Wednesday, September 24, 2008

A year and a half too late sheeple

Published in Property Home on 24 September 2008 1 comments Should you cash in on the property slump by selling your home?

Over a few beers at the weekend one of my friends announced that she and her husband had put their house on the market. ‘Oh, have you found somewhere you want to buy?’ I said. ‘Well, we’re not looking at the moment,’ she replied, ‘we’re going to rent for a bit and see what happens.’ The plan, it seems, is to wait for property prices to fall, then either buy a similar-sized property for less money and or buy a bigger place for the same amount they sell their two-up two-down terrace for. Good luck to them, I say, but isn’t it a risky strategy? It’s certainly not an uncommon one at the moment. But like all cunning plans, it has a list of pros and cons.

Posted by housebear @ 08:56 AM (2753 views)
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31 thoughts on “A year and a half too late sheeple

  • if the article was written about a conversation 18 months ago it shows foresight. As it wasn’t, it only displays an astonishing amount of stupidity on the part of this couple and their complete lack of awareness as to whats happening all around them

    It’s as bigger case of missing the boat as starting a BTL endevour 2 years ago

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  • We sold our house in kingston in September last year and so nearly rented but with baby number 2 on the way and a house we saw that we really liked we took the plunge. One problem with renting now apart from all the additional costs would be that even now I have not seen somewhere we would have liked to buy as there is simply nothing suitable on the market and what is is over priced… Who knows what will happen but remember that a house is for living in not just an investment…. I would say thought that outside of London selling your country house and renting is a good idea as you get so much more for your rent in the country and anecdotally you get better landlords….

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  • george monsoon says:

    I was a bit annoyed earlier this year when three “sold” signs went up on three houses in a row at the end of my street. Since then, the signs are still up, but two are now showing “for sale” again. Two sales that obviously fell through.. more to follow Im sure..

    ================================

    Off topic – but I got this in an email today…

    If you had purchased £1000 of Northern Rock shares, one year ago, it would now be worth £4.95;

    with HBOS, your £1000 would have been worth £16.50;

    £1000 invested in XL Leisure would now be worth less than £5,

    but if you bought £1000 worth of Tennents Lager one year ago, drank it all, then took the empty cans to an aluminium re-cycling plant, you would get £214.

    So based on the above statistics the best current investment advice is to drink heavily and re-cycle, it clearly makes commercial sense!!!!
    ========================

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  • got that too – it was in the Times last Sunday as an article. To be a pedant, I would say that the best investment advice right now is not to make a loss of £784 by drinking. For a start I would suspect one would be too out of it to drive to the recycling plant with a thousand crushed cans in the boot

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  • It depends how much they can sell their house for now. I am a property landlord. I would say that now is a very good time to buy. Firstly rental prices have shot up in the last year which means it is no longer cheaper to rent than to get a mortgage even at 7%, as rental prices will be roughly 7% of the value of the property soon. Secondly, house prices have fallen by almost 30% in some areas (eg Sussex) and it is certainly a buyers market. Since no-one really knows the real value of their house you can make a silly offer and walk away knowing there’s plenty more out there. My brother just had an offer accepted of 68K on a flat advertised at 89K which would have been worth 100k last year. I’m looking at a flat that sold last year for 142k and is currently on the market for 115K! Prices may well fall for another year but not by much.

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  • 1. theboltonfury said…
    “if the article was written about a conversation 18 months ago it shows foresight. As it wasn’t, it only displays an astonishing amount of stupidity on the part of this couple and their complete lack of awareness as to whats happening all around them

    It’s as bigger case of missing the boat as starting a BTL endevour 2 years ago”

    I would say that anyone here who sold to rent must admit the large part that luck played in their timing, so I think it’s unfair to criticise – some sold in 2005, remember.
    The article is rubbish though – most of the ‘cons’ are the normal unavoidable process or moving or renting. If someone was thinking of moving anyway within the next few years, they don’t apply. As we all know, the drops have only really started, so if the people concerned have done their calculations, fair play to them.

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  • of course it’s luck to an extent but, and speaking for myself, I believed it would happen for this reason and feel that it was pretty calculated. To me it’s astonishing simple, albeit I’m sure my circumstances won’t reflect the country in general

    I used to live in Warrington, an industrial town with an average wage of circa 18k. Yet, a standard 3 bed Jones homes was on for 150k. It was unfeasible that it could go any way other than down. How could a familly who may earn 30k pa in total be expected to afford a home at these levels? Answer, they couldn’t and that house is now around 120k. Incidentally the house I bought for 133k in 2005, sold for 136 in Aug 2007 was sold for 66k in 2003. Now that’s an eye opener!

    Not a day goes by though when I don’t remember what could have been if my buyer had pulled out and left me starting again in Aug 07. Luck in that respect has smiled on me all over and I’m hugely appreciative of that. To say I had a weight removed from my worry load on xchange day would be quite an understatement

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  • @ theboltonfury
    “To me it’s astonishing simple, albeit I’m sure my circumstances won’t reflect the country in general”

    you bought a house for 133k that was worth 66k 24 months earlier, that sounds like dreadful timing to me.

    I was posting on this site about HPC’s when you were buying into the pyramid scheme, don’t come along then start calling everyone else who bought when you did.

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  • I’ll do what I like without seeking your permission. Anyway, I wasn’t trying to illustrate my genius. Far from it. Read my post again, without your bellend cap on

    I wasn’t buying into a pyramid scheme. I got divorced in 2005 so needed to live somewhere – just that, somewhere to live and I the £750 a month mortage was affordable to me. Incidentally, I bought my previous home in Bolton in 2002 for 90k and sold it in 2005 for 185k. So I’d say on that front my accidental timing was pretty damn good

    now disappear back under your scabby little rock and be vitriolic to someone who is actually trying to be as pompous as you allude that I was.

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  • To speculate on your home is probably not a good idea, even though now is as about as good a time as any to do so – except for last year of course. Unless you need to move I wouldn’t go to the trouble. However, if you need to move there is little sense in buying what is still an overpriced asset in decline. The argument that prices could suddenly stabilise then rise again is pretty weak at best.

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  • @theboltonfury

    I’m suprised you didn’t get all that anger out on Friday/Saturday night in Bolton town centre.

    Anyway, Mr Fury has just illustrated a point I want to make. Its not us against them, or we are so good for not buying etc etc. Everyone has been sold up the creek without a paddle, friends I have known since school are up to their eyeballs in debt, I can’t afford a house, who’s the winners. Not normal people. Its about time we stopped this speculative crap about “I bought my previous home in Bolton in 2002 for 90k and sold it in 2005 for 185k”, that’s the problem, we are the problem. Let’s tax any profits on house transactions at 95%! But you watch if any government suggested that they’d be hell and Mr Fury and his mates would revolt instead of wasting my time having to respond to his dribble.

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  • 1) I don’t live in Bolton
    2) Note my word ACCIDENTAL. I had no idea about the increase in house prices to come. I was hardly going to say ‘no mate, you’re fine, just offer me the 90k I paid’ – note the doubling of price of one house was relative to the doubling the next house so I won nothing as you incinuate. Winning was not my intention ever
    3) None of my previous points ever on this site have been anthing other than about the greed of society, the pitfalls of house price increase or what a mess we’re all in generally
    4) you’ve made a show of yourself by berating me. I feel quite confident that most people can see my initial post was anecdotal, a bit self depreciating and highlighting the point of how quickly prices could fall to concur with the general view of most on here.

    just learn to read properly and think before you write your illiterate DRIVEL, although to see a response to dribble would be fun.

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  • Reading the comments under the article – about the couple who rented but were then kicked out by a landlord who was being chased by debt collectors – is a situation we have all foreseen. But it makes me realise that we should really be promoting to renters that they should insist on a full credit check of their landlords before signing a rental agreement. There’s nothing stopping them doing it – it could avoid a lot of upset at being evicted thanks to these BTL friendly laws – and it will also be a bit of an eye-opener for landlords who think that they can get innocent renters to guarantee tehir fortune at minimum risk to themselves.

    Where can we promote the idea of credit reports on landlords?

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  • No it wasn’t a typo I meant dribble, drivel would have been a complement.

    I see you have realised that this is not a site to boast about profiteering from property, apology accepted!

    Also you didn’t HAVE to buy, there is such a thing as renting and I’m sure you could have picked up something for ~150 pcm in Bolton.

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  • @ Shipbuiler. We sold to rent in December 2007. Was that luck? Perhaps. But as a Land Value Taxer I listen carefully to what our Guru Fred Harrison has to say, and he syas 18 year cycles and confimed his opinion that HPC would kick in late 2007 several times in the years leading up to the start of the HPC. We had a year’s advance warning from the USA where prices started sliding in 2006, don’t forget.

    @ Matt The Hat. I don’t like the idea of 95% tax on house transactions. That would freeze up the market forever more. Far better to prevent the bubbles arising in the first place by replacing existing property taxes (Council Tax, Business Rates, Stamp Duty Land Tax, Inheritance Tax, Capital Gains Tax and anything else you can think of) with a Land Value Tax at a fixed % of site only land values. 5% or even 10% might be fiscally neutral, depending on how low land values fall – remembering that land values are falling twice as fast as property values – if property values fall by 40% then land values will fall by about 80%. That will act like a much higher interest rate on the land element and so keep prices low and stable.

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  • What about 95% profit tax and no taxes on moving i.e. a mobile labour force like this country needs. It has to be 95% to encourage investment in property maintainance. The problem with LVT if I understand it correctly is that our old people are taxed back into work because of a property tax (council tax) and you should ba able to live in your home without the threat of poverty in your old age.

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  • Ok, let’s be friends. I think we have been guilty of a misunderstanding between each others points

    I hated Bolton. I really couldn’t rent, and it will sound stupid to say but at the time this was very valid issue. I have a Husky whom I love dearly, and I wasn’t prepared to give him up, so I needed a house (not a flat) with a fenced garden for his saftey. Every rental option had a no pets rule or was unsuitable. This coupled with the need to move out quickly kind of left me with the buying option

    may seem a minor issue but a factor that people come up against. Although, now I am aware from EA’s that would be renters have no problems with dogs, cats, just about anything. Wonder why that could be? Desperate landlords maybe?

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  • Sorry BF just playing, its never one man’s fault (not saying yours) for this festering pile of you know what. The population as a whole just need educating about a few things: wealth is a zero game, the difference between real and nominal. If anyone can add other things I/we should (need educating) know to stop this happening again please contribute.

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  • [email protected] – completely agree. Agents are very quick to look down their nose at you as if trying to figure out whether you can afford rent. I’m sure the time is rapidly approaching where the balance of power sits with tenants. Why can’t landlords also put up a deposit so tenants can claim for inconvenience if the landlord is forced to terminate prematurely?

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  • “if you bought £1000 worth of Tennents Lager one year ago, drank it all, then took the empty cans to an aluminium re-cycling plant, you would get £214”.

    Yeah right. So they pay between 10 and 20 pence per can at the recycling plant do they?

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  • @ Matt The Hat – this little old lady argument is a non starter. Even Henry George and Winston Churchill were heartily sick of it and that was 100 years ago.

    I have also said a zillion times that INHERITANCE TAX is one of the taxes that LVT should replace (this is not a ‘bash the rich’ exercise). If pensioners can’t afford to pay as they go along (and some wouldn;t be able to), they can either just roll up the tax to be repaid on death (which is why you’d have to get rid of IHT or that would be just spiteful), or they can ask their heirs to pay the tax in exchange for the right to inherit. Or trade down. Or sublet a room. Or take out equity release.

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  • @19 Why not then have all the housing stock owned by the government – you pay a rent dependant upon what you need – when you get old the rent surplus you paid covers your retirement – after death the house is returned to the state? Result same as your LTV idea, everyone has affordable housing.

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  • How about central banks keeping IR sufficiently high ? With governments providing well designed and affordable housing. Sorry I’m being silly…

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  • Mark Wadsworth – would love to know you as an OAP and see what you think then if you were encouraged for fifty years to believe that you’d earned all was necessary to secure a reasonable position in your later years. Here’s how it works out in the present scenario — your work your a** off for all those eons, take up a private and pay for the full State pension, and end then up in a room somewhere when you’d earned a decent home — and only because you were socked with unreasonable taxation that buys nothing at all special from the local authority. When you’ve gone the full course and ended there — then tell me how you feel about it at that point, not when it’s only a dim shadow on the wall at the height of your earning powers. And think what all those monies paid into the system by the OAPs are supporting – besides them. A bit short-sighted, disrespectful and narrow, our Mark.

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  • @ Indiablue

    1. I have said many times, the idea is not to tax old people out of their homes (which applies to Council Tax just as much as LVT). Any sensible LVT system would allow OAPs to defer the tax to be repaid on death. As the plan envisages scrapping Inheritance Tax and Stamp Duty, the heirs will pay it when they inherit the house.

    2. Anyway, let’s assume that one guy buys the biggest house he can and retires and another saves up for a pension. Your view seems to be that the guy in the big house gets off tax free and can leave it all to his heirs, but the guy who draws a pensions takes an annuity, pays tax on it and leaves nothing to his heirs.

    3. Therefore LVT just balances out the tax treatment of different types of assets.

    4. LVT pays for the value of services you get from local council – refuse collection, old age care, street lighting, local police etc. Rather than income tax or VAT that is a purely confiscatory tax. It also encourages councils to only spend money on things that ADD VALUE rather than waste it on 5 a day advisors and climate change officers.

    5. A fiscally neutral LVT that replaced Council Tax, IHT and SDLT would be more for people with big gardens in posh areas (fair enough, but they get let off SDLT and IHT) but much less for grannies shivering in an ex-Council flat oop north (fair enough?)

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  • mark wadsworth says:

    @ Matt The Hat, that’s far too radical and I’m a small government free market liberal anyway.

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  • @28 We could still have a ‘free’ market if such a thing existed, the market decides the rent of the housing stock. However the only difference between a government (i.e. the people) owning the housing stock and a few capitalists backed by bankers is that interest payments would be removed from the equation making living cheaper. The alternative is that people want to own their own house for capital accumulation, i.e. speculation, I think most people on this site are against that or I might be wrong – most people are against it temporally because they missed out on the last bubble. Who knows.

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  • Mark Wadsworth says:

    @ Matt. LVT is a nice half-way house.

    In economic terms, the local council owns a large part of the land – you are paying them rent in exchange for them spending that rent sensibly on things that make the place more pleasant to live in. That’s a market solution which also wipes out spculative gains.

    But property owners own their own bricks and mortar (legally and economically), on which you cannot make speculative gains.

    LVT is the nigh perfect tax, it would go a long way to eliminating booms and busts. It would encourage councils to only spend money on value-added services. It is fair and easy to collect. It does not discriminate against tenants for the benefit of landlords. It discourages NIMBYism AND urban sprawl. It is the closest thing to a market solution for land ownership, which of necessity is a series of local monopolies.

    It is absolutely maddening that people always advance this spurious ‘little old lady’ argument (which I have dealt with time and again, see for example above).

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  • 15. mark wadsworth said…

    “@ Shipbuiler. We sold to rent in December 2007. Was that luck? Perhaps. But as a Land Value Taxer I listen carefully to what our Guru Fred Harrison has to say, and he syas 18 year cycles and confimed his opinion that HPC would kick in late 2007 several times in the years leading up to the start of the HPC. We had a year’s advance warning from the USA where prices started sliding in 2006, don’t forget.”

    I still think we’re all lucky to an extent. In Northern Ireland there was a window of about 1-2 months to sell at the peak. Anyone outside that would have been 10-20% down. UK overall, at the moment we’re still as far from the peak as probably 2006, so anyone who sold then (a reasonable guess at the peak) would be no better off than selling now. Also – what if your buyer had pulled out?
    I’d also like to say that, in my opinion, if this couple had no intention of moving anyway, this is just as much speculation as flipping with the market on the way up, the difference being that they are not forcing prices up for everyone else.

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  • mark wadsworth says:

    @ Matt I did a good reply to that, but I forgot admin password and it hasn’t appeared yet.

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  • I just had an offer of 125 accepted on a two-be flat, near the sea, in West Sussex. It started off earlier this year at 179K and they eventually started marketing it lower for offers between 140-160. We offered 125 and they went for it. Strangely enough, a similar flat; in the same block with exact specs just came on for for 174K. can’t imagine how the owners will feel if they hear what we bought ours for. They are BTLers so I might tell them (lol). I am very happy with the deal, I know I could’ve rode the fall and maybe saved more but I need a home as the flat we rent is awful and with the mortgage it’ll be about 80 quid a month higher.

    By the way, our deposit was 50%, hard times for FTBs, we were lucky enough to receive some inheritance and the bank gave us quite a grilling – two meetings with two ****ankers present each time.

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