Hi all. Where to start...I find myself at a bit of a crossroads, I bought a house in Ballymena in 98 for 55000, 3 bed semi, out of the blue my father in law offered us land to build a new house on about 3-4 years ago. The way things were going at the time I felt it was a good idea to keep hold of the semi and rent it out. Can I just stress now that I consider myself to be in a very fortunate position and I am not crying or feeling sorry for myself now things have went tits up, I always said that once/if the semi reached 200k i would sell up...at that point I would have made out of it what I needed to make a big difference to our lives. I am not a greedy person, I felt and feel I was just trying to do the best for my wife and 2 kids with the VERY lucky position we found ourselves in. I am also lucky in that IF I were to sell now I would still make good money on the house. My question is to those with a crystal ball...should i sell now if I can or sit tight and hope i get what I need in a few years?? I am fully expecting to get slated for this but like I said, I was only doing what I felt was best for my family.

I don't use a crystal ball. I look at:-

1. The history of housing bubbles.
2. Fundamentals of house prices.
3. Housing markets in other countries today.

You have alot of research to do... good luck!

Welcome to the thread and I hope no-one slates you. You have a perfect right to do the best for your family as we all have and once you have worked out whether it would be more advantageous to collect rent or sell for profit then you can make a decision. You need to remember you are providing a house for someone to rent just now and thats good. You will also have to work out your liability under capital gains tax if you sell just now or after April. You will probably not achieve your wildest dreams in the marketplace just now if you sell but you may make a fair profit. Its up to you. I personally have no time for the specuvestors who hyped this bubble to a point where young families cannot get a house at a reasonable price but I have no problems with someone looking after the family finances. Do some research on here- speak to an accountant - speak to several estate agents and good luck with whatever decision you make.

doccyboy speaks sense

Welcome to the forum.

I would say that the huge supply of houses here (plus the planned new social housing to be built in the next few years) will keep prices down - the crash has just started and is likely to get worse. It could be years before your house regains its nominal value, never mind its real value adusted for inflation - perhaps a generation or more. As doccy says, weigh it all up and get good advice - but my gut instinct would be to sell.

Good luck, and keep us posted!

I would suggest that it comes down to nothing more than pure financial calculations. Even if you knew a year ago that prices were going to fall, it might not have been the best thing to sell. I might get slagged for that but it is true. The rental property represents a high-yielding, low-risk investment. They're hard to come by.

You know by now how much income the property generates for you. If you sell it you've got the cash but you will have to find a decent way to invest that. Maybe you could do a better job with the cash - you'll have to put some kind of realistic percentage growth on that value. The house value will keep up with inflation (over the long term) whereas the cash will need to generate extra income to make up for erosion by inflation.

A simplistic break-even:
Sell value 200K.
Cash return on investments: 10%
Inflation (real): 5%
Actual realised return on cash 5% or 10K
Income from rental: 10K
House price value when holding for the long term is irrelevant.
You see that you will NEED to achieve a certain selling price in order to make the sale worthwhile. Not only that, but you will face investment risks with the cash because you'll constantly need to be reviewing your portfolio, etc. If you tried, you might be able to be more efficient at letting the property out and thereby push the returns up slightly. It's also a fair assumption that rentals will largely stay in line with inflation generally.

Mind you, I'm not saying John Paul Getty was right when he advised his offspring "Never sell!", but only sell if the cash can be put to much better use.

Or maybe you just want to blow the money...

You may also want to do some research into "economic cycles".

And be careful about who you get advice from. Estate agents and bankers are still talking a lot of rubbish about prices leveling this year. It has always taken years for prices to level after previous bubbles.

But, as usual, DYOR (do your own research).

...fair enough...

Recent reports form the University of Ulster/Bank of Ireland are showing that house prices are falling by £6,500 a month.

Do the calculations. Does property really sound like a good financial investment at the moment?

That's another emotive argument. The answer is "It depends". If you bought in 1999 and find that your yield is 20% then it remains a good, low risk investment that will keep up with inflation. The crux is what can be done with the cash by comparison. Large or small, numbers up or down are irrelevant unless we compare them to each other. Ofcoure, there comes a price at which the sale becomes compelling, but it has more do do with price achievable than amount lost per month - the break-even point may have past last year or it might be a few months away at present trends. I am urging anyone considering a purchase or sale to do the calculations based on a long-term outlook, or at least as long a term as is feasible given circumstances.

Can you really say that selling is the best 50 year approach with this particular property?

So what are the exact number?

I second this.

Dellboy, you have made a decent point and I concede that, long term, the property should come back to its present value. But is that a good investment? With the banks tightening up and restricting lending (no more 100% mortgages, salary multiples going down etc etc) - eventually the max salary people will be able to borrow will go low and stay low. This is not the same as the 90s recession - in my view it will be much worse. Imagine 4x MAX salary multiple on mortgages for the next 15 years at least. How long will it take for the average NI salary to reach 50K? How would ULTRAS_76 feel if his house is still worth 200K in 2020?

ULTRAS_76, work out for yourself what yield you can achieve with rent versus what the capital sum will earn you in the bank over the next X number of years if you sell, and compare the two. How soon do you need the money? Play around with calculations, get some independent advice and good luck.

Thanks to all for the helpful comments!!

Tara, if the house is worth 200k in 2020 i'm out of here now!! I never wanted this to be long term, but I also don't want to be in the position where I am left cursing myself for selling too soon. Gut feeling is to sell, what I do with the money I really don't know, could pay off big slice of the mortgage on our new house or stick in the bank for a few years.

What I do know is I will have to make a decision pretty quick if the current price falls are anything to go by.

Thanks again to all.

Hi ULTRAS-76, You may not be able to sell at the minute anyway, I know of several people with houses on the market and no viewings whatsoever. The market will only come back again when housing is affordable.

IMO, Dellboy has made some very good points. There is a reason why being a landlord was profitable before the boom and it will continue to be after, as long as the yield is good.

If the house is generating a good income and will continue to do so, why rock the boat? I'm sure working some long term plans out would help gauge which is the most profitable.

I don't think you need to worry about 'selling too soon' - selling too late may be your problem.

In any case, Traktion's advice is sound - work out the numbers for yourself and good luck.

I'd sell now. Drop to less than similar properties and expect to be offered less again, then take it...

I'd do the same - actually, did it the same a year ago in the States. Those who didn't are still selling...

You say that wages would need to inflate to £50k a year here for prices to regain their 'peak' value, and this will not happen in 20 years, which I don't agree with as the average couple currently earning two average wages of £21k or whatever it is, giving a joint income of £42k, even with a fairly low mortgage multiplier of 3.5X, giving them access to borrow approx. £150k + their deposit NOW. A higher multiple of 5X is still available if you have decent deposit, meaning that the average couple could afford £210k+.

As with regards wage inflation, I can't find an average annual wage chart, maybe someone could? However in 1970 for a full-time position in a UK solicitor's office you could expect to pick up £126 gross per month which would equate to £1512 a year.

http://www.bbc.co.uk/dna/h2g2/A319619

If we take that as an indication of the average wage, it has increased over 13 fold in 38 years, so might it not be possible for the average wage to double in 20 years???

Just trying to give both sides of the argument. Short term, selling would be the best option, long term renting it out is the best option. Remember what site you are using-some here would like to see prices return to their 1976 level and then still expect a free car! (I borrowed that line from a friend-so if you are lurking thanks). I'm not trying to antagonise anyone on here but to have a proper debate you need both sides involved (where have you gone MD?) and a little humour always helps!

Good point

... but not very accurate.

"The data on the MIG is inaccurate!" I love Top Gun

This is more a little more accurate...

The historical 3.25x multiple, offered by banks, applies only to single people.

Historically banks only lend 2.5x joint income. There are several reasons for this - increased risk of reduced income due to sickness or redundancy, and increased risk of additional expenditure i.e. children.

Besides that: surveys show that the average joint income is not 2 times the average single income. I can't remember exactly, but I read somewhere that the average single income in Engalnd is £24,000 and the average joint income is around £35,000.

So what you are talking about is a couple who's joint income is well above average joint income.

I wonder what the average joint income for Northern Ireland is? Probably not much more than £30,000.

Yes, I know lots of couples have large joint incomes. But we are talking about averages.

Lets use £30,000 as an example:-

£30,000 x 2.5 = £75,000

and

£21,000 x 3.25 = £68,250

Have you ever heard of creative accountacy, I have.

Even the FSA are admitting now that anyone who borrowed more than 3.5 times their income are at risk of defaulting. Those 5x loans may still be available. But I doubt if many people would now qualify for them.



Yes people remember what site you are on. We tell the truth here! If you want to read lies and spin go to another site.

And I only expect prices to go back just 6 years. Yes, 2002 prices look affordable to me



Did you really believe that stuff md posted? I actually stopped reading his posts as I found his views wildly optimistic and largely irrelevant. Or was that large and irrelevant

You are in a better position than most on here to know what is really happening out there. How is your sale going? Any viewers/offers?

As they say there are lies, damn lies and then statistics! You can manipulate figures to pretty much back-up any viewpoint!

What I don't get is the constant referral to 3x single income, 2.5x joint income. With a good deposit 5x joint income is still easily accessible, I know as I've been looking and talking to my bank. Banks still want to lend those 'less risky' people money (i.e. those who have been prudent enough to save a sizeable deposit) as that is how they generate their huge profits! Simply cutting off credit supply entirely will de-value their assets and thus isn't in their best interest. But as always do your own research, crunch your own figures, factor the likely changes to your circumstances and come to a balanced decision!

Yes the banks are still trying to suck more people in... and their deposit will disappear quickly when the housing bubble bursts.

Don't belive me? Just read the last 2 University of Ulster/Bank of Ireland reports. They show house prices are falling by £6,500 a month. Any deposit given too a bank will disappear very quickly as the value of the property falls.

Yes I seen that report also, however there is another report produced specifically for investors where although prices dropped that much last quarter, they had dropped more but recovered slightly in the final 6 weeks of that quarter. I don't see that small increase (~1%) continuing by any means but I do think that house prices will have stabilized by the summer this year and further falls will be in 'real' terms only due to inflation and the odd desperate seller/repossession!

My honest opinion, if i were you I'd:

1. Sell the house - take the money you've made and buy a house in North East of England - all NI investors seem to favour Newcastle for capital appreciation and buy to let possibilities - rent out house.

2. If you do have a capital Gains Tax liability (go to www.taxationweb.co.uk) the online forum section - the accountants there will work it out for you for free - just post your question. You will probably just be liable for the flat rate of 18% tax, as your property will not probably be sold before 6th April, when new rules take place!

3. Or if you don't fancy the buy to let in England, put your money from your house sale in a 2 year bond and buy again when NI market is at bottom - then rent out.

I would defo sell now. what you do with your money is up to you, dont put in high interest savings account due to taxation - it wont grow that much!

I which you all the best, for you and your family, make your money work for you, try not to let the tax man get to much of it and invest in property when market is bottomed out!!!!

Bless you, sophia

You got a link to that report?

I am sure you have read these reports
http://www.treesdontgrowtothesky.com/PN_NI_charts.htm

Thats right - over 6500 separate reductions in the asking prices of property on Propertynews NI since the beginning of the year, I seriously doubt the brakes will be back on the property market by the summer - maybe by summer 2010/11

Just ask yourself this. Could you afford, as a FTB, to buy your own house at the price you are asking?

Yes, wages may have gone up 13-fold in 38 years, but a lot of that was a period of very high inflation. Wage inflation is going to be VERY low in the next few years, imho.







Oooh, a report produced for investors only! Painting a rosy picture I presume? Mmm-hmm.

Of course, he could - with the part-ownership scam... sorry, scheme + his parents MEWing on their own bloated equity.

Or a Kerryvestor with "a considerable cash component" could buy it.

All these options were availble galore less than a year ago.

What a pity they have all dried up, apart from a few deluded individuals using part-ownership, who are still "bargain-hunting"...

Yes I could buy at £150k as a first time buyer now. I'd actually be in a better position now than when I did buy in May 2006 as then the multiple was over 5X my joint income (100% mortgage) whereas now it would be less than 4X (based on current asking price!). I guess that could be described as 'sub prime' but my payments were very comfortable as they would be now had my better half not got a job in England leaving us now paying out for two properties in their entirety! This has made our payments less comfortable but still manageable and we can still afford flights to see each other at weekends. If the house fails to sell it will be let out, leaving my fiancee & I still able to pay for both properties in their entirety but obviously we will be a lot more comfortable when a tenant is in place. Then the house would become part of my retirement plans. Property has always proved a good long term investment, with only specuvestors (i.e. those looking for short term capital aprreciation) getting burned!

With regards you saying that wage inflation will stay very low, the following article showing that wage inflation is currently holding at 3.5%, which looks pretty average.

http://news.bbc.co.uk/1/hi/business/7282710.stm

Even so, this means that a person earning say £21k now would be on £25k in five years, £31k in ten, £45k in twenty etc, etc. This could be slightly out depending on exactly what inflation does but does give a rough idea of what we can expect based on average wage inflation!

Oooh, a report produced for investors only! Painting a rosy picture I presume? Mmm-hmm.


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I wasn't entirely convinced buy it but who knows...if they can find houses where the achievable rent is in excess of their mortgage, bearing in mind that most BTL's require a 15% deposit, and for the most favourable rates a 25% deposit. They may have this if they bought house before the peak and sold at the peak! Who knows

yeah but with inflation on the up - food, fuel, etc.... 25k in 5 years won't be much more...if any....than what 21k is worth today...imo

Agreed - in fact, I have a feeling it may feel a fair bit less if oil keep on climbing.

Just got 500 litres delivered and its up 40 quid since February.

Yeah but with mortgage payments will be a lower percentage of a persons pay than at present thus making houses/mortgages seem cheaper!

what about if commodities inflation outstrips wage inflation - which is what has surely been occurring so far this year?

commodities inflation is a big worry to me personally speaking as (like Trakiton says) I see no slow-down in oil prices, maybe if the $ firms up then who knows, but with Ben big hand-outs Bernanke at the wheel is this likely?

the recent 0.25% drop in rates on a 200k mortgage was only a reduction of about £15-20 a month in real terms. £15 is nothing compared to food costs etc so any reduction in mortgage payments is negilgble in real terms with other costs increasing.....Petrol £1.20 a litre anyone???

also....

I keep being told by media 'experts', that IRs will come down this year and to expect another 3 x 0.25pt cuts in the next 12 months or so, are these experts reading the same script as the BoE?

it's irrelevant now what the BoE does for base rates, look at NR and others that aren't reducing their rates at all regardless of the recommended cut by the BoE....some even pushing up their rates...I'll see if I can find the link Bradford and Bingley I think it was.....

true enough

Just to say, that due to financial events over the last 6 months, House Prices are not the top of my economic agenda anymore. I will be deadly honest with you when I say that as each month goes on, my outlook becomes more bearish. I wish this wasn't so, I wish the SMs and currencies were relatively stable, ditto commodity prices, but this is simply not what I am seeing with my own eyes.

jeepers, am I having a CGNAO moment!!! md you need to come back here to knock some sense into me!!

edit - FTSE up today though

You could try and sell now - if you had asked the question 6 months ago I'd have definately said YES. I still say yes - but I fear trying to sell and actually selling are two completely different things.

Ballymena has been leading the downturn in property - it would seem it is a more bearish town than most and my guess is you will find very very few buyers right now....


You are too late selling - Sorry I can't give you more hope on this.

Hey PP soon you will be more bearish on the Global situation than me!!

ha ha

your posts are great as ever

Oil is going mad and its down to investors getting out of currencies (frankly the dollar IS DOOMED - even many in the mainstream press are hinting at this now - unfortunately so is the Pound), our currency and savings are being destroyed as we speak by greedy selfish knavish men more interested in personal aggrandisement than in their countries.

Ballymena has some of the most unrealistic asking prices in the country - 3 bed bungalows at 300k. I couldn't believe some of the prices -

Thanks Vicmac

The more I open my eyes to what's happening in the Global Economy the more I wish I hadn't bothered!! Ignorance is bliss!!

A true bull would tell me that every market has opportunities, maybe it's time to start looking at things from a Chinese / Far East perspective (i.e where the growth is, but so much of it is dependent on oil) or really start thinking about commodities.

Crystal ball please work for me now!!

right time for a laugh everyone - this is a classic http://www.youtube.com/watch?v=OCbvCRkl_4U

Yes but nothing is selling - the asking prices are just that - the owners are caught with properties they can't sell - maybe in a year or two or three when prices have plummeted as those distressed sellers do the value reducing for the obstinate variety you will see real reduction in inflation adjusted terms.

Until then there will be high asking prices on property that does not sell.

PP if you can find something let me know - I'm looking too.. Everything with investment potential seems so fragile right now?? Any Ideas?

That's a lot of ifs...




Exactly. Wage inflation at 3.5% is actually making people poorer in real terms as they need to spend ever more on the basics. Less disposable income = bye bye retail, nail bars, tanning salons etc = job losses - not a pretty picture.



I agree. It is becoming frightening to watch what is happening economically.

Well it begins in G and ends in D

Sorry everyone I promised not to do this (become a goldbug on here) but as Vicmac asked the question, I will answer.

Don't get me wrong I am not giving advise here, but for me, I have decided that I need an insurance policy against rising oil and food prices and this seems the logical answer.

As part of a balanced portfolio I should add.

At the risk of sounding patronising and facetious (which I am not trying to do) could I suggest investing in yourself. In the current and coming economic climate good health is important and an extra qualification can go some way to helping you find work. So check your lifestyle and health - its been brought home to me this year that all the money in the world is no replacement for good health.

ahhh Doccyboy you star - thanks for your well-timed wise words (as allways)



this is good advice for everyone here, I know that I need reminding of it from time to time

edit - ps. doccyboy, without going into detail on an open forum I hope your situation is as best as it can be