Robert Shiller on BTL (in the USA)

Conrad

Generali wrote: »

UK house prices (after inflation) are up about 150% since 1975.

I often carry out factfinds where clients bought for a few thousand in the 70's and now the place is valued at 100 times that.

I've had ISA's (formely PEPS) and such mlike for about 20 years, but the returns are nothing like those from property so I really find such reports to be wholly academic and non sensical.

Generali

the_flying_pig wrote: »

but ultimately i'd say that the depreciation comment is a total red herring.

if you were thinking about investing in, say, a car hire company, or a computer company, what kind of idiotic response woudl it be for someone to tell you 'nah - cars depreciate' or 'nah - computers depreciate'.

whether these are good business or not turns on whether or not the cashflows coming in are sufficient to compensate you for all your costs, including the need to maintain & replace assets.

To turn what you are saying around, you'd be crazy to ignore your accountant who says to you, "Nah. Your sums for your computer leasing firm doesn't work as you're assuming too long a life for your computers'.

HAMISH_MCTAVISH wrote: »

And that is one of the biggest differences between the US and the UK.

Here, the old ones are usually considered to be better, more desirable, more sought after.

That is traditionally the case in the UK. Is that still the case? Look at apartment blocks built in the centre of cities in the UK in the 1960s and 70s and they have depreciated pretty quickly, indeed in London quite a few blocks of that era have been demolished already.

Modern building techniques, along with British conservatism, have led to a premium being paid for older houses. Given that houses for about the last 25 years have been built using 'modern techniques', how long until (some) older houses lose their premium?

Generali

Conrad wrote: »

I often carry out factfinds where clients bought for a few thousand in the 70's and now the place is valued at 100 times that.

I've had ISA's (formely PEPS) and such mlike for about 20 years, but the returns are nothing like those from property so I really find such reports to be wholly academic and non sensical.

Annecdote isn't data.

However, my parents' house in a wealthy part of leafy SE England was bought for £20,000 in 1976. With extensions that have been done it would be worth about £400-450,000 I reckon. That's a nominal increase and takes no account of improvements and maintenance.

I can't imagine that there are more than a handful of places in the UK that have seen a 100fold rise e.g. a £10,000 place (roughly average in 1975?) became worth a million.

ETA Average house price for the UK in Q1 1975 was £10,800. You have some truly exceptional clients having beaten the market more than five times over!

the_flying_pig

Generali wrote: »

To turn what you are saying around, you'd be crazy to ignore your accountant who says to you, "Nah. Your sums for your computer leasing firm doesn't work as you're assuming too long a life for your computers'...

yes if you've done the sums but all the article says is, "It takes maintenance, it depreciates".

these things are true of all assets other than land but does not mean that all asset leasing businesses are dogs.

the_flying_pig

Generali wrote: »

...You have some truly exceptional clients having beaten the market more than five times over!

of course they're exceptional - they've got 'I can get you 10% risk-free yield' Conrad as an advisor.

Generali

the_flying_pig wrote: »

yes if you've done the sums but all the article says is, "It takes maintenance, it depreciates".

these things are true of all assets other than land but does not mean that all asset leasing businesses are dogs.

I think we agree with each other.

Depreciation is a factor in any business including BTL.

Conrad

the_flying_pig wrote: »

these things are true of all assets other than land but does not mean that all asset leasing businesses are dogs.

Land often requires ongoing hedge maintenance, pest and weed control, drainage work, third party insurance and what not.

GEN - data is often nonsense when it comes to such matters, and wholly misleading. Economists study the stuff day in day out as do fund managers but both make pretty poor predictions. I've sat in many a conferance with expert fund managers talking a good fight, only to deliver pathetic returns over the long term. They had all the info one could ever ask for.

I'm sorry but clients from Surrey to Berks, Herts to Essex, Cambs to Dorset all got very rich through property and your data makes no sense tpo my 20 years of anecdote. I suppose tommies in the trenches with thier daily anecdote had worse info compared to far away generals sipping sherry?

I have clients that went the PEP / ISA / Pension routes but in the main they did nothing like as well as those that were more property centric.

Thrugelmir

Generali wrote: »

When you buy a house you buy two things: a house that depreciates and land that does not. That's the same in all countries.

I remember my early years. When this was the accounting treatment.

Land was split from buildings. Buildings were depreciated.

Excessive property valuations were the cause of many of Japan's problems. As Companies revalued to strengthen their balance sheets to secure bank lending. Asset prices fell. And the spiral downwards started.

globalds

Japanese property valuations can be very different to UK valuations

Often a house on land is seen a liability

traditionally in Japan houses only had a 25 year life span .So what you bought was just something to knock down and build your house onto the land

I think our geology ,construction techniques and tradition of preservation probably does deserve to be recognised in the value.

Generali

Conrad wrote: »

Land often requires ongoing hedge maintenance, pest and weed control, drainage work, third party insurance and what not.

GEN - data is often nonsense when it comes to such matters, and wholly misleading. Economists study the stuff day in day out as do fund managers but both make pretty poor predictions. I've sat in many a conferance with expert fund managers talking a good fight, only to deliver pathetic returns over the long term. They had all the info one could ever ask for.

I'm sorry but clients from Surrey to Berks, Herts to Essex, Cambs to Dorset all got very rich through property and your data makes no sense tpo my 20 years of anecdote. I suppose tommies in the trenches with thier daily anecdote had worse info compared to far away generals sipping sherry?

I have clients that went the PEP / ISA / Pension routes but in the main they did nothing like as well as those that were more property centric.

The data are what they are. My parents' place was bought in Surrey in 1976 in a very nice village that has probably increased by more than average as it's now a commuter town and wasn't in '76.

That house is possibly worth £450k having been bought for £20,000. There is no way that any house bought in the same time in a similar area is worth £2,000,000 unless a hovel was knocked down and a palace built in its place.

I call BS. Sorry mate.

The only places that have appreciated remotely like that are a handful of oast houses but they've had fortunes spent on them so hardly comparing like with like.