Is the Smart Money Leaving Property?

michaels

But if I sell the monthly cost of renting is high, couldn't an option allow me to avoid the hassle and cost of moving but still allow me to avoid the capital loss from a falling market (obviously at the cost of not making the gain if the market rises)?

Thrugelmir

michaels wrote: »

But if I sell the monthly cost of renting is high, couldn't an option allow me to avoid the hassle and cost of moving but still allow me to avoid the capital loss from a falling market (obviously at the cost of not making the gain if the market rises)?

And if you were an underwriter which way would you be hedging your bets currently?

Pennywise

The "smart money" left property before the prices slumped. Professional investors in shares, or securities, or commodities, or properties, or whatever, always have an exit strategy of cutting their losses when things go wrong or selling up when things have gone well. I've had several wealthy clients who at one stage had several hundred properties between them - all independent of eachother. They were selling them off at a tremendous rate between 2004 and 2007, one after the other, each being careful not to flood the market. They'd built up their portfolios in the late 1990's after selling shares in advance of the dot.com and Y2K bubbles/bursts. One guy actually owned virtually an entire road of houses. He only ever had two on the market at any one time so as to keep the buyers keen and competing with eachother. Those with any left at all in 2007 just sold them as fast as they could before the collapse. Each and every one of them knew that a massive crash was on its way simply because of the way prices had risen. Just as they all knew that crashes were on their way with the dot.com bubble/burst. Trouble is that they don't really know what to do with their money now as they aren't sure what's going on at all - they seem to be spreading it around - a bit on deposit, a bit on Govt bonds, a bit in gold and other minerals, a bit on the stock market, etc., but certainly nothing significant in anything at the moment, which is very ususual because they people are usually very bullish and have a strategy, and in the past they've all done the same, bought and sold at the right time, but this time, they're just as stumped as the rest of us as to what's going to happen next.

chucknorris

Pennywise wrote: »

The "smart money" left property before the prices slumped. Professional investors in shares, or securities, or commodities, or properties, or whatever, always have an exit strategy of cutting their losses when things go wrong or selling up when things have gone well. I've had several wealthy clients who at one stage had several hundred properties between them - all independent of eachother. They were selling them off at a tremendous rate between 2004 and 2007, one after the other, each being careful not to flood the market. They'd built up their portfolios in the late 1990's after selling shares in advance of the dot.com and Y2K bubbles/bursts. One guy actually owned virtually an entire road of houses. He only ever had two on the market at any one time so as to keep the buyers keen and competing with eachother. Those with any left at all in 2007 just sold them as fast as they could before the collapse. Each and every one of them knew that a massive crash was on its way simply because of the way prices had risen. Just as they all knew that crashes were on their way with the dot.com bubble/burst. Trouble is that they don't really know what to do with their money now as they aren't sure what's going on at all - they seem to be spreading it around - a bit on deposit, a bit on Govt bonds, a bit in gold and other minerals, a bit on the stock market, etc., but certainly nothing significant in anything at the moment, which is very ususual because they people are usually very bullish and have a strategy, and in the past they've all done the same, bought and sold at the right time, but this time, they're just as stumped as the rest of us as to what's going to happen next.

I didn't take my money out and I am pleased I did not, as I would only have done so to buy back in at a later date. They haven't fallen enough IMO to justify getting out (for those that would buy back in) when you consider:

CGT now 18% (better than 40% with taper/indexation allowance)
Estate agents fees
Solicitors fees for both buying and selling
Mortagage arrangement fees
Higher mortgage costs when buying again (no lifetme trackers +0.5%)
Stamp duty
Very high current (temporary) abnormal profits due to low interest rates
valuation fees
Lack of comparable returns to place the equity from sales
Not to mention the time and effort in selling and re-buying

I wouldn't crticise those that sold and to be honest I would have sold myself if I was nearer to retirement but I have up to about 15 years before I retire. I do admit there were times when I was wondering how bad would it get, I suspected about 35% from peak but it wasn't that bad, although there were times when it looked that way. I do not believe there will be more substantial falls, although I do think we will see minor falls before the bottom next year. So I am happy I put my mouth where my money was and stayed put.

Of course I agree with your answer to the OP though, it would be madness to get out of property now, you either get out back in 2007 (or earlier) or stay in (unless you are forced to sell of course), there is nothing smart about getting out now.

mewbie_2

chucknorris wrote: »

there is nothing smart about getting out now.

If you are struggling to rent your heavily mortgaged BTL properties, or tired of making 10 quid a month after expenses, or simply scared of having a huge debt on an asset which may be stagnant at best for many tears - then now is as good a time as any.

chucknorris

mewbie wrote: »

If you are struggling to rent your heavily mortgaged BTL properties, or tired of making 10 quid a month after expenses, or simply scared of having a huge debt on an asset which may be stagnant at best for many tears - then now is as good a time as any.

I think you missed this part of my post:

(unless you are forced to sell of course)

But then how could being in that position be intrepeted as 'smart'? more like desperation to me.

Obviously I can't speak for everyone but due to the low interest rates I am reconsidering pensions now, as a means to avoid paying too much in 40% tax, in the nxt year or so.

I don't particularly like the idea of having to buy an annuity but after spending time looking at it I have more or less concluded that it's not a bad investment, as long as I live until 72 (being 51 I have to think thats a reasonable bet, my wife disagrees but its hardly an arguement because if I die early I have LOST, you can't win by dying. So you are forced to take the optimistic view on lifespan.

It looks even better if you take income draw down until you are 75 (or when annuities look attractive to buy (or should I say less ugly))

JonnyBravo

chucknorris wrote: »

I think you missed this part of my post:

He didn't miss it. He chose to ignore it. He ignores anything that doesn't compute..... and that seems to be plenty nowadays.

Arise Sir mewbie.... the All New All Shining Graham_Devon MkII.

mewbie_2

JonnyBravo wrote: »

He didn't miss it. He chose to ignore it. He ignores anything that doesn't compute..... and that seems to be plenty nowadays.

Spot on Johnny. I have my own point to make, and not really interested in 'debating' stuff. 4 months ago Generali typed something that made me think "hmm, interesting", but since then.... nothing.

Generali

mewbie wrote: »

Spot on Johnny. I have my own point to make, and not really interested in 'debating' stuff. 4 months ago Generali typed something that made me think "hmm, interesting", but since then.... nothing.

Thanks.....I think.

michaels

SO getting out in 2007 made sense but getting out now at 2007 (+) prices which is what has happened locally does not?

Prices were hit by reduced credit and expectations of further declines. They were stabalised by unsustainable fiscal and monetary easing which by definition can not be repeated if prices and expectations start a second downward leg. What is there to suggest that the second leg of the W will not be deeper than the first one?