Do you think property prices will double in 10 years?

Chichi_2

Oh forgot to say- and I'm not expert on this but the property we're buying is in Greater London which has always been the mecca for thousands of immigrants. Many Eastern Europeans will enter this country over the next 10 years and may rent for the first few years.

Just to illustrate what I mean. Only a year ago a friend advertised for a lodger to rent a room, not even sharing the lounge. Her property was quite far from a bus stop/ station and on the outskirts of London. The rent was ridiculously low but it took her 3 months to find a person who in fact was Eastern European.

Last month,she advertised the same room again and found someone within a day!!!

ashcarrot

Errmmm I dont think over the 10 year the property price will increase at all or by only a margin because of the over inflated prices currently.

What you need to be aware of is you could be getting 5.1% interest. Although your yield may be 8% you got to bear in mind the following

Finding Tennants
Estate Agent Fees
Stamp Duty
Legal Fee
Survey etc.
Damage and Maintenence
Void Periods
House Insurance.
Tax
Interest Rates & increases in it.
Mortgage Fee's

devils_advocate

On the assumption taht inflation is 7.12% pa fro the next 10 years, and house prices follow inflation, yes property prices will double in the next 10 years.

On tha ssumptioon that infaltion is nil in the next 10 years, yes i beleive there is an odds on chance that property prices could fall by up to 40 % from today's levels.

Will property prices go up? Yes, but that isn't the question you should be asking. Is propety a good investment in the next few years? No, but that's my opinion.

D_e_n_i_s_e

i predict an average year on year growth of 3%

therefore a house worth £100,000 now would be worth £151,258 in 10 years.

in the immediate short term i expect the market to be quite sluggish - people have 'maxxed' themselves out with motgages, loans etc i can see house prices only racing ahead for a short time like they have done in the last 7 years in another 20 years time!

furndire

Sounds like a pretty good prediction D e n i s e

PoorDave

Chichi wrote:

I don't really have eggs to put in my basket. As it's my mum's investment. I would benefit from the capital growth in x amount of years or on her death as it's in my name. There will be a life policy payable on my death so she gets the property unencumbered.

Her deposit of 20K could get her at most £1400 K a year gross interest at 7% in savings account. With a rental yield of 8%, she will have equivalent interest of £5400 a year which will be her rental income. She'd be better, we hope.

We have made allowances for tax and all outgoings associated with a BTL.

As for property prices going up, with inflation everything else goes up. So if property was only £134K in 10 years time, I get £34K minus CGT if I sell it.

Does anyone think there is risk in what we're doing?

Have you actually calculated a yield of 8% from your own figures, or have you assumed this is what you'll get? I would assume you'd get about 5% generally these days. Also where would you get a 7% savings account from? The only ones i know of are regular savers, where you would not be able to invest large lump sums straight off (most are max £250 pcm).

I am very surprised you can get £450pcm left over. I assume this is a multiple occupancy property.

Best of luck

sm9ai

Chichi wrote:

Oh forgot to say- and I'm not expert on this but the property we're buying is in Greater London which has always been the mecca for thousands of immigrants. Many Eastern Europeans will enter this country over the next 10 years and may rent for the first few years.

Just to illustrate what I mean. Only a year ago a friend advertised for a lodger to rent a room, not even sharing the lounge. Her property was quite far from a bus stop/ station and on the outskirts of London. The rent was ridiculously low but it took her 3 months to find a person who in fact was Eastern European.

Last month,she advertised the same room again and found someone within a day!!!

Thousands of immigrants may well enter the country, but they are certainly not going to be loaded with cash to pay for higher rents.

Prices may double in 10 years, but only with significant wage inflation. I would say there is probably more chance of them halfing in 10 years than doubling.

Gorgeous_George

Interest rates and population are the two major factors that drive house prices.

I expect some of the thousands/millions of immigrants to jump on the benefits bandwagon and have loads of kids. The population may drop between 2010 and 2020 but is likely to rise again thereafter. So, in 10 years time, with a falling population, demand for housing will reduce and prices could plummet. After 2030, prices should rise again. I think it more likely that a major health problem, such as bird flu, HIV or obesity, will reduce the UK's population. Global warming may encourage more people to move here from Southern Spain and similar hot spots.

I'm not sure that prices will fall in the near future. That would depend largely on Interest Rates and I don't think they will rise too much over the next ten years.

I think the OP has got his/her sums wrong as far as the yield is concerned.



GG

SmartGirl_2

Chichi wrote:

Oh forgot to say- and I'm not expert on this but the property we're buying is in Greater London which has always been the mecca for thousands of immigrants. Many Eastern Europeans will enter this country over the next 10 years and may rent for the first few years.

Just to illustrate what I mean. Only a year ago a friend advertised for a lodger to rent a room, not even sharing the lounge. Her property was quite far from a bus stop/ station and on the outskirts of London. The rent was ridiculously low but it took her 3 months to find a person who in fact was Eastern European.

Last month,she advertised the same room again and found someone within a day!!!

Immigrants will go for the cheapest properties only. If you will be letting out a room while living in the same property, it should be ok. But if you let out a whole flat/ house to let's say 2 people, it does not mean that only those 2 people will be living there. It is not uncommon for immigrants to have 3-4 people living in one room, except as a landlord you would not know about it! My friend rented a room in a shared house and one of the rooms was rented by a Polish girl (so thought landlord), while in fact her brother and her boyfriend were living in the same room!!! Typically 2 bed flat would be shared by 2 families, so you are looking at 4 adults and 2-4 kids living there, a total of 6-8 people!

movieman

We're speculating about property prices rising, but have rents ever gone down or wages????

Yes. Rents dropped in the last crash, and wages are dropping in many areas as jobs are outsourced to China or 'insourced' to cheap immigrants: for example, I've heard several people in the building trades saying they're being undercut up to 50% by Eastern European immigrants, so they can no longer charge as much as they used to.

Come on surely there will eventually be a rise even if I wait 15 years.

Tell that to the Japanese: house prices there are much lower than they were 15 years ago in their last housing bubble.

Britain has an aging population and declining opportunities for the young to make a decent salary as more and more jobs are given to foreigners willing to work for a fraction of the cost. What makes you think that house prices will increase?