How far will house prices fall [volume 4]
Discussion
NomduJour said:
My point is only that yields are lower in London than the North because of yield compression. Not sure how anyone could interpret that as taking a position on the market.
What??? 
That's exactly what yield compression is.
You think you will get asset price appreciation (inflation) so you accept a lower rental yield.
How is that NOT taking a position on the market?
NomduJour said:
Derek Chevalier said:
More details in on Wkikpedia
The greater fool is the one with zero comprehension skills. My point is only that yields are lower in London than the North because of yield compression. Not sure how anyone could interpret that as taking a position on the market.
Derek Chevalier said:
And my point was that many in London are not covering their costs and are relying on someone paying them more at some point in the future than they paid to escape above water.
Which, unless they bought in the last year or so, will be seeing them making out like bandits!Derek Chevalier said:
turbobloke said:
Derek Chevalier said:
LucreLout said:
Derek Chevalier said:
That is the problem - how many people are old enough to remember that the property market is cyclical? Yet more moral hazard introduced by the Government....
It no longer matters. Prices have risen for the best part of 25 years. There's no going back now, at least, not to a position that will bail out those who went short on housing.Can the market retreat? Yes, somewhat. Will it? Not by much as there's no votes in that. Will it drop to 2003 levels? Not nominally, no.
This is according to my Japanese SIL. Might be different in big cities.
walm said:
How is that NOT taking a position on the market?
Obviously those buying and accepting a lower yield are taking a position, I meant I wasn't necessarily advocating it.Derek Chevalier said:
And my point was that many in London are not covering their costs and are relying on someone paying them more at some point in the future than they paid to escape above water.
Same as anywhere, but I certainly wouldn't say most. Yields are generally lower in London but there are still people making money (just as there are people who aren't).Interest rates will go up
When they do, rents will not increase to the same extent
Some landlords will find themselves paying for their tenants' accommodation
Some landlords will have to bail
More property will come onto the market
(Affordable) housebuilding will increase
Valuations will decrease
I think the only real question is the extent to which each of the above will happen. My only interest would be in whether I can rent my properties as I would have no mortgages on them. Capital appreciation, which seems to be the get out of jail card for a lot of people, is of no interest to me whatsoever, as I have no interest in >2035. Quoted yields seem like a bit of a joke to me, as they never never appear to take into account things like repairs, maintenance charges, periods where the property is unoccupied, tenancy disputes, unpaid rent, etc.
All of this just tells me that BTL is a possible investment but it's a very long way from a universal and guaranteed solution. Not sure I see any kind of catastrophic crash ahead but I can foresee a period of unpleasant stagnation.
When they do, rents will not increase to the same extent
Some landlords will find themselves paying for their tenants' accommodation
Some landlords will have to bail
More property will come onto the market
(Affordable) housebuilding will increase
Valuations will decrease
I think the only real question is the extent to which each of the above will happen. My only interest would be in whether I can rent my properties as I would have no mortgages on them. Capital appreciation, which seems to be the get out of jail card for a lot of people, is of no interest to me whatsoever, as I have no interest in >2035. Quoted yields seem like a bit of a joke to me, as they never never appear to take into account things like repairs, maintenance charges, periods where the property is unoccupied, tenancy disputes, unpaid rent, etc.
All of this just tells me that BTL is a possible investment but it's a very long way from a universal and guaranteed solution. Not sure I see any kind of catastrophic crash ahead but I can foresee a period of unpleasant stagnation.
9mm said:
Interest rates will go up
When they do, rents will not increase to the same extent
Some landlords will find themselves paying for their tenants' accommodation
Some landlords will have to bail
More property will come onto the market
(Affordable) housebuilding will increase
Valuations will decrease
I think the only real question is the extent to which each of the above will happen. My only interest would be in whether I can rent my properties as I would have no mortgages on them. Capital appreciation, which seems to be the get out of jail card for a lot of people, is of no interest to me whatsoever, as I have no interest in >2035. Quoted yields seem like a bit of a joke to me, as they never never appear to take into account things like repairs, maintenance charges, periods where the property is unoccupied, tenancy disputes, unpaid rent, etc.
All of this just tells me that BTL is a possible investment but it's a very long way from a universal and guaranteed solution. Not sure I see any kind of catastrophic crash ahead but I can foresee a period of unpleasant stagnation.
Most of what you have written is pure speculation. The fact is we are in a very benign interest rate environment with low inflation. You won't see 10% interest rates again in your life time would be my best guess. Affordable housing will always lag the demand for teh simple reason there is more money in not so affordable housing. BTL are simply part of a well balanced portfolio. By the way some posters are carrying on they are preparing for WW3 and alien invasion.When they do, rents will not increase to the same extent
Some landlords will find themselves paying for their tenants' accommodation
Some landlords will have to bail
More property will come onto the market
(Affordable) housebuilding will increase
Valuations will decrease
I think the only real question is the extent to which each of the above will happen. My only interest would be in whether I can rent my properties as I would have no mortgages on them. Capital appreciation, which seems to be the get out of jail card for a lot of people, is of no interest to me whatsoever, as I have no interest in >2035. Quoted yields seem like a bit of a joke to me, as they never never appear to take into account things like repairs, maintenance charges, periods where the property is unoccupied, tenancy disputes, unpaid rent, etc.
All of this just tells me that BTL is a possible investment but it's a very long way from a universal and guaranteed solution. Not sure I see any kind of catastrophic crash ahead but I can foresee a period of unpleasant stagnation.
fishballs said:
Most of what you have written is pure speculation. The fact is we are in a very benign interest rate environment with low inflation. You won't see 10% interest rates again in your life time would be my best guess. Affordable housing will always lag the demand for teh simple reason there is more money in not so affordable housing. BTL are simply part of a well balanced portfolio. By the way some posters are carrying on they are preparing for WW3 and alien invasion.
I would agree we wont see 10% interest rates for the foreseeable future.But 4% would have been regarded as low until the financial crises. At some point we will enter into a more "normal" financial environment where savers can earn a return on their money again.
Was this discussed?
http://www.theguardian.com/money/2014/dec/15/londo...
I think the Rightmove index understates declines in average asking price.
Please correct me if I am wrong, but it only registers the initial asking price in the index and does not take into account subsequent price reductions.
If so, the landreg figures should be interesting when they catch up (3 month lag).
http://www.theguardian.com/money/2014/dec/15/londo...
I think the Rightmove index understates declines in average asking price.
Please correct me if I am wrong, but it only registers the initial asking price in the index and does not take into account subsequent price reductions.
If so, the landreg figures should be interesting when they catch up (3 month lag).
jdw1234 said:
Was this discussed?
I think you are right about the methodology but wrong about the interpretation.They take "all new properties" each month and compare it to previous months.
So it is genuinely like-for-like.
Of course, there could be a disconnect between lowered prices of existing for sale properties and the aspirations of new sellers but it isn't clear which way that would go.
In other words, you can't possibly know whether asking price drops (on existing for sale property) in November were better or worse than the asking price drops in October.
However, what seems far more likely to me is that new listings will take those changes into account - as obviously people want to price close to what the CURRENT asking prices look like in their area.
So the VERY BEST measure would be what Rightmove give us.
Of course it could be skewed if a whole bunch of very expensive property came to market (or very cheap) in one month.
But don't new listings every month make a small proportion of overall listings?
E.g. if 5 new properties come on at initial kite flying prices, but in the same month 100 other existing listed properties reduce by 10% then the index doesn't reflect the true decline.
I appreciate what you are saying about new listings matching existing prices, but I think there is a bit of a lag before new vendors accept the price promised by the estate agent to get a listing/last sold price on street is not realistic (for example).
What about that house on Bishop's Av. which was up initially for £100m, but is now offers over £30m!!
E.g. if 5 new properties come on at initial kite flying prices, but in the same month 100 other existing listed properties reduce by 10% then the index doesn't reflect the true decline.
I appreciate what you are saying about new listings matching existing prices, but I think there is a bit of a lag before new vendors accept the price promised by the estate agent to get a listing/last sold price on street is not realistic (for example).
What about that house on Bishop's Av. which was up initially for £100m, but is now offers over £30m!!
walm said:
Derek Chevalier said:
NomduJour said:
Mr Whippy said:
OK, and my point is that oop'north properties are cheap and have yields because they are risky
No - a strong market with capital appreciation means yield compression (people will pay more for the same return, trade-off being capital growth). Not the same thing as risk vs yield per se.http://en.wikipedia.org/wiki/Greater_fool_theory
I think it is absolutely rational to believe in LONG TERM inflation.
(Particularly with a government printing money!)
As a result it makes sense that hard assets will also rise in price.
So if I were doing a full financial analysis of a property investment I would absolutely build in some level of inflation which would enhance my returns above and beyond the simple net rental yield.
People do this everyday. A 4% gross yield on property absolutely does not justify the risks, transaction and other costs.
You would be better off with that new risk-free 4% bond from the government or whatever it is.
So completely rational people are building in some capital appreciation to their numbers.
And with a little leverage, it doesn't have to be huge to add 1-2ppt to the yield.
Of course you can disagree and say - look at the oil price, look at wages, look at interest rates and say we will have zero to negative inflation which is most likely close to true for a couple of years.
However, it's not irrational to disagree with that view.
What my point is, is that stuff up in the North boomed for no other reason than cheap credit and a high degree of growth potential fervour, driven by probable actual growth in the south, alongside cheap credit offered based on the idea that if prices would rise then there was little risk to lenders.
How else could my property jump almost 60% in 2 years, and the two years before that it'd jumped 35%... that's a near doubling in 4yrs.
That was common at the time all over the Leeds city area.
NO boom in jobs. NO boom in salaries. NO boom in transport links. No nothing except a boom in property values, a boom which never really corrected in 2007/2008.
That isn't a good place to start from if you're buying and expecting capital appreciation in the medium term.
Even from 2000 values, at 5% growth average per year, we'd only just have doubled by now... but salaries and jobs and potential to earn in most of the North hasn't risen my 5% average per year in that intervening 15 years.
What exactly will drive house prices UP, when they're already all but unaffordable to FTB'ers today (generation rent, high unemployment, relatively poor salaries, tighter borrowing restrictions)?
Maybe if salaries were rising fairly strongly, interest rates off the bottom, and low unemployment, I'd say yes maybe houses will go up in value. But right now there is no signals to suggest anything but another decade of doldrums as the debt is devalued away for another half generation.
Dave
Every new generation wants a home and they don't care what prices are, they just want to buy.
Interest rates are more likely to go down than up.
Even just with inflation a £100k house goes up £2kpa.
Population is going up.
If a £60k house is £60k in 20 years I'd be surprised, that means the economy has had a bad run. the average wage at that time may be £50k.
no one knows what will happen
Interest rates are more likely to go down than up.
Even just with inflation a £100k house goes up £2kpa.
Population is going up.
If a £60k house is £60k in 20 years I'd be surprised, that means the economy has had a bad run. the average wage at that time may be £50k.
no one knows what will happen
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