Tired of Waiting

He was on radio 4, a few days ago, saying that he wants to sell the lot. He said that his equity is about £50 million. But he had also said that he has 700 properties, most in or around Maidstone, and that he bought most of them after the year 2000. He also said that he usually bought most of them them with near 100% finance. Now, £50 million of equity in 700 properties mean about £70k equity per property. I find it a bit difficult to believe. He also admitted that he can't sell them retail, or he would collapse the local market. And he said that he has a deal almost completed, to sell the lot, wholesale, to an investor. But... if so, why is he wasting time talking to the BBC??? If he is selling the lot now, it is because he saw a lot of his equity evaporating in the last 2 years, and is afraid of losing it all. Why is he talking to the BBC??? My guess: free advertising. He does not have a deal yet. Nice. FTBs of Maidstone, your time will come soon! Enjoy it! Good luck guys! But do wait as much as possible, OK? It will get much, much cheaper over there!

You are right. We are re-balancing it. We'll rent in a better location. And we'll pay more attention to our social life than to properties. Thanks.

Solid DATA, from Primelocation, this month: In the past year rents in "Prime London" fell by 20%. But that has not been enough, and stocks of empty units are going up fast - almost trebled in the past 2 years, and doubled in 1 year. Increasing stocks will keep pushing rents down, increasing pressure on Buy to Lets. With unemployment high, the tendency will continue, further increasing pressure on BTL. Where do we think this will lead ? . . . s

Of course. But how? When? And what is the best way to minimise our individual losses? Perhaps it helps if we start trying to see the diferences between our UK crisis, the American, and the global. The USA had a housing bubble about 20% overvalued, and we had about 30%. The rest of the world didn't have much. They were affected by reduced exports to us and USA, but I think will recover first, by dealing more with each other, in a few years (3-5?). The USA has an economy much more dynamic and diversified than us, and I guess will recover next (4-6?). But we had nothing but a huge bubble - not only in properties, but on finances, and consumers also, fuelled by debt. Our whole economy was a bubble. And we have only the City. Our national productivity didn't grow at all in the past decade, to justify that "GDP growth". Think of its 2 main fundamentals: infrastructure and educational level of the labour force... It was all debt based. It was all a bubble - the whole thing! In short: yes, we are doomed. It will take a decade or more to get back to our 2007 GDP. And we will be for ever behind countries we thought were "similarly rich" - Germany, France, BeNeLux, Scandinavia, etc. (I have to stop here - work calls. Sorry.)

I think you are right. All this extra money must, will, at some point, cause inflation. Fundamentals will alwys prevail - in time. "Sentiments" and "expectations" only influence the short term. The question is WHEN fundamentals impose themselves over "expectations" - the timing of it? This is indeed the most extraordinary moment in the economic history of the world. It is MUCH more complex than the 1930s, due to the huge interventions by governments now. Years ago, in the 90s, I was working with international development and I had to research the Brazilian debt crisis of the 1980s. Despite Brazil having only about 1% of the world GDP at the time, it affected the whole world. Now, the current crisis was triggered by the "de facto" bankruptcy of the whole American and British financial systems! These 2 countries account for about a third of the world GDP! I can't imagine what will happen next. And apparently nobody can. The "The Economist" had an article recently trying to analyse the situation, and concluded that we can have either hyperinflation, or deflation, or anything in between! But I still think they are wrong though. We can't allow ourselves to be confused by all this "smoke and mirrors" talks about the complexities of markets and finances. I think traders get caught up in these short terms movements and instruments and lose the broader, longer term picture. The bottom line must be: too much money around, for the same amount of goods (or even fewer goods) = inflation! I think...

You are welcomed. << fed up being in rented >> We too! Tell ME about it! But how much do we have left per year, after taxes, and after livings expenses? How much is our DISPOSIBLE incme? Ours is surprisingly small. Little mistakes in properties mean the disposible incomes of many years! The government is pumping billions in the economy, is managing only to stop the fall, and won't afford to do it anymore. The correction, back down to a normal level, will continue in a few months. <<eldest leaving for Uni in 2011>> Get your buying timing right, and when he leaves Uni in 2015 you will have positive equity enough to help him with a deposit. He will prefer that. If you buy now, when he leaves Uni you will be in negative equity. Properties will never, in real terms (compensated by inflation), go back up to that 2007 peak. That was not NORMAL. That was a bubble. <<euro savings account>> That was a summary. Savings are always safer if diversified. The Euro is easy and safe, but we shouldn't put all eggs in the same basket. We should put in a group of currencies from countries not/less affected by the properties bubble, and in good macro-economic position ( = government finances). Up to now my list includes Switzerland, Canada, Australia, and Noway. But I don't know yet the practicalities of investing there, and the security, or legal/government protection. I have to do more homework on it. Commodities may be good too, as they are naturally protected against inflation, since they are products, and not currencies. Gold is over-bought already. Perhaps future contract of commodities (Rice? Popular in Asia). I have to research more as well.

Dear PaG, I'm very sorry to hear that. But I have very good news for you. It may be a bit difficult to believe it, but it IS possible (and kind of easy), to be happy. I'll tell you how here. I know how, as I started dating my now wife in mid 1997, started living together in 2000, and got legally married a few years ago, and we are still very very happy with each other, and could not even think how we would live without each other. So, it is possible. And you do need a partner in life to be happy. Essential. Nobody can do without it. Scientifically proven. Now, I do have a practical, realist side as well, and I do think it helped us to build this happiness. Yes, you have to "construct" it, as you do a garden. Sorry, sounds tacky, I know, but the garden analogy is perfect, as you build a living thing. First thing you need is convergence of interest = work together = help each other = a partnership = synergy = mutual respect = equality. For that to happen, it helps a lot if both work, and both earn about the same. That is what you will have to look for in your next partner - a partner. On the other hand, you will have no chance of happiness if you want to be "the boss", in control, "the bread winner", the "head of the household". Forget it. Well, that is enough for now. I'm starting to guess here. And I don't even know if you want advices. Just trying to help. Hold in there. Things will get better. Maybe even better than before.

Sorry. I forgot to mention the source: primelocation. You'll have to click the centre top tab "prime lettings index", from the page below: http://www.primelocation.com/house-price-index/

1) See the stocks in prime London going up in the chart below. What do you think this will do to rents next? 2 e 3) The government is borrowing (mostly from the BoE's presses, and some from abroad) and spending £200 billion this year, 12% of GDP. They will not be able to keep doing that. Even if they wanted. They won't afford it. The BoE will not risk hyperinflation, as they can't scare foreign lenders. This mini-boom is artificial, and unsustainable. If serious inflation takes hold then interest rates will go sky-high, and the market will crash in real terms (nominal terms are for idiots). Properties didn't even start to crash. We are entering the worst financial crisis in a century. And you think it is all over already?! My god... If you want to stay in properties, please do so, by all means. You deserve it. But don't give bad advices to others.

The biggest landlord in Maidstone wants to sell all 700 houses there (BBC, 16 Sept 2009). He can't sell them retail, as it would crash the local market. He has to find some big investors, and keep them renting. Will he find it? he says he is "almost" there. True? - - - "Bbc r4: Bye bye buy to let Couple put 700 properties up for sale Fergus Wilson and his partner Judith were once the golden couple of the property boom. After resigning as teachers from schools in Kent they went on to build up a buy to let property empire which, at its peak it included over 900 properties with an estimated value of £250m. But they now have decided to sell up. Go to this link, and go to 37 mins in http://www.bbc.co.uk/iplayer/b006qps9/Wednesday/console

Distribution of residential property ownership in Great Britain (Source: HMRC)

You were lucky. Don't buy yet. Prices will crash badly on the next few years. As will sterling as well. Invest your money in some Euros savings account, and in a few years you will buy a similar property for 20% less, and your Euros will be worth 20% more pounds. Just rent for now, and watch the crashes. Good luck.

Ok, I agree re. fees - I will have to pay them at some point. But you still can't see that rent and interests are both an identical form of "waste". Actually they are virtually identical forms of renting capital. (If I were to buy this ugly flat I would pay exactly the same in interest alone to the bank as I now pay in rent to the landlord.) The difference is that with interests you rent an amount of cash, and with rent you rent a building. They are both "rents". To calculate which one will be a better deal depends on how much you will have to pay for each (in rent and interest), and how much you think these 2 things (buildings or sterling) will be worth in the future. I know they will both go down. So, I'll rent (a better place) for now, and invest my savings in Euros (and a few other currencies). And I'll buy in a few years, at the bottom.

Well done. Capitalism does have a Darwinian fairness after all. I will only buy at the bottom. Meanwhile, I'll invest our savings in Euros.

In the next years: (1) Rents will go down; (2) Interest rates will go up; and (3) Property prices will crash. To keep a Buy To Let will be a lose-lose-lose proposition. (And all this is very obvious. It does boggle the mind that someone can't see this.)

Yep. Not to have capital is very, very expensive... (Is that why they call this system "capitalism"?!)____ ;-) Same problem if you "buy", via a mortgage though, as the interest part of your mortgage (which is most of it) is as much a "waste" as renting. As are all the fees (legal and financial), stamp duty and commissions. Usually, the most important point when comparing buying Vs renting is capital gain or loss. The only good moment to buy is at (or at least near) the bottom.

These yields are happening in London, right now, as the prices of flats fell already, but rents didn't fall as much yet. But stocks of flats to let doubled in the last 12 months (data from primelocation). So, rents will soon fall as well.

Rubbish. Yield must be added to future capital fluctuations (gain or loss) before deciding what to do. And capital fluctuations will affect the whole flat - not only the equity. If the flat is worth 235k, then just a 4% annual fall in the flat value (-£9,600) will wipe out all the yield. Properties will crash, sooner or later, depending on government policy, between 2010 and 1014. (Sterling will also crash, but IN-dependently of government wishes...) . Anyone with a property should sell now, invest the equity (not in sterling - invest either in commodities or in foreign currencies), and rent for a few years.

Thank you for your posts thedebtisreal, they were very useful, confirming some other sensible advises in this forum. I was just going to reply to your previous message when I saw this one: (1) So thats only eight months of saving. (...) Well, our savings are not that "linear", as our income varies, and our expenses too (example: we could not resist to a holiday last month...) We are trying to balance some savings for the future, with some "living the present". (2) Houses will fall slowly I know. Thanks to this government pumping loads of our tax money to support high housing costs... (3) nicer rental place. Look to get a big discount on something priced much higher. Do you think we can negotiate rents even if we are dealing with a letting agency? We should get very good references, as we have been in this flat for almost 6 years now (unbelievably...), and have always paid the rent on time and were very careful with the flat (not a single nail). And we have good credit histories. What do you mean by a "big" discount? 5, 10, 20%? Cheers

Thanks for your post PaG. You are right. Others advised us on the same direction: "rent a better place, and enjoy yourselves!" Absolutely right. We have decided to do just that. We've also realised that the aspect that depresses us most here is the location, and not the size, or the fact that it is rented. We are already looking for a better place to rent. . . . But I must confess that I still find very difficult to pay £800/month, or more in rent. It seems that this is what you have to pay around here, in West Sussex, to get a nice place. We are paying £615/mo here. But I am trying hard to change myself, and be less tight-fisted ! Lets see. I've just bought the local paper. Let see if I can rent directly from an owner, saving agencies' fees. Thanks again for your post.

But it IS tragic! The bursting of this huge properties prices bubble (mainly in the USA and UK) undermined the banks in both countries, and then caused this financial crises in both countries, and then it affected the whole world! Our government has tried to blame the financial crisis for the fall in properties prices, but it was the other way round! Overvalued properties were given as collaterals for loans, in this vicious circle of ever greater debts and ever higher housing "prices" (housing "costs" for you and me - who need a home). This bubble bursting generated a global recession. Imagine how many jobs lost, how many families in deep trouble - millions! And how many families affected to the point of rupture - divorce?! And in poor countries a recession is much much worse. Over there unemployment means hunger. My God, it IS tragic!

If the stock really went up like that, then it will surely force rents down. The question becomes: by how much? The answer depends on what economists call "price elasticity", or, how sensitive the price/demand is. In some products, a small change in price results in a big change in demand. In other cases, it doesn't much. It depends on competition, need, etc. I guess people need to live somewhere, but they can share, go back to parents home, downsize, commute, etc. And when someone loses a job, they have no choice. Besides trying to think, one could also see what happened in previous crashes. Anybody has any info/idea? Cheers

Exactly. A very good, and very clear report. And Timm is right re. RBS total lack of due diligence. It was very ironic.

"But Britain is a crowded island!"... ... has been a common popular argument to explain high housing costs. However, countries with population densities similar (Germany) or greater (Japan, Netherlands) did not have housing costs increases similar to Britain, if at all. (Source: ABM AMRO report, April 2007.) (Besides, even in the USA people prefer to live in high density areas, such as New York, LA, Chicago, Miami, etc.)

Yes! Thank you. I figured out that I had to click "Insert Image", instead of "Insert Link", and that I should then paste the whole address of the "Direct link to image" It worked. Thanks. Yes, I did find that chart very very interesting. They don't explain their methodology, so we can't be sure it is accurate. But -IF- it is, then this will bring some serious falls in rents. To predict how much, we would have to know the "price elasticity" of rents there (as economics calls it). Any chart about that around?