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Anecdotal from Prime London


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Mate decided to sell nice 2 bed flat in prime London, i.e. prime for real people with jobs, not funny money. Very established area, not up and coming in the last 20 years. No garden/outside space but a nice flat on a nice street in a period property. All done to a nice spec. 

Told me in mid July his view of the housing market was "viewings up 100%, volumes up 35% and thats because properties [Edit: like mine] that are hot and safe bets if the economy goes bad are selling. Safe stock going at asking or offers overs with sealed bids now back. Dishi Rishi is clearly helping."

Fast forward to this morning:

"Flat has had loads of viewings but was on at too high a price, which I thought at the time but listened to the two estate agents. We dropped price [5%] to a more reasonable level yesterday. I am worried we won't get anything at that level now."

And that is a real life example of housing market psychology. Everything is a lag. The Lockdown has made the lag effect even worse. 

 

 

Edited by qejunkie
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I'm buying and selling right now. We've found the place we want to buy and are prepared to do it but we're worried about selling our current place (everything sells at the right price though).

I'll update as it progresses.

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On 30/07/2020 at 08:39, qejunkie said:

"Flat has had loads of viewings but was on at too high a price, which I thought at the time but listened to the two estate agents. We dropped price [5%] to a more reasonable level yesterday. I am worried we won't get anything at that level now."

Does he know what similar flats rent for?  If so then he can calculate what a maximally-leveraged BTL landlord could pay for it and thus what the likely ceiling on the price is.

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17 minutes ago, Will! said:

Does he know what similar flats rent for?  If so then he can calculate what a maximally-leveraged BTL landlord could pay for it and thus what the likely ceiling on the price is.

2,100 per month - what are the maths? 

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On 31/07/2020 at 21:07, qejunkie said:

2,100 per month - what are the maths? 

Rental cover is 145% so rent of £2,100 per month is 145% of a mortgage repayment of £1,450 per month.

Mortgage repayment of £1,450 per month x 12 = Mortgage repayment of £17,400 per year.

Let's assume an IO mortgage.  BTL mortgages are stress tested to a possible interest rate of 5%.

£17,400 is 5% of £348,000.

Let's assume an LTV of 75%.

£348,000 is 75% of £464,000.

So the most a maximally leveraged BTL landlord could pay would be £464,000 and that is making some generous assumptions.

Just out of interest, how much is your friend asking?

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2 minutes ago, Will! said:

Rental cover is 145% so rent of £2,100 per month is 145% of a mortgage repayment of £1,450 per month.

Mortgage repayment of £1,450 per month x 12 = Mortgage repayment of £17,400 per year.

Let's assume an IO mortgage.  BTL mortgages are stress tested to a possible interest rate of 5%.

£17,400 is 5% of £348,000.

Let's assume an LTV of 75%.

£348,000 is 75% of £464,000.

So the most a maximally leveraged BTL landlord could pay would be £464,000 and that is making some generous assumptions.

Just out of interest, how much is your friend asking?

Thanks so much for the maths. Where does tax come in? 

Lets just say he is a few hundred thousand above you. So will be owner occupier only. 

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2 hours ago, qejunkie said:

Thanks so much for the maths. Where does tax come in? 

Lets just say he is a few hundred thousand above you. So will be owner occupier only. 

Tax is considered in the 145% rental cover.

Does your friend know about the Mortgage Market Review?  Very few owner-occupiers will be able to borrow more than 4.5x their gross household income less recurring costs.

Let's assume tenants in similar flats spend 25% of their gross household income on rent and have no recurring costs.

Rent of of £2,100 per month x 12 = Rent of £25,200 per year.

£25,2000 is 25% of £100,800.

£100,800 x 4.5 = £453,600.

So very few owner-occupiers of similar flats would be able to borrow more than £453,600 and that is making some generous assumptions.

If your friend is asking a few hundred thousand more than that then he or she needs buyers with a few hundred thousand in cash, and there are very few of those.

 

Edited by Will!
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23 minutes ago, Will! said:

Tax is considered in the 145% rental cover.

Does your friend know about the Mortgage Market Review?  Very few owner-occupiers will be able to borrow more than 4.5x their gross household income less recurring costs.

Let's assume tenants in similar flats spend 25% of their gross household income on rent and have no recurring costs.

Rent of of £2,100 per month x 12 = Rent of £25,200 per year.

£25,2000 is 25% of £100,800.

£100,800 x 4.5 = £453,600.

So very few owner-occupiers of similar flats would be able to borrow more than £453,600 and that is making some generous assumptions.

If your friend is asking a few hundred thousand more than that then he or she needs buyers with a few hundred thousand in cash, and there are very few of those.

 

Yeah I think you are right. He needs to find a late twenty something on 120k base salary and couple of hundred k in the bank. 

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12 hours ago, qejunkie said:

Because Wimbledon is just another drab south London suburb with bad transport? Flat in question is much better location.  

Wimbledon has great transport and is nowhere near drab. Your mate's flat has probably halved in value if not more - very few people are going back to 9-5, Monday to Friday so quick access to Central London isn't such a draw and few people are going to want to buy a flat with no garden.

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16 minutes ago, This time said:

Wimbledon has great transport and is nowhere near drab. Your mate's flat has probably halved in value if not more - very few people are going back to 9-5, Monday to Friday so quick access to Central London isn't such a draw and few people are going to want to buy a flat with no garden.

Halved in value - there's a thought!! If there really is a massive negative wave coming from central London as you suggest I doubt inner suburbia is safe. I don't even think the commuter belt is safe. There should be a re-balance of greater London (inc commuter belt) down and then places beyond the home counties doing Ok. Hampshire, Dorset, Northamptonshire, Oxfordshire etc etc.

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On 03/08/2020 at 14:48, Will! said:

Tax is considered in the 145% rental cover.

Does your friend know about the Mortgage Market Review?  Very few owner-occupiers will be able to borrow more than 4.5x their gross household income less recurring costs.

Let's assume tenants in similar flats spend 25% of their gross household income on rent and have no recurring costs.

Rent of of £2,100 per month x 12 = Rent of £25,200 per year.

£25,2000 is 25% of £100,800.

£100,800 x 4.5 = £453,600.

So very few owner-occupiers of similar flats would be able to borrow more than £453,600 and that is making some generous assumptions.

 

Earning over 100k allows 5x, so £504,000, plus 15% minimum deposit, gives £592k

Thats a  FTB, any other equity (most people would have started on a 1 bed) shifts it further up.

£2100 sounds like Prime Outer London, like Battersea.  Many people here earn much more than £50K, 60-70k is common add bonus and the average £750k for a two bed is affordable.

BTL is nonviable in Prime Central (1% yield) and probably Prime Outer 

All this is an **** backwards way of determining value, its cost per M2 compared to recent sales that matter, minus estimated future falls.

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On 10/08/2020 at 17:41, Peter Hun said:

£655k for 55m2. Get stuffed, way overpriced. Should be <9k per m2

These prices are exactly why I would never live in London.  Its a joke.  For that money you could get a more than 3x that space with a decent garden + garage in an easily commutable area.

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On 10/08/2020 at 16:29, Peter Hun said:

Thats a  FTB, any other equity (most people would have started on a 1 bed) shifts it further up.

That 1 bed flat has to be sold to realise that equity.

On 10/08/2020 at 16:29, Peter Hun said:

£2100 sounds like Prime Outer London, like Battersea.  Many people here earn much more than £50K, 60-70k is common add bonus and the average £750k for a two bed is affordable.

And there are many two-bedroom flats.

On 10/08/2020 at 16:29, Peter Hun said:

All this is an **** backwards way of determining value, its cost per M2 compared to recent sales that matter, minus estimated future falls.

It's not a method of determining value.  It's a method of determining price.

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On 30/07/2020 at 09:33, dugsbody said:

I'm buying and selling right now. We've found the place we want to buy and are prepared to do it but we're worried about selling our current place (everything sells at the right price though).

I'll update as it progresses.

Found a buyer yet? 

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16 hours ago, qejunkie said:

Found a buyer yet? 

Yes. At the full asking price which I thought wasn't realistic but turns out other places are selling fast too and at higher prices. 

Edited by dugsbody
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29 minutes ago, dugsbody said:

Yes. At the full asking price which I thought wasn't realistic but turns out other places are selling fast too and at higher prices. 

Where are you? Not a flat in London I assume...

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On 18/08/2020 at 08:39, qejunkie said:

Where are you? Not a flat in London I assume...

No. Small starter house in suburbs of London with a long garden and room to add a good extension. Not one of the "decent" areas, but in my opinion under-rated and close enough to get to the "decent" areas. It was just that the schools there are no good and our house was small (I mean really small, for a three bed). I bought a house with potential to extend precisely because I thought flats would be hid harder if ever there was a crash.

We're moving to a new area, gaining more space and better schools, for a price of course. 

Well, this is the idea, no exchange contracts yet, we'll see.

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On 8/25/2020 at 9:50 AM, qejunkie said:

UPDATE: Still no bids at 10% below 2014 traded price. 5 viewings and counting. 

Whats the area? 

Friend tried to sell a mews house in South Kensington but has given up for a year. They have a large family home near Paris, i didnt shed a tear for her

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  • 433 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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      • up 5%



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