Landlords Still Keen

[Guest]

But we had at least 5% nominal drops in 2004/5, and a full-blown crash didn't happen. That's why I think my prediction is correct.

That's because there was significant pricing on SIPPS expectations.

Remember SIPPs?

[Realty Cheque]

findaproperty

I can't get my head around these figures?

The rental income for the East Midlands is higher than London? Surely not!

Edited June 3, 2006 by Realty Cheque

[Casual Observer]

That's because there was significant pricing on SIPPS expectations.

Remember SIPPs?

I do remember it. It was analysed to death on this very forum. The overwhelming concensus was that it would not support house prices.

[Guest]

I do remember it. It was analysed to death on this very forum. The overwhelming concensus was that it would not support house prices.

Precisely. But try telling ho-moaners that.

[theChuz]

I do remember it. It was analysed to death on this very forum. The overwhelming concensus was that it would not support house prices.

Eww CO i thought that was a word not to be spoken on here again, the filth

[Guest]

Which word, Chuz?

[BillyShears]

I think the article probably did quote correct numbers because it says Return on Initial Investment. Thus if your initial investment was only 10% and you leveraged the investment with 90% borrowing, then a 5% increase in valure = 50% return on your 10% deposit. Hence the apparently large figures. Of course the reverse is true when propert prices fall as will surely happen as sure as night follows day and then..TTTR beware !

The figures showed a 34% rise in the house's value in London. So your explanation doesn't explain the figures given.

And as someone else mentioned, the rent in the East Midlands being more than London? I moved from London to the East Midlands (Leicester) and my rent halved. To the penny!

But we had at least 5% nominal drops in 2004/5, and a full-blown crash didn't happen. That's why I think my prediction is correct.

Where? I can't find these drops. In some areas sure, but not over the whole country.

Have a look through

http://www.landreg.gov.uk/publications/?pubtype=0

I can't find your 5% nominal drops 2004/5.

findaproperty

I can't get my head around these figures?

The rental income for the East Midlands is higher than London? Surely not!

These are the most ridiculous figures for anything I have ever seen in my life.

Billy Shears

Edited June 3, 2006 by BillyShears

[theChuz]

Which word, Chuz?

the one that is an anagram of PISPs

[ToilAndTrouble]

findaproperty

I can't get my head around these figures?

The rental income for the East Midlands is higher than London? Surely not!

What a crock... they quote leveraged return, but forget to deduct loan servicing costs.

T&T

[BillyShears]

What a crock... they quote leveraged return, but forget to deduct loan servicing costs.

T&T

I don't think these are leveraged return. The ROI calculations are performed by dividing the "total gross return" over the full 2005 value and converting the result to a percent. So I don't see how leveraged return

comes into it.

The problem with the figures is that the quoted returns in both HPI and rents don't seem to have any relationship to reality.

TTRTR has lost serious amounts of credibility over this. The figures are clearly a crock of sh*t, but he posts them as if they are serious figures that should be taken at face value, and then is completely unable to defend them.

Billy Shears

Edited June 4, 2006 by BillyShears

[RJG18]

...

My view:

I think things will continue as before. A year or two of low inflation, maybe a few dips here and there. This will provide time for wages and savers to catch-up, this in turn will then trigger a new phase of high HPI.

But that's the point that so few people still seem to understand. The most that house prices can sustainably increase by over the long term is by the rate of inflation. It is techically impossible for them to continually grow above the rate of inflation over the long term. Unfortunately, whenever you get a large bubble (in anything) then when you measure the rate of growth from any historic starting point up to the peak of the bubble, then the "long term" average rate of growth will always be artifically over-inflated, and will wrongly show a "long term" growth rate that is actually not correct and not sustainable.

Look at it this way, if you actually, genually believe that prices will continue to grow at anything other than the rate of inflation over the long term then ask yourself this simple question: "Until when?". Because, quite simply, this is an utterly finite prediction. If prices continue to grow forever then it will cost an ever larger proportion of your earnings (in real terms) in order to buy or rent one, but until what point? Until you can afford a house but cannot afford any luxuries at all (holidays, etc)? or maybe until you can't afford to heat or light it? or maybe until you can afford food and water, and you sit in your expensive house slowly dying over a few weeks?

If prices kept growing, then a house might cost, say 50% of your real earnings to buy or rent, then 60% then 70%, 80%, 90%, 100%... then prices physically could not go any higher, but you also could not aford food, water, lighting, etc.

When ever I ask the "until when" question to anyone with the common opinion of "prices will always continue to rise over the long term", then cannot answer it.

Any takers?

[BillyShears]

I think the article probably did quote correct numbers because it says Return on Initial Investment. Thus if your initial investment was only 10% and you leveraged the investment with 90% borrowing, then a 5% increase in valure = 50% return on your 10% deposit. Hence the apparently large figures. Of course the reverse is true when propert prices fall as will surely happen as sure as night follows day and then..TTTR beware !

I can't see how that makes sense given the figures. If you divide the "total gross return" they give by the full 2005 value fo the house, and convert the result to a percentage, then you get the percentage ROI that they claim.

And it's not the ROI where I claim the figures are just ridiculous. It's the capital appreciation and rents claimed for the properties. They're on another planet. But the only problem with the ROI other than the capital appreciation and rents being from la-la land is that ongoing costs are not estimated and deducted.

If you think that these are leveraged returns, could you run a numerical example from the data given and show how it works?

Billy Shears

Edited June 4, 2006 by BillyShears

[othello]

http://www.findaproperty.com/story.aspx?storyid=9509

And you lot told me I should sell!

Absolutely. The market can only go up.

[Casual Observer]

But that's the point that so few people still seem to understand. The most that house prices can sustainably increase by over the long term is by the rate of inflation. It is techically impossible for them to continually grow above the rate of inflation over the long term.

Unfortunately, they can if the industry continually comes up with new financing techniques e.g. life time loans, shared equity arrangements, inter-generational loans, extremenly low IRs etc. etc.

[BillyShears]

Unfortunately, they can if the industry continually comes up with new financing techniques e.g. life time loans, shared equity arrangements, inter-generational loans, extremenly low IRs etc. etc.

No, there are limits. As the time of the mortgage increases, the amount that can be borrowed increases by smaller amounts. I did numerical examples of this a month or two ago. Given a limit of how much you can afford on a per-month basis, then as you stretch the mortgage out longer and longer, the extra amount you can borrow approaches a limit, where the mortgage will take an infinite length of time to pay off. Or, IO mortgages. Shared equity arrangments only work if affordability is improved. The government can run a certain amount social housing, but can't afford to house the entire country. Extremely low IRs have been and gone, and they didn't save the Japanese housing market did they? The mortgage lenders can cut their margins, but that can only go so far before the margins are gone.

But mainly, if prices rise to a certain level, the property ladder stops working. First rung houses will cost so much that not enough buyers will be able to save up a deposit for a more expensive house within a reasonable amount of time (see your comments on longer mortgages). Then something has to break.

Billy Shears

Edited June 4, 2006 by BillyShears

[Robbrent]

But that's the point that so few people still seem to understand. The most that house prices can sustainably increase by over the long term is by the rate of inflation. It is techically impossible for them to continually grow above the rate of inflation over the long term. Unfortunately, whenever you get a large bubble (in anything) then when you measure the rate of growth from any historic starting point up to the peak of the bubble, then the "long term" average rate of growth will always be artifically over-inflated, and will wrongly show a "long term" growth rate that is actually not correct and not sustainable.

Look at it this way, if you actually, genually believe that prices will continue to grow at anything other than the rate of inflation over the long term then ask yourself this simple question: "Until when?". Because, quite simply, this is an utterly finite prediction. If prices continue to grow forever then it will cost an ever larger proportion of your earnings (in real terms) in order to buy or rent one, but until what point? Until you can afford a house but cannot afford any luxuries at all (holidays, etc)? or maybe until you can't afford to heat or light it? or maybe until you can afford food and water, and you sit in your expensive house slowly dying over a few weeks?

If prices kept growing, then a house might cost, say 50% of your real earnings to buy or rent, then 60% then 70%, 80%, 90%, 100%... then prices physically could not go any higher, but you also could not aford food, water, lighting, etc.

When ever I ask the "until when" question to anyone with the common opinion of "prices will always continue to rise over the long term", then cannot answer it.

Any takers?

That is one of the best arguments that i have heard in this debate, and it is correct, why can't people see that!

[geneer]

http://www.findaproperty.com/story.aspx?storyid=9509

Take a look at the chart at the bottom of this report. Very interesting IMO & demonstrates the varied situation across the UK.

Here's a clue for you: London ROI 40.88%

And you lot told me I should sell!

Maybe you still should. Saved this one for you especially.

Time to reduce the rates.

[apom]

http://www.findaproperty.com/story.aspx?storyid=9509

Take a look at the chart at the bottom of this report. Very interesting IMO & demonstrates the varied situation across the UK.

Here's a clue for you: London ROI 40.88%

And you lot told me I should sell!

Can you answer this one..

I am in devon I can rent a £360,000 town house for £1000 a month.. result.. if I could spare a thousand a month.

In London I can rent a £160,000 studio flat for £800 a month... result for the landlord...

and I can earn double my salary in London that I earn in devon.

you seem TTRTR's my be a bit cruel in his goading.. but in some ways he has a point...

London you can make money on rent..

the example above for exeter shows a massive loss, and all the property that is held is loosing.. heavily... at todays prices in devon

[charmer]

Quick question, do those figures include transaction costs and are they gross of net of tax?

See what I'm driving at?

Pile of b*llocks.