Anyone else in the same boat as me?

CYBERCIDERSAVER

And that is part of my point.

It encourages people to use money that isn't even theirs to speculate on property. Hence more BTLs than if their was some rule about restricting BTL mortgages to one per private individual.


That is an idea that is probably full of holes and would never work. Partly cos of the outcry over restricting investment potential in the private housing sector.

and I am slightly confused. With the lack of council properties, a lot of BTLs are surely used for social housing. Hence there is a conflict between the interests of the Landlord and those of the tenants.

And with the mortgages on BTLs pushing up rents we the tenants suffer so the BTLer can maintain a healthy investment.

MrShed

CCS I think you are looking at it the wrong way - IMHO

House prices are not high because of BTLers. BTLers are high because of high house prices. In fact BTLers actually limit the housing market prices.

Let me explain.

If I have a buy to let mortgage, interest only, at say £600 per month. The way house prices have been rising, the actual capital gain on the property is MORE than £600 a month in many areas. Therefore, even before a tenant is installed, the landlord is making a profit(albeit a paper one).

Now lets look at the flip side. Should BTLers have interest only mortgages(not saying all are, but most are), then a fall in house prices would result in negative equity, and negative equity is much more serious on an interest only mortgage that a repayment mortgage. Therefore BTLers will ONLY enter the market on house prices that are already rising.

It was shown in the 70s and 80s. There were MASSIVE controls on renting property at this point(Rent act tenants anyone?), and this resulted in landlords being forced out of the market en masse. Hence, many more people stopped renting and became owner occupiers. This resulted in the boom(and subsequent crash) of house prices over this period. The difference is that BTLers only enter the market when financial conditions are correct, owner occupiers do not neccessarily do the same, as it is not neccessarily a financial investment.

Does this make sense? I am not stating the BTLers have had no impact on the rise in house prices. However, it is probably less of an impact than should the rental market have been overly controlled.

The real cause of the rise in house prices is the prolonged and consistent low interest rate over the last 10 to 15 years. Now I am not saying that the way to resolve the issue is to increase interest rates. This will reduce house prices, but will still be unaffordable, as the repayment element will fall but the interest element will rise.

I do not know what the solution should be!!

ixwood

Do you REALLY think house prices are going to go up for ever? It's called a cycle.

Be positive and prepare to be in a good position when the next cycle starts.

John_Pierpoint

Do you live in one room in a shared house?
Do you work all the overtime going?
Have you any significant savings, at least the tax free ISA type?
Could you work a second job?
Did you holiday under canvas last year?
Do you cook your own food and take home made sandwiches to work?
Do you understand the planning and tax and rental laws of the country?
Have you considered joining a self build group?
Do you have practical DIY skill?
Do you know how to get a book out of the Library and teach yourself?
How do you travel? Can you afford to run a small second hand diesel car/van?
Do you expect to buy with a partner with an income and aspirations similar to your own?
Does your job pay at least the average wage for a 40 hour week?

If you can answer yes to all these questions, you have a sporting chance of being a candidate for laying bricks after work, using a strip light and an oil heater under a barrow of mortar to stop the frost freezing it.

The upside is that if you start now, you might have enough capital and knowledge to buy and develop a wrecked BTL in a couple of years time, after the current credit crunch has bankrupted its current owner.
Bankruptcy is living death, so you won't have to worry about being in a chain.:D If you are quick you might get a bargain next spring as BTLers clutch at the remains of their profits as the 18% capital gains starts.

John.

Afterthought "What is the difference between renting the money and renting the bricks?" In one case you could end up with nothing to show for it and in the other you could find yourself choosing between local authority B&B or stuck in your over mortgaged negative equity hell hole.
That does not sound like "security" to me.

Guy_Montag

MrShed wrote: »

Dan I agree - it is nigh on impossible as a first time buyer these days. It shouldnt be as hard as it is. However, I also agree with RH - it also isnt(and shouldnt) be entirely easy either. To buy a house always required sacrifice, it just maybe needs a bit more now than in the past.

Why should it not be easy, it should be a piece of p1ss. It should be so cheap to buy or rent a place that we can pay it off in a few years & spend our money on something more fun & productive like our children. Wouldn't that be nice?

The reason it's not cheap & easy is because that's the way the banks make their money. Remove large mortgages from the equation & banks have to start working for their money.

Edited to add: 30, no house, living in a tiny flat to save for one.

Leiut. dan - Suggest you come up with alternate strategies:

1) Move abroad - a good capitalist option, voting with your feet.
2) Marry a girl with her own place.
3) Buy some land (not from a landbanking co., but some nice cheap agri land), & hope that PP rules are reduced or removed. (Or bribe the right councilors)
4) Get on the council list & bribe your way to the top, buy your place in 3 years

Good luck

carolt

Chin up, lieutenant dan.

Only you can decide if you want to make that sacrifice or not. You don't have to - you can continue in the lifestyle you currently have, and not save towards a deposit. Or you can downsize.

But, firstly, don't get trapped into thinking those are the only 2 options you have.

You could:
- save money in other ways, using wonderful resources elsewhere on mse eg one 5 minute phonecall re my broadband/phone package saved me about £35/month
- you could up your earnings in other ways eg look at the new board on this - lots of good tips - declutter stuff and sell on ebay, etc etc
- work on getting promotion to up your income this way
- meet a rich partner or discover a rich elderly long-lost relative!
- wait for house prices to come down more relative to income levels
- move to renting in a cheaper area - not necessarily in a bedsit or shared house, just slightly further away, for example
- rent a 2 bed flat/house, and then sublet the other room to someone YOU know, so at least you have some control over who you share with - if that is the route you want to go down.

I really appreciate where you're coming from, and know how frustrating trying to save is when the goalposts keep getting moved further away. But I do firmly believe that is about to cease..is happening at this moment, if calls by desperate estate agents (whom I have NOT been ringing!) are anything to go by.

In your mid 30's, I'd say get on with living your life and don't allow worries about 'getting on the ladder' interfere more than marginally. If you can afford a reasonable standard of living then that's great and you are much better off than all those who mortgaged themselves up to (beyond?) the hilt on interest-only mortgages to 'own' their own homes and are absolutely screwed if there any changes in their circumstances/interest rate levels/house prices.

You may not have big equity but you don't face huge debts either, which is a rare thing these days.

And you DO have choices - enjoy!

Unknown1234_2

Could you think about moving to a different area where prices are cheaper?
Could you change jobs to get a higher salary?

I bought a 2 bed flat last year at 19.

nollag2006

Good for you Melissa. Hope you're enjoying it

Some of this self-pitying wailing from those who feel its just sooooo unfair that house prices are high really is tedious.

Unknown1234_2

nollag2006 wrote: »

Good for you Melissa. Hope you're enjoying it

Some of this self-pitying wailing from those who feel its just sooooo unfair that house prices are high really is tedious.

Well im currently SSTC need to go into rented for my fiance's work.

But walking away with profit so it was worth it.

Will buy again in 2010 hopefully, just wait and see when i get there.

I can understand the frustration for people who find it difficult to get on the housing ladder, but there are ways its just finding them : )

Keep positive

pamaris

Hiya

Yes there are others in your situation. I am 31 and OH is 39. We didn't buy in the UK when we "should have" 7 years ago (when we got married) because we moved overseas. We bought 5 years ago in Texas and 2 years ago in Oklahoma, both very affordably and easily. We came back here from low HPI areas (thus no equity) last December and have lived with OH's mum (and our 2 little ones) ever since saving a deposit. We are only about halfway there, with no major living expenses and a "peppercorn" rent to pay. It sucks to live here with mum but I am thankful for the opportunity.

Personally I do not begrudge BTL's for the most part... if they purchase for income at a reasonable yield and not capital gains. I object to high HPI all the way around. I think that HPI should be moderately controlled through lending restrictions. The BoE is set up to control inflation, so why not house price inflation? Thankfully, this credit crunch thing can work for us and the lending markets are set to reign in house prices in the coming year. Supposedly, tighter lending restrictions should lead to less money being lent out at high multiples of income... if people can't borrow as much then sellers just can't charge as much. In the short term it will be very difficult to get a mortgage with no deposit... which is just as well because that is a very risky thing to do. However if you move in with family, houseshare or do the bedsit thing, then you will be set to take advantage of a more amenable market in a couple years time. Even with tighter lending conditions, I think that people with no debt, good credit history and a 5% or 10% deposit will have an OK time.

Another factor is that in most areas, the numbers just do not stack up for BTL's... they are still buying but the ones buying IMO are the "greatest fools". Serious professionals will come back to the market when the numbers stack up again (i.e. incomes rise and/ or house prices fall). By then all the "greatest fools" will have jumped ship and the demand just will not be there.

In April 2008, many BTLs who have been looking to take profits will sell to take advantage of a huge tax cut on capital gains (40% to 18%). I believe we will see a glut of FTB properties in the coming spring and summer. Instead of BTLs competing to buy, they will be competing to sell.

If I were you I would take the advice here and take the hard but intense route... think of the cheapest living situation you can handle and just start chucking money into savings. Move in with mum and dad if necessary or possible. The money does add up and by the time you have it all together, the market will have turned.