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VeryMeanReversion

"the House Is My Pension"

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For those people that were using BTLs or their main home as their main pension, where will they turn now? e.g. people that bought through Inside Track type schemes or just BTL'd on their own.

A few years ago, I thought that there would be a mini stock market boom after the "house is my pension" mantra would be shown to be false.

Although possible, I'm now wondering if the equity of those pre-pensioners will be so badly hit that they will be paying down debt in retirement years rather than living off any property-related income.

If house prices do drop 50% then trading down is hardly going to be worth the fees and hassle. Any equity left in BTLs would also have to be paid off using remaining equity in the main home to be able to get rid of them.

VMR.

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For those people that were using BTLs or their main home as their main pension, where will they turn now? e.g. people that bought through Inside Track type schemes or just BTL'd on their own.

A few years ago, I thought that there would be a mini stock market boom after the "house is my pension" mantra would be shown to be false.

Although possible, I'm now wondering if the equity of those pre-pensioners will be so badly hit that they will be paying down debt in retirement years rather than living off any property-related income.

If house prices do drop 50% then trading down is hardly going to be worth the fees and hassle. Any equity left in BTLs would also have to be paid off using remaining equity in the main home to be able to get rid of them.

VMR.

I have little sympathy for BTL, but quite a lot for the downsize brigade.

BTL's made a speculative investment, with risk.

Downsizers are just doing something that makes sense, and frees up larger houses for younger folks with families.... Very bad luck for them that they will have maybe 100K less today than they would 18 months ago, or in 3-5 years from today. In fact, I can see a lot of them waiting unless poor health absolutely demands it. Less houses available for the younger crowd as a result.

(and I know it's not exactly on topic, but fairly sure it's where the thread will end up)

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The problem with the downsizers is that the government subsidises them through council tax benefit. Even iof their houses are worth less many still would be better off downsizing and reducing all their bills. Council tax benefit removes the incentive. The answer is to restrict council tax benefit to a certain amount dependent on family size. If people then want to live in huge houses they will need to subsidize it themselves.

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I wonder if BTL income qualifies as income under pensions means testing, even if the capital value is dropping like a stone. Double punishment :)

That could make my day.

VMR.

Yes, but on profit, ie after mortgage and costs

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I have little sympathy for BTL, but quite a lot for the downsize brigade.

BTL's made a speculative investment, with risk.

Downsizers are just doing something that makes sense, and frees up larger houses for younger folks with families.... Very bad luck for them that they will have maybe 100K less today than they would 18 months ago, or in 3-5 years from today. In fact, I can see a lot of them waiting unless poor health absolutely demands it. Less houses available for the younger crowd as a result.

(and I know it's not exactly on topic, but fairly sure it's where the thread will end up)

Actually what people have done is fail to diversify risk due to the flawed assumption that house prices only ever go up. To be fair anyone who has paid of their mortgage over the past 25 years is probably looking at a tidy increase.

What will happen as a result of this correction is that the plethora of sunshine care old age homes will find out that their residents cannot afford to pay god knows how much for god knows how long.

Just one more business model that’s about to fall to pieces.

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depends when you retire..... But your right a long term investment is a short term investment gone wrong...

BTL was always long term .... something only 10% of people on HPC understand.

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In the next 5 years an awful lot of people, be they STRers or BTLers, are going to twig that living in this country is too expensive and that it is now impossible for them to save for their old age.

Have you seen the price of nursing homes - 600 - 700 per week. In Swansea several nursing homes are full of people from the South East of England who could not afford the prices there so goodness knows what the weekly costs are in Surrey or Berkshire.

Let's face it, how many people gross 700 per week in work currently?

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What I am seeing is a newish phenomenon of formerly fairly well off older people living in large country houses suddenly trying to sell the 'the major part' of the house but hoping to keep a wing or an annex back so they can keep on living there.

It just is not going to work. No one buys a country house to have the old owner living in the back garden. These sellers will eventually capitualte as many have borrowed againt the equity in the property. These types are also likley to have holiday homes elsewhere and a lot of these holiday homes will become forced sales.

Lets face it, houses have been used by older generations as tax free shelter for their money with massive unearned and untaxed gains for the last two decades and used it to fund a much better lifestyle than they ever earned while working. They did not need the space when their families left home but they kept the house mainly for the tax benefit and MEWed a bit here and there but now they are going to come unstuck - just like most tax driven investment booms end.

Edited by Wad

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It really worries me how many times the parents in law keep saying the house is their pension.

Especially as they dont have an actual pension.

:blink:

<_< Have you considered (or perhaps you already have!) that YOU may be their pension... :P

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The problem with the downsizers is that the government subsidises them through council tax benefit. Even iof their houses are worth less many still would be better off downsizing and reducing all their bills. Council tax benefit removes the incentive. The answer is to restrict council tax benefit to a certain amount dependent on family size. If people then want to live in huge houses they will need to subsidize it themselves.

What on earth makes you presume that 'downsizers' get council tax benefit? You have to be on benefits or have a very low income to get it. And have less than £6k in savings or other capital. Single people get 25% off but that applies to everybody.

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Yes, but on profit, ie after mortgage and costs

Apparently not all costs. A relative in this situation (retired with 2 BTLs) has been told by the Revenue that he cannot deduct mortgage fees and redemption penalties.

Ouch.

VMR.

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Apparently not all costs. A relative in this situation (retired with 2 BTLs) has been told by the Revenue that he cannot deduct mortgage fees and redemption penalties.

Ouch.

VMR.

I was told the same - just the mortgage interest can be tax deductable.

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BTL was always long term .... something only 10% of people on HPC understand.

Only long-term if you started at the right time. I think most of the recent crop of BTLrs will not see a real return in their lifetime or their childrens.

Their only claim-to-gain maybe in relation to stock market falls over the same period.

VMR.

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Only long-term if you started at the right time. I think most of the recent crop of BTLrs will not see a real return in their lifetime or their childrens.

Their only claim-to-gain maybe in relation to stock market falls over the same period.

VMR.

BTL works fine if your numbers aren't too aggressive - The main aim of most BTL investors is to end up with an additional property that is mortage free by the time they retire that has been largely paid for by the rental income.

This is perfectly achievable even at current prices. The trick, of course, is to make sure that you don't get caught out without enough money to pay the mortgage in the early years.

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I have little sympathy for BTL, but quite a lot for the downsize brigade.

Downsizers are just doing something that makes sense, and frees up larger houses for younger folks with families.... Very bad luck for them that they will have maybe 100K less today than they would 18 months ago, or in 3-5 years from today. In fact, I can see a lot of them waiting unless poor health absolutely demands it. Less houses available for the younger crowd as a result.

Downsizers are not going to downsize if they think there is any chance at all that prices will return to 2007 levels within 3-5 years. This is why many of them refuse to reduce the prices.

But do you seriously think that prices can return to 2007 levels within 3-5 years?!?!?!?!?!

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Work till you drop thanks to (StrikethroughLabour) The Americans, Iceland, short sellers, Russia and Terrorists.

*Who broke strikethrough?????*

Edited by Angry Sheeple

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BTL works fine if you buy at the BOTTOM of the market.

If you buy anywhere above half way up the curve, it doesn't work.

If you've bought a "buy-to-let" property, you were to late and are screwed.

People that were early enough bough before it was called "buy-to-let".

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Downsizers are not going to downsize if they think there is any chance at all that prices will return to 2007 levels within 3-5 years. This is why many of them refuse to reduce the prices.

But do you seriously think that prices can return to 2007 levels within 3-5 years?!?!?!?!?!

New build flats in overbuilt English city centres? No.

Old farm cottages in rural Scotland? Yes.

Everything in between? Probably, or close enough as makes no difference, and certainly close enough to make downsizers waiting that long well worthwhile.

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New build flats in overbuilt English city centres? No.

Old farm cottages in rural Scotland? Yes.

Everything in between? Probably, or close enough as makes no difference, and certainly close enough to make downsizers waiting that long well worthwhile.

You including the effects of inflation in that analysis? If so you might be right. However in real terms there's only one way houses are going over the next 5 years and it ain't up.

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BTL was always long term .... something only 10% of people on HPC understand.

Over half of all BTL mortgages were taken out in the 2005 to 2007 boom years. In other words it's the old, familiar story of the majority climbing aboard at the very end of the bubble. So will these "me too" BTL landlords make any money, even over the long term?

I doubt it.

The bubble was driven by an extraordinary combination of factors. The laws of probability suggest it could be decades, even generations, before all these house bubble causes once again fall into alignment

1. Low taxation. The 40% marginal rate has now been breached, the size of the government debt means this will quickly ratchet above 50% and stay there for a long time to come, that's all money that will no longer be available for mortgages.

2. Securitization. The parcelling up and re-selling of mortgage debt is deader than a dead thing, and likely to stay that way for as long as, well as long as anyone alive today is around to wave the history books and show how it nearly broke the financial system in 2008.

3. Easy mortgages. Now that all the Icelandic, Belgian, and Irish banks have all stopped offering mortgages in the UK, and that the government is the owner of most of the banks, it would be reasonable to expect a virtually permanent return to prudent normality, ie a deposit of over 20%, x3 or x4 income, no more self-certification, repayment only, etc. We'll soon see hordes of civil servants setting out the guidelines for sensible mortgage lending, which should keep house prices down for years to come.

4. Booming Brittania. Financial services accounted for 25% of total British corporation tax in 2007. That party's now definitely over, and with it has gone the big bonus culture that drove London prices, home county prices, and the prices of all the weekend retreats from Norfolk to Cornwall.

5. Growing household incomes. The uncomfortable fact is that for the last twenty years we've kept the myth of growing household incomes alive with at least three sleights of hand. Women joing the work force, longer commuting times, and longer working hours. All three of these tricks have now run their course, so even when the current recession is over we'll have to face up to the fact that we're actually no better off than our parents.

6. Low interest rates. Interest rates over the last fifteen years have been articially suppressed because of the largest human migration in history, a billion Chinese agricultural labourers moved to the industrial cities of the Pearl River delta. Their willingness to work for peanuts allowed interest rates to remain low without inflation taking off. That migration is now ended (if they're not making land anymore it's also true to say that, thanks to the one child policy, they're not making Chinamen either), so many economists now forecast base line interest rates will be about three points higher over the next fifteen years compared with the last fifteen years. In Britain we have the added complexity of having to sell bonds to service our debts, so our interest rates are likely to be even higher than everyone else's.

7. Landlord friendly legislation. We're currently going through a political sea-change, the type of thing that happens every thirty or forty years, and ditching the ideaology that informed Thatcher and Nu-Labour. I've already mentioned the tax increases that are part of this trend, but an even more severe change for BTL landlords will be the swing in legislation from landlord friendly back to the tennant friendly norm that prevailed for most of the 20th century. This is such a tempting vote winner (just look at the electoral maths, there's far more tennants than landlords) that we can confidently expect this during the life of the next parlament.

8. The real property winners, those who were securely on the ladder in the 70's, will soon start becoming forced sellers as they need to fund their nursing homes. In demographic terms this will be a massive exercise in price discovery as all those houses flood the market for years to come.

The bottom line is that most of BTL landlords joined the party very late, and therefore they will be losers over the short term, the medium term, and the long term. All they will leave their children is their bitter regrets, and an iron resolution never, ever again to speculate on Britain's treacherous property market.

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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