Venger Posted March 24, 2014 Share Posted March 24, 2014 Oh look it's yet another person deciding to go heavily into more property-investment, out of their own free will, to try and gain personal advantage, paying such prices. These must be the UK's "savers" and such investors owners not at risk of letting real savers buy and split up their portfolios at lower prices in the future, as such savers would be over-rewarded, and must lose all their savings instead. http://www.dailymail.co.uk/money/mortgageshome/article-2586872/I-got-buy-let-investing-right-second-time-Landlords-best-rates-home-loans.html 'I think the property will give me the best nest egg for the future' The right mortgage will not be much help if you buy the wrong property, which is why successful buy-to-letters do their homework. Second-time investor Fiona Brown, of Market Deeping, Lincolnshire, researched her latest buy. ‘I rent out an older property in Hertfordshire but decided that a new home would be more attractive to tenants and cost less to run,’ she says. Fiona, 36, who is director of a motor sports engineering business, targeted new builds in central Cambridge, where prices are tipped to rise 23 per cent in the next five years. ‘I chose a two-bedroom flat in the Kaleidoscope development because it’s close to the city centre but surprisingly tranquil, which I thought tenants would like,’ she says. She was right. A young professional couple snapped up the tenancy to her £387,000 flat the moment she offered it, and she is hoping they will stay for the long term. ‘I don’t currently have a pension and I think the property will give me the best nest egg for the future,’ she says. Quote Link to comment Share on other sites More sharing options...
olliegog Posted March 24, 2014 Share Posted March 24, 2014 Oh look it's yet another person deciding to go heavily into more property-investment, out of their own free will, to try and gain personal advantage, paying such prices. These must be the UK's "savers" and such investors owners not at risk of letting real savers buy and split up their portfolios at lower prices in the future, as such savers would be over-rewarded, and must lose all their savings instead. NOT A BOOMER THEN Quote Link to comment Share on other sites More sharing options...
dances with sheeple Posted March 24, 2014 Share Posted March 24, 2014 NOT A BOOMER THEN No, just a moron. Stories like these are just ramping, when rates start moving it will be flappy bum time all round. Quote Link to comment Share on other sites More sharing options...
MrD Posted March 24, 2014 Author Share Posted March 24, 2014 Some interesting thoughts. However rational or irrational people will be, it just concerns me that the "pension changes will lead to surge in BTL" headlines shouldn't go unchallenged. (I think they're partly down to VI ramping, but also simply reflect the financial and economic illiteracy of a lot of journalists.) Perhaps an alternative slant might be "massive sell-off of buy-to-let property expected as traditional pensions become more attractive"... Quote Link to comment Share on other sites More sharing options...
Bruce Banner Posted March 24, 2014 Share Posted March 24, 2014 Some interesting thoughts. However rational or irrational people will be, it just concerns me that the "pension changes will lead to surge in BTL" headlines shouldn't go unchallenged. (I think they're partly down to VI ramping, but also simply reflect the financial and economic illiteracy of a lot of journalists.) Perhaps an alternative slant might be "massive sell-off of buy-to-let property expected as traditional pensions become more attractive"... I suspect that many journalists, along with those in other reasonably well paid occupations, are into buy to let and as such have a vested interest in rising house prices. They may not consciously ramp prices, but they will be happy when prices rise and this will show in the way they report the news. Quote Link to comment Share on other sites More sharing options...
ReggiePerrin Posted March 24, 2014 Share Posted March 24, 2014 Good explanation by the OP on the disadvantages of taking the lot out in one hit to invest in BTL (although I think going by the past decade most of the population is mad enough to do it) Given the number of references made by the politicians on Budget day to 'paying off the mortgage' I think this is all about trying to defuse the IO timebomb (this has probably been discussed to death here.. my apologies if it has). So if you add the tax lost taking your pension out onto the interest paid over the years on an IO mortgage you'd have lost a small fortune on your 'investment' in a house Quote Link to comment Share on other sites More sharing options...
dances with sheeple Posted March 24, 2014 Share Posted March 24, 2014 (edited) Some interesting thoughts. However rational or irrational people will be, it just concerns me that the "pension changes will lead to surge in BTL" headlines shouldn't go unchallenged. (I think they're partly down to VI ramping, but also simply reflect the financial and economic illiteracy of a lot of journalists.) Perhaps an alternative slant might be "massive sell-off of buy-to-let property expected as traditional pensions become more attractive"... Yes, I have not looked in detail at the changes, but you would think that BTL would look less attractive? Thing is I don`t see a new wave of people coming along who want to get into BTL anyway, the 2001 - 2007 Credit consumption generation were a one off, the most prime of prime numpties, they were like fish on a chum line. The game now from the press will be to just keep pushing the debt mantra without provoking collapse (the collapse is coming anyway) Thought it was telling how Andy Burnham on QT the other night said in answer to something about more jobs for the north - "People just want to get on in life - they want loans and mortgages" Looks like him and his ilk are all scripted to keep this criminal nonsense going? Of course no one pulled him up on this blatant ramping of the banks and their debt system. I want to see prats like him on TV when debt consumption and the housing Ponzi has fully collapsed, see what shite they come away with then. Edited March 24, 2014 by dances with sheeple Quote Link to comment Share on other sites More sharing options...
dances with sheeple Posted March 24, 2014 Share Posted March 24, 2014 Good explanation by the OP on the disadvantages of taking the lot out in one hit to invest in BTL (although I think going by the past decade most of the population is mad enough to do it) Given the number of references made by the politicians on Budget day to 'paying off the mortgage' I think this is all about trying to defuse the IO timebomb (this has probably been discussed to death here.. my apologies if it has). So if you add the tax lost taking your pension out onto the interest paid over the years on an IO mortgage you'd have lost a small fortune on your 'investment' in a house As I said before, are people drawing down reasonably big lumps of money going to get margin calls if they are even a couple of months behind on the mortgage? Worst case for the banks and PTB is if everyone just empties their pension pot and pisses it away without paying down mortgage debt? I am unfortunately too young to empty mine, but would do so in a heartbeat (not to pee away though) Quote Link to comment Share on other sites More sharing options...
Dreadymatt Posted March 24, 2014 Share Posted March 24, 2014 Good analysis - I know i was worried it might trigger some kind of last-bout-of-property-mania before the big crash, which I personally envisage occuring in 2016 (rising interest rates, removal of CGT for no-residental owners, and simple realisation of the massive elephant in the room - insanely inflated property prices that nobody can truely afford) Quote Link to comment Share on other sites More sharing options...
dances with sheeple Posted March 24, 2014 Share Posted March 24, 2014 (edited) Good analysis - I know i was worried it might trigger some kind of last-bout-of-property-mania before the big crash, which I personally envisage occuring in 2016 (rising interest rates, removal of CGT for no-residental owners, and simple realisation of the massive elephant in the room - insanely inflated property prices that nobody can truely afford) I would be happy to sit and watch one final blow off, even if it takes two or three years (which I don`t think it will) the generations coming through are not going to do Ponzi property like their parents did IMO. My thinking has shifted to just having multiple years living expenses in safe (as possible) liquid investments/savings, and property ownership has drifted off to the background. When you see how people tie themselves to mortgages, and slave away to pay them, it all starts to look pretty pointless, a large chunk of the UK population are just Diddies when it comes to property and property prices, the only cure for them is a massive blow off and crash Edited March 24, 2014 by dances with sheeple Quote Link to comment Share on other sites More sharing options...
tomandlu Posted March 24, 2014 Share Posted March 24, 2014 I would be happy to sit and watch one final blow off, even if it takes two or three years (which I don`t think it will) the generations coming through are not going to do Ponzi property like their parents did IMO. My thinking has shifted to just having multiple years living expenses in safe (as possible) liquid investments/savings, and property ownership has drifted off to the background. When you see how people tie themselves to mortgages, and slave away to pay them, it all starts to look pretty pointless, a large chunk of the UK population are just Diddies when it comes to property and property prices, the only cure for them is a massive blow off and crash Looks that way - meanwhile us renters can presumably hope for a change in rental legislation as the demographics catches us up. Quote Link to comment Share on other sites More sharing options...
dances with sheeple Posted March 24, 2014 Share Posted March 24, 2014 Looks that way - meanwhile us renters can presumably hope for a change in rental legislation as the demographics catches us up. Legislation pretty much favours the renter now in Scotland, and rents have not moved anywhere for years. England could do well to follow the lead of deposit protection and banning agents fees etc. Used to be they would charge for "inspections", new leases, "annual charges" just because they could etc. No more Quote Link to comment Share on other sites More sharing options...
tomandlu Posted March 24, 2014 Share Posted March 24, 2014 Legislation pretty much favours the renter now in Scotland, and rents have not moved anywhere for years. England could do well to follow the lead of deposit protection and banning agents fees etc. Used to be they would charge for "inspections", new leases, "annual charges" just because they could etc. No more What's the weather like? On a more serious note, I would assume that there surely must be some votes now in England for better rights for tenants, and I strongly suspect the only reason any suggestions have been very muted is a continuing commitment to high house prices, and uncertainty about whether a change in tenancy laws might hit them... Quote Link to comment Share on other sites More sharing options...
ingermany Posted March 24, 2014 Share Posted March 24, 2014 In an article for The Daily Telegraph, Boris Johnson praises Mr Cameron and George Osborne, the Chancellor, describing their policy as a “grenade” that has “destroyed” Labour’s position. He says the reform is “Thatcherite in its elegance” and is “all about trusting people to run their own lives”. Mr Johnson says it will allow pensioners to follow a “path of enlightened self-interest” and use the money to help their children or grandchildren pay for homes. A new definition of the phrase "self interest", but the point is that this measure was introduced with the sole purpose of keeping the pyramid going. The latest entrants to the mad scheme will be proxy house buyers using pension pots to gift deposits to children and grandchildren..............say 5% deposits so that the younger generation can get the 15% equity loan from government and the other 80% from a government owned bank. With that sort of leverage, those pension pots could be used to trigger a new round of pyramid frenzy. Quote Link to comment Share on other sites More sharing options...
tomandlu Posted March 24, 2014 Share Posted March 24, 2014 A new definition of the phrase "self interest", but the point is that this measure was introduced with the sole purpose of keeping the pyramid going. The latest entrants to the mad scheme will be proxy house buyers using pension pots to gift deposits to children and grandchildren..............say 5% deposits so that the younger generation can get the 15% equity loan from government and the other 80% from a government owned bank. With that sort of leverage, those pension pots could be used to trigger a new round of pyramid frenzy. Is it my imagination or have I seen a bank poster recently specifically pushing the grandparents -> grand-kids meme? It might have been a particularly nasty nightmare, but it was particularly sick-inducing. Quote Link to comment Share on other sites More sharing options...
BlokeInDurham Posted March 24, 2014 Share Posted March 24, 2014 I'm a trustee of a company pension scheme, based on the questions and comments I hear from members of that scheme I've long given up any expectation of rational behaviour when it comes to pensions. [...] The thing about an annuity is that it comes down to a single number in black and white, so people are confronted with a simple scenario, if I retire at 55, or 60, or 65 then I'll have £7,000 a year to live on...or whatever the number is. And they can clearly imagine what living on that amount would look like and shudder. But the budget changes mean they can now construct some insanely optimistic BTL forecast based on zero voids, regular rent increases, massive capital appreciation, etc etc. I haven't the slightest doubt that a fair proportion will now go down that irresponsibly optimistic road. Why do you say irresponsibly optimistic? I certainly don't see the problem in choosing to gamble what they have. Whether house-ownership is the best form of gamble is another matter. If someone will have a basic, or even miserable, existence on the basic state pension and you offer them the following choice: 1. Take a meagre annuity allowing you just slightly above a basic/miserable existence for the rest of your life. 2. Take your saved wealth and gamble it. It doesn't really have to be housing, it could be all on a 20-1 outsider at Newmarket. Now, the correct decision, even if you know the precise likelihood of your gamble (which in reality you don't) is by no means fixed. You could calculate the choice with the highest expected monetary value, but not the choice with the highest expected happiness value. It entirely depends on the person making the choice. If they would only be marginally less miserable on a "just more than existing" level than a "just existing" level, but jubilant if the gamble pays off and they are significantly more wealthy, then the right choice is to gamble, even if the chance of winning that gamble is low. If on the other hand they would really appreciate the extra cushion from the modest annuity and it would considerably increase their happiness from the basic state pension, and they would obviously be happy with significantly more wealth, but wouldn't be distraught if they didn't have it, then the right choice is to stick with the annuity, even if gambling has a higher expected outcome in monetary terms. Quote Link to comment Share on other sites More sharing options...
arrgee1991 Posted March 24, 2014 Share Posted March 24, 2014 I think the OP is first class. The danger is that this analysis gives the Wurthers generation too much credit. This is the lot that have seen property sore (sic), want something other than thickness to "pass on", have experienced QE (but don't realise), aspire to owning property, and have seen a man on the magic lantern suggest it. I fear it will end in their tears. The best thing to do when you are old is spend it all and max out your credit cards as the taxman takes 40% of anything over £325k (double if you are/were married). If people hang onto their pension or invest it, it will be a bonanza for the tax man. Quote Link to comment Share on other sites More sharing options...
The Knimbies who say No Posted March 24, 2014 Share Posted March 24, 2014 (edited) Oh look it's yet another person deciding to go heavily into more property-investment, out of their own free will, to try and gain personal advantage, paying such prices. These must be the UK's "savers" and such investors owners not at risk of letting real savers buy and split up their portfolios at lower prices in the future, as such savers would be over-rewarded, and must lose all their savings instead. http://showcase.savills.com.vn/Kaleidoscope/Default.aspx?PageID=484 £1,600 in ground rent plus service charges. There is a 2 bedder up for rent at £1,300 pcm asking. Seems distict possibility she is getting sub 3% before interest costs have been looked at, which in turn might wipe the rest entirely to leave a big fat eff-all. Not to mention the £10k in stamp duty to buy in the first place. Surprised to read she is a businessperson, she could generate approximately zero income much more cheaply than spending nearly £400k. By buying a bag of crisps, for example. Edited March 25, 2014 by The Knimbies who say no Quote Link to comment Share on other sites More sharing options...
Venger Posted March 31, 2014 Share Posted March 31, 2014 £1,600 in ground rent plus service charges. There is a 2 bedder up for rent at £1,300 pcm asking. Seems distict possibility she is getting sub 3% before interest costs have been looked at, which in turn might wipe the rest entirely to leave a big fat eff-all. Not to mention the £10k in stamp duty to buy in the first place. Surprised to read she is a businessperson, she could generate approximately zero income much more cheaply than spending nearly £400k. By buying a bag of crisps, for example. A good read. And me too (re below). Even better if rents begin to soften, followed by house prices. Good post, and in line with my view. They'd be nuts to buy a BTL when seeking a reliable income stream. Won't stop some though, and if someone wants to provide a place for rent at sub-4% gross yield, while assuming obligations for the maintenance of the building and white goods, I'll happily consider providing them with that sort of return. Yesterdays D-Mail. http://www.dailymail.co.uk/money/mortgageshome/article-2592354/House-prices-race-ahead-rents-bubble-market-grows.html House prices in London have risen five times faster than rents in the capital since 2005 – adding fuel to suggestions that price rises are being driven by a speculative bubble.The London boom is extreme but a similar picture is emerging right across Britain, where the price of housing has risen at three times the rate of rents. Quote Link to comment Share on other sites More sharing options...
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