Halifax May +3.9% MOM, +8.7% YOY

IronWolf

Prices in London are too high and it is not just a supply issue, its speculation. You can tell this by the rental yields, which are the best way to judge whether houses prices are sensible based on market demand.

My parents just bought a house in the north and are renting it out for a 10% gross yield. Compare this to my old flat in Westminster, it was bought in 2010 for 250k and rent was 14k per year net of service charges, so about 6% gross yield. Now that flat is worth 350k, when i left they tried to rent it for the same amount andnit was empty for 3 weeks, they eventually had to accept a reduction in rent so are now making more like 12k a year, or a gross yield of about 4%. That isnt good.

mobfant

wotsthat wrote: »

You're showing your lack of analytical skills.

Why assume that the problems associated with world hunger and the UK housing market have a) the same root cause(s) and b) the same solutions?

Looking at the root cause(s) of problems is the best way to determine effective corrective actions whether that be a shortage of UK housing or world hunger.

Growing more rice may not resolve world hunger but building more houses in the UK will resolve a housing shortage. Difficult to understand?

I think his point is it's a little more complicated than that. Famine is not so often caused by a lack of food availability but problems within markets, infrastructure, or government.

Similarly, the UK's housing problem is not just a shortage of houses (though you're right that it is a part of the problem) but includes factors such as the disproportionate focus of the UK economy on one city, and the lack of alternative safe locations for international wealth and capital

Moreover, if it was purely a supply issue in London, rents would be rising at a similar rate to house prices. But they're not - they are rising but much more slowly. Rental yields are already low and falling.

The scale of the price rise in London is therefore at least as much to do with fear/panic on behalf of first time buyers, and greed on behalf of Buy-to-Letters, who are increasingly focusing on investment.

Prices are rising because people think prices are going to rise. And that is a bubble. If it doesn't pop, that is only because the government and Band of England will do everything in their power to stop it from popping. But when the economy starts to grow, they will have no choice but to raise interest rates. And that's when the fun starts.

*I should caveat this by saying no-one truly has a clue what will happen, so don't quote me on this in a few years time...

Blacklight

CLAPTON wrote: »

if you have specific information about illegal cartels in the building industry then please do share this with us.

who is involved?
how does it work?

It works like this:

• There's a rumor that the economy might slow down a bit.
• BBC get hold of said bad news and flog that horse every day until it becomes a self fulfilling prophecy on which they can feed for months to come (this step is optional).
• Every housebuilder in the UK quickly downs tools, closes every site and leaves hundreds of homes unfinished as the know they won't be able to sell them for anywhere near as much (supply severely restricted).
• Good economic news some years later
• Housebuilders go back to work increasing supply as they can now sell again at previous peak prices.

This can be evidenced by:

1. Comparing number of houses built in Feb 2009 (low price) to 2007 (peak price).
2. Looking out of your window.

IveSeenTheLight

IronWolf wrote: »

Prices in London are too high and it is not just a supply issue, its speculation. You can tell this by the rental yields, which are the best way to judge whether houses prices are sensible based on market demand.

My parents just bought a house in the north and are renting it out for a 10% gross yield. Compare this to my old flat in Westminster, it was bought in 2010 for 250k and rent was 14k per year net of service charges, so about 6% gross yield. Now that flat is worth 350k, when i left they tried to rent it for the same amount andnit was empty for 3 weeks, they eventually had to accept a reduction in rent so are now making more like 12k a year, or a gross yield of about 4%. That isnt good.

So, looking at the whole investment, they have received

((Yearly Rent * number of years) + (Capital Appreciation - CGT calculation)) / number of years

or
(( 14k * 4) + (£100k - (£100k - £22k (joint allowance) *0.28)) / 4

or

£33.5k per year minus expenses

Sure rent yield is now down to 4% and there is a question of whether releasing the equity will provide a better investment return or is the low rental yield likely to be boosted by likely further capital appreciation.

Graham_Devon

IveSeenTheLight wrote: »

So, looking at the whole investment, they have received

((Yearly Rent * number of years) + (Capital Appreciation - CGT calculation)) / number of years

or
(( 14k * 4) + (£100k - (£100k - £22k (joint allowance) *0.28)) / 4

or

£33.5k per year minus expenses

Sure rent yield is now down to 4% and there is a question of whether releasing the equity will provide a better investment return or is the low rental yield likely to be boosted by likely further capital appreciation.

Though when prices were falling or static you maintained that BTL was all about the yield?

wotsthat

mobfant wrote: »

I think his point is it's a little more complicated than that. Famine is not so often caused by a lack of food availability but problems within markets, infrastructure, or government.

I haven't offered a solution to world famine other than to suggest a good place to start is to look at root causes (as with any problem). I readily acknowledge that it's much more complicated than growing food. Graham's jibe about famine was merely a way to divert attention away from the root cause of the UK's housing problem so we can continue to obsess about the minutiae of foreign owned homes in London that are empty.

The UK housing market is a less complex problem. The predominant issue is that there's a shortage of housing - this can be solved by building more houses.

mobfant

IveSeenTheLight wrote: »

So, looking at the whole investment, they have received

((Yearly Rent * number of years) + (Capital Appreciation - CGT calculation)) / number of years

or
(( 14k * 4) + (£100k - (£100k - £22k (joint allowance) *0.28)) / 4

or

£33.5k per year minus expenses

Sure rent yield is now down to 4% and there is a question of whether releasing the equity will provide a better investment return or is the low rental yield likely to be boosted by likely further capital appreciation.

The difference is that yields are relatively predictable, low risk, and broadly within the control of the landlord if they maintain the property in good nick.

The expectation of capital appreciation is speculation or gambling. Which is what the original poster was saying.

wotsthat

Bantex wrote: »

So just building houses will not solve the problem. There is more to it.

Does it really need to be stated that they need to be built in places where they are most needed i.e. where people want to live and work?

IveSeenTheLight

Graham_Devon wrote: »

Though when prices were falling or static you maintained that BTL was all about the yield?

As a model, it is about the yield, especially when buying.

I'm merely stating that if you have invested in a property at a time when the yield was sufficient and the yield is now showing lower due to capital appreciation, you have to factor whether selling that property will provide the best return on the investment.

Let me say it clearly again "WHEN YOU ARE BUYING (INVESTING) IN PROPERTY, YOU HAVE TO ASSESS THE RENTAL YIELD"

IveSeenTheLight

mobfant wrote: »

The difference is that yields are relatively predictable, low risk, and broadly within the control of the landlord if they maintain the property in good nick.

The expectation of capital appreciation is speculation or gambling. Which is what the original poster was saying.

I fully agree, I work on a yield basis and view appreciation as a bonus only realised when I no longer choose to have my investment in the properties I won.

To the point previously, if my rents have decreased £2k, I will have a consideration for the £20k (after CGT deductions) yearly appreciation, especially if my costs have not increased