UK House prices: News & Views

[John Doe]

I haven't been talking "crash cruise speed" for months.

 

But you did for many months before that, and it didn't happen did it (yet).

 

We will see what happens from now.

[drbubb]

You gotta stay flexible, and watch indicators like BDEV and rates

 

What helped UK property prices this spring?

 

This slide in 10 year rates - CHART

 

...may have been a factor.

[John Doe]

You gotta stay flexible, and watch indicators like BDEV and rates

 

What helped UK property prices this spring?

 

This slide in 10 year rates - CHART

 

...may have been a factor.

Indeed, another factor I pointed out previously as part of my view, when others were saying rates were (and would) rise.

 

I also see they are still falling. Might be able to get an even better 10 year fix soon (5 year fixes at 3.89% now).

[John Doe]

Thus we are not to believe the tales of BTL 'professionals'* out on their saintly lender-encouraged spending sprees outbidding FTBs, purely in an effort to put a roof over the heads of the less fortunate?

 

*No-one it seems has a suitable nausea bag - not even THIS GUY. This gap in the market needs to be filled.

Like it or not, (I don't) more people are renting and rents are still rising. That will only lead to more BTL

 

http://www.bbc.co.uk/news/business-14135553

 

And it's not just the VI's

 

The growth in demand for rented property was also seen last week in the findings of the English Housing Survey, published by the Department of Communities and Local Government (DCLG).

 

It revealed that between 2005 and 2009-10 the number of people renting homes privately in England had risen by 1 million to 3.4 million - a rise of 40% in that time.

 

I mean, seriously, with a yield of >6% and a fixed rate 10 year mortgage of less than 5% (with inflation expected over the period) it's not rocket science to think that BTL'ers will increase, is it?

[tinecu]

Like it or not, (I don't) more people are renting and rents are still rising. That will only lead to more BTL

 

http://www.bbc.co.uk/news/business-14135553

 

And it's not just the VI's

 

 

 

I mean, seriously, with a yield of >6% and a fixed rate 10 year mortgage of less than 5% (with inflation expected over the period) it's not rocket science to think that BTL'ers will increase, is it?

 

You don't get that (gross) yield everywhere:

 

http://www.home.co.uk/company/press/the_uks_best_buy_to_let_locations.htm

 

Take out management costs, capital losses due to falling house prices and maintenance and it looks like a dreadful investment.

[drbubb]

Indeed, another factor I pointed out previously as part of my view, when others were saying rates were (and would) rise.

I also see they are still falling. Might be able to get an even better 10 year fix soon (5 year fixes at 3.89% now).

Well, I do think that rates will rise, as the debt problems from Europe eventually spread into the UK.

 

In the meantime, bonds in the US and the UK are benefiting from a (temporary) "flight to safety". But there is no long term safety in these instruments, only a short term blip.

[drbubb]

You don't get that (gross) yield everywhere:

http://www.home.co.uk/company/press/the_uks_best_buy_to_let_locations.htm

Take out management costs, capital losses due to falling house prices and maintenance and it looks like a dreadful investment.

Top 10 Locations for 2-Bedroom Home Rental Yields

 

Location No.2BR

.......... Properties for Sale Typical Asking Price(£) No. 2-Bed Properties for Rent Typical Rent (£ pcm)

========== ........ ......... Rental Yield (gross per annum)

Bootle...... 331 70000 113 450 7.7%

Hamilton... 410 80000 129 495 7.4

Thamesmead 169 175000 180 1075 7.3

Mansfield. 464 85000 113 494 7.0

Manor Park 128 156250 116 895 6.9

Brentford. 214 307500 238 1733 6.7

Beckton..... 115 195000 128 1094 6.7

Dundee....... 362 89475 214 490 6.6

London*.... 21754 305000 22600 1650 6.5

Hull......... 1213 87950 221 472 6.4

*The typical asking prices and rent for London were calculated by sampling over all properties in the Home.co.uk property search within 10 miles of the centre of London

[John Doe]

You don't get that (gross) yield everywhere:

 

http://www.home.co.uk/company/press/the_uks_best_buy_to_let_locations.htm

 

Take out management costs, capital losses due to falling house prices and maintenance and it looks like a dreadful investment.

 

Maybe not, but you do in a lot of places.

 

As for the falls, most likely nominal won't fall much further and in 10 years prices are more than likely to be higher.

 

(Baring total financial collapse, of course, in which case house prices will be the last of our problems)

 

I’m not advocating it, but rather trying to point out that many will (and indeed do) think it’s not that bad a deal, especially with rents still rising, the lowest rates in history and inflation beckoning (no, not wage, but everything else, including rents).

[drbubb]

(Baring total financial collapse, of course, in which case house prices will be the last of our problems)

When Financial Collapse comes, falling House prices, and paying your mortgage will be a HUGE part of the problem faced by most households.

[John Doe]

When Financial Collapse comes, falling House prices, and paying your mortgage will be a HUGE part of the problem faced by most households.

Really? IF it comes (while possible, it is still unlikely) I would have thought, from many of the posts I’ve been reading recently, that we would be more concerned with eating than worrying about house prices?

[tallim]

Top 10 Locations for 2-Bedroom Home Rental Yields

 

Location No.2BR

.......... Properties for Sale Typical Asking Price(£) No. 2-Bed Properties for Rent Typical Rent (£ pcm)

========== ........ ......... Rental Yield (gross per annum)

Bootle...... 331 70000 113 450 7.7%

Hamilton... 410 80000 129 495 7.4

Thamesmead 169 175000 180 1075 7.3

Mansfield. 464 85000 113 494 7.0

Manor Park 128 156250 116 895 6.9

Brentford. 214 307500 238 1733 6.7

Beckton..... 115 195000 128 1094 6.7

Dundee....... 362 89475 214 490 6.6

London*.... 21754 305000 22600 1650 6.5

Hull......... 1213 87950 221 472 6.4

*The typical asking prices and rent for London were calculated by sampling over all properties in the Home.co.uk property search within 10 miles of the centre of London

Balls of steel needed to become a landlord in places like that; you only need apply if you already own a taxi firm, a chippy or the local snooker hall. Not a game for out of town hands off investment.

 

BTL mortgage table here:

 

http://www.money.co.uk/mortgages/buy-to-let-mortgages.htm

 

You'll be lucky to fix at under 5% for much more than 2 years when you factor in arrangement fees of 2%+, trackers are 4%+.

 

There's still not enough margin to make this anything more than a punt on house prices unless you're operating in poor areas, buying at auction and willing and able to handle 'demanding' tenants to keep maintenance and voids at a minimum.

[John Doe]

Balls of steel needed to become a landlord in places like that; you only need apply if you already own a taxi firm, a chippy or the local snooker hall. Not a game for out of town hands off investment.

 

BTL mortgage table here:

 

http://www.money.co.uk/mortgages/buy-to-let-mortgages.htm

 

You'll be lucky to fix at under 5% for much more than 2 years when you factor in arrangement fees of 2%+, trackers are 4%+.

 

There's still not enough margin to make this anything more than a punt on house prices unless you're operating in poor areas, buying at auction and willing and able to handle 'demanding' tenants to keep maintenance and voids at a minimum.

 

Maybe, but then again, if you know how to play the game, then you can buy as if it is your main abode on a great rate (i.e. Nationwide 5 year fix ~3.89% with £500 fee), then rent out for >1% more, (which doesn't even kick in for 6 months), so still less than 5% for 5years with small fee.

 

Any way you cut it, you can get good deals if you know how.

 

Then if you research your target area well, you'll get a >6% yield without too much trouble.

 

For those that rush in just anywhere, you are correct and they will loose, more fool them. For those that research well, there is a potential gain to be made.

[drbubb]

Really? IF it comes (while possible, it is still unlikely) I would have thought, from many of the posts I’ve been reading recently, that we would be more concerned with eating than worrying about house prices?

And then their houses get taken away (once the over-generous subsidies are capped or removed)

[drbubb]

Balls of steel needed to become a landlord in places like that; you only need apply if you already own a taxi firm, a chippy or the local snooker hall. Not a game for out of town hands off investment.

 

BTL mortgage table here:

 

http://www.money.co.uk/mortgages/buy-to-let-mortgages.htm

 

You'll be lucky to fix at under 5% for much more than 2 years when you factor in arrangement fees of 2%+, trackers are 4%+.

Then when the roof needs repair or the boiler needs replacing: You've got big problems.

 

The BTL investor really only makes decent money if:

+ He has no mortgage, and/or

+ Property prices are rising

 

Remove the second of these, and it is a bad business for most landlords with gearing beyond maybe 50-60%

[tallim]

Maybe, but then again, if you know how to play the game, then you can buy as if it is your main abode on a great rate (i.e. Nationwide 5 year fix ~3.89% with £500 fee), then rent out for >1% more, (which doesn't even kick in for 6 months), so still less than 5% for 5years with small fee.

 

Is that game still available to BTL guys? I thought (hoped) the application processing places had started following their rules and were getting better at weeding them out. I suppose I'll never know, because neither side is going to trumpet the fact that it's still going on.

 

Any way you cut it, you can get good deals if you know how.

 

Then if you research your target area well, you'll get a >6% yield without too much trouble.

 

For those that rush in just anywhere, you are correct and they will loose, more fool them. For those that research well, there is a potential gain to be made.

 

There's an auction near me that regularly has 8%+ gross yields, not much goes over top guide:

 

http://www.theauctionpeople.co/Auctions/SummaryOfLots

 

But it's only on the very cheap or weird stuff, I suppose you need a higher yield on the cheaper stuff because a lot of the operational and maintenance costs are the same no matter what location or size of house (within reason).

 

I still struggle to find family houses in average locations that would give much over 4%.

[Schaublin]

Then when the roof needs repair or the boiler needs replacing: You've got big problems.

 

The BTL investor really only makes decent money if:

+ He has no mortgage, and/or

+ Property prices are rising

 

Remove the second of these, and it is a bad business for most landlords with gearing beyond maybe 50-60%

 

Yes, you have summed it up succinctly but the wannabe rentiers do not want to shatter their dreams by listening and the current leveraged BTL crew think that nanny Central bank will bail them out forever.

[drbubb]

Yes, you have summed it up succinctly but the wannabe rentiers do not want to shatter their dreams by listening and the current leveraged BTL crew think that nanny Central bank will bail them out forever.

They have given help so far, but "forever" is not on the agenda.

 

When that fact becomes clear, perhaps as a result of a spreading debt crisis, there will be a mass exodus from BTL

[John Doe]

Is that game still available to BTL guys?

 

A mortgage broker friend says they are still using all sorts of tricks.

 

I still struggle to find family houses in average locations that would give much over 4%.

Yes, the decent family homes are still far cheaper to rent than buy. I guess that's more to do with desirability and flight to quality. Weird really.

 

The best yields still seem to be relatively cheap terraced/semi 2 beds.

 

Then when the roof needs repair or the boiler needs replacing: You've got big problems.

 

The BTL investor really only makes decent money if:

+ He has no mortgage, and/or

+ Property prices are rising

 

Still playing devil's advocate here, but a new boiler is less than £1k and these things can all be insured now.

New builds even have a 10 year warrantee in the UK (NHBC).

 

However, as rents rise (while the mortgage stays fixed) yields increase with time. If it's a repayment mortgage, who cares about the house price? At the end of the mortgage, you have a fully paid for house. You can then rent that out, or move in, or sell it.

 

And then their houses get taken away (once the over-generous subsidies are capped or removed)

 

Not sure what you mean by this, but if related to a possible financial collapse, it's just as likely to end with a debt jubilee as compulsory acquisitions.

 

but the wannabe rentiers do not want to shatter their dreams by listening and the current leveraged BTL crew think that nanny Central bank will bail them out forever.

 

That's right, and again, I'm not condoning BTL or advising people to do it, just trying to get across this mentality in the UK which I believe will continue to give support to prices (and that's not saying they will not fall further, just not as far and fast as some expect).

[pondlife]

wrong thread! Doh!

[G0ldfinger]

Going... down.

 

http://gold.approximity.com/since1930/UK_House_Prices_in_Gold_LOG_GUESS.png

[TrueNorth]

Thank you for the updated chart.

[marceau]

Going... down.

 

http://gold.approximity.com/since1930/UK_House_Prices_in_Gold_LOG_GUESS.png

 

 

Fingers crossed for a head & shoulders.

[LauraB]

Another article mentioning the unthinkable!

 

http://www.independent.co.uk/opinion/commentators/mary-dejevsky/mary-dejevsky-the-property-ladder-that-threatens-to-become-a-snake-2313834.html#disqus_thread

 

There are few more pernicious expressions in the English language than the "housing ladder". Its cultural specificity is illustrated by the difficulty of finding any exact translation in any of the more common European languages. The British, though, still seem hooked on getting a foot on that first rung, even though the warnings should be sounding loud and clear that in many places it is already rotting, to expose a slithery snake.

 

However most of the rest reminds me of the outpourings of MSE member 'julieq'.

[Meralti]

Another article mentioning the unthinkable!

 

http://www.independent.co.uk/opinion/commentators/mary-dejevsky/mary-dejevsky-the-property-ladder-that-threatens-to-become-a-snake-2313834.html#disqus_thread

 

 

 

There's an excellent comment on this article posted by Mack that I've quoted below: This speaks for itself and gives a pretty good international perspective too.

 

I have personally experienced 5 housing crashes - Ireland in the late 1970s, the US in the late 80s/90s, Japan in the 90s and Ireland since 2007. Every symptom of an imminent crash is present in the UK today. Take for example James Gregory's cited "measures, including different types of mortgages, shared ownership and more secure private rented accommodation, that might be developed to help." These are measures akin the the Japanese "multi-generational mortgage," the Irish 50 year mortgages, etc. that I have seen in every market where house prices have departed from sane levels. Ultimately these solutions have been obviated by the crash they presaged.

 

The other defining sign of a market about to "go over a cliff" has been rental yields, or as an old shrewd and very successful developer over 50 years said to me in 1992, having survived, for him, yet another crash with his fortune undiminished - rents don't lie. As he pointed out, 8% is about a sensible yield for a landlord - after taxes, expenses, real-depreciation (i.e., the need to renew and update) and voids are backed out it leaves a bit over 4% or so, comparable with long term interest rates on Aaa bonds. But then as he pointed out, tenants will only pay what the property is worth to them, as a function of the profits they can make by occupying a commercial property, or the share of their income that they can afford to devote to housing. By his measure the UK property market is massively overpriced, 30-40% for most - much more for central London where yields are of the order of 3% or less.

 

There is not question in my mind that this situation is increasingly dangerous for the UK. A huge proportion of Britons perceived wealth is tied up in property. Moreover, over the last decade there has been a massive misallocation of investment into residential property. However, the biggest issue is that the soaring price of property has caused the cost of living to rise, and UK labour costs to rise to support these housing costs, without a rise in the UK's broader standard of living. In short, UK workers are getting very expensive, but not living any better, all to support the soaring cost of housing. This is part of what choked the Irish "Celtic Tiger" - the soaring cost of housing in the Irish cities where high technology and pharmaceutical companies were anxious to locate in the 80s and 90s made labour costs increasingly too high by the 'oughties.

 

In a Eurosceptic environment it may be unfashionable to suggest that the UK could learn from its European neighbours - but there is much that they have done - ranging from legislative limits on lending (making law of the old bank deposit and income multiple requirements) to better long term leases.

[drbubb]

Another article mentioning the unthinkable! ("property ladder" may be a snake)

http://www.independent.co.uk/opinion/commentators/mary-dejevsky/mary-dejevsky-the-property-ladder-that-threatens-to-become-a-snake-2313834.html#disqus_thread

However most of the rest reminds me of the outpourings of MSE member 'julieq'.

They should call it a "Housing Elevator", and make it clear that the BofE (amongst others) has its finger poised over both the Up and Down buttons

 

Have people noticed the move in Barratt?

 

BDEV ... update

 

Further downside may be dead-ahead, with a CROSS confirm a bigger move down in BDEV, to be followed by a break in UK house prices