Northern Ireland house crash 'among world's worst'

A.L.D.A

Mistral001 wrote: »

Many people still see it as the only way they can make their money grow. It is familiar. Everybody lives in houses or flats. Most people who have ever gotten repairs or extensions done to their house will have dealt with builders or building trades and many may even have DIY skills near professional standards. It will take a long time for many to see beyond that. To see that there are other businesses that can make money.

This is a major problem and there are reasons,

1. Many people think it is something they know and can manage themselves.
2. Understandably they do not trust financial advisers (some never have), and see property as a safer pension pot than, say, placing pension management in the hands of others. And they have a point!!!!!!!!!!!
3. Endless nonsense programs about property investment, giving the impression that anyone can do it.
4. Failure to realise that you cannot get out of property as quickly as other investments.
5. Failure to fully appreciate the possible costs.
6. Difficulty in obtaining financial backing for any other type of investment.

Traditionally Bank lending is skewed towards property. Personal loans for other business investments are secured against it.


To break this property orientated investment pattern we need to make other forms of investment more accessible and better protected against fraud. We need to encourage a culture that is more enterprising.

Mistral001

A.L.D.A wrote: »

This is a major problem and there are reasons,


3. Endless nonsense programs about property investment, giving the impression that anyone can do it.
.

All good points you make. The one above is one I have often thought of. Poeple who have innocently followed those programmes lead and lost a fortune must also have had to buy a new TV with the number of times they have thrown the remote at the screen when they come.

A.L.D.A

Mistral001 wrote: »

Poeple who have innocently followed those programmes lead and lost a fortune must also have had to buy a new TV with the number of times they have thrown the remote at the screen when they come.

In case anyone is tempted; 2 rules to keep in mind.

1. You can seldom recover money lost by paying too much for a property. The viability of what you intend is usually dependant on obtaining a property at below market value!!!
2. If rental returns do not show profit allowing for reasonable increases in interest rates do not proceed in the hope that appreciation in value will save you.

All very obvious, BUT when herd instincts take over!



Who would buy a 120 year old terrace house for £250,000 in the hope of converting it into 3No. apartments. Overall cost say £400,000, average cost of apartments £133,000. Rental return per apartment say £6,000 max. Utter madness when you start to allow for loan repayment, repairs, the occasional tenant from hell, periods when the property is empty etc. This is the reality of what the Banks were financing. I could give worse examples where properties were being revalued on the basic of Planning Approvals that had not been granted.


A cynic would say that commissions were more important than any real assessment of risk. Any wonder it imploded?

saverbuyer

A.L.D.A wrote: »

In case anyone is tempted; 2 rules to keep in mind.

1. You can seldom recover money lost by paying too much for a property. The viability of what you intend is usually dependant on obtaining a property at below market value!!!
2. If rental returns do not show profit allowing for reasonable increases in interest rates do not proceed in the hope that appreciation in value will save you.

All very obvious, BUT when herd instincts take over!



Who would buy a 120 year old terrace house for £250,000 in the hope of converting it into 3No. apartments. Overall cost say £400,000, average cost of apartments £133,000. Rental return per apartment say £6,000 max. Utter madness when you start to allow for loan repayment, repairs, the occasional tenant from hell, periods when the property is empty etc. This is the reality of what the Banks were financing. I could give worse examples where properties were being revalued on the basic of Planning Approvals that had not been granted.


A cynic would say that commissions were more important than any real assessment of risk. Any wonder it imploded?

What is this below market value crap.

What is below market value anyway?

No such thing, it's something Kirsty and Phil made up to make your speculator friends think is the deal of the decade.

I expect better from you A.L.D.A.

THE VALUE YOU OF SOMETHING IS WHAT SOMEONE ELSE IS WILLING TO PAY.

Mistral001

saverbuyer wrote: »

What is this below market value crap.

What is below market value anyway?

No such thing, it's something Kirsty and Phil made up to make your speculator friends think is the deal of the decade.

I expect better from you A.L.D.A.

THE VALUE YOU OF SOMETHING IS WHAT SOMEONE ELSE IS WILLING TO PAY.

Now now, Saverbuyer, I agree "market value" is a bit of a redundant term these days, but a bit of an over reaction do you not think. Estate agents and surveyors are asked all the time to put valuations on property. I suppose since a 20 or 25% deposit is required nowadays they have that amount of leeway, but there are still valuations being carried out and we have something to go on. Vacant sites and grand schemes that went wrong, maybe no valuation can be given, but that does not mean that it cannot be done at all.

saverbuyer

Mistral001 wrote: »

Now now, Saverbuyer, I agree "market value" is a bit of a redundant term these days, but a bit of an over reaction do you not think. Estate agents and surveyors are asked all the time to put valuations on property. I suppose since a 20 or 25% deposit is required nowadays they have that amount of leeway, but there are still valuations being carried out and we have something to go on. Vacant sites and grand schemes that went wrong, maybe no valuation can be given, but that does not mean that it cannot be done at all.

No they estates agents assign an asking price and surveyors assign a value for mortgage purposes.

Neither is Market value. Market value is the sold price.

A.L.D.A

saverbuyer wrote: »

What is this below market value crap.

What is below market value anyway?

No such thing, it's something Kirsty and Phil made up to make your speculator friends think is the deal of the decade.

I expect better from you A.L.D.A.

THE VALUE YOU OF SOMETHING IS WHAT SOMEONE ELSE IS WILLING TO PAY.

Oh come on you know rightly what I mean. Let us imagine there are a row of houses all the same and most sell for around £80,000 then if you pay £100,000 for one because you simply 'must have it' you will find it hard to ever recoup that over assessment of value. If however you paid £60,000 your position is obviously much stronger. If anyone sees themselves as some future property magnet, never get over enthused about any property. Always consider the price of adjoining or similar properties and always walk if the numbers do not add up. Buying for investment is a dispassionate affair.

If you are buying to live in a building it is a lot more complicated involving, schools, where you work, personal taste, size of garden etc. Amateurs let personal tastes influence investment decisions.

By the way there is a difference between what someone is willing to pay and what someone is able to pay. To take an example: If a house is for sale for say £50,000 and two offers are made one for £50,000, but needs to arrange a mortgage and another £45,000 cash (someone buying to rent). In current climate the cash offer is often accepted. Three things happen, the people who want to live in the house do not get it, sale price is lower than someone was willing to pay, but one less property for sale.

I personally am not over enthused about encouraging a growing private rented sector, unless they are actually building new units or modernising buildings in severe need of repair. (reasons are obvious)

If you rely on market forces then the limit of units purchased for rental is likely to be set by rental return versus purchase price and liquidity. If purchase price drops and rental returns remain constant, or increase, then the yield improves and buying to rent becomes more attractive. That of course is complicated by perceptions of future values as no one wants to be sitting with negative equity. But unfortunately on the low end buy to let can be significant in determining overall availability. Ultimately it increases the cost of living and much of it adds little real wealth.

My view of the market (any market) is of a complicated and often irrational beast.