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When Will You Buy?

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Been here a while, watched prices go from being silly to being rediculous. We will hopefully now watch them go from being rediculous to silly to sensible. Then I want to buy.

The question is when that is. As an experiment I sent an email to a estate agency near me. I live in a nice bit of London which has a row of houses, lots of them have been converted into flats. Some of these flats are thus pretty similar:

(p.s. I house share now).

Hi there,

I noticed you have for sale:

http://xxxx.com (@£650k)

I am renting a property on this street that is almost identical to the one above (although mine features a small extension the one for sale lacks) for just under £25k/year.

While I am interested in purchasing, given this flat returns less than a 4% yield, clearly it is extremely overvalued. With no prospect of capital appreciation in property for the foreseeable future, wouldn’t a 6% yield be more appropriate – so a value closer to £400k?

If I am missing something, please do let me know.

I got the response:

Many thanks for your email.

I note that you are interested in buying – what are you key requirements and expectations? We have several properties in XXX and XXX that could be suitable.

In respect to rental yield/capital value comparison, on average sales concluded within the last 3 months are averaging between 4 – 4.75%. The flat in XXX does have some flexibility in price but other similar properties to have sold in the street and close by have been achieving prices £600k+. A ground floor flat at No XXX has just sold for in excess of £800/sqft.

Please give us a call to discuss your requirements further.

Many thanks

What do people think, a 6% yield is a reasonable expectation? This flat is on the market at £650k, I imagine they would take £600k. I think I need around a 33% drop to make it sensible.

Thoughts?

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....What do people think, a 6% yield is a reasonable expectation? This flat is on the market at £650k, I imagine they would take £600k. I think I need around a 33% drop to make it sensible.

Thoughts?

I get 7% on a building society account, my money's liquid, and is at a fairly low risk - biggest risk is inflation eating its value away. Why would any one think 6% a fair return:- I see high risk/low return/illiquid.

Edited by happy?

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I'd say 6% is a very fair yield - for a rental property. From a personal perspective I'd pay more to own somewhere than I would to rent it. Purely personal but on that basis I'd pay more for a flat to live in than one to rent.

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I get 7% on a building society account, my money's liquid, and is at a fairly low risk - biggest risk is inflation eating its value away. Why would any one think 6% a fair return:- I see high risk/low return/illiquid.

6% yield with stable prices is a good return; because you are getting a real 6% return, and not 6% - inflation = 3% return.

Of course we don't have stable prices now; but that's because no one buying now is getting a 6% return.

I am not doing this as an investment, I want somewhere to live - but only when it makes sense to do that. I think when property is back to 6% return, that is about when I know it makes sense again. For my street, thats a 33% drop (assuming rents don't change).

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6% yield with stable prices is a good return; because you are getting a real 6% return, and not 6% - inflation = 3% return.

Of course we don't have stable prices now; but that's because no one buying now is getting a 6% return.

I am not doing this as an investment, I want somewhere to live - but only when it makes sense to do that. I think when property is back to 6% return, that is about when I know it makes sense again. For my street, thats a 33% drop (assuming rents don't change).

I can understand your position but will it stop at 33%?

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I would buy when houses are affordable for me i.e 3 to 3.5 times my salary of 40k = 130k - 150k (inc deposit) for a 1 or 2 bedroom flat in London. Will that ever happen? Im not too worried, if it happens i will buy, if it doesn't i will rent. Simple really.

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Been here a while, watched prices go from being silly to being rediculous. We will hopefully now watch them go from being rediculous to silly to sensible. Then I want to buy.

The question is when that is. As an experiment I sent an email to a estate agency near me. I live in a nice bit of London which has a row of houses, lots of them have been converted into flats. Some of these flats are thus pretty similar:

(p.s. I house share now).

I got the response:

What do people think, a 6% yield is a reasonable expectation? This flat is on the market at £650k, I imagine they would take £600k. I think I need around a 33% drop to make it sensible.

Thoughts?

Thoughts...

Wait - the parties just started - soon the next phase will hit - these go by the name of forced sellers egged on by redundancy. Then we will have the real drops and some degree of realistaion in the market that prices need to go lower.

HAL

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Guest Shedfish

i sent an email to an EA today, about a house that (according to the fabulous PropertyBee) had been reduced from 159k or so to 140k or so... i requested that when this house gets below stamp duty threshold they could give me a call. i realised afterwards that even 125k was too much...

i'll probably buy when there's been a broad drop of 33% or so from peak. even then, they're overpriced, but i'm getting bored.

(this doesn't include city centre 'luxury apartments'. wouldn't touch one with a stick)

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What do people think, a 6% yield is a reasonable expectation? This flat is on the market at £650k, I imagine they would take £600k. I think I need around a 33% drop to make it sensible.

Thoughts?

You have to make up your mind if you are a property speculator or a home owner.

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Thoughts...

Wait - the parties just started - soon the next phase will hit - these go by the name of forced sellers egged on by redundancy. Then we will have the real drops and some degree of realistaion in the market that prices need to go lower.

HAL

I guess the same. The struggling economy has not bitten many,deeply, yet. As you said, the redundancies will force many people to sell. Friend of mine owns a very small garage business and he already made 4 people redundant. It is happening. Prices will drop much more.

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I would buy when prices hit 3.5x avg salary, I had a 10% or more deposit and was totally and utterly sure my job had made it past the dark times.

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I'd say 6% is a very fair yield - for a rental property. From a personal perspective I'd pay more to own somewhere than I would to rent it. Purely personal but on that basis I'd pay more for a flat to live in than one to rent.

If you were to buy the property instead of renting it, you would be paying yourself the 6% yield (which you then use to pay your mortgage). Not only that but it would be effectivly tax free. This seems a reasonable prospect unless interest rates rise significantly. Under current monetary policy, this is only likely if inflation rises and if that happens, you are eroding your debt at a faster rate. The only gotcha is that you need to withstand the payment shock on your mortgage, which would also go up. However, that is a good thing because it helps you pay the debt off faster and so pay less interest overall. I suppose you need to live with youself saying "I could have made an 8% yield if only I waited six months!"

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Probably early next year.

The missus has finally caved in and resigned herself to the fact that houses will be getting cheaper for the foreseeable future. With a bit of luck, we'll be past the "denial" stage and well into "capitulation", with our chunky deposit enabling us to get a hefty discount, and finally leave home at the age of 28.

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Had planned to buy in about 3 years time or so. However, at the current rate of falls, we may not need to wait so long. :unsure: I guess our current priority is to increase our deposit. Would really love to put down 50%, which is feasible if we both hold onto our jobs.

Edited by Buffer Bear

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The nasty me would be buying my exes place of her in 5 years time for about just under 50% what she paid for it, with around 50% deposit (though I'd have to be on beans on toast to do it).

Whether there are still jobs around in the UK sufficient to allow me to do this is the real issue. It could be quite odd with people stuck in NE but with professional government cheese jobs, supported by the dwindling taxes paid by the remnants of those of us in the non-service private sector.

Rent's are going to collapse massively, and I think there's going to be a huge growth in lodgers/mo

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I just want to buy when I can afford a 2-bed terrace or 3-bed semi for 3.5x my income within about an hour commute of work. I'm getting married next year and would like to have children at some point in the next 5 years and don't want to have kids while renting.

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On a personal basis I would start looking at the market when buying becomes materially cheaper than renting. From what I can see this will require substantial falls.

As an investment, considering the cost of capital seems to be now 7% per year or thereabout and growing; add 1% for void periods, maintenance costs, etc., and about 25% profit on top of that to take the investment risk factor into account (e.g. an extra 2% on property price) gives me a neat 10% return requirement. I don't believe any sound professional investor would go for any less.

I believe current yields are between 3% and 4%, says it all IMO.

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I was 21 and living in rented in Bath in 1989 and still I remember being virtually laughed out of the estate agents when I tried to join the frenzy and told them my salary.

After traveling about, going to college and generally dossing for 10 years I bought in 1999, so 10 years from the previous peak.

I know from documents that I have seen that I paid £8k less for my house than the previous owner paid in 1988 and she also did a massive amount of improvements.

I am now looking to upsize, but will not be considering it for at least another 5 - 8 years, I have a 3 year old son and will be looking to get into a better school catchment area by the time he is 10.

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I've been pondering when would be the right time to buy. Here's what I'm looking for:

1) Rate of fall is decreasing but not yet zero. Thus you are able to bully the seller into a big discount to current values in lieu of further falls that may or may not happen.

2) Mortgage availability bottoms out, some offers of higher LTV etc being tentatively reintroduced

3) There are no bulls left, everyone predicts more doom and gloom

4) All the property porn programmes are cancelled.

5) I may also want to look at bond markets to see when worst of the monetary contraction seems to be over, this preceeds the bottom in the real economy.

I'm guessing late 2009, though maybe this is because this is when I'd like it to be and it may not be until 2010. We'll see. Either way looking forward to a once in a generation chance to buy my first property at a baragain rate having been priced out of the market for many years.

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I've been pondering when would be the right time to buy. Here's what I'm looking for:

1) Rate of fall is decreasing but not yet zero. Thus you are able to bully the seller into a big discount to current values in lieu of further falls that may or may not happen.

2) Mortgage availability bottoms out, some offers of higher LTV etc being tentatively reintroduced

3) There are no bulls left, everyone predicts more doom and gloom

4) All the property porn programmes are cancelled.

5) I may also want to look at bond markets to see when worst of the monetary contraction seems to be over, this preceeds the bottom in the real economy.

I'm guessing late 2009, though maybe this is because this is when I'd like it to be and it may not be until 2010. We'll see. Either way looking forward to a once in a generation chance to buy my first property at a baragain rate having been priced out of the market for many years.

be careful you dont call the bottom too early... 2009/2010 seems very early to me...

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Indeed, that's what I'm wary off.

I think the crash may be shorter than the last one in that all regions are (pretty much) going down together rather than ripples from london but yes I'm not going to rush into the market too soon I hope.

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  • 399 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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