House Prices Have Dropped

[apom]

So, Buy To Let landlords with interest only mortgages are begining to look at a short term investment that was expected to yield £10,000 to £20,000 in a year and realsie that they may now have made a loss.

Perhaps only a small one, but a loss.

When considering the housing market £10,000 is not big money. But when just considering money.. it is big money.

How many short term investors were buying and selling to increase their property portfollio on a year on year basis. taking profits made to make more deposits on more properties?

so how many BTL landlords own more then one property with each one loosing several thousand this year alone?

With rent revenues not covering repayments how many BTL landlords are now struggling to keep their portfoilio and themselves solvent?

It is a slow market and this sort of gradual decline will take many months to reveal its true impact on investors.

The "No Chain" properties that are begining to appear are appearing for many reasons, this is one.

That people will be ruined by this is a shame.

I would like to see something in place when things settle that ensures that however people make money, it is not through homes again.

Let us have a roof over our heads and then let us go out and approach the world and make of it what we will.

[oracle]

Good post apom.

I elluded to this a few months aback also.I'ts nice to see a dose of reality kicking in!!!

My guess is there are still a lot of sheeple,that,just like the dotcom days....will hold out in the HOPE prices will rebound,even withstanding a loss for a brief period.

when the rise does not materialise,or the losses being incurred are becoming hazardous,they will sell en masse!!!!

an average monthly drop of 0.4% is £700 PER PROPERTY PER PCM.

...if a LL has 10 he is LOSING 7K A MONTH!!!!,it won't take long for the fear of losing to hit home.

[Elizabeth]

But according to John Wrigglesworth this in no way represents a crash. I know this because I read the evening standard.

[woody]

but don't you know? prices always go up in the long run. You have to be in it for the long term which all the btlers are ... so its all okay and just a small blip and nothing to worry about.

everyone go back to bed now. nothing to see here...

[Smell the Fear]

But according to John Wrigglesworth this in no way represents a crash.  I know this because I read the evening standard.

<{POST_SNAPBACK}>

John neglected to include inflation (2.5% at least) plus the widening asking/selling price. Looks more like 10%. Maybe even John would concede that it resembles a crash a little bit.

Throw into the mix a fact that even VIs admit - houses that are selling are of a better quality than average (dross isn't moving) and it looks like a 10-20% slide in real terms.

[BuyingBear]

John neglected to include inflation (2.5% at least) plus the widening asking/selling price. Looks more like 10%. Maybe even John would concede that it resembles a crash a little bit.

<{POST_SNAPBACK}>

Plus the fact they could of cashed in an had a no risk return of at least 4% in the bank.

[red]

...

The "No Chain" properties that are begining to appear are appearing for many reasons, this is one.

That people will be ruined by this is a shame.

I would like to see something in place when things settle that ensures that however people make money, it is not through homes again.

Let us have a roof over our heads and then let us go out and approach the world and make of it what we will.

<{POST_SNAPBACK}>

Would you feel the same pity for someone who blew 100K on the stocks market?

You will never stop people trying to make money if they see an opportunity - unfortunately for them, they don't often do the homework and will get their fingers burned. Tough luck, I say.

As I have said before, it would take a massive shift in mind set for people (in this country particularly) to see houses simply as somewhere to live...this is the shame.

[theChuz]

Would you feel the same pity for someone who blew 100K on the stocks market?

You will never stop people trying to make money if they see an opportunity - unfortunately for them, they don't often do the homework and will get their fingers burned. Tough luck, I say.

As I have said before, it would take a massive shift in mind set for people (in this country particularly) to see houses simply as somewhere to live...this is the shame.

<{POST_SNAPBACK}>

Hi Mr Bank Manager can i have a loan for 100K so i can blow it on the stock market?

Oh good evening Mr Chuzby nice to see you afain but get f*cked.

Have a nice day.

[apom]

but don't you know? prices always go up in the long run.  You have to be in it for the long term which all the btlers are ... so its all okay and just a small blip and nothing to worry about.

everyone go back to bed now.  nothing to see here...

<{POST_SNAPBACK}>

Granted prices do go up in the long run, in real terms prices oscilate around about 4 times average income.

but to believe that most BTL landlords were in it for the long run does not measure the true performance of the BTL landlords.

1: Rents do not cover costs against property bought on an 15% deposit for the last three years.

2: A good proportion of BTL Landlords would sell property as the market climbed and used the equity to generate deposits against more properties.

3: Rent not covering costs means that any money lost while renting was gathered back on a sale. Loosing £100 or even £200 a month was not much when the market was seeing 20% rises a year.

read the above points and consider what happens when a short term speculative investment does not yield the speculated returns.

There are people out there with a large amount of debt and a wealth on paper that relies on not just their investments retaining their value, but on increasing value. People who are having to maintain their debt with money from their own pockets.

imagine working a nine to five job with the income that you have, but holding down 3 properties that cost you perhaps only £150 a month each.

Thats £450 on top of your own costs.

Imagine that its more then £150 that you ahve more than just 3 properties.

Imagine that not only are you having to prop up your investments each month from your own pockets but that the price drop is eating into your deposit. Taking real money from you.. and heading toward the point where your orriginal deposit dispears and you enter negative equity.

No chain houses for sale?

Edited August 31, 2005 by apom

[woody]

sorry you didn't see the sarcasm.

[apom]

sorry you didn't see the sarcasm.

<{POST_SNAPBACK}>

Sorry.. lost on me that time

Now I do..

Does anyone remember the market for classic cars in the 80's where rusty on mg midgets were going for £20,000..

I love the specualtor...

[woody]

Sorry.. lost on me that time

Now I do..

Does anyone remember the market for classic cars in the 80's where rusty on mg midgets were going for £20,000..

I love the specualtor...

<{POST_SNAPBACK}>

My boss says "never apologize"!!! I was just in one of those moods last night.

I logged in hoping for some mega break through on the house price crash but that will never happen over night - unless Dr Bubb wants to argue otherwise? Bruno?

[Marina]

I wonder if I said to the Bradford and Bingley - can you lend me 85% of 100k please - I'll stick in the other 15% (by remortgaging my house) - I am going to invest in stocks and shares - which, over time, always go up ... what would they say?

[Smell the Fear]

I wonder if I said to the Bradford and Bingley - can you lend me 85% of 100k please - I'll stick in the other 15% (by remortgaging my house) - I am going to invest in stocks and shares - which, over time, always go up ... what would they say?

<{POST_SNAPBACK}>

They would say no, because there are too many factors outside their control that affect the value of shares.

With housing, they pull all the strings via their control of the money supply. Houses are worth whatever they can persuade us to borrow from them, and they are pretty confident that that is a large amount of money.

Edited August 31, 2005 by Smell the Fear

[Smell the Fear]

"Would you feel the same pity for someone who blew 100K on the stocks market?"

The crowd seems to believe that :

"People are NOT speculating when they are betting on houses prices".

And there is some justification in that, but in recent times:

+ They are paying more, maybe much more, to own than to rent,

+ They are taking on levels of debt that will be a strain to repay,

+ Even those that can readily afford their mortgages, may have alot of

equity, or a big deposit at risk.

"Safe as Houses" is another of those crowd mantras that inhibit thinking

<{POST_SNAPBACK}>

They are selling a story - the story that our parents have been the main characters in.

"Your daddy bought a house in 1970 for £3k. It is now worth £150k. Why won't the same happen to you?"

Unfortunately the vast majority are unaware of the intervening factors (notably rampant inflation). In all honesty, what proportion of people in the street do you think could explain the concept of compoound interest?

10%?

[apom]

They are selling a story - the story that our parents have been the main characters in.

"Your daddy bought a house in 1970 for £3k. It is now worth £150k. Why won't the same happen to you?"

Unfortunately the vast majority are unaware of the intervening factors (notably rampant inflation). In all honesty, what proportion of people in the street do you think could explain the concept of compoound interest?

10%?

<{POST_SNAPBACK}>

Can anyone suggest why house prices are as high as they are, beyond the fact that people could guarantee a short term high profit and that people were prepared to pay the money..?

Is there a housing shortage..?

New developments in Exeter suggest to me that with a shrinking population and growing housing stock that there may be too many..

Certainly there are too many currently for the people who can buy at current prices.

[Smell the Fear]

Can anyone suggest why house prices are as high as they are, beyond the fact that people could guarantee a short term high profit and that people were prepared to pay the money..?

Is there a housing shortage..?

New developments in Exeter suggest to me that with a shrinking population and growing housing stock that there may be too many..

Certainly there are too many currently for the people who can buy at current prices.

<{POST_SNAPBACK}>

Money supply. Banks are lending on higher multiples than in the past. If you want to buy, you have to compete with those who seek competitive advantage by borrowing as much as they can.

It's the same argument for why dishonest borrowing (self cert) causes price increases. The banks make the money available, and someone will use it.

These people determine the leading edge of transactions, despite the fact that they are probably overborrowing. We can't do anything about it other than call for credit controls (which is effectively what your MP letters scheme is about).

The only way to stop it is to impose strict credit controls, for credit is the determining factor in house prices.

If we were only allowed to pay cash for houses, they would be extremely cheap. Why would this be a bad thing?

The only reason is that the money supply would dry up. Mortgaging is THE major method of injecting money into the economy. Money would become a scarce resource, pushing up its value (i.e. you would get more for your money).

This screws up the perpetual growth machine that is our economy, and despite the fact that it would make us all better off, that is not allowed!

Edited August 31, 2005 by Smell the Fear

[apom]

Is there logic to this:

People growing their debt massivly has helped the economy.

People have been prepared to borrow (often gambling on the equity of their homes increasing year on year) and spend the money back into the economy.

Essentially it was taking money from the future and spending it now.

But by no means did everyone do this. It is a minority of people in this country that hold the majority of debt. It might sound harsh but they are no longer required.

What the Economy needs is for those of us who resisted massive debt to now be able to sustain a cost of living that allows a good proportion of our income to be pushed into the economy. The economy finds a ballence, it may be resisted but it is too complex to be able to avoid the simple fact that it draws towards its status quo.

So, those in massive debt need to be left to quietly pay back their debt while the economy moves back to a more "earn then spend" than the current "Borrow then spend, struggle to pay back so borrow some more" tactic

[woody]

Marina,

Why don't you go for a 105% mortgage - this is much better because you wouldn't have any risk on your 15% and you can go on a great holiday with the 5% and blow a bit on alcopops etc.

[Clouseau]

Is there logic to this:

People growing their debt massivly has helped the economy.

People have been prepared to borrow (often gambling on the equity of their homes increasing year on year) and spend the money back into the economy.

Essentially it was taking money from the future and spending it now.

But by no means did everyone do this. It is a minority of people in this country that hold the majority of debt. It might sound harsh but they are no longer required.

What the Economy needs is for those of us who resisted massive debt to now be able to sustain a cost of living that allows a good proportion of our income to be pushed into the economy. The economy finds a ballence, it may be resisted but it is too complex to be able to avoid the simple fact that it draws towards its status quo.

So, those in massive debt need to be left to quietly pay back their debt while the economy moves back to a more "earn then spend" than the current "Borrow then spend, struggle to pay back so borrow some more" tactic

<{POST_SNAPBACK}>

A recent development tho, is that (due to less social constraint) for many, bankruptcy has lost the stigma it once had - so, if many of the over-borrowed go that route, it will presumably have a knock-on effect on their creditors, thus dragging others down with them; I think it may be interesting to watch the bankruptcy figures over the coming months