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royalvictor

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About royalvictor

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  1. Equity withdrawal is kind of a misnomer. It's only equity if the profit (or loss) is realised, first house sold. Until then, it's nothing but another secured loan. Why do BTL'ers not get this rather than kidding themselves how rich of equity they are. Rather silly.
  2. Matey of mine release equity from his E14 newbuild (well, 7 years old, def. not period, his is Ballymore) to get a second as BTL towards Stratford. All just before the March deadline. The new place is supposed to make 5k gross (assuming no fees to EA, no wear/tear/repair budgeted) for an interest-only mortgage (which say HSBC or other high-street lenders why shy away). Don't get the attraction on a mere 5k return on borrowed money as upside with 10 times its downside. Released equity is quite misnomer, it's nothing but a secured loan.
  3. http://www.standard.co.uk/business/fears-over-luxury-property-bubble-spread-to-city-as-flat-prices-slashed-a3220056.html Canary Wharf officially denying .. it gotta be true!
  4. My daily observation on the DLR to/from work: Ballymore's newest & finest, the New Providence Tower (Blackwall) caught my eye. This development complex has two parts, a lower round block and a tower. I have been counting windows with lights on around 7-8pm every evening now. Must be another ghost village. Perhaps 20% seem occupied. During my morning commute, I have not notices more folks getting in at East India or Blackwall over the past 1 year, so pre/post completion comparison supports this. On City Island (Canning Town), some asking price reductions have started. Smallish though: 20k perhaps. Still overprices by 100k considering the square footage you can get in the outer parts of London in the West. How many units have been sold, no idea. I called up the site, asking how the development is progressing as I cannot see visible progress. They said phase 1 would be completed, they're now on phase 2. Just looks like a major construction site to me, why would anyone move in the completed parts? Zero infrastructure, all the shops and bistros the high gloss brochures suggest, hmm, not seeing any of that ... Does anyone have any info on the Royal Wharf and the Asian Business Park with these new developments? Or the Hoola and the Royal Gateway development? The latter is a total joke. The close vicinity around it would make me run!
  5. We are unlikely to see rates at 6% anytime soon. Perhaps I am taking ye olde boy to literally, but didn't he repeat the mantra that even if rates will eventually and gradually be increased they'll remain below the long term average. Market is currently not pricing in or expecting anything of that sort the next 3 years forward. Higher rates in the forwards will eventually make remortgaging more expensive and - without growth of disposable income - some over-stretched households may no longer be able to roll the mortgage forward. But the labour market news have so far been quite upbeat. Everything is possible, and higher oil prices for one, but I think the heat will come from somewhere else. My guess: new regulations to deleverage or restrict BTL or something along these lines might be introduced and some banks might be a bit too earger implementing these rules, restricting access to funding. As I see it today, I think Carney & team might actually be able to deflate the bubble without causing much carnage. Then again I might be all wrong. Who knows.
  6. PS: We should not be complaining. the short end of the yield curve remains flat, helping anyone with a mortgage. As long as the forward rate are low, the borrowers can remortgage at a relatively lower rate. Mind you, that is 50 to 70 bp higher than current spot, so households with a shoe-string mortgage operation going should keep this in mind...
  7. my expectation/position: rates unchanged. Don't think the Fed would be concerned with their credibility. They have reason enough to keep them on hold for the time being. The Chinese would be seriously ticked off once the USD were to appreciate, they would have to manage their peg to the downside, devalue again that is. Given what's been and is still going on in the Asian equities markets, the Fed cause a short term Treasuries sell-off would cause unneccessary havoc. Best to avoid for the time being. Carney & team is playing cool without losing credibility their side.
  8. Apparently, the news of price reductions at BPS have not reached China just yet. Knight Frank as up-beat as ever. Article dated Sep '15 not Sep '14, a touch behind the curve so it seems: http://www.scmp.com/news/china/money-wealth/article/1855880/london-property-developers-eye-chinese-buyers-disillusioned "Its first phase went on sale in 2013, but only a few units were bought by Chinese investors – a state of affairs the developer hopes to change. It plans to tour Beijing, Shanghai and Hangzhou from mid-September to search for more Chinese investors. 'Now we are in phase three, and are really starting to explore and trying to service the need of the people in mainland China,' said Rob Tincknell, chief executive officer of the Battersea Power Station Development Company. 'Other than Shanghai and Beijing, we are now looking at second-tier cities including Guangzhou, Hangzhou, Shenzhen and Chengdu,' he said."
  9. Has anyone of you guys been following City Island by Ballymore in Canning Town? http://www.londoncityisland.com/ It's next to the tube/DLR station. I pass daily by but start to think they might be stalling development. But I may well be wrong! The layout is a funny one and I cannot see too much from the DLR when passing by. I start to think it takes an aweful long time to do a bit of digging, nothing new gets erected. Might give these guys a call as naive prospective buyer to dind out ...
  10. ok, I could not find the actual service charges but I guess they are higher than in Canary Wharf, so I took £4k pa, ground rent and repair unchanged at £250 and £500 pa respectively. Rent I took £1,700 for a 1 bed but also assumed that 1 month goes to the agency. Interest only mort. for 25y term. case: £100k dep., MINUS 8.96% pa gross, the interest only mort. is prohibitively expensive at £1,900 pcm. case: £200k dep., 3.14% case: £300k dep., 2.97% case: £400k dep., 2.74% case: paid fully in cash: 2.54% Full cash does not even beat Gilts, haha. The catch is, if for one reason or another (hehe) the property value is < £550k, I wonder what banks would do when after 2 years the owner would have to remortgage. I presume to realise the negative MTM as loss, could become a forced seller, forced into realising the loss before he can "sit it out" after say 5 or 7 years until the property is back at £550k.
  11. What I mean is this: what is the optimal deposit size (or loan size) to achieve the highest rental yield. Brief comparison: £400k property price (let's assume fair value), £1,300 pcm taking into account EA fees etc, all other outlays (service charge, ground rent, upkeep/repair). Interest-only mortgages, 25y term, 2y fixed taken from Google compare. Case: £100k deposit, free cash flow £4,730 pa would be 4.73% gross yield Case: £200k deposit, free cash flow £9,806 pa would be 4.90% gross yield Case: £300k deposit, free cash flow £11,822 pa would be 3.94% gross yield Case: 100% cash, free cash flow £13,850 pa would be 3.46% gross yield Paying the condo fully in cash (no leverage), or even 25% LTV is suboptimal, and so is 75% LTV. By "properly leveraged" I did not mean to suggest that 10% or 5% deposit would be "best", that would be highly leveraged (and insane for my risk preference). This is of course highly simplistic, a proper discounted cash flow spreadsheet would have to get worked out with interest rate and property price appreciation (or depreciation) scenarios to incorporate the risk element.
  12. if it was paid fully in cash I'd agree, and propbably most were. If it was properly leveraged, shouldnt the gross yield not be applied to the deposit?
  13. two of my favourites: Ballymore's River Island: http://www.cornwell.com.au/projects/content/london-city-island/images/City-Island-01.jpg Hoola: https://media.licdn.com/media/p/1/005/094/097/0ebb219.png or better yet, the Royal Wharf: http://2.bp.blogspot.com/-HV2SwRWbZcU/UxCxUC3OnWI/AAAAAAAACuk/5qDWiVTq0ng/s1600/Royal_wharf_London_Urproperty_sg.PNG anyone heard of the lovely Asian Business Hub? Any info on what the status is there? Little press coverage I can find: http://www.constructionenquirer.com/2015/04/15/go-ahead-for-1-7bn-royal-albert-dock-scheme/ nothing in recent weeks. I bet a bottle of Cheval Blanc (or Blue Nun) that the business hub will get "delayed" at best if not scrapped.
  14. I feel a big short coming on as well, at least in that segment. Any 1 bed for 500k is overpriced by at least 100-150k easily (purely argueing from a rational perspective using 60k average salary and 5-times multiple and assuming some decent sized deposit). As disclaimer, yes, this is calculated on the high side. Local demand = 0. Either some ill-informed arabs or other foreigners snap them up at some point or they'll stay empty in the foreseeable future. If we assume they had been bough mainly outright with 100% cash to "park" or launder it, well, these kind of investors I reckon could live with a 20% loss. I mean if they have been hanging around waiting for other buyers, the owners may not be in a rush to sell at all. If they are actually let out, rents may or may not neccessarily come under pressure. As a cash buyer I would be less stressed out on my running cost than if I were to finance on a silly shoe-string as BTL, so no real need to push up the rates to cover my higher costs (increasing service charges, rising interest rates and alike). That's one possible outcome. But who knows, perhaps they'll be "forced" to sell given new taxation rules etc. Here I had SW London in mind. East London I would argue - and please correct me if I am wrong - is a different ball game. There will be some serious oversupply and these investors are second tier at best. The ones jumping last onto that freight train. Even if one could no longer sell Battersea and SW as "prime", at least its in the West, but hoods like Stratford, Bow, Hackney, Walthamstow, Woolwich, Rotherhide, Canning Town, the Asian "business hub" ... "gentrification" my eye, with asking prices of 400k as well, that's where I see the real bubble. To and from work cranes everywhere. They look so nice and flasy in glossy brochures till a run down doner shop and poundland is found, not quite the buzzing shopping mile and flashy eateries the EA made their Asian buyers believe... Even today the Stratford shopping mile I find absolutely horrible. The few times I had to buy something there, I loathed it every time. This ain't Selfridges or Jermyn St by any stretch of imagination. I am struggling with this whole concept of gentrifying the East. In 10-15 years perhaps like with the Docklands. I was playing around with some NPV calculation earlier today. A 400k condo BTL bought just 50k over market value and letting its value appreciate by 5% pa, increasing the costs (interest rate and service changes), bad news for the BTL investor. It's NPV negative for the first 5+ years, perhaps even 7 years depending how much was paid in excess of its fair value. That could be a reason BTL'ers getting forced into selling in 2-3 years from now when they have to remortgage. Till then not sure what'll happen.
  15. Here's a little gem worth looking at for current market expectation of forward rates: the Eurodollar market. No, not EUR/USD but the the 3m Libor deposit rate futures. That's the interbank market and the CME futures contract is highly liquid into the forwards. With a bit of math you can convert the 3m futures rate into a forward rate, annualise it and simply add a basis point spread on top to get the floating rate for mortgages. Eye-balling the numbers I'd say the retail guy on the street is paying 70 bp premium. Perhaps one of the most neglected futures markets from a mere observational point of view and a nice alternative to tracking gilt futures. Bonds I would use more for inflation expectation. Here's a link: http://www.cmegroup.com/trading/interest-rates/stir/eurodollar.html Covered interest rate parity tends to hold in the nearbies, so you can translate the Dollar Libor rate into a Sterling equivalent.
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