silver surfer
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Posts posted by silver surfer
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I continue to believe in property as a long term investment. While the value of companies in stock markets may collapse, in local currency a decent house in a decent area will be worth having.
I understand how daunting it is for a prudent and responsible person to try and safeguard their capital. Pension funds dry up and disappear, the world is full of charlatans, and global events can conspire to leave any plans in shreds.
It's understandable why in these circumstances many people feel most secure with property, it's had a great run for the past thirty odd years and, if nothing else, you can at least reach out and touch it!
But I still believe there are risks to property that deserve some serious reflection.
Firstly, unless you have a huge property portfolio spread throughout the country, you have to distinguish between the security of the entire property market and the security of an individual property. Even though the past thirty years have been kind to property owners in general they haven't always been kind to each individual owner. A major employer can fold or relocate, like Pfizer did in 2011 in Kent, leaving the local Sandwich property market marooned, or as might be playing out right now in Aberdeen with the collapse in oil industry investment. You can suffer planning blight, such as the Heathrow runway or the HS2 rail line. Or you might encounter financial loss from a very small disturbance, the house next door gets turned into flats, you find the ceilings are insulated with asbestos, Japanese knotweed takes a hold in your garden. There are more ways to render a property unsaleable than you can shake a stick at!
Secondly, even though I'm not one those HPC forumites expecting an imminent crash in prices, I still struggle to see a plausible route where the next thirty years will be as remotely as kind to property owners as the past thirty. If I had to point to one single argument it would be this. Interest rates peaked in the 1980's, and the trend has been downward ever since. I doubt interest rates will leap up anytime soon, but over the coming decades they will almost certainly trend upwards. And that one conclusion alone will probably be sufficient to remove the prospect of material capital gains for the best part of a generation to come.
Thirdly, for me the abiding puzzle of placing all your faith in property, in particular in just one or two properties, is that in flies in the face of diversifying your risk. I used to receive share options, and even though I thought they were a pretty good long term bet I always sold them as soon as they'd vested because I didn't want to be doubly exposed to one company as both my employer and my investment. Spreading your risk should be the bedrock of any wealth preservation strategy, but the cost of a property relative to the wealth of the great majority of individuals means it's inevitably a huge number of eggs in one or two baskets.
It's your money and your decisions, and if your analysis leeds you to a different conclusion then I respect that. All I would say is never, ever let property become the default choice without investigating all the other options out there, and always try to hedge your bets so that when the inevitable upset occurs you can at least have something in your portfolio that holds its value or even grows.
Good luck!
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I'm developing huge man crush for Varoufakis,
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Yanis Varoufakis is one smart guy. His proposals seem to give the Germans the headlines they want, while showing the Greeks a route out of the austerity vice. The markets seem to admire Varoufakis too, the Athens stock market is up over 10% today. Maybe this can actually work.
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What an amazing country we inhabit, where postmen and novelty hat makers have property empires.
Get up and walk you downtrodden folk of Somalia, Bulgaria, Cambodia! Take any risk, suffer any privation, all your dreams will flourish once you cross those magical white cliffs.
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Oh how the Radio Times goes on about how funny and great it is.
Its not funny or interesting to 99% of the population who do not work for the BBC FFS!
Insular in-jokes. A sign of an bloated organisation.
When the BBC was moving to Salford a couple of BBC people I'd worked with previously called me up. They knew I was from the Salford area and (nervously) wanted to know what it was really like. My advice was little Tarquin would be fine as long as kept his stab vest on and didn't wander into Moss Side.
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Right now the lead story on the BBC web site is this,
http://www.bbc.co.uk/news/world-middle-east-31083890
It's breathlessly heralded with a "Breaking News" banner, no doubt the story is superbly researched and meticulously fact checked, but on what planet does an item about the deportation of a non-life imperilled Australian journalist qualify as a lead story?
I spent most of my working life in the commercial media sector, I knew plenty of people at the BBC and they were always just that bit out of step with everyone else. It's like when Hollywood makes a film about the inner workings of the movie industry and thinks that anyone might actually care less. But at least with a film you can choose to buy a cinema ticket or not, no one gets that choice with the BBC. We're forced to foot the bill for their own weird insider rankings of world significance.
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Poor gidiot. Dippy dippy running up to his fixed term election. Whos idea was that then?
RBS Economic Insight @RBS_Economics
UK #housing market firmly turning. Nov transactions fell 0.8%y/y, with ONS house price growth slowing in response
Maybe the drop off in transactions is a function of the election itself, in other words maybe transactions are generally depressed by the prospect and uncertainty of elections?
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Depends on your mind-set. Wouldn't work for me - in no way whatsoever - netting a fortune in some fraud or deliberate deception from a group of investors. I would be riddled with guilt, feelings of no-self worth; regardless of ability to have a mansion/luxury this and that, from the proceeds. You need a really callous streak to do it, and not to be affected from such feelings.
I couldn't agree more.
But someone as loathsome as Shastri clearly dances to a different tune, I doubt all the would be Shastri's out there will be much deterred by this sentence.
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did she pass on the savings when the original rate was 5.99% and dropped to 1.99%?
You nailed it.
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Here are 100,000 Spaniards who aren't sold on the "austerity is working" line,
http://www.theguardian.com/world/2015/jan/31/podemos-spain-austerity-rally-madrid-syriza
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Masked Tulip:
Hope’s co-defendant Raj Von Badlo, also known as Raj Shastri, pleaded guilty to an offence of recklessly making false representations to investors and a further offence of promoting a collective investment scheme without authorisation at a hearing on 22 July 2014. He was sentenced to two years and 12 months, which he will also serve concurrently.
How much of that two year sentence will Shastri actually serve? Twelve months, a bit more?
Not much of a deterrent.
So for someone like Shastri the life options are; A, live 50 years in marginal poverty, or B, live 44 years in marginal poverty, 1 year in a low security prison, and 5 years in jaw dropping luxury being fawned over by beautiful TV presenters and hailed as a commercial titan.
We're frequently told the secret of happiness is building up a rich store of amazing memories, if that's true then maybe Shastri made the right call? All in all, a five year tariff might have been a better judgement.
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waste of time
Maybe they used to say the same about Podemos? They don't anymore.
http://www.theguardian.com/world/2015/jan/31/podemos-spain-austerity-rally-madrid-syriza
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In the last ten years i have seen the most adamant HPI lovers of ten years ago do a complete u turn as their children started to enter the work place
It would be refreshing if that were the case. Sadly all I see in terms of enlightenment is a very few, and even those are keen for other people's houses to fall in price, while their own house (which they regard as genuinely exceptional because of their uniquely sensitive application of Farrow & Ball paint) is somehow spared the carnage in a real estate equivalent of the Jewish Passover story.
Ho hum.
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Foxtons had about 50 branches in 2014, 2014 EBITDA is forecast to be £46m,
http://www.foxtonsgroup.co.uk/investors/results/files/foxtons_group_plc_trading_update_20150127.pdf
I don't believe they have any debts to service, and I doubt depreciation or amortisation are all that significant in the scheme of things (how long before a desk wears out?)...so about a million quid a branch.
I guess that's pretty much the upper limit, and by their own admission it's rental business that driving any growth. So a local EA office outside of London that hasn't built much of a rental operation might be struggling to achieve a tenth of that.
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Odey's basically saying that if you drop into a recession when you're already at the lower bound then you're fighting a battle without any bullets.
Plenty of people have already figured that one out.
Let's hope central bankers realise this too, that they grasp the current asymmetry of risk, and don't lift interest rates too fast or too far.
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The age issue is interesting. If you could borrow £200K at say age 40 on a 25yr mortgage (paid off age 65) should you take the deal even if you expect prices to fall on the grounds that if you wait 10 years you'll be too old for a mortgage?
I'd never really thought of that aspect of it.
If you rented for those 25 years, at an attractive discount, and religiously invested the saving you were making versus paying a mortgage in a tax efficient wrapper, is there any possibility that you'd have enough to buy outright once you retired.
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You must have been living in or around London 2005-2010 STR not to work. Would have worked spectacularly well in 85% of the country. Almost dream timing.
Yes, I was. Plus there were some sleepless nights after the Northern Rock bank run as I had unprotected bank deposits, but as I said, that was one of the triggers that pushed me more into equities at an advantageous moment, so it wasn't calamitous, but it was a mistake. When it comes to money it's important not to re-write history to paint your decisions in a more favourable light, if you do then you'll never learn.
To make STRing work, like any shorting decision really, you need a big price fall. There's the obvious factor of transaction costs, but there's also the more subtle issue that I saw first hand during the 1989/95 crash, namely that the really choice properties that we all want (the south facing garden, the genuinely exceptional location, the absence of ill-considered extensions, etc) are rarer than hen's teeth when the market falls, so you also need to be prepared to endure a long search.
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You have my sympathies, I STR'd in 2005 then bought back in again about five years later.
I can't avoid the fact that my decision was wrong (I'd expected a slump in house prices, triggering BTL landlords to head for the exit, which in turn would have fed into a greater price decline than during 1989/95), but it wasn't calamitous. In particular it drove me to make equity investments at the bottom of the market, and it caused me to re-think my housing needs and buy a much smaller property than I would have otherwise bought, both positive outcomes.
Furthermore, I doubt buying now (either as an occupier or as a BTL investment) will prove a good investment over the long haul. I'm not expecting any imminent material price falls, but I very much doubt there'll be much in the way of capital gains either. Personally I think renting currently makes an awful lot of sense, but if you really really want to be an owner occupier then it's better to regard it as akin to a money pit like owning a boat, in other words it's a self indulgence with a cost attached rather than an investment.
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Drop in demand will do the same as rate rises.Increase in supply too.
IR's are a factor in determining the price action and not necessarily the most dominant as that can vary depending on circumstances.
Do you sense any drop in demand? I don't.
An increase in supply would be a wonderful thing, there are about 250,000 new households being formed every year but only about 100,000 new properties, so in the longer term that's something this country badly needs to address. But how long do you think it will take to magic a million south east houses into existence?
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Rate rises are one mechanism for bringing house prices down but falls are not reliant on this factor alone.
London could easily pop without rate rises and that in itself could be the factor to send the dominos tumbling.
I agree that the price of property is a function of many, many variables.
But take a few paces back and ask yourself, what are the really significant variables?
As a first approximation you could start with a simple model that has a large number of 20 and 30 somethings who would dearly love to become owner occupiers in any area with half decent jobs. They only ask themselves one question, "how big a mortgage can I afford", so for them the price and availability of credit is pretty much everything. Their decisions have a great effect on the next tier of the property market. And so it ripples out until you get to a few streets in Kensington where it has virtually zero affect.
That's a very crude model I agree, but isn't a crudely correct model likely to be more accurate than a sophisticated but incorrect model?
Which is why I don't believe house prices are likely to rise much higher versus incomes, but neither do I believe there will be any material price fall until we see higher mortgage rates. And looking right out to the far horizon I still can't see any credible expectation of higher mortgage rates.
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A strong incentive for a country to stay in the Euro is the threat of a bank run if the world thinks you're about to leave.
But what if that bank run has already happened? You can't continue to be cowed by a threat that has already happened.
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affordability, relative to earnings, is at about long term average because of record low interest rates.......... Exactly, and when rates return to a more normal figure?
Which is why house prices won't go up much if at all. Bad news for BTL and recent buyers.
But rates aren't going back to anything approaching normal for a decade or more. Which is why house prices won't go down by much either. Bad news for this forum.
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There hasn't been any price plateau in the SE
I'm not sure I'd agree with that. Here are the figures for my little bit of the SE, you'll have to click "Time" on the graph to "All", unfortunately I can't link to it.
Goes up like a train from 2000 to 2008, then from 2008 to now just bounces around with no real conviction in either direction. I've heard the argument that the property market is like a bicycle, unless there's forward momentum it just falls over, indeed that's a position I used to have some sympathy with. But I've changed my mind because I've seen the contrary outcome where property prices can go sideways for years, and in respect of the particular case of BTL landlords, I just didn't observe them jumping ship in 2008 or 2009.
I'm also not convinced that many BTL landlords are particularly sophisticated. I've spoken to quite a few and when you dig a bit deeper I've often found that their real motivation for BTL is fear and ignorance about other investment opportunities. One prospective landlord once told me, "at least if I lost money in property no one would laugh at me, but if I lost money in the stock market my family and friends would say I'd been a fool".
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When rates are initially lowered buyers can borrow more and drive up prices, but rates can't be progressively lowered indefinitely (the lower bound being somewhere above zero to allow for bank solvency). Eventually rates can no longer move significantly lower so they remain static and increases in borrowing capacity become once again reliant on wage increases. If wages do not increase then borrowing capacity remains static and prices plateau. In a low-yield speculative market reliant on capital appreciation this then sparks a crash as investors look to realise paper gains and search out higher yields elsewhere.
What do you think? Plausible?
This notion that when investors realise there's little prospect for capital appreciation they'll bolt for the door, is a very interesting one. That was basically what I thought would happen to BTL in 2005, I assumed the point of peak house prices was close and that soon afterwards BTL landlords would cash out, precipitating if not a crash then certainly a sizeable correction. Consequently I put my money where my mouth was and STR'd a south-east property.
More fool me!
One of the many lessons I learnt was that the great majority of people in this country have exactly two investment options that they're prepared to consider. Bank accounts and property. And it's in that light that your very valid point "search out higher yields elsewhere" needs to be considered. It also explains why, if you listen to BTL landlords, you'll hear the same phrase cropping up repeatedly, "it wasn't earning anything in the bank".
Ho hum.
S&p Downgrade Barclays, Lloyds, Rbs, Hsbc And Others
in House prices and the economy
Posted
Here's an article with a similar interpretation,
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/11388312/RBS-Barclays-and-Lloyds-downgraded-over-fears-government-will-not-help-them-in-next-crisis.html
If banks are on their own in a crisis then by definition they also become riskier for depositors. If you're over the FSCS £85,000 limit it's time to open some new accounts with other UK regulated deposit takers. Even if you're below the limit, if the bank goes bust you might wait for a considerable time for compensation, so a second account might still be a prudent move.
I've been an active investor for nearly forty years, and I've had my share of losses, but the scariest financial moment I ever had was during and after the Northern Rock bank run. I'd STR'd a couple of years earlier and had what was for me a great deal of cash with one bank. At the time I was frequently travelling abroad with my job so didn't have as much opportunity as I needed to open new accounts, plus I found myself at one time with my passport away for a new visa and a bank requiring my passport as part of their checks before they'd give me a new account. It was a bit of a nightmare as the prospect of a household name bank going under seemed very real.
The irony is that my biggest financial fright came not from shares or bonds, but from holding cash in the bank!