The Next Nail in the Coffin

chucknorris

economic wrote: »

capital values and rental incomes are both risky in that they both are not guaranteed.

im in a bit of a dilema - i found a flat i like in highgate which should exchange soon however not sure if its worth waiting post tax change for prices to dip and find something better value? or should i just go for it. i do know it is hard to find decent well located properties so i guess waiting is only worth it if a big correction is coming this year which i doubt.

what woud you do?

The problem is that everything is risky! Holding cash is worse than risky, it is virtually guaranteed to under perform both property and shares over the very long run. I do not perceive much risk to London rental income, the only true rental income risk over the long run would be rent controls, and even labour's previously proposed rent controls were a 'watered down' version of rent controls, so not that threatening.

Timing the market is risky in itself, look at the first and last posts on the 'London has peaked' thread:

Bubble_and_Squeak wrote: »

i'm calling April as the peak of the london property price bubble.
i was actively looking to buy a house in tottenham late 2013 early 2014 during which time asking prices for a victorian terrace rocketed from around £250-275k to over £400k in around 6 months.
classic bubble territory.
i predict a sharp correction henceforth...

chucknorris wrote: »

Since this thread started with bubbles calling the top of the London market, the type of house in the location that he was wanting to buy has gone up by more than another £100k/25%.

economic

agree on the timing aspect and post eu referendum things could start booming again as the uncertainty wears off.

however disagree that cash is worse then risky. it has a place if you can time the market well. given we are under immense deflationry pressure i would be overweight cash. however i also need a home and also dont want all my cash in the banking system (there are risks with that) so will have to put in 50% of my cash for my own home. there are also tax advantages of owning own home too.

Filo25

economic wrote: »

agree on the timing aspect and post eu referendum things could start booming again as the uncertainty wears off.

however disagree that cash is worse then risky. it has a place if you can time the market well. given we are under immense deflationry pressure i would be overweight cash. however i also need a home and also dont want all my cash in the banking system (there are risks with that) so will have to put in 50% of my cash for my own home. there are also tax advantages of owning own home too.

Surely though the offset to that is increased deflationary pressure leads to low rates for longer/more QE, looser credit, and probably helps to actually increase capital values in property, the people who benefit most from that situation are oddly enough BTL investors as well.

The idea of timing the property market is great in theory but very hard to do in practice, I just bought as a FTB myself, well aware of the prospect of greater challenges for London property this year than there have been previously, but its a long way from that to saying a collapse is likely this year, more likely scenarios are slower price growth or a moderate correction.

Its hard to see sufficient drivers for a large fall in prices without significant interest rate increases imho anyway

chucknorris

economic wrote: »

however disagree that cash is worse then risky. it has a place if you can time the market well.

I am not talking about people who have yet to buy their home, I can see why you need to hold cash, because you might have to move quickly to buy a property. But I am in a totally different place, we have 9 properties. There is no reason for me to hold (significant) cash. I definitely do not wish to start playing 'roulette' by trying to time the stock market, and I have no interest at all in buying property (as an investment).

But I am hoping that the stock market stays low for another week, so that I can invest in both my SIPP and ISA in the new tax year at the ftse's current level.

economic

wrong - increase in capital values is not certain even if thre is more QE/low rates etc. you can flip the argument and say low rates and qe is signallying poor growth and deflation in the years ahead and so asset values should fall. generally there is a positive correlation with rising rates and rising stock markets. not sure what it is for property and low rates certainly do not mean prices will continue rising.

economic

also with a lot of talk about london property being a bubble i would really like to see a graph of prices on a log scale. much more meaningful as it shows relative changes in price growth.

i think a lot of peope see the london price graph and just get scared and immediately say its clearly a bubble i would like to see a log graph to at least paint a more realistic picture.

Filo25

economic wrote: »

wrong - increase in capital values is not certain even if thre is more QE/low rates etc. you can flip the argument and say low rates and qe is signallying poor growth and deflation in the years ahead and so asset values should fall. generally there is a positive correlation with rising rates and rising stock markets. not sure what it is for property and low rates certainly do not mean prices will continue rising.

Well if I'd said it was certain that would probably be a fair enough comment, but I do recall using the word "probably" somewhere in there!

As a general rule though ongoing tightening of fiscal policy and extremely loose monetary policy is a pretty favourable environment for property price rises, in areas where demand remains strong.

Of course there are limits to how far low rates can increase prices, but I wouldn't see much evidence that those have been reached through the recent behaviour of the market in London and the South East.

The biggest medium term threat to property prices would be significant increases in interest rates, that would change the equation dramatically for BTL investors, whether they are leveraged (squeezed profitability) or not (better returns elsewhere), and obviously has an impact on OOs as well

cells

mwpt wrote: »

You have no idea if this is true or not, it is anecdote. I could just as well say that anecdotally, most private landlords rent out their old house on a residential mortgage and don't declare the income to HMRC.

So I could argue that corporate landlords are easier for HMRC to tax, they will have higher mortgage rates and typically chase high yields rather than capital gains resulting in lower HPI, can be regulated more easily to transform tenancy laws, and overall will be better for our housing market.

I dont foresee small corporates buying 1-2-10 homes. If it happens at all it will possible be like the german housing corporates the largest of which owns 300,000 properties and theere are multiple large corp landlords

They sell and buy amongst themselves they dont sell to the open market so a FTB will never own those 300,000 properties

They dont take mortgages from banks they issue their own paper at likely lower rates than a mr wilson could get.

They bypass the people who get employed by normal human landlords. the solicitors the banks the surveyors etc and just buy


You may be correct that the corp landlords will not not pay their taxes. they may however decide to be located in low tax areas and pay little to no uk tax. Also at 18% corp tax vs 40-45% income tax you must think more than half of landlords dont declare. even if that were true its a case of HMRC doing their jobs and catching and fining them. 18% is clearly a lot lower than 40-45% and no transaction tax is clearly lower than the 3-18% human landlords will pay every so often

padington

chucknorris wrote: »

I've just looked at the figures more closely, when Crashy first advised me to sell up (July 2014) our property values were £300k lower than they are now, and if we had invested the equity in the stock market back then, that investment would now be £340k lower (the market is currently down about 8.5% since then). That is a total difference of £640k. I'm not taking any credit for that, because it could have went the other way (I'm not an after timer), no one knows what capital values will do. But both you and crashy seem to think that you do, and you were both wrong to the tune of £640k.

But as I have said, it isn't capital values currently keeping me in the market, because no one knows whether they will rise or fall, but what I do know, is that my rental profits currently exceed the alternative dividend income. That is why I base my decisions on income not capital value.

EDIT: What you and crashy will probably not understand is that even if the market had moved the other way, it still would have been the right decision to stay in the market, because that decision was based upon known facts, rather than speculation.

Imagine the collective economic loss HPC website has caused for those guided by its 'light'.

Hundreds of millions lost.

chucknorris

padington wrote: »

Imagine the collective economic loss HPC website has caused for those guided by its 'light'.

Hundreds of millions lost.

I think some of them will probably look back with bitterness, but really they have to take that responsibility themselves for not buying, but of course it doesn't help if a group of people are trying to convince you otherwise. At least those people eventually woke up, what is truly amazing is those that have been there from the start, if there are any long term HPC members like that, maybe not.