Future of house prices & the buy-to-let mkt

moneysavingobsessive

I bought a house last year and due to a job change, it is likely that I will move out and get some tenants in.

I have informed by bank that I am thinking of doing this and apparently, if the rental income covers the mortgage, some lenders would lend to me again. This would mean that I could buy nearer my new job, although obviously run the risk of my rented house being empty and having to fund two mortgages.

Just wanted peoples opinions on the risk/return of a strategy such as this and general feelings about the housing market.

jimjams99

I think everyone would like to know where the housing market is going.

As for renting, it seems to me that you would probably want a property management company to manage the place for you so you would have to factor in their costs (although the costs are tax deductable) and of course how much tax you would pay on the income from the rental. If after that you still have more than enough to cover the mortgage to the point that you could cope if the place was empty for a couple of months then I personally would go for it.

Be aware of Capital gains tax on a second property. Ask your account for advice.

Good luck

Jamie.

iamconfusedagain

For what people feel about the housing market look at the poll http://www.moneysavingexpert.com/#vote

Most think a rise.

I however think they are wrong. I think there is going to be a god awful crash......well you did ask!

I would not want the risk of void periods, unexpected maintainence and the risk of capital loss.

Really though, do not listen to me (i am risk adverse) sure as hell do not listen to the advice of a lender! Do research, look at every indicator for prices in your area, at least then if it goes tits up you will have gone into it with your eyes open.

ReportInvestor

The 55% rise in the Bradford & Bingley share price in less than a year is telling me that some professional investor types think the buy to let market is in a half decent shape.

I have noticed that rental yields have not recently fallen in the same manner as on other asset classes like shares (eg Bradford & Bingley) and government stock, indexed linked gilts, annuities, PIBs, Corporate Bonds etc. etc.

And the baby boomers are a greedy, income hungry lot.

Also.

Rising population (including immigration), more single households, more students, later family partnerships, rising student debts, later age of first time buyers all underpin the buy to let market in the long term.

P.S. I am not a btl investor, I couldn't stand the hassle.

rozeepozee

Well rents are certainly falling on new build 'luxury' city developments here in Sheffield so be careful where and what you buy.

I personally don't know how you get the sums to work on current prices when you factor in the hassle associated with letting compared to other investments.

Surely you gotta be talking real loooong term investing?

Ian_W

My local property paper up to 2/3yrs ago had one page of lettings per week, it now has 4 pages every week. Some of the new flats are also still for sale and the rentals being asked [and obviously not got, otherwise they wouldn't be vacant] wouldn't cover an 85% BTL mortgage.

I think it depends on the area where you live. Research the rental you could get for your house and compare that with your mortgage repayments but also allow for other expenses, so ideally the rental should be at least 130-150% of the mortgage. Also check out how much rental property of the same type is being advertised. Around here it's all 1 & 2 bed flats so houses seem to be less plentiful and probably a better prospect to let without too many empty periods.

Personally I'd look at as a business, if you can make money letting - go for it. If you can't sell and buy another near your new work. Capital growth in housing should be seen as a long term investment anyway, though I don't believe a price crash is likely soon.

meanmachine_2

These things move in cycles.

In 1996 I could have bought a property in London on my then very average wage. I remember going into an estate agency and before I'd opened my mouth the agent only wanted to talk to me if I was interested in buying. Sadly, I wasnt, so I was put on a VERY long list of people looking for a rental.

These days, the market has swung in the opposite direction. A glut of rentals and my rent hasn't risen in the last five years. Meanwhile, well, we all know what's happened to house prices.

I'm not making any predictions, but everything moves in cycles. Now looks like a bad time to be investing in a rental, but in five years, who knows? The bottom could have fallen out of the sales market and the pendulum swung back.

In 1996, though, few people thought of property as an investment. Why would they? It had just lost 30% of its value.

Don't follow the herd. Think for yourself. The smart people are already looking at other investment opportunities.

rozeepozee

Meanie! Haven't seen you in ages! What with you, me an IanW chewing the fat over house prices, it's like the old days

meanmachine_2

As I'm no longer actively looking, I've lost interest - just as the market seems to be heading into a second boom phase! (well, according to rightmove, anyway...).

To be honest, I don't think the market's going to dip in any way while affordability remains broadly where it is.

So there's nothing I can do about prices, or even homeowners. It's all about what banks are willing or able to lend, and at what price.

Like all things, we're slaves to the global market - if bad debts continue to rise, the banks will tighten, if IR rates around the world rise, then ours will inevitably do the same (whatever is happening to the UK economy).

THis is a worldwide phenomenon. It's nothing to do with UK supply, demand, land availability, or anything like that.

If you turn off the money tap 1000s of miles away, suddenly the banks stop leding at 6 times my salary and at a rate that is dirt cheap. And if I can't physically borrow, then I can't buy your house - except at a lower price.

Although I have noticed some new properties come on the market which are WILDLY overvalued - I'm talking at least 50K above anything else. The madness continues (in the vendors' heads at least). But if the buyers don't play ball, then the whole market will stagnate again. If the ball is taken from them (due to global factors), then the market will slide.

rozeepozee

Awww! You sound a bit mis Meanie. I'm hearin' your frustration. I haven't bought any properties for the last three years because I've been convinced the housing market can't continue to rise and I've been proven wrong (so far ). Sheffield where I'm based is a funny place and in some areas buyers are still getting into bidding wars and properties going to closed bids but I've also noticed that in others, prices seem to have risen very slowly if at all and there's starting to be quite a few ads that say "new price" where there hasn't been a sale. I've also noticed that secondhand new build flats are now being reduced quite significantly (as are rents) as a result of the saturation of this type of property on the market. I'm sure this must have a knock on effect eventually on the currently still rising areas. I'm too risk averse to buy at the mo (I've lived through one property crash and saw how painful it was for many of my friends) and I'm an investor, so I can't imagine how frustrating it must be when you want to buy for somewhere to live in such an uncertain climate.

rozeepozee

PS. I've noticed in a number other posts that valuers are beginning to value properties at less that the offer price, suggesting that the property fraternity may be drawing in their horns. I remember a time when the value was basically whatever the buyer was willing to offer and next month it would be worth 3 grand more!