Brokers have accused those linking a mortgage network’s falling share price to a wider malaise in the buy-to-let market of “scaremongering”, saying demand from clients remains strong.
Last week news directors and other investors in Aim listed Mortgage Advice Bureau would sell around 15 per cent of the company’s issued share capital to institutional investors sent its stock tumbling.
It fell 8.6 per cent to £3.70 per share just after markets opened on 27 April and by 11am the price was down 12 per cent at £3.56, before recovering slightly to £3.60 as trading closed.
Colin Cloy, director of Horsham-based Pendulum Financial Management, suggested the share sale pointed to the top of the mortgage market and buy-to-let investors with large outstanding loans should sell up as house prices would soon start to fall significantly.
“Increasing costs from reducing tax relief on mortgage interest, as well as the likelihood of increased mortgage rates next year, mean landlords will start to lose money on each mortgaged property,” he said.
“Investors have been warned for a number of years that the housing market was reaching a peak,” he continued, adding that first-time buyers should therefore make very low offers to landlords who wish to sell now.
MAB finance director Lucy Tilley moved to quell fears, saying the price moves followed “quite a volatile” few weeks for the stock, and represented a return to its original placing price of around £3.60.
The share sale was merely due to directors having the first opportunity to take some profits as the firm reached the end of its first lock-out since its listing in November 2014, she added.
Jane King, a mortgage consultant at Ash-Ridge Private Finance, called Mr Cloy’s comments “scaremongering” and said she had not seen any large scale selling by her buy-to-let clients.
She said: “Most of my clients are in this market for the long term and are looking for capital growth rather than income, so the tax implications do not really affect them.
“They certainly are not too concerned by any short term dip in prices and in my patch - London and the south east - I am still being asked to advise on buy-to-let mortgages.”
Andrew Montlake, director at Coreco Mortgage Brokers, said the MAB share sale was “a sensible group decision to take some hard earned money off the table”, adding historically the shares “have fared very well” and it shows there is a good demand to obtain the figures quoted.
“An institutional sale is always at a discount and it is not unusual for shares to drop back a bit, although they are still maintaining levels they were at not long ago.”
He said he expected to see a strong end to the year as “many landlords we have spoken to have no intention of suddenly selling up”.”
The most recent house price data certainly suggests a dip in the property market in recent months, with Nationwide stating the annual rate of house price growth moderated in April to 4.9 per cent, from 5.7 per cent in March, while the Land Registry showed prices were down 0.5 per cent from February to March.
Most commentators have been fixated on the supposed surge in buy-to-let deals being done before the government introduced an extra 3 per cent stamp duty charge on buying a second home from 1 April.
However, Equifax Touchstone’s analysis, which covers 92 per cent of the intermediated lending market, revealed a buy-to-let sales slump of 26.2 per cent (-£1.04bn) from February to March.
While it recorded residential sales up 1.4 per cent on February to £12.95bn, when combined with buy-to-let, advised sales declined by 5.1 per cent (-£855.7m) on the previous month.
The firm’s relationship manager Iain Hill said the data indicates borrowers took the advice of their lenders and initiated transactions in good time to avoid an eleventh-hour panic.
peter.walker@ft.com
