Saturday, Nov 24, 2007
Merryn is good!!
Times: A plague on houses
"This is all horrible news for buy-to-let investors. Back in 1999, 73,200 buy-to-let mortgages were approved. Last year 850,000 were. Even more amazingly, a quarter of net new mortgages in the first half of this year went to buy-to-let investors. Clearly, a lot of people were convinced they were going to make a lot of money. Unfortunately, they are probably wrong. Why? Because the numbers don’t add up. The rental yield on property is 3.5%-4%. The base rate is 5.75% and many buy-to-let mortgage rates are much higher than that." Please, tell that b@stard butch of Rosie Millard. UAA HHA HHAHH AH AHHA AH MWAUUA AUUAUAUUAUU
Posted by confused76 @ 10:18 PM (893 views) Add Comment
15 Comments
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1. confused76 said...
http://property.timesonline.co.uk/tol/life_and_style/property/buying_and_selling/article2923705.ece
About to get lucky?
This could be the time to take the plunge – if you do your research and drive a hard bargain
Ziff says first-time buyers might have a greater choice of homes in spring, when sellers who have failed to attract any offers will be even more desperate to shift their properties, but by then there may also be more first-time buyers competing with them. “Those looking to buy in the quieter months, with fewer buyers and less competition, can drive a harder bargain,” he says.
Ray Boulger, senior technical manager at the mortgage broker John Char-col, suggests that first-time buyers should hold off and save for a deposit, which will give them a greater choice of mortgages ? but agrees that now could be a good time for bargain-hunting. “A year ago, first-time buyers would have wanted to buy as soon as they could afford it; now they can use the sluggish market to their advantage. They are in a strong position. There will be distressed sellers out there who need to make a sale. It is worth putting in that cheeky bid.”
2. New User 2007 said...
They are saying a bargain is if a property sells for a bit less than the asking price. Is that the same as waiting for prices to fall or even asking prices to revert to the actual house price of a year ago? NO, it is not even the same as a zero price increase..it is a cut in an over inflated asking price....
i.e. if I get 5% off the asking price on a house, that is still 15% above the price of the last house that was sold (less than one year ago)....that would not be much of a bargain, as the higher asking privce right now is is just agents trying their luck). That is still called driving up the market
3. New User 2007 said...
p.s. and Ray Boulger is merely saying we can now save more money over the next 6 months so we can afford to pay at least what a house costs now. The underlying assumption of that advice is therefore that price growth will be zero, not a fall (even if having a higher deposit to get a better mortgage works as a logic whether prices are falling rising or stable).
4. Brit1234 said...
I'm holding on for 6-18 months longer. My plan is to save even more for my deposit till I take the plunge when prices have dropped even more.
5. Quiet Guy said...
Thanks confused76, that is a very funny article. Quote:
"Buy a flat now and you are going to have to subsidise it, and the lucky tenant living in it, from your cash flow every month. That means your after-tax income in most cases.
This isn’t in any doubt. Even Stuart Law, the relentlessly optimistic chief executive of property company Assetz, said that “an investor buying an average property may expect to lose around 1% of the property price due to rental shortfall in their first year”. So why would anyone get into property investing at all?"
Regarding your comment about "do your research and drive a hard bargain", I'd offer the opinion that next year is too soon to buy. It is very common to underestimate how far a bubble market can drop. It seems hard to believe now but a drop of 50% for those who are patient may be possible.
6. tyrellcorporation said...
All very well but surely money has run out (cheap credit) and people will be borrowing at relatively high interest rates. I'm gonna hold off.
7. taffee said...
with buy-to-let people forget management fees,gaps in tenancy and any repairs(including washing machine breakdown etc..) have to be paid for by the landlord...so from where I see
it the yield is probably less than zero....add on price falls and buy-to-let is the next endowment!
8. confused76 said...
But, before BTL bcomes the next endowment, how about commercial property??
Capital economics is forecasting 10% drop in value next year, but TWICE THAT!! if there is a banking downturn ("if"! we are already in a nasty banking downturn)
http://business.timesonline.co.uk/tol/business/industry_sectors/construction_and_property/article2935643.ece
A zero year for property
THE commercial property market is facing its worst year since it crashed in the early 1990s, according to forecasters that include CB Richard Ellis, the world’s biggest property consultant.
The firm predicts that returns will plunge to almost zero by the end of this year. The plummeting returns – down from 18.1% last year – follow a steep correction in commercial property that has wiped an estimated £14 billion off the value of the £350 billion investment market between July and October.
It is likely that values will drop further between now and the end of December.
The news will cast a further pall over the sector, which has suffered a rapid shift in sentiment since this summer’s credit crunch.
Forecasters at Capital Economics predict that property values will fall by a further 10% next year, and they warn that more bad news in the financial markets could force values down by double that.
9. Winnie said...
The time to buy will be deepest January 2009.........by which time desperation will be at its most extreme.
10. C'mon Correction said...
The last crash took approx 8 years to play out. Just rent cheaply, save and buy in 2013. That's my plan !
11. techieman said...
Winnie - That depends on the depth of the fall / crash. If about 20% then no probably not expect a classic A-B-C in Elliott terms. This is the A wave - the B will be the bear trap (they think its all over) and the C wave will probably be when its realised how badly the whole economy has been affected - thats the real plunge. A bull market that has lasted since the 70s (although i'd argue before - since the end of the depression in the 30s - the issue with that is there wasnt really strong home ownership then so its difficult to compare) takes more than 2 years to deflate. If it is only 2 years then there will be absolute carnage. This is unlikely to be like the 87 Stockmarket "crash" in the stockmarket or the 89/90 "crash" in residential property. These were both examples of CORRECTIONS to the main trend. What we MIGHT (i.e. what i believe) have here is the Bear. That means we have a larger correction of super cycle degree.
12. dohousescrashinthewoods said...
I get a sense that property is more speculative now than it used to be, so I can see it turning a lot quicker than in the past. This is being borne out by current events. I can see property hitting the deck quite quickly, then declining more slowly for a few years after that. As things stand, 50% is quite plausible, even foolishly optimistic.
Take a simple indicator and it stands to reason:
I for one will be using the time-honoured mean of 3-3.5xincome. If average wage is 20k, then the average 200k house will need to fall to 60-65k in today's money. (I'd like to see mean wage and mean price, as average can be skewed). I hope not to be tempted into the market until after we cross that line. I can really see 2 decades of bumping along the bottom of a Japan-style bust before a recovery led by people who will grow up after the "lost generation".
Given bubbles tend to undershoot, we get to the point where 48-52k for an average house doesn't seem crazy (20% under). That's 75% off. Pensions will be fried. Those here who banked that much in profits in 2004 will be snapping them up 2-for-1, cash. BTLs now sitting pretty on 20k of equity per house and looking to take the long view, will see that if you go from 200k to 50k it means zip equity and a 130k loss per house. At, say, 5 properties -650k is a very long view indeed, Rosie - that's the price of 12 houses!
And that's still optimistic. Compare it to Northern rock going from £12 to £1 per share. Many property companies are down 60-90% this year, which does rather indicate a parallel with the value of the assets that underpin their businesses. If sector average is down 75%, that's not because house prices are set to stand still, is it.
The more I look into this, the more I think it's going to be massive.
13. dohousescrashinthewoods said...
Case in point: ING UK Real Estate Income Trust Ltd.
That's 40% down this year - and an accelerating downward trend.
Sure it'll be a soft landing, sure prices won't tank. My flippin eyeballs they won't! The writing is on the wall.
14. X Blogger said...
I agree, 50% is plausible, hindsight is a wonderfull thing.
Fibonacci levels suggest that it could even be worse. I am ready for anything as nothing would suprise me more than this housing boom.
15. dohousescrashinthewoods said...
Fantastic - just heard this:
http://news.bbc.co.uk/1/hi/uk_politics/7111838.stm
"A wealthy North East property developer has admitted being behind a series of large donations to the Labour Party."
Labour has no vested interest in propping up the market, then. Blimey.