Why buy – ever?

chucknorris

mwpt wrote: »

And right here you've summed up all that is wrong with some of BTL investing. Your statement should be :

"the rental income is consistent and offers a good ROI. After that capital gains are a bonus".

When I bought mine over 24 years ago, I bought them for the future rental profits, and also hoping that there would be a good capital gain when I eventually sold, but as you say, that was perceived as a bonus. Now that I've seen the gains, they have become even more valuable than the rental profit, due to higher values reducing yields, but the capital gain was never the focus.

chucknorris

MatthewAinsworth wrote: »

Mwpt - house price inflation is between 5-10% generally and that alone is difficult to reliably beat, I'd like to see what else performs like this,

Houses can't continue to rise at the rate of 5-10% in the long term (in a low inflation environment, like we have), especially from the current all time highs that we have in London. You can't look at the good years in isolation and ignore the bad years.

System

The living wage in April and tax credits help boost it too. You'd see scarier numbers if wage inflation was 3 or 4%; 15-20% house inflation

System

Chuck - its the mortgage multiplier that does this, makes it 5x whatever wage inflation is

chucknorris

MatthewAinsworth wrote: »

Chuck - its the mortgage multiplier that does this, makes it 5x whatever wage inflation is

Don't get me wrong, I would welcome such rises, but I just don't see it happening.

antrobus

MatthewAinsworth wrote: »

The living wage in April and tax credits help boost it too. You'd see scarier numbers if wage inflation was 3 or 4%; 15-20% house inflation

But wage inflation is 3%. So why aren't the numbers scarier?

antrobus

MatthewAinsworth wrote: »

Chuck - its the mortgage multiplier that does this, makes it 5x whatever wage inflation is

No, your arithmetic is wrong.

Someone who earns £20,000 a year, can borrow £100,000 if the multiplier is five. If their wage increases by 10% to £22,000, they can borrow £110,000, an increase of £10,000 on the previous £100,000. Which would be the same 10% increase.

System

Well spotted antrobus, I concede that it made sense to me seeing wage inflation generally 1-2% and seeing rises of 5-10%, and it still means its v difficult to save up without mortgage or with just one significant income

Also deposits are holding back rises, so things like help to buy and shared ownership are intent on getting round that to enable further rises.

Also I think London had the oligarch effect, which could've been a bubble if it weren't for allowing normal rises to catch up

Garethgrew

If we were coming off a big dip in house prices then it's pretty safe to think about buying. But as we are coming off the largest boom, the largest house price bubble in recent history, yes it's a good question why buy now?

Not why buy ever, because after the next big dip whenever that is, then will be a better time to buy.

ukcarper

Garethgrew wrote: »

If we were coming off a big dip in house prices then it's pretty safe to think about buying. But as we are coming off the largest boom, the largest house price bubble in recent history, yes it's a good question why buy now?

Not why buy ever, because after the next big dip whenever that is, then will be a better time to buy.

Good point but has the boom finished, judging that is the problem.