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kuurus

Anecdotal: The Two Year Sweat

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A quick anecdotal from our street in Plymouth, a couple across the road from us bought their terrace house exactly two years ago (Dec, 2003) for £170k.

Today, on the second anniversary of their purchase I notice a for sale board, they want £200k (minus 50 quid). Their house is far from being the best on the street, and nothing went for much over £190k even at the top of the recent madness, average wages in Plymouth are £18k (property going for 11x av. wages!).

What I find interesting is that this month will mark the start of the 'two year sweats', when the bonus mortgage rates finish and lucky borrowers get to return to the 'standard variable rate' adding several hundred pounds to their repayments.

The couple who bought the house are a bit atypical, the husband is in his early twenties, and works stacking the shelves in Morrisons over the road, the wife is a nurse in her late forties and has 2 teenage kids from a former marriage, they also have a newborn baby to look after.

This has all the hallmarks of a forced sale, possibly a locked in mortgage become unaffordable, combined with a hugely optimistic asking price. The classic symptoms of the current situation where people want to have their cake and eat it.

It'll be interesting to see how quickly the price comes down and low it will go, for economic comparison rent on the street is around £700 a month.

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It'll be interesting to see how quickly the price comes down and low it will go, for economic comparison rent on the street is around £700 a month.

Based on my 12/20 investment rule, I wouldbn't pay more than 100k for it

(12/20 rule: Never pay more than 12 times the annual rental and sell if its value rises to 20 times)

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The couple who bought the house are a bit atypical, the husband is in his early twenties, and works stacking the shelves in Morrisons over the road, the wife is a nurse in her late forties and has 2 teenage kids from a former marriage, they also have a newborn baby to look after.

Are you sure this is a typical couple in Plymouth... husband in early 20s and wife in late 40s...?! :blink:

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Based on my 12/20 investment rule, I wouldbn't pay more than 100k for it

(12/20 rule: Never pay more than 12 times the annual rental and sell if its value rises to 20 times)

Excelelnt advice.

I bought at 5x, 7 and 7

I now estimate they are only 15, 18 and 16 - so not time to sell.

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He said atypical :D

Without being harsh it does show how wierd this boom has become.

3 kids is not cheap although GB will have most of us paying them for the privilege rather than them paying thier own way. However Shelf Stacker and nurse would be lucky to earn £40,000 between them probably nearer £30,000 and the 'own' a £200,000 house.

Again harsh but I hope people have to pay for the debt they have got in. It will make me really angry if people can just give up their houses and not pay any negative equity.

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Are you sure this is a typical couple in Plymouth... husband in early 20s and wife in late 40s...?! :blink:

Do you actually know what the word "atypical" means? Hint: it doesn't mean "typical".

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Do you actually know what the word "atypical" means? Hint: it doesn't mean "typical".

sorry, I actually didn't even see the letter 'a' as I was so shocked by the rest of it :lol:

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He said atypical :D

Without being harsh it does show how wierd this boom has become.

3 kids is not cheap although GB will have most of us paying them for the privilege rather than them paying thier own way. However Shelf Stacker and nurse would be lucky to earn £40,000 between them probably nearer £30,000 and the 'own' a £200,000 house.

Again harsh but I hope people have to pay for the debt they have got in. It will make me really angry if people can just give up their houses and not pay any negative equity.

Since the wife is an older divorcee then it is likely that she would have a share in the the proceeds of a former house, so their situation might not be dire.

However, it does highlight the plight of more typical families where both parties are relatively young and have minimal equity. If mortgage lending becomes more conservative then I think we will see more 'high risk' couples having difficulty in remortaging, and so facing the increased payments 2 years down the line. We are now getting to that 'crunch point', when people who bought at the peak are not seeing any increase in the value of their property, but are facing increasing costs. Luckily (for them) prices have not dropped dramatically so negative equity should'nt stop them selling, yet...

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As I said - there are some graet bargains around - so actually am doing just that - multiple of 8 to buy & 12 once done up. :)

Really? Can you give an example of buying price and rental income? Where I am, a 200k flat rents for about 600/month

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Back to the 12/20 rule. In a strange way it does make sense. You also need to track it each year to see the difference and make best use of when to enter/exit the market of course.

LL,

I now estimate they are only 15, 18 and 16 - so not time to sell.

What were the ratios in 02,03,04, were they closer to 20 then or over?

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Back to the 12/20 rule. In a strange way it does make sense. You also need to track it each year to see the difference and make best use of when to enter/exit the market of course.

LL,

What were the ratios in 02,03,04, were they closer to 20 then or over?

02 - a bit lower than now

03 + 04 about the same as now - they have nexer been over 20

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I posted some example links on this before on another thread

Rental = 1,500pcm - purchase = 220k - done up

I remember that thread. I still can't see how you can charge £1500/month while I'm paying only £750/month when both properties would go on the market for 220k.

Location? But that would affect both the rent and the value wouldn't it?

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Based on my 12/20 investment rule, I wouldbn't pay more than 100k for it

(12/20 rule: Never pay more than 12 times the annual rental and sell if its value rises to 20 times)

Thats actually £16,000 to much based on your own rule. Its should be £84,000 (and even at that price I'd only be looking at paying £80,000 at most).

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Thats actually £16,000 to much based on your own rule. Its should be £84,000 (and even at that price I'd only be looking at paying £80,000 at most).

£700pcm x 12 x 12 = £100,800

Casual observer is not a pedant - so he/she has rounded it.

Looks like the standard of maths is about the same as the standard of english grammar!

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£700pcm x 12 x 12 = £100,800

Casual observer is not a pedant - so he/she has rounded it.

Looks like the standard of maths is about the same as the standard of english grammar!

If you view the property as a 'home' rather than as an investment I would put the economic price maximum at around £135k. Above this price the cost of a interest only mortgage plus maintenance (at 1% of value per annum) is more than the equivalent rent.

Maybe I should put in an offer of £135k, although I feel it would have to be through a proxy, unless I want car torched the next day! :unsure:

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A quick anecdotal from our street in Plymouth, a couple across the road from us bought their terrace house exactly two years ago (Dec, 2003) for £170k.

Hey Kuurus,

Im guessing this is somewhere near the Tor Lane Morrisons? (Chestnut Rd maybe?) Good to hear some local news, I also live in Peverell and waiting for some movement on prices. They don't seem to dropping rather holding their own. I think Peverell is the likely to be one of the last places in Ply to drop as it is somewhat nicer than half the dodgy 1960s estates which are bl**dy souless.

Like you say in our OP - average wage vs HP is way out of line for Plymouth (but not as silly as the surrounding area) and a correction is IMHO inevitable.

SC

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Hey Kuurus,

Im guessing this is somewhere near the Tor Lane Morrisons? (Chestnut Rd maybe?) Good to hear some local news, I also live in Peverell and waiting for some movement on prices. They don't seem to dropping rather holding their own. I think Peverell is the likely to be one of the last places in Ply to drop as it is somewhat nicer than half the dodgy 1960s estates which are bl**dy souless.

Like you say in our OP - average wage vs HP is way out of line for Plymouth (but not as silly as the surrounding area) and a correction is IMHO inevitable.

SC

Hi,

Yes I live on Chestnut road. One of the reasons I chose to live in Peverell was the turn of the century architecture of the houses there (high ceilings, large rooms etc.). I agree with you and think that Plymouth is due for a big drop because of the low local wages, and is more precarious than the surrounding area as it does'nt benefit from the retirement and second home market like the rest of Devon and Cornwall.

The for sale signs around Peverell seem to be multiplying recently, so it is bound to come sooner or later. We just have to be patient and see what happens.

It is not as if we are 'loosing out' at the moment, with the huge gap between renting and ownership costs!

Good luck!

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  • 302 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% +
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      • Even
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      • up 5%



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