UK House prices: News & Views

[tallim]

....

So my friend is in a interestingly fortuitous situation to have this much capital to invest. I am genuinely at a loss as to how to challenge the apparent straightforwardness of their proposition. So here I am asking a (usually pretty friendly) bunch of strangers on the internet! ;-)

...

 

Do they want to be a landlord, would they be comfortable with the risks and responsibilities that entails?

 

Happy to replace a boiler at the drop of a hat, happy to kick out a non-paying tenant, happy to leave the tenant alone to enjoy quiet occupation, happy to have that nagging feeling that the letting agent is somehow conning you and that the tenant is hiding damage?

[drbubb]

BAB's: "...a lot of people own, or part own, more than one property whose mortgage is being paid off by tenants..."

 

This is very emotive language that doesn't really describe the situation at all, but has been used an awful lot in the last decade.

I would put it differently:

 

In return for paying a "risk premium" called a rent, a tenant gets :

+ Use of the property, and

+ Passes the risk of changes in asset values to the Landlord

 

Many UK LL's living outside London have already discovered that being a "bagholder" in a sliding market is no joy,

and I think those with property in London will discover that same truth soon too.

READ THE CHARTS HERE ! (And examine the actual DATA): http://tinyurl.com/GEI-data

They whisper their messages to those who can decipher them, as we have done on GEI.

 

Close-up : H&N Index (average of Halifax & Nationwide) ..... Rightmove's Greater London Offering prices

.

 

The Rest of the UK (H&N Index, with Gr.London prices extracted)

 

Rest of the UK is now in Crash Cruise Speed, and should soon crash below GBP 120,000.

[John Doe]

Now 95% of towns, apparently.

 

First-time buyer torment: paying mortgage is cheaper than renting in 95pc of towns

 

http://uk.finance.yahoo.com/news/First-time-buyer-torment-tele-3130048439.html?x=0

[John Doe]

Do they want to be a landlord, would they be comfortable with the risks and responsibilities that entails?

 

Happy to replace a boiler at the drop of a hat, happy to kick out a non-paying tenant, happy to leave the tenant alone to enjoy quiet occupation, happy to have that nagging feeling that the letting agent is somehow conning you and that the tenant is hiding damage?

 

For a fee, all of that can be insured against (i.e. £14 pcm covers boiler etc). Pleanty of EA's can also run the whole show for you, again for a fee (~10% of the monthly rent here) if you want.

 

Jees, you can even get insurance for vacant periods now.

[BoldAsBrass]

This is very emotive language that doesn't really describe the situation at all, but has been used an awful lot in the last decade.

 

If a landlord can fund an asset for less than the tenant, don't both sides benefit? If the landlord wants to take on risks that the tenant doesn't, don't both sides benefit? If a landlord can provide access to an asset that the tenant can't because they have no security to offer to obtain a mortgage, don't both sides benefit?

 

It's often portrayed as a very one-sided relationship, but that's not always the case. Haven't landlords sheltered many of our younger generations from the capital losses we've seen everywhere but London in the last few years?

 

Why does this phrase never get used for commercial buildings?

 

It might be emotive langauge but it seems to be how landlords think. When I bought a house last year - I had occasion to talk to a number of people about property - estate agents, vendors - even lenders as I toyed with the idea of an offset mortgage.

 

Nearly everyone I met in that process managed to volunteer the fact they were landlords. A woman who I saw in a local building society proudly told me she had 6 buy to let investments - which she had bought over the last 7 years. Given that this was 2010 and we were two years into the credit crunch, I asked how the BTL thing was going. She was very pleased with herself - all the properties were modern, so not much maintenance, no hassles with tenants and no negative equity (house prices around here really haven't fallen much, if anything compared to the market high in 2007) - she even said something like 'when we get to retirement age we'll be well set up as all the mortgages will be paid off.' I don't think it escaped her that the mortgages were being paid off by her tenants.

 

How can this generation of BTL investors 'fund an asset for less than a tenant'? Most BTL mortgages have a higher interest rate, do they not?

 

But banks seem to prefer to lend to BTL investors rather than home buyers. Which I guess you can understand. If a tenant gets ill or loses his job, kick the fecker out and get another tenant in. If a home buyer loses their job or gets ill - the lender has all the nuisance or repossession.

[BoldAsBrass]

For a fee, all of that can be insured against (i.e. £14 pcm covers boiler etc). Pleanty of EA's can also run the whole show for you, again for a fee (~10% of the monthly rent here) if you want.

 

Jees, you can even get insurance for vacant periods now.

 

Where I live some letting agents guarantee the rent.

[BoldAsBrass]

FreeTrader's HPC charts:

 

 

 

As calculated by me a few posts earlier, prices hit a new real low 30.4% below peak.

 

This time next year I reckon we'll be talking about another 5% off in real terms... and possibly more.

 

What, the price of bread goes up 5% and you think a house goes down 5% - in 'real terms'?

[John Doe]

What, the price of bread goes up 5% and you think a house goes down 5% - in 'real terms'?

 

Well yes, if you sell your house and spend all the money on bread

[Walktothewater]

Well yes, if you sell your house and spend all the money on bread

 

Leveraged players and owners are doing extremely well. And continue to do so. And renters, like savers or anyone not in debt, are being screwed to the wall in this country. [that's why it's important for the people being screwed by this system to buy gold - another story].

 

But I ask you, where does this end? Do we end up with a UK where everyone owns their own home, with average prices £10m, £100m £1000m or whatever. Where those that don't get 'on the ladder' are gradually forced into ever worsening rental situations/ poverty, forced out of the UK, forced into tent cities for the dispossessed, squatter camps beside Dover or Stansted for people who don't/can't own a piece of UK land, waiting to scrape the money together to escape "property Apartheid UK" ??

 

Of course not.

 

The trend will change and it will be devastating for this country. I wouldnt want to be here when the unravelling gets serious..

[drbubb]

The trend will change and it will be devastating for this country. I wouldnt want to be here when the unravelling gets serious..

Try living in a Market Town.

This idea fits in with what I have just posted on another thread...

 

Realization #3 - Don't be the foreigner : source

 

Another important point to remember in all this is that if you're, let's say, a white person living in a white town in America, you blend in. You can walk around anonymously -

 

...while you're driving around in a brand-new Toyota 4x4 (which I never did, by the way), the locals are looking at you and thinking to themselves that they could never afford that vehicle in their LIFETIME.

. . .

What I learned from this is that I'd rather be an "average" white guy living in an average neighborhood, driving an average car than sticking out like some sort of person who appears to be relatively well off. That's why today I still live in a modular trailer unit in Austin, I still drive a Toyota pickup truck, I dress like a rancher in blue jeans and flannel shirt, and nobody gives it a second thought when I'm out in public. I blend in, and that's far wiser than sticking out.

I've got a better idea:

 

Don't be a car-driving target at all!

Live in s small town, where you can walk down Main street, and wave to your neighbors,

and buy your food from a farmer whom you know by name !

 

 

I think JH Kunstler may have the right idea in living someplace like Saratoga Springs, NY - where he can get to know his neighbors.

 

Try Totnes (or somewhere like it in the UK)

[John Doe]

Leveraged players and owners are doing extremely well. And continue to do so. And renters, like savers or anyone not in debt, are being screwed to the wall in this country. [that's why it's important for the people being screwed by this system to buy gold - another story].

 

But I ask you, where does this end?

 

Hopefully with prices bobbing along, not rising (or falling too much), until wages finally catch up, then hopefully, houses will be seen as homes, and not investments, like they used to be.

 

The mix of rental and owned will probably go one-way, then the other, then back again, just as before.

 

I don't buy this end of the world stuff. Heard it all before, many times. If the SHTF big time, then there will be co-ordinated world action, printing or debt relief or something new, but life will go on.

 

Of course, the rich will still get richer, but heh, that’s life.

 

Now, just got to find a way to become rich

[John Doe]

Try living in a Market Town.

This idea fits in with what I have just posted on another thread...

 

I think JH Kunstler may have the right idea in living someplace like Saratoga Springs, NY - where he can get to know his neighbors.

 

Try Totnes (or somewhere like it in the UK)

 

Depends who your neighbours are

 

Some of these places can be quite "clicky". If you ain't born and (in)bred there, you don't belong.

[Walktothewater]

The mix of rental and owned will probably go one-way, then the other, then back again, just as before.

 

 

one-way, then the other, back again, up, down, up again, back around the garden...

 

Which is it?

 

Either we go the whole way down a long road to eventual 'Property Apartheid' feudal serfdom, or we don't. There's no 'permanently high plateau' waiting round the corner. And if we don't continue to inflate the property market (at the expense of renters and savers) the UK banking system goes t1ts.

 

This is the ugly truth the bulls don't want to see.

[tallim]

...How can this generation of BTL investors 'fund an asset for less than a tenant'? Most BTL mortgages have a higher interest rate, do they not?

...

 

Yes they do have higher interest rates on BTL loans (if the tenant has a big enough deposit to actually access a mortgage), so you either dabble at the low end where gross rental yields are greater than 7% or you understate the opportunity cost of the capital that's tied up, which is not really both sides benefitting, so maybe you have a point, it's just the tenant that benefits in the latter case.

[tallim]

For a fee, all of that can be insured against (i.e. £14 pcm covers boiler etc). Pleanty of EA's can also run the whole show for you, again for a fee (~10% of the monthly rent here) if you want.

 

Jees, you can even get insurance for vacant periods now.

It's what puts me off being a landlord though, I think I would't trust people enough. I wouldn't want what I perceive as the hassle. Plus, in my experience, letting agents are next to useless when anything goes wrong in a tenancy for both the tenant and the landlord, suddenly it's the landlord's job to chase non-paying tenants, or sort out serious disputes. I am a bit risk averse though, most landlords probably never have to deal with these situations.

[tallim]

Well yes, if you sell your house and spend all the money on bread

I thought you were of the opinion that prolonged inflation would eventually lead to pay catching up and closing the gap quite significantly?

[John Doe]

It's what puts me off being a landlord though, I think I would't trust people enough. I wouldn't want what I perceive as the hassle. Plus, in my experience, letting agents are next to useless when anything goes wrong in a tenancy for both the tenant and the landlord, suddenly it's the landlord's job to chase non-paying tenants, or sort out serious disputes. I am a bit risk averse though, most landlords probably never have to deal with these situations.

 

That's a fact. When the rented place we had flooded, they didn't have a clue and we were essentially homeless.

 

We ended up telling them what to do, getting alternative accommodation, insisting that their landlords had the correct insurance to cover both us and them (as opposed to the usual policy which only covers the landlord etc etc.

 

Seriously considered setting up a decent rental agency once. Might still, as in my experience, they are generally c**p.

 

I thought you were of the opinion that prolonged inflation would eventually lead to pay catching up and closing the gap quite significantly?

 

Along with some gentle falls in nominal prices (although I think we're near the nominal low now, maybe another 5% or so).

 

Pay rises are ~ 2.5% YOY last time I checked. Since the 2007 peak, it's been >10% AFAIR. So doesn't take much. Time, the great healer

[TestIcicle]

Thanks for the responses to my friend's uncommon scenario everybody. Very much appreciated. As someone renting and saving (still considering a first home purchase though) TestIcicle finds it hard to imagine the thoughts/feelings of somebody who has a sudden £200k to do something meaningful... and responsible!

 

Interesting to see that some say in the circumstances it's not totally insane.

 

I chatted to him on the phone on my way home from work this evening to relay some of your comments.

 

Borassic's suggestion to split it up into things like PMs, blue chip companies and stuff like Personal Assets Trust (ticker PNL), which was "up 10% this year", was met with a blunt response:

 

Gambling on the stock market? Why don't I just set fire to the money?!

 

The background here is that his uncle has traded privately for yonks, and trading is/was his prime source of income I believe. My mate tells me of the time he went round their house when he was 11, and was overawed by what he saw in the study room: he counted no less than 13 CRT monitors. His uncle has been very successful in the past, but also experienced some major "bad luck" in the late 90s (not sure what/how - Asian crisis??) led the family to downsize their house and move to a rather less spectacular part of town. They survived, but their nephew (my mate) is not attracted to the level of intellectual application to the discipline, and even then dealing with the seemingly wild risks involved.

 

Contrary 50sQuiff's assertion that zone 2 is out of reach pricewise, the £200K will definitely get a 1 or 2 bed flat in the zone 2 and 3 areas he's been looking at. Perhaps not prime in the traditional sense, but he's looking at places like New Cross and Brockley and beyond, focusing on the East London Line extension (London Overground) to Canada Water (rats' paradise!) - he explained to me he wants to pitch these places to graduate bankers, who are building their career before they earn enough to buy their own places outright (lol - how this country disturbs me).

 

He's less than chuffed about the practical stuff of being a landlord, and says he has already been looking at various insurances, but hasn't yet looked into the detail of agency fees etc. He's got a full time job so he is basically keen just to grow the capital with minimal risk and effort (don't we all!!).

 

Trouble is though I'm doing the worrying about this for him. He's one of my best mates, was the best man at my wedding. I'm just trying to watch out for him without wanting to give him any dumb advice. For where I am on the investing front, I have put a modest amount into PMs but am worried if gold is at a sort of peak (yes, I'm familiar with the arguments). I remember thinking this way in 2003 re: property - how well did that thinking play out for me, eh?! I'll give you a clue: I continue to rent and save and try not to have too many more moves forced upon me by incompetent dumbarse landlords.

 

Perhaps it's the dumbarse landlords that cause me to be biased against my mates becoming another "flea" even if he IS aiming at bankers' money.

 

Anyway, thanks again. I might be still very early on in my own investment education, but I don't think I'd be being as gung-ho as my mate if I was in his situation!

[Van]

I don't buy this end of the world stuff. Heard it all before, many times. If the SHTF big time, then there will be co-ordinated world action, printing or debt relief or something new, but life will go on.

 

Really?

All great civilisations destroy themselves in the end. The seeds of the own destruction are sown from within. Life will go on until it doesn't.

 

[drbubb]

Really?

All great civilisations destroy themselves in the end. The seeds of the own destruction are sown from within. Life will go on until it doesn't.

... and then the way we live will change, and we will move on to something else.

Which may be better.

[John Doe]

Really?

All great civilisations destroy themselves in the end. The seeds of the own destruction are sown from within. Life will go on until it doesn't.

 

One day, one day.

 

Until then though,

 

FSA to announce relaxation on mortgage lending

 

http://uk.finance.yahoo.com/news/FSA-announce-relaxation-tele-1597872151.html?x=0

[BoldAsBrass]

Try living in a Market Town.

This idea fits in with what I have just posted on another thread...

 

 

I've got a better idea:

 

Don't be a car-driving target at all!

Live in s small town, where you can walk down Main street, and wave to your neighbors,

and buy your food from a farmer whom you know by name !

 

 

I think JH Kunstler may have the right idea in living someplace like Saratoga Springs, NY - where he can get to know his neighbors.

 

Try Totnes (or somewhere like it in the UK)

 

Totnes is a great place (seriously) - with some of the highest house prices in the UK - outside London.

 

Everyone with a few bob that visits Totnes says to themselves 'I'd like to live here' and sell up their homes in London and the Home Counties and off they go. Finding a Devonian in Totnes is a rare happening.

[BoldAsBrass]

http://uk.finance.yahoo.com/news/FSA-announce-relaxation-tele-1597872151.html?x=0

 

Same thing happened in the early 90s. A couple of years after the housing crash - the cries about negative equity trapping people in their homes finally reached the powers that be and some scheme was put in place then to allow you to carry your negative equity forward. Bless the bankers eh? Generous, as always, to a fault. I love them!

[BoldAsBrass]

Thanks for the responses to my friend's uncommon scenario everybody. Very much appreciated. As someone renting and saving (still considering a first home purchase though) TestIcicle finds it hard to imagine the thoughts/feelings of somebody who has a sudden £200k to do something meaningful... and responsible!

 

Interesting to see that some say in the circumstances it's not totally insane.

 

I chatted to him on the phone on my way home from work this evening to relay some of your comments.

 

Borassic's suggestion to split it up into things like PMs, blue chip companies and stuff like Personal Assets Trust (ticker PNL), which was "up 10% this year", was met with a blunt response:

 

 

 

The background here is that his uncle has traded privately for yonks, and trading is/was his prime source of income I believe. My mate tells me of the time he went round their house when he was 11, and was overawed by what he saw in the study room: he counted no less than 13 CRT monitors. His uncle has been very successful in the past, but also experienced some major "bad luck" in the late 90s (not sure what/how - Asian crisis??) led the family to downsize their house and move to a rather less spectacular part of town. They survived, but their nephew (my mate) is not attracted to the level of intellectual application to the discipline, and even then dealing with the seemingly wild risks involved.

 

Contrary 50sQuiff's assertion that zone 2 is out of reach pricewise, the £200K will definitely get a 1 or 2 bed flat in the zone 2 and 3 areas he's been looking at. Perhaps not prime in the traditional sense, but he's looking at places like New Cross and Brockley and beyond, focusing on the East London Line extension (London Overground) to Canada Water (rats' paradise!) - he explained to me he wants to pitch these places to graduate bankers, who are building their career before they earn enough to buy their own places outright (lol - how this country disturbs me).

 

He's less than chuffed about the practical stuff of being a landlord, and says he has already been looking at various insurances, but hasn't yet looked into the detail of agency fees etc. He's got a full time job so he is basically keen just to grow the capital with minimal risk and effort (don't we all!!).

 

Trouble is though I'm doing the worrying about this for him. He's one of my best mates, was the best man at my wedding. I'm just trying to watch out for him without wanting to give him any dumb advice. For where I am on the investing front, I have put a modest amount into PMs but am worried if gold is at a sort of peak (yes, I'm familiar with the arguments). I remember thinking this way in 2003 re: property - how well did that thinking play out for me, eh?! I'll give you a clue: I continue to rent and save and try not to have too many more moves forced upon me by incompetent dumbarse landlords.

 

Perhaps it's the dumbarse landlords that cause me to be biased against my mates becoming another "flea" even if he IS aiming at bankers' money.

 

Anyway, thanks again. I might be still very early on in my own investment education, but I don't think I'd be being as gung-ho as my mate if I was in his situation!

 

I would go along with your mate's blunt response.

 

The only people that make money from the stock market - CONSISTENTLY - are stock brokers.

 

The days of making a fortune from the stock market - like Buffet - buy and hold forever - seem to be behind us for now. The market has flatlined now for 15 years. Pension returns are crap. Endowment returns are crap. The big returns in the past were based on inflation and massive market dominance - and growth - by companies like Coca Cola (one of Buffet's favourites as I recall). Nowadays you just have to get lucky. If you bought Google you're doing well - but if you have a portfolio of 10 shares over the last 15 years - I bet you've made nothing. Who is to say if Google will be around in 20 years. The rate of change since the leaps in technology is now exponential.

[geisaver]

Or, prolonged economic depression could see the flat go unoccupied for a period or the whole building could be devalued through social decay or lack of maintenence. If the BTL investor cannot keep the plates in the air for the full 25 year term, the forced sale and negative equity will bankrupt them.

 

Just an alternave scenario

 

Just reading an article with a comment that reminded me of this thread

 

I bought a new house that was at a reasonable price in order to rent it out and subsidise my pension. This was a good option because the government told us that 6.6 million people were looking for places to live. 6 months later and incuring monthly council tax, landlords insurance, standing charges for water, electricity and gas, I have not had 1 application. What the government failed to tell us was the 6.6 million people were looking for FREE places to live.

 

Read more: http://www.thisismoney.co.uk/money/mortgageshome/article-2071640/The-worlds-distressed-property-markets--grab-bargain-house.html