money every month, but you must surely agree that as a rule he would only be successfully in getting the rent up if market rents are indeed around 900-1000 for that type of house. Will he, won't he... the only answer to this will be provided by the market. If the rents can't be pushed up to that level, then the only way the house can be profitable to a landlord is if the market value falls to a price where letting the property does become profitable again. In this case it would be a theoretical 30-35% drop if the rent remained at 600. Of course it's not an either-or situation, something in between could happen, e.g. the max rent might go to 700. Now I don't know the area, your neighbour, the house, etc, so I am speaking in general terms.

the point is that SOME tenants and SOME landlords will suffer ... NOT all.  similarly "rents" will not rise or fall as one .... unprofitable BTLs will be dumped into the Owner-Occupier market and the supply of rental props will reduce, rents will rise.  we are at an historic peak in the supply of rental property ... this will reduce. 

you are showing your naivety (if i may say?) if you think that there are not, all over the UK, profitable rental properties ... they are all around you.  in the case above, the rental level is irrelevant to the value of the house ... all that will happen is that the prop will be sold into the Owner-Occupier market, and that will be 1 fewer family home available for rent.  this will repeat ... and repeat ... and the rental for the remaining houses will increase to (say) £650 ..... and so on.  nobody is going to come into the market now, slap £55k down and accept a neutral cashflow ... the tenant is on borrowed time. over time, yields will increase back up to profitable levels ... the natural equilibrium.  the proportion of BTLs compared to Owner Occupier homes is such that the relatively few BTLs that get dumped into the OO market will not have a massive impact on prices ... it is rents that will need to rise to justify a landlord purchasing the prop.  actually, i have 1 at the moment that I'm splitting into 2 flats ... £195k, rent £700 .... a non-starter as a family BTL ... but as i have explained a tenant of mine, if he wants to pay me £1000pcm i happy to rent this big house to him ... he (i.e. the tenant market) can't afford that ... hence me (i.e. the landlord market) won;t provide it. 

sensible landlords will continue to buy suitable BTLs, and rent them profitably.  BTL novices will need to give up with some serious wedge to put into their "investments" (loose term!) or suffer years of hefty rental losses ......... i know which one i am predicting!