How I intend to make £'000s

theGrinch

there have been 12 house price crashes in the last 5 years...predicted I mean and none have come to anything and the reason is demand for housing far outstrips the supply and will continue for a while yet.

mr.broderick

theGrinch wrote:

there have been 12 house price crashes in the last 5 years...predicted I mean and none have come to anything and the reason is demand for housing far outstrips the supply and will continue for a while yet.

Christ, theres been 12 this week on here...

Ian_W

Jim_B wrote:

The lender's house price index shows that a property valued at £100,000 in 1983 would be worth £555,000 today (not quite today, anymore; needs updating by a few monthes). Although this may seem like a decent return, a similar investment in commercial property would have grown to £997,000, while investing in a FTSE All Share tracker fund would have returned £1.4m with all dividends reinvested.

Whoops - have a freebie "Thank You" on me Jim, meant to press Quote! :rolleyes:

It's hardly a fair comparison though. I don't know many who could have borrowed a substantial part of the £100K "stake" money to make the investment w/o it being secured against a property, do you? So the investment in shares should be done on the basis of the deposit plus monthly investments for the term. Commercial property could be borrowed against I suppose but you'd have to deduct the cost of that borrowing, as you'd still need somewhere to live and be paying a mortgage or rent on that to make it a fair comparison.
Just for interest sake, applying the RPI the original £100K would now be worth £228,664.81 so double that is a good investment even if it isn't the best.

As for the OP's point - good luck to him. If it works he'll make a lot of money, if it doesn't he'll lose some. Personally I won't be joining him for many reasons but mainly because last time there wasn't a uniform drop in prices thoughout the land. London was hardest hit, -30% - overall nationally it was about -20% - but where I live it was only about 10% so for the £25K [less buying and selling costs] I could "make" if he's right - I truely couldn't be @rsed!!:D

jamesd

Jim_B wrote:

The lender's house price index shows that a property valued at £100,000 in 1983 would be worth £555,000 today ... a similar investment in commercial property would have grown to £997,000, while investing in a FTSE All Share tracker fund would have returned £1.4m with all dividends reinvested.

You don't get a similar investment. You get your deposit to invest. I'm assuming that you used 100,000 as the investment, not 10,000; please accept my apologies if you used 10,000.

Call that deposit 10,000 and it would have grown by 87,000 in commercial property or 140,000 in the FTSE, while the leveraged property buy grew by 455,000. That's a surplus of 315,000 over the FTSE. Next you have to allow for interest costs on the property buy for 23 years. 90,000 borrowed (10% deposit) needs to have an annual interest rate average of 5.6% to match the FTSE, lower to do better, higher to do worse.

The base rate has been above that on average for the period, decreasing the net return to below that expected for the FTSE, so your point seems proved for this period: the FTSE looks to have been better than a leveraged domestic property purchase. Except...

This ignores the saving in renting a place to live. For the primary residence the rent pays the interest or more, so you'd be ahead. No capital gains tax on this either.

For leveraged buy to let the same essentially holds: the rent pays the mortgage cost and you're getting both the greate leveraged investment return and some surplus income from the rent. CGT applies here, so it's not as favorable as a primary residence.

brasso

franklee wrote:

Frankly I like the irresponsibility of renting, no DIY, no worries about how to find a plumber, can move around to try out new areas, can try out different types of property. Originally having sold a three bed semi I had planed, post crash, to buy a detached house, but since I'm still missing the rented seafront flat I'm having a rethink!

No disagreement with the sentiment there, franklee, but if you're married with kids and comfortably middle-aged, sadly, your perspective changes!!

brasso

a010454 wrote:

What a lot of rot ;-) House prices aint going to fall. They may stagnate or at the higher end drop slightly in certain areas, but overall in the long term property is a great investment.

Owch!! Hope all your fingers were crossed there! History tells us that property prices periodically dip and occasionally crash.

I agree that property appears to be a sound long term investment but the subject of this thread was how one could play the market to produce a short term profit.

Porperty is a dangerous short term game because it is notoriously volatile, whether you want to believe that or not. There were major crashes in the housing market in the 1970s, 1980s, AND 1990s.

You're telling me that it won't happen again.

Hmm!! Hope you're right.

franklee

brasso wrote:

No disagreement with the sentiment there, franklee, but if you're married with kids and comfortably middle-aged, sadly, your perspective changes!!

For sure I see that. It would be madness for anyone happily settled in a family home and not wanting to move to sell up and rent on the off chance. But for those wanting to move anyway, even with children, then renting is worth serious consideration these days. For footloose couples, like OH and me, then renting is a steal. We are looking forward to being responsible home owners again but not for a few years yet.

nrsql

meanmachine wrote:

It's a gamble I wouldn't be willing to make.

Also, I'm predicting a maximum rise in prices of around 30% between now and around 2009/2010 - then for a painful slow correction to set in.

I'd love to be proved wrong, but with the high street lenders loosening their lending criteria in 2005 - hence causing the recent increase, you're unlikely to see falls for a while.

Also mortgage approvals are strong right now - so again you'll defo see rises in the next few months.

I'm afraid you may be right - and I mean afraid.
Think if prices rise for that long then the correction will be sharper than you suggest though.
I'm hoping the fall will be precipitated by interest rate hikes in 2007 (I think it will be more than 2 x 0.25% - wouldn't be surprised at a 0.4%-0.5% in the first half) but the market has proved oddly resiliant.

Best would have been a fall/stagnation a couple of years ago but now I don't think we can avoid a shock - it's just a matter of when.

arkie

zkeithz wrote:

Arkie,

My point entirely.

It will crash, there is hard evidence, re my previous comments on earning levels and demand for mortgages, and my personal experience in the property market.
Rent will only go up in accordance with the limitations of "Market Rents" as controlled by supply and demand, as well as the rent officer service.
With the pressures on demand for social housing, because people are finding it difficult to buy and even rent, I am sure the Government would be more than happy to see house price deflation, who would lose out? mainly private landlords and unfortunately first time buyers of the last 1-3 years due to negative equity returning. But wouldn't deflation have a massive effect on preventing inflation from rapidly rising?
I wonder whose figures the press are using " reported house ""asking"" price rises" - not actual sales prices - see previous comments
I don't disagree with you about the magnificent property market, but I would disagree about staying on the property ladder, particularly now, as it appears the time is right.

its a case of supply and demand which will dictate prices, and there is a massive shortage of houses across the UK,that is why the government is keen on building more and removing alot of planning restrictions
house prices may fall a little 1-3% but over the long term as many a graph will show you, house prices go up.
You are expecting a drop of an enourmous, unrealistic amount.
If you look hard enough on the internet, financial press you will see that the majority of experts and me not being one, expect house prices to double over the next 10 years, the experts who are expecting house prices to CRASH are vastly outnumbered and still think the earth is flat !!!!!!

As for the other post, No I dont cheer when a tin of beans goes up...
will you cheer if house prices go down, causing a rise in interest rates , rise in rent, rise in petrol, rise in the cost of living,.... a money spending expert.

sm9ai

arkie wrote:

You are expecting a drop of an enourmous, unrealistic amount.

Well they have had rises of enourmous, unrealistic amounts so why should falls be any different?