London property prices to fall 30%....

chucknorris

sebtomato wrote: »

When BTL investors realise that property is no longer a great investment, because of low yields (before tax, maintenance, unpaid rents etc) and low capital growth (given the current prices), then there will be a large sell off.

The problem is that the alternative investments to re-invest the equity are still poor by comparison, especially if a significant part of that equity is diminished by 30% (CGT and ES fees). I might sell some property soon anyway, but only because of my age, because the equity has to be realised and spent before death, not because of any fear of a downturn or dissatisfaction with yields/profitability. So I don't anticipate a large sell off, although I do anticipate a significant reduction in the number of new investors entering the market.

cells

chucknorris wrote: »

So I don't anticipate a large sell off, although I do anticipate a significant reduction in the number of new investors entering the market.

Something like +250,000 properties NET are bought by BTLs per year if that falls away then prices will fall

BTL don't need to become net sellers just the net buying quantity needs to fall for the clearing price to fall.

Personally I don't think the huge growth in the rental sector will slow due to the changes in interest tax.

They could definitely reduce the +250,000 a year towards zero via taxation (people would still buy homes to rent they would just be offset by landlords selling) but hopefully they don't as it would cause a real term HPC with prices maybe not increasing for 10-20 years in London

cells

sebtomato wrote: »

So the property prices are so high now that people can't afford to buy, but the rents are going down??

Surely, the rents should go up, when purchasing a property becomes unaffordable to most people (given salary multipliers to apply etc.).

To be honest, many investors should sell their property, if the property price has gone up by 60%, but rent is the same as before. Yield is significantly lower now, so should be incentive to sell for BTL, and therefore have property prices going down.

When BTL investors realise that property is no longer a great investment, because of low yields (before tax, maintenance, unpaid rents etc) and low capital growth (given the current prices), then there will be a large sell off.

Most the landlords i know hold on until retirement and more often longer until they are on their death bed. Biggest landlord I know is 75 now and still has his BTLs been talking about selling for the last 5 years but never does

In some cases I reckon its how the older landlords keep some sense of worth and it gives them something to do part time. The alternative of sitting at home 7 days a week with the wife probably isn't a good alternative for them. So price is perhaps irrelevant to them it's their 'job' until they are forced to give up

lisyloo

To be honest, many investors should sell their property, if the property price has gone up by 60%, but rent is the same as before.

That assume that investment is the only reason.
My last couple of landlords have been what I'd call "accidental landlords". The first one wanted to try out a new business/lifestyle elsewhere but keep their home as security, the second have gone abroad (presumably working) for a period of time and again want to keep their home.
I don't have figures but as above people rent out for more than just pure investment reasons.

Crashy_Time

lisyloo wrote: »

There are always people who can't sit tight. Death, divorce etc.
I know of a few cases where individuals (usually men) have taken a haircut to get a clean break from a relationship. It's usually the man that has the earning potential and therefore the ability to move on. After a certain period of time people want to move on.
If I had an inheritance I'd want the money asap and not to have the issues of cutting the grass, insuring an empty house etc.
Prices are set at the margins.

I can understand householders wanting to sit tight, but what about a Chinese/Malaysian investor with a empty London flat. Will they sit tight or will they take a profit?
I think properties at battersea/nine elms might take a hit.
Will oo's rush in whilst they are falling.
As a potential OO I can say I would NOT rush in. I would wait and yes I know that's a risk.

Many will sell at a loss in this one.

Jason74

cells wrote: »

They could definitely reduce the +250,000 a year towards zero via taxation (people would still buy homes to rent they would just be offset by landlords selling) but hopefully they don't as it would cause a real term HPC with prices maybe not increasing for 10-20 years in London

Well, given that the consequences you describe from that scenario are universally positive for London, I'd hope "they" do just that. Indeed, there is probably no single policy that would be more likely to make me vote for a given party. I would however agree with you that they probably won't.

gadgetmind

I know people who made a fair few bob "flipping" flats bought off plan, and then lost all of it and more by getting greedy and not allowing for multi-year price drops.

cells

Jason74 wrote: »

Well, given that the consequences you describe from that scenario are universally positive for London, I'd hope "they" do just that. Indeed, there is probably no single policy that would be more likely to make me vote for a given party. I would however agree with you that they probably won't.

i'm in two minds there would be lots of winners and losers and I haven't come to a conclusion as to the net position for London and Londoners. is 0% HPI for 20 years (which would be a near 50% house price crash in real terms) a good thing or would they just tracking inflation be better for the majority?

CLAPTON

cells wrote: »

i'm in two minds there would be lots of winners and losers and I haven't come to a conclusion as to the net position for London and Londoners. is 0% HPI for 20 years (which would be a near 50% house price crash in real terms) a good thing or would they just tracking inflation be better for the majority?

what Lononders need is more and better housing


what exactly happens to the price is not the only important factor

cells

CLAPTON wrote: »

what Lononders need is more and better housing

what exactly happens to the price is not the only important factor

yes indeed Londoners need more (quantity and quality) housing but price is definitely important for a lot of people as price is what will determine for the individual the quantity and quality of housing that they have access to

also in a quota system like we have its almost irrelevant what the price is more or less the same number of homes will be built

---

also if house prices didn't go up and were flat for 20 years I reckon the rental sector would shrink and Londonds population would be lower than it otherwise would be.