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Property !!!!!! A Nation Hypnotised? Blog Discussion
Former_MSE_Andrea
Former MSE 9.6K Posts
This is the discussion to link on the back of Martin's "A Nation Hypnotised By Property !!!!!!? Property isn’t as safe as houses" blog. Please read the blog first, as the discussion follows it.
Read Martin's "A Nation Hypnotised By Property !!!!!!? Property isn’t as safe as houses" Blog
IMPORTANT NOTE FROM MARTIN! PLEASE READ
IMPORTANT NOTE FROM MARTIN! PLEASE READ
Folks I know this is a highly polemic and emotional debate for many people. Please even if you disagree with someone - dissect their arguments politely, refrain from calling them names or saying they're 'stupid' there is no need to call names or be rude. Please be courteous even if you have diametrically opposed positions.
And if someone is sadly rude to you - please report it to [EMAIL="abuse@moneysavingexpert.com"][email protected][/EMAIL] and don't respond in kind, it just takes away from the debate
Martin
And if someone is sadly rude to you - please report it to [EMAIL="abuse@moneysavingexpert.com"][email protected][/EMAIL] and don't respond in kind, it just takes away from the debate
Martin
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Result? I have a capital sum stashed away, a BMW motorcycle that I would never have owned otherwise, some nice toys at home (like the Qosmio laptop I'm composing this on) and a generally comfortable lifestyle. Spending the kids inheritance? Yes, but so what, they're more than capable of generating their own.
One other point which you didn't make but which I think's important. When I owned my own property, when things went wrong (or needed maintenance) I had to either do it myself (not my forte) or pay someone else to do it. Now, when there's a problem, it's the landlord's responsibility to sort it (and, because I'm renting privately rather than through an agency, he does).
Also, the first flat I had after my breakup was brilliant initially, then the neighbours from hell moved in above me. After six months of the Council wringing their hands and doing the best part of nothing and with life becoming increasingly intolerable, I moved. This would have been nigh on impossible (and expensive as well) if I'd had the misfortune to have bought the place.
I know there is a petition to persuade carol vorderman to stop selling people bad debt, is something similar due for property programs?
Looking on the ground, rents are rising swiftly, and property is still rising at double digit rates. The U.K. of a decade ago, with controlled migration, and peoples wages being able to buy them a piece of thier own country, a home - no longer exists.
For all the saving and frugality on this site, a saver could never beat the decade of double digit gains that anyone having even one property has enjoyed. In fact, the mass of frugal savers on this site, have helped keep interest rates lower than they would otherwise be, encouraging even higher property prices.
To get 'real' - A city of people the size of Birmingham in population, has to find houses every two years under the continuation of the most massive immigration in history.
Far from renting being a way out of falling property prices, a large section of the population are under the grip of rising rents. The poltical classes, funded by landlords and business interests, are now changing the occupancy laws in even greater favour of landlords, beyond even the limited rights under the AST.
As much of the immigration is very low skilled, in any demand slump, due perhaps to US imbalances, rising rates etc.. we will see unemployment tend to rise, hence the population register and national ID card scheme in 16 months time which gives town hall officialdom unlimited access to an individuals financial records and movements.
Rising rents and rising taxes are almost certain. I just do not see why this property boom could ever let up.
:A
I get suspicious when someone posts something verty one-sided, giving no credence to the other side of the argument. Martin has given a pretty balanced view in his blog that property prices can do down as well as up ... and they have done before in the late 80s and early 90s. Most economic indicators would suggest that houses are becoming unaffordable for many people and I don't believe that is sustainable. Sure, interest rates are at a historical low and there is net immigration into this country but a never-ending property boom is a physical impossibility in my book.
I also disagree with your comments about the law changing in favour of landlords. Far from it with the introduction of HMO legislation with its costs, licensings schemes etc.
As someone who owns 3 properties I would like to see house prices continue to grow at double digit growth but I don't think the will.
Clariman
That's an interesting assertion. Would you care to back it up with facts?
Are you sure? All my friends seem to think they have to be on the property ladder and renting means you are poor
Rents are in fact incredibly low relative to property suggesting that property is over-valued, as sensible landlords would not look to buy at 5% yields and below, as we are getting now
Incorrect. http://www.nationwide.co.uk/hpi/ indicates annual house prices inflation of 6.6%.
That's a lot of rubbish. Houses are worth what people are willing to pay for them. THere is no magic equation to say 'house x is worth £100,000'. It is pure sentiment. If people stop paying 6* their salary, the BTLers realise that they are extremely stupid to buy at 5% yield, then sentiment will change. As it will when interst rates rise.
Incorrect. The stockmarket consistently outperforms the property market. £100k invested in 1956, 1966, 1976, 1986, would be worth a lot more in the stock market than in a house.
In addition, http://www.nationwide.co.uk/hpi/historical.htm 'UK house prices adjusted for inflation' indicates a long term trend of just 2.4% above inflation. This is not a brilliant return at all - houser prices go down as well as up, and it's as valid to say that a saver coudl not beat the gains of investing in Papua New Guinean copper mines as it is to compare housing with saving. Saving is always lowest risk, lowest return.
In fact the 10% annualised rises indicate that housing is an extremely risky investment, as the money to pay for housing comes from people's salaries and is therefore finite. 10% rises forever are literally impossible: it is far more likely that people will stop paying over the odds for housing and prices will in fact fall. What idiot buys at the top?
No, interest rates are low because inflation is low due to low-priced clothes and goods funded by peasant workers in China.
To get real? A city of people the size of Birmingham has to find houses? How many houses? What massive immigration. I have seen no evidence, no figures, to support your suggestion that a £400k detached house in Surrey in 2000 is now worth £600k, and this is due to a 'massive surge of Polish migrants' as you claim. People come, people go. They will be housed, and it fundamentally does not mean that prices go from £100k to £200k, just because the population has risen 0.3%.
Are you serious? "changing the occupancy laws in even greater favour of landlords". I have never heard anything so ridiculous in my life.
Buy-to-let landlords facing falling rental yields were landed with another headache this week, with new rules that could cost the owners of some rental properties several thousand pounds in fees.
Since 6 July, all HMO owners have been obliged to apply for a licence from their local authority, which could cost landlords up to £1,100 depending on which council they deal with.
Licences will be handed out only to landlords whose properties meet a range of rigorous safety measures
Sounds great, doesn't it?
Rents are not rising, they are falling sharply in relation to property prices. In my area of West London rents are the same now as in 2002 but prices have risen. So the house owner is even worse off.
SIMPLE FACT: House prices have tripled. Rents HAVE NOT TRIPLED. If you claim they have you are lying.
Therefore renting is much better value than buying relative to before. Landlords and property owners are WORSE OFF relatively.
Rising taxes will reduce property prices. Rents are not high enough - it costs more to buy than rent. Mortgage rates are 5%+, but to rent in most areas costs less than 5% of the house price. So renting is cheaper.
Er, let me see, because a house costs 6 times average salaries and people will refuse to pay when interest rates go up? Because the economy goes in cycles and now we are at the top.
Because if a 1-bed flat costs £400k and average salaries are £30k then people will not be able to buy, it will be too expensive. Therefore prices WILL NOT BE £400k. They will fall, people will refuse to pay it.
There are only two ultimate sources of cash: BTL, and FTB. Soon the BTLers will realise that yields that do not even cover the interest are costing them money every month, and they are gambling on capital growth, without which, they would be better (yes, they would have more money) putting the money in the bank. The FTBer will stop paying so much, and prices will fall.
There is no infinite profit cycle where prices rise forever - the money has to enter at the bottom, and FTB just won't have the cash. When sentiment changes things will go very badly wrong because the market has tripled. The pain will be much greater because the market has risen too fast. It is literally impossible for perpetual increases, unless you somehow believe a few hundred thousand Poles mean prices should triple.
The presenter mentioned if you bought a house, after 25 years you would own it, concluding renting is dead money. But currently you would have to pay far far more to buy a house than to rent. Infact, the average rents are around the same as the interest charges on a mortgage. Also, what about the huge amount of people buying on interest only mortgages?
So, the only way a renter in this situation would lose out if house prices were to rise.
But what about a steady market? Many people choose to rent as it is infact cheaper to buy the very same house. Looking at national averages rents are around 5% of the value of a home (Source RICS), so if you're buying at todays prices and the mortgage interest is above this (plus the loss of income on your deposit), you are paying extra to own the home.
Also, renting allows people to invest in other areas which has easily outperformed the housing market or cash in the bank. This is the main reason why people sell to rent.
I also kind of disagree when you say no one knows what will happen. They are all sorts of reasons to predict something, such as interest rates, in that myself and others have discussed interest rate futures on here, which is valueable to anyone considering a fixed mortgage vs a variable mortgage.
Remember, if something is unsustainable, it won't be sustained. That I can guarantee.
Your blog is also excellent - I really have to hand it to you as a wordsmith.
"If you don’t own a home, you’re seen as the underclass " . . . this is sad and reminds me of the comment Margaret Thatcher made in the 1980's that anyone finding themselves sitting on a bus in their 30's could consider themselves a failure. With regard to the 21 year olds you met, I feel desperately sorry to think that they could feel like failures in the same way. Good on you for challenging an assumption that is rotten to the core.
Well said that man, I do hope as many possible people in their mid-twenties find the time to listen to you. I bought my first home at 24, and although it didn't financially ruin me I look back and realise what a financial burden it was to bear and think I would have been much better waiting a few years to develop my career.
£57K of my house still belongs to the bank, on target to clear 2015 but I'm hoping to get there much sooner.
Looking forward to celebrating :beer:
Congratulations to thefunkygibbons on becoming mortgage free and thanks for the inspiration along the way :T
There is another route that could be labelled Let-to-Buy.
A homeowner can let, rather than sell a house, and use the equity as collateral to borrow against for the purchase of another home. They may not be too concerned about capital gains from the house they are now letting. On the contrary, if the LTV is not high, then yields do not need to be that great to make the renting out sustainable. I think that this is a type of purchaser that was not really seen in the boom and bust of the late 89-95.
Sure there have always been let-to-buyers, especially where employment required on-site residence, e.g. armed forces, agricultural tied accommodation and that kind of thing, where people bought (and then let out) a house for security in case of losing their job. However today it's a simple route to multiple property ownership - but only for those who already own and have a store of equity to draw on.
:rolleyes:
£57K of my house still belongs to the bank, on target to clear 2015 but I'm hoping to get there much sooner.
Looking forward to celebrating :beer:
Congratulations to thefunkygibbons on becoming mortgage free and thanks for the inspiration along the way :T
If we couple this with the continual rise in BTL purchases - with some people using the equity in an existing BTL - the result is a reasonable market for LL's to make money from BTL, creating an arguement for higher rents (too many tennants and too few rental properties = higher rents). However, the reverse could also be argued - namely everyone seems to have bought into the BTL market as a way of making money (house prices always go up and the (stupid) renter is paying the mortgage for me...).
So, where does the market go from here? Everyone has got their opinion - my concern is on the BTL market. If house prices continue to rise and more properties are bought for BTL then, unless the LL want to pay more and more of the mortage costs himself, rents would have to rise. However, there's (probably) more than enough rental property to ensure that there is a reasonable degree of competition from other LL's - some of which will have bought the property a number of years ago when prices were lower. Some BTL'ers - facing void periods - will then try and cash in their equity, only to find that most of their potential market won't be able to afford because they've been priced out. The prices get cut to make a sale...and the correction begins.