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Grandmasterspank

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Everything posted by Grandmasterspank

  1. Sorry meant to write all about rates and yields. It's the spread between them that is important. I take your point about affordability being driven by debt and interest rates but...check out the affordability data per Nationwide: http://www.nationwide.co.uk/about/house-price-index/download-data#xtab:affordability-benchmarks Earning ratios are through the roof for London but mortgage affordability well below past peaks. When rates rise people will suffer but mortgages are afforabie at the moment because of low rates.
  2. Note sure you are right on that at all. HTB didn't cause the boom IMO. Have a look at the economist site on global house prices: http://www.economist.com/blogs/dailychart/2011/11/global-house-prices HPI took off across the world around Q1 2013, even in countries without HTB! IMO it was the resolution (temporary) of the Eurozone debt crises and QE3 that light a fire under global asset classes. It's all about yields in my opinion. Mortgage rates drive affordability.
  3. You might be right but I just want to keep a level head. Sick of being disapointed. One thing that did ring a bell from your post was I read allot of the new off plan new builds were sold on a tiny margin deposit with people never intending to take ownership - they just planned to flip in a couple fo months / years at higher prices. Almost like a massive futures market on new builds in London. I remember thinking this could easily implode if prices just stoped rising.
  4. BTL pay higher mortgage rates, therefore they should logically be the first movers in any crash as they are most sensitive to any rate movements. Modelled two locations in London: Wandsworth (Low yield) and Croydon (High yield - relatively). Took value and rent values of a one bed in each location from Rightmove. Assumed a 60% deposit for BTL for each location. Took best buy mortgage rate from comparison site then modelled for different base rates assuming that 100% increase is passed on. Assumed rental yield is stable. Wanted to understand two things, as rates rise: When (assuming rents stable) would each location become a cost centre rather than a profit centre to the landlord When would the opportunity cost i.e. comparable rate in an ISA be greater (assuming base rate passed onto ISA in same way). Flat cost £ 200,000.00 Croydon Rent £ 850.00 Gross Yield 5.1% Costs 1.0% Net Yield 4.1% Base rate Incremental increase Mortgage rate House value Deposit Outstanding Mortgage Rental income Mortgage costs Return net of mortgage costs Yield Net Mortgage costs ROCE ISA rate 0.50% 0 2.25% 200,000.00 80,000.00 120,000.00 8,200.00 2,700.0000 5,500.0000 2.75% 6.88% 1.50% 1.00% 0.50% 2.75% 200,000.00 80,000.00 120,000.00 8,200.00 3,300.0000 4,900.0000 2.45% 6.13% 2.00% 1.50% 0.50% 3.25% 200,000.00 80,000.00 120,000.00 8,200.00 3,900.0000 4,300.0000 2.15% 5.38% 2.50% 2.00% 0.50% 3.75% 200,000.00 80,000.00 120,000.00 8,200.00 4,500.0000 3,700.0000 1.85% 4.63% 3.00% 2.50% 0.50% 4.25% 200,000.00 80,000.00 120,000.00 8,200.00 5,100.0000 3,100.0000 1.55% 3.88% 3.50% 3.00% 0.50% 4.75% 200,000.00 80,000.00 120,000.00 8,200.00 5,700.0000 2,500.0000 1.25% 3.13% 4.00% 3.50% 0.50% 5.25% 200,000.00 80,000.00 120,000.00 8,200.00 6,300.0000 1,900.0000 0.95% 2.38% 4.50% 4.00% 0.50% 5.75% 200,000.00 80,000.00 120,000.00 8,200.00 6,900.0000 1,300.0000 0.65% 1.63% 5.00% 4.50% 0.50% 6.25% 200,000.00 80,000.00 120,000.00 8,200.00 7,500.0000 700.0000 0.35% 0.88% 5.50% 5.00% 0.50% 6.75% 200,000.00 80,000.00 120,000.00 8,200.00 8,100.0000 100.0000 0.05% 0.12% 6.00% 5.50% 0.50% 7.25% 200,000.00 80,000.00 120,000.00 8,200.00 8,700.0000 - 500.0000 -0.25% -0.63% 6.50% Flat cost £ 400,000.00 Wandworth Rent £ 1,300.00 Gross Yield 3.9% Costs 1.0% Net Yield 2.9% Base rate Incremental increase Mortgage rate House value Deposit Outstanding Mortgage Rental income Mortgage costs Return net of mortgage costs Yield Net Mortgage costs ROCE ISA rate 0.50% 0 2.25% 400,000.00 160,000.00 240,000.00 11,600.00 5,400.0000 6,200.0000 1.55% 3.88% 1.50% 1.00% 0.50% 2.75% 400,000.00 160,000.00 240,000.00 11,600.00 6,600.0000 5,000.0000 1.25% 3.13% 2.00% 1.50% 0.50% 3.25% 400,000.00 160,000.00 240,000.00 11,600.00 7,800.0000 3,800.0000 0.95% 2.38% 2.50% 2.00% 0.50% 3.75% 400,000.00 160,000.00 240,000.00 11,600.00 9,000.0000 2,600.0000 0.65% 1.63% 3.00% 2.50% 0.50% 4.25% 400,000.00 160,000.00 240,000.00 11,600.00 10,200.0000 1,400.0000 0.35% 0.88% 3.50% 3.00% 0.50% 4.75% 400,000.00 160,000.00 240,000.00 11,600.00 11,400.0000 200.0000 0.05% 0.13% 4.00% 3.50% 0.50% 5.25% 400,000.00 160,000.00 240,000.00 11,600.00 12,600.0000 - 1,000.0000 -0.25% -0.62% 4.50% 4.00% 0.50% 5.75% 400,000.00 160,000.00 240,000.00 11,600.00 13,800.0000 - 2,200.0000 -0.55% -1.38% 5.00% 4.50% 0.50% 6.25% 400,000.00 160,000.00 240,000.00 11,600.00 15,000.0000 - 3,400.0000 -0.85% -2.13% 5.50% 5.00% 0.50% 6.75% 400,000.00 160,000.00 240,000.00 11,600.00 16,200.0000 - 4,600.0000 -1.15% -2.88% 6.00% 5.50% 0.50% 7.25% 400,000.00 160,000.00 240,000.00 11,600.00 17,400.0000 - 5,800.0000 -1.45% -3.63% 6.50% Return on capital employed is c. 7% for Croydon and c. 4% for Wandsworth. Wandsworth doesn't become a cost centre until base rate hits 3.5% and 5.5% for Croydon. But makes sense to sell out of Wandsworth when base rate hits 1.5% because ISA rates higher and 3% for Croydon. Bottom line, I can't see a crash until rates rise. That said, this analysis assumes risk premium of holding property is zero!
  5. I think that data on Damiks thread is from Rightmove. Properties listed = Existing stock + New Supply - Sales Properties listed have jumped up but I think what RICS survey is saying is that this is because buyers have pulled out i.e. sales are down. New supply is stable. In London anyway. For a crash to happen we need a jump in supply. Some of my friends in London have a almost superstious view of London property. They say things like 'I'll never sell' etc. IMO we need a shock to break that mentality. People need to be compelled to sell. i.e. Interest rate rises or recession.
  6. Wonder if market stagnation and standoff is more likely than an outright crash. In London new buyers are pulling out but new instructions down too. Sellers are not being compelled to sell which is a key requirement for a crash. The overvaluation is clear but need material rate rises or a recession to tip market from it's unstable equilibrium.
  7. Surprised new vendor instructions are flat in London given the volumes we are seeing in Rightmove data. Guess that means stock is just accumulating because sales aren't going through.
  8. I have work share options coming out 1st DEC and am literally bricking it. Markets are well overvalued especially s&p could easily see them rolling over with end of qe http://www.hussmanfunds.com/weeklyMarketComment.html
  9. Yield compression. Its why holding bonds has been a winner for 20 years. Death inflation and all that.
  10. So which is the right yield? Either lpool and Brum appreciate so that yield match London or London prices falls so yields match lpool and brum. Prob a bit of both. 9% sounds frickin good when the 30 year gilt has just gone sub 3%.
  11. There going for £380k now! I've lost all reference as to what's fair value. Happens in London!
  12. In these areas gross rental yield of 4℅ is achievable (based on RM searches) therefore say net 3.5 ~ 3%. What's fair value? 6.5℅ gross gives you a one bed in Balham (where basing calcs) for £250k which feels about right to me but that would be 30% fall. Any thoughts what fair ry should be?
  13. Interesting thread (as a Londoner I f**ckin prey it's correct) - new member so appologise if covering old ground but do you lot follow the ONS value of new construction orders: http://www.ons.gov.uk/ons/publications/re-reference-tables.html?edition=tcm%3A77-330939 Stumbled across this - Have a look at 'table 6'. Tried to do a graph but wouldn't let me post pic. New housing construction orders literally off the chart, interestingly other regions across the UK don't show this uptick at all. I'm not a property guru but would imagine this would show up in the new starts with a lag of x months?! Wall of supply heading for London for foreseable future?
  14. Pretty creative stuff - thing is, it's difficult to assess the level of correlation without a bigger dataset. Does Google data go back further?
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