"Thousands" of London flats to come to the market

Philuk

chucknorris wrote: »

No It doesn't make sense to rush into selling! It makes much more sense to carry on making the £100k per annum profit (for now and have a few more years of low mortgage rates and use of the £330k GCT that I would otherwise pay). I'm not intending to sell because the model doesn't work, it does, and very well too. I'm intending to sell because I only have around 30 years to spend all the equity, so at some point I need to get started, because there is a lot of equity (before my death), but I am at least (all things being equal) 2 years away from the optimum time to sell.

Very rough calculation, if you make 100k profit out of your RE portfolio, usual net yield being 3% net across London, I assume your portfolio market value should be around 3M. Surely 330k tax has to be put in parallel with the scenario where price in London drops by 10%, bringing down your portfolio by 300k (and you ll still be liable for some GCT I presume). Are RE investors that confident that the London market won't fudge at all at current price level, I live here for 10 years now and the mood as really changed since the 2010 bull market, I juts cannot understand how some many here are so confident about current price sustainability.

westernpromise

Crashy_Time wrote: »

there are lots of little sign-posts appearing that the direction of travel for property is changing

The trouble with this kind of observation is that I've been reading it on the internet ~(Usenet) for 19 years now and HPC has been around since 2003 dedicated to the proposition that the right price for property was on some date in the past.

In respect of London such prognostications have been exactly 180 degrees dead wrong every day.

The person making the forecast always turns out to be someone who's short property, often speculatively so. It's always just wishful thinking, from people who think a £350k property should be £150k (because then they could afford it).

I've thought London property was overpriced since about 2001, which shows how much I or anyone else knows, but I don't really have to care, either. I occupy one and its value doesn't affect how I use it, and I let another for a rent around 9x the mortgage interest so it would take some very odd circumstances for that to become significantly cashflow negative. Then and only then am I at the point where I have to care about what it's worth.

chucknorris

Philuk wrote: »

Very rough calculation, if you make 100k profit out of your RE portfolio, usual net yield being 3% net across London, I assume your portfolio market value should be around 3M. Surely 330k tax has to be put in parallel with the scenario where price in London drops by 10%, bringing down your portfolio by 300k (and you ll still be liable for some GCT I presume). Are RE investors that confident that the London market won't fudge at all at current price level, I live here for 10 years now and the mood as really changed since the 2010 bull market, I juts cannot understand how some many here are so confident about current price sustainability.

Our property (I have other investments) portfolio (excluding our home) is worth about £4.75m, but that includes a £900k house that my MIL lives in rent free (and also expense free too), so you weren't that far away. The £330k CGT is only mine (not incl. my wife’s properties and also one property that we jointly own, she has no intention of selling for while). The remaining properties are worth just under £2m.

You can mitigate CGT in equities much easier than property, so I don’t think that it is fair for you to imply that property and equities CGT would be similar (it wouldn't, I’ll explain further if you want me to). But the point you missed was that I would have to pay £330k CGT then get a return on the net figure, whereas if I stay in property I am getting a return on the gross amount!

If prices dropped 10%, I wouldn't be fazed, that would only be about £144k (net of CGT), then if you take off something for additional profit attributable to low interest rates and use of the £330k CGT, we are probably down to about £80k net, but of course prices might not fall! Additionally no one should expect to buy at the bottom and sell at the top, so all things being equal I think I am better off staying in the market for now.

EDIT: I'm not saying categorically that history will show that staying in the market was the right decision, what I am saying is that given all the factors, I believe staying in the market for now is my preferred decision.

westernpromise

Prothet_of_Doom wrote: »

London. The best thing for it would be if people and businesses moved north, and west, until they found affordability.

In which case you'd just end up with another London, elsewhere.

You could try to disperse a whole city, I suppose, to prevent a concentration of house-buying power, but this is the opposite to the direction of travel of human development, so is a bit odd as well as probably being impossible.

Philuk

chucknorris wrote: »

Our property (I have other investments) portfolio (excluding our home) is worth about £4.75m, but that includes a £900k house that my MIL lives in rent free (and also expense free too), so you weren't that far away. The £330k CGT is only mine (not incl. my wife’s properties and also one property that we jointly own, she has no intention of selling for while). The remaining properties are worth just under £2m.

You can mitigate CGT in equities much easier than property, so I don’t think that it is fair for you to imply that property and equities CGT would be similar (it wouldn't, I’ll explain further if you want me to). But the point you missed was that I would have to pay £330k CGT then get a return on the net figure, whereas if I stay in property I am getting a return on the gross amount!

If prices dropped 10%, I wouldn't be fazed, that would only be about £156k (net of CGT), then if you take off something for additional profit attributable to low interest rates and use of the £330k CGT, we are getting near to £100k net, but of course prices might not fall! Additionally no one should expect to buy at the bottom and sell at the top, so all things being equal I think I am better off staying in the market for now.

EDIT: I'm not saying categorically that history will show that staying in was the right decision, what I am saying is that given all the factors, I believe staying in the market for now is my preferred decision.

It seems that because of your capital structure and tax exposure, you could mitigate a large part of a moderate fall in property value (especially if interest rate remain low as you seem to be on variable). I am not too familiar with the CGT so I can't comment on your figures although it seems like a hell of a lot of compensation to reduce the impact of 300k fall to 150k thanks to CGT reduction. With such a significant personal wealth, I am pretty sure you covered all the options and reviewed them with the appropriate professionals! So far from me the idea of suggesting there are better investment out there than property, my comment was more toward understanding where the belief in the London property market come from. Well I guess you unexpectedly responded to that, and you made very good points: no viable alternative, tax trapped.

chucknorris

Philuk wrote: »

It seems that because of your capital structure and tax exposure, you could mitigate a large part of a moderate fall in property value (especially if interest rate remain low as you seem to be on variable). I am not too familiar with the CGT so I can't comment on your figures although it seems like a hell of a lot of compensation to reduce the impact of 300k fall to 150k thanks to CGT reduction. With such a significant personal wealth, I am pretty sure you covered all the option and reviewed them with the appropriate professionals! So far from me the idea of suggesting there are better investment out there than property, my comment was more toward understanding where the belief in the London property market come from. Well I guess you unexpectedly responded to that, and you made very good points: no viable alternative, tax trapped.

If you search my posts, you will see that I myself am saying that I can't see any real term growth in London property, but I have been wrong about that before. My conclusion is that it is better for me to stay in the market until the base rate creeps over 2%. My mortgages are low margin (average 0.5% over base) trackers. Although I can only guess what happens to capital values, it is much clearer what the relevant incomes of property v equities would be, and (to a lesser extent) what the tax treatment of those incomes would be. My decision is based upon leaving the market when dividend income equals property income, so in a way, I am actually favouring equities, by deciding to sell property when they would have equal value to me. Things can change though, therefore I will continue to monitor the situation.

wotsthat

mwpt wrote: »

Because prices are too high. Why is it that this is never the problem for you guys? It's always too little credit, too little help on demand side, too little cheating on mortgage applications. The fact that some people cheat on mortgage applications (the regulations exist for a reason) means that they will bid prices up higher and those that do not cheat, and those that do not cheat then cannot afford to buy. It's all part of the problem. Liar loans especially were one of the causes of the US bust.

How does knowing prices are too high help the nurse buy a house today?

mwpt

wotsthat wrote: »

How does knowing prices are too high help the nurse buy a house today?

You're myopic in your views, pure HPI bull. I believe I'm more moderate than you in that I see both sides of the coin, but find it very frustrating trying to debate this stuff with you because literally everything you post is framed with unashamed housing bull and protective over existing gains. I feel it's pointless.

Exhibit A: You're defending someone breaking the law above which clearly has a negative affect of people who remain within the law. I don't believe you'd normally do this if it wasn't for your unmovable pro HPI stance.

wotsthat

mwpt wrote: »

You're myopic in your views, pure HPI bull. I believe I'm more moderate than you in that I see both sides of the coin, but find it very frustrating trying to debate this stuff with you because literally everything you post is framed with unashamed housing bull and protective over existing gains. I feel it's pointless.

Exhibit A: You're defending someone breaking the law above which clearly has a negative affect of people who remain within the law. I don't believe you'd normally do this if it wasn't for your unmovable pro HPI stance.

It was a simple question. What's with all the bulls and bears stuff?

I've never lied on a mortgage application and I don't think anyone else should do it. It's funny because Thrug was saying the other day about how difficult it is to lie on applications because of the 'algorithms'. I don't think 'liar loans' are behind us but am continually surprised by Conrad's tales - I would've thought if there's one thing that's reasonably easy to check it's someone's income.

Oh, I'll be as happy as Larry if prices fall by the way. Obviously, purely for selfish reasons rather than rejoicing for 'the children' like you lot living at the top of moral mountain.

Anyway, we've established you're nice and I'm nasty but that nurse is no nearer to buying a place.

mwpt

wotsthat wrote: »

Anyway, we've established you're nice and I'm nasty but that nurse is no nearer to buying a place.

Don't take my comments personally btw. My partner always tells me when I express my views I tend to do so in a way that comes across as too judgemental.

I very much believe in incentives and I also believe that humans tend to look out for their own interests foremost, myself included. I believe that is normal, inevitable and not in itself a bad thing, just so long as we manage it appropriately. And my interests lie in being able to own a nice home without fear of financial armageddon ruining me. In this, I am very much against massive runaway HPI built on high amounts of debt. Because ultimately, that's bad for everyone (except for a few who cash in at the lucky times), and everyone includes me.

To get specific re the nurse. Encouraging someone to lie on their mortgage application has a measurable result in that they can bid more for a house than they would otherwise. This negatively affects other people. It might be a small impact but a lot of small impacts add up. It's not just the nurse, it's the entire system skewed in favour of existing owners and setting - what I believe are dangerous and ultimately impossible to uphold - narratives that you can never lose on housing. It encourages the wrong type of risk taking behaviour.

It all boils down to me not believing in anything that seems to good to be true. For 20+ years owning property in London has been too good to be true. BTL investment all over the place was too good to be true, even to the point that rates were slashed which bailed out a lot of over-leveraged speculation.

Right now, I realise how wrong I was to bet against that too good to be true narrative in property. I'm in the game now and I don't have a clue when it will correct itself, but it will, inevitably, one day. And it would be better for everyone if we could soften the impact, by not doing stupid things like setting dangerous incentives.