How low will property go?

Jack_Johnson_the_acorn

AG47 wrote: »

I never said that at all, I said they can't go much lower, all they can do is go up. I have a long term view.

.... all they can do is go up.....

WRONG.


They could go even lower. They could remain historically low for an ever greater span of time. This could be the new normal.....

What you wish to happen is irrelevant. :money:

Conrad

Jack_Johnson_the_acorn wrote: »

.... all they can do is go up.....

WRONG.


They could go even lower. They could remain historically low for an ever greater span of time. This could be the new normal.....

What you wish to happen is irrelevant. :money:

What did they do since 1970, in spite of cold war, OPEC crisis, IRA, endless middle east conflict, 3 day weeks, strikes, Honda putting staff on short weeks every other year, Bank crash, recessions, exiting the ERM and piles of other pestilence?


Is population fed demand going to go backwards? Brexit will bring even more safe haven seeking investors to British real estate before you say Brexit will crash the market, especially given so much chaos in the world, China close to popping, a Trump America, EU failure and our devalued currency

economic

Conrad wrote: »

What did they do since 1970, in spite of cold war, OPEC crisis, IRA, endless middle east conflict, 3 day weeks, strikes, Honda putting staff on short weeks every other year, Bank crash, recessions, exiting the ERM and piles of other pestilence?


Is population fed demand going to go backwards? Brexit will bring even more safe haven seeking investors to British real estate before you say Brexit will crash the market, especially given so much chaos in the world, China close to popping, a Trump America, EU failure and our devalued currency

im still debating whether to buy anothe rproperty for investment. in london unless i can get 5-6% gross yield minimum then i dont see it being worth it. i also want to buy in areas where its safe but those areas tend to be where yields are sub 4%....

cells

economic wrote: »

im still debating whether to buy anothe rproperty for investment. in london unless i can get 5-6% gross yield minimum then i dont see it being worth it. i also want to buy in areas where its safe but those areas tend to be where yields are sub 4%....

A 5.5% gross yield property is still ok value in my view.
Property beats the stock market even in my 30 year conservative assumption case, 0% HPI, 1.5% RentPriceInflation, 1.5% CPI, 3% long term finance cost, 3.8% stock market return. That's including all the taxes and new ruels and being a higher rate payer and with the Stock market tracker in an ISA.


I think whats beginning to dawn on me is that the world economies (starting with the more advanced ones) need to go to towards a zero savings rate. Already in a country like the UK the stock of wealth is about £10 trillion yet people are saving more when there is no need for it. No wonder rates are zero and knocking on the door of negative. (this does not mean no one in the economy saves, just that on net its not so positive). I dont think this is actually going to change much at all so we are going to enter the Japan type environment of permanent zero rates.

For a number of years now i've been saying and suggesting the world can not sustain real returns (and savings) above 0% but I didn't think it would come so soon.

If this holds to be true, I would expect Japan type ~1% mortgages even on BTL. In a scenario of 1.5% HPI/CPI/RPI/Mortgage-Int then property even with all the changes will result in a compounded real return of 6%, higher than the 0% on cash and higher than my base assumption of ~3.8% on the stock market

economic

cells wrote: »

A 5.5% gross yield property is still ok value in my view.
Property beats the stock market even in my 30 year conservative assumption case, 0% HPI, 1.5% RentPriceInflation, 1.5% CPI, 3% long term finance cost, 3.8% stock market return. That's including all the taxes and new ruels and being a higher rate payer and with the Stock market tracker in an ISA.


I think whats beginning to dawn on me is that the world economies (starting with the more advanced ones) need to go to towards a zero savings rate. Already in a country like the UK the stock of wealth is about £10 trillion yet people are saving more when there is no need for it. No wonder rates are zero and knocking on the door of negative. (this does not mean no one in the economy saves, just that on net its not so positive). I dont think this is actually going to change much at all so we are going to enter the Japan type environment of permanent zero rates.

For a number of years now i've been saying and suggesting the world can not sustain real returns (and savings) above 0% but I didn't think it would come so soon.

If this holds to be true, I would expect Japan type ~1% mortgages even on BTL. In a scenario of 1.5% HPI/CPI/RPI/Mortgage-Int then property even with all the changes will result in a compounded real return of 6%, higher than the 0% on cash and higher than my base assumption of ~3.8% on the stock market

I think it's going to be highly dependent on ones tax situation more so now then ever. Also I think on a total return basis global stocks will outperform property in London. You have to consider currency as well. I just feel a lot safer and think a portfolio of globally diversified stocks will outperform property in the long run. If you can bear the volatility in stocks then I think stocks are a no brainier vs property currently.

Thrugelmir

ukcarper wrote: »

True but mortgage lending is profitable for banks have you reasons to think it will become unprofitable?
Selling baked beans has to be profitable for companies selling baked beans.

Not totally unprofitable. More profitable to lend the money through other avenues.

lisyloo

I think it's going to be highly dependent on ones tax situation

I get 45.8% relief via salary sacrifice if I put it into a pension (20 tax, 12 NI, 13.8 employers NI).
It's tied up til 55 so much more comfortable for someone like me (48) than for someone in their 20's and of course one has to factor in the tax on withdrawing (some a 0%, some at 20% at todays rates), but I think it's quite attractive if you can tie it up.

Conrad

economic wrote: »

I think it's going to be highly dependent on ones tax situation more so now then ever. Also I think on a total return basis global stocks will outperform property in London. You have to consider currency as well. I just feel a lot safer and think a portfolio of globally diversified stocks will outperform property in the long run. If you can bear the volatility in stocks then I think stocks are a no brainier vs property currently.

I've always invested in equities by various means, but the returns on property I've harvested are an order of magnitude greater, partly due to the leveraging effect, and before you say it, no I don't want to take out loans to invest in equities - there's a reason Building Societies and Banks have always been happy to offer loans against bricks n mortar.


My own personal outlook is to have a bit of both.


Whilst there are always risks and hassle with property, at least you own real assets with real utility value based on a fundamental human need (Ray Meers encourages would be survivors to get that shelter and fire built as the priority).


Can you not imagine your pot of securities one day being worthless, or at least taking a huge hit in the event of a grand global depression, because I can. It would terrify me to rely on bits of paper.


Look back into our history, way back when, those with real estate were those with financial security. Brave Knights fought for the King and his reward was land. If the wheels fall off the global economy, people still require shelter and have allways on the whole found the rent

Conrad

It was a passage in a Shakespearean era story (I forget which) that sparked something in me. One character, middle class but always just about keeping his head above water, described his envy at his great chum that always walked with a spring in his step as he owned 4 properties that he let out for almost his entire livelihood, thus in spite of what life threw his way, at least he had the huge comfort of an unending income

ukcarper

Thrugelmir wrote: »

Not totally unprofitable. More profitable to lend the money through other avenues.

That's always been the case do you really believe the banks will stop selling mortgages ?