The Market Astounds me!

Property_Magnate · 13 May 2006 at 12:32PM

A great week!

On Friday the sales completed on two of my properties. I thought I'd share the stories with you.

The first had been on the market since January. There was only one offer; at the asking price by the eventual buyers. Other than that absolutley no interest. The buyers were a couple in their thirties. It took them a while to get the mortgage together and they borrowed the deposit from parents. Here is the rub though ... they were my tenants! Their mortgage costs are considerably more than they were paying in rent. The perfect situation for me - whilst I'm waiting for their mortgage approval I'm still getting the rent.

My point is that they did not negotiate. There were no other buyers. I instructed my usual Agent to send buyers my way but they wouldn't go for it at the price. So why did the tenants pay full asking price? I just don't know!!

The second property was bought by an older couple Buy to Letting. They got 5% off the asking price so in their eyes got a good deal. The last tenants moved out in April has they've bought somewhere. Now, there is much competition for tenants, but if they do let it out they will be looking at 3% yield assuming no voids, fees etc. Oh dear.

In conclusion, the market still astounds me. Just when you think you've run out of fools ... along comes a greater one.

mystic_trev · 13 May 2006 at 1:04PM

Well done PM I'm thinking of getting shot of my two when the Tennancies come up for renewal - I've got the sniff of a bloodbath in the Property market. The last of the BTL Investors have climbed on a grossly overwieght ship which is going to start sinking anytime now!

nmiah786 · 13 May 2006 at 1:17PM

Just a thought, maybe the first couple didnt want the hassle of finding another place to rent and moving or maybe this is the area they want to live in for the forseable future. A property is worth how much someone is willing to pay for it. Thats what they wanted to pay for it! Maybe, other people were not interested in it because it had tenants in it.:D

With regards to the second couple, well thats crazy. Thats all I'll say!!!
:eek:

Alan_M_2 · 13 May 2006 at 9:06PM

There will always be a never ending supply of lemmings willing to take on 50 year self certification mortgages that are in reality 15 times their gross income in a blind belief that property only goes up in value.

May they continue to blindly to jump off that cliff....:-)

v0n · 13 May 2006 at 9:52PM

I'm not surprised with the first buyers. They liked the property they rented from you, they thought they could make it their permanent perfect home and they propobably had certain view on your business tactics and they presumed you would probably reject their offer at the last minute and kick them out as soon as better offer came along. And so they just wouldn't risk it and offered asking price and wouldnt' even negotiate. Of course I have nothing but presumptions in this case, but I had various lanlords too and I don't think the fact they were ready to perhaps overpay rather than deal with owner doesn't make them fools, as you call them, it only reflects the opinion people have about you.

As for the second buyers and low yeld. Perhaps they have an idea how to make the property more desirable, rent it higher and make better profit then previous owner. Maybe they know something you dont' about the area..

MOLLYBRUSH · 13 May 2006 at 10:33PM

It is an interesting topic. I have been in the property sector for a good many years but have been slowly selling off all my rental properties. I only have two left now. I separated from my partner a year ago and have rented a house for that time as the other properties were tenanted on long tenancies. A lot of people questioned this but from my point of view, the rent was much cheaper than it would be to get a mortgage to buy this property. A lot of people can not get their head around this at all. If you rent, you are throwing money away they seem to think without questioning it. I used to think the same but the situation in my area is that there is plenty of property to let at very reasonable prices and if I got a mortgage I would have to pay stamp duty and costs, and then about £600 pcm more than the rent. Fine if the market keeps rising but I didn't think it would so I went with the gamble. I am staggered to find that the market is still buoyant though and that property around here is selling very quickly. It just doesn't add up and I am still going ahead and selling the two remaining properties. Who is buying all these houses and how are they affording it? FTBs have to take out huge mortgages and the earnings multipliers must have been increased substantially. How does someone on £15K afford a house? I just think it is like the dot.com bubble. Everyone keeps piling in just in case they miss out.

nelly_2 · 14 May 2006 at 4:44AM

Houses must be more interesting, what they are spending on a mortgage they are not spending on other things in life. That might be allright for a bit but they'll soon get sick of it.

meanmachine_2 · 14 May 2006 at 11:34AM

A couple of FTBer friends of mine have taken on huge mortgages.

And they really are suffering debt fatigue now. They haven't had wage increases and all they see is 20-odd years of massive IO payments.

Both are hoping to sell this summer and you know what? Both properties have been revalued around 40K above what they paid 2 years ago!

Mad, mad, mad, mad, mad.

As I've said before, there will be no soft landings. The market rockets then runs out of fuel and falls out of the sky.

But that might not be for a few years yet. Prices still need to be around 40-45% above where they are now before we hit that wall of total unaffordability.

To see our bleak future, look at Ireland. It's scary.

BobProperty · 14 May 2006 at 1:25PM

meanmachine wrote:

A couple of FTBer friends of mine have taken on huge mortgages.

And they really are suffering debt fatigue now. They haven't had wage increases and all they see is 20-odd years of massive IO payments.

And that's without the interest rate rises that look like are coming along.

meanmachine wrote:

Both are hoping to sell this summer and you know what? Both properties have been revalued around 40K above what they paid 2 years ago!

Be interesting to see if they get it. What would these properties rent for? Where are they going to live once they sell?

I still believe we look for an outside trigger to "hang" the turn in the market on (or replace "hang" with "blame"). We had the double MIRAS removal in 1989 and changes to stamp duty at one point, which is why I now suspect the introduction of HIPs next year will be one such point. Joe Public will ignore the interest rate rises either made or foreseeable at that point, but a glut of property in the spring followed by a dearth of new property coming on the market in the autumn will affect the market.
Now anyone want to guess how much the market needs to correct? i.e. how big a fall from top prices now to bottom of the market?

hitman_uk · 14 May 2006 at 8:45PM

Ive just read this topic with great interest. I am a first time buyer or will be as Im thinking about buying my council house (good area and good discount). However i keep reading about the "what if the prices drop" and the more topics i read the people believe it is going to happen. If I buy this house which i want to as i love it my morgatge will be double my reant and then some. If then the prices drop i will be totally knackered. Its such a huge decision.

MOLLYBRUSH · 14 May 2006 at 10:25PM

Yes it's a gamble and I suppose a lot of your decision will be based on what sort of discount you will be getting. Obviously the higher it is, the better it is to buy as you can always sell and recoup the difference other than costs, but the increase in mortgage payments is understandably a worry.

To be fair though, I have been in the property game for 25 years and have been so lucky that what started as a "hobby" of transforming dumps into attractive properties (pre-Changing Rooms) has served me well, but I have been predicting the market can't keep going up for four years and sold a property then, thinking well it can't go up and that house is probably worth £60K more now. I don't think anyone knows for sure, it's all guess-work and luck. I just can't get my head around the prices now compared to what I paid when I first started and keep wondering who is buying at the bottom end, ie, FTBs and how they are paying for them. Wages are not going up very much so there must come a point when FTBs simply cannot afford anything and then the market must react.

In your case work it all out and factor in things such as loss of interest, stamp duty, legal costs, increased payments etc so you can roughly weigh up what you think either option will cost

The Market Astounds me!

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