B T L Yields Plummet From 9% To Below 6%

[Realistbear]

The article argues that houses are not really unaffordable due to low IR, but it does point out some arguments that suggest thet Mervyn King was right:

http://www.telegraph.co.uk/property/main.j.../20/pword20.xml

Word on the street: slo-mo to beat the slump

(Filed: 20/05/2006)

There are few things liable to get the shivers running down householders' spines as much as a warning on house prices from the Bank of England Governor.

Last week, Mervyn King confirmed many of our fears, saying prices had risen by more than he expected in the first few months of the year, and that houses are still overvalued.

"Relative to average earnings or incomes, or anything else you could look at, house prices do seem remarkably high," he said.

Measuring house prices compared with earnings provides something of a shock.

Average house prices are now worth about 5.6 times more than average earnings - the highest proportion since records began

. Only a decade ago, just before the late 1990s boom began, houses were worth only 2.7 times the average wage.

Houses are expensive, too, for buy-to-let investors. This is clear when you look at the rental yields of property - in other words, how much you earn if you rent your home out.

In recent decades, the average return homeowners could make from doing so has been just over 9 per cent. Now, the same figure has slumped to less than 6 per cent - a sign that rental rates have failed to keep up with property prices.

With affordability stretched far more than the author suggests and the econoic unviability of BTL a HPC seems more likely than not.

Edited May 20, 2006 by Realistbear

[Realistbear]

The press do appear to be printing more on the slow down than the "flyng off the shelves" stories Rightmove were ramping a couple of month back:

http://www.thisismoney.co.uk/mortgages/mor...3&in_page_id=58

Homes mini-boom set to slow

Simon Lambert, This is Money

19 May 2006

THE property mini-boom - which has delivered a half-year run of record mortgage lending - could be about to slow down, according to a report released today.

'In the past couple of months the interest rate picture has changed and financial markets are expecting the Bank of England to raise rates this summer. If this happens, housing and mortgage market activity is likely to slow down from the recent high levels as the year progresses.'

Edited May 20, 2006 by Realistbear

[Righteous]

It’s nice to see that you are still keeping an eye on them Realistbear

[BillyShears]

What does he mean that yields have fallen to 6%? Quite hard to find a house likely to give a 5% yield round my way.

Billy Shears

[88Crash]

What does he mean that yields have fallen to 6%? Quite hard to find a house likely to give a 5% yield round my way.

Billy Shears

I think he said less than 6%, which would cover the 5% in your neck of the woods and the 3.5% yield my landlord will be making from the rental on my house

[Realistbear]

I am renting a house worth about 300k on today's market and pay 750 a month rent. That is about 3% yield whcih is not bad for the West Midlands which is in a slump due to job losses and low existing wages.

My landlord is happy because he built the house about 20 years ago for his mother who has since died. So in his case its probably a good return on the original investment. For BTLers who bought into the bubble after 2003 things cannot be too good. Better to go risk free in a building society savings account or fixed rate bond around 4.75% and no headaches.

[cupidstunt]

I'm an STR but still own 2 BTL's. When I bought these (10 and 8 years ago) they were yieling over 10% now (on todays value) they'd yield just over 3% The figs just don't add up for todays BTLer. Which is why I now choose to rent.

Edited May 20, 2006 by cupidstunt

[88Crash]

I am renting a house worth about 300k on today's market and pay 750 a month rent. That is about 3% yield whcih is not bad for the West Midlands which is in a slump due to job losses and low existing wages.

My landlord is happy because he built the house about 20 years ago for his mother who has since died. So in his case its probably a good return on the original investment. For BTLers who bought into the bubble after 2003 things cannot be too good. Better to go risk free in a building society savings account or fixed rate bond around 4.75% and no headaches.

Not far off of my place, house is worth £650 and my rent is £1800, but this is in Surrey, so this low yield can't be put down to a slump (even though NTL are losing thier headqarters nearby, but that has only just happened)

Apart from the low yield, it was empty for 3 months and the maintanance is very, very expensive