It's a funny old world - BTL's are prospering!

barnaby-bear

Guy_Montag wrote: »

I'll vouch for Barnaby's statement if he doesn't want to give out too many details. What I don't understand is why people stand for it & don't live elsewhere. You could take a serious pay cut & yet still have more disposable income each month.

S'ok with me but Guy used to live here too so knows I'm not making this up.

Vincenzo

By way of clarification - the OP was referring to the figures reported by the RICS. These were Gross Yields. These do not take into account costs and purely reflect the relationship between the capital value of the property and the rental value TODAY.

IE if you could buy a £200,000 property today and achieve rent of £10,000pa, the gross yield would be 5%.

Teh Net Yield (taking into account purchasers costs) would be sub 5%.

carolt

Ah, I suppose Cambridge is a special case - there really is a limited supply of land there and genuine economic reasons for living there rather than elsewhere. Still, I used to live in Oxford, and find it astonishing that rents are now so high (assuming the two are comparable?).

But I'd be wary of extrapolating from Cambridge to the rest of the UK - most of the rest doesn't have the advantage of its own micro-economy the way Cambridge does. (And is a lot nastier.)

Elsewhere, I do think rents will be capped by ultimate affordability; unlike fuel and food, which are priced at a global level, rental prices are set locally.

So I don't think they're comparable.

barnaby-bear

carolt wrote: »

Ah, I suppose Cambridge is a special case - there really is a limited supply of land there and genuine economic reasons for living there rather than elsewhere. Still, I used to live in Oxford, and find it astonishing that rents are now so high (assuming the two are comparable?).

But I'd be wary of extrapolating from Cambridge to the rest of the UK - most of the rest doesn't have the advantage of its own micro-economy the way Cambridge does. (And is a lot nastier.)

Elsewhere, I do think rents will be capped by ultimate affordability; unlike fuel and food, which are priced at a global level, rental prices are set locally.

So I don't think they're comparable.

I think it's compaarable in that people don't want to move to areas they don't know / have links with and carry on supporting themselves rahter than throw in their jobs.... people adapt to a lower standard of living if needs must - I think the rent each person can pay is capped by affordability, if the jobs dictate where people are that dictates how many people a BTLer can cram in each unit

Guy_Montag

carolt wrote: »

Ah, I suppose Cambridge is a special case - there really is a limited supply of land there and genuine economic reasons for living there rather than elsewhere. Still, I used to live in Oxford, and find it astonishing that rents are now so high (assuming the two are comparable?).

But I'd be wary of extrapolating from Cambridge to the rest of the UK - most of the rest doesn't have the advantage of its own micro-economy the way Cambridge does. (And is a lot nastier.)

Elsewhere, I do think rents will be capped by ultimate affordability; unlike fuel and food, which are priced at a global level, rental prices are set locally.

So I don't think they're comparable.

When I lived there, there was no shortage of land, there was land as far as you can see in every direction, mind you you couldn't see that far, what with it being so flat. So I've just run up google earth & I'm right. There's vast amounts of land round cambridge - it stretches all the way to the sea! Better yet, almost all of it could be made available to brilliant, young scientists & engineers like Barnaby for housing, unfortunately the powers that be would prefer that he (& thousands like him) are unable to live close to work.

*& breath*

barnaby-bear

Guy_Montag wrote: »

When I lived there, there was no shortage of land, there was land as far as you can see in every direction, mind you you couldn't see that far, what with it being so flat. So I've just run up google earth & I'm right. There's vast amounts of land round cambridge - it stretches all the way to the sea! Better yet, almost all of it could be made available to brilliant, young scientists & engineers like Barnaby for housing, unfortunately the powers that be would prefer that he (& thousands like him) are unable to live close to work.

*& breath*

East anglia is one of the most sparsely populated regions of the country particularly to the east of the city.... people argue the colleges control the land and that's why it can't be built on but the uni is desperate for some to be released as they have huge staffing problems as a result of the housing crisis - most of the land is just scrub/fen and not attractive - acres of it within 3 miles of the city but NIMBY is strong....

Generali

!!!!!!? wrote: »

The prices rose by far above the inflation rate because the banks suddenly started giving out great wodges of cash to anyone drawing breath who wanted to buy a house. Not only would they give out lots of money, they weren't too particular about who they loaned it to either. Deposit? Who needs that in our eternally booming house market! Want to borrow 125% of the house's value? No problem sir!

Then add in the factor of speculators jumping on the bandwagon and a media telling everyone that home ownership and property investment was the way to go (all those TV 'property !!!!!!' shows) and it's easy to explain the last six or seven years of house price madness.

The only question is how bad and how long the downturn is going to be.

The point I was trying to make was that house prices have generally risen at a faster rate than inflation for a few decades, not just during the current boom (bubble?). I don't see why that should be the case except that levels of owner occupation have risen.

I remain looking at a long term view whereby the UK will have a load of pensioners in a few years time living a house worth half a million quid and with a pension worth five eighths of eff all. They will want to sell. Who can buy?

carolt

Interesting point. Thing is, where I live anyway, all the big houses are already full of equity-rich, cash poor pensioners - weeding their huge gardens in threadbare cardis and catching the bus with me because they can't afford a car. (They don't 'do' equity release round here.... :rolleyes:) Wish some of them would sell up to me.

But having been the generation that was young in the war, they do make do and mend rather well, and aren't in the least bit bothered, as far as I can tell.

Maybe the baby boomers will be different?

Can't see them foregoing foreign holidays or meals out....

Generali

carolt wrote: »

Interesting point. Thing is, where I live anyway, all the big houses are already full of equity-rich, cash poor pensioners - weeding their huge gardens in threadbare cardis and catching the bus with me because they can't afford a car. (They don't 'do' equity release round here.... :rolleyes:) Wish some of them would sell up to me.

But having been the generation that was young in the war, they do make do and mend rather well, and aren't in the least bit bothered, as far as I can tell.

Maybe the baby boomers will be different?

Can't see them foregoing foreign holidays or meals out....

Time will tell. I wouldn't want to sit on a half a million quid of asset whilst living on a grand a month of income.

In a few years time there will be many facing that. Sell up and buy somewhere smaller and you can double your income just as long as you're the first to do it and not the last.

Gorgeous_George

Generali wrote: »

Yield is measured vs market price. It's a tool more usually used to measure the relative prices of shares or bonds. It's meaningless to measure your current income against what you bought the house for - if you bought in 1962 you could be looking at a yield of hundreds of percent. What does that prove? It shows you that rents have risen since 1962, nothing more. It doesn't help you work out where you are now.

FWIW, I think it's too crude a tool to be used for measuring the relative merits of houses. BTL is a business not an investment and a measure like free cash flow including a cost of carry for the equity portion in the house is much more useful. Including a cost of carry measures how much interest you are forgoing by holding on to the house, free cash flow shows you how much cash you're generating after costs from the rest of it.

If I don't have my BTL valued, what is it worth? I paid £15.5K in 2001 and it's worth about £80K I guess. I don't know if it would sell.

Unlike shares, I'd need to subtract EA and solicitor fees for selling and a few months' void would be likely if I was to offer vacant possession. Then there's CGT. I might end up with a reasonable profit but would it bring me £5K per year?

I know my yield isn't 35%. It might be 7% but who cares? Not me and not my tenant. I have an income of £5K and my tenant has the best LL in the world.



GG