London Has Peaked

cells

chucknorris wrote: »

Although I do not think rents will continue to rise at 3.9% per annum, I have no concerns over holding London property, other than to get the timing right for selling, the only reason that I will sell is my age. We have no children and I am 57, there is a lot of equity that needs to be released and spent, plus I don't want the hassle of owning property when I am in my 70's. So it is a case of selling sometime before the next market correction. It all depends on the market, at the moment my best guess would be about 10 years. The reason that I do not think rents will rise at 3.9% per annum is that we are now in a low inflation environment, whereas back in the 90's inflation was extremely high, and it was also higher in the noughties too. Again this doesn't concern me, I am more than content with the current profitability (skewed in my favour by low margin tracker mortgages).

There were 2 or 3 short periods when rents stagnated, even dipped slightly, but nothing that bad, by then profits were high anyway, it might have been more meaningful if I had just started out. Over the years it has changed from just covering the mortgages in year one (1991), to very good profits. But the main thing is that in over 24 years with multiple properties, I have never had a rental void, other than when I have instigated a short void between tenancies to redecorate, or a longer one to refurbish.

How do you manage to achieve no voids at all?

its definitely wise to have an 'exit plan' irrespective of being a landlord or not
One elderly man I know in his early 80s was conned out of nearly his whole life savings by a gang. Sadly not long after that he had a stroke and can't even take care of his basic needs now and is effectively partially brain damaged. That taught me to make sure I spend or give away what I have by the time im 70 and keep just enough to get by for the remaining years

chucknorris

cells wrote: »

How do you manage to achieve no voids at all?

its definitely wise to have an 'exit plan' irrespective of being a landlord or not
One elderly man I know in his early 80s was conned out of nearly his whole life savings by a gang. Sadly not long after that he had a stroke and can't even take care of his basic needs now and is effectively partially brain damaged. That taught me to make sure I spend or give away what I have by the time im 70 and keep just enough to get by for the remaining years

The rental market really is that good in London, but I do tend to rent at slightly under the market rent, this gives me a wider choice of tenant, and obviously helps to avoid voids.

I am certainly not planning to spend most of it by the time I am 70 (just as well because I don't think that I could spend it in 13 years anyway). Obviously it is possible my health may not last but I am hoping (and planning) to be a very fit 70 year old. I will probably be doing my first triathlon next year, as I am likely to retire this December, and I will finally have the time to train in all 3 disciplines.

padington

Could this thread ever look any more wrong ....

http://www.theguardian.com/business/2015/may/14/london-house-prices-could-double-in-the-next-15-years-to-1m-pounds

lisyloo

What do you think of the article paddington?
I'd be interested in your view.

FWIW - I sometimes think about buying somewhere in London and then I remember that work could finish any day. Looked (online) at a houseboat this morning (£139K) but I didn't think the undersized bed was big enough for us.

padington

lisyloo wrote: »

What do you think of the article paddington?
I'd be interested in your view.

FWIW - I sometimes think about buying somewhere in London and then I remember that work could finish any day. Looked (online) at a houseboat this morning (£139K) but I didn't think the undersized bed was big enough for us.

My view is that there are now large pockets of London that have absolutely smashed the old expected average worker / house price ratio and those areas are only going to grow as more rich people settle here.

Because London has become such an important global city we begin to need to look at other formulas to understand the expectations of London prices, which possibly has more to do with the average income of rich people than the average person.

Mega cities are the new trend. Evidence is suggesting that now we are are entering the post instustrial era cities are sucking people in at increasing volumes like black holes might.

Once upon a time we needed to spread our people far and wide because that's where the resources where. However the red hot power house resource now is human brains working with computers and it seems these brains prefer the benefit of people huddled together.

For me the cards are marked for cities like London.

House boats are a great temporary solution but require quite a lot of effort and are not really an investment. The clever money will continue to buy the thing they don't make anymore, London land.

Even future technology I imagine will only make things worse. If the world could teleport instantly, London would become even more populated not less. It's possible things could get even more crazy than even I am imagining.

k12345678

Doubling in 15 years is basically 5% a year (compounded) isnt it which is less than they are rising at now.

chucknorris

k12345678 wrote: »

Doubling in 15 years is basically 5% a year (compounded) isnt it which is less than they are rising at now.

It is about 4.73% per annum, but with inflation so low, that IMO is an astronomical rate to be sustained for 15 years. Especially when you consider they already seem to be pushing the boundaries of affordability now, even with my most optimistic head on, I just can't see it happening. Also we are probably due a market correction within that 15 year timeframe.

lisyloo

However the red hot power house resource now is human brains working with computers and it seems these brains prefer the benefit of people huddled together.
For me the cards are marked for cities like London.

Thanks for giving your view.
What about the following
1) More people working from home. This doesn't seem to have taken off enough to reduce London congestion, or perhaps has and has been absorbed by more people. I'll admit that my company wants people in for "collaboration".
2) The coming robot apocalypse. Sounds fanciful but we already have self-use checkouts in supermarkets.
3) Business driven out of London? Admittedly my company feels they need a London office just as a "sillicon valley" office has some value.
4) People driven out of London? Is there a point where people will just say no? We're clearly not there yet, but there is a point where I'd personally draw a line and be willing to clean toilets up North to make a living. People tell me we're a long way from that for people generally.

padington

lisyloo wrote: »

Thanks for giving your view.
What about the following
1) More people working from home. This doesn't seem to have taken off enough to reduce London congestion, or perhaps has and has been absorbed by more people. I'll admit that my company wants people in for "collaboration".
2) The coming robot apocalypse. Sounds fanciful but we already have self-use checkouts in supermarkets.
3) Business driven out of London? Admittedly my company feels they need a London office just as a "sillicon valley" office has some value.
4) People driven out of London? Is there a point where people will just say no? We're clearly not there yet, but there is a point where I'd personally draw a line and be willing to clean toilets up North to make a living. People tell me we're a long way from that for people generally.

1) People seem to want to work from home alright, it's very popular in my office, even though everyone admits they dont get much work done, however there seems to be no one holding on to the romantic idea of moving to the countryside. Even our intern just bought a 450k flat in Hackney, his family used to own a belt makers factory. I bet they didn't start in London but that's where the families money has ended up.

2) Key thing about robotics that will be a game changer is the self driving car. Apparently they will be so strategically better than the way we use family cars now, that they will be lots cheaper to use, maybe like papers one day free, this will make cities even more enjoyable to live in. They will be virtually fool proof safe, run better than clock work, probably will lead us to press the 'buy' button far too much but will make the city smell nicer and become even more efficiient. That efficiency won't be able to be replicated in many other places apart from other global cities.

3) De-industrialisation drives people to the cities not the other way around

4) People will be driven out of living in London but will be forced to commute to work. I imagine there will be discussions one day about the 'city class', the 'commuter class' and the 'rural class'. We can see the plans to 'bus' the workers in from afar in progress as we speak. So London workers will still rent homes family cheaply.

cells

padington wrote: »

My view is that there are now large pockets of London that have absolutely smashed the old expected average worker / house price ratio and those areas are only going to grow as more rich people settle here.

Because London has become such an important global city we begin to need to look at other formulas to understand the expectations of London prices, which possibly has more to do with the average income of rich people than the average person.

Mega cities are the new trend. Evidence is suggesting that now we are are entering the post instustrial era cities are sucking people in at increasing volumes like black holes might.

Once upon a time we needed to spread our people far and wide because that's where the resources where. However the red hot power house resource now is human brains working with computers and it seems these brains prefer the benefit of people huddled together.

For me the cards are marked for cities like London.

House boats are a great temporary solution but require quite a lot of effort and are not really an investment. The clever money will continue to buy the thing they don't make anymore, London land.

Even future technology I imagine will only make things worse. If the world could teleport instantly, London would become even more populated not less. It's possible things could get even more crazy than even I am imagining.

Some random info and points from me....


some of the most expensive parts of London have the fewest owners. Eg in Hackney an inner London Borough where I live the owner stock is now ~25% of the market. What that tells me is that we don't need any/many owners to have very high prices. The BTL investors will just keep buying so long as homes yield a greater return than bonds and stocks which even in crazy Hackney where a tereace home now costs £1m they do beat bonds and stocks



With regards to London land. There will come a point where the government will have to decide to effectively cap London population (via not building enough) which will mean everywhere else will need to take the +500,000 a year epopulation growth. or they will need to build more. Land is indeed limited but it can be utilised much more efficiently. The council's or mayor could compulsory purchase whole streets and knock them down and rebuild at a much higher density. There is a lot of scope to add units thay way eg my parenta street has about 40 detached and semis homes on it but it could easily and effectively be rebuilt as 500+ good sized low rise flats. Also the invention of self drive vehicles will help allow higher density building and also free up a lot of land currently dedicated to the vehicle sector.


And finally there are a lot of people who simply don't need to be in London. Just shy of 50% of the homes in Hackney are council flats and homes. I doubt many of the residents need to be within walking distance of the square mile. The tories are going to want to see a falling of the state owning homea especially expensive ones in inner London