Wise words for the HPC fans...

System

GreatApe wrote: »

The level of confirmation bias over there is unbelievable




verging on deluded paranoia

An honest summary would be 'I can't afford a house !!!! the people who bought before me if houses don't crash 75% and dam soon all of civil society will crash and burn'

Someone needs to tell those clowns only 3% of UK born privately rent long term. They were they are and they always will be an irrelevant minority. I used to feel sorry for them but their anger and bile and extreme confirmation bias is turning me off.

Whoever wrote that post could do with going back to school. Maybe the reason they don't own a house is their illiteracy.

GreatApe

economic wrote: »

the time to sell london property was last year before brexit. not because i think brexit will caused prices to fall (they wont) but because the pound has fallen and we haven't seen any material rise in london property. that along with taxes on rent and potential future labour government make owning london property for investment not good from an opportunity perspective (better investments out there). i dont think there is a certainly that property prices in real and nominal terms will be higher in 10 years then today. anything can happen specially when politics is involved.

of course it still may make sense if you dont see the income from property fall that much and is part of a diverfied portfolio, but many including myself have a huge chunk of net worth in my own home which is tax efficient (although that could very well change too) so doesnt really make sense to own another (especially when eventually i will inherit a few properties myself - so i have a contingent property exposure if you like).

The problem is my average property yields a return on capital invested in excess of 10% (this is assuming 0% HPI) and its hard to jump ship with10%+ ROCI and into savings account at 1% or stocks at 4% dividend.

With 3.5% nominal wage inflation that's doubling of wages in a 20 year period.
Even if house prices crash 50% in real terms over 20 years aka stay flat for 20 years I would be happy with the 10%+ ROCI on the rental side.

And of course if houses don't crash 50% in real terms over 20 years that 10% ROCI becomes a lot more than 10% ROCI. If house prices just stay flat in real terms (go up 3.5% pa with wages) the ROC is over 22%


Oh and i don't really mean ROCI rather return on capital remaining post sale post taxes I don't know what the financial terms for that is but its the important metric for me to make my decison on.

GreatApe

There are about half a dozen prolific posters on that site that seem almost rabid.
Its funny how the tone of a forum of thousands can be set by a dozen or two posters

Venger is one of the posters there to me it sounds like he has truly lost the plot perhaps on the verge of a breakdown.

economic

GreatApe wrote: »

The problem is my average property yields a return on capital invested in excess of 10% (this is assuming 0% HPI) and its hard to jump ship with10%+ ROCI and into savings account at 1% or stocks at 4% dividend.

With 3.5% nominal wage inflation that's doubling of wages in a 20 year period.
Even if house prices crash 50% in real terms over 20 years aka stay flat for 20 years I would be happy with the 10%+ ROCI on the rental side.

And of course if houses don't crash 50% in real terms over 20 years that 10% ROCI becomes a lot more than 10% ROCI. If house prices just stay flat in real terms (go up 3.5% pa with wages) the ROC is over 22%


Oh and i don't really mean ROCI rather return on capital remaining post sale post taxes I don't know what the financial terms for that is but its the important metric for me to make my decison on.

well it depends what stocks do in terms of capital gains as well. a globally diversified portfolio of stocks yield around 2%. if your average capital gains a year over the next 20 years of greater then 8% and house prices remain nominally the same, that is the scenario where would one would be better off in stocks. in fact its not actually 8% that is the break even level. it is probably more or less then 8% as your 10% is on capital invested and my 8% is a compounded interest but what do you do with the 10% once yielded? if you put it in stocks that return 8% + 2% then i would require a higher return then 8% on capital gains to break even.

assigning probabilities to different scenarios (and therefore deciding on optimal portfolio allocation) is highly subjective and your views will be different to mine which will be different to crashys.

the other thing is tax implications. if you have a pension and/or isas with stocks all the gains and income will be tax free. property wont be. obviously this is highly dependent on the individual.

is the 10% ROCI post income tax?

economic

there are so many factors to consider and scenarios that you really can not be certain or even certain within a high degree of confidence of the optimal portoflio. what about currency? thats probably one of the biggest difference between london property and a globally diversified portfolio of stocks.

so is liquidity. the ability to time the market is a great option too. also having risk in one asset in one city in this world you would expect to have a higher return then a globally diversified stock portfolio. risk adjusted returns is a far better measure of performance.

GreatApe

A

economic wrote: »

well it depends what stocks do in terms of capital gains as well. a globally diversified portfolio of stocks yield around 2%. if your average capital gains a year over the next 20 years of greater then 8% and house prices remain nominally the same, that is the scenario where would one would be better off in stocks. in fact its not actually 8% that is the break even level. it is probably more or less then 8% as your 10% is on capital invested and my 8% is a compounded interest but what do you do with the 10% once yielded? if you put it in stocks that return 8% + 2% then i would require a higher return then 8% on capital gains to break even.

assigning probabilities to different scenarios (and therefore deciding on optimal portfolio allocation) is highly subjective and your views will be different to mine which will be different to crashys.

the other thing is tax implications. if you have a pension and/or isas with stocks all the gains and income will be tax free. property wont be. obviously this is highly dependent on the individual.

is the 10% ROCI post income tax?

Pre income taxes.
Worst property is 6.95% best property 18.38%

If nominal prices go up 2% a year (thus falling 1% pa vs wages) the return on capital would be 13.4%

I am not convinced I could get 8% capital gain on global stock especially as some of that would be lost against a rising pound assuming it recovers to a more long term $1.5-$1.6 to the pound

Taxes are a problem. You can get rid of a lot of the capital gains by dying..... Can pass a net £1 million without IHT or CGT. Income taxes of course have to be paid. While pensions and ISAs are good tax free wrappers you can only put so much in. I already max out the shares ISA limit. Haven't got a SIPP yet but I do have a final salary pension although I suspect that will only buy me a can of baked beans daily by the time I retire in 30+ years. Was thinking of transferring it to a SIPP but so far apathy has the better of me. Leaning towards not touching it and having it as an alternative to shares & property

GreatApe

economic wrote: »

there are so many factors to consider and scenarios that you really can not be certain or even certain within a high degree of confidence of the optimal portoflio. what about currency? thats probably one of the biggest difference between london property and a globally diversified portfolio of stocks.

so is liquidity. the ability to time the market is a great option too. also having risk in one asset in one city in this world you would expect to have a higher return then a globally diversified stock portfolio. risk adjusted returns is a far better measure of performance.

I think the most reasonable guess is that property will just track inflation of say 2%

If property tracks this 2% inflation then my return on capital would be 17.05% which would I assume be better than a global or FTSE tracker.

The big downside is the 40-45% income taxes.
Not sure I would invest in a BTL right now the tax efficient ISA looks tempting
On the other hand I'm not convinced I should sell.
Rent cap would convince me to divest so long as I could get out at current prices.

economic

GreatApe wrote: »

Pre income taxes.
Worst property is 6.95% best property 18.38%

If nominal prices go up 2% a year (thus falling 1% pa vs wages) the return on capital would be 13.4%

I am not convinced I could get 8% capital gain on global stock especially as some of that would be lost against a rising pound assuming it recovers to a more long term $1.5-$1.6 to the pound

Taxes are a problem. You can get rid of a lot of the capital gains by dying..... Can pass a net £1 million without IHT or CGT. Income taxes of course have to be paid. While pensions and ISAs are good tax free wrappers you can only put so much in. I already max out the shares ISA limit. Haven't got a SIPP yet but I do have a final salary pension although I suspect that will only buy me a can of baked beans daily by the time I retire in 30+ years. Was thinking of transferring it to a SIPP but so far 40% for 69% against just on the principal that its a different investment vehicle and maybe just leave of alone

thats the thing. everything is based on assumptions. long term averages may mean something to you but it does not mean much to me.

i have maxed out my isa since i was legally able to do so. its all in stocks. i dont plan to touch this for a whilst yet unless i see a big correction in say property and even then it will depend on why prices crashed (political landscape etc). my pension is a normal company one which is all in aggressive stock funds.

keeping the tax wrappers is very useful long term. i just hope corbyn doesnt come in and remove them all. tbh i can see that happening.

GreatApe

economic wrote: »

thats the thing. everything is based on assumptions. long term averages may mean something to you but it does not mean much to me.

i have maxed out my isa since i was legally able to do so. its all in stocks. i dont plan to touch this for a whilst yet unless i see a big correction in say property and even then it will depend on why prices crashed (political landscape etc). my pension is a normal company one which is all in aggressive stock funds.

keeping the tax wrappers is very useful long term. i just hope corbyn doesnt come in and remove them all. tbh i can see that happening.

Agree with the ISA and pension wrappers going or being limited. Eg maybe limit ISA to £100,000 and pensions to £250k or even get rid of the pension savings of gross income altogether.

In the last GE labor had a proposal to greatly reduce the IHT nil rate band and it was hardly picked up in the media and another proposal for introducing the gifting exempt period to 20 years. That would have been horrific changes but hardly noticed by the media. Was 10x worse than the so called 'dementia tax'.

Forget all that the man is an outright communist
What is worse is that the UK is a rich country so he could make it work for some time.
There is a lot of wealth that can be stolen and distributed it isn't soviet Russia or China which had not built out its capital. He could indeed become a populist robin hood. There are 5 million rentals he could confiscate and give to his voters. There is some £3 trillion or so in UK companies he could distribute to 'the workers'. While long term it would be ruinous for the nation shirt term 5-10 years it could be popular. I'm not knowledgeable wbiigh to know if the UK laws and institutions could stand in his way perhaps even his own party will stand in his way which is why he willpurge the Blaireites.

economic

GreatApe wrote: »

Agree with the ISA and pension wrappers going or being limited. Eg maybe limit ISA to £100,000 and pensions to £250k or even get rid of the pension savings of gross income altogether.

In the last GE labor had a proposal to greatly reduce the IHT nil rate band and it was hardly picked up in the media and another proposal for introducing the gifting exempt period to 20 years. That would have been horrific changes but hardly noticed by the media. Was 10x worse than the so called 'dementia tax'.

Forget all that the man is an outright communist
What is worse is that the UK is a rich country so he could make it work for some time.
There is a lot of wealth that can be stolen and distributed it isn't soviet Russia or China which had not built out its capital. He could indeed become a populist robin hood. There are 5 million rentals he could confiscate and give to his voters. There is some £3 trillion or so in UK companies he could distribute to 'the workers'. While long term it would be ruinous for the nation shirt term 5-10 years it could be popular. I'm not knowledgeable wbiigh to know if the UK laws and institutions could stand in his way perhaps even his own party will stand in his way which is why he willpurge the Blaireites.

Let’s hope we have a nation of smart enough people to not vote for corbyn:

https://youtu.be/Zsh_b70NSFQ