Jump to content
House Price Crash Forum
GreenWarwick

Moneyweek Article On Property Here And In Usa

Recommended Posts

"Down at Myrtle Beach last week I spent some time nosing around a condominium overlooking the sea. With its own health spa and swimming pool, a good location and a sleek appearance it was all very tasteful.

The show apartment was 1300 square feet. Two large bedrooms and bathrooms, and the sort of generous cupboard space that UK builders always seem to think we can live without. There was a little balcony, and of course a nice fitted kitchen complete with giant American style fridge.

‘150,000,' said the sales agent, ‘......dollars.'

Three years ago, these apartments were selling for over 400,000 dollars. If it were anywhere in the UK, it would cost twice as much at least.

In recent editions of Penny Sleuth I have been explaining why I would not touch UK property investment. How the economic predicament of this country dictates that land values and houses prices must come down.

But this place is very different. These properties are now selling way below their building costs.

And I have to admit that the rental yields look very enticing. This particular flat would yield an annual rental from holiday lets of about 30,000 dollars. That is a 20% yield on cost.

Even allowing for some agent hype, this is the sort of yield that gives the owner the luxury of a handsome income while he waits for capital values to recover.

It just goes to show how delusional we are about property prices in this country. Can anyone point me in the direction of that kind of value in the UK? I'd be delighted to see it. Hell, I might even buy in.

Unfortunately, I sincerely doubt it exists. The trip to Myrtle Beach has only made me more certain: UK property has a long way to fall before I get interested. It seems that when it comes to excess, we British can put the Americans to shame."

• This article was first published in Tom Bulford's twice-weekly small-cap investment email The Penny Sleuth.

http://www.moneyweek.com/investments/property/us/housing-us-once-in-a-lifetime-opportunity-11605

The only way is down....

Share this post


Link to post
Share on other sites

Some of the yields of around 20% look good on US properties but I don't know enough about the property taxes to know if there are hidden costs.

And surely the glut of properties will force rents down?

Share this post


Link to post
Share on other sites

In the US house prices are simply reverting to the norm (2.5 times income). Its a healthy thing wot is going on over there.

Whereas we are still keeping the cadaver (housing market) alive by pumping artificial blood (debt) through its veins to make it look alive. Trouble is the pump (artifical debt instruments, smi, dodgy loans etc) is wearing out and bits are falling off the cadavar.

I am about to exchnage contracts on a gaff because I need to get settled but I sometimes wonder of the pain of renting for a couple more years might be worth it. Thinking about it.....no, I have had enoug and I awill be seeing about 30% off the top if I go ahead and there is only another 20% to go to the bottom round this way.

Share this post


Link to post
Share on other sites

In the US house prices are simply reverting to the norm (2.5 times income). Its a healthy thing wot is going on over there.

Whereas we are still keeping the cadaver (housing market) alive by pumping artificial blood (debt) through its veins to make it look alive. Trouble is the pump (artifical debt instruments, smi, dodgy loans etc) is wearing out and bits are falling off the cadavar.

I am about to exchnage contracts on a gaff because I need to get settled but I sometimes wonder of the pain of renting for a couple more years might be worth it. Thinking about it.....no, I have had enoug and I awill be seeing about 30% off the top if I go ahead and there is only another 20% to go to the bottom round this way.

The problem you have on the other side of the coin is the threat of ever increasing inflation (assuming you have cash in the bank to buy a house with - which I imagine in your case is true :) )

Share this post


Link to post
Share on other sites

In the US house prices are simply reverting to the norm (2.5 times income). Its a healthy thing wot is going on over there.

Whereas we are still keeping the cadaver (housing market) alive by pumping artificial blood (debt) through its veins to make it look alive. Trouble is the pump (artifical debt instruments, smi, dodgy loans etc) is wearing out and bits are falling off the cadavar.

I am about to exchnage contracts on a gaff because I need to get settled but I sometimes wonder of the pain of renting for a couple more years might be worth it. Thinking about it.....no, I have had enoug and I awill be seeing about 30% off the top if I go ahead and there is only another 20% to go to the bottom round this way.

I thought you were exchanging a couple weeks ago, hope nothing is wrong.

Share this post


Link to post
Share on other sites

The problem you have on the other side of the coin is the threat of ever increasing inflation (assuming you have cash in the bank to buy a house with - which I imagine in your case is true :) )

Ever increasing house price inflation?

Share this post


Link to post
Share on other sites

Ever increasing house price inflation?

I assume RealistBear has a substantial deposit (perhaps it will be a cash purchase) which is being eroded away by inflation. Once that is factored in plus the rent he is paying plus the negative situation that renters face in this country etc etc

Share this post


Link to post
Share on other sites

I suppose it is a trade-off for RB between the rent and the money in the bank getting no interest... and the slow fall of prices...

I know other HPCers, myself included, in a similar position... which is a good position in some regards... but it is also a scary one...

Share this post


Link to post
Share on other sites

aye and presuming people will still holiday and at what price.would have thought holiday yields a less stable measure than say resi yields.

+1. From what I've seen, estimates of holiday lettings (weeks per year) are often wildly optimistic. Especially when someone's trying to sell you something. Weekly rates can sound very high and people who don't do their homework may be daft enough to imagine you can multiply all that lovely money for old rope by not far off 52.

Plus, unless you're on the spot to do it yourself, you have to factor in all the management, weekly cleaning, changing linen, etc., which all add up to a much bigger percentage of the rent than ordinary residential lets.

Share this post


Link to post
Share on other sites

+1. From what I've seen, estimates of holiday lettings (weeks per year) are often wildly optimistic. Especially when someone's trying to sell you something. Weekly rates can sound very high and people who don't do their homework may be daft enough to imagine you can multiply all that lovely money for old rope by not far off 52.

Plus, unless you're on the spot to do it yourself, you have to factor in all the management, weekly cleaning, changing linen, etc., which all add up to a much bigger percentage of the rent than ordinary residential lets.

Sounds lovely :blink:

http://en.wikipedia.org/wiki/Myrtle_Beach,_South_Carolina

Myrtle Beach Bike Week, also called "Harley Bike Week" is a week-long motorcycle rally that started in 1940 and attracted as many as 200,000 visitors to the city every May. Black Bike Week, founded in 1980, takes place the weekend around Memorial Day Weekend and is the largest African American motorcycle rally in the US and attracts as many as 400,000 visitors. The event was created in response to a history of discrimination against African-American visitors and riders to Myrtle Beach and the Grand Strand Area.

The Myrtle Beach government created 15 new laws aimed at preventing all sanctioned motorcycle events within the city in response to controversy including accusations of racism by African-American riders during their event and complaints of lawlessness and poor behavior during all highly attended events. Several lawsuits by the National Association for the Advancement of Colored People (NAACP) against Myrtle Beach businesses were settled with agreements that discrimination cease, compensation be given to some plaintiffs, and employees be given diversity training. The NAACP suit against the City of Myrtle Beach was settled in 2006 without the city paying damages, but with the agreement police would use the same traffic control rules during both the black and the white motorcycle rallies.

Share this post


Link to post
Share on other sites

I assume RealistBear has a substantial deposit (perhaps it will be a cash purchase) which is being eroded away by inflation. Once that is factored in plus the rent he is paying plus the negative situation that renters face in this country etc etc

That money will still be eroded by inflation when sunk into property.

Share this post


Link to post
Share on other sites

I assume RealistBear has a substantial deposit (perhaps it will be a cash purchase) which is being eroded away by inflation. Once that is factored in plus the rent he is paying plus the negative situation that renters face in this country etc etc

If you have a set amount of money in the bank to be used to buy a house the only inflation that matters to it is house price inflation. The cost of fuel, bread, etc is irrelevant.

If you went out to buy a pair of trousers would it worry you that a shirt had gone up in price?

Share this post


Link to post
Share on other sites

If you have a set amount of money in the bank to be used to buy a house the only inflation that matters to it is house price inflation. The cost of fuel, bread, etc is irrelevant.

If you went out to buy a pair of trousers would it worry you that a shirt had gone up in price?

His deposit is still being eroded by inflation.

Share this post


Link to post
Share on other sites

Some of the yields of around 20% look good on US properties but I don't know enough about the property taxes to know if there are hidden costs.

And surely the glut of properties will force rents down?

Yes, beware of community fee's of $10-20-30k in Florida

They can skew the economics completely, should be posted on the adverts though.

Share this post


Link to post
Share on other sites

Sounds lovely :blink:

http://en.wikipedia.org/wiki/Myrtle_Beach,_South_Carolina

"Myrtle Beach Bike Week, also called "Harley Bike Week" is a week-long motorcycle rally "

The highest concentration of Doctors, Lawyers and Dentists in the country. Harley riders are notorious for being rich middle class posers who turn up with the bike towed in a trailer. I've seen bikes that are several years old advertised for sale with less than 100miles on the clock.

Share this post


Link to post
Share on other sites

His deposit or cash in the bank to buy a house outright is not being eroded by "inflation" only house price inflation can erode it.

I don't know why so many people fail to ubderstand this? According to the land registry HPI is -1.7% my house savings are earning 3% so in real terns it's 4.7% currently.

CPI/RPI is only slightly relevant in the fact that as living costs rise you may have to reduce the amount you can add to savings each month. But in terms of a lump that is to be used purely for the purpose of buying a house no other inflation matters it's no getting eroded in any way. In fact at the moment it's appreciating.

Share this post


Link to post
Share on other sites

"Down at Myrtle Beach last week I spent some time nosing around a condominium overlooking the sea. With its own health spa and swimming pool, a good location and a sleek appearance it was all very tasteful.

The show apartment was 1300 square feet. Two large bedrooms and bathrooms, and the sort of generous cupboard space that UK builders always seem to think we can live without. There was a little balcony, and of course a nice fitted kitchen complete with giant American style fridge.

‘150,000,' said the sales agent, ‘......dollars.'

Three years ago, these apartments were selling for over 400,000 dollars. If it were anywhere in the UK, it would cost twice as much at least.

In recent editions of Penny Sleuth I have been explaining why I would not touch UK property investment. How the economic predicament of this country dictates that land values and houses prices must come down.

But this place is very different. These properties are now selling way below their building costs.

And I have to admit that the rental yields look very enticing. This particular flat would yield an annual rental from holiday lets of about 30,000 dollars. That is a 20% yield on cost.

Even allowing for some agent hype, this is the sort of yield that gives the owner the luxury of a handsome income while he waits for capital values to recover.

It just goes to show how delusional we are about property prices in this country. Can anyone point me in the direction of that kind of value in the UK? I'd be delighted to see it. Hell, I might even buy in.

Unfortunately, I sincerely doubt it exists. The trip to Myrtle Beach has only made me more certain: UK property has a long way to fall before I get interested. It seems that when it comes to excess, we British can put the Americans to shame."

• This article was first published in Tom Bulford's twice-weekly small-cap investment email The Penny Sleuth.

http://www.moneyweek.com/investments/property/us/housing-us-once-in-a-lifetime-opportunity-11605

The only way is down....

That's just great for him, I presume that he lives for free in the UK and doesnt age at all?

Meanwhile, the rest of us cant wait forever because we are still paying a mortgage to have a roof over our heads ( the landlords mortgage) and are not getting any younger. The older we get the less of a window there is for mortgages and every year of paying the lanlords mortgage adds another year to our own.....when we eventually get one.

It isnt as simple as saying " prices have to come down so I'm not buying in" because if he lives here then he is already paying in.

Share this post


Link to post
Share on other sites
It seems that when it comes to excess, we British can put the Americans to shame

Well that's a quote to cut out and keep.

As far as I'm concerned, the UKs obsession with property & shafting the younger generation shows easily as much greed as any American :ph34r:

Share this post


Link to post
Share on other sites

His deposit or cash in the bank to buy a house outright is not being eroded by "inflation" only house price inflation can erode it.

Ok I guess what I mean to say is his deposit is appreciating at a slower rate. I think we all got the gist :)

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.