Do you think property prices will double in 10 years?

ManAtHome

But if rental yields are 8% how can anyone who can't afford a mortgage (at 5% ish) afford to rent..? And if they can't swing cats in what they can't afford to buy, they can hardly get a few mates in to share the rent...

Or am I missing something?

FaTB

Chichi wrote:

Mean Machine,

How can you say I've wasted everyone's time. I asked my mum who's a newbie investor to read this board to gauge general opinion. This forum is here so that Joe Public can debate and read others' views. Everyone had a choice to post or not, so how could I have wasted everyone's time??

I visited a great IFA today and he said 4 years ago if asked whether prices would rise in 5 years' time, he would have said no. Well they did rise!!!

I think what Mean Machine is trying to say is that you asked a question you already knew the answer too.

You also asked for advice but have not taken a blind bit of notice of the advice given.

I'd say 75% of the replies, said prices will NOT double, its HIGH risk, DON'T buy now, or property is currently a BAD investment.

Then you say "thanks i'm just off to buy a house"

Why did you bother ?

richgirl

The question of this thread should have been do you expect house prices to double in REAL terms in 10 years.

As inflation trundling along at about 3.5% equates to a 40% rise in price.

F_T_Buyer

ManAtHome wrote:

But if rental yields are 8% how can anyone who can't afford a mortgage (at 5% ish) afford to rent..? And if they can't swing cats in what they can't afford to buy, they can hardly get a few mates in to share the rent...

Or am I missing something?

The point you're missing is average yields are not 8%, they are around 5%. The average mortgage rate is much higher at 5.29% which was before the rate rise.

lynzpower

FaTB wrote:

I think what Mean Machine is trying to say is that you asked a question you already knew the answer too.

You also asked for advice but have not taken a blind bit of notice of the advice given.

I'd say 75% of the replies, said prices will NOT double, its HIGH risk, DON'T buy now, or property is currently a BAD investment.

Then you say "thanks i'm just off to buy a house"

Why did you bother ?

I can only presume that the OP wanted everyone to know how theyve found a BTL property with an 8% yeild.

greencat_2

Chichi wrote:

How many people do you know with a spare room?

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).

PS. I think you should go for it. If prices double you'll have made a ruck load of cash. If they halve - you'll have gained an profound insight into the cyclical nature of markets through direct personal experience. Either way - you'll get a useful education in how to invest which is well worth any potential risk. Basically you cannot lose.

whambamboo

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).

PS. I think you should go for it. If prices double you'll have made a ruck load of cash. If they halve - you'll have gained an profound insight into the cyclical nature of markets through direct personal experience. Either way - you'll get a useful education in how to invest which is well worth any potential risk. Basically you cannot lose.

Is this a joke? A useful education losing £100k? I'd rather take the money and spend it on a real education; e.g., a Harvard MBA.

BTW, any time *you* want to be 'educated' in this manner, just send me £50k of your money - I'll be happy to help :-).

jackieblue

Chichi,
Don't really want to comment on whether house prices will double over the next 10 years as I really have no idea. It's more your BTL calcs I'm interested in.

From your comments I've picked up the following (but please correct me if I'm wrong).

Deposit = 15%
Deposit = £20,000.
So purchase price is £134,000

You will have £450 surplus each month after costs, £450 x 12 = £5,400.

Rental yield is 8%, ie either £10,720 or £9,120 (depending on whether you're calculating yield on purchase price or mortgaged amount).

So your best case scenario (ignoring taxes and other related costs as you say the surplus is after deducting those) is

£10,720 (rent) minus £5,400 (surplus) = £5,320 to pay the mortgage. That's a BTL mortgage rate of 4.7%. That's a very good rate - is it fixed and where would you get it.

If you're calculating your yield on the mortgaged amount, then you're at £9,120 rental income, (after costs). If you still have £450 pm surplus, then that would imply you are paying £3,720 on the mortgage, which must be a mortgage rate of 3.3% ish.

Also in your area, would a property costing £134,000 generate a rental income of either £895pm or £760 pm (8% but depending on how you are calculating the yield).

It certainly wouldn't in my area which is why I am genuinely curious.

Was the £450 surplus after costs including the cost of the life assurance ?

If you are getting the low mortgage rate and the rental income I'm suggesting I personally wouldn't care whether house prices doubled or not, as your £20,000 deposit is already generating surplus income of £5400 pa, which would be 27% pa if I'm doing all this right.

Chichi_2

F_T_Buyer wrote:

And if you asked an IFA whether prices would rise in 5 years' time, they would say yes.

See the pattern...

Or is it a SALESMAN telling you what you want to hear?

Actually he had the same view as me and many others contributing to the thread in that we cannot truly predict anything. Also he didn't sell anything at all, just gave sound advice.

Chichi_2

FaTB wrote:

I think what Mean Machine is trying to say is that you asked a question you already knew the answer too.

You also asked for advice but have not taken a blind bit of notice of the advice given.

I'd say 75% of the replies, said prices will NOT double, its HIGH risk, DON'T buy now, or property is currently a BAD investment.

Then you say "thanks i'm just off to buy a house"

Why did you bother ?

I would guess that most of the people who were kind enough to respond are not qualified financial experts (and even they get it wrong sometimes). So 75% of the replies being No is useful to know but I can't simply follow that.
It's actually my mum's investment, she hasn't bought a BTL before whereas I have in the 90's and made a nice profit. The purpose of the thread was to let Mum see the general pros and cons of buying a second property and to also help other people thinking about investing in property.

Although the property will be in my name, of course I'll closely watch the market. I'll have life insurance which will pay off the capital in the event of my death negative equity or not. Or my beneficiary can keep it and still receive rent.

Why my mum has decided to go ahead is that her 18K deposit will generate a far greater income than sticking it in a savings account.

I'll let everyone know how it's going when we do let it out.