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House Price Crash Forum


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About geranium

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    HPC Poster
  1. Here's the full report Except for London, the South-East and Scotland, most areas don't look that strong. I know RICS is VI but they did produce suitably dismal reports when the market was weak in mid-2005.
  2. Not cheap at all but Foxtons newbuilds must be the worst value properties imaginable on the market.
  3. The moral is always to avoid Foxtons and newbuilds. I'm not saying that makes Islington affordable but it's a good starting point. This one works out at £572 per square foot whereas £500 per square foot it closer to the current asking average I think for a 2-3 bed in Islington (house or flat) at present.
  4. Please tell me ... think I should be able to check it out. What is HPC so afraid of? Unless the new one is much better of course.
  5. I sold because it was a nightmare property (neighbours from hell) - he may be lucky with these, he may not. Ex-council is a big risk in that way. Painting could happen soon I guess - depends if the freeholder (the council) remembers to do it or not. Ex-council does have a problem of OTT bills once in a while, although this block is small which limits the risk. Transaction costs tend to be added onto the mortgage so I included those in the cash flows. My £6363 included 1% stamp duty (if it's still 1% sub £250k anyway) and £1k for fees. An agency is managing the property so he'll be earning quite a bit less than £2k per annum but he will be cash positive for as long as he can get that rent. I agree the real yield for investment purposes is the rent divided by the price you could sell it for, not the price you bought it for. However, in cashflow terms, the yield based on what you paid for the property is the important thing if you have a mortgage. I suppose the key thing is that I didn't lose out much by selling! I did offload a lot of risk onto him ... partly because he didn't read the papers when he signed. If he had read them, he wouldn't have bought it
  6. Good analysis RealistBear. City employment seems to be a key factor for the housing market in London. In 2003 the market was very weak in London and not surprising when thousands lost their jobs in the City. Now recruitment is tight. Headhunters call often and salaries are rising. Bonuses should be good again this year. It won't last forever - City downturns are deep and ruthless when they happen - but it hasn't ended yet. It's not a conspiracy that the weak market in the Midlands and elsewhere is not being reported, it's simply that the journalists are based ... guess where... in London! Remember 2005 - plenty of doom headlines as the London market was still weak and people in the rest of the country were probably thinking "uh?" what are they on about? PS: Where is the "other side" that people on this site keep referring to?
  7. I doubt he spends 388 hours a year or 38 10-hour days a year managing it, it's probably just an irritant once in a while. The outside painting every 10 years is only for metal staircase railings and front doors in the block - the windows are aluminium framed and don't need painting. After 7 years with no paint it really didn't look any worse than when I bought it. I suppose if he bought the flat with mainly borrowed money then the sub £2k per annum just feels like free money - provided he has full occupancy and no problem with neighbours or the tenants - and he probably thinks he's in it for the capital gain rather than the net yield. The risks in his case were probably worth taking although I did think he was mad at the time.
  8. So a buy to let mortgage costs about 5%? Painting only happens once every 10 years - if that - so he might avoid it completely, as I did over a 7 year period. So I'll forget the painting in the equation. I suppose if he's a higher rate tax payer and he owns 100% of the flat the opportunity cost is closer to 3% or £6363 =0.03*((210000*1.01)+1). I included the transaction costs in that. But that's unlikely and I know he needed a mortgage. He'd have to pay tax on his £1940 per annum rent as well but there are some offsets on that and I imagine a lot of BTLs don't pay any tax on their income, even if they should. My feeling is his "investment" will more than washing its face most years. So far he's made a decent capital return on it as he could probably sell for closer to £250000 today although of course that could always change in the future. I still don't regret selling it to him though - I didn't want the pain of being a landlady (in a block full of problem neighbours) for what I thought at the time would be a very slim benefit and the risk (at the time) that the value of the place would fall. It probably did fall in 2005 when the market was dead in North London even if it has picked up since. I remember spending most of 2005 feeling relieved that I sold when I did.
  9. Why does 6% gross yield offer a negative return? I STR'd in 2004, selling my 1 bed flat in North London to a local restauranteur who wanted a buy to let property. I sold for £210k. He rented it out immediately. I recently noticed the flat advertised for rent again at £250 pw with one agent and £260 pw with another. I guess he may get a slight discount to £250 pw? I worked out, including the costs he must have paid to purchase the flat, that his gross yield will be about 6% (assuming it's rented 52 weeks a year) and thought he must be quite pleased with that. =(245*52)/((210000*1.01)+1) The service charges are low eg. £300 per annum although as an ex local-authority flat it can occasionally incur £1-2k charges for common parts painting. The flat is very near the tube giving direct access to the City and West End in around 10-15 minutes so should rent fairly easily. As far as BTL investments go it was probably one of the better options to go for. As an ex LA property it is the sort of flat that is great to rent but maybe not so attractive to own and live in. This is reflected in the price and helps the yield. The flat was recently and resiliently renovated (granite kitchen top, wipe-clean diamond hard paint on walls) so he shouldn't have to renovate in the next 3 years or so. He did have to buy some basic furniture, but no more than bed + sofa + table + chairs) as it is offered furnished. What would his buy to let mortgage cost? Naturally I'd be quite pleased if you can show me why his return would be negative!
  10. If you're a higher rate taxpayer then your return in a low risk account will be 3% net or thereabouts. If you have a significant deposit (sounds like you do) and you're a higher rate taxpayer, buying a decent-sized (eg 4-bed) house can be cheaper than renting that house and it'll be easier to find one you'd like to live in, probably. It's only when you have a small deposit and you want to buy smaller property that it can be cheaper to rent. Anyway, do the maths: 1. compare whatever return you'd be hoping to get from eg cash (3% if you're a higher rate taxpayer, 5% if not, or equities, if you're prepared to take that risk) with your view of how the housing market will perform over the longer term (for as long as you hope to stay in that house). Equity (your deposit) in the house needs to rise at the same rate or faster than your invested cash would if you were to STR. Granted, you need to guess whether you think the housing market will go up more or less than 3% (or whatever rate you're using) per annum and the answer to this is unknowable. 2. compare the interest only on the mortgage you would need (include stamp duty, fees and any renovation costs) to buy the house with the cost of renting a similar house If you can pay the mortgage and are not too worried about job security, then it might seem sensible to buy the country house if, as above, you're a higher rate taxpayer with a good deposit, the numbers stack up on mortgage interest versus rent and you believe the house will rise in value by 3% per annum for as long as you will be there.
  11. According to Hometrack reports back in 2005, when the London market really was weak, buyers were negotiating an average 7% discount from the asking price.
  12. Nice and polite - this makes perfect sense to me. Wasn't there a Nationwide (or maybe Halifax?) report out about a year ago, pointing out that the gap between London prices and rest of the UK was the narrowest it had been for years? This might have suggested that London was undervalued and the rest of the UK overvalued. The London market has been rising strongly for a year following 3 years when nothing much happened and the market in the rest of the UK carried on rising. A recovering equity market and the bonuses/employment that go with it helped the London market recover. If you look at recent RICS reports in detail you'll see very weak markets in eg. the Midlands and a very strong market in London. The London housing market seems to have been quite dependent on city fortunes for quite some time now. I'm not sure that a 25bp interest rate rise is enough to calm the London market given the support from very tight City employment and Clapham South seems quite popular with City workers because of the Northern Line.
  13. Thanks, Jason. I guess people can ask what they like but if there really is going to be an interest rate rise, they might be well advised to price attractively and get out while they can.
  14. Has anyone managed to find the press release on Rightmove's website? I can't find it this month.
  15. Look at the May RICS survey - East and West midlands markets not in good shape - more prices going down than going up.
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