By "real time" on FT forum.
01 Jan '05 19:00
prudence
i agree on certain points but i firmly believe that the confidence has evaporated from the market, as it did in the early 90s, house builders and estate agents are once again in denial, which long term creates its own momentum leading to panic.
The corporate groups of estate agents by mid Feb will start to instruct branch offices to value to the market, building society surveyors are already as early as november starting to de-value this will intensify (they rem the late 80s boom when they were sued at a later stage for overvaluing), so all in all the market at the moment is like an oil tanker still going forward allthough reverse thrust has been deployed!!
Let's have an update Surveyor.
Full Version: Downvaluing......
QUOTE(Buffer Bear @ Jan 1 2005, 11:41 PM)
By "real time" on FT forum.
01 Jan '05 19:00
prudence
i agree on certain points but i firmly believe that the confidence has evaporated from the market, as it did in the early 90s, house builders and estate agents are once again in denial, which long term creates its own momentum leading to panic.
The corporate groups of estate agents by mid Feb will start to instruct branch offices to value to the market, building society surveyors are already as early as november starting to de-value this will intensify (they rem the late 80s boom when they were sued at a later stage for overvaluing), so all in all the market at the moment is like an oil tanker still going forward allthough reverse thrust has been deployed!!
Let's have an update Surveyor.
01 Jan '05 19:00
prudence
i agree on certain points but i firmly believe that the confidence has evaporated from the market, as it did in the early 90s, house builders and estate agents are once again in denial, which long term creates its own momentum leading to panic.
The corporate groups of estate agents by mid Feb will start to instruct branch offices to value to the market, building society surveyors are already as early as november starting to de-value this will intensify (they rem the late 80s boom when they were sued at a later stage for overvaluing), so all in all the market at the moment is like an oil tanker still going forward allthough reverse thrust has been deployed!!
Let's have an update Surveyor.
Greed turns to fear very quickly!!
QUOTE
Greed turns to fear very quickly
It certainly does which is why all those FTB'ers pushed up the prices over the past few years.
Panicking they were missing out they put in inflated prices to secure the property.
Thank god their money supply has now dried up and only those with real collateral can now play the market keeping it both stable and affordable.
Thank god their money supply has now dried up and only those with real collateral can now play the market keeping it both stable and affordable.
Stable?
Affordable?
Are you still under the influence?
Sober up mand smell the coffee.
The market is in free fall.
The market has reached an ridiculous over valued level which has precipitated that free fall.
The sensible collateral of FTBs and STRs will remain earning interest whilst the capital required to buy in reduces.
Our only problem is when to call the bottom, 25% (minimum IMO) 40% (thats the point at which i go back) or 50% (crap lost out on another 10% but what the hell, loads to choose from and as the bulls say, its somewhere to live not an investment).
At 40% it will be as cheap to buy as rent which sure as hell aint the case now!
I expect to be house hunting in Feb/March 2006 having spent an enjoyable 12 months watching the financial nightmare about to unfold.
Stable?
Affordable?
Are you still under the influence?
Sober up mand smell the coffee.
The market is in free fall.
The market has reached an ridiculous over valued level which has precipitated that free fall.
The sensible collateral of FTBs and STRs will remain earning interest whilst the capital required to buy in reduces.
Our only problem is when to call the bottom, 25% (minimum IMO) 40% (thats the point at which i go back) or 50% (crap lost out on another 10% but what the hell, loads to choose from and as the bulls say, its somewhere to live not an investment).
At 40% it will be as cheap to buy as rent which sure as hell aint the case now!
I expect to be house hunting in Feb/March 2006 having spent an enjoyable 12 months watching the financial nightmare about to unfold.
Affordable! 
To paraphrase Douglas Adams, this must be a new definition of the word 'affordable' that I was not previously aware of.
To paraphrase Douglas Adams, this must be a new definition of the word 'affordable' that I was not previously aware of.
QUOTE
Our only problem is when to call the bottom, 25% (minimum IMO) 40% (thats the point at which i go back) or 50% (crap lost out on another 10% but what the hell, loads to choose from and as the bulls say, its somewhere to live not an investment).
At 40% it will be as cheap to buy as rent which sure as hell aint the case now!
I expect to be house hunting in Feb/March 2006 having spent an enjoyable 12 months watching the financial nightmare about to unfold.
At 40% it will be as cheap to buy as rent which sure as hell aint the case now!
I expect to be house hunting in Feb/March 2006 having spent an enjoyable 12 months watching the financial nightmare about to unfold.
My first point is that if houses became cheaper to buy than renting then they would all be bought up by BTL Landlords who have the collateral to do just that.
Those that are not already BTL Landlords would be sure to jump on the bandwagon I know I certainly would.
If I could purchase properties at 40% off todays prices I would buy as many as possible and setup a huge property rental empire. Rents will never go down, just as Petrol prices will never go down at best they may soften as demand weakens however all the pointers are that demand is greater due to massive housing undersupply.
If housing were to drop 40% then unless you have got cash you will be unlucky as it is most likely in this scenario that the UK has gone into recession and you will most probably not have a job and the benefits system will be in Chaos as the spending Chancellor has already cashed in the family jewels and there is nothing left in the pot today let alone in a recession.
Rents would go down if you had a period of rising unemployment and low inflation.
We've got the low inflation and now Gordon must stop hiring public sector workers we'll have rising unemployment. In real terms rents in London are much lower than they were 8 or 9 years ago.
There are two certainties in life, and neither of them involve rents never falling.
We've got the low inflation and now Gordon must stop hiring public sector workers we'll have rising unemployment. In real terms rents in London are much lower than they were 8 or 9 years ago.
There are two certainties in life, and neither of them involve rents never falling.
In 1998 I was getting around 700pcm for a two bed semi.
Today I would get 700pcm for the same property so it is true that rents have not risen. However they have also not gone down.
House Prices have risen, however the real cost of ownership has gone down as interest rates are much lower as are utility bills. Council Tax or what was the rates have gone up but then those burdens are the domain of the tenant and not the landlord.
From what I can see the figures still stack up for BTL, maybe some will hold off for a while happy with their current portfolios however there is still money to be made in BTL V Penions.
Properties in Portsmouth are around 140k for a three bed terrace, now that stacks up for BTL and for so long as that is the case I cannot see anything like a 40% drop in the market.
At the end of the day we all know that the price of a house is irrelevant the question is how much does it cost each month to buy and can I afford it and with low long term fixed rates there is certainly no crash on the horizon.
Today I would get 700pcm for the same property so it is true that rents have not risen. However they have also not gone down.
House Prices have risen, however the real cost of ownership has gone down as interest rates are much lower as are utility bills. Council Tax or what was the rates have gone up but then those burdens are the domain of the tenant and not the landlord.
From what I can see the figures still stack up for BTL, maybe some will hold off for a while happy with their current portfolios however there is still money to be made in BTL V Penions.
Properties in Portsmouth are around 140k for a three bed terrace, now that stacks up for BTL and for so long as that is the case I cannot see anything like a 40% drop in the market.
At the end of the day we all know that the price of a house is irrelevant the question is how much does it cost each month to buy and can I afford it and with low long term fixed rates there is certainly no crash on the horizon.
QUOTE(laurejon @ Jan 2 2005, 10:36 AM)
My first point is that if houses became cheaper to buy than renting then they would all be bought up by BTL Landlords who have the collateral to do just that.
**how ?, The BTL muppets over the last few years are HEAVILY INDEBTED ALREADY on property, that is not worth what they paid for it, so if they want to raise money to purchase property based on their "portfolio" they'll find that not even the most bully bullish of vested interest estate agent/mortgage broker liars will lend them MORE money to waste on a asset that is losing value.
where were you when they did the basic ecomonics lesson at skool ?**
Those that are not already BTL Landlords would be sure to jump on the bandwagon I know I certainly would.
**This sums it up really doesn't it. - You're going to jump on a ship that the rats have already left, tell me "how stupid are you ? prices go down so you try to buy more knowing that they are likely to go down even more ??????**
If I could purchase properties at 40% off todays prices I would buy as many as possible and setup a huge property rental empire. Rents will never go down, just as Petrol prices will never go down at best they may soften as demand weakens however all the pointers are that demand is greater due to massive housing undersupply.
**What with?, you have enough cash to buy more houses then ? rents do go down, petrol prices have come down !, get real.
You really need to take an economics course, whoops, no you dont, you're just another lamb to be slaughtered, keep going.
There is no housing shortgage, just a shortage of affordable homes, another vested interest lie**
If housing were to drop 40% then unless you have got cash you will be unlucky as it is most likely in this scenario that the UK has gone into recession and you will most probably not have a job and the benefits system will be in Chaos as the spending Chancellor has already cashed in the family jewels and there is nothing left in the pot today let alone in a recession.
**welcome to the real world**
**how ?, The BTL muppets over the last few years are HEAVILY INDEBTED ALREADY on property, that is not worth what they paid for it, so if they want to raise money to purchase property based on their "portfolio" they'll find that not even the most bully bullish of vested interest estate agent/mortgage broker liars will lend them MORE money to waste on a asset that is losing value.
where were you when they did the basic ecomonics lesson at skool ?**
Those that are not already BTL Landlords would be sure to jump on the bandwagon I know I certainly would.
**This sums it up really doesn't it. - You're going to jump on a ship that the rats have already left, tell me "how stupid are you ? prices go down so you try to buy more knowing that they are likely to go down even more ??????**
If I could purchase properties at 40% off todays prices I would buy as many as possible and setup a huge property rental empire. Rents will never go down, just as Petrol prices will never go down at best they may soften as demand weakens however all the pointers are that demand is greater due to massive housing undersupply.
**What with?, you have enough cash to buy more houses then ? rents do go down, petrol prices have come down !, get real.
You really need to take an economics course, whoops, no you dont, you're just another lamb to be slaughtered, keep going.
There is no housing shortgage, just a shortage of affordable homes, another vested interest lie**
If housing were to drop 40% then unless you have got cash you will be unlucky as it is most likely in this scenario that the UK has gone into recession and you will most probably not have a job and the benefits system will be in Chaos as the spending Chancellor has already cashed in the family jewels and there is nothing left in the pot today let alone in a recession.
**welcome to the real world**
QUOTE(laurejon @ Jan 2 2005, 11:07 AM)
In 1998 I was getting around 700pcm for a two bed semi.
Today I would get 700pcm for the same property so it is true that rents have not risen. However they have also not gone down.
Today I would get 700pcm for the same property so it is true that rents have not risen. However they have also not gone down.
Laurejon, are you familiar with the concept of "money illusion" ?
If you left cash in a bank for 7 years, and received no interest, would that cash still be "the same" ?
QUOTE
The BTL muppets over the last few years are HEAVILY INDEBTED ALREADY on property, that is not worth what they paid for it,
That is a myth.
Most BTL'ers are those that have cashed in their failing pensions or their malignant savings that have been eyed up by the Labour Party from the first day they took office.
The Labour Party have made no secret of their plans to penalise anyone who dares to save for their retirement. Pensions in the Labour Parties eyes are the fruits of a lifetimes work in the public service and not the domain of the humble drone working class taxpayer.
BTL'ers contrary to popular belief have to undergo strict vetting by banks and building societies before the money is advanced. If Joe Public walks into the high street armed with 10K deposit for a BTL they would be laughed out of the bank.
In the BTL world the financial institutions have no charity in mind they are hard nosed lenders and as such will not enterain anything that does not stack up in their favour which is not the case in domestic Mortgages.
In short the vast majority of BTL'ers are essentially letting their second homes and for so long as it is still legal to raid pensions and tax savings BTL will remain the safest place to secure your future into retirement.
200k invested in a BTL will return around 900PCM.
You can argue that 200k invested in a particular share over the past six months has returned more than that, however many neglect to point out the shares that were losers either slightly or completely.
That 200k is unlikely to see more than 450 pcm in a term deposit after tax. And with property in the long term there will be significant capital gain at the least or a property to hand on to your children saving them the hassle of saving up a deposit and walking the treadmill to get onto the ladder.
QUOTE(laurejon @ Jan 2 2005, 10:36 AM)
however all the pointers are that demand is greater due to massive housing undersupply.
OK, let's assume that this is correct. On this basis BTL'ers would keep piling in.
Would you agree that at some point (in the future?) we may reach a situation where supply of rental property may exceed demand? If so, what do you think happens to rents, and what would you do with your BTL portfolio in such circumstances?
I dont have a BTL portfolio
I am indeed which is why you money is better off in property than in the bank.
Those advocating STR and banking the dosh are in free fall.
Inflation at 2% and they get 3% return after tax at best on their money.
In real terms they are renting for a measly return of 1% on their money.
Housing has ups and downs and if you guage them correctly you can hop in and out of the market place. However to do that you have to know the high and the low and given that over the past five years even the sum total of the UK's analysts have not been able to guage that, nor the treasury, nor the BOE then I am dammed sure that Joe Blogs logged on to Nothingventured.com is going to have any information that is more valueable than theirs.
QUOTE
Laurejon, are you familiar with the concept of "money illusion" ?
If you left cash in a bank for 7 years, and received no interest, would that cash still be "the same" ?
If you left cash in a bank for 7 years, and received no interest, would that cash still be "the same" ?
I am indeed which is why you money is better off in property than in the bank.
Those advocating STR and banking the dosh are in free fall.
Inflation at 2% and they get 3% return after tax at best on their money.
In real terms they are renting for a measly return of 1% on their money.
Housing has ups and downs and if you guage them correctly you can hop in and out of the market place. However to do that you have to know the high and the low and given that over the past five years even the sum total of the UK's analysts have not been able to guage that, nor the treasury, nor the BOE then I am dammed sure that Joe Blogs logged on to Nothingventured.com is going to have any information that is more valueable than theirs.
QUOTE(laurejon @ Jan 2 2005, 11:26 AM)
Most BTL'ers are those that have cashed in their failing pensions
So, they effectively sold shares at the bottom to put the money into property at the top.
Isn't it better to buy low and sell high ?
QUOTE
Would you agree that at some point (in the future?) we may reach a situation where supply of rental property may exceed demand
No I would not.
You have sixty million people who require a roof over their heads.
Unless people are prepared to double up or live in corrugated tin sheets with polythene groundsheets by the roadside it is irrelevant the tenure of the property.
Rented, or Owner Occupier it will always be a resource with a use.
Every Property is owned by someone, they dont just spring up out of the ground.
They are either sold or let and one things for sure there are not enough of them and never will be.
QUOTE(laurejon @ Jan 2 2005, 10:36 AM)
My first point is that if houses became cheaper to buy than renting then they would all be bought up by BTL Landlords who have the collateral to do just that.
Those that are not already BTL Landlords would be sure to jump on the bandwagon I know I certainly would.
Those that are not already BTL Landlords would be sure to jump on the bandwagon I know I certainly would.
You seem to be under the impression that there is an infinite demand for rented property. In my area the oversupply of rented property - as a consequence of half the middle class people in the area buying a flat as an investment over the last few years - is mind boggling. Everywhere you go, every little block of flats has two or three To Let signs outside. The local paper has hundreds and hundreds of properties to rent. Half the blocks of flats also have two or three For Sale boards - I guess this is the aforementioned middle class landlords trying to sell as the rent (when they have tenants) does not cover their mortgage costs.
So, as prices fall, why would you buy BTL properties. True the price will be less so the mortgage will be less, but so will the rent - as, if lots more people jump in as landlords, there will be even more over supply.
Markets have a way of sorting themselves out and I would think there are a lot less new potential BTL landlords now than there are BTL landlords trying to sell up and get out.
So, I am not bothered if some new BTL landlords jump in on the way down - this will just keep rents down. Ultimately prices must come down to the point where youngsters can get a reasonable start in life without having to take on a 5 times salary mortgage for a hutch to live in.
QUOTE(laurejon @ Jan 2 2005, 11:46 AM)
Housing has ups and downs and if you guage them correctly you can hop in and out of the market place. However to do that you have to know the high and the low and given that over the past five years even the sum total of the UK's analysts have not been able to guage that, nor the treasury, nor the BOE then I am dammed sure that Joe Blogs logged on to Nothingventured.com is going to have any information that is more valueable than theirs.
I agree with you here. My personal interest in HPs is that I do not want to get ripped off and live in a dodgy area, when with a little patience I may be able to afford to spend the rest of my life somewhere nicer.
I have put my effort into getting good at my job. Being useful is my security, and I love my work. Constantly scheming on how to get rich quick without effort or knowledge is not my bag. I think there are many others who think like this. Many BTL types seem to assume that we all share their outlook on life (I don't mean LJ here or anyone in particular - and I agree it takes all sorts
)
Laurejon you have to accept there is a possibility of a house price crash on the horizon. You may argue its a remote possibility, but you can't ignore the possibility.
If you are getting 700 pcm now and were getting 700 pcm 6/7 years ago you aren't making as much money in real terms as you used to be. Rents have fallen.
If you bought shares in one of the big banks in 1998 your dividend would now be significantly higher than it was in 1998. And if you'd reinvested the dividends in the shares you held you'd now probably be receiving an income 40-50% higher in nominal terms on your shares where as you're now getting the same dividend (rent) on the property.
Now you would between 1998 and now probably have made much larger capital gains on a house than on blue chip shares, but that trend is unlikely to continue.
If you are getting 700 pcm now and were getting 700 pcm 6/7 years ago you aren't making as much money in real terms as you used to be. Rents have fallen.
If you bought shares in one of the big banks in 1998 your dividend would now be significantly higher than it was in 1998. And if you'd reinvested the dividends in the shares you held you'd now probably be receiving an income 40-50% higher in nominal terms on your shares where as you're now getting the same dividend (rent) on the property.
Now you would between 1998 and now probably have made much larger capital gains on a house than on blue chip shares, but that trend is unlikely to continue.
It is better to buy on the low and sell on the high.
But for most people they just want a house/roof over their heads.
They dont want the hassle just like Christmas when the shops put up the prices you could have bought the same thing cheaper in the summer.
If we were that bothered today we would all be out shopping for christmas cards and decorations at cheap prices for next year.
Life is too short to be worried about what is a high and what is a low. What matters to BTL'ers is, does it cover the loan if I have one. That covered then we all know that Property in 10 years will be more than it is today.
As for FTB'ers how old are they going to be when they get onto the ladder. Today we here the average age is 35 years old, can they really wait till they are 50 to get onto the ladder.
On that basis at what time do they start a family 40 these days is reckoned to be tops for most couples.
But for most people they just want a house/roof over their heads.
They dont want the hassle just like Christmas when the shops put up the prices you could have bought the same thing cheaper in the summer.
If we were that bothered today we would all be out shopping for christmas cards and decorations at cheap prices for next year.
Life is too short to be worried about what is a high and what is a low. What matters to BTL'ers is, does it cover the loan if I have one. That covered then we all know that Property in 10 years will be more than it is today.
As for FTB'ers how old are they going to be when they get onto the ladder. Today we here the average age is 35 years old, can they really wait till they are 50 to get onto the ladder.
On that basis at what time do they start a family 40 these days is reckoned to be tops for most couples.
And another thing. Every year - what is it - 140000 new properties are built. But are 140000 knocked down? Most of the development in the fairly urban area where I live is still green field. So we have a constantly increasing supply of houses as far as I can see. And, until very recently, a falling population. And lots of people that want to leave the country. And a chronically low birth rate that means in a generation's time there won't be enough young people to pay for pensioner's state pensions.
What's the answer? Millions of immigrants doing valuable jobs like pointing out to people where there are empty car parking spaces in Marks and Spencer's car parks?
What's the answer? Millions of immigrants doing valuable jobs like pointing out to people where there are empty car parking spaces in Marks and Spencer's car parks?
QUOTE(laurejon @ Jan 2 2005, 11:49 AM)
They are either sold or let and one things for sure there are not enough of them and never will be.
No-one knows if that is true. A recession would cause immigration to dry up, and we are not breeding enough, and the baby boomers are staring to get old. Also
Planners back Labour's building programme
has everyone forgotten that 500,000 more homes are planned.
Where I live (Nottingham) there is a glut of new build and plenty of empty houses. There is no shortage round here, just speculation.
We are whether we like it or not part of Europe.
And on that basis we will always be the number 1 destination for most of the new entrants.
Like it or not we will always be overpopulated and for what the British dont make up for in breeding because they are overtaxed and underpaid and too knackered to start a family the new arrivals are making up for ten fold.
And on that basis we will always be the number 1 destination for most of the new entrants.
Like it or not we will always be overpopulated and for what the British dont make up for in breeding because they are overtaxed and underpaid and too knackered to start a family the new arrivals are making up for ten fold.
The return on many BTL is paying a 2% risk premium over cash (although the viability of BTL is reducing in the geared case as rents fail to meet mortgages).
Is this risk premium sufficient? No one really knows - the market will decide when sentiment has averaged out a bit.
The risk premium on BTL averaged 2% in the eighties during periods of higher inflation (where the capital risk was obviously much lower). BTL valuation may be in question right now because the risk premium has not moved up to reflect the higher risk associated with holding property during periods of lower inflation. Needless to say, an adjustment from a 2% to a 3% risk premium would be painful as this implies a big price fall.
Is this risk premium sufficient? No one really knows - the market will decide when sentiment has averaged out a bit.
The risk premium on BTL averaged 2% in the eighties during periods of higher inflation (where the capital risk was obviously much lower). BTL valuation may be in question right now because the risk premium has not moved up to reflect the higher risk associated with holding property during periods of lower inflation. Needless to say, an adjustment from a 2% to a 3% risk premium would be painful as this implies a big price fall.
QUOTE(wrongmove @ Jan 2 2005, 01:00 PM)
No-one knows if that is true. A recession would cause immigration to dry up, and we are not breeding enough, and the baby boomers are staring to get old. Also
Planners back Labour's building programme
has everyone forgotten that 500,000 more homes are planned.
Where I live (Nottingham) there is a glut of new build and plenty of empty houses. There is no shortage round here, just speculation.
Planners back Labour's building programme
has everyone forgotten that 500,000 more homes are planned.
Where I live (Nottingham) there is a glut of new build and plenty of empty houses. There is no shortage round here, just speculation.
The issue is the availability of affordable housing, not of housing quantity. If this were not true then the supply (number of properties for sale) would not have risen in the last 3 months
QUOTE(laurejon @ Jan 2 2005, 11:07 AM)
In 1998 I was getting around 700pcm for a two bed semi.
Today I would get 700pcm for the same property so it is true that rents have not risen. However they have also not gone down.
Today I would get 700pcm for the same property so it is true that rents have not risen. However they have also not gone down.
But if inflation averaged around 3%pa between 1998 and 2005 then you are now making 20% LESS in rent that you were in 1998. So rents have fallen 20%.
True but if you only paid 55K for the house that today is worth 225K and your tenants have paid off the bulk of your loan then its a good deal and remains so.
If someone stopped you in the street and said you could own 100 houses with mortgages that will be paid by someone else over the next 25 years would you refuse the offer?.
If someone stopped you in the street and said you could own 100 houses with mortgages that will be paid by someone else over the next 25 years would you refuse the offer?.
QUOTE(laurejon @ Jan 2 2005, 11:46 AM)
Housing has ups and downs and if you guage them correctly you can hop in and out of the market place. However to do that you have to know the high and the low and given that over the past five years even the sum total of the UK's analysts have not been able to guage that, nor the treasury, nor the BOE then I am dammed sure that Joe Blogs logged on to Nothingventured.com is going to have any information that is more valueable than theirs.
The ability to accurately call the top of the market does not in any way affect ones ability to correctly identify it as an asset bubble, however good an analyst you are.
QUOTE(laurejon @ Jan 2 2005, 11:26 AM)
200k invested in a BTL will return around 900PCM.
You can argue that 200k invested in a particular share over the past six months has returned more than that, however many neglect to point out the shares that were losers either slightly or completely.
That 200k is unlikely to see more than 450 pcm in a term deposit after tax. And with property in the long term there will be significant capital gain at the least or a property to hand on to your children saving them the hassle of saving up a deposit and walking the treadmill to get onto the ladder.
You can argue that 200k invested in a particular share over the past six months has returned more than that, however many neglect to point out the shares that were losers either slightly or completely.
That 200k is unlikely to see more than 450 pcm in a term deposit after tax. And with property in the long term there will be significant capital gain at the least or a property to hand on to your children saving them the hassle of saving up a deposit and walking the treadmill to get onto the ladder.
Nice to see you didn't bother to apply any taxes to your 900pcm in your comparrison.... nor any other maintenance or ownership overhead costs...
QUOTE(laurejon @ Jan 2 2005, 09:58 AM)
It certainly does which is why all those FTB'ers pushed up the prices over the past few years.
Panicking they were missing out they put in inflated prices to secure the property.
Thank god their money supply has now dried up and only those with real collateral can now play the market keeping it both stable and affordable.
Panicking they were missing out they put in inflated prices to secure the property.
Thank god their money supply has now dried up and only those with real collateral can now play the market keeping it both stable and affordable.
So you think that pricing levels in a market which is either inflated or inflating can be sustained by a dramatic drop in new money entering the market at the bottom. An overpriced market such as this requires new money to enter at the bottom at ever increasing values just to remain stable, let alone rise.
Also you post is a little contradictory, as in the same sentence you are celebrating the fact that FTBs can no longer afford to enter the market and using this to justify prices as "affordable". You are rather strange.
I am celebrating the FTB'er who have pushed up prices not being in a position to enter the market.
It is a fact that those with a reasonable deposit are more calculated with their offers. Those with no deposit and asking for 100% loans are the ones who are happy to throw caution to the wind as they have nothing to lose.
I do not celebrate FTB'ers having a hard time however I would also not promote the idea to them that the UK economy is so flawed that there is going be some kind of economic meltown in the near future.
Life is full of dissapointments as it is, FTB'ers should be given a helping hand not told that they may as well give up.
As to the current market I dont believe that new money has to come from FTB'ers it is quite feasable for everyone to cash in their pensions and hop onto the property bandwagon. For every BTL purchased that is one less FTB property. If all the private households were puchased by BTL'ers then we would all become a nation of renters.
To kill the market you will need to lose affordability and although many young people starting out with big debts and student loans are finding it tough. There are many many more people who dont have those overheads and are in a position to finance a house purchase and as we are seeing daily some are financing several having second and third homes and many overseas.
It is a fact that those with a reasonable deposit are more calculated with their offers. Those with no deposit and asking for 100% loans are the ones who are happy to throw caution to the wind as they have nothing to lose.
I do not celebrate FTB'ers having a hard time however I would also not promote the idea to them that the UK economy is so flawed that there is going be some kind of economic meltown in the near future.
Life is full of dissapointments as it is, FTB'ers should be given a helping hand not told that they may as well give up.
As to the current market I dont believe that new money has to come from FTB'ers it is quite feasable for everyone to cash in their pensions and hop onto the property bandwagon. For every BTL purchased that is one less FTB property. If all the private households were puchased by BTL'ers then we would all become a nation of renters.
To kill the market you will need to lose affordability and although many young people starting out with big debts and student loans are finding it tough. There are many many more people who dont have those overheads and are in a position to finance a house purchase and as we are seeing daily some are financing several having second and third homes and many overseas.
QUOTE(laurejon @ Jan 2 2005, 12:47 PM)
True but if you only paid 55K for the house that today is worth 225K and your tenants have paid off the bulk of your loan then its a good deal and remains so.
Yes, BUT, for this to continue and be sustainable you now have to pay £225k for the same house (not £55k), which means going forward from today the market would only continue to stack up if the same property became valued at £920k a few year later. If the price merely now stayed at £225k (let alone fell) the BTL justification would no-longer work.
The bTL market requires more money to be poured in at the bottom at an ever increasing rate, creating a sufficient % of capital increases in house prices merely for the BTL model to remain stable and viable.
Not a great anaology, but picture this. If your car did 50 miles per gallon you would think it to be a reasonably efficient mode of transport. However, not assume for the first mile it did 50 miles per gallon, then the second mile it's fuel consumption increased so it was doing 49 miles per gallon, then a mile later it's fuel consumption increased so it was no only doing 48 miles per gallon, and so on. You were having to add more fuel at an ever increasing rate just to keep the same milleage going. This is not sustainable (obviously), so why do you think the same thing can be sustainable in BTL investment?
QUOTE(laurejon @ Jan 2 2005, 12:47 PM)
If someone stopped you in the street and said you could own 100 houses with mortgages that will be paid by someone else over the next 25 years would you refuse the offer?.
I'd probably explain the completely flawed financial logic of the aforementioned person in the street to them, until they had a good enough understanding of economics to see the the error of their ways, or they got bored and knifed me, whichever came first.
QUOTE(laurejon @ Jan 2 2005, 01:47 PM)
True but if you only paid 55K for the house that today is worth 225K and your tenants have paid off the bulk of your loan then its a good deal and remains so.
If someone stopped you in the street and said you could own 100 houses with mortgages that will be paid by someone else over the next 25 years would you refuse the offer?.
If someone stopped you in the street and said you could own 100 houses with mortgages that will be paid by someone else over the next 25 years would you refuse the offer?.
Damn right I'd refuse. I'd take the cash, though. In a falling market, you'd be mad to take the properties and watch those paper profits dwindle...
Cash is king right now.
Cash is King.
However just because you dont have any cash should that deter you from making money?.
Its a whole lot easier to risk someone elses money especially the banks.
So if you can get a few BTL's under a limited company with little outlay from yourself you would be mad not to take the risk.
I think the point is everyone is in a different position.
Take the city guys this years sitting on a six million pound bonus would they really STR to save a few quid. Or the middle aged manager with no kids and no mortgage who opens his annual pension statement to see its worth less than last years and he has made another 12 contributions.
These people are now becoming common (maybe not the 6M bonus ) and as such property to them is an ideal investment.
Let us not forget that many including myself thought that in 2000 we had seen the peak of the market and there were many fancy graphs to support a massive fall. My own agent when selling one of my two bed semis for 120K that I paid 52K for and let told me. "There are going to be tears soon, the market is so overpriced".
That same agent sold that property on for 225K two years later and the only tears where mine.
My point is that we have come on five years and the rates are lower and the wages are higher. Its even stevens in my book and a crash to me is not on the cards just yet. If prices this summer did rise 10% then I think that for sure we would be looking at a bubble burst scenario. Today we are at the pinnacle however I think without a shove in the form of higher rates we will be just perched on the edge.
However just because you dont have any cash should that deter you from making money?.
Its a whole lot easier to risk someone elses money especially the banks.
So if you can get a few BTL's under a limited company with little outlay from yourself you would be mad not to take the risk.
I think the point is everyone is in a different position.
Take the city guys this years sitting on a six million pound bonus would they really STR to save a few quid. Or the middle aged manager with no kids and no mortgage who opens his annual pension statement to see its worth less than last years and he has made another 12 contributions.
These people are now becoming common (maybe not the 6M bonus
) and as such property to them is an ideal investment.Let us not forget that many including myself thought that in 2000 we had seen the peak of the market and there were many fancy graphs to support a massive fall. My own agent when selling one of my two bed semis for 120K that I paid 52K for and let told me. "There are going to be tears soon, the market is so overpriced".
That same agent sold that property on for 225K two years later and the only tears where mine.
My point is that we have come on five years and the rates are lower and the wages are higher. Its even stevens in my book and a crash to me is not on the cards just yet. If prices this summer did rise 10% then I think that for sure we would be looking at a bubble burst scenario. Today we are at the pinnacle however I think without a shove in the form of higher rates we will be just perched on the edge.
QUOTE(laurejon @ Jan 2 2005, 01:25 PM)
Its a whole lot easier to risk someone elses money especially the banks.
So if you can get a few BTL's under a limited company with little outlay from yourself you would be mad not to take the risk.
So if you can get a few BTL's under a limited company with little outlay from yourself you would be mad not to take the risk.
That's not really how it works. You can't use the Limited Liability status of a company to simply borrow money to speculate with at zero risk to yourself. While it's true that as a Director of a Ltd company your liability for the companies debts can not exceed the value of your own share capital, this cannot be used as an excuse to take on huge loans at no risk.
Try it. Set yourself up as a Director of a small Limited company, then walk in off the street to a bank and try to borrow large sums of money, or even just set up an overdraft facility of any reasonable size on your Busines Account. They won't let you do this at no risk to yourself. They will require you to put in a very sizable amount of your own capital, and if you can't provide reasonable collateral then forget it. I even know of recent cases where Directors have been required to secure the overdraft facility on their Business Account against their own house.
Generally banks are very risk averse and cannot simply be used to divert the risks from you to them, and certainly not for free.
QUOTE(laurejon @ Jan 1 2005, 09:58 PM)
It certainly does which is why all those FTB'ers pushed up the prices over the past few years.
Panicking they were missing out they put in inflated prices to secure the property.
Thank god their money supply has now dried up and only those with real collateral can now play the market keeping it both stable and affordable.
Panicking they were missing out they put in inflated prices to secure the property.
Thank god their money supply has now dried up and only those with real collateral can now play the market keeping it both stable and affordable.
Can you quote a reference about FTB pushing up the house prices, laurejon?
I thought it was those greedy BTL and the desperate people saving as their pension. The money supply of the prospective FTB is not drying up, but the cautious ones are waiting for house prices to fall to sensible levels before entering the market.
DESPERATE SELLER downvaluing!!
http://cgi.ebay.co.uk/ws/eBayISAPI.dll?Vie...4347167908&rd=1
http://cgi.ebay.co.uk/ws/eBayISAPI.dll?Vie...4347167908&rd=1
QUOTE(consa @ Jan 2 2005, 01:41 AM)
This is a typical example of things to come. Thanks for posting it.
QUOTE
Can you quote a reference about FTB pushing up the house prices, laurejon
I will have a look around however I thought it would be obvious as the FTB'ers pay more to get on the ladder. If they had not then the prices would not have been pushed up as none would have been prepared to pay the increases.
In the last two years the FTB'ers have pulled back however the slack has been taken up with BTL'ers buying to house STR'ers and the like. The more STR'ers there are the more BTL'ers will come in to take up the slack. The problem for the STR'ers is that they have gambled on a drop, if the BTL'ers take the slack then the STR'ers will be up sht creek without a paddle.
QUOTE(laurejon @ Jan 2 2005, 02:00 PM)
In the last two years the FTB'ers have pulled back however the slack has been taken up with BTL'ers buying to house STR'ers and the like. The more STR'ers there are the more BTL'ers will come in to take up the slack. The problem for the STR'ers is that they have gambled on a drop, if the BTL'ers take the slack then the STR'ers will be up sht creek without a paddle.
And of course BTLers have gambled on a rise and will be up that very same creek if that doesn't happen.
BTLing is sooooooo 2004. All the glamour has gone now. Instead of gloating up the pub about paper profits, everyone is taking the p1ss
The one thing that can be said about a fashion is that in a very short time it will be deeply unfashionable. That time has come for BTLing IMHO.
QUOTE(consa @ Jan 2 2005, 01:41 PM)
He he. He says that he is selling it for the discounted price of £84,500, but it has a market value of £115,000. However, our new best friend NetHousePrices.com shows similar houses in Swinton (Manchester) that have sold most recently have gone for between £75k - £87k.
Oh dear. Someone offer him £40k for it, and show him reality hurts.
To pick up on one of Laure's earlier points: "That covered then we all know that Property in 10 years will be more than it is today." - I bought a house in 1990. 10 years later it was worth less than I paid for it. I had also paid out about 10 percent of its value in r epairs. A truly lousy investment in the short and the medium term. .There is nothing special about property as an assett. You can win and you can lose.
QUOTE(Uriah Heap @ Jan 2 2005, 03:48 PM)
To pick up on one of Laure's earlier points: "That covered then we all know that Property in 10 years will be more than it is today." - I bought a house in 1990. 10 years later it was worth less than I paid for it. I had also paid out about 10 percent of its value in r epairs. A truly lousy investment in the short and the medium term. .There is nothing special about property as an assett. You can win and you can lose.
And that was with relatively high inflation. With low inflation/deflation it could take much longer than 10 years.
But be careful what you say UH. People have been burned at the stake for heresy such as this !!
QUOTE
To pick up on one of Laure's earlier points: "That covered then we all know that Property in 10 years will be more than it is today." - I bought a house in 1990. 10 years later it was worth less than I paid for it. I had also paid out about 10 percent of its value in r epairs. A truly lousy investment in the short and the medium term. .There is nothing special about property as an assett. You can win and you can lose
That must of been some hellish kind of basket case.
Was it on the seafront on the isle of wight on the cliff edge or something.
I cannot imagine any property priced in 1990 being worth less in 2000.
I purchased a property in 1995 for rental purposes and made 100% when sold in 1998 today if I had kept it I would have made 250% today.
How much did you pay in 1990 and how much did you sell if for in 2000?.
It all stacks up for BTL then does it????
when house prices fall,consumer confidence drops.
When consumer confidence drops,they wont shop
When they wont shop,stores lose profit
When stores lose profit,they make redundancies.
when people get laid-off,they can't afford mortgages/rents and default
Any landlord want to endure the legal costs incurred by a defaulting tenant!
let alone a fall in capital growth?
NOT ME!!!!
when house prices fall,consumer confidence drops.
When consumer confidence drops,they wont shop
When they wont shop,stores lose profit
When stores lose profit,they make redundancies.
when people get laid-off,they can't afford mortgages/rents and default
Any landlord want to endure the legal costs incurred by a defaulting tenant!
let alone a fall in capital growth?
NOT ME!!!!
QUOTE
He says that he is selling it for the discounted price of £84,500, but it has a market value of £115,000. However, our new best friend NetHousePrices.com shows similar houses in Swinton (Manchester) that have sold most recently have gone for between £75k - £87k.
I'm starting to think that www.nethouseprices.com will be the most revolutionary thing to hit the UK property market since owner-occupation. No more wondering about the mark-up that the vendors are screwing you for, it's all there in black and white. No more kite-flying asking prices, no more buying a shitheap and flipping it for a profit that would choke a horse. This could be a tool to bring sanity back to the UK housing market.
Long live www.nethouseprices.com!
QUOTE(laurejon @ Jan 2 2005, 12:49 PM)
No I would not.
You have sixty million people who require a roof over their heads.
Unless people are prepared to double up or live in corrugated tin sheets with polythene groundsheets by the roadside it is irrelevant the tenure of the property.
Rented, or Owner Occupier it will always be a resource with a use.
Every Property is owned by someone, they dont just spring up out of the ground.
They are either sold or let and one things for sure there are not enough of them and never will be.
You have sixty million people who require a roof over their heads.
Unless people are prepared to double up or live in corrugated tin sheets with polythene groundsheets by the roadside it is irrelevant the tenure of the property.
Rented, or Owner Occupier it will always be a resource with a use.
Every Property is owned by someone, they dont just spring up out of the ground.
They are either sold or let and one things for sure there are not enough of them and never will be.
To some degree they already are, rather than living in some of the rental dives available they are putting up at the parental home longer they are building inventive extensions,convering lofts reorganising larger houses into up down family flats,I have seen many instances of all these,I know several couple living in caravans in the yard be it unnofficial,necessity is the mother of invention and people will do all sorts to save towards a house by saving on rent.
QUOTE(zzg113 @ Jan 2 2005, 10:57 PM)
I'm starting to think that www.nethouseprices.com will be the most revolutionary thing to hit the UK property market since owner-occupation. No more wondering about the mark-up that the vendors are screwing you for, it's all there in black and white. No more kite-flying asking prices, no more buying a shitheap and flipping it for a profit that would choke a horse. This could be a tool to bring sanity back to the UK housing market.
Long live www.nethouseprices.com!
Long live www.nethouseprices.com!
It's only free till 18 jan of this year. After that, it's cheaper to go to the land registry to get your info, if you want data on a specific house.
In my London suburb street, it turns out that profits aren't that pretty.
238500 -> 249000 over the course of a year. That's 10K 'profit', excluding all costs and taxes. Even without costs that works out to just about 4.2%. Even if they were buying cash only to minimize costs that's still a crap return.
Couldn't find out what my landlord paid for the place, but some rough numbers at current market rate mean that unless interest rates + maintenance costs are at 2.4% of property price, it's cheaper to rent for me....
For those who say rents don't go down.... they do: in my place from 300/week with previous tenants to 260/week.
Happy to rent now
QUOTE(laurejon @ Jan 2 2005, 06:10 AM)
I purchased a property in 1995 for rental purposes and made 100% when sold in 1998 today if I had kept it I would have made 250% today.
That's the point - you purchased at the bottom of the cycle, and sold higher up it. In other words you bought low and sold high. Which is why we're all waiting until the bottom of the cycle again so we can do the same!
QUOTE(laurejon @ Jan 2 2005, 01:02 PM)
Life is full of dissapointments as it is, FTB'ers should be given a helping hand not told that they may as well give up.
The biggest disappointment most young people face these days is the realisation that property is so overpriced they have take on huge levels of debt - just for a rabbit hutch to live in.
No-one as far as I can see is advising FTBers to give up - on the contrary - the advice is to wait for the crash to bring property down to historically affordable levels.
laurejon has the dubious honour of being the first poster ever to make it onto my filter list. A troll who doesn't realise he's trolling.. having a discussion with him is like banging your head against a brick wall.
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