What is UK property really worth? Here are three ways to find out

chucknorris

nollag2006 wrote: »

I'd beg to differ on your comment about initial yield not being so important.

I got into BTL again relatively recently (bought two flats in 2009, and another in 2011), which all had a minimum of 6% rental yield from the outset. Quite nice, when I can borrow at almost half that, and especially considering the rents (and capital value) have all ticked up well above inflation since the initial investment.

That still doesn't detract from the point that the real advantage of property investment is that the yield increases over time. Which means that even though your initial yield was very good your future yields will be even better.

MacMickster

HAMISH_MCTAVISH wrote: »

Far more likely they'll rise by above inflation for most of the next cycle, given the critical housing shortage and increasing population.

If the government further reduces, or even stops, subsidising rents then rental yields will fall. Likewise if a significant building programme is put in place.

nollag2006

chucknorris wrote: »

That still doesn't detract from the point that the real advantage of property investment is that the yield increases over time. Which means that even though your initial yield was very good your future yields will be even better.

Very true indeed.

HAMISH_MCTAVISH

MacMickster wrote: »

If..... If.....

Yeah, and if my Aunty had male genitalia she'd be my Uncle.

There's pretty much zero prospect of a house building boom, and indeed even less of prospect of further benefit cuts now that Labour is looking a shoe-in at the next election thanks in no small part to the overall cuts already done.

the government further reduces, or even stops, subsidising rents then rental yields will fall..

Also worth mentioning that less than a quarter of private tenants receive any form of rent assistance or housing benefits. And of that quarter a majority receive very little in benefits that serves largely to top up other income.

There was much made on this board of how rents would crash when the rules came in for new claimants over a year ago. And in reality it had no impact whatsoever.

It's largely a myth that housing benefits have a big impact on setting rents in the market.

The reality is the other way around, housing benefits reflect the rents in the 75%+ of the market that receives no assistance whatsoever.

DervProf

RenovationMan wrote: »

Regardless of where house prices go, rentals will always increase (roughly) in line with inflation, while the mortgage debt is fixed. Well, it obviously reduces if you use the profits to pay down the mortgage.

Is the mortgage debt fixed ?

If you have a mortgage, then you not only have to pay back the amount borrowed to the lender, but usually the interest also. Unless the interest rate is fixed for the term of the mortgage, the debt is not fixed. Of course, it depends on the definition of "the debt". My definition (and I assume most others would agree) of debt is the amount of money you have to pay someone back if you borrow money from them.

robmatic

DervProf wrote: »

Is the mortgage debt fixed ?

If you have a mortgage, then you not only have to pay back the amount borrowed to the lender, but usually the interest also. Unless the interest rate is fixed for the term of the mortgage, the debt is not fixed. Of course, it depends on the definition of "the debt". My definition (and I assume most others would agree) of debt is the amount of money you have to pay someone back if you borrow money from them.

I would consider "the debt" to be the principal and the interest paid to be the cost of servicing the debt.

Zero_Sum

DervProf wrote: »

Is the mortgage debt fixed ?

If you have a mortgage, then you not only have to pay back the amount borrowed to the lender, but usually the interest also. Unless the interest rate is fixed for the term of the mortgage, the debt is not fixed. Of course, it depends on the definition of "the debt". My definition (and I assume most others would agree) of debt is the amount of money you have to pay someone back if you borrow money from them.

I beg to differ. Debt is purely the size of the loan outstanding at a given point in time. What you have to pay back is variable depending upon when you pay it back.

If I get a £100k mortgage over 30 years, the debt is £100k, not say £180k (prinipal + 30 years of interest), as the quicker I pay it back the less interest I pay to service that debt

chewmylegoff

chucknorris wrote: »

That still doesn't detract from the point that the real advantage of property investment is that the yield increases over time. Which means that even though your initial yield was very good your future yields will be even better.

wow, so it's just like compound interest then?!

chewmylegoff

DervProf wrote: »

Is the mortgage debt fixed ?

If you have a mortgage, then you not only have to pay back the amount borrowed to the lender, but usually the interest also. Unless the interest rate is fixed for the term of the mortgage, the debt is not fixed. Of course, it depends on the definition of "the debt". My definition (and I assume most others would agree) of debt is the amount of money you have to pay someone back if you borrow money from them.

the debt is the amount you borrowed.

the interest payable on the debt is relevant not to the debt you have to repay (which is just the capital sum) but to the net yield on your investment.

The-Joker

The best way to measure value is not to use fiat currency. Measure stuff with stuff.

How many barrels of oil or bussels of weat have been worth the same as an average house over the last century. This shows the times when things were under or overvalued. Right now this shows property to be over valued.