Another 50% to fall off property - Robin Griffiths (Expert Economist)

lostinrates

Ant_Lyons wrote: »

Do I think I could get the same return from a bank or even through stocks and shares - very unlikely.

Have you looked at investment comparison graphs? I presume you must have in your role (plugging is strongly discouraged here BTW). They, along with the stress and responsibilty involved in being a good landlord are discouragement enough for me. I do not deny property is a good long term investment, but I would question whether its necessarily ''the best'' or the easiest.

GDB2222

Ant_Lyons wrote: »

I personally purchased a flat last month for £52,000 that is now being rented at £420 per month. This represents a yield of over 9.5%.

Do I think I could get the same return from a bank or even through stocks and shares - very unlikely.

Do I think my £50k flat will be worth £100k next year? No

Am I happy to have a tenant in place that pays off my mortgage debt over time giving me a reasonable cashflow in the interim- Yes

Do I believe that in 20 years time the flat may be worth more than I paid for it right now? Yes probably but if not it has given me a good return and through amortization I have paid off what I owe.

The truth behind property investment is that when the general public thinks inveting is a good idea you are probably going to get poor returns and pay far more for property.

Right now is an unbelievable time to invest if you can get the funds, buy the right property (high yield) and are buying for the long term. Recently James Caan and Richard Branson have both openely stated that they are buying property and I doubt many of us would doubt their financial acumen.

I agree that that sort of property, with that sort of yield, is likely to be a reasonable letting proposition. However, there is a lot of work to be done to achieve that yield, so it's not reasonable to compare it to a bank investment. You also have many deductions from the 9.5% rental yield, so your net yield is likely to be closer to 6% before tax. That's quite attractive for someone who has the purchase money in the bank, but less attractive if you are borrowing most of it at say 6%.

I very much doubt that Richard Branson or James Caan are investing in that sort of down-market residential property. Do you have details of what they are actually buying? Commercial?

kennyboy66_2

carolt wrote: »

Nationally, the Halifax/Nationwide figures show prices tripled in a decade.

Except they didn't triple nationally in 10 years did they ?

GDB2222

dopester wrote: »

...does not mean we have even begun to feel the full shock-and-awe power the credit-crunch still has to hit on property values in the UK.


Graph sourced from cogs @ hpc

With due respect, you are making much out of little there. First of all, although you do not say it, you strongly implied that the graph 'proves' that more lending causes house prices to increase, and vice versa. As any statistician can tell you, you cannot infer causality from correlation. As an example of that fallacy, there is a strong correlation between the amount of damage caused by a fire and the number of fireman who attend. At least, that is a fallacy in normal society, excluding Fahrenheit 451.

If we simplify things and assume for the moment that all houses are bought with 100% mortgages, there is a simple equation:

Amount lent = (number of houses sold) x (average house price)

What we have seen over the last year is a dramatic reduction in the number of houses sold and a less dramatic reduction in house prices. Over the period shown in your graph, the number of houses sold from year to year was pretty much constant, so it is hardly surprising that the amount lent was very closely related to the average house price. It does not prove that the large amount of lending caused house prices to increase, although that may well be the case.

ad44downey

brit1234 wrote: »

However till that program I heard this break down of future falls by the well respected econmist Robin Griffiths.

He states that house prices have another 50% to fall and that we are going through a tempoary bounce. He also talks about bubbles and states about them returning to pre bubble values,

Robin Griffiths, author with William Houston of Water: The Final Resource. How the Politics Of Water Will Affect The World, discusses cycles, technical analysis and some of the many issues raised in his excellent new book.


http://commoditywatch.podbean.com/

It's hard to argue with the persuasive argument put forward by this eminent Economist. Don't say you weren't warned people!

the_ash_and_the_oak

I agree w dan that sentiment is still fairly strong (and stronger than a year ago)

not really thinking sentiment is the problem imo

chucky

properties in my area tripled in that time - even the bad ones.
but i don't think it would have been the case nationally - which isn't very important anyway.

as for dropping another 50% - i wouldn't have thought so unless you can get a budget new build or a repossession. some people are going to be very disappointed if they're exprecting to get 50% price drop.

it's going to come to the point where you have to ask yourself - do you buy a bad house in a good area or a good house in a bad area? these are the types of property will be the majority, better properties in good areas will be in much more demand due to the recent drop in prices.

chucky

lostinrates wrote: »

Have you looked at investment comparison graphs? I presume you must have in your role (plugging is strongly discouraged here BTW). They, along with the stress and responsibilty involved in being a good landlord are discouragement enough for me. I do not deny property is a good long term investment, but I would question whether its necessarily ''the best'' or the easiest.

you should look at the correct charts not the ones that are hand-picked to make the point that property isn't the best investment.

the FTSE 100 would have given you 400% but the FTSE 250 would have given you over 800% profit in the graph.
http://uk.finance.yahoo.com/q/bc?t=my&s=%5EFTSE&l=on&z=m&q=l&c=&c=%5EFTMC

i know the graph goes out over 20 years but it's just a point not to believe every graph out there because i could use the data to prove property investment is good or bad depending on what FTSE Index I used - just a point

FoxtonsRIP

Dan: wrote: »

There may wll be 50% falls on some property types in certain areas, but I doubt we will ever see the magic "-50%" figure on any index.

Hilarious. Desperate Dan yet again trots out his baseless view that house prices will never fall by more than x%.

So who would you rather believe - a respected economist with Phd's, Master degrees, etc. Or Desperate Dan with his GCSE in woodwork. :rotfl:

lostinrates

chucky wrote: »

you should look at the correct charts not the ones that are hand-picked to make the point that property isn't the best investment.

the FTSE 100 would have given you 400% but the FTSE 250 would have given you over 800% profit in the graph.
http://uk.finance.yahoo.com/q/bc?t=my&s=%5EFTSE&l=on&z=m&q=l&c=&c=%5EFTMC

i know the graph goes out over 20 years but it's just a point not to believe every graph out there because i could use the data to prove property investment is good or bad depending on what FTSE Index I used - just a point

I agree, graphs can prove most things if you hand pick the data . But still, we love graphs . What you can't graph is perosnal feeling. Alot of people prefer property becasue they feel they underdtand brocks and mortar. I would argue a good LL has a much deeper knowledge and responsibilty to others than that, a responsibility I don't feel the need for in my life. Far from condeming good LL I think they are valuable, I just don't think its the best route for everyone, financially or otherwise.