Housing market move given Brexit and interest rise

ukcarper

Tiners wrote: »

Yes, it's truly hilarious innit... that an entire generation and more have been priced out of possibly ever owning their own home, unless they're able and prepared to commit unprecedented proportions of their income for possibly they're entire working life to service a mortgage... and the real kicker is it's our government and central bank that have enabled it.

I don't find it hilarious that prices have increased so much in certain areas, but I don't think an entire generation have been priced out, as in many parts of the country prices have not increased dramatically and in the areas where they have some people can still. But blaming the government and making rash predictions helps no one.

caronoel

ukcarper wrote: »

I don't find it hilarious that prices have increased so much in certain areas, but I don't think an entire generation have been priced out, as in many parts of the country prices have not increased dramatically and in the areas where they have some people can still. But blaming the government and making rash predictions helps no one.

No one finds it hilarious, but why spoil a good rant with the truth?

chucknorris

Tiners wrote: »

You definitely won't get a ''better debate'' there... it's populated by a small but very vociferous clique of vested interests, property investors, recent buyers etc... who all hold the general opinion that never ending, policy driven, rampant house price inflation is great and has no drawbacks what so ever.

We have a vested interest, because we invested quite a bit in property, although we have already sold a couple of properties and I'll sell most of mine in the next 4-6 years (market permitting). But I don't hold the opinion that significant HPI has had no drawbacks, of course it has. I think that it is awful that young people today have to take on so much debt (property and student loans).

GreatApe

There is one very simple fact the crash cheerleaders are missing.
Why the hell would landlords sell after a crash ???

If prices fell 50% that would mean a property with a rental return of 5% today would have a rental return of 10% post crash. Which landlord is stupid enough to sell a 10% rental return property and put that into a 1% return savings account?

The crash wishers have it completely wrong. If prices doubled a hell of a lot of landlords would sell out and bank the profit. If prices half then few landlords would sell and many more would buy investment properties becoming landlords in the process.

chucknorris

GreatApe wrote: »

There is one very simple fact the crash cheerleaders are missing.
Why the hell would landlords sell after a crash ???

If prices fell 50% that would mean a property with a rental return of 5% today would have a rental return of 10% post crash. Which landlord is stupid enough to sell a 10% rental return property and put that into a 1% return savings account?

The crash wishers have it completely wrong. If prices doubled a hell of a lot of landlords would sell out and bank the profit. If prices half then few landlords would sell and many more would buy investment properties becoming landlords in the process.

Exactly! Last year I decided to sell my properties as tenants gave me notice,and I sold the first property when this happened (my wife also sold a property too), but when tenants gave me notice on a second property, I thought 'hang on a minute, this is a particularly profitable property' so I'll hang on to it a while. So given that I made the decision to sell, then changed my mind because property is the most profitable asset for me to hold. Do the 'crash cheerleaders' seriously think that I would sell if prices fell? Please 'crash cheerleaders' I'd really love to hear why you think this, so please explain your reasoning, I can't wait to hear.

You are correct about that 1% GreatApe, we are looking to upsize our home and we currently have about £1.3m sitting in savings accounts earning about 1% (1.17% in my case in a Sainsburys bank savings account), I feel like I'm being mugged.

LdnFtB

GreatApe wrote: »

There is one very simple fact the crash cheerleaders are missing.
Why the hell would landlords sell after a crash ???

If prices fell 50% that would mean a property with a rental return of 5% today would have a rental return of 10% post crash. Which landlord is stupid enough to sell a 10% rental return property and put that into a 1% return savings account?

The crash wishers have it completely wrong. If prices doubled a hell of a lot of landlords would sell out and bank the profit. If prices half then few landlords would sell and many more would buy investment properties becoming landlords in the process.

If I can take a punt at understanding the reasoning (using some stats from a CML publication The Profile of UK Private Landlords, I think that the hope that the crashists have is that these sellers are forced sellers and not voluntary (the TL;DR is negative equity begets bankruptcy begets reposession):
1) Over half of landlords own a single property. Increases/falls in prices won't affect them. Most landlords have no borrowing, so price falls/increases and interest rates won't affect them either.
2) Less than 10% of landlords own more than five properties.
3) However, this small proportion of landlords accounts for 40% of the market.
4) Many portfolio landlords have arrived at their position by withdrawing equity from existing properties to fund deposits for further properties. As such their position is more dependent upon finance than the average landlord.
5) Falling values place these portfolios in negative equity, leaving the owners unable to remortgage and stuck on SVR's. Simultaneously, removal of tax relief increases the tax bill. So a double whammy of increased costs. Finally, older properties require energy efficiency upgrades otherwise they can't be let.
6) These costs may be passed on to tenants in the form of increased rents, but they're competing against over half the market who isn't bearing these increased costs.
7) As such, rents can't be raised to cover increased costs.
8) As a result, portfolio landlords need to subsidise their business as if they can't then either their lender or HMRC is going to go wanting.
9) If they are unable to service their debts or pay their taxes, neither of these entities take very kindly to commercial ventures being in arrears and can force a disposal of assets in order to settle bills.

Now, the situation with finance was even more acute in 2008 and the sector has only grown since then so I'm not sure if the above will really play out, but I think that's a fairly accurate summation of the thought process.

westernpromise

Tiners wrote: »

You definitely won't get a ''better debate'' there... it's populated by a small but very vociferous clique of vested interests, property investors, recent buyers etc... who all hold the general opinion that never ending, policy driven, rampant house price inflation is great and has no drawbacks what so ever.

Give an example of one such poster.

NineDeuce

Decreasing house prices is not a good thing as negative equity can have serious implications on families. What is needed is a stagnation in increase and allow wages to catch up.

westernpromise

Incidentally, mortgage rates are pretty close to long term averages. The problem with listening to crash troll millennials on places like HPC is that they think the world began the day they were born and therefore they imagine "normal" interest rates to be those they can vaguely remember from the early 90s.

The fact is that the UK base rate has only been above 10% in 20 of the last 300 years and all of them were between 1970 and 1995. They weren't normal, they were the aberration. The genuine long term base rate is just under 4% IIRC and hence a "normal" mortgage rate can be considered something around 5%. Most lenders' SVR is about 4% so we are indeed not very far off that. Certainly, to have rates 1% or so away from the long term average is a lot closer to a 'normal' rate than rates at the 15% that millennial crash trolls would like to return so they can buy a cheap house.

It is probably more useful to think about what we mean by normal in the current climate. We have had a base rate of 0.5% or lower for nearly nine years now. Even the rumoured November rise, if it happens, will only take us back to 0.5%. So someone who bought nine years ago could fix today for 10 more years and would thus ensure that at least 19 of the standard 25 years of the term are at current comparatively low mortgage rates.

Now I don't know about anyone else but if I can lock in pretty much 80% of a mortgage term at rates of 2-point-whatever per cent, it's the rate applicable over those years that I consider 'normal'. I seriously question the mental balance of anyone who suggests that any higher level to which they may rise for 20% of the term should be labelled 'normal'. The 2-point-whatever per cent is the new normal. And of course this only has to persist for another 6 years for me to able to lock in the whole 25 years at low rates, by doing a 10-year fix at year 15.

Finally, a point often not understood by crashtrolls is that low interest rates have an important embedded advantage: you pay down principal very fast. If you put down a 10% deposit on a £100k property and borrow the other £90k at 3%, then after 5 years, you will have paid off about 15% of the loan. This means that the price could fall to £75k and you would still be able to sell up and move on without negative equity. In return for taking on that risk you get to participate in any upward price movement as well.

There is a lot more to house buying economics than timing the market so you can buy cheaper. It is because Crashy has failed to understand any of the above that he is a single man in his 50s renting a bedsit and advising other people not to buy because prices may briefly fall.

GreatApe

LdnFtB wrote: »

If I can take a punt at understanding the reasoning (using some stats from a CML publication The Profile of UK Private Landlords, I think that the hope that the crashists have is that these sellers are forced sellers and not voluntary (the TL;DR is negative equity begets bankruptcy begets reposession):
1) Over half of landlords own a single property. Increases/falls in prices won't affect them. Most landlords have no borrowing, so price falls/increases and interest rates won't affect them either.
2) Less than 10% of landlords own more than five properties.
3) However, this small proportion of landlords accounts for 40% of the market.
4) Many portfolio landlords have arrived at their position by withdrawing equity from existing properties to fund deposits for further properties. As such their position is more dependent upon finance than the average landlord.
5) Falling values place these portfolios in negative equity, leaving the owners unable to remortgage and stuck on SVR's. Simultaneously, removal of tax relief increases the tax bill. So a double whammy of increased costs. Finally, older properties require energy efficiency upgrades otherwise they can't be let.
6) These costs may be passed on to tenants in the form of increased rents, but they're competing against over half the market who isn't bearing these increased costs.
7) As such, rents can't be raised to cover increased costs.
8) As a result, portfolio landlords need to subsidise their business as if they can't then either their lender or HMRC is going to go wanting.
9) If they are unable to service their debts or pay their taxes, neither of these entities take very kindly to commercial ventures being in arrears and can force a disposal of assets in order to settle bills.

Now, the situation with finance was even more acute in 2008 and the sector has only grown since then so I'm not sure if the above will really play out, but I think that's a fairly accurate summation of the thought process.

Yes I agree they think that a huge number of mortgaged Landlords will all hit the wall around the same time causing mass selling to crash prices. However like you say we already had the recession of 2008-2010 and what were the results? Well mortgage lending for Landlords crashed hard there were very few mortgage landlord buyers.

The result was that the largest groups of landlords, those who inherit and cash buyers just bought more property. Through 2008-2010 the rental stock expanded by about 750,000 properties NET not gross.

When house prices crash landlords buy property. And a huge number of new landlords are minted as those who inherit their parents properties decide its not a good time to sell so they rent them out and become landlords. This is what happened in 2008-2010 a massive number of people who normally would have sold inherited property decided not to bother.

As I say, if house prices doubled I would sell all my rental properties. If house prices half I would sell none of them