Roll up. Make your housing market prediction here.

meanmachine_2

You're probably right. With wage inflation, houses in the longer term are a good bet.

But in the shorter term, no.

Since the 50s, we've "enjoyed" massive inflationary periods which saw wages rocket.

We ain't going to see that now because the govt is committed to a very low inflation policy.

Why do you think Brown is begging the unions not to ask for big pay rises?

Mervyn has publicly stated his amazement that people are prpeared to take on huge debts, when their wages simply wont be able to eat into them.

What can I say though? People are thick.

inmypocketnottheirs

I agree, but we have had pay caps, pay guide lines and other restrictions in place over the last 25 years. The real problem we have here is supply and demand. In good areas there is a shortage of decent affordable property and in poorer areas nothing seems to shift. Hence supply and demand. Property is and will remain, in my opinion the best wealth creating tool in this country, subject to strict criteria, with Location, Location, Location being foremost.

I have given this subject alot of thought over the last couple of years. I have had a lot of up and downs financially. I did have two BTL's in Manchester, and struggled with tenants etc, being a distant landlord. Under pressure I sold up at a good profit, consolidated and reduced my mortgage. Since which my finances have perked up again, and I have surplus income. So what do I do with it? Invest in a pension?? Not sure about that one. Stick it in the bank?? 5% return. Not too appetising. Overseas property?? Too many uncertainties. So what is the answer??

In my opinion, a good area, good schools, good communication links, good local/national employers closeby, has to be the best place for capital growth. As I once heard on a 'property seminar' aimed at BTL landlords, if ever you are unsure about your investment, or if it does not seem a good idea, go and sit outside your property at sunrise and watch the lights go on, and think that somebody else is buying that property for you.

Unless any one knows better. Now where is that number for the guy dealing in futures for Yak oil??

tomstickland

I tend to agree with Meanmachine. House prices are too high as a proportion of pay. This continues to be the case becuase of many people taking out high multiple self cert mortgages which might lead to trouble in the long term. Either way, I'm not prepared to pay what they are asking and am happy to rent or leave the country.

inmypocketnottheirs

Glad to hear it! Long may there be a surfeit of tenants and a shortage of landlords!!!

meanmachine_2

inmypocketnottheirs wrote:

Glad to hear it! Long may there be a surfeit of tenants and a shortage of landlords!!!

In my experience there's a surfeit of landlords and a shortage of tenants - particularly reliable ones, like what I am.

My rent has stayed flat in the last 6-8 years, and yet house prices have soared. The BTL sums no longer add. up

If investors didn't buy before 2001, then, to use an EA's stock phrase, they've missed the boat. Simple as that.

inmypocketnottheirs

MM, my comments in my last post were tongue in cheek.

My position is at 42, self employed with no pension, what do I do. In todays money even to live a frugal existence, I need a 100k property to live in (rent/mortgage free) plus 250K to invest on retirement. Lets assume I have the £250K in my own home, and I want to provide for a £100k pension pot. How much would I have to invest in a pension now per month to get a £100k fund, £300, £400, £500 per month. I know of people who have had £60k - £70k knocked off teh value of the pension, plue they have had to take annuities of 4 or 5%. And that annuity you are locked in to.

So, if adhering to the Location, Location, Location mantra, and buying a property of say £85K, putting £20K deposit and financing the rest on a repayment mortgage at £400 a month. If I yield 75% rental per annum at £350 per month I am still getting an appreciating asset (see previous comments about property prices always increasing over a 5,10,20 year period), a tenant is still contributing £3160 p.a. towards my £4800 repayments. So if 75% of my investment is paid for 'with somebody elses money' and I only contribute 25% - assuming void periods for example, then surely this must be better than a pension.

Alternatively, what else can you suggest as a suitable investment tool?

rozeepozee

I can see the logic there, inmypocket. My anxiety as a BTL landlord is what happens when interest rates rise or you get a tenant who doesn't pay the rent. I bought all but one of my properties pre 2001 so i have substantial equity in them but it would still hurt if I wasn't receiving a regular rental income or if the payments on my small-ish mortgages increased. I have a large contingency fund for this eventuality. I suspect many small BTL investors don't have that luxury. Sorry if this topic is a little off thread but back to the topic of housing market predicitions, I wonder how many small investors would have to sell up if interest rates rose further?

inmypocketnottheirs

Hi Rozee. I know we are off topic, but I just can not see any alternative. The critical point is having a contigency fund or income to cover voids and tenant problems. Although Letsure have ways to overcome this, subject to premiums etc.

I would like to know what meanmachine suggests. By his own admission his rent has stayed the same for 6-8 years but property prices have rocketed. And that is my whole point. Where else can you see that capital gain, have an appreciating asset, and get someone else to pay for it????

meanmachine_2

inmypocket, I completely sympathise.

.

My point is that, in that 8 year period pof static rents, BTL has gone from being profitable (for the person who bought 8 years ago), to being marginally unprofitable, and therefore highly risky.

To rely on capital gains, when we all know the market is cyclical is extremely dangerous.

Yes, property might rise over a 20 year period, but int rates might spike in that time, there might be a recession, a world war, aliens might land, the green belt might be opened up, BTLs could be taxed. All sorts of things could happen.

The govt raided pensions. BTL could be next.

rozeepozee

Well, inmypocket, I think we're all singing from the same song sheet: property values should do well in the long term, since they have done historically. I just can't see an increase in the short term (apart from possibly a blip due to A day or whatever they're calling the SIPPS changes) so I can sympathise with MM wanting to wait and see for now.

My prediction, if I haven't said this already, is for house prices to fall over the next five years by up to 20% - I don't think that's such a crazy suggestion when you look at how much less they cost only a short while ago.

Maybe MM should just be glad he's not Australian for this: http://www.theage.com.au/articles/2005/11/30/1133311106610.html?from=top5 and other more obvious reasons :rotfl: