Do you think property prices will double in 10 years?

jackieblue

Does "yield" always refer to rental / property price ? Would that be regardless of the mortgage on the property ? Does it not depend on current value of a property either ?

This would mean that people who bought 15 years ago must be achieving massive yields. My mum bought a place for £37k 10 years ago which now brings in £8340 pa. This would make her yield over 22%.

Do most people quote on purchase price, current value or size of mortgage when quoting yields ?

Thanks in advance for opinions.

whambamboo

jackieblue wrote:

Does "yield" always refer to rental / property price ? Would that be regardless of the mortgage on the property ? Does it not depend on current value of a property either ?

This would mean that people who bought 15 years ago must be achieving massive yields. My mum bought a place for £37k 10 years ago which now brings in £8340 pa. This would make her yield over 22%.

Do most people quote on purchase price, current value or size of mortgage when quoting yields ?

Thanks in advance for opinions.

Gross Yield is equivalent to

Total Annual Rent / Current Market Value

The buying price is irrelevant, it is the current value - unless she wants to sell it now for the buying price, which she clearly does not, the yield is based on the income as a percentage of the value of your asset. E.g., if you have a house worth £100k, then you could sell it and get 5.15% interest (yield) from the bank. Whether or not you originally bought the house for £5k, £10k or anything else is irrelevant.

The size of the mortgage is also irrelevant, as is the interest rate, although you'd want your yield to be higher than your mortgage interest rate, otherwise you're gambling on capital growth.

Net Yield is Annual rent - Letting Agent Charges - Voids - Maintenance, etc.

F_T_Buyer

PoorDave wrote:

The point you're missing is that the 8% quoted is from what the OP said applies to her case.

5%+ yields are perfectly possible in some areas. Quoting the average doesn't help each potential BTL person, as they should be checking their own figures anyway. The average presumably means that in some cases the yield is barely above zero (bad investment -all agreed?), but correspondingly, some areas will be more (good investment if you're happy it's more than you can get for your cash elsewhere?).

Regardless of whether we have any confidence in the scheme the OP proposes, if the figures are true, and they do work, then would you agree the OP should go for it, since thus it makes a good investment?

Ok, fair point. 8% is a very good yield, although I was refering to averages.

PoorDave wrote:

F_T_Buyer wrote:

Reference?

I'm trying to look for a link, but Abbey has sold off commercial property that was in it's pension.

Also, Barclays has been selling it's branches and renting them back (although this isn't pension related).

ChrissieI

greencat wrote:

Even a one bed flat usually has a spare room (the lounge) which may be rented out in times of trouble. I've regularly come across 3 bed terraces in London where the rent is £40/week incl. because 10-14 people live there (3 beds to a room, plus people sleeping in living room and even in the scullery next to the freezer).

I agree when I brought my 2 bed terrace five years ago the previous owner had a lodger in the spare room and another one in the dinning room.
When people are about to lose their homes they will rent put any space they can find to enable them to hold on to it.

ashm1

http://www.ifaonline.co.uk/public/showPage.html?page=ifa2006_articleimport&tempPageName=345140

Probable 2% treasury capped public sector pay rise.

http://www.nationwide.co.uk/hpi/

What happened in 2004 ?

10 years.. Where are the actuaries ?


Kind regards,

Ashley.

Chichi_2

jackieblue wrote:

The deposit has become 18K, whereas you previously mentioned 20K.

You did quote the % deposit as well as its value, see below :



You also gave the surplus, and yield so you didn't need to quote the mortgage rate - I can work it out from the info available.

I mentioned 20K then 18K, perhaps I wanted to use a round number first so people could calculate it easily. I also asked at the start of the thread " What would a £100K property be worth in ten years' time?" That didn't mean that the property I'm buying is £100k. I just gave a ballpark figure to make calculations easier. I don't think it's important to know EXACTLY what the figures are in my case. All I'll stick by is the 8% yield!!!! Pls. I hope no-one focuses too much on my case, it's the YIELD and capital appreciation that matters.

Now I don't want people like MEAN Machine to say that I have mislead everyone and start citing the Misrepresentaion Act of 18....:D

meanmachine_2

The yield is extremely important. That's why I said, if 8% is achievable, it seems OK.

But now you're claiming that 8% is an aspiration.

And ignore those - including yourself - who might have "made a packet" in the last five years. A dead donkey with a BTL would have made money.

The question is "how do the figures stack up now and going forward"?

I don't know anyone who would have argued that property was a bad investment in 2000. A simple calculation would have told you otherwise, so again your mum should ignore those who try to re-write history to convince themselves they were somehow "brave" or "insightful".

Investing in property now really is a brave move. If it pays off, good for you/your mum.

richgirl

Japanese house prices are still lower than they were in 1989

And yes it 'could' happen here, small island and everything

mi-key

Interesting point in that previous post 'even a dead donkey with a BTL could make money'

Exactly - most of these people who have 'made a killing' from property benefitted from freak rises in the property values - they made their money by selling the places they had bought cheap at very high prices. I bet 90%+ of these were just lucky.

Had prices not rocketed, they would still be renting them out and making a modest return, and planning to sell in 20 years when it would be worth it.

But now, all these amateur BTL investors are buying at the peak of a price increase, and still think they are going to make the same profits someone who bought 5 years ago did.

Property is generally not a good short term investment as prices as a rule dont double within a few years like they just have. As a long term investment they are generally safe as prices generally do rise over a longer term, but compared with inflation they dont increase a massive amount.

Partly I blame the 'Property Ladder' style TV shows, which have given the impression anyone who buys a house for any amount will always make huge amounts of money on it. Obviously they show a lot of the people who have made a lot of money, as it makes good TV, but how many people who they filmed didnt make it to the final program because they only made 10% profit, and could have earned as much working in an office at an average job ?

seraphina

Just a quick OT observation - I think we're a bit too harsh on shows like Property Ladder. I'd say between a quarter and a half of all people on that show wind up living in their "development" because they can't sell it at a good price. Sarah Beeny has always been very clear about what percentage of the final value can be attributed to a rising market - if viewers chose to extrapolate that to a blanket statement reading "all houses will increase in value all the time" that's their own problem.