I've £100K equity and I'm going to sell and rent...

whambamboo

Andy_L wrote:

"I'm going to fill up my (and wife's) ISA's with as much as possible (against FTSE 100 currently (Jupiter Finance))."

Every thing invested in a single fund? What's likely to happen to the FTSE 100 if house prices crash? Would it fall as people stop spending money or rise as people swith investments from (BTL) property into the stockmarket or something totally unrelated.

If the property market crashed we would likely face a UK-wide recession. If the crash is linked to a US crash (which might or not turn very nasty), then the recession could be worldwide.

So either:

property prices go down, but UK economy isn't affected - invest in UK equities
property prices go down locally, UK economy is affected but not global - invest in Far East, Europe, emerging markets
property prices crash globally, global recession - hold cash. But currency devaluation can also erode the value of your cash.

Generally I guess you have least risk with exposure to a whole variety of assets across mtuliple continents.

whambamboo

you could also ask the folks at https://www.housepricecrash.co.uk, https://www.globalhousepricecrash.com, or for a more general investment perspective https://www.fool.co.uk - over there they like to sell a 'high yield portfolio'

But beware caveat emptor as far as free advice goes.

Chrismaths

EdInvestor wrote:

1.Inflation caused by major rises in the price of oil (74,79)
2.Serious instability/wars in the Middle East (74,79)
3.Inflation caused by problems with the pound sterling ( eg exit from the ERM)(90s)
4.Mismanagement of the property market/economy by incompetent (normally Tory) Chancellors of the Exchequer (Barber,Lawson,Lamont) (74,89,90s)

These past additional factors are either not present, or aree not having the same effect as they used to these days. Thus I remain to be convinced that a house price crash is a racing certainty.

1. Oil has gone from $10 per barrel to $60 per barrel.
2. Noticed anything happening in Middle East recently? How about Russia tinkering with Shell's licences?
3. A weak UK currency? Seen the size of the budget defecit? Or the unfunded public sector pension liability? How about the current account deficit?
4. The property market is not managed by any governmental organisation. It's a free market (bar stamp duty). Mismanagement of the economy - now that's a problem. Not issuing gilts into the long end, arbitrarily changing the measure of inflation, the timing of the economic cycle, raising taxes, discouraging those on benefits to work....

I can see your point that oil has less of an effect than it did in the 70's, and I also don't view a crash as a racing certainty, however the risk is there in the system - the levels of debt, the ratios of payments to income are high, and I don't think it would take 10% interest rates to kick it off. 6% might be all it needs, or a (greater) rise in unemployment.

Almost_Redundant

All sounds great, but until you actually 'sell' and have the money in the bank.................

meanmachine_2

Property is a high risk investment.

Ergo selling to rent and going "short" on property, when it's been a bull market for 10 years, is also high risk.

I wouldn't do it - you might be smart but ordinary people are stupid and will happily spend up to 50% of their income just to keep a roof over their heads - but then, I'm risk averse.

I think we need to see oil spiral up again beyond $80 for IRs to come under serious pressure.

Don't forget, the MPC is now flooded with lily-livered doves. They'll avoid rate rises if they can - for as long as they can.

Oh, by the way, don't keep more than £35K in any one savings account, just in case the bank collapses.

al_yrpal

There are a lot of disgruntled STR'ers on the Motley Fool site who sold up too early and are now regretting it. Some are now firmly stuck in the wilderness like Rabbits in headlights, not knowing which way to go. It seems to be regarded as a sport on there to bait them.

There has to be a full blown recession to cause a 'worthwhile' housing slump for STR'ers, who could possibly find themselves out of a job too..... Where would that leave them; paying rent and no income, other than interest, to pay it?

Chrismaths

There has to be a full blown recession to cause a 'worthwhile' housing slump for STR'ers, who could possibly find themselves out of a job too..... Where would that leave them; paying rent and no income, other than interest, to pay it?

How is that worse than paying a mortgage with no income AT ALL?

ReportInvestor

Here's a rent v buy calculator from down under that could be useful

I'm not sure of the status of the Oz "quarterly council rates" [paid in the UK by the occupier whether renting or owning] so I've been putting £0 in that box to ensure that the key final sum (difference between buy or rent) isn't messed up.

In "He Who Dares' " case I assume he would also leave out the cost of buying and borrowing (but then add the cost of selling and maybe rebuying later).

The nice thing about this calculator is that you can input all your own personal assumptions (prejudices?) about price growth, interest rates, investment rates etc.

There doesn't seem to be a facility for a house price deflation though. e.g. if you input -5% annual house price apprecation it reads it as +5%. So the worst you can input is 0% growth over x years.

A further flaw is that it will only compare the difference for the period that you are paying the mortgage (whereas it is the period after you have paid off the mortgage that gives the biggest boost to buyers over renters).

EdInvestor

Chrismaths wrote:

I can see your point that oil has less of an effect than it did in the 70's, and I also don't view a crash as a racing certainty, however the risk is there in the system - the levels of debt, the ratios of payments to income are high, and I don't think it would take 10% interest rates to kick it off. 6% might be all it needs, or a (greater) rise in unemployment.

Quite so.

We have already had a huge rise in oil prices and two concurrent wars in the Middle East, but guess what, no recession,no rise in interest rates and no fall in house prices.

We don't have sterling crises any more, and we have ongoing low inflation, despite full employment.Gordon Brown is widely regarded as the best Chancellor the UK has had for many decades. The BoE is in charge of interest rates, they have kept them low and kept inflation low too.

There may be high levels of debt, but as mentioned, that will only cause problems if interest rates shoot up.

Credit for figuring out that if a recession is looming the thing to do is to *lower* interest rates not raise them (which only makes things worse as we saw in the 90s) has to go to Alan Greeenspan of the Fed.But there's absolutely no doubt that Brown and King took this principle on board at a very early stage and have used it very effectively to maintain stability.

Expect more of the same.

Chrismaths

[Slightly off topic]Australia has some odd rules regarding BTL. If you buy a property and rent it out for less than your interest (and other) costs, you can deduct the difference against income tax from any source (as opposed to here where you can only offset property losses against future property income). It's called negative gearing.

This has the effect of inflating house prices, and decreasing the cost of renting. A common way for young people to buy a house is for them to do a BTL on the property they want whilst they still live at home, negatively gear it, and then once they have the money to support the whole mortgage move in.