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London-loser

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Everything posted by London-loser

  1. Another impassioned post with no solid foundation. Your thread is about how you can't get better yields than on BTL... but you quickly point out that yields are low... but landlords don't care... because of the capital growth (wasn't this thread about the yields?). Then you explain how, anyway, landlords can calculate fantasy yields based on what they paid years ago... so everything is alright. Why is a bank account the correct alternative to measure BTL against today? For someone willing to gear themselves up six times into arguably a massively overpriced asset shouldn't you take a far riskier alternative as a comparison? Even a boring average Balanced Managed pension fund made over 15% over the last 12 months. Why is 4.75% in ING the right comparison... other than that it helps you "prove" what you want to prove? JO BLOWS drove the tech market too... and every other bubble you care to mention. Nobody here believes they can drive the market... just that they can get ahead of it. Landlords and tenants? If last year I paid £10k in rent to my landlord and the value of his property dropped £10k in nominal terms (more in real terms) plus he had to pay interest on his mortgage, service charges, ground rent, maintenance fees etc how much wealthier did he become for being a landlord and how much wealthier did I become by renting from him? I'm sure that you can't do the maths and more importantly wouldn't see any value in doing it anyway. You already know the answer you want the rest is details. I really don't know why you bother coming here to argue, you know what you believe and you are not interested in "irrelevances" like how to actually calculate a rental yield etc. Why don't you just go out and buy BTL? You are an incredibly vocifeous property bull, which is a little strange for a boy who admits he sold all his BTLs recently while ramping property on this site. WEIRD.
  2. Time for my monthly update. Eight properties in total sold (recorded on Nethouseprices anyway) so far this year from three streets (175-ish properties). Still PLENTY on offer (eight I think, although I haven't tried hard to see how many are on findaproperty.co.uk with multiple agents). I tend to keep a very close eye on two-bed/two-bath properties (since this is what I rent and turned down the opportunity to buy) but I've just noticed a studio on offer with an asking price of £150k!! They used to be on offer at £120k asking price... no wonder Rightmove etc say asking prices are up. Pure fantasy but hey the asking prices LOOK healthy. Two two/bed/two baths available. One at £220k and the other under offer at £225k. No change for a few months it seems.
  3. This is yet another line of fantasy BTLs used to comfort themselves. I'm willing to bet that the vast majority of the people who choose to rent today will not be renting in 25 years' time. I suspect you know that too.
  4. Bob, I very much doubt IRs are going anywhere near 1990 levels. It used to be a bull argument that until rates hit 15% (or at least double figures) there would be no problem in the UK housing market. However, rate rises to just 4.75% started having people say we couldn't cope with 6% let alone double digits. I would agree that interest rates are not harsh now. The problem is that while the interest is not a problem the actual debt (the loan taken to buy the very expensive property) IS a problem. Hence why bulls have decided interest-only mortgages are a great solution rather than a symptom of the problem (none of us need to actual buy property anymore as long as we are willing to take what is effectively a long lease with a future attached). The interest rate is not high but the high debt means small changes in the interest rate ARE very painful. I do believe that BTL activity holds the key now. They SAY they will not sell, they will hold for the long-term, they will keep buying etc. Time will tell how much is talk and how much they back it up with hard cash (borrowed, naturally) and to what extent they CAN keep borrowing and doubling their bet in the face of poor returns. I do believe a correction will bring a credit tightening and it will benefit the people you suggest (and so many users of this site). People WILL come back in and it will drive prices up over time but it will not happen quickly. It seems odd to say it today but people will be scared off by property (today it is seen as risk-free by many, at the bottom of the market it will be seen as too risky).
  5. Dogbox, Believing in a revival is one thing, believing the average London property price has jumped 5% in a month is a waste of everybody's time.
  6. I'm not sure whether referring to HPCers generally as pirates is better or worse than mentalists. Anyway, I agree the psychology is important and that people don't WANT to drop prices. However, I wonder how many people are willing to stubbornly put their lives on hold for a looong period of time just to avoid having to cut their price? Remember also that the vast majority of these people are not taking losses yet anyway - they just have to accept that the £200k profit they thought they were going to make will actually only be £180k. For example, all those bleaters on the ex-pat forums with their visas sorted out only waiting for their property to sell before they get on with their lives, they are not FORCED sellers but will they prefer to stay in Bognor or wherever rather than accept that their house isn't worth what the estate agent promised? I'm also not at all sure your view on wealthy property investors' buying because there are rents on offer. If you can buy an unimpressive yield today, with little prospect of major rental growth (given low economic growth, low inflation and low wage growth) and even less prospect of notable capital growth (given the wall of supply WAITING to sell when prices to rise) why would these wealthy people not just decide to invest elsewhere? Wealthy people generally aren't that stupid... or they don't stay wealthy for long. Father Fred, I agree, it is the REAL interest rate that is important. We COULD end up in a weird world where property on the whole does not sell. Where high sales to stock ratios become 'normal', where low transaction volumes become 'normal', where it is 'normal' for houses to stay on the market for a year or more... but I doubt it.
  7. Does ANYBODY, bull or bear, actually believe the average London property price rose £10k (around 5%) in the last month? I would suggest this is 100% concrete evidence that this index is providing misleading information - the bum steer I have been banging on about for a while now.
  8. Hi FF, It's always good to hear from you. I hope you are studying hard. It is an interesting question. The data I have to hand only goes back to 1973 but the last three times it is true that inflation was high (roughly double digits and more) before house prices corrected. I don't know about pre-1973 without going to do some digging but I would not be surprised to see a house price correction against a low inflation environment. I think there is no doubt we are in a relatively low inflation environment for the foreseeable future (whether you believe it is going up a little or down a little I'm not sure anyone can suggest it is going to double digits any time soon). The last time around (annual) inflation was roughly 7.5% when the UK property market peaked in nominal terms (Q3 1989) but actually rose to over 10% less than a year later. The two things I'd note are: 1) In 1989 people could have made the case that in the last two corrections (1974 and 1979) inflation had been 20% or more so how can prices correct when inflation is ONLY 7.5%? This argument might have held as much logic as your point today but was ultimately proved wrong. You might conclude it is not relevant but I'm sure people would point out Japan saw house prices fall with no inflation at all. 2) I actually think it is the relationship between things like inflation, interest rates, economic growth, wage growth, rental yields, house prices etc that is important rather than the nominal levels of these factors. Presumably the view is that as inflation is low then interest rates are low and therefore the burden of high interest rates is not what it was before so people can keep paying their mortgages... so no crash (something like this?). The opposite side of this coin though is that wage growth is low so the debt burden (of very high house prices) is not eroded so each new buyer of property at these high prices puts themselves into a great deal of debt for a looong time (in the absence of high wage growth to erode the impact of the debt) and finds it extremely difficult to climb what used to be called the property ladder. As much as property bulls don't want to accept it, the housing market is supported only if the bottom rung is supported. This bottom rung long along priced out the vast majority of the traditional FTB market so now it relies on BTL buying (or returning prices to levels where FTBs once again support the market). But BTL buying in the face of no capital growth becomes more and more difficult, especially IF credit starts to dry up, and actually less and less logical. I suspect wiser BTLs have seen the writing on the wall while some amateur BTLs are already being forced out of the market but many existing BTLs just continue to tell themselves it will be fine (this is a long-term investment, prices will rise again with Sipps in the Spring etc). My bet is there will be an erosion in the support for BTL and this will drive prices down as sellers realise they have to cut prices to actually sell. It seems patently obvious to me that the current situation is entirely unhealthy and unsustainable. Exactly how, why or when it will correct I cannot say but I thin the odds are very much on a correction in prices rather than the seven/eight/ten years of flat prices needed for our low wage growth economy to correct the imbalance. I think it might well play out more slowly than many people here would like but, like you say, I'll just look to stay on the right side of the equation saving and investing in the meantime.
  9. Yeah, you're right Gel, another seven or eight years of stagnation and people will be wondering what all the fuss was about. I'm not sure why you choose 2001 prices but the stagnation theory requires a Goldilocks scenario for a looooong time. Somehow I strongly doubt it is going to happen (for example, at present we are seeing inflation falling and economic growth falling, both of which point to lower wage growth... but that's OK, we can just extend the stagnation period a couple more years). It seems like a fatasist's view to me - what bulls who acknowledge there is an issue WANT to believe will happen.
  10. London Landlady, Don't get me wrong, I've never disagreed with the general view that property goes up overall (provided we remain in a healthy economy with positive economic growth and inflation) I just think it swings from boom to bust and has done so this time as well (I don't believe all the "new paradigm" stuff that tells me landlords don't need decent risk premiums any more). Buying at the top of a bubble is VERY costly to your long-term wealth. I'm not doing it. If I remember correctly you said the last time you bought was in 1999. Again, I wish I was in a position to have bought in 1999 (I wasn't until end 2001 by which time London prices had already gone silly).
  11. Indeed. And this affects indices such as Rightmove's without actually making the market any healthier. This, among other things, is why I suggest interpretation of the indices these days (positive or negative) needs to be taken very cautiously.
  12. London Landlady, Perhaps we're destined to keep disagreeing. This is another CLASSIC investor fug up - to analyse from past history not from the current position. If the property halves from here (but gains rental income) that is a FAT LOSS. Re-calculating on the assumption that you'd never made that £100k to make yourself feel better doesn't make it any more true. You'd have lost a fat amount of cash and, perversely, might THEN be sitting on a good investment (looking forward). As I told you before, making a 0% return over ten years or more in the hope that you'll do OK over 20 years really isn't very bright.
  13. If this argument had even the slightest foundation in reality can you explain why bears can even present a decent argument about not owning property? Surely there would be nothing to discuss... global property indices would be showing significant gains, trading volumes would be holding up, sales to stock ratios would not be at lows etc. You might want to stop digging sometime shortly. I've always avoided giving out personal details and plan to continue to do so (I don't really think they are relevant anyway). I was a Stoodent (studying Economics/Finance, which has given me the skills to analyse such things... even if Dogbox doesn't like the results). I now get paid very nicely to analyse such things and along with some decent investments (and not being stupid enough to overpay for property) I'm confident I'll be fine.
  14. Hmm, An impassioned response... if somewhat lacking in substance. Presumably these guys who have "done it" taught you the lesson of selling recently? If so, why do you keep coming here to tell us about your mates who are still "doing it" rather than selling up as us over-analysers tell them to? Or did their lessons say buy but you sold anyway? You really are a strange boy. Why would someone who REALLY analysed the situation in the mid-1990s have concluded that it was a bad deal? I mean house-price-to-income ratios gave a buy signal, the yield premium over the cost of borrowing was huge etc... surely an unemotional analysis would have said buy? I'm deeply disappointed that I was too young to be in such a position.
  15. Your argument just gets stranger and stranger. How can you compare TTRTR today with Cambridge University in WW2? And those landlords' yields are "juicy" provided they use some fugged up version of a yield calculation that does not take into account today's property prices. And you talk about bears' unreality? You're making an Aris of yourself.
  16. Hmmm, For what it's worth I'm not in favour of such policies. I haven't followed everything you've written but I haven't seen any reason to label you a troll (even if I don't agree with you). I don't doubt Spring is a BETTER time to sell. The issue is whether it will be a GOOD time to sell? Last year all the bulls were sure it would be but actually the market got swamped by loads of people all thinking the same. Whether there is a new bunch awaiting the arrival of Sipps next April set for further disappointment, well time will tell.
  17. London Landlady, This is another revisionist view of history. Interest rates did jump 3% in a day from 12% to 15%... in September 1992 by which time, as I've already explained in this thread, the real value of London property had ALREADY corrected by 40%... they also fell massively again the next day when Lamont (that guy with a third in Economics who got to run HM Treasury) gave up trying to defend the pound. I would contend that spike had little or no impact on the house price correction. In fact, I'm a White Wednesday man rather than a Black Wednesday man (I say that day was not a disaster for Britain but a day of liberation) and I would argue that day set in motion the elements that brought recovery. Do a search on this site, we have debated endlessly about just how high interest rates were ramped in the run up to the last crash. The answer was about 40%... not entirely different to the rises we saw recently. And that "Spring Bounce" argument of yours sounds remarkably like the one that was being trotted out on this website this time last year. Us bears joked that the "bounce" would be in the number of properties for sale in Spring. I'd say your view that most people are not forced sellers is entirely fair. However, as I tried to explain to TTRTR, this just puts us all into a surreal position where "sellers" prefer not to sell and instead kid themselves that their property is worth more than it actually is (if your property won't sell at £250k do you drop the price or take it off the market and continue to tell yourself it is worth £250k?). If the property market stops functioning properly (by allowing those who want to sell to sell) then does that mean houses are still worth what they were when you could sell? I think we are entering into a surreal, philosophical world.
  18. I can only assume that WE is a Royal WE. I'm trying to explain to you that these are two very different things with two very different sets of driving forces. Shareholders can sell any time they like so why should a board (even ignoring their own personal vested and substantial interests) vote to close the business down? If I own BT shares and think it is going to suffer for five years I can sell the shares and look to buy them later, there is no need for the business to close down to make me happy. The directors can still enrich themselves while times are tough (as Rover's management team demonstrated, even if it would have been better for others for them to have cut the losses earlier). Your analogy doesn't work. I find it strange that someone who freely admits he sold his BTL portfolio (while blatantly ramping property on this site) then argues landlords should "stick with it". Surely, by definition one way or the other, nobody should take your advice. If someone is telling me Horse A is a dead-cert in a race but I know he is backing Horse B shouldn't I conclude that he is either a liar or a fool? I think it is entirely consistent for bears to believe landlords should sell. Just because you get a good income (while losing heavily in capital terms) that doesn't make it sensible. Of course, landlords like TTRTR who do not believe prices will fall (much?) should not sell. This is the crux of the argument on HPC and nobody has a crystal ball.
  19. So, you started to become active pretty much right at the bottom of the market - well done. My point is it had been a buyer's market for YEARS (even if you were busy doing something else). If you actually see a graph of average London property prices (nominal or real terms) there is an impressive trough... it was not a V-shaped recovery as you imply, people did not fill their boots, slowly over time the market recovered before it took off again. Potential buyers had YEARS to decide whether to buy again or not, you didn't need to time the bottom of the market to the nearest week. That property bought in 1998 was a good investment long-term (if a crap investment for MANY years though) assuming you were able to ride through the downturn. Many were not able to. Without wishing to bore you too much with stats, the real £1,000 was re-gained in Q2 2001 (nearly 13 years later- that is 0% real capital return over a 13-year period on an ungeared investment). There was a lot of inflation and other things that make the nominal investment look fantastic. I'd suggest you'd be unwise to rely on it happening again. On the renting argument you are saying that the number of new renters/immigrants will exceed the number of people dying/emigrating. I believe the UK's demographics suggest there are more elderly heading off to meet their maker than newborns coming through (this has been true for some time) so it seems you are relying rather heavily on new rental demand from immigrants. This may come through... but I'd encourage you to consider the opposite side of the coin in terms of the impact all of these immigrants are going to have on the wage levels that underpin the ability to pay rents.
  20. Dogbox, If you don't mind me saying, this is an impressively dim-witted post. Can you ever imagine the chief executive of any company making a six/seven figure salary plus bonuses, share options and a fat pension payment saying "actually, do you know what, I reckon we should just shut the company down" regardless of whether this is in the best interests of its shareholders or not? Nope, he'll weather the storm and bank the money (while the shareholders pay). Of course in a BTL the chief executive is the shareholders. A strange analogy you made I would suggest. I can't even be bothered to explain why the rest of the post is rambling bollogs.
  21. Undecided, Can I ask you to go a little easy on such over-excited responses - it's just that a LOT of tedious people from websites like Singing Pig do come over here to post rubbish that doesn't actually hold up to scrutiny (so when someone sees you posting about your house and then sees you change you mind to a flat they think it is just yet another wind up). I hope you'll stay and make your opinion known (and be prepared to argue/back them up - as you seem entirely happy to do and capable of doing).
  22. Sorry London Landlady, what is it that has never happened before? Are you saying the market has never bottomed before or that when the market has bottomed before people FLOODED back in to buy so it never happened that people were put off buying property at the bottom of the market? Last time around (using the 'real' value of London houses based on Nationwide quarterly data deflated by RPI) the peak was in Q3 1988. A £1,000 (real terms) investment in London property at 30/9/1988 fell in value (in real terms) to £540 by 31/3/1996 (that is, almost half of the wealth tied up in London property was wiped out over this seven-and-a-half-year period). But you could have bought for less than £600 any time fron 30/9/1992 through to 30/9/1996 (four solid years). In fact, you could have bought at less than 5% away from the ultimate low (in real terms) for an entire three-year period. I can only assume you were not active in the London property market back in 1993/4/5 if you believe people were desperately buying up "cheap" property. I remember being very well aware at that time that people did not want to touch property. As for your "renting" argument, we seem to have found ourselves back at the same argument you couldn't stand up the last time around. I am already renting, if I don't want to buy how does that provide any extra support for the market? I'm still waiting for you to logically explain why people not buying will provide support for landlords (other than what is already there).
  23. London Landlady, When the market really bottoms MOST people (especially the average FTB) will not want to know about buying property.
  24. I love the idea that CML's best guess as to where house prices are going in the next two years (perhaps tinged with a slight vested interest) is your top piece of factual information to bash us bears with! I'd agree on the repos - we're rising rapidly from low levels (like last time around, I believe).
  25. Your view pre-supposes it is all over. The general view here is that is has started but has a LOOOOONG way to go yet. The crash of the early 1990s took something like five years to bottom out. It would nice for you to believe 18 months of static prices has sorted everything out but I very much doubt it (with wage growth of about 6% over this period I'd say not much of the overvaluation has been resolved). Apparently intelligent people argued all the way down last time that it was "all over now" - this is very much a feature of bear markets (several "false bottoms" being called). The evidence (of high levels of properties for sale, lower transaction volumes, low sales to stock ratios etc) suggests there is plenty of potential supply if prices move up at all. This is also a classic bear signal - any nascent price rises are simply met with more supply (in the stockmarket, for example, if you know a stock is priced at 100p but there are queues of sell orders in to be filled at 100.25p, 100.5p, 100.75p, 101p etc then you can take it as a pretty sure sign that prices aren't going to rise much any time soon and the slightest problem will knock the stock again as these ready sellers decide that 100p or 99.5p is better than hope of 100.5p etc). Your approach presumably means you haven't been buying for quite some time. Provided you don't end up buying at the top that should leave you very well placed.
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