What's Goona Stop Prices Coming Down?

[music man]

Please give me a plausable answer to this as I'm thinking 'curtains'. Nice 70's pub paisley curtains 'cos prices seem to be defying gravity a little for the mo.

[Casual Observer]

BTL investors will prevent serious dips in prices, IMO. As soon as prices fall abit (as they did last year) people will jump back in (as they did this year).

If IRs rise significantly, it's likely to be accompanied by high wage inflation, which will further support the market.

[cupidstunt]

BTL investors will prevent serious dips in prices, IMO. As soon as prices fall abit (as they did last year) people will jump back in (as they did this year).

Doubt it - yields are too low and IR's look like they're going up, which is why I'm selling my BTL's. There are much better Investment oppurtunities - you can make more money on deposit.

[Robbrent]

BTL investors will prevent serious dips in prices, IMO. As soon as prices fall abit (as they did last year) people will jump back in (as they did this year).

If IRs rise significantly, it's likely to be accompanied by high wage inflation, which will further support the market.

I am sorry but I think you have misread the market there, whilst there are a few mugs left there are not that many.

The last HPC saw sales fall through the floor, no matter what vendors did they could not sell,

Where do you get you Higher wage inflation from?

[Unexpected]

BTL investors will prevent serious dips in prices, IMO. As soon as prices fall abit (as they did last year) people will jump back in (as they did this year).

If IRs rise significantly, it's likely to be accompanied by high wage inflation, which will further support the market.

If there are any BTL investors left still buying after interest rates rise then of course they will help to support the market. But with higher interest rates and possible recession around the corner there will be less people who can afford high rents, and BTL investors will see that they can get get a much more reliable and higher return with a savings account, especially with higher interest rates.

[BillyShears]

BTL investors will prevent serious dips in prices, IMO. As soon as prices fall abit (as they did last year) people will jump back in (as they did this year).

If IRs rise significantly, it's likely to be accompanied by high wage inflation, which will further support the market.

Disagreed. Investors don't tend to dive into a falling market, they tend to wait until the market has bottomed out and started rising again. Why did it take so long for the market to get going again after the 1990 crash? Why did gold get all the way down to £250, and why was nobody talking about buying it

Precisely the same psychology that gets people to dive into a bubble (recent gains creating an expectation of future gains) then sustained (and publicised) falls will lead to an expectation of further falls, as happened last time.

A few BTLs may dive in during the downward slide causing a few sucker's rally, but like this time, the tide will turn again.

Billy Shears

[music man]

Can anyone afford a BTL these days and lose money each year in the hope that in 25 years the'll have a BTL pension and not consider investing elsewhere?

Of course some can and will through desire or ignorance but tell me if I'm wrong Buy Low - Sell High.

[Casual Observer]

Doubt it - yields are too low and IR's look like they're going up, which is why I'm selling my BTL's. There are much better Investment oppurtunities - you can make more money on deposit.

That misses the point - if prices fall sufficiently, yields will rise and investors will re-enter. That's the underpinning.

. Why did it take so long for the market to get going again after the 1990 crash?

BTL wasn't so prevalent then. The market relied on OOs

[Veritas]

BTL investors will prevent serious dips in prices, IMO. As soon as prices fall abit (as they did last year) people will jump back in (as they did this year).

Pyramid buying then - the opposite of pyramid selling schemes. Every man and his dog will soon be a landlord

If IRs rise significantly, it's likely to be accompanied by high wage inflation, which will further support the market.

What a cracker. 6% interest rates - market supported? 7% ditto? 8% ditto? ........ all the way to 15% - market still supported?

BTW Doesn't increasing interest rates tend to supress wage inflation not stoke it?

[Casual Observer]

Can anyone afford a BTL these days and lose money each year in the hope that in 25 years the'll have a BTL pension and not consider investing elsewhere?

Of course some can and will through desire or ignorance but tell me if I'm wrong Buy Low - Sell High.

What percentage do you they will have to drop, before btl 'ers are tempted again?

What a cracker. 6% interest rates - market supported? 7% ditto? 8% ditto? ........ all the way to 15% - market still supported?

If we had 15% IRs , what rate of inflation do you think we would be having? Probably 10% at least, which would erode debt and support nominal prices

BTW Doesn't increasing interest rates tend to supress wage inflation not stoke it?

Err. yes, but you only tend to get really high IRs when inflation is already high

[cupidstunt]

That misses the point - if prices fall sufficiently, yields will rise and investors will re-enter. That's the underpinning.

BTL wasn't so prevalent then. The market relied on OOs

OK Point taken - my BTL's yield just over 3% (on purchase price over 10%) I need a Property correction of nearly 40% to get my yields to over 5% I might re enter the market then!

[Casual Observer]

Pyramid buying then - the opposite of pyramid selling schemes. Every man and his dog will soon be a landlord

Where was that implied?

OK Point taken - my BTL's yield just over 3% (on purchase price over 10%) I need a Property correction of nearly 40% to get my yields to over 5% I might re enter the market then!

Have you taken into account the higher rents, due to generalinflation?

[El_Pirata]

That misses the point - if prices fall sufficiently, yields will rise and investors will re-enter. That's the underpinning.

BTL wasn't so prevalent then. The market relied on OOs

BTL yields may well rise as prices fall, but they will still not look attractive as interest rates will be higher too. So what if you can get a 6% rental yield if you can get the same in a savings account? And that's with a risk of further capital depreciation - not a great investment. Classic bear market.

[Guest Guy_Montag]

What percentage do you they will have to drop, before btl 'ers are tempted again?

There's a couple of issues here -

1) When prices are falling long term, why buy your btl now, when you can get a better/cheaper one if you wait 6 months?

2) As the UK economy tanks (if it does) all these immigrants that have been keeping btl ticking over will head off back to Poland, or go work in Germany as the economy there expands. It's all very well being a Polish plumber here, as long as there's plenty of work, but once that work dries up better to head somewhere else.

[music man]

Disagreed. Investors don't tend to dive into a falling market, they tend to wait until the market has bottomed out and started rising again. Why did it take so long for the market to get going again after the 1990 crash? Why did gold get all the way down to £250, and why was nobody talking about buying it

Precisely the same psychology that gets people to dive into a bubble (recent gains creating an expectation of future gains) then sustained (and publicised) falls will lead to an expectation of further falls, as happened last time.

A few BTLs may dive in during the downward slide causing a few sucker's rally, but like this time, the tide will turn again.

Billy Shears

the same pyscholgy in a market drop as rise in very true and so missed on pundits not acknowledging the words of MK. There is a huge level of psycholgy in their words and the worm has turned.

I still think there is little argument in housing as an investment and as a home it appears out of reach. HIPS propaganda or real will add to the negatives of buying.

The debt net if as full as it's gonna get (nationally and globally) and so it's the horrible though of 70's pub wallpaper and Paisley curtains again.

[tiff]

currently low interest rates.

[Casual Observer]

BTL yields may well rise as prices fall, but they will still not look attractive as interest rates will be higher too. So what if you can get a 6% rental yield if you can get the same in a savings account? And that's with a risk of further capital depreciation - not a great investment. Classic bear market.

Because BTL investors have more faith in property than you think they have.

[El_Pirata]

Because BTL investors have more faith in property than you think they have.

Just like dotcom investors had faith in shares. Till prices started to fall. Human nature.

[BillyShears]

OK Point taken - my BTL's yield just over 3% (on purchase price over 10%) I need a Property correction of nearly 40% to get my yields to over 5% I might re enter the market then!

But when house prices are falling the rental yield needs to be higher to make up for price depreciation. That is what will keep BTL'ers out of the market for a while.

Because BTL investors have more faith in property than you think they have.

And how long will that faith last when prices start going negative YOY and this finally gets publicised in the media.

Billy Shears

Edited June 14, 2006 by BillyShears

[JonoP]

Another point is that banks will start to tighten their lending criteria for BTL (and OO as well I guess). This will make it much harder for the amateur landlords to even get credit to buy BTL in the first place.

This will be coupled with the previously mentioned points around decreased demand and the 'it will be cheaper in 6 months' sentiment.

We will also start to see a lot more negative BTL stories in the media (.....In 2005, George had a property portfolio worth £1 million, now he is a tramp....type stuff) and this will remove the common perception that BTL is a one way bet.

[cupidstunt]

We will also start to see a lot more negative BTL stories in the media (.....In 2005, George had a property portfolio worth £1 million, now he is a tramp....type stuff) and this will remove the common perception that BTL is a one way bet.

The new breed of BTL's are the same type of people that were day traders in the dotcom era, the difference being that tha BTL's are more highly geared and there are a lot more of them, as property only ever goes up. Also these new breed have used their owm homes as security.It only need a small correction to see a number of these people heading for Insolvency....and then....

[brassfarthing]

Just like dotcom investors had faith in shares. Till prices started to fall. Human nature.

But dotcom gamblers were just buying bits of paper. Worse than that, they were just buying half-baked ideas that had no intrinsic value.

Property prices may well drift downwards for a while. It's a certainty in fact, as it's an established feature of the house price cycle. But another feature of that same cycle is that prices will then rise again. This is why most BTL-ers will be OK with their investments. The ones at risk are 1) those hoping for a quick buy-sell gain. When they want to sell they may well find themselves in a HP dip. 2) Those who have overstretched themselves who will be vulnerable if IRs go up significantly.

BTL-ers who hold onto their properties will be fine.

A bit like shares. Fortunately I sold most of my stocks and funds before the recent dip but I hung onto a few. They're now 10% lower than they were when I bought them so there's nothing to gain by selling them now. They may halve in value again, but there's no incentive for me to sell. I'll just have to wait till they rise again, as they most certainly will. The importance of patience is something that a lot of new investors find hard to understand.

[Guest The_Oldie]

The importance of patience is something that a lot of new investors find hard to understand.

A large number of posters here recognise this and are patiently waiting for a correction in the housing market.

[befuddled]

Several bulls have mentioned in the past that if things begin to fall, then the number of people sitting on this site with deposits ready to buy will prop the market up and prevent an outright crash.

I suspect that even those with a 100k deposit and the desire to buy will actually sit and wait longer as greed takes over their investment decisions somewhat.

[cupidstunt]

A bit like shares. Fortunately I sold most of my stocks and funds before the recent dip but I hung onto a few. They're now 10% lower than they were when I bought them so there's nothing to gain by selling them now. They may halve in value again, but there's no incentive for me to sell. I'll just have to wait till they rise again, as they most certainly will. The importance of patience is something that a lot of new investors find hard to understand.

A great deal of these new breed of BTL's are too highly geared - when there's a correction (even a small one) they'll be forces to sell - just like a margin call.