zzg113 Posted October 16, 2004 Share Posted October 16, 2004 how do you know he is heavily leveraged? have you looked at the land registry entry for the property? Quote Link to comment Share on other sites More sharing options...
housepricepooper Posted October 16, 2004 Share Posted October 16, 2004 how do you know he is heavily leveraged? have you looked at the land registry entry for the property?<{POST_SNAPBACK}> No, I found out by chance when I quizzed the agent a few months ago - pure fluke, she had his file open and I saw the numbers. Quote Link to comment Share on other sites More sharing options...
zzg113 Posted October 16, 2004 Share Posted October 16, 2004 what, she had the details of his mortgage and outgoings right there????? Is it cashflow negative? Quote Link to comment Share on other sites More sharing options...
housepricepooper Posted October 16, 2004 Share Posted October 16, 2004 what, she had the details of his mortgage and outgoings right there????? Is it cashflow negative?<{POST_SNAPBACK}> No, I only know the mortgage amount from about a year ago because this was on the file. I don't know about the terms of the mortage or other outgoings. What I am comfortable about is that since I saw those numbers, this house has probably gone down in value by 5-10%. It is difficult to say because nothing is selling around here. (Herts) Based on svr, he could easily be -ve now but I can't be sure. Since we've been here, I've been sure his number have only worked with capital growth also. We've certainly been happy just paying rent! I can't see why so many of these bulls see property as the one way bet for future wealth - past performance and all that. Quote Link to comment Share on other sites More sharing options...
zzg113 Posted October 16, 2004 Share Posted October 16, 2004 can you guess the LTV? Is s/he in negative equity? Quote Link to comment Share on other sites More sharing options...
housepricepooper Posted October 16, 2004 Share Posted October 16, 2004 can you guess the LTV? Is s/he in negative equity?<{POST_SNAPBACK}> About 80% based on property at £380 now. Makes my eyes water. I know how long it takes to save up that sort of money. BTW - the market is so quiet around here it's spooky - particularly for 'executive' properties! Quote Link to comment Share on other sites More sharing options...
zzg113 Posted October 16, 2004 Share Posted October 16, 2004 wow, even on an IO mortgage that probably isn't cashflow postitive. Is that London/SE? Quote Link to comment Share on other sites More sharing options...
housepricepooper Posted October 17, 2004 Share Posted October 17, 2004 wow, even on an IO mortgage that probably isn't cashflow postitive. Is that London/SE?<{POST_SNAPBACK}> Morning S/E - Hertfordshire As I said, I am confident the numbers don't work and that the owner noe has to look at an additional calculation of yield assuming capital losses!!!! That's the thing, so many BTL buying decisons have assumed capital growth 'thrown in' for good measure. My view is that the UKeconomy and the £ have some '30's' times ahead I'm afraid. Based on what we produce and earn, there is just not enough 'production' in the country to afford all these expensive houses and BMW X5's!! I envisage a correction period lasting several years where earnings and spending converge to something more sustainable. Those with heavy gearing on fixed assets like houses are likely to suffer. Some are fueled with pure greed in my experience but most are heavily influenced by the media or peer pressure which is genuinely very sad. I feel particularly sad for the damage all this debt will do to young people's relationships - those are investments in the country's future after all. Quote Link to comment Share on other sites More sharing options...
The Masked Tulip Posted October 17, 2004 Share Posted October 17, 2004 If house prices are now so high that they have become unaffordable, how will the same people, who cannot afford to buy, be able to afford to rent, given that the rent must cover the cost of capital for the purchase plus the landord's expenses and profit? I agree about the flaw in the new paradigm. In my part of West Swansea so many houses that were 150 to 250K 3 - 4 years ago are now 400 to 700K. When the homes were 200Kish it was only really the more successful people who could afford them or people who had bought into the market decades ago and moved up. Now, such properties are simply unaffordable even to people on very good salaries. An incredible, (I can't believe how many in fact), number of these properties are now 'To Let' so have obviously been purchased in a speculative bubble by people wishing to get in on the BTL game. It looks like alot of London money has driven this BUT... There are now so many of these properties to let in West Swansea that the rents would not cover the mortgage of the properties at the prices they were 2 or 3 years ago let alone properties purchased in the past 18 months. So, here you have people who are renting out properties... which, incidently, are mostly lying empty... and charging rents which are much less than the mortgage repayments...it don't add up. It is only a matter of time before this market collapses. It is not complicated economics - it is basic 2 plus 2! Quote Link to comment Share on other sites More sharing options...
The Masked Tulip Posted October 17, 2004 Share Posted October 17, 2004 My view is that the UKeconomy and the £ have some '30's' times ahead I'm afraid. Based on what we produce and earn, there is just not enough 'production' in the country to afford all these expensive houses and BMW X5's!! I envisage a correction period lasting several years where earnings and spending converge to something more sustainable. Joseph and his technicolor dreamcoat... or something like that Joking aside, it seems to be the way of things not just in nature but also in the financial field. Perhaps it is part of our Human Conditioning. I don't know... but historically good times in the harvest have been followed by bad times... and every credit bubble has been followed by a big downturn. Quote Link to comment Share on other sites More sharing options...
chashley1806 Posted October 17, 2004 Share Posted October 17, 2004 Very interesting report from the SMF - and thanks for bringing it to attention! Haven't read the whole report, but did read pages 35 onwards (as recommended). Two immediate comments to make: 1) Report quotes an ARLA survey carried out in Feb 2004 (when bull market was still going strong) that 90% of landlords expect to be in it for the long-term and do not expect to sell even if prices begin to fall. That's very easy to say when the market is rising and the real pain of falling prices have yet to be felt. It could be a whole different ball game when prices are falling - in particular, it would take a very, very brave investor to subsidise rents to ride out a fall in the market, particularly when there may be other investment vehicles, currently unfashionable like the stockmarket, bonds or cash that provide better returns. Indeed, sentiment can have as equally destructive an effect on the market as it has had a positive effect in the current bull market. You are in a very different culture with different investment choices when sentiment is "why should I buy today, when tomorrow the price will be cheaper?" (ie. a bear market) as opposed to "if I buy today, the price of my asset will rise and I will realise a profit" (ie. the bull market). 2) Report argues that there is a shortage of property; therefore a glut of property can not occur; therefore prices can not fall. Sorry - am not convinced! There may well be an overall shortage of property, but there's increasing evidence of a glut in different sectors of the market - e.g. buy-to-lets for FTBs currently priced out of the market. As the market is driven at the margins, it will be these sectoral gluts which drive the market down. Regards Chris Quote Link to comment Share on other sites More sharing options...
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