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Guest wrongmove

Should You Sell Your Home And Rent?

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Guest wrongmove

Should you sell your home and rent?

"People who believe the housing boom is over are putting their properties on the market in preparation for a crash. Should you join them?

HOMEOWNERS who believe the housing market is at a peak are selling their properties to lock in profits from the house-price boom. They are then renting in the hope that they can buy back into the market when prices fall.

The phenomenon of “selling to rent†is gathering pace in London and the home counties, according to estate agents, where house prices in some areas have surged by 50% over the past 12 months.

The trend has emerged amid growing signs that the property boom could be over.

Mimi Capas at the estate agency Knight Frank said: “Many people think that property prices have gone as high as they can go. Their instincts are telling them the rate of growth that has been seen recently can’t carry on much longer, so they want to sell now while demand is still strong.â€

The rate of house-price growth this year has defied most analysts’ expectations. Interest rates have risen four times since last August and are at their highest level for six years, yet annual property-price inflation is still running at double-digit levels. The latest figures from Halifax reveal that the average house price has risen by 10.6% over the past 12 months to £196,893.

But there are clear signs that the market has started to slow. Halifax said that in May prices rose by 0.3%, the smallest monthly gain this year. It also said that buyer interest had subsided, falling for the fifth consecutive month. Mortgage approvals are also at their lowest level for 12 months. ........."

Edited by wrongmove

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Now that is what I call a TOP.

You'd have to be fairly investment-savvy to STR. Most people don't view their own home as an investment so wouldn't see it as an investment falling in value in real terms if prices stood still.

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Guest wrongmove
Fantastic - STR goes mainstream!

Sentiment, sentiment, sentiment.

Check out the business/money sections of all the broadsheets this morning. I have posted 4 articles - a bit OTT - but there are many more generally bearish stories today. The big bond sell-off last week has the financial writers all excited. Long term IRs are on the up at last, so liquidity may finally be beginning to reduce. We all know what this can do to asset prices in general, and house prices in particular (except those who think IRs are irrelevant, of course.....)

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Fantastic - STR goes mainstream!

Sentiment, sentiment, sentiment.

STR goes mainstream.

Which means you won't be able to do it anymore.

You can only really take advantage of an asset price bubble if you get out before the market turns.

Folks, we haven't just called the top. We have made the top.

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I read the article. I got upset by the Knight Frank spokesman that was forgetting that bringing in your own capital of £500K also has a cost. He was telling renting was still a lot more expensive than buying. In 90% of the cases this is not true anymore.

So I submitted a reply to the times website.

:rolleyes:

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I did it 6m ago, so I'm sitting here feeling like a smug b*****d

:P

I am not at all comfortable with smugness, but this last couple of weeks I have been feeling exactly the same. Suddenly people at the office are not treating me as mad (or sad) for not owning a house.

Our period of waiting has come to an end..............

We are just at the point of the big-dipper almost poising in mid-air as it goes over the top. Hold on tight and keep smiling.

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Guest grumpy-old-man
I am not at all comfortable with smugness, but this last couple of weeks I have been feeling exactly the same. Suddenly people at the office are not treating me as mad (or sad) for not owning a house.

Our period of waiting has come to an end..............

We are just at the point of the big-dipper almost poising in mid-air as it goes over the top. Hold on tight and keep smiling.

yes, me too.

It takes a lot doesn't it to go against the grain, especially something as ingrained in society as housing.

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Fantastic - STR goes mainstream!

Sentiment, sentiment, sentiment.

not being funny but if you STR surely you will be renting off a BTL'er. if everyone STR then demand for renting (and rental prices) will go up and so there will be more BTL'ers to cater for this demand.

this will essentially switch ownership from homeowners to landlords if everyone STR and in the long term you may end up paying off someone elses mortgage rather than your own.

Edited by mfp123

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not being funny but if you STR surely you will be renting off a BTL'er. if everyone STR then demand for renting (and rental prices) will go up and so there will be more BTL'ers to cater for this demand.

this will essentially switch ownership from homeowners to landlords if everyone STR and in the long term you may end up paying off someone elses mortgage rather than your own.

Hmm. Trying to think my way around that good point. Intuitively I feel that more people renting should bring prices down. But as you say, somebody will still own the houses.

Not sure.

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Hmm. Trying to think my way around that good point. Intuitively I feel that more people renting should bring prices down. But as you say, somebody will still own the houses.

Not sure.

There's an easy way to answer that one. Most of the latest BTL'ers who have 85% mortgages will be subsidising their tenants. A few more rate rises and they won't want to pay even more, so they will try to get the tenant out, but will have to give 2 months notice after the initial 6 months tenancy. Houses crashing around them but they can't get the tenant out!!!

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not being funny but if you STR surely you will be renting off a BTL'er. if everyone STR then demand for renting (and rental prices) will go up and so there will be more BTL'ers to cater for this demand.

this will essentially switch ownership from homeowners to landlords if everyone STR and in the long term you may end up paying off someone elses mortgage rather than your own.

If the people moving from OO to STR sell to BTLers then the demand is neutral, the numbers balance. There will be one new BTL available for each STR sold.

Currently STRers are not paying BTLers mortgages, it is the other way round, BTLers are subsidising STRers rent, so that we STRers can put our capital in the bank and earn more interest than we pay rent. Long may it last.

The fly in the ointment when thinking about supply and demand is that the supply is increasing dramatically with all the new build flats, so the rents are going to go down, as well as house prices. Because of inflation interest rates are going to go up if anything. So in the short run the BTL financial transfer to the STR is going to increase.

In actual fact there won't be a huge number of people moving now into STR, because any big movement will flood the market with property that they can't sell.

Given that this site has been the standard bearer for STR, and was very likely the ultimate source for the Times piece, and given that the Times piece may have encouraged a lot of people in London and the South to put their properties on the market (never mind scare the bejezaz out of the BTL crowd), it is arguable that we have been a trigger for the HPC.

Time will tell.

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Guest Bart of Darkness
Suddenly people at the office are not treating me as mad (or sad) for not owning a house.

When that kind of sea change happens, calling the top doesn't seem quite so Whacko Jacko any more.

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If the people moving from OO to STR sell to BTLers then the demand is neutral, the numbers balance. There will be one new BTL available for each STR sold.

Also, if an OO STRs and sells to a FTB moving out of rented accommodation, then the numbers balance too, as they're essentially swapping places.

It's only if an OO STRs and sells to someone moving out of some form of cohabitation with people who remain OOs , e.g. marriage, living with parents, that rental demand can increase.

Currently STRers are not paying BTLers mortgages, it is the other way round, BTLers are subsidising STRers rent, so that we STRers can put our capital in the bank and earn more interest than we pay rent. Long may it last.

The fly in the ointment when thinking about supply and demand is that the supply is increasing dramatically with all the new build flats, so the rents are going to go down, as well as house prices. Because of inflation interest rates are going to go up if anything. So in the short run the BTL financial transfer to the STR is going to increase.

In actual fact there won't be a huge number of people moving now into STR, because any big movement will flood the market with property that they can't sell.

Given that this site has been the standard bearer for STR, and was very likely the ultimate source for the Times piece, and given that the Times piece may have encouraged a lot of people in London and the South to put their properties on the market (never mind scare the bejezaz out of the BTL crowd), it is arguable that we have been a trigger for the HPC.

Time will tell.

I predict there will be a lot more STRs than during the last crash. Because:

- many more recent FTBs or STBs are saddled with bigger mortgages as multiples of income than at the peak before the last crash, and at an older age. Also a lot of them have a vast experience of renting so there's not such a stigma attached to it as for previous generations, especially among the middle classes.

- a much higher proportion of these people are childless, so STRing will not be such an upheaval

- the only direction interest rates are heading in the medium-term is up, c.f. down in the last crash, i.e. the cost of servicing current mortgages is nowhere near the peak yet

- opportunities to emigrate are better? (not sure about this one)

Edited by bugged bunny

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I read this today, it's not exactly an article that says it's a good idea to STR though it it?

'But experts warn that homeowners who decide to rent in the hope of making a profit are taking big risks. House prices need to fall by about 4% to make it financially worthwhile, according to Knight Frank.

For example, it calculates that you would pay £36,100 more over a year to rent a house worth £1m than you would to buy it. The figures assume you have £500,000 equity from your old home so would need to take out an interest-only mortgage of £500,000. They also assume a mortgage rate of 5.75%, rent of £865 a week and that the equity is invested in a savings account paying 5.95%.

Prices would have to fall by at least 3.6% a year to make it worthwhile. If this happens, the property worth £1m would drop to £963,900.

Most analysts dismiss talk of a crash although they do expect price growth to slow. Diana Choyleva at Lombard Street Research said: “It is unlikely there will be a crash similar to the one in the early 1990s, but we think there will be a correction next year, with house-price growth falling to 0% in 2008.”

Even in areas where the market is weaker at the moment, widespread falls are not expected because underlying fundamentals remain robust. '

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We are just at the point of the big-dipper almost poising in mid-air as it goes over the top. Hold on tight and keep smiling.

O it's great to see the old favourite phrases getting a dusting off, like "hold on tight" and references to roller coasters. I particularly used to like "strap in now everyone".

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I read this today, it's not exactly an article that says it's a good idea to STR though it it?

'But experts warn that homeowners who decide to rent in the hope of making a profit are taking big risks. House prices need to fall by about 4% to make it financially worthwhile, according to Knight Frank.

For example, it calculates that you would pay £36,100 more over a year to rent a house worth £1m than you would to buy it. The figures assume you have £500,000 equity from your old home so would need to take out an interest-only mortgage of £500,000. They also assume a mortgage rate of 5.75%, rent of £865 a week and that the equity is invested in a savings account paying 5.95%.

Prices would have to fall by at least 3.6% a year to make it worthwhile. If this happens, the property worth £1m would drop to £963,900.

Most analysts dismiss talk of a crash although they do expect price growth to slow. Diana Choyleva at Lombard Street Research said: “It is unlikely there will be a crash similar to the one in the early 1990s, but we think there will be a correction next year, with house-price growth falling to 0% in 2008.”

Even in areas where the market is weaker at the moment, widespread falls are not expected because underlying fundamentals remain robust. '

What a stupid and irrelevant example - taking a £1M property. :rolleyes:

In any case, according to PropertySnake, it's the more expensive properties that are seeing the biggest price reductions in Bristol.

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So you are happy that you are 5-10% of the value of your property worse off?

I am sure Selling Up will respond but in many parts of the country there certainly has not been a 5-10% increase in 6 Months, don't believe everything you hear on the BBC!

I put my house on the market in October 2006 for a few weeks, then took it off until the new year putting it back on at the same price despite hears things were rising at 1-2%/month, I accepted a good offer below asking price in February, and an identical house on my street has had to drop the asking price below my selling price in the last few weeks. I am not saying things are crashing round hear but think things are definitely cooing down.

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I am sure Selling Up will respond but in many parts of the country there certainly has not been a 5-10% increase in 6 Months, don't believe everything you hear on the BBC!

I put my house on the market in October 2006 for a few weeks, then took it off until the new year putting it back on at the same price despite hears things were rising at 1-2%/month, I accepted a good offer below asking price in February, and an identical house on my street has had to drop the asking price below my selling price in the last few weeks. I am not saying things are crashing round hear but think things are definitely cooing down.

There had been very high HPI in Bristol YoY to the end of April - approx 12% on average.

However, the market has definitely turned here, and I'm sure Selling Up is very relieved he got out 4 months too early rather than 4 months too late!

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I liked the fact that the STR they featured in the article was a mortgage broker based in central London. I imagine they would be the some of the first to get a 'heads up' on what's happening in the market. Could it be that prime and central London is experiencing a fall off in demand ?! - gasp no surely not - London is the centre of the universe - populated by Sheiks, Sultans, Oligarchs and financial geniuses. Everyone in the known universe wants to live in the big smoke.

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There had been very high HPI in Bristol YoY to the end of April - approx 12% on average.

However, the market has definitely turned here, and I'm sure Selling Up is very relieved he got out 4 months too early rather than 4 months too late!

The small costs of estate agents fees and legals and then stamp duty when you re buy never seem to get a mention. Thats before you enter the awful stress of the process of trying to buy a house you like.

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