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they will still buy , they only know HPI

Actually we don't since we lost S*** loads in the 80's and 90's but don't let that get in the way of making a sweeping generalisation about a cohort born in a particular time

Edited by Greg Bowman

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Actually we don't since we lost S*** loads in the 80's and 90's but don't let that get in the way of making a sweeping generalisation about a cohort born in a particular time

You only lost money if you cashed out. If you stayed in a property until the '00 or moved up despite negative equity you'd still have a positive view of property.

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Actually we don't since we lost S*** loads in the 80's and 90's but don't let that get in the way of making a sweeping generalisation about a cohort born in a particular time

My Boomer parents had their home repo'd after they overextended themselves in the late 80s bubble, but the Brown-Osborne bubble restored their faith in HPI forever. From what I can see they're pretty representative of their age cohort, though of course not everybody born in the same year thinks the same way.

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http://en.wikipedia.org/wiki/Buy_to_let

The Council of Mortgage Lenders (CML) started collecting statistics on buy-to-let in 1997 and some observers have interpreted the growth in buy-to-let lending, as reported by the CML, as evidence of a boom.[16] However the CML only measures the growth of the new specialist lenders in the market - such as Paragon Mortgages, Mortgage Express and BM Solutions, whilst omitting the core back book of loans to residential property investors by mainstream lenders.

I thought this was interesting

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A one stop shop for Boomers who might try to do their own research.

Anything more you'd add to this?

http://www.buytoregret.com/

With the average pot being about £20k the average taxpayer will pay 20% of the £15k left after the tax free 25%, That,s £3000! before you start on your BTL investment, if you are a 40% taxpayer you pay £6000 in tax.

Are these figures correct?

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I do find it interesting how all of the boomers that I seem to meet have either forgotten about the 80s/90s crash altogether or treat it as a 'blip' rather than the quite severe downturn than it actually was.

It certainly doesn't harm their resolve to upsize/get into BTL/advise their offspring to buy.

The current bubble has gone on for so long, even against the adversity of the credit crunch (which really did only cause a 'blip' in this area) that the confidence is never ending.

Maybe it is me looking at it the wrong way. I was talking to a boomer the other day who is buying a property for £800k even though neighbouring properties sold for £650k last year and £500k in 2013. To me, that just screams that a crash is around the corner, but to him it means that it will be £900k next year so he better get in now.

The problem is that I'd never advise anyone not to buy. I'd have given the same advice not to pay £500k in 2013, and I don't think that I'd be very popular right now!

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I do find it interesting how all of the boomers that I seem to meet have either forgotten about the 80s/90s crash altogether or treat it as a 'blip' rather than the quite severe downturn than it actually was.

...

Whilst not wanting to endorse the "all boomers" suggestion as there are some boomer hpcers who hunger for the bear food as avidly as any wet behind the ears thirty-something, there is definitely something to the generalisation, but then it is fair enough, on a crude empirical basis. If they bought in the 1970s and are prey to money illusion (i.e. focusing on nominal prices not real prices) the leveraged nominal gains they have enjoyed are spectacular, (and the real gains were pretty good too!).

Other asset classes might have done better, but you can't live in your shares and punters aren't allowed to take leveraged positions in anything other than houses. Plus shares have been patchier for longer. The tech stock bubble then the 2007 crash will have shaken confidence in equities. Returns on bonds and cash are underwhelming. If you are convinced that there must be easy money to be had somewhere, where are they going to go but property?

These people aren't complete idiots, it's just that by failing to seek a mechanism for the magical behaviour of house prices, they've fallen for the classic sucker punch that anything that looks too good to be true is too good to be true.

Then when something that came along that was big enough to show it was just another bubble, the correction was so big that given the way the new-fangled credit derivatives were routing the risks around the banking system in a way that nobody confidently understood in the moment of crisis the government had to throw down and support house prices in order to defend the banks. I think this has been widely misinterpreted by people who believe in forever HPI as support for house prices and an open-ended state support of their crappy, broken banks. I would not bet my own money that it was the intention of governments and central banks to support house prices for the sake of supporting house prices and to commit to a forever-and-ever complete guarantee of the too-big-to-fail banks and absent those two commitments UK property is just waiting for the hammer to fall.

Edited by bland unsight

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Actually we don't since we lost S*** loads in the 80's and 90's but don't let that get in the way of making a sweeping generalisation about a cohort born in a particular time

You are an exception lots of boomers have forgotten that - which seems strange to me.

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I do find it interesting how all of the boomers that I seem to meet have either forgotten about the 80s/90s crash altogether or treat it as a 'blip' rather than the quite severe downturn than it actually was.

It certainly doesn't harm their resolve to upsize/get into BTL/advise their offspring to buy.

The current bubble has gone on for so long, even against the adversity of the credit crunch (which really did only cause a 'blip' in this area) that the confidence is never ending.

Maybe it is me looking at it the wrong way. I was talking to a boomer the other day who is buying a property for £800k even though neighbouring properties sold for £650k last year and £500k in 2013. To me, that just screams that a crash is around the corner, but to him it means that it will be £900k next year so he better get in now.

The problem is that I'd never advise anyone not to buy. I'd have given the same advice not to pay £500k in 2013, and I don't think that I'd be very popular right now!

You are an exception lots of boomers have forgotten that - which seems strange to me.

2007-10 was quickly forgotten... never mind 1989-95... the latter part being a long-wave entry point of hpi glory anyway.....

Too many don't have a clue of what it's like on the professional/senior earner renter/saver side vs house prices - I hope they're soon to find out (HPC).

It's a Western/Boomer phenomenon.... if and when this market turns they deserve absolutely no mercy.

Housing Bubble 2: Investor Purchases Hit Record, Small Investors Pile in, ‘Smart Money’ Gets Out

by Wolf Richter • May 1, 2015

.....But “institutional investors,” entities that buy 10 or more units a year, accounted for only 3.4% of total sales in Q1, the lowest level in the data series, down from 6.2% in Q1 2014, and from 8.7% during the heyday in Q1 2013. These big investors, including large PE firms that used to buy tens of thousands of units – the “smart money” – have been losing interest for two years. But in the last quarter, they just about pulled up their stakes:

The investors that are now piling into the market like never before are “smaller, mid-tier, and mom-and-pop investors,” explained RealtyTrac VP Daren Blomquist.

Of all investors, 44.7% were all-cash buyers, down from 61% a year ago. Cheap debt is just too tempting. A large variety of easy-money financing options have become available for small investors as “a new crop of nationwide companies has emerged offering financing specifically for investment properties,” Blomquist said. I can attest to that; I get their spam in my inbox.

So small investors are piling into the market in record numbers, even as institutional investors are backing out, to where overall investor purchases hit a new record. And what happens? Prices soar. According to the report, the median price in March jumped 8% from a year ago.

Institutional investors may smell a rat in these prices. For them, the math of buying high and then renting the place to struggling consumers may no longer work. But for the intrepid small investors, including those that have learned the art of real estate investing from once again hot radio shows, it’s a debt-fueled, high-leverage paradise where only the sky is the limit.

http://wolfstreet.com/2015/05/01/housing-bubble-2-investor-purchases-hit-record-small-investors-pile-in-as-smart-money-gets-out/

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I have always suspected govenment will go for BLT landlords as they are an easy target..However I think the mechanism will be increasing regulation rather than overt direct tax.

BTL landlords will be made subject to licensing and inspections with very high anual inspection charges by council workers.

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I would think a crash in prices is not the greatest fear of a BTL landlord....more like a crash in rents, new policies to favour renters, higher taxes and interest rates.

With a government trying to reduce the deficit housing benefit and welfare must be a target if not higher taxes and greater tenant security will be....buyer beware.

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That website seems to be overlooking the fact that if the rent is your pension then house prices are irrelevant. It doesn't matter if the price goes down - you're only interested in the rental value. You're not going to sell in your life time. The real problem with high gearing is when mortgage rates go up and the interest payments exceed the rental income - then you're fooked.

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That website seems to be overlooking the fact that if the rent is your pension then house prices are irrelevant. It doesn't matter if the price goes down - you're only interested in the rental value. You're not going to sell in your life time. The real problem with high gearing is when mortgage rates go up and the interest payments exceed the rental income - then you're fooked.

Only if you've paid fully in cash.

Even then, the voids and the maintenance are a worry.

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You only lost money if you cashed out. If you stayed in a property until the '00 or moved up despite negative equity you'd still have a positive view of property.

It goes that way with any asset investment. But stocks and shares are in some respects too easy to cash out by comparison. Edited by Si1

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It goes that way with any asset investment. But stocks and shares are in some respects too easy to cash out by comparison.

There's a school of thought that builds a portfolio for income, and says you should never even look at the capital value. Often associated with planning for retirement.

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Funny whenever I watch HUTH many of the boomers buying BTL properties seem to be under boomer age. Can't be true of course because anyone under 50 is a victim of anyone over 50.

Edited by campervanman

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I would think a crash in prices is not the greatest fear of a BTL landlord....more like a crash in rents, new policies to favour renters, higher taxes and interest rates.

With a government trying to reduce the deficit housing benefit and welfare must be a target if not higher taxes and greater tenant security will be....buyer beware.

That is something I am casting eyes over for weakness - rent prices - by doing loads of searches. However I am not that familiar with some areas I'm searching on... there looks to be loads of rentals coming to market in some areas (the norm?), but few cuts... and occasional renewed PB listing from 2-3 years ago where they've now jacked the rental price... can't get a full view as I don't know the (London) areas.

There has been a lot of hype about renters paying 1 year up front (including in Prime) recently... and stress on renters of rental hikes. I'm just of the view we're nearing peak rent with a wobble coming.

http://www.theguardian.com/money/2015/mar/30/years-rent-upfront-wealthy-tenants-london

Possible hints of a market at work in the background (if you strip out the hype of all the wealthy foreigners flowing in): She added: “As many people are renting after selling their primary home, getting the cash isn’t too difficult – but not helpful to those not in that lucky position.”

http://www.theguardian.com/money/2015/may/02/20-per-cent-rent-rise-forced-out-home-tenant

https://www.youtube.com/watch?v=jNn2CwoRGQM

It doesn't look so easy to be a landlord to me (a good landlord) - and there are a few more regulations to follow.

http://www.propertyinvestmentproject.co.uk/blog/become-landlord/

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That is something I am casting eyes over for weakness - rent prices - by doing loads of searches. However I am not that familiar with some areas I'm searching on... there looks to be loads of rentals coming to market in some areas (the norm?), but few cuts... and occasional renewed PB listing from 2-3 years ago where they've now jacked the rental price... can't get a full view as I don't know the (London) areas.

Rental prices are a poor proxy for this.

You need to look for voids.

My local paper has a noticable number of rentals that have been kicking around for months.

I see 'aspirational' rentals - no one aspires to rent FFS! - listed at 12k/year. These struggle to get a tenant in for 6 months, so the actual rent received is 6k-1.2k ctax + utilities. Voids are very very very expensive.

Non-London by the way.

Edited by spyguy

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Rental prices are a poor proxy for this.

You need to look for voids.

My local paper has a noticable number of rentals that have been kicking around for months.

I see 'aspirational' rentals - no one aspires to rent FFS! - listed at 12k/year. These struggle to get a tenant in for 6 months, so the actual rent received is 6k-1.2k ctax + utilities. Voids are very very very expensive.

Non-London by the way.

Yes; agreed about voids - what greedy landlords need the most.

Voids + supply to / hanging on market is what I was trying to glimpse into At least Property-Bee does give some info about that on my London searches (and for some I track back to find what the landlord paid for the house... only do that for houses as it's easier to find the match). I should add rental supply in my own area, on market, is lower than ever. Although when your poor-mathers are landlords, they can all eat the kerb in the HPC.

So they get into BTL and find the returns either negative or the margin so thin that a one month void wipes all the profit out.

I think the fundamental problem is most UK peoples maths is lousy. As my mum replied, when I was talking her out of doing something stupid - 'I can't do percentages'. Add poors maths to not being able to run a business and handle the issues and you have yourselves a disaster.

lets say you rent @ £450.

you get from the agent then, about £375. so you nett £4500 PA gross before tax.

so you void one month with a non paying tenant....you lose your £375 but still have £75 fees to pay.

One void drops your annual to £4050....a loss of the whole rent, whereas you normally were expecting £375, you are shelling out £75 for the fees.

very quickly a small number of voids will take a BTL out. 6% yield on £450 is only a £90K property, and a 4.5% IO mortgage wipes you out on one void only.

Its tight.

That's about right out of London. Typical fees are around 15% + VAT - so around 18% in total.

17-19% +VAT can be found in London.

No fees on voids.but management fee usually still payable if rent defaulted.

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