Hometrack: UK house prices up 2.3% yr/yr in Jan

IveSeenTheLight

merlinthehappypig wrote: »

It will hit home first with the second home owners and the buy-to-let investors. As they have to reduce prices to sell it will cause the rest of the market to stagnate.

I'm not so sure on this.
Many second home / BTL investors have joined this investment way in order to ensure they have a pension.

This is a long term view and it may be that these people would only sell if the really had to. This comes down to affordability. As long as the rent covers the mortgage payments and associated maintenance / insurance costs then the LL is not subsidising and will not have to sell.

One of my BTL's was bought in early 2007 and the rent received more than covers my costs. In fact interest rates would have to rise to 9.5% before I had to subsidise the rental.

Many say that the rental market will be much stronger in the next 5-10 years as many have sold to rent and people are waiting for the house prices to hit the bottom of the cycle.

If the rental market is so strong, then surely it would be a good time to be a LL. Definately there may be a lot who will ride any equity drop in paper value.

I certainly plan to as my intention is to keep the property for at least another 30 years (mortgage paid off in less than 10 years).
Do I think that the property prices (even if they crash) will not recover / increase in 30 years time? Definately not.

TTMCMschine

There is not a chance that prices will drop slowly over a prolongued period of time. Firstly there have been countless bubbles in the past, & they are ALL the same - rapid asset price growth, followed by rapid asset price loss. It isn't different this time (they say that every time) because of the economy/interest rates/ jobless figures/ wage rises/ anything else, it is EXACTLY the same as all of the other times because it involves people, and were just the same now as we've always been. GREED drives prices up, and FEAR drives prices down.

In addition, with mortgages taken out dropping by 25% or whatever, & less money available to borrow, & the number of repossessions soaring, its going to go fast, really fast, once that people get it into their heads that no one is going to pay silly prices anymore.

I reckon that by July it'll be in freefall, & by the end of the year house prices will be 15% to 20% lower - the financial marlets are in turmoil & all you've seen so far is the tip of the iceberg - wait til the DOW collapses at the end of Feb.

PasturesNew

IveSeenTheLight wrote: »

As long as the rent covers the mortgage payments and associated maintenance / insurance costs then the LL is not subsidising and will not have to sell.

In most cases this is not happening.

IveSeenTheLight wrote: »

One of my BTL's was bought in early 2007 and the rent received more than covers my costs. In fact interest rates would have to rise to 9.5% before I had to subsidise the rental.

You are fortuitously placed.

Care to put a location and some figures to that for us?

IveSeenTheLight wrote: »

Many say that the rental market will be much stronger in the next 5-10 years as many have sold to rent and people are waiting for the house prices to hit the bottom of the cycle.

Not everybody has the b4lls to wait. And if FTBs can see the bottom rung coming within their grasp they will be more happy to stay put at their parents and save longer than if they thought they were missing out.

IveSeenTheLight wrote: »

If the rental market is so strong, then surely it would be a good time to be a LL. Definately there may be a lot who will ride any equity drop in paper value.

Many lenders, I believe, have a clause that you have to maintain your LTV ratio - making up the shortfall with a cheque. So as prices fall, some may find their lender wants them to write out a cheque each year to maintain the LTV.

IveSeenTheLight wrote: »

I certainly plan to as my intention is to keep the property for at least another 30 years (mortgage paid off in less than 10 years).
Do I think that the property prices (even if they crash) will not recover / increase in 30 years time? Definately not.

You might intend to, but for other LL in your position, with a couple of void months a year - and a lender pressing for a cheque each year for them to maintain the LTV, they might not be able to do it.

Also, if there's a general economic downturn and a LL of a small handful of properties that aren't covering themselves adequately, a period of unemployment could tip them over the edge. BTLs have to be declared when they go to sign on and they could end up in a right pickle.

Generali

A couple of points:

Stagflation is an economic situation (as experienced in the UK in the 1970s) where inflation is high and GDP growth approximately nil. It's got nothing to do with house prices rising, falling or staying the same.

Due to the current state of credit markets and the shakiness of many banks' balance sheets, the money available for mortgages (and all sorts of credit) is dropping dramatically. FTBs and BTLers are going to be unable to 'snap up a bargain' once the price of property has fallen 5% or whatever unless they have plenty of cash.