Wednesday, December 31, 2014

HOUSE prices are set to soar next year with the introduction of new rules allowing people to invest

House prices to soar next year with new pension rules

Analysts predict home values will rise to almost £190,000 in 2015, adding more than £12,000 to the price of the average home. Experts claim the rule change could see as much as £5billion injected into the property market by people cashing in their savings. From April, the legal requirement to buy an annuity with pension savings on retirement will be lifted and many people are expected to instead purchase properties that they will rent out to provide an income in old age.

Posted by libertas @ 01:03 AM (5021 views)
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22 thoughts on “HOUSE prices are set to soar next year with the introduction of new rules allowing people to invest

  • This is big news, because most folk with pensions to invest have experienced 30yrs of solid growth from their own property.

    Many of them are already familiar with and heavily invested in property. They should probably diversify their portfolio from it, but unlike Annuity investors, will be unable to fathom the risk of having a one-sided portfolio.

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  • An Express article, is that the best you can do?

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  • Khards, you are obviously a complete numbskull disregarding FACTS about ACTUAL changes in the law that WILL impact markets next year.

    Even a broken clock is right once a day.

    If The Sun reported that walking in front of a bus may kill you, will you disregard that source and get flattened?

    Your statement used to be known, by educated individuals, as a logical fallacy, back in the days when Britons had a Classical education. I would not expect you to comprehend.

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  • ”Big news”

    The average pension pot is around £30,000 very unlikely to cause an overheated, overpriced and topping market to ”soar”.

    The market is slowing and will continue to slow; what we need now, is for sterling – and UK government – to come under pressure due to government debt, so their hands are tied and are unable to continue to prop-up UK housing.

    If all plays out, Libby will be completely underwater this time next year.

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  • £30,000 deposit is enough to leverage £110k of borrowing. This will purchase a studio flat in MOST OF BRITAIN. The pension pots of most Londoners will be well in excess of the average, and you can still pick up a studio flat for £135k in cheap parts of London, i.e. Enfield, Redbridge, Barking and Dagenham, etc.

    This is a total game changer.

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  • All of you forget the role of leverage in this market and completely fail to understand the market’s dynamics as a result, i.e. you forget that a 2% rise in earnings can sustainably leverage 7% house price rise because the average mortgage is 3.5% salary, leveraging any wage increase more than three fold.

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  • Damn, I over-estminated this. The average BTL mortgage requires 30% deposit. That allows £100k on average of property. However, the same conclusion applies.

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  • Recall that BTL is exempt from MMR, further skewing the market.

    If 1 million pensioners buy property, we are talking about £100bn being plunged into the market. Reality will probably be a tenth of that, but still looking at a £10bn boost for the housing market, potentially.

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  • libertas, you really should stop misleading people with incorrect maths (comment above at 11:51). What you say is simply not correct. See my example last night under the earlier thread:
    ZZzzzzzzzz
    Mail: Prepare for house prices to FALL

    Perhaps you could come up with a better ending to your statement there: “OF COURSE, this math mainly works for owner occupiers, because…”

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  • Libertas, regarding your use of the word ‘exponential’, do you mean that a 2% rise in earnings is a 7.18% rise in house prices, i.e. 1.02^3.5? If so, let’s extrapolate out 10 years. Wages up 21.9%, house prices almost exactly 100% up. Sure, could happen, it has before. But extrapolate out 20 years, wages up 48.6%, house prices up almost exactly 300%. 30 years wages up 81.1%, house prices up by 700%. Is this really what you think can happen?

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  • Serial posting again Libby?

    But extrapolate out 20 years, wages up 48.6%, house prices up almost exactly 300%. 30 years wages up 81.1%, house prices up by 700%. Is this really what you think can happen?

    It’s a completely overbought market, definitely topping out, and yet, some on here are foolish enough to think that the party will go on and on….

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  • Isn’t BTL due to regulated similar to MMR from March 2016 – if so, the effect of non-regulation cited by libertas will be short lived.

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  • stillthinking says:

    I think they will put their pensions into property as well. Its an obvious choice. Prices are near the bottom in most of the UK.

    What I don’t see is how exactly our brilliant currency system works if everybody attempts to heavily leverage but nobody wants to hold savings. The scam, imo, is that government debt is very different from private sector debt. Private sector debt is credit expansion + in one column and – in another, but public sector debt is mainly (apart from QE) real ordinary meaning of the word borrowing. There is no additional credit expansion so it is not inflationary. How the government can then pay this debt back is hard to see.

    But that just makes the choice to go into property more convincing. I don’t think, apart from London, there is a bubble anymore, I don’t think that prices are too high anymore. The adjustment in terms of sterling devaluation is pretty much over. So the whole game will start again.

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  • Stillthinking, the monetary system works with low savings because right now, there is excess capacity in the economy. Less demand for investments, taking into account all the production in China, etc.

    In addition, British political stability and the reserve status of Sterling means that Sterling funded entities can benefit from capital inflows from overseas and are less dependent on domestic savings.

    That situation reverses If we lose stability in Britain, which is why the Scottish vote was so crucial. Had capital fled the country, interest rates would have been forced upwards, with the market encouraging greater domestic savings. I don’t see the spare capacity issue being resolved in the short or long run because the trend is towards ever reducing costs of production.

    That is the economic stand-point. Whether it is a good thing for individuals and families to have no savings is a larger question. Though the issue for families is less how much cash they have but, moreover, how much access they have to liquid assets. Again, the bank of house allows pretty quick access to cash when needed through MEWING. Not ideal, but that is where people feel they can protect the value of their wealth.

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  • bidin'matime says:

    There will be some offset of this arising from the new CGT rules, which make gains on UK residential property by non-resident owners subject to CGT as from April. The tax will only apply to gains from that date, but it will make the UK less attractive. Some will sell before April just so they don’t have to bother with the tax at all, while others will refrain from buying in the future.

    Also there must be a few wealthy Russians looking at shifting their profits home right now – I’ve no idea how many Roubles you pay for a ‘palace’ over there, but with the collapse of the Rouble, I dare say that your relatively modest Chelsea investment will buy you something rather grand over there right now…

    Indeed, what we need is international instability in the money markets – to break up this cosy global devaluation of currencies. Bring it on…

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  • @stillthinking
    The government can repay by taxation and rolling over the debt, and its ability to do so is greater in a growing economy. (Then there is the grey area of QE). But I think you are right that it is constrained by not being able to issue credit to finance the deficit, thus it has to be able to convince financial markets that it is a good enough debtor. I don’t buy the debt hysteria because national debt is actually at historically low levels. However, before Maastricht we could finance deficits by printing money. Private sector debt is also problematic, however, because of the interest component, which is not put into circulation when someone takes out a loan. If the economy does not grow I don’t see how loans can generally be repaid with interest.
    N

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  • @mombers

    The obvious counter to this is that is sort of what happened over the last 30 years. HPs have risen 80-fold since 1952.

    The problem with that logic, of course, is the falling interest rates and women entering the workplace. That is why income multiples are a flawed measure of housing affordability. The banks lend at much greater multiples than they used to, because repayments are more affordable and couples tend to feature two earners.

    There is also rising income inequality which complicates matters as the gap widens between median and mean, have’s and have-to-pay-rent’s etc.

    @BMT Yes, it will be interesting to see how these two collide. The foreigners will have to sell off before the pensioners can buy.

    If Sterling falters before March, the impending CGT changes might create a firesale.

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  • @mombers

    Also, there seems to be this thinking that housing returns will always outperform stocks etc. because it is observed that they generally have.

    But it seems naive to think that the voting public will allow this trend to continue indefinitely without curbing speculation as such a process would see the housing stock concentrated into less and less hands. This elite set already seems to have excluded the majority, for my generation at least.

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  • I’m surprised no one has made mention of the new government pensioner 1 or 4 year bonds and the interest that these will yield vs btl.

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  • Mortgage approvals going down, yet Libby forecasts that house prices will soar next year……wtf?

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  • This is wishful pre-election hype from the Daily Express…nothing short of another producer interest along with the other so called ‘experts’ from the property sector whose fear of a house price crash is now palpable. There is nothing keeping this particular Ponzi scheme afloat other than blind faith from the greedy and, unfortunately, the naïve. Sooner or later some external trigger will undermine what little remains of faith in UK economic stability and this is the year it is most likely to occur. Anyone who thinks UK property will stand further inflation from modest pension pots or dangerous leverage (assuming lenders take a favourable stance) is living in ‘Cloud Cookoo’ land…much like the readers of the Daily Express.

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  • What about the new government pensioner bonds as an alternative to btl for pension pots?

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