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ULTRAS-76

Advice Please.

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Hi all. Where to start...I find myself at a bit of a crossroads, I bought a house in Ballymena in 98 for 55000, 3 bed semi, out of the blue my father in law offered us land to build a new house on about 3-4 years ago. The way things were going at the time I felt it was a good idea to keep hold of the semi and rent it out. Can I just stress now that I consider myself to be in a very fortunate position and I am not crying or feeling sorry for myself now things have went tits up, I always said that once/if the semi reached 200k i would sell up...at that point I would have made out of it what I needed to make a big difference to our lives. I am not a greedy person, I felt and feel I was just trying to do the best for my wife and 2 kids with the VERY lucky position we found ourselves in. I am also lucky in that IF I were to sell now I would still make good money on the house. My question is to those with a crystal ball...should i sell now if I can or sit tight and hope i get what I need in a few years?? I am fully expecting to get slated for this but like I said, I was only doing what I felt was best for my family.

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My question is to those with a crystal ball...should i sell now if I can or sit tight and hope i get what I need in a few years??

I don't use a crystal ball. I look at:-

1. The history of housing bubbles.

2. Fundamentals of house prices.

3. Housing markets in other countries today.

You have alot of research to do... good luck!

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Hi all. Where to start...I find myself at a bit of a crossroads, I bought a house in Ballymena in 98 for 55000, 3 bed semi, out of the blue my father in law offered us land to build a new house on about 3-4 years ago. The way things were going at the time I felt it was a good idea to keep hold of the semi and rent it out. Can I just stress now that I consider myself to be in a very fortunate position and I am not crying or feeling sorry for myself now things have went tits up, I always said that once/if the semi reached 200k i would sell up...at that point I would have made out of it what I needed to make a big difference to our lives. I am not a greedy person, I felt and feel I was just trying to do the best for my wife and 2 kids with the VERY lucky position we found ourselves in. I am also lucky in that IF I were to sell now I would still make good money on the house. My question is to those with a crystal ball...should i sell now if I can or sit tight and hope i get what I need in a few years?? I am fully expecting to get slated for this but like I said, I was only doing what I felt was best for my family.

Welcome to the forum.

I would say that the huge supply of houses here (plus the planned new social housing to be built in the next few years) will keep prices down - the crash has just started and is likely to get worse. It could be years before your house regains its nominal value, never mind its real value adusted for inflation - perhaps a generation or more. As doccy says, weigh it all up and get good advice - but my gut instinct would be to sell.

Good luck, and keep us posted!

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I would suggest that it comes down to nothing more than pure financial calculations. Even if you knew a year ago that prices were going to fall, it might not have been the best thing to sell. I might get slagged for that but it is true. The rental property represents a high-yielding, low-risk investment. They're hard to come by.

You know by now how much income the property generates for you. If you sell it you've got the cash but you will have to find a decent way to invest that. Maybe you could do a better job with the cash - you'll have to put some kind of realistic percentage growth on that value. The house value will keep up with inflation (over the long term) whereas the cash will need to generate extra income to make up for erosion by inflation.

A simplistic break-even:

Sell value 200K.

Cash return on investments: 10%

Inflation (real): 5%

Actual realised return on cash 5% or 10K

Income from rental: 10K

House price value when holding for the long term is irrelevant.

You see that you will NEED to achieve a certain selling price in order to make the sale worthwhile. Not only that, but you will face investment risks with the cash because you'll constantly need to be reviewing your portfolio, etc. If you tried, you might be able to be more efficient at letting the property out and thereby push the returns up slightly. It's also a fair assumption that rentals will largely stay in line with inflation generally.

Mind you, I'm not saying John Paul Getty was right when he advised his offspring "Never sell!", but only sell if the cash can be put to much better use.

Or maybe you just want to blow the money...

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...the crash has just started and is likely to get worse. It could be years before your house regains its nominal value, never mind its real value adusted for inflation...

As doccy says, weigh it all up and get good advice...

You may also want to do some research into "economic cycles".

And be careful about who you get advice from. Estate agents and bankers are still talking a lot of rubbish about prices leveling this year. It has always taken years for prices to level after previous bubbles.

But, as usual, DYOR (do your own research).

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I would suggest that it comes down to nothing more than pure financial calculations.

...fair enough...

Recent reports form the University of Ulster/Bank of Ireland are showing that house prices are falling by £6,500 a month.

Do the calculations. Does property really sound like a good financial investment at the moment?

Edited by Belfast Boy

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Fair enough...

Recent reports form the University of Ulster/Bank of Ireland are showing that house prices are falling by £6,500 a month?

Does property really sound like a good financial investment?

That's another emotive argument. The answer is "It depends". If you bought in 1999 and find that your yield is 20% then it remains a good, low risk investment that will keep up with inflation. The crux is what can be done with the cash by comparison. Large or small, numbers up or down are irrelevant unless we compare them to each other. Ofcoure, there comes a price at which the sale becomes compelling, but it has more do do with price achievable than amount lost per month - the break-even point may have past last year or it might be a few months away at present trends. I am urging anyone considering a purchase or sale to do the calculations based on a long-term outlook, or at least as long a term as is feasible given circumstances.

Can you really say that selling is the best 50 year approach with this particular property?

So what are the exact number?

Edited by dellboy

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DYOR (do your own research).

I second this.

Dellboy, you have made a decent point and I concede that, long term, the property should come back to its present value. But is that a good investment? With the banks tightening up and restricting lending (no more 100% mortgages, salary multiples going down etc etc) - eventually the max salary people will be able to borrow will go low and stay low. This is not the same as the 90s recession - in my view it will be much worse. Imagine 4x MAX salary multiple on mortgages for the next 15 years at least. How long will it take for the average NI salary to reach 50K? How would ULTRAS_76 feel if his house is still worth 200K in 2020?

ULTRAS_76, work out for yourself what yield you can achieve with rent versus what the capital sum will earn you in the bank over the next X number of years if you sell, and compare the two. How soon do you need the money? Play around with calculations, get some independent advice and good luck.

Edited by tara747

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Thanks to all for the helpful comments!!

Tara, if the house is worth 200k in 2020 i'm out of here now!! I never wanted this to be long term, but I also don't want to be in the position where I am left cursing myself for selling too soon. Gut feeling is to sell, what I do with the money I really don't know, could pay off big slice of the mortgage on our new house or stick in the bank for a few years.

What I do know is I will have to make a decision pretty quick if the current price falls are anything to go by.

Thanks again to all.

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Thanks to all for the helpful comments!!

Tara, if the house is worth 200k in 2020 i'm out of here now!! I never wanted this to be long term, but I also don't want to be in the position where I am left cursing myself for selling too soon. Gut feeling is to sell, what I do with the money I really don't know, could pay off big slice of the mortgage on our new house or stick in the bank for a few years.

What I do know is I will have to make a decision pretty quick if the current price falls are anything to go by.

Thanks again to all.

Hi ULTRAS-76, You may not be able to sell at the minute anyway, I know of several people with houses on the market and no viewings whatsoever. The market will only come back again when housing is affordable.

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That's another emotive argument. The answer is "It depends". If you bought in 1999 and find that your yield is 20% then it remains a good, low risk investment that will keep up with inflation. The crux is what can be done with the cash by comparison. Large or small, numbers up or down are irrelevant unless we compare them to each other. Ofcoure, there comes a price at which the sale becomes compelling, but it has more do do with price achievable than amount lost per month - the break-even point may have past last year or it might be a few months away at present trends. I am urging anyone considering a purchase or sale to do the calculations based on a long-term outlook, or at least as long a term as is feasible given circumstances.

Can you really say that selling is the best 50 year approach with this particular property?

So what are the exact number?

IMO, Dellboy has made some very good points. There is a reason why being a landlord was profitable before the boom and it will continue to be after, as long as the yield is good.

If the house is generating a good income and will continue to do so, why rock the boat? I'm sure working some long term plans out would help gauge which is the most profitable.

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Thanks to all for the helpful comments!!

Tara, if the house is worth 200k in 2020 i'm out of here now!! I never wanted this to be long term, but I also don't want to be in the position where I am left cursing myself for selling too soon. Gut feeling is to sell, what I do with the money I really don't know, could pay off big slice of the mortgage on our new house or stick in the bank for a few years.

What I do know is I will have to make a decision pretty quick if the current price falls are anything to go by.

Thanks again to all.

I don't think you need to worry about 'selling too soon' - selling too late may be your problem.

In any case, Traktion's advice is sound - work out the numbers for yourself and good luck.

Edited by tara747

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I'd sell now. Drop to less than similar properties and expect to be offered less again, then take it...

I'd do the same - actually, did it the same a year ago in the States. Those who didn't are still selling...

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I second this.

Dellboy, you have made a decent point and I concede that, long term, the property should come back to its present value. But is that a good investment? With the banks tightening up and restricting lending (no more 100% mortgages, salary multiples going down etc etc) - eventually the max salary people will be able to borrow will go low and stay low. This is not the same as the 90s recession - in my view it will be much worse. Imagine 4x MAX salary multiple on mortgages for the next 15 years at least. How long will it take for the average NI salary to reach 50K? How would ULTRAS_76 feel if his house is still worth 200K in 2020?

ULTRAS_76, work out for yourself what yield you can achieve with rent versus what the capital sum will earn you in the bank over the next X number of years if you sell, and compare the two. How soon do you need the money? Play around with calculations, get some independent advice and good luck.

You say that wages would need to inflate to £50k a year here for prices to regain their 'peak' value, and this will not happen in 20 years, which I don't agree with as the average couple currently earning two average wages of £21k or whatever it is, giving a joint income of £42k, even with a fairly low mortgage multiplier of 3.5X, giving them access to borrow approx. £150k + their deposit NOW. A higher multiple of 5X is still available if you have decent deposit, meaning that the average couple could afford £210k+.

As with regards wage inflation, I can't find an average annual wage chart, maybe someone could? However in 1970 for a full-time position in a UK solicitor's office you could expect to pick up £126 gross per month which would equate to £1512 a year.

http://www.bbc.co.uk/dna/h2g2/A319619

If we take that as an indication of the average wage, it has increased over 13 fold in 38 years, so might it not be possible for the average wage to double in 20 years???

Just trying to give both sides of the argument. Short term, selling would be the best option, long term renting it out is the best option. Remember what site you are using-some here would like to see prices return to their 1976 level and then still expect a free car! (I borrowed that line from a friend-so if you are lurking thanks). I'm not trying to antagonise anyone on here but to have a proper debate you need both sides involved (where have you gone MD?) and a little humour always helps!

Edited by championmongo1

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You say that wages would need to inflate to £50k a year here for prices to regain their 'peak' value, and this will not happen in 20 years, which I don't agree with as the average couple currently earning two average wages of £21k or whatever it is, giving a joint income of £42k, even with a fairly low mortgage multiplier of 3.5X, giving them access to borrow approx. £150k + their deposit NOW. A higher multiple of 5X is still available if you have decent deposit, meaning that the average couple could afford £210k+.

As with regards wage inflation, I can't find an average annual wage chart, maybe someone could? However in 1970 for a full-time position in a UK solicitor's office you could expect to pick up £126 gross per month which would equate to £1512 a year.

http://www.bbc.co.uk/dna/h2g2/A319619

If we take that as an indication of the average wage, it has increased over 13 fold in 38 years, so might it not be possible for the average wage to double in 20 years???

Just trying to give both sides of the argument. Short term, selling would be the best option, long term renting it out is the best option. Remember what site you are using-some here would like to see prices return to their 1976 level and then still expect a free car! (I borrowed that line from a friend-so if you are lurking thanks). I'm not trying to antagonise anyone on here but to have a proper debate you need both sides involved (where have you gone MD?) and a little humour always helps!

Good point

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Good point

... but not very accurate.

"The data on the MIG is inaccurate!" I love Top Gun B)

This is more a little more accurate...

The historical 3.25x multiple, offered by banks, applies only to single people.

Historically banks only lend 2.5x joint income. There are several reasons for this - increased risk of reduced income due to sickness or redundancy, and increased risk of additional expenditure i.e. children.

Besides that: surveys show that the average joint income is not 2 times the average single income. I can't remember exactly, but I read somewhere that the average single income in Engalnd is £24,000 and the average joint income is around £35,000.

So what you are talking about is a couple who's joint income is well above average joint income.

I wonder what the average joint income for Northern Ireland is? Probably not much more than £30,000.

Yes, I know lots of couples have large joint incomes. But we are talking about averages.

Lets use £30,000 as an example:-

£30,000 x 2.5 = £75,000

and

£21,000 x 3.25 = £68,250

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... but not very accurate.

"The data on the MIG is inaccurate!" I love Top Gun B)

This is more a little more accurate...

The historical 3.25x multiple, offered by banks, applies only to single people.

Historically banks only lend 2.5x joint income. There are several reasons for this - increased risk of reduced income due to sickness or redundancy, and increased risk of additional expenditure i.e. children.

Besides that: surveys show that the average joint income is not 2 times the average single income. I can't remember exactly, but I read somewhere that the average single income in Engalnd is £24,000 and the average joint income is around £35,000.

So what you are talking about is a couple who's joint income is well above average joint income.

I wonder what the average joint income for Northern Ireland is? Probably not much more than £30,000.

Yes, I know lots of couples have large joint incomes. But we are talking about averages.

Lets use £30,000 as an example:-

£30,000 x 2.5 = £75,000

and

£21,000 x 3.25 = £68,250

Have you ever heard of creative accountacy, I have.

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A higher multiple of 5X is still available if you have decent deposit...

Even the FSA are admitting now that anyone who borrowed more than 3.5 times their income are at risk of defaulting. Those 5x loans may still be available. But I doubt if many people would now qualify for them.

Remember what site you are using-some here would like to see prices return to their 1976 level and then still expect a free car!

Yes people remember what site you are on. We tell the truth here! If you want to read lies and spin go to another site. :P

And I only expect prices to go back just 6 years. Yes, 2002 prices look affordable to me ;)

I'm not trying to antagonise anyone on here but to have a proper debate you need both sides involved (where have you gone MD?) and a little humour always helps!

Did you really believe that stuff md posted? I actually stopped reading his posts as I found his views wildly optimistic and largely irrelevant. Or was that large and irrelevant :unsure::D

You are in a better position than most on here to know what is really happening out there. How is your sale going? Any viewers/offers?

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Have you ever heard of creative accountacy, I have.

As they say there are lies, damn lies and then statistics! You can manipulate figures to pretty much back-up any viewpoint!

What I don't get is the constant referral to 3x single income, 2.5x joint income. With a good deposit 5x joint income is still easily accessible, I know as I've been looking and talking to my bank. Banks still want to lend those 'less risky' people money (i.e. those who have been prudent enough to save a sizeable deposit) as that is how they generate their huge profits! Simply cutting off credit supply entirely will de-value their assets and thus isn't in their best interest. But as always do your own research, crunch your own figures, factor the likely changes to your circumstances and come to a balanced decision!

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With a good deposit...

Yes the banks are still trying to suck more people in... and their deposit will disappear quickly when the housing bubble bursts.

Don't belive me? Just read the last 2 University of Ulster/Bank of Ireland reports. They show house prices are falling by £6,500 a month. Any deposit given too a bank will disappear very quickly as the value of the property falls.

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Yes the banks are still trying to suck more people in... and their deposit will disappear quickly when the housing bubble bursts.

Don't belive me? Just read the last 2 University of Ulster/Bank of Ireland reports. They show house prices are falling by £6,500 a month. Any deposit given too a bank will disappear very quickly as the value of the property falls.

Yes I seen that report also, however there is another report produced specifically for investors where although prices dropped that much last quarter, they had dropped more but recovered slightly in the final 6 weeks of that quarter. I don't see that small increase (~1%) continuing by any means but I do think that house prices will have stabilized by the summer this year and further falls will be in 'real' terms only due to inflation and the odd desperate seller/repossession!

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My honest opinion, if i were you I'd:

1. Sell the house - take the money you've made and buy a house in North East of England - all NI investors seem to favour Newcastle for capital appreciation and buy to let possibilities - rent out house.

2. If you do have a capital Gains Tax liability (go to www.taxationweb.co.uk) the online forum section - the accountants there will work it out for you for free - just post your question. You will probably just be liable for the flat rate of 18% tax, as your property will not probably be sold before 6th April, when new rules take place!

3. Or if you don't fancy the buy to let in England, put your money from your house sale in a 2 year bond and buy again when NI market is at bottom - then rent out.

I would defo sell now. what you do with your money is up to you, dont put in high interest savings account due to taxation - it wont grow that much!

I which you all the best, for you and your family, make your money work for you, try not to let the tax man get to much of it and invest in property when market is bottomed out!!!!

Bless you, sophia

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there is another report produced specifically for investors where although prices dropped that much last quarter, they had dropped more but recovered slightly in the final 6 weeks of that quarter. I don't see that small increase (~1%) continuing by any means but I do think that house prices will have stabilized by the summer this year and further falls will be in 'real' terms only due to inflation and the odd desperate seller/repossession!

You got a link to that report?

I am sure you have read these reports

http://www.treesdontgrowtothesky.com/PN_NI_charts.htm

Thats right - over 6500 separate reductions in the asking prices of property on Propertynews NI since the beginning of the year, I seriously doubt the brakes will be back on the property market by the summer - maybe by summer 2010/11

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  • 297 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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