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iLegallyBlonde

Things Will Never Be The Same Again Btl Is Too Entrenched Now

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There is some logic in having a house as a 'pension' because you get the benefit of a larger house (or holiday home on the costas) before you retire but with tax relief on pension contributions it would be hard to get a better return in the long term.

There is something to be said for having you eggs in different baskets, lots of peoples pension plans went badly wrong after the dot com crash but now really isnt the time to buy houses!

Edited by DONT PANIC !!! DONT PANIC !!!

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http://www.mumsnet.com/Talk?topicid=2230&a...mp=060827202324

Read the last comment about pensions, I can't argue with that can you ?

I disagree with the sentiment that BTL is too entrenched. At the end of the 90's the newspapers (even the Daily Mirror Link) had share dealing advice. A large number of people I encountered would tell me of the fortunes they would make on internet companies. People were leaving their day jobs to become day traders and everybody seemed to have the name of the next big share to invest in. Now you can't get people to talk about it or admit the amounts of money they lost.

BTL should be similar if the outcome is similar. Its popularity is in no small part to the daytime TV shows and prime time evening shows about the "never miss" property market. If people lose money the BBC and C4 will find some other source of cheap programming , deny any culpability and move on. After all, who will complain that they were lead on by these programs, and who to ?

The power of these programs which last between 30 and 60 mins can only be guessed at when you consider what companies will pay for just a mention of their product on the TV.

This also explains why the opinions of VI's should be (but rarely are) balanced in the media when the majority of the people who watch them stupidly expect them to be unbiased and implicitly trust the content. As long as they get away with it, they'll continue to do it.

If I'm right, then a good indicator of market sentiment will be the number and type of these programs broadcast. It would be interesting if the webmaster could set up a "property program index" highlighting patterns in property porn broadcasting.

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I can't argue with that can you ?

What on earth makes people think that rearranging the deckchairs while the iceberg of old age poverty approaches qualifies as "investment"?

Here's some free bits to gnaw on - rent is a fee for a service rendered (in a highly competative market), not some magical free lunch; I'd say anyone depending soley on rental income in lieu of a lifetime's worth of fiscal mismanagement is going to be struggling to cover the associated capital and operational costs, let alone be able to massage the resulting cashflow into a position where it buys them a better brand of dog food for their dinner.

A career as a landlord and property investor will favour those with an overly extended, not ludicrously abbreviated time horizon.

But this concept of achieving one's goals in many constant, carefully risk-managed, and relatively small increments doesn't sit nearly as well with that (wide-eyed, and bipolar) end of the demographic curve - particularly now that time's clearly getting short.

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the 'smart' money (including me) is now out of BTL. The yields don't stack up, and prices look more likely to fall for the next 5 years than rise.

Only the Me2's are still trying it. Just like always.

They end up effectively giving their savings to the next set of house buyers.

That's how I initially got a 'leg up'.

Other peoples deposits effectively 'gifted' to me in repos and auctions. Now THAT'S leverage.

It's happening again, surprise surprise.

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I agree, unless of course you have a sizeable amount of cash that you do not wish to expose to the vagaries of the Stock Exchange, Commodities, or to some silver tongued Financial Advisor/ Fund Manager who is most obviously out for a cut of your cash irrespective of performance.

I think the Mature BTL will survive a downtown with ease, however anything post 2002 will for sure be looking pretty grim.

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very true, Laurejon.

Those who have been in business for 10 years or more and havent 'pyramided' too agressively should be fine.

Me, I just got bored with the whole hassle of looking after @sshole tenants. I'm now making a better 'yield' just from having the cash in the bank, with zero hassle. And I haven't even begun to think about investing in stocks or other areas yet...

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I disagree with the sentiment that BTL is too entrenched. At the end of the 90's the newspapers (even the Daily Mirror Link) had share dealing advice. A large number of people I encountered would tell me of the fortunes they would make on internet companies. People were leaving their day jobs to become day traders and everybody seemed to have the name of the next big share to invest in. Now you can't get people to talk about it or admit the amounts of money they lost.

This is very true. I lost a lot of respect for a number of friends at the end of the 90s when they talked up the dot com bubble and looked at me like I was crazy for suggesting that a company that made massive losses and had no track record might not be the best place for your savings. One guy I worked with at the time wanted to invest heavily in lastminute.com and tried to buy £15k worth of shares. Fortunately the issue was heavily oversubscibed and he only got a grands worth. Saved by luck rather than judgement. In 8-10 years, people who were the biggest BTL bulls in town will be talking down their involvement and trying to make it look like a massive crash was all part of their plans..!

Edited by redalert

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Guest pioneer31

Me, I just got bored with the whole hassle of looking after @sshole tenants. I'm now making a better 'yield' just from having the cash in the bank, with zero hassle.

You've just illustrated the reason that I think a lot of BTL will bite the dust.

IR's are rising now, who wants hassle?

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I think the Mature BTL will survive a downtown with ease, however anything post 2002 will for sure be looking pretty grim.

Your Southern perspective is showing through. In many parts of the country - Leeds, Liverpool for example, prices were only really starting to move up in 2002. I remember posting on here a link to a 3 bed semi in Leeds that sold for 32k in 2002 and 110k in 2004.

Someone entering BTL up North in 2002 will be fine.

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Things will never be the same again. Tulip speculation is too entrenched now.

Things will never be the same again. Dot.com day trading is too entrenched now.

Things will never be the same again. Residential mortgage backed securities have achieved permanent twin plateaus in default risk and in yield spreads.

Things will never be the same again. Sterling and greenback denominated treasuries are as safe as houses.

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I disagree with the sentiment that BTL is too entrenched. At the end of the 90's the newspapers (even the Daily Mirror Link) had share dealing advice. A large number of people I encountered would tell me of the fortunes they would make on internet companies. People were leaving their day jobs to become day traders and everybody seemed to have the name of the next big share to invest in. Now you can't get people to talk about it or admit the amounts of money they lost.

BTL should be similar if the outcome is similar.

Exactly what sprang to mind the second I read the thread title.

Thanks for saving me the effort.

I'm not sure I share your view entirely, but here is an admission of my own. I bailed ahead of the crash in 2000-2002, but I came in too early in 2003 and that was EXTREMELY painful. Folks forget that 1p lost on a 10p share is no different from 10p lost on a 100p share and that former sort of move was very common for crashed-and-burned techs in 2003. Why was I trying to play a tech bounce? Simple: it still had not fully sunk in that technology shares were just a blip. I was still convinced, even after sitting on my hands for two and a half years, that a time would come when it would be right to invest in "the future". Of course, what raced away was "the past" - mining stocks and house builders. So BossCat might be spot on. Maybe 3 years after a crash investors will try to pile back into BTL only to get slung out by after-tremours. Maybe these tremours will negate the prospect of propper (>10% yields). Don't believe me? Look at Lloyds TSB and Royal Sun Alliance. Both fat dividend stocks in 2003. They've hardly recovered, despite lloyds div being > 6.5%. the fact is house prices have gone up despite cr@p BTL returns, so why should good BTL returns keep them supported in a downturn?

Things Will Never Be The Same Again Btl Is Too Entrenched Now

As Fleming said, "never say never again."

Edited by Sledgehead

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Things will never be the same again. Tulip speculation is too entrenched now.

Things will never be the same again. Dot.com day trading is too entrenched now.

:rolleyes:

I see a problem with comparing recent HPI to tulips and dotcom, which is simply the scale of the overpricing. Tulips and dot-com shares were basically worthless commodities, that got into speculative bubbles. Housing is overpriced, but it is far from worthless. Most people here would say it is overpriced by perhaps 50% but accept that somewhere around 3x salary would be reasonable. That is a very different situation to a bubble of tulip proportions.

So the question is whether the higher level of BTL, created by laxer tenancy laws and increased competition in the lending market, is going to be a permanent feature of the UK property market. If prices fall a bit, as they probably will, do all the BTLers get out in a stampede causing further falls? Or do a reasonable proportion of them stick it out?

If the latter, then it could mean that the market is less overpriced than some would suggest, and that the natural level of the market has risen from the days when 3x income was normal. The OP sounds a bit despondent about this possibility. Whether it is realistic or not remains to be seen.

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Rather than rehash this, which has been discussed many times, I suggest we just wait a decade and see.

Good plan, though not very practical for someone trying to decide whether to buy or not. I know it's been gone over many times (I've read posts here a lot of the last couple of years without joining in).

But I still see people lazily saying "it's a bubble and bubbles always burst" without seeing how much of an assumption is being made. There's a difference between a bubble bursting and an overpriced market correcting.

(BTW my guess is that UK houses are about 100% overvalued, and that real prices will undershoot fair value even further, by the end of the collapse.)

I do think that's a possibility. It certainly happened in 1989-93 though I think the ERM ****-up helped push them a bit further than they would otherwise have gone.

However I also think stagnation or less catastrophic falls are a possibility. In the past few decades we have examples of both type of correction.

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But I still see people lazily saying "it's a bubble and bubbles always burst" without seeing how much of an assumption is being made.

As one of those 'lazy people', I'd like you to take a look at the following graph and tell us all again there is no bubble. We could all do with a laugh.

27leon_graph2.large.gif

post-5688-1156859352_thumb.jpg

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Globalisation is what's different this time, in the London housing market at least:

http://www.ft.com/cms/s/02a5fdb8-349f-11db...00779e2340.html

50% of buyers in prime London areas are from outside the UK. Could these areas be immune from any crash?

I guess that if an HPC triggered recession hits the UK (and most of London), London will become 'uncool' and most of the people who are buying the prime property will want to move on to the next 'place to be'. Certainly a declining US stock market (which looks likely now) and a declining UK market will lead to a bloodbath in the City, and a sharp reduction in demand for the £2M+ mini mansions.

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50% of buyers in prime London areas are from outside the UK. Could these areas be immune from any crash?

still a very small amount - ie 50% of buyers in a small number of select areas. Theres always been foreign buyers. Remember the 1970s when oil rich arabs bought loads of upmarket London property

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As one of those 'lazy people', I'd like you to take a look at the following graph and tell us all again there is no bubble. We could all do with a laugh.

Don't get me wrong, I do think property is significantly overpriced and will correct in one way or another. I just think that comparing it to the tulip craze is misleading. Property will always be worth something, so there is real value as well as the speculative element. And other than the early nineties most property booms have died with a slowdown/stagnation rather than a crash.

Maybe this one has gone too far for that. Your lovely graph would certainly seem to suggest that. I see it's a US graph, but the UK one would look pretty similar.

But some people here seem to imagine that every property crash follows the pattern of the early nineties with large, rapid falls in nominal prices - that's what I think of when I think of a "bursting bubble". I think it remains to be seen if we get that or something less precipitous on the way down. And the OP's point about BTL seems to me to be one key factor, so I don't think dismissing it with talk of bubbles or mocking cries of "It's different this time" is sufficient.

A mass BTL exodus would exacerbate any falls, probably making this the biggest crash yet. But without that exodus, the natural price level for property may have been permanently raised. I certainly don't yet know which of those will happen.

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Don't get me wrong, I do think property is significantly overpriced and will correct in one way or another. I just think that comparing it to the tulip craze is misleading. Property will always be worth something, so there is real value as well as the speculative element. And other than the early nineties most property booms have died with a slowdown/stagnation rather than a crash.

Tulips also have real value, as do dot com companies (well, most of them B) ). This is a 'bubble' preciesly because it does have the speculation. People 'flipping' property was a sign of speculation, BTL when yields are lower than a savings account is a sign of speculation, people warning of a last chance to own a property, etc., take up of IO and talk of inter-generational morgages is a surefire sign of a bubble.

If the UK ecconomy is and remains rosy, then maybe we could ride out the high prices with a period of stagnation, but with an economy that now seems dependant upon rising house prices and the 'feel good' factor that brings, I think that as soon as sentiment changes and people get the impression there really could be a crash, their reaction will almost certainly create one.

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I'm still hanging on to my great, great, ..., great grandfather's bulbs, waiting for an upturn. (No one has opened the box since they were put in. Do you think they'll be alright?) :lol:

Hey, I didn't say they have much value, just some :lol:

Here is the wikipedia 'bubble' definition:

http://en.wikipedia.org/wiki/Bubble_%28economics%29

"An economic bubble refers to a market condition, where the prices of commodities or asset classes increase to absurd levels (that no longer reflect utility of usage and purchasing power). It occurs when speculation in the underlying good causes the price to increase, thus producing more speculation."

I think it's fair to say that most UK house prices don't reflect utility of usage, as rents in nearly every area are cheaper than buying. They also are now out of line with purchasing power, as various surveys showing FTBs needing £30K have revealed. I would also say that the popularity of BTL is the speculation. The fact that someone will still invest in BTL with very low (or non-existant yields) because they are speculating that the price will continue to rise.

Edited by redalert

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I'm still hanging on to my great, great, ..., great grandfather's bulbs, waiting for an upturn. (No one has opened the box since they were put in. Do you think they'll be alright?) :lol:

:lol:

Yes, well I suppose if there is a real distinction it is just what proportion of the price is real value vs speculative froth. I have the same problem when people talk about the property market as a pyramid scheme. It's an appealing comparison, but by exaggerating the degree of overpricing it maybe isn't a very helpful one.

Admittedly property prices are constrained by mortgage lending so there's a limit to how far they can spiral upwards, unlike tulips or dotcom shares.

No one wants your g.g.g... grandfather's festering bulbs but people will always want houses.

But I think the biggest speculative froth is in urban new-build apartments, as they are being bought as pure investment. Whereas a fair part of the rest of the market is still driven by people simply wanting somewhere to live. I can certainly imagine zero demand for the executive apartments in future.

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I just think that comparing it to the tulip craze is misleading. Property will always be worth something, so there is real value as well as the speculative element.

not trying to be rude, but you need to read up on both the tulip mania and bubbles in general.

Bubbles are when any relationship to intrinsic value goes out the window thanks to Me2 speculation. They generally start off as a believable rise in price tied to that intrinsic value.

In the case of tulips, that 'intrinsic value' was what they could be sold for at market. Believe it or not, people still buy flowers, so they still have 'intrinsic value'.

BTW, the UK graph makes the US version look like an incredibly conservative gentle rise.

BTW BTW, when bubble pop, prices collapse, as in all housing crashes so far. The fact that the falls in previous crashes were hidden by hyperinflation is neither here nor there. Read up on the subject before posting. Seriously. You just make yourslef look silly.

No offense.

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  • 301 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% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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