Housing Affordability has peaked, now decreasing

Emy1501

Chrysalis wrote: »

on your point #1 that depends on the level of interest rates, as well as some other factors.

eg. some landlords are happy to take less rent than mortgage costs knowing that at some point they will sell the house for a profit making it up, and of course in theory using your argument everyone should be able to buy a house that rents privately even people on benefits since it will be cheaper. When you buy a house there is other costs involved such as compulsary insurance, legal fees, mortgage broker fees as well as paying your own maintenance costs.

Personally I think interest only mortgages should be banned, people should be able to afford a mortgage at 4-6% with paying of the capital as well or rent.

Of course i also think the rental legislation needs a rehaul giving tenants more long term rights as right now a 6 month tenancy period is a joke.

Interest rates are as low as they are going to get. I suspect some will be willing to do as you say but professional landlords rely on rental yields not HPI. Its only the amatuer landlords who may allow rent at less than the mortgage and rent on the basis of HPI. I do not know how much cash is in the system but I doubt there is enough. Banks want you show that the rent will cover at least 125% of the mortgage when you take out a BTL. A couple of years ago they would ignore this to get the deal but times are different now.

As for everyone being able to buy a house people on benefit are using housing benefit money to pay the rent hardly likely they would get a mortgage. As for most others well if they could get a deposit etc then they could afford the mortgage as there is not much different between an interest only mortgage and the rent on a property but if prices rise by 100% in real terms then rent has to follow a similar path unless as you say many landlord are going to subsidsed the rent and therefore be pretty cash rich and I'm not sure there is enough cash in the economy to do this.

chucky

Emy1501 wrote: »

Interest rates are as low as they are going to get. I suspect some will be willing to do as you say but professional landlords rely on rental yields not HPI. Its only the amatuer landlords who may allow rent at less than the mortgage and rent on the basis of HPI. I do not know how much cash is in the system but I doubt there is enough. Banks want you show that the rent will cover at least 125% of the mortgage when you take out a BTL. A couple of years ago they would ignore this to get the deal but times are different now.

that's a generalisation - different types of properties have different types of varying types of yields and different levels of potential capital growth.

for example ex-local authority are generally high yield low capital growth.

it's a business that identifies business opportunities be it for yield or for yield + capital growth.

what qualifications does landlord need to be a pofessional landlord?

chucky

Thrugelmir wrote: »

Different times. Different market.

BP was still a nationalised industry back then.......

Look ahead at the wider picture.

each day is a different market and a new business opportunity - it doesn't stop people looking in the rear view mirror for reassurance.

treliac

HAMISH_MCTAVISH wrote: »

250,000 additional households a year being created, 80,000 houses a year being built.

The picture is clear.

Vast numbers of young people will be stuck at home (some for ever :eek:). They won't be able to afford to leave.

Only those who are wealthy, or who qualify for social housing will get to move out. :rolleyes:

jojo1964

treliac wrote: »

Vast numbers of young people will be stuck at home (some for ever :eek:). They won't be able to afford to leave.

Only those who are wealthy, or who qualify for social housing will get to move out. :rolleyes:

Young people will only make up a small number of those looking for housing, immigration will be a more important factor in house price rises, the buy-to-let market will still be profitable, with transient workers needing short term housing, and those that settle will be looking to purchase family homes and bring their families over,and whilst the population continues to rise and house building fails to keep up with demand, prices will continue to rise at best, or remain stagnant at worse, of course there will be fluctuations short term, but over a 5 or 10 year period the trend will continue to be upwards, only a more catastrophic recession will affect this, as generally most people have been largely unaffected by the current recession, in fact for millions the recession has been beneficial with lower interest rates, lower prices etc.

Emy1501

chucky wrote: »

that's a generalisation - different types of properties have different types of varying types of yields and different levels of potential capital growth.

for example ex-local authority are generally high yield low capital growth.

it's a business that identifies business opportunities be it for yield or for yield + capital growth.

what qualifications does landlord need to be a pofessional landlord?

Dont know but everything I have read suggests that you should be looking for decent yields of above 3-4% which I cant see happening if nobody can afford to pay the interest plus some on the Landlords mortgage.

The beauty of BTL has been you can take someone else money get some one else to pay the mortgage, get a decent yield on your investment and get HPI in the long run not only on your investment but the money you borrowed as well. People looking at cash only investments could have probably done alot better out of other investments than property. There was someone from Barclays on TV the other day who dealt with rich investors who was saying that there are better investments than property for people with lots of cash. I therefore cannot see what Hamish is saying comming true

chucky

Emy1501 wrote: »

Dont know but everything I have read suggests that you should be looking for decent yields of above 3-4% which I cant see happening if nobody can afford to pay the interest plus some on the Landlords mortgage.

The beauty of BTL has been you can take someone else money get some one else to pay the mortgage, get a decent yield on your investment and get HPI in the long run not only on your investment but the money you borrowed as well. People looking at cash only investments could have probably done alot better out of other investments than property. There was someone from Barclays on TV the other day who dealt with rich investors who was saying that there are better investments than property for people with lots of cash. I therefore cannot see what Hamish is saying comming true

a diverse investment portfolio is the answer having it across different asset classes.

BTL will make you or lose you money in simple terms, it's also a tax efficient way to pay your mortgage.

if you buy high don't expect a good yield and less HPI potential; buying low and the right property the yield is better and there is potential HPI incolved, it's a bonus if it's there.

nearlynew

A couple of years ago, most new entrants to the BTL market didn't even know what yield was, let alone be able to calculate it.
It was all about HPI.

It was only when prices started falling that they discovered they could console themselves by using this "new" word.

[Deleted User]

Emy1501 wrote: »

Why would you want prices to rise for your nieces and nephews if they want to climb the housing ladder? Did they buy using a 100% mortgage and therefore need equity to raise a deposit? Surely if prices rise then the next property up the ladder becomes more expensive unless they are moving to another part of the country which was going to be cheaper or less affected by HPI.

If had kids in their early 20's I would only encourage them to consider buying they could raise a good deposit, were in a very stable job and could afford to fix their mortgage for at least 5 years. If they could not I would suggest waiting till at least after the election when we are likely to find out exactly what mess we are in. I would also make them fully aware that prices can go upas well as down so to prepared for the fact that the price of the property they buy could fall in the short run.

And that's not far removed from the advice that sensible parents have always given their children. The price of property can and does go down as well as up and like any investment you need to be willing and able to stay put for a long time. Plan for the worst and hope for the best and you won't go too far wrong.

My neices and nephews all own property in their 20's and already that property is worth a lot more than they paid for it.

If house prices go down they have a smaller profit should they choose to sell. They probably wouldn't be much better off than those that simply rented.

If house prices go up they have a larger profit should they choose to sell. Now if they sell simply to move to a bigger house they'll have to pay more for that house but they'll get more for their old house. Once in the new house they'll have an even bigger pot of money tied up in their house. And so it continues. The benefit to house prices continuing to rise above the rate of inflation is that it doesn't take long to get to the stage where you're paying a micky mouse morgage for a house worth a small fortune.

Now sure, you don't actually get to spend that money if you're living in your house but it gives you lots of options. Those with children might take pleasure out of being able to give their kids a HUGE financial gift. Singles with small flats can marry, sell up and have a huge deposit on a shared, larger house. Maybe they'll both move into one of the houses and they'll release the money previously tied up in the other. Maybe they'll emigrate, sell up and live in a boat, release equity to start a business - it will give them the options and wealth in later life that previous generations have benefited from.

My generation were just starting out at the time of the last house price crash. I wasn't affected as I could aford to stay put. But cousins in Windsor were. They had a tiny one bedroom flat and a baby on the way. They needed to move but the house was worth less than they'd borrowed. They ended up renting out the flat and getting a second morgage. It was a HUGE worry for them at the time I remember but it turned out to be a blessing in disguise. Prices recovered and they made a mint when they finally sold that pokey little flat.

But there's nothing wrong with renting if you aren't interested in owning something that's worth a lot. If house prices trends start to go down long term rather than up I see little point in buying a house.

Emy1501

Deleted_User wrote: »

And that's not far removed from the advice that sensible parents have always given their children. The price of property can and does go down as well as up and like any investment you need to be willing and able to stay put for a long time. Plan for the worst and hope for the best and you won't go too far wrong.

My neices and nephews all own property in their 20's and already that property is worth a lot more than they paid for it.

If house prices go down they have a smaller profit should they choose to sell. They probably wouldn't be much better off than those that simply rented.

If house prices go up they have a larger profit should they choose to sell. Now if they sell simply to move to a bigger house they'll have to pay more for that house but they'll get more for their old house. Once in the new house they'll have an even bigger pot of money tied up in their house. And so it continues. The benefit to house prices continuing to rise above the rate of inflation is that it doesn't take long to get to the stage where you're paying a micky mouse morgage for a house worth a small fortune.

Now sure, you don't actually get to spend that money if you're living in your house but it gives you lots of options. Those with children might take pleasure out of being able to give their kids a HUGE financial gift. Singles with small flats can marry, sell up and have a huge deposit on a shared, larger house. Maybe they'll both move into one of the houses and they'll release the money previously tied up in the other. Maybe they'll emigrate, sell up and live in a boat, release equity to start a business - it will give them the options and wealth in later life that previous generations have benefited from.

My generation were just starting out at the time of the last house price crash. I wasn't affected as I could aford to stay put. But cousins in Windsor were. They had a tiny one bedroom flat and a baby on the way. They needed to move but the house was worth less than they'd borrowed. They ended up renting out the flat and getting a second morgage. It was a HUGE worry for them at the time I remember but it turned out to be a blessing in disguise. Prices recovered and they made a mint when they finally sold that pokey little flat.

But there's nothing wrong with renting if you aren't interested in owning something that's worth a lot. If house prices trends start to go down long term rather than up I see little point in buying a house.

Unless they are moving to another part of the country which is cheaper there is no benefit from HPI if they are trading up. The property the maybe selling maybe worth less but the property they are planning to buy will be worth less too.

You also have not answered how future generations will pay for a mortgage or rent if HPI continues way above inflation.