Misery of the BTLers and property developers...

Edale

mp2 wrote: »

are you sure of that? because in japan property prices have dropped 18 years in a row since 1991.

same credit bubble, stock bubble, same housing bubble, same credit collapse, stock market collapse, banks going bankrupt, government bailout of banks.
same low interest rates for 2 decades at 0%, same limited supply of property and limited land available.

do these events in japan over the past 2 decades ring any bells?

i wouldnt be so sure that your house price will be worth more in 25 years. especially in real terms. nominally you may get back to where you were in around 15-20 years time. but adjusting for inflation it will be worth a lot less than what it was valued at in 2007.

in real terms i dont think house prices will ever get back to where it was in 2007. it was all a bubble, funded by essentially what was a pyramid credit scheme.

also if i told you i stumped up £100,000 of my own money and borrowed money at a 10-1 margin so i invested £1million in the stock market in 2007 how secure would you say is my investment?

after all, stock markets always go up too in the long run over 25 years, and generally even more than property.

are you saying that i cant lose?

A very relevant post, wish I could thank it twice.

Dan:_4

mp2 wrote: »

are you sure of that? because in japan property prices have dropped 18 years in a row since 1991.

same credit bubble, stock bubble, same housing bubble, same credit collapse, stock market collapse, banks going bankrupt, government bailout of banks.
same low interest rates for 2 decades at 0%, same limited supply of property and limited land available.

do these events in japan over the past 2 decades ring any bells?

i wouldnt be so sure that your house price will be worth more in 25 years. especially in real terms. nominally you may get back to where you were in around 15-20 years time. but adjusting for inflation it will be worth a lot less than what it was valued at in 2007.

in real terms i dont think house prices will ever get back to where it was in 2007. it was all a bubble, funded by essentially what was a pyramid credit scheme.

also if i told you i stumped up £100,000 of my own money and borrowed money at a 10-1 margin so i invested £1million in the stock market in 2007 how secure would you say is my investment?

after all, stock markets always go up too in the long run over 25 years, and generally even more than property.

are you saying that i cant lose?

Sorry mp2, I missed this due to that sockpuppet thing posting rubbish again.

Anyway, Japan - that old chestnut. It's a great soundbite, and similarities may seem obvious, but there some massive differences.

Firstly, I'm not sure of your statement that Japan Property prices have fallen every year since 1991. They started to pick up in the early 2000s, although not by much.

Japans property/credit bubble was not purely a private housing bubble, but a commercial property bubble, it was corporate businesses that suffered more then the average household.

Bankruptcy laws are also completely different.

Also, a big difference is that the average life span of houses in Japan is very short.

You've made a rather rash statement saying that prices will NEVER get back to 2007 levels. I am confident that my house will be worth more, a lot more then 2007 prices in 25 years from now.

I'm not saying you can't lose out, like pretty much everything in life, it is still a risk. However, you need to take risks every now and then or your be to scared to leave your front door.

mp2

Dan: wrote: »

Sorry mp2, I missed this due to that sockpuppet thing posting rubbish again.

Anyway, Japan - that old chestnut. It's a great soundbite, and similarities may seem obvious, but there some massive differences.

Firstly, I'm not sure of your statement that Japan Property prices have fallen every year since 1991. They started to pick up in the early 2000s, although not by much.

Japans property/credit bubble was not purely a private housing bubble, but a commercial property bubble, it was corporate businesses that suffered more then the average household.

Bankruptcy laws are also completely different.

Also, a big difference is that the average life span of houses in Japan is very short.

You've made a rather rash statement saying that prices will NEVER get back to 2007 levels. I am confident that my house will be worth more, a lot more then 2007 prices in 25 years from now.

I'm not saying you can't lose out, like pretty much everything in life, it is still a risk. However, you need to take risks every now and then or your be to scared to leave your front door.

ok Dan lets throw some figures into the fray to explain why, and see if you are quite aware of the full extent of the bubble.

1985 average salary = £9k average house price = £33.2k ratio= 3.68
1990 average salary =13.8k avergage house price = 62k ratio = 4.49 (last housing bubble)
1995 average salary =17.4k average house price = 53k ratio= 3.04
1999 average salary = 20.8k average house price = 72k ratio = 3.46

2007 average house price = 200k

you do realise that to support average house prices of 200k, average salaries need to be 54k across the whole of the uk (using a long term ratio of 3.7)

how many years will it take the uk to achieve average salaries of 54k?

average salary today is around 24k so just based on normal estimates it maybe another 25 years for you to reach parity on a "nominal" basis never mind a real terms basis.

the bubble over the last 10 years has detached earnings from prices but it has now popped and going back to normal.

if your argument is that "things are different this time around" then you dont appreciate the market or the gravity of the situation.

this bubble was never real. your argument would be that all past prices pre 1999 were false and that prices in ths bubble are the "real" prices.i.e you are using a bubble price of 2007 as your marker.

no different from trying to value yahoo based on their price at the height of the tech bubble in 2001.

its the wrong marker unfortuantely.

you cant cheat the market in the long term, things will always go back to equilibrium.

for the market to go back to 200k average house prices, earnings across the uk need to be 54k.

to sell a 600k house, soon you will find that the easy borrowing has disappeared and the only people that can afford to buy are those earning 150k a year to buy a standard basic house in london. its not going to happen.

you might want to have a genuine think about where people will be getting this money from to buy your overpriced properties. if you think well theres buyers out there doing it today so there will be some for mine too, then also think pyramid ponzi scheme.

to not question where the money will come from is like not questioning how a pyramid scheme works.

just because there are buyers today, tomorrow will be a whole different story when it dries up and the tide goes back out again. the ones who lose out are those that were the last to join the party. just like any pyramid scheme.

at the end of the day, the fundamentals always win. you cant hold it back and neither can everyone else. the market is what it is.

Graham_Devon

I heard someone a couple of weeks back, stating that house prices just can't go back to normal, because, well, they just can't.

When asked why they can't, it was the same answer, because, well, they just can't.

Pressed further, the answer was "well people would lose their equity and this wouldnt be allowed to happen".

These were two GP's. One who had bought an 800k property in 2007 and mortgaged up to the hilt. That one was the one saying it just couldnt happen.

Same as the BTL landlords. The only answers ever seem to be "it just couldnt happen".

What I want to know is why, if it could increase like it did, it can't fall in exactly the same way?

The real answer from these people? "Well, it can happen, but I am going to categorically deny that it will".

Dan:_4

mp2 wrote: »

ok Dan lets throw some figures into the fray to explain why, and see if you are quite aware of the full extent of the bubble.

1985 average salary = £9k average house price = £33.2k ratio= 3.68
1990 average salary =13.8k avergage house price = 62k ratio = 4.49 (last housing bubble)
1995 average salary =17.4k average house price = 53k ratio= 3.04
1999 average salary = 20.8k average house price = 72k ratio = 3.46

2007 average house price = 200k

you do realise that to support average house prices of 200k, average salaries need to be 54k across the whole of the uk (using a long term ratio of 3.7)

how many years will it take the uk to achieve average salaries of 54k?

average salary today is around 24k so just based on normal estimates it maybe another 25 years for you to reach parity on a "nominal" basis never mind a real terms basis.

the bubble over the last 10 years has detached earnings from prices (because of these new risky loans that came form nowhere) but it has now popped and going back to normal.

if your argument is that "things are different this time around" then you dont appreciate the market or the gravity of the situation.

this bubble was never real. your argument would be that all past prices pre 1999 were false and that prices in ths bubble are the "real" prices.i.e you are using a bubble price of 2007 as your marker.

no different from trying to value yahoo based on their price at the height of the tech bubble in 2001.

its the wrong marker unfortuantely.

you cant cheat the market in the long term, things will always go back to equilibrium.

for the market to go back to 200k average house prices, earnings across the uk need to be 54k.

to sell a 600k house, soon you will find that the easy borrowing has disappeared and the only people that can afford to buy are those earning 150k a year to buy a standard basic house in london. its not going to happen.

you might want to have a genuine think about where people will be getting this money from to buy your overpriced properties. if you think well theres buyers out there doing it today so there will be some for mine too, then also think pyramid ponzi scheme.

to not question where the money will come from is like not questioning how a pyramid scheme works.

just because there are buyers today, tomorrow will be a whole different story when it dries up and the tide goes back out again. the ones who lose out are the last to join the party. just like any pyramid scheme.

at the end of the day, the fundamentals always win. you cant hold it back and neither can everyone else. the market is what it is.

So we are back to the 3 x salary argument.

Are you sure the average salary is 24k? It was 24K in 2003, so it’s got to be around the 30k mark today.
Average house prices, as of today is 160k – so someone earning 30k will need to borrow 4 x salary (if they have a 20% deposit). This is very doable, which is why I think the market will start to level out towards the end of the year.

Remember that thing called ‘the credit crunch’. Before the banks withdrew lending , average FTBers had no problem getting mortgages – and I’m not talking about sub-prime either.

Affordability and ‘ability to service mortgage’ is what mortgage lending, quite rightly, is based on, and not multiple earnings. Every borrower is unique. You may have 2 people both earning 35K. One may be able to afford 200K, the other 150K.

Also remember that few single people buy a house, most buy with a partner/spouse which will increase the amount available to borrow.

With no more 100% mortgages, no more lending to folk with a poor credit record and no more 8 x salary multiples, the rampant HPI experienced over the last decade will not happen again (at least until this all a distant memory) but don’t get too excited that property will be completely worthless and so low I could use a credit card transaction to purchase a flat.

Why do people think it should be easy for FTBers. When I first bought , we had to give up a lot and it only gets easier over time.

Graham_Devon

Dan: wrote: »

So we are back to the 3 x salary argument.

Are you sure the average salary is 24k? It was 24K in 2003, so it’s got to be around the 30k mark today.
Average house prices, as of today is 160k – so someone earning 30k will need to borrow 4 x salary (if they have a 20% deposit). This is very doable, which is why I think the market will start to level out towards the end of the year.

Trouble is, average salary is 27k, and the ACTUAL average salary is more like 23k, i.e. what the majority of people actually earn.

Remember that thing called ‘the credit crunch’. Before the banks withdrew lending , average FTBers had no problem getting mortgages – and I’m not talking about sub-prime either.

We are kind of post credit crunch now, so theres no point really in reminising in the past, when the lending procedures you talk about to back up your argument bought the banking sector to it's knees.

Affordability and ‘ability to service mortgage’ is what mortgage lending, quite rightly, is based on, and not multiple earnings. Every borrower is unique. You may have 2 people both earning 35K. One may be able to afford 200K, the other 150K.

Indeed, and again, the majority of the population will NOT be able to afford the sums you talk about above. Some will, naturally, but most won't. Again, hence where we are today, and hence why reposessions are going up and up.

Also remember that few single people buy a house, most buy with a partner/spouse which will increase the amount available to borrow.

With no more 100% mortgages, no more lending to folk with a poor credit record and no more 8 x salary multiples, the rampant HPI experienced over the last decade will not happen again (at least until this all a distant memory) but don’t get too excited that property will be completely worthless and so low I could use a credit card transaction to purchase a flat.

Why do people think it should be easy for FTBers. When I first bought , we had to give up a lot and it only gets easier over time.

From one end of the scale to the other. It never was 8x salaries.

mp2

Dan: wrote: »

So we are back to the 3 x salary argument.

Are you sure the average salary is 24k? It was 24K in 2003, so it’s got to be around the 30k mark today.
Average house prices, as of today is 160k – so someone earning 30k will need to borrow 4 x salary (if they have a 20% deposit). This is very doable, which is why I think the market will start to level out towards the end of the year.

Remember that thing called ‘the credit crunch’. Before the banks withdrew lending , average FTBers had no problem getting mortgages – and I’m not talking about sub-prime either.

Affordability and ‘ability to service mortgage’ is what mortgage lending, quite rightly, is based on, and not multiple earnings. Every borrower is unique. You may have 2 people both earning 35K. One may be able to afford 200K, the other 150K.

Also remember that few single people buy a house, most buy with a partner/spouse which will increase the amount available to borrow.

With no more 100% mortgages, no more lending to folk with a poor credit record and no more 8 x salary multiples, the rampant HPI experienced over the last decade will not happen again (at least until this all a distant memory) but don’t get too excited that property will be completely worthless and so low I could use a credit card transaction to purchase a flat.

Why do people think it should be easy for FTBers. When I first bought , we had to give up a lot and it only gets easier over time.

your argument therefore is "but things are different this time". it isnt.

the truth is, the make up of the uk economy has not fundamentally changed much since 1999.
the stock markets are not underpinned by this sudden surge in earnings growth you claim to exist in the uk. uk gdp has not grown massively in the past 10 years to support massive house prices. people use to buy with a partner and spouse in 1995 as well.

there is only one thing that has changed since the start of this bubble - easy risky borrowing. its not a coincidence.

an individual can make ends meet with an expensive mortgage, a million individuals cant. individual cases are irrelevant, when the market it this big you need to take the market as a whole and look at it as a statistic.

e.g at 3.5 times earnings, the mortagage payment makes up about 35% of take home pay
at 4.5 times earnings it make up 45% of take home pay. (both based on around 5% interest rate)

the question isnt can people afford to pay 45% of take home pay on their mortgage, but should be what percentage of people will default at 3.5 times earnings, what percentage of people will default at 4.5 times earnings.

also, you dont get to decide how much you can afford to borrow. the banks do. that rate is 3.5 times earnings. risky borrowing is gone forever now.

i would seriously think hard about where you think people will be getting the money from to buy houses.

mrs-puff

Affordability and ‘ability to service mortgage’ is what mortgage lending, quite rightly, is based on, and not multiple earnings. Every borrower is unique. You may have 2 people both earning 35K. One may be able to afford 200K, the other 150K.

Also remember that few single people buy a house, most buy with a partner/spouse which will increase the amount available to borrow.

Affordibility works both ways.

You're forgetting that cirumstances change and, especially in this climate, that 2 salaries may be reduced to one or even none due to job loss, babies coming along, relationship break-ups etc. This also has an effect on the housing market. ie.. the mortgage isn't AFFORDABLE any more.

Affordibilty rather than low salary multiples may be ok when a mortgage is granted. But it doesn't look long term much does it ?

Kenny4315

leveller2911 wrote: »

I'm getting the impression your a really nice down to earth chap who,s life isn't ruled by money, good on you Kenny ,I'm really pleased money isn't your GOD.:rolleyes: ..................Just remember you can't take it with you

Actually you'd be fairly suprised that I'm not that fussed about loot .... I'm simply stating facts ...

I gave up a senior management consultant role in SAP, because I didn't want to spend all week travelling and in hotels (UK and overseas), and wanted to be at home with the kids. I did up houses from the first I bought the reason being my old boys a painter and decorator (& general mtce), so as a result every school holiday I had was spent up a ladder painting, or doing some other job. So doing up houses came pretty naturally, as for my BTL flats as the guys have been with me some years now they get a good discount, and are so pleased that when my other 2 became available they got there friends to move in.

I can just about afford anything I want but I'd rather have more spare time, to go to the gym, on holidays, play my video games, etc, than have a £100k + motor and then have the work full-time to keep in up to date, etc. As I come from a poor background I still a tight git and in reality am unable to blow lots of cash on crap even though I have it. :rolleyes:

chucknorris

Graham_Devon wrote: »

Honestly, I really couldnt give one iota of a flying sh*te.

You sounds like someone who didnt like what I said! Truth hurt?

It's ok ramping up the economy and saying, yes, this 0.5% interest rate makes my mortgage piddly. But you know full well paying a mortgage yourself, for an empty house, thats falling in value, is pure misery.

This is what this BTL landlord tells us. Oh, the interest rate means my outgoings have gone down. What he doesnt tell us is that he's advertising at least 4 properties for rent in the paper, in a desperate attempt to get some income to pay the mortages.

His worst move though, was buying a couple of holiday places last year. These were high end cottages, designed to make him uber rich. The holiday people would pay the mortgages see.

Shame for him, and all the others buying holiday homes down here pricing everyone out that people can't afford to go on holiday anymore, so he's left paying rent and services on an empty cottage!

The LL you are describing sounds like a very bad investor, he wasn't the first and certainly won't be the last, but for every 2-3 bad investors there's probably at least one good one.

I think a major fault of threads like this is the lack of understanding that not all landlords are the same. Whatever the ratio of wise to foolish investors within the general population, I think that ratio will be higher here. Because the foolish investors are the ones who do not do their homework whereas I would imagine LL's on this site are here for that very reason (ie keeping up with what's going on). I think this compounds the problem for some as they see replies from LL's that are among the least effected, the ones they would really like to hear from are not the sort of people who frequent websites like this.

Of course all LL's are effected to some extent, but the ones least effected are the ones who bought ages ago when price levels were far below 40% less than 2007 peak prices, who haven't mewed and as well as not selling are actually waiting to buy more. You could even say that these are barely effcted at all, some will even make more money eventually when prices go back up.