silver surfer

One part of the reason is that banks struggle to make money when interest rates are low (fees on mortgage arrangements are rising because that's about the only way a bank can make any money on the loan). The expectation has now switched from the decent possibility of a small interest rate rise to the near certainty of an interest rate fall. So now bank profits and bank dividends are looking very shaky. The commercial property companies, are being hammered because one of the most profitable parts of their business was London office space. In the current climate no one will be looking to rent fresh London office space, indeed the prospect is that as financial institutions relocate staff from London to Europe then there will be a glut of vacant London office space. House builders are getting a pummelling because, after five or more years of fast rising profits, the expectation is that the party's now over and they won't be able to shift their stock without cutting prices and their land banks have cost them more than the profit they can make from building on them. Look beyond these sectors and the share prices of many companies are currently rising. Anyone earning their money mainly in a foreign currency is doing well, as are stodgy companies like utilities with largely recession proof earnings.

+1 I spent most of my working life in the commercial media sector, and I've no particular love for the BBC. But every poll that measures the affections of the British people seems to say there's a Holy Trinity of the NHS, the Monarchy, and the BBC. When the chips are down they're the three institutions that most people cherish, respect and defend.

We won't get a clean break with the EU, our new relationship with the EU will be much more similar to that of Norway or Switzerland rather than say Canada or New Zealand. Of course it will be dressed up as being nothing at all like Norway or Switzerland, but in reality it'll be pretty close and will trade free movement of workers (albeit with a curtailed benefits clause and a break with the European Court of Human Rights) for a financial services Euro passport. The Conservatives will close ranks and claim the new arrangements, represent a meaningful change. "New UKIP" will be born (providing a job for Farage when it's clear no other party will let him near the levers of power) and they'll tear chunks out of the Labour vote on a platform that the will of the people has been ignored, but they won't win enough seats to threaten the Tories or to hold the balance of power in a hung parliament. The only enduring legacy will be that never again in our lifetimes will any politician take a punt on the direct democracy of a referendum, it's strictly parliamentary democracy from now on out.

I don't have the stats to hand but I'm pretty clear in my mind that the starting place and date of investment endeavours has a big impact on the final outcome. I recall analysis of people who started their investment journey in 1980's Japan or in late pre-revolutionary Russia or in 1920's America, where it didn't have a happy ending! I started work in the early 1980's and was investing from day one, consequently I made most of my daft, early mistakes in a benign environment that was lifting all the boats...even the stupid ones like mine! More significantly there's probably a psychological effect, if you lose a lot of money with your early forays I suspect most people would retire to lick their wounds and forever after confine themselves to Post Office Savings Accounts. If you make out like a bandit in the early days it stiffens your resolve to stick it out through subsequent bad patches. Investing is really a very long game played out over decades, it's absolutely not about short term wins or losses, and unless you think in those glacial time periods you're unlikely to make it to the finish line.

Mixed bag. On equities I got absolutely mullered on British Land and Barclays, but increases from the likes of Unilever, BAE, BAT, and AZN were fairly modest and not enough to compensate. I did have a last minute hefty hedging bet on Brexit (even though I voted Bremain), which was useful. I almost didn't place it as I was following the Forex markets during Thursday and saw sterling rise, which I guessed was probably based on results from the private exit polls. The FTSE tracker was a big pile of nothing, down on the day, up on the week, so what. Another lucky escape was that I sold Persimmon a few months ago, chiefly on the grounds that the biggest customers of the house builders are BTL landlords and S24 will progressively throttle that over the next few years. Surprisingly some of my more adventurous smaller picks, like Vesuvius, Manx Telecom, Telecom Plus, and Empiric, were all a bit of a wash, and didn't seem that badly affected by the FTSE 250 and AIM turmoil. Roll it all up and I was down nearly 5% on the day. Meh, I've had worse days before and no doubt I'll have worse days again. If Barclays and BL cut the divi I won't feel so phlegmatic, until then I'll stick it out.

Good answer, I can't disagree with any of your points. When I think of the BTL landlords I've met there at least two groups of them who will be strongly impacted by all this. First is the home owner moving property who decides to keep their previous property and let it out, so more Keep To Let rather than Buy To Let. I know a few in this category, they've bought the myth that property is a low risk way of acquiring a pension so they hang on to their previous property with a sizeable mortgage and pat themselves on the back for being prudently on top of their future finances instead of recognising that they're actually just lazy opportunists. However, this person will now find their inertia comes at a price. Going forward it will start to cost them money every year to "just hang on" to that previous property, and many will be unwilling to see their current spending crimped so will finally get around to selling their previous property. The second is the person without any pension provision, often self employed or a contractor, who hits their 40's or 50's and realises they either start saving seriously or face working until they drop. If the first group are lazy then this group are greedy. They want the pension but they don't want to pay for the pension. So the BTL fairy story holds giant appeal. Load up with debt, get a couple of sh1tty properties, and capital appreciation will deliver them a pension in twenty years time while still allowing them to run the Range Rover Sport. Phew, problem solved! But now S24 changes everything. Instead of being cash flow neutral their BTL will start to cost them money every month. But they spend everything they earn so they're now faced with a choice. Either ditch the Range Rover to keep the BTL dream alive, or ditch the sh1tty BTL properties and keep the Range Rover pretension alive. Many of these puffed up buffoons will choose the Range Rover and just hope and pray that something eventually turns up to plug the yawning pension hole...which of course won't happen but that's tomorrow's problem.

I'm puzzled. Right now the mood on this forum seems gloomier and more resigned to further HPI than I've ever known it. However, there's recently been a momentous change to the commercial reality of BTL. Over the next few years highly leveraged BTL landlords will progressively see their cash flow decimated. The key word is "progressively", I'm not expecting a sea change overnight, but the balance of purchasing power between BTL landlords and FTB's will inexorably ratchet in favour of FTB's from now until 2020. Furthermore, the flow of credit to BTL landlords is also being severely restricted. Throw in the seasoning of 3% stamp duty and the removal of the 10% wear and tear allowance, and you've surely got a reliable recipe for a fall in house prices? Surveyors seem to grasp this. The latest RICS report has professional surveyors, the group that's probably closer than any other to the real ebb and flow of the market place, now expecting wide spread price falls across most of the UK. Like I say, I'm puzzled. I'd have expected the tone of this forum to be currently one of eager anticipation, but that's not what I'm reading. Perhaps people thought S24 would impact instantly like a light switch, and it's now been dismissed as a damp squib? But it was never going to play out like that, it'll be a slowly growing snowball that will take a couple of years to build up full momentum, there may even be occasional reversals along the way (I'd guess the vote will swing to Bremain and that could trigger a very short and modest increase in prices), but over the next thirty-six months the deeper trend of price decline will surely reveal itself. It's obviously your personal decision to buy or continue renting, but before committing to the decision why not take a couple of hours and re-read the posts concerning the S24 legislation? It might encourage you to stick it out for a bit longer and by then perhaps the downward price trend will have become a little more apparent?

Yes, I've changed my mind, from a position of long-term flatlining prices to a position where declining BTL will probably trigger a meaningful price correction. Changing your mind is just the sensible response when the facts change, and the facts have now changed mightily, -disappearing tax relief for mortgaged landlords -no more automatic 10% "wear and tear" allowance -much stricter standards for granting BTL mortgages -the BTL tax amnesty probably signals a forthcoming BTL crack down by HMRC Given that BTL constitutes the majority of UK property transactions I can't see how any rational observer could believe that this package of changes will not have an impact. However, I'm still sceptical that we'll see big changes quickly, I've been caught out before by the persistence of BTL landlords, their stubbornness in 2007/8 largely scuppered the benefit from my STR move, so I wouldn't be surprised if it's two or three years before this all becomes apparent on Rightmove. However, even if the wheels grind slowly it's now baked in, so slow or fast I'm pretty much convinced a material price decline will happen.

You've nailed it. Whenever the market hiccups (up or down) I have to remind myself that the capital value of my equity portfolio is entirely irrelevant. I'll never be forced into selling shares at any particular moment in time, so all I care about is the dividends. And when I chart those dividends over many years it's surprising just how boringly stable they are. Many people flinch from stock market volatility, but the dividend stream that it throws off really isn't all that volatile. Anyone who's self-employed or has a large bonus component to their job will likely have a much more erratic income.

I'm sure that describes some BTL landlords. But the ones I most commonly meet don't have a "spare wad of cash built up over (a) lifetime". More typically they're people in their 40's or 50's, often self employed or contractors, with minimal pension entitlements and expensive tastes. They've fallen out of love with their careers and are laying awake at nights worrying about retirement. They realise that seriously saving for a pension will put a massive dent in their current living standards, so they swallowed the BTL fairy story. Where by they get a couple of properties on very low deposits (so no "spare wad of cash"), the rents cover the mortgages, and in twenty years time the capital gains allow them to segue into a retirement full of Caribbean cruises and Range Rovers. I was at a neighbour's barbecue last night with a few people there who fitted this description to a tee. When I asked about their thoughts on the recent BTL tax changes it was surprising how cloudy their awareness really was. "Is it really law, I thought it was just being debated in parliament?". "Yeah, I've heard about that but I leave all that stuff to the accountant". "If I followed every rumour in the newspapers I'd drop dead with worry". Actually not that surprising, they just don't want to think about it so they ignore it. And for the time being they can ignore it. Reality won't force itself into their calculations for another year or two, but when it does there'll be absolutely no avoiding it. That's why I'm not expecting much of a BTL exodus this year, maybe not even next year. But beyond that there'll be thousands, maybe hundreds of thousands, of BTL landlords who find themselves paying out increasing sums of money they don't have to keep their retirement plan afloat. Only then will they be forced to confront the hard facts of the new BTL reality. Instead of it being a leveraged purchase of a lifeline of retirement hope, it morphs into being a very expensive punt on a dubious and uncertain prospect. My guess is that by 2018 or 2019, 2020 at the absolute latest, the brute force of monthly cash flow will drive a stampede to the BTL exit door.

Brexit or Bremain won't have much influence on the tsunami of grief that's about to hit the BTL market. No matter what happens at the polls in June BTL landlords will still feel the squeeze from higher taxation, a more aggressive Inland Revenue, tighter mortgage restrictions, and higher stamp duty. So given that BTL seems to have been one of the few areas of vigour in a property market otherwise characterised by dismally low transactions, it's difficult to see how UK house prices can do anything other than fall no matter what our European relationship looks like. I'm not expecting the collapsing BTL card to be fully or even significantly played out in 2016. I STR'd back in 2005 on the expectation that a dip in house prices would cause BTL landlords to head for the exit and turn a dip into a crash. I was wrong. BTL landlords proved more dogged (or simply went into denial). But by 2017 and 2018 BTL highly leveraged landlords will be discovering that they can no longer afford to hang on. It won't be a matter of hunkering down and ignoring reality, they'll be facing bills dropping onto on the doormat that they simply won't be able to pay, and what's more some of those bills are likely to be from HMRC!

I disagree. I think the forthcoming tax changes will absolutely cripple demand for BTL in it's current guise. Apply the realities of reducing tax deduction for mortgage interest to the kind of BTL mentality evidenced here http://www.property118.com/interest-only-vs-repayment-mortgages/ and you can see what an almighty kick has been delivered to BTL's balls, Bad news for BTL landlords, but very good news for first time buyers and commercial operators such as this http://thestudenthousingcompany.com What's more the really uplifting message from that article is that if I'm wrong, and "rampant demand for buy-to-let investments" doesn't cool, then "policymakers could take further action". How wonderful is that! So if by some slim chance this kick in the balls doesn't work, then the government will swing their size 12 Doc Marten back and take aim for another mighty blow!

+1 When calculating the Lifetime Allowance for a company final salary pension, the Inland Revenue multiplies the annual pension by twenty. Which hugely understates the true value of a final salary pension, it would be more accurate to multiply the annual pension by forty, fifty or even sixty depending on the exact terms of the benefit.

Good for you. I retired when I'd just turned 56. I'm kicking myself now because if I knew then what I know now I'd have retired much much earlier. Sadly I was a scaredy cat, frightened that I'd run out of money. What I've found is that you can live really well on far less than I'd assumed, and there are still casual earning opportunities out there to keep the pot topped up.

Makes sense. Thanks for that.

I had no idea. What about all the Brit pensioners in Spain, does that mean they're currently paying EUR 1k per head?

I doubt we will Brexit but if we do then you're probably right, however what about medical/educational costs? Surely in the event of Brexit most Brits domiciled by the Med are just a stroke or a car accident away from penury?

I have had a good run, like so many boomers. Where I differ is the realisation that it was just generational luck rather than evidence of personal achievement. I'm still HPC pro, but I differ from the mainstream of this forum in at least two ways. Firstly I recognise that any particular outcome I desire may not happen, it might or it might not, so best to confront and plan for both results. Secondly I try not to weave moral issues into the narrative. Not only are the outcomes I desire not guaranteed, but neither are the outcomes I deserve. Bad things happen to good people, and good things happen to bad people. Loathsome BTL landlords may die in penury, they may not. Patient, honest citizens may get their dream house at a fair price, they may not. There's no invisible and righteous hand guiding how things play out. My indignation and outraged sense of natural justice won't have the slightest effect one way or the other. Self build? More a big re-build during the 1987-95 crash. Lot of learning from that experience but that's another post. Russian friends are generally much reduced, both in numbers and in circumstances. Only three or four that I'm still in contact with, and the past year hasn't been particularly kind to any of them. One ditched her husband and came to the UK but subsequently lost her job, one stayed in Moscow but now has a much smaller job, one went to Switzerland and fell ill, another rediscovered the Russian Orthodox Church I suspect there's a back story to that but I don't know what it is. I've had a couple of trips up to Manchester recently, which if my memory is correct is where you are. Changed out of all recognition, and very much for the better, could have been Vienna or Milan with all the trams and restaurants and beautiful architecture! I can see why people are clamouring to live there. Good luck, I'm not a frequent visitor here anymore but I always enjoyed your posts.

I STR'd in 2005. My family and friends thought I was stupid. When 2007 happened they thought I was the cleverest man on the planet. But then the months passed and, in London and the South East at least, not much actually happened. Family and friends stopped palpitating and went back to the stupid verdict. Eventually I gave up on the waiting game and bought back in, I think it was at the end of 2010, I can't remember exactly because I didn't actually move in until I took early retirement at the end of 2012. One thing I did was radically re-think how much of my money I wanted tied up in a non liquid, sitting tax duck, asset class like domestic property. So instead of buying the biggest property I could afford I bought the smallest property that fitted my needs. Family and friends re-affirmed the stupid verdict. I'm out of the game now, I'll neither STR again nor will I trade up if a crash comes, my partner and I are happy where we are in a smaller house. But I still have a kind of proxy STR play running, or rather a proxy No-Buy play. I've two children rapidly approaching first property age, my ex wife and I both banked enough money to get them each a starter home and the calls to buy are getting louder by the day. I'll hold out against that in the hope that something unforeseeable happens and UK interest rates get cranked up, it's not impossible, just I doubt it's very probable. Still, weirder stuff has happened so who knows.

How many years of their own house building does this represent? This article suggest the top ten builders are nearly 50% of the market, http://www.building.co.uk/grip-of-big-housebuilders-loosens-on-uk-market/3054581.article So in round terms they're sitting on land equivalent to about 8 years of future building. Given the enormous time required to steer projects through planning permission that doesn't seem unreasonable.

I didn't do particularly well with my 2015 predictions, not bad but no cigar. 2015 Predictions 1. No party can achieve a majority in the May elections, still less the 325 or so seats needed for a reasonably stable working majority. So two predictions, first there'll be another coalition. And secondly, despite the new fixed term parliament legislation, there'll be another election before 2020. 2. Base rates will not exceed 1% in 2015. 3. Nominal UK house prices won't move up or down by more than 2% during 2015. 4. The US dollar will continue to strengthen. 5. FTSE dominated by Eurozone developments in 2015. If Mario Draghi prevails with meaningful QE then the FTSE will top 7000, more likely he won't and the FTSE will fall below 6000 on fears of a Euro exit and subsequent break up. 6. Despite oil prices increasing in the second half of 2015 inflation will remain well below the 2% target. Let's see if I can do better in 2016, 1. Nominal UK house prices -2% in London, +3% outside London. 2. Peak pessimism occurs in spring 2016, after that Oil, Commodities, and FTSE 100 stage small recovery ending year slightly higher than they began. 3. The US has a particularly bad tempered Hilary vs Donald election, Hilary wins (but failing health means she doesn't make a second term). 4. If there's no UK interest rate rise soon then it'll be too late to have one before the European vote in the second half of 2016. If we vote to leave then there won't be an interest rate rise at all in 2016. More likely we'll vote to stay in and there will be a single, quarter point increase in the autumn. The most obvious black swan that could overturn all this and see interest rates move up sharply is a balance of payments crisis, but on balance I don't think that will happen, at least not in 2016. 5. The tide really turns against small BTL landlords, and BTL moves towards being a big player enterprise with pension funds and big builders taking a stake. 6. China doesn't collapse, but makes progress on rebalancing and new, more modest growth rates appear secure. India becomes the new China. Russian-Western relationships slowly thaw. Brazil becomes a basket case and the IMF are forced to intervene. 7. A frontline country, maybe Mexico, maybe Columbia, throws in the towel on fighting the war against drugs for the benefit of the US and legalises all drugs. 8. UK RPI finishes 2016 at about 1%.

What I really took from The Telegraph article was the section at the very end, which describes the really parlous situation many BTL landlords would be in if and when mortgage rates increase. Many would quickly find themselves being unable to take any income at all from their properties. With flat or falling property prices, zero income, and little prospect of the situation turning around I can see vast numbers of landlords ruing the day they ever bought into the BTL dream. How tremendously wonderful!

Investors Chronicle is part of the FT and behind the same pay wall.

Mr Bearbull is the longest running columnist in The Investors Chronicle, over the years he's made me a fair amount of money so I listen carefully to what he has to say. This week he argues that Brexit would be the key to a HPC, particularly in London and the South East. His logic is that ultra low interest rates have obscured the deeper reality of income/price ratios (6.8x for England & Wales, not the absolute highest but far above average, however London is 14.1x which is an absolute record). In the event of Brexit foreign city workers would move from London to Frankfurt and Basel, overseas property investors would rethink the UK's "safe haven" status, and there would be a run on sterling which would drive up interest rates. He further argues that even though these three factors would trigger a relatively quick correction the unwinding may well continue longer as "the City's faltering performance means that the UK's lousy balance of payments are further weakened and it becomes increasingly difficult to persuade foreigners to fund the deficit". He then adds a third level scenario in which a government, desperate for post Brexit growth, sweeps away planning regulations. Put it all together and he envisages, "By the close of 2017 house prices across England and Wales are 25% lower than two years earlier. In London prices fall by 40%, and in Kensington and Chelsea,...,prices halve." I always tend to pay more attention to someone arguing a case against their own personal interest; so when a long established, boomer columnist; with an audience of boomer BTL landlords; and a reputation for sober, measured predictions, writes something like this then it's especially worth reflecting on.

They're fairly similar to your projections with a couple of exceptions. I run a boat, moored in a south coast marina, which isn't cheap; so let's park that separately for these purposes (but worth noting that I end up eating a lot of fresh fish for free, Mackerel, Bass, Bream, and the occasional Cod, plus I've now got a few informal boat maintenance contracts with London based boat owners which has reduced my own forecast running expenses substantially). In addition, the house is largely heated with log burning stoves (plus hot water in winter) and that's a good example of a substantial saving, as living near The New Forest it's basically free. Even the annual chimney sweep required for insurance purposes gets done on a barter basis, I provide 30kg of conger eel steaks for his dogs and he cleans my chimneys and signs off the insurance documentation. House maintenance is more than covered within your 1% allowance, even using premium materials like linseed oil based paints for exterior joinery. A lot of the happy surprises can't be really planned for, but they occur naturally when you immerse yourself in the local community. For example I became friendly with a guy who works for a small group of local hotels and restaurants. Through him I met a local pig farmer (one of his suppliers) who rears "pannage pork" (google it, it's delicious!) I ended up building him some bee hives and in return got a freezer full of pork and sausages. We had an impromptu summer barbecue party and I was telling this story to another person, net result more bee hives this time traded for honey and two Twickenham rugby tickets. And so it goes on... Although it's all a bit crackpot and laissez faire I'm astonished at how reliable these semi-commercial, providential, occurrences have become. Having spent my working life in a buttoned down corporate environment it's been a revelation that much of the world seems to operate on this "you scratch my back`" basis. I think the key though is my previous comment about immersing yourself in the local community. As a born networker I don't have to work too hard at it, but I did think to myself when I read your plans about Malta that I might struggle in that situation, where language and cultural issues might not allow me to interact so broadly with all the people who have become the gateway to a good life lived for surprisingly little. Good luck!