Interpretation - Bricks & Mortare (times 29.9.05)

[teddyboy]

Just been reading parts of the Times supplement "Bricks and Mortar" and had to read a few things twice. Not coz Im thick (although thats a matter of opinion) but because I didn't know how to interpret a comment.

I will type is VERBATIM and you decide.

P2. FOCUS ON

THE FACTS BEHIND THE FIGURES

House prices fell by 0.2% in the South East last month

The counties of Beds and Bucks were the worst hit with 0.5% falls.

House prices in Ingatestone, Essex, have dropped to realistic levels to motivate buyers. Previous overvaluing of properties has led to this reduction. (Hometrack)

WHAT ESTATE AGENTS SAY:

Prices have fallen in the past few months, improving the number of sales. However, buyers are still offering 5 to 10% under the asking price.

OK the starter for 10 - Just concentrating on the bold text. Hometrack saying what we all know that prices are overvalued. But the Estate Agents remarks could be read in 2 ways.

1) However, buyers are still offering 5 to 10% under the asking price. (They are surprised that people are only offering 5-10% under the asking price)?

2) However, buyers are still offering 5 to 10% under the asking price. (They are disgusted the people are asking this much under the asking price when they've already knocked 50p of the asking price)?

Whats your take on it - explanation 1 or 2?

2nd quezzy!

Page 21

FLAT RACE WINNERS

I presume this section is a tipsters - your on a winner here section.

Chelmsford Essex 1 bed flat for £169,995 with rental returns from £130 a week.

I worked out that on IO at 85% it would cost £566.53 2 year discounted rate 4.74% then £669.32 at 5.6%.

the rent at the starting stage would be £563.33. This does not sound like a good investment to me or am I missing something? Also where would you get any profit to maintain the flat and also put aside for the purchase after 25 years? This is IO mortgage?

My brain hurts

[Smell the Fear]

FLAT RACE WINNERS

I presume this section is a tipsters - your on a winner here section.

Chelmsford Essex 1 bed flat for £169,995 with rental returns from £130 a week.

I worked out that on IO at 85% it would cost £566.53 2 year discounted rate 4.74% then £669.32 at 5.6%.

the rent at the starting stage would be £563.33. This does not sound like a good investment to me or am I missing something? Also where would you get any profit to maintain the flat and also put aside for the purchase after 25 years? This is IO mortgage?

My brain hurts

The flat is a bad investment. At £130 a week, it yields 3.9% gross (before voids, agents fees, maintenance etc.). Only worthwhile if you think prices are going up a lot. As you point out, the owner would have to contribute to the cost of the mortgage and maintenance. Not clever.