B T L Yields Now At 5 Year Low - Stocks Far Better

[Realistbear]

http://www.telegraph.co.uk/money/main.jhtm...6/ixperson.html

Is buy to let a good bet?

(Filed: 26/07/2006)

Yields are falling

so becoming a landlord rather than investing in a pension is a difficult choice, says John Greenwood

A surge in interest in residential property as a long-term investment means the proportion of mortgages being taken out by landlords has soared just as

rental returns have fallen to their lowest level for

five years

.

....../

"Rental yields have fallen so low that it has got to the stage where you can't make money

out of buy to let without picking your property carefully," says Lee Grandin, the managing director of Landlord Mortgages, a broker. "As a rule of thumb, a property needs to yield rent of 6 per cent of the purchase price to make the sums add up, so with the national average yield standing at exactly 6 per cent, you have to get the right property to make it work."

Many buy-to-let landlords are investing in property to fund their retirement instead of taking the traditional option of making regular payments into a pension plan. But is that sensible?

Those who invested in property years ago are sitting on healthy gains, but houses have not always been stellar performers and there is no guarantee they will be in the future. Whether residential property is a better bet than traditional pensions is a long-running argument,

but, going back as far as records allow, houses have not performed as well as shares or commercial property

.

The oldest consistent data on house prices is from Halifax. The lender's house price index shows that a property valued at £100,000 in 1983 would be worth £555,000 today. Although this may seem like a decent return, a similar investment in commercial property would have grown to £997,000, while investing in a FTSE All Share tracker fund would have returned £1.4m with all dividends reinvested.

......../

The overriding message is to think carefully before putting your faith in one asset class such as property. Balance is the key because cycles will dictate which asset class comes out on top; diversification reduces the risk of getting your timing wrong.

We are at or very near the top of the cycle for housing. With yields falling to 5 year lows the message seems to be now is the time to get out of BTL before everyone else decides to do so. Long term? Stocks.

[Guest donall]

I think that most BTLers have realised that there is no easy money in it anymore.

The suckers who are coming in now - buying a decent flat, changing the carpets and putting a bowl of sticks in the corner - are going to get their fingers burnt.

Case in point - a friend of mine has a flat, a good "investment" in his eyes, which pays about 3.5% yield. He would make money selling it but feel that he should buy and hold.

He doesn't understand that it is losing him money.

Coincidentally he is a big fan of property TV shows.

I think that most BTLers have realised that there is no easy money in it anymore.

The suckers who are coming in now - buying a decent flat, changing the carpets and putting a bowl of sticks in the corner - are going to get their fingers burnt.

Case in point - a friend of mine has a flat, a good "investment" in his eyes, which pays about 3.5% yield. He would make money selling it but feel that he should buy and hold.

He doesn't understand that it is losing him money.

Coincidentally he is a big fan of property TV shows.

It's good that the Telegraph is putting out the message that BTL is not a really good investment decision.

I'd like to know about how BTL has affected the lower end of the property market, since we are hearing that so many people (FTB) are being priced out of the market.

[Casual Observer]

We are at or very near the top of the cycle for housing.

WTF?

How can we be? You've been saying that prices have been crashing, so how can we be at or very near the top?

Surely we are a long way below it (if we believe your evidence of falling prices)

Edited July 27, 2006 by Casual Observer

[Sledgehead]

The oldest consistent data on house prices is from Halifax. The lender's house price index shows that a property valued at £100,000 in 1983 would be worth £555,000 today. Although this may seem like a decent return, a similar investment in commercial property would have grown to £997,000, while investing in a FTSE All Share tracker fund would have returned £1.4m with all dividends reinvested. - says John Greenwood

Do bear in mind that little red phrase. The Halifax index is ex-rental yield. It is also ex-maintenance, ex-council tax, ex-insurance, ex-letting fees...

I really do wish somebody would create like for like indices, though factoring in maintenance etc and ability to fund by leverage (something the average equity investor is ony just becoming familiar with) this wouldn't be easy.

[nhyujm6]

My perception is that “Joe Public” in the UK doesn’t have much knowledge, aptitude or experience when it comes to investing in the SM. Stateside middle-class America is a lot more into investing in stocks. I mean you don’t see a lot of prime time TV shows in the UK discussing individual stocks earnings and market outlook.

The point Im getting to is that most people in the UK don’t even see direct investment in the stock market an option; they simply wouldn’t know where to start. They may have some managed funds and some savings, but the property market seems like a very attractive option compared to the latter. In fact the average person wouldn’t even care if you told them there are better gains to be made in the stock market, simply because it requires accounting and financial knowledge as well as an idea about how a business works. The tech bubble bursting was due in part to 1st time investors buying into highly speculative companies that had no chance of becoming profitable.

For Joe public property is the easy option. Even properties right next to airforce bases and sewage works have doubled in the last 6 years, and what they don’t know they can pick up in an entertaining format in the media.

For what its worth, I do advocate property as a “safe but boring” component (10-20 %) of ones own portfolio.

Good Luck!!

[Goat]

"As a rule of thumb, a property needs to yield rent of 6 per cent of the purchase price to make the sums add up, so with the national average yield standing at exactly 6 per cent, you have to get the right property to make it work."

Not sure where this 6% figure comes from, think you really need to be looking >7.5% minimum.

[Realistbear]

WTF?

How can we be? You've been saying that prices have been crashing, so how can we be at or very near the top?

Surely we are a long way below it (if we believe your evidence of falling prices)

Blame the Land Registry for the good HPC news, I just report the data. The reason I think we are still near the top is because we have a long way to go down and the correction is still in its early stages. Down 8.8% in my area which is just the beginning--or very early stage:

Greater London

£306,664 5.9% 5.9% 29242

South East

£228,762 -0.1% 3.5% 51705

South West

£198,952 -0.7% 1.1% 22843

East Anglia

£175,036 -1.8% 1.7% 9958

West Midlands

£158,343 -1.2% 4.5% 19571

East Midlands

£150,502 -3.1% 0.7% 18000

Northern Ireland

£145,987 4.6% 23.4% N/A

Wales

£142,121 -2.1% 6.4% 9871

Yorks & Humber

£139,967 -1.8% 7.4% 20681

North West

£137,503 -1.9% 7.6% 25173

North

£129,332 -3.1% 8.2% 11728

Scotland

124,481 -1.2% 8% 31,479

N/A

Sources:

England and Wales

Land Registry of England and Wales. The information above is based on figures provided by the Land Registry of England and Wales.

Figures for England and Wales are for the period January to March 2006.

http://news.bbc.co.uk/1/shared/spl/hi/in_d...tml/regions.stm

[AwaitingFairPrices]

My perception is that “Joe Public” in the UK doesn’t have much knowledge, aptitude or experience when it comes to investing in the SM. Stateside middle-class America is a lot more into investing in stocks. I mean you don’t see a lot of prime time TV shows in the UK discussing individual stocks earnings and market outlook.

The point Im getting to is that most people in the UK don’t even see direct investment in the stock market an option; they simply wouldn’t know where to start. They may have some managed funds and some savings, but the property market seems like a very attractive option compared to the latter. In fact the average person wouldn’t even care if you told them there are better gains to be made in the stock market, simply because it requires accounting and financial knowledge as well as an idea about how a business works. The tech bubble bursting was due in part to 1st time investors buying into highly speculative companies that had no chance of becoming profitable.

For Joe public property is the easy option. Even properties right next to airforce bases and sewage works have doubled in the last 6 years, and what they don’t know they can pick up in an entertaining format in the media.

For what its worth, I do advocate property as a “safe but boring” component (10-20 %) of ones own portfolio.

Good Luck!!

Property should indeed be a component in peoples portfolio, but with the current reliance on property, do you think that it is anywhere near as low of 10-20% of anyones total asset holding? With less savings, investments and pensions funds, too many buyers are counting on their house value, thinking they have all this nice inherent money to use in the future.

With surplus incomes shrinking each month because of rising costs of living, less and less people will be investigating and committing to monthly savings/investment schemes which would broaden their asset base, build real wealth and create a more risk diverse portfolio.

Even worse is that many people with 135K mortgages on their £150K houses think they 'own' this £150K and can rely on it in the future. It's certainly not a good sign and only holds pain for many in the future.

AFP

[nhyujm6]

Property should indeed be a component in peoples portfolio, but with the current reliance on property, do you think that it is anywhere near as low of 10-20% of anyones total asset holding? With less savings, investments and pensions funds, too many buyers are counting on their house value, thinking they have all this nice inherent money to use in the future.

With surplus incomes shrinking each month because of rising costs of living, less and less people will be investigating and committing to monthly savings/investment schemes which would broaden their asset base, build real wealth and create a more risk diverse portfolio.

Even worse is that many people with 135K mortgages on their £150K houses think they 'own' this £150K and can rely on it in the future. It's certainly not a good sign and only holds pain for many in the future.

AFP

agreed

[Realistbear]

agreed

The problem in the UK is that we are a one-horse race. Its houses or nothing. Hence boom and bust cycles. Germany avoids such dramatic housing busts because of a more diversified approach to life. We in the UK do not know how to diversify and suffer everytime the down cycle for housing hits. And suffer miserably.

[Van]

Here is a truism of investing: higher price means lower expected returns.

[Sledgehead]

Here is a truism of investing: higher price means lower expected returns.

Hey Van, remember a few weeks ago when RealistBear was telling everyone to "Get out whilst you still can" from the stockmarket? (after it had plunged 10%)

Now this is what he is saying:

B T L Yields Now At 5 Year Low - Stocks Far Better

"The oldest consistent data on house prices is from Halifax. The lender's house price index shows that a property valued at £100,000 in 1983 would be worth £555,000 today. Although this may seem like a decent return, a similar investment in commercial property would have grown to £997,000, while investing in a FTSE All Share tracker fund would have returned £1.4m with all dividends reinvested."

We are at or very near the top of the cycle for housing. With yields falling to 5 year lows the message seems to be now is the time to get out of BTL before everyone else decides to do so. Long term? Stocks.

What's changed? Oh, wait a min: yep, the Ftse has surged ~350 points.

I'm beginning to believe him when he says he is some sort of money manager. Haven't met one yet who didn't tell you to buy after a steep rise and sell after a steep fall!

By the way, did you know that if America goes up, the next day ... (no m8, don't worry, I'm not going there again!)

Edited July 27, 2006 by Sledgehead

[Realistbear]

Hey Van, remember a few weeks ago when RealistBear was telling everyone to "Get out whilst you still can" from the stockmarket? (after it had plunged 10%)

Now this is what he is saying:

What's changed? Oh, wait a min: yep, the Ftse has surged ~350 points.

I'm beginning to believe him when he says he is some sort of money manager. Haven't met one yet who didn't tell you to buy after a steep rise and sell after a steep fall!

By the way, did you know that if America goes up, the next day ... (no m8, don't worry, I'm not going there again!)

Hey Van etc.

Now this is what he is saying

:

You may be confused by the fact that the article I posted is making the statements? When you post an article it reflects the views of the article and the idea is that you read the artcile and then post your own views. You obviously muddled the fact that your copy and paste was written by the author of the article and not me?

Here it is again to clear up any doubt:

http://www.telegraph.co.uk/money/main.jhtm...6/ixperson.html

Is buy to let a good bet?

(Filed: 26/07/2006)

Yields are falling so becoming a landlord rather than investing in a pension is a difficult choice, says John Greenwood

A surge in interest in residential property as a long-term investment means the proportion of mortgages being taken out by landlords has soared just as rental returns have fallen to their lowest level for five years..../

The oldest consistent data on house prices is from Halifax. The lender's house price index shows that a property valued at £100,000 in 1983 would be worth £555,000 today. Although this may seem like a decent return, a similar investment in commercial property would have grown to £997,000, while investing in a FTSE All Share tracker fund would have returned £1.4m with all dividends reinvested.

As you can see Greenwood takes the view you quoted. Now, what part of Greenwood's arguments do you disagree with?

BTW, The FTSE is still tracking the DOW

http://uk.finance.yahoo.com/q/bc?s=%5EFTSE&t=5d

http://uk.finance.yahoo.com/q/bc?s=%5EDJI&t=5d

And you still don't believe it? What happens in NY is usually (not always) reflected the next day in Europe. Its been that way for years. What is your point in denying it? Or is it just Trolling to get the thread off on another track--the Angry Bull/Troll attack stuff maybe?

Edited July 27, 2006 by Realistbear

[Sledgehead]

You may be confused by the fact that the article I posted is making the statements? When you post an article it reflects the views of the article and the idea is that you read the artcile and then post your own views. You obviously muddled the fact that copy and paste was written by the author of the article and not me?

And the headline of this thread? :

B T L Yields Now At 5 Year Low - Stocks Far Better

Who did you "copy and paste" that from then eh?

or how's about your conclusion:

We are at or very near the top of the cycle for housing. With yields falling to 5 year lows the message seems to be now is the time to get out of BTL before everyone else decides to do so. Long term? Stocks.

Where did you "copy and paste" that from, eh?

You cheap little liar.

Christian apologetics has taught you all you need to fool the sheep in your flock but you better bring something a little more convincing when you come here!

Edited July 27, 2006 by Sledgehead

[Realistbear]

And the headline of this thread? :

Who did you copy and paste that from then eh?

You cheap little liar. Christian apologetics has taught you all you need to fool the sheep in your flock but you better bring something a little more convincing when you come here!

And your point is....................?

If you had read the article you would have seen that the point being made by the article (not me) is that BTL is at a 5 year low in relation to yields and that, over the long haul, stocks are far better. Which part of that do you disagree with? And which part is a "lie" in your opinion, of course?

Or, is this your usual Trolling to get the thread off track?

Here is what the artcile said, cut and pasted:

"rental returns have fallen to their lowest level for five years."

"The oldest consistent data on house prices is from Halifax. The lender's house price index shows that a property valued at £100,000 in 1983 would be worth £555,000 today. Although this may seem like a decent return, a similar investment in commercial property would have grown to £997,000, while investing in a FTSE All Share tracker fund would have returned £1.4m with all dividends reinvested."

To the intelligent mid the quotes are exactly what I said--"B T L Yields Now At 5 Year Low - Stocks Far Better"

Edited July 27, 2006 by Realistbear

[Sledgehead]

and or how's about your conclusion:

We are at or very near the top of the cycle for housing. With yields falling to 5 year lows the message seems to be now is the time to get out of BTL before everyone else decides to do so. Long term? Stocks.

Care to comment on whether this is you opinion?

I mean to say, either it IS your opinion, or you are merely reitterating what somebody else wrote two lines above. Think we all need a reminder of what was written two lines above do you? Think we are goldfish? Hmmm?

C'mon BE A MAN for crissakes and TELL US WHETHER YOUR WORDS ARE YOUR OPINION. Simple question.

(other posters must find this most quaint - a poster having to ask another whether their words are their opinion - don't worry it's very common when discussing things with christian apologists - they are trained in the useless "art" of obfuscation don'tchakno)

Edited July 27, 2006 by Sledgehead

[Realistbear]

We are at or very near the top of the cycle for housing. With yields falling to 5 year lows the message seems to be now is the time to get out of BTL before everyone else decides to do so. Long term? Stocks

.

Now you have got it! Yes, the above is my opinion. It may also the opinion of the author of the article. I fail to see the problem.

Now you go ahead a post your opinion or will you try to obfuscate and attempt to confuse with your usual Trolling to bring in something off topic. "Christian" apologetics? What does this have to do with the article that states BTL yields are at a 5 years low? Are you saying there IS a connection?

AWOOGA.

Edited July 27, 2006 by Realistbear

[Without_a_Paddle]

The oldest consistent data on house prices is from Halifax. The lender's house price index shows that a property valued at £100,000 in 1983 would be worth £555,000 today. Although this may seem like a decent return, a similar investment in commercial property would have grown to £997,000, while investing in a FTSE All Share tracker fund would have returned £1.4m with all dividends reinvested.

......../

I appreciate these are not your own words RB, but I do think this comparison is oversimplified.

If you had £100k cash in 1983 and simply bought a house with it (for renting out purposes, assuming you already had a main residence) you would have a house worth £555k today. If you rented it out you would also have a fair bit more cash built up courtesy of the tenant(s)

However you could have used the £100k as a series of deposits to buy several properties to rent out. (how about 5 properties?) The rental income would have easily paid off the capital by now even allowing for tax on the rent, voids and maintenance etc. (the rent today would be around £18k pa !!)

Result: you own 5 houses today worth £550k. (things might have got scary during 1989 with the 15% IRs though...)

I'm not saying you could do it that easily over the next 23 years but then no one knows for sure what stocks will do in the future either.

I don't see how you can match that with the stock market over the same period unless you resort to gambling on short term trends. (if this was as easy as BTL then we would all be doing it and the 'bookies' would be out of business)

Maybe some of the traders on here can advise otherwise.

[Sledgehead]

We are at or very near the top of the cycle for housing. With yields falling to 5 year lows the message seems to be now is the time to get out of BTL before everyone else decides to do so. Long term? Stocks

.

Now you have got it! Yes, the above is my opinion. It may also the opinion of the author of the article.

So you are saying buy stocks for the long term? Is that your opinion - ie the one you have stated above?

Sorry to have to pin you down on every word. You do have a habit of trying to wriggle.

C'mon, RB, own up to your own words. They are there in black and white after all (fancy having to do this with everyone one talks to on line! )

Edited July 27, 2006 by Sledgehead

[Realistbear]

I appreciate these are not your own words RB, but I do think this comparison is oversimplified.

If you had £100k cash in 1983 and simply bought a house with it (for renting out purposes, assuming you already had a main residence) you would have a house worth £555k today. If you rented it out you would also have a fair bit more cash built up courtesy of the tenant(s)

However you could have used the £100k as a series of deposits to buy several properties to rent out. (how about 5 properties?) The rental income would have easily paid off the capital by now even allowing for tax on the rent, voids and maintenance etc. (the rent today would be around £18k pa !!)

Result: you own 5 houses today worth £550k. (things might have got scary during 1989 with the 15% IRs though...)

I'm not saying you could do it that easily over the next 23 years but then no one knows for sure what stocks will do in the future either.

I don't see how you can match that with the stock market over the same period unless you resort to gambling on short term trends. (if this was as easy as BTL then we would all be doing it and the 'bookies' would be out of business)

Maybe some of the traders on here can advise otherwise.

Agreed. The profits over those years, for any investment, would depend on what the investment was. "Stocks" is too vague as there are some stoicks that have lost over the period. I am certain some stocks performed very poorly over the years. I bought Natwest (now RBS) shares back in 1989 and they have risen 400% to date. I am not sure, but I believe they have outperformed houses over the same period.

Its also a question of timing. If you buy low then your profit will obviously be more than if you bought at the top. Houses follow boom and bust patterns although the volatility is much less given that you cannot trade houses like you can stocks.

I believe the bottom line is that stocks have outperformed real estate over the long haul. If you invested 1000 pounds in the FTSE 50 years ago and the same amount in a typical detached house in suburbia the stocks would have probably outperformed the house.

So you are saying buy stocks for the long term? Is that your opinion - ie the one you have stated above?

Sorry to have to pin you down on every word. You do have a habit of trying to wriggle.

C'mon, RB, own up to your own words. They are there in black and white after all (fancy having to do this with everyone one talks to on line! )

We are at or very near the top of the cycle for housing. With yields falling to 5 year lows the message seems to be now is the time to get out of BTL before everyone else decides to do so. Long term? Stocks.

[Without_a_Paddle]

I believe the bottom line is that stocks have outperformed real estate over the long haul. If you invested 1000 pounds in the FTSE 50 years ago and the same amount in a typical detached house in suburbia the stocks would have probably outperformed the house.

We are in danger of going round in circles here...

I don't see how the stocks could 'win' under this scenario. This person would have to find 50 years' rent from somewhere...

If this rent is purely funded from the growth in stocks then it puts a pretty big dent in the growth potential.

(compared to the person who lives rent free in the house bought for cash in 1956)

[Realistbear]

We are in danger of going round in circles here...

I don't see how the stocks could 'win' under this scenario. This person would have to find 50 years' rent from somewhere...

If this rent is purely funded from the growth in stocks then it puts a pretty big dent in the growth potential.

(compared to the person who lives rent free in the house bought for cash in 1956)

I think the exercise looks at an ivestment property vs. stocks, i.e.. BTL vs. Stocks.

[Without_a_Paddle]

I think the exercise looks at an ivestment property vs. stocks, i.e.. BTL vs. Stocks.

So we are going round in circles.

eg invest the £1000 as a deposit on several rental properties and get the tenants to pay for the houses.

After 25 years you can use the rental income (all houses now paid for) to buy even more properties which would also be paid for by today.

I know it was harder to do BTL pre 1996 but my money is still on the highly leveraged property tycoon in your 50 yr example...

[Sledgehead]

And your point is....................?

If you had read the article you would have seen that the point being made by the article (not me) is that BTL is at a 5 year low in relation to yields and that, over the long haul, stocks are far better.

We are at or very near the top of the cycle for housing. With yields falling to 5 year lows the message seems to be now is the time to get out of BTL before everyone else decides to do so. Long term? Stocks

.

Now you have got it! Yes, the above is my opinion. It may also the opinion of the author of the article. I fail to see the problem.

...AWOOGA.

Here is my problem with you "Realist"Bear.

You tell people to get out at the bottom cos it's their "last chance to get out", the market zooms up 350 points and you tell them to buy for the long term.

You then deny this is your opinion, saying it is merely an article. You then say it is your opinion. You then say "hey what's the fuss?"

Apart from you being a two faced clueless twonk posing as a stockmarket expert, absolutely nothing! :angry:

As for accusing me of trolling....

[Realistbear]

Here is my problem with you "Realist"Bear.

You tell people to get out at the bottom cos it's their "last chance to get out", the market zooms up 350 points and you tell them to buy for the long term.

You then deny this is your opinion, saying it is merely an article. You then say it is your opinion. You then say "hey what's the fuss?"

Apart from you being a two faced clueless twonk posing as a stockmarket expert, absolutely nothing! :angry:

As for accusing me of trolling....

Buy low sell high. While stocks are best for the long term, as the article suggests, they may not be good for the short term. I think you are confused with regard to short term and long term strategies. IMO, the stock market is not the place to be at this time because of volatility and the US slowdown. Just because there has been a summer rally does not guarantee that it is safe to go back in the water just yet.

You should also consider anger management control. For some reason, you seem to take exception to anyone whose view differs from your own. Your language indicates that you are a hostile person that cannot tolerate discussion or views that do not fit with your own. A case in point would be your constant referral to Christian perspectives or your anti-semitic stand. You are free to express opposition to any point of view but you need to respect others and their views without resorting to persoanl adn often unrelated attacks.

Trolling? Anyone who constantly tries to throw a thread off into another subject is a Troll IMO. Further, I am not sure if you are actually trying to discredit this entire website as you must be aware of the growing influence it is having with links from the BBC site and recent mention in mainstream newspapers.

There is nothing wrong with expressing your opinion but the mods should take note of attempts to Troll or where personal attacks and insults are used to discredit other's points of view. Using profane language with certain letters changed to avoid censorship may help you get your point accross but it really does little to add to your credibility. You attack others and yet seem to have no views of your own which seems to be your way of proving that you are always right. If you have no opinions that may well be the case.