Property Recycling Share Discussion Threads

[muchos wonga] 02/7/2002 09:00

Come on Norman :-)

Interest rates are low, sure, but asset prices have adjusted to reflect this. However interest rates CAN move up by big percentages (20% in the case of a move from 4% to 5%)

Employment IS full, but cannot get 'fuller'

The Government has no control over inflation, that is the BOE's job.

Affordiblity. Well yes, here I agree, but then that depends on the above three factors.

My argument all along has been that all the factors in property's favour have now been fully reflected in current prices. There may be some upside left, but its not a place for people with vertigo, because there is a big drop round the next bend. don't look down!

With all this full employment and low inflation, people should be saving for their retirements, not taking on more debt.

[currypasty] 02/7/2002 08:50

Its different this time mw

interest rates are low and set to stay low

employment is full and set to stay full (albeit city types may have to move to the SW, where there is a shortfall of public service staff)

inflation is low, and Govt is committed to keep it low

affordability is still below historical values based on what you actually pay, not some arbitary multiple of earnings.

[muchos wonga] 02/7/2002 08:34

An income of £50,000 is needed by first time buyers to get on board the property ladder!

So what happens next year when prices have risen another 20%? Then first time buyers will need an income of £60K to get aboard (before they will be priced out of the market altogether?)

This is 1989 all over again. Or is someone going to claim its different this time?

[maxk] 02/7/2002 08:05

From todays Times:

July 02, 2002

Homeowners rush to fund spending by remortgaging
By Lea Paterson, Economics Editor



RECORD numbers of homeowners are cashing in on the rising value of their properties by remortgaging at cheap rates to fund high street spending, new figures have shown.
In a report that will add to fears about the sustainability of the property boom, the British Bankers’ Association (BBA) said that a record 77,676 loans were approved by its members for “mortgage equity withdrawal” in May. This was almost 4,500 above the level in April, and sent the value of loans approved for equity withdrawal to a record high of £1.5 billion during the month.

Mortgage equity withdrawal — remortgaging to fund household spending — was a feature of the 1980s property boom, which ended with a price crash in the early 1990s. Recent rises in equity withdrawal have concerned many economists, who fear that the property boom is running out of control.

In total, £16.5 billion of new home loans were approved by the major banks in May. This was 39 per cent higher than in the same month a year ago. Gross mortgage lending during May totalled £14.2 billion, also a record high.

A new survey from the Nationwide Building Society underlined the strength of the UK property market. The society said that house prices rose by 3.3 per cent in June, the fastest rate of growth since 1989.

The Nationwide doubled its forecast for growth in house prices this year, saying that they were now likely to rise by as much as 18 per cent.

Alex Bannister, Nationwide group economist, said: “Barring a major economic shock, such as a sharp rise in unemployment or mortgage rates, the housing market is set for continued growth in prices.”

The Nationwide survey underlined the difficulties faced by first-time buyers hoping to get a foot on the property ladder. In London, a would-be buyer with a 5 per cent deposit for a mortgage worth three times their salary would need to earn £49,400 a year to afford the typical property for a first-time buyer.

Ian Mullen, BBA chief executive, said that borrowers needed to ensure they did not take on more debt than they could handle. “Just as it is important that lenders remain prudent in their lending practices, borrowers should assess both their current and future financial circumstances when making borrowing decisions,” he said.

City analysts said the ratio of house prices to earnings had now reached worrying levels. This ratio has now reached 4.6, compared with a figure of 4.9 at the peak of the 1980s boom, according to calculations by Capital Economics.

Sabina Kalyan, of Capital Economics, said: “Houses look increasingly over-valued, and households could be in for a rude awakening. The chances of a housing market crash are rising.”

[muchos wonga] 02/7/2002 08:00

Darias

Well, blow me down, an estate agent who is positive about the market! Makes a change from all the others who are saying things are potentially very serious.

[itsourpete] 02/7/2002 07:24

Darius - I entirely agree with your opinion! (this is a very rare 'itsourpete' statement, by the way!)

Pete

[energyi] 02/7/2002 07:18

...or London property can drop, so returns in London are more
consistent with the rest of the UK...
That process has started already

[darias] 02/7/2002 07:11

The bears may want to consider this statement from Savilles

"Residential markets in the UK are firm and we have an excellent
current book of instructions, both in London and the Country. The New
Homes market continues to be particularly buoyant despite widespread
concern in the Press about the buy-to-let market.

The property investment markets throughout the UK remain strong with
significant demand for property from domestic, private and
institutional as well as overseas buyers. This increased demand
reflects in part investor's lack of confidence in the stock markets.

Tenant demand in London and the South East is being adversely affected
by the downturn in the technology based industries in particular.
However outside London and the South East demand remains robust with a
number of major tenants requiring new accommodation".

As has been stated times without number on this and other threads dont judge the residential property market by what is happening in London. There may be a nose dive in the capital but it is not likely to spread very far out of the south east in the near future. A year or two perhaps!

Outside the south east property prices have to rise by around 20% further before they can catch up with the increases in London over the last 5 years.

Just my opinion.

[itsourpete] 02/7/2002 06:11

max - they may well be a safe haven - I introduced by IFA to them and he's switching his main BTL recommendations to BoI as he thought that the staff were knowledgable and most helpful and that the range of schemes were 'excellent'!

(but I'm not a buyer of the shares though!)

Pete

[maxk] 01/7/2002 22:57

Sounds like bank of ireland shares are a safe haven! I like cautious bankers!

[johndee] 01/7/2002 22:45

I have just sold my property that I let for the last two years. £96,000 after paying off the mortgage which was only £80 per month and the rent about £450 net a month. I have decided to ride out(keep) the shares I have in the market and use the money to pay off everything else. No mortgage on the house we live in.

[sabeen] 01/7/2002 22:36

Pete,

I checked out Bank of Ireland today, the staff on the phone were most helpful, but their loan to value is incredibly cautious, and they do not have the 'flexible' loan approach of L and G bank and Mortgage Express. Bristol and West are calling me on Wednesday to discuss terms.

Regs

Sabeen

[itsourpete] 01/7/2002 20:42

Demand Outstripping Supply...........

[itsourpete] 01/7/2002 18:59

sabeen - my favourite BTL deals are

Bank of Ireland - 5.25% No redemption fees & £250 arrangement

Stafford Railway - 5.23% No redemption fees & no arrangement costs (but midlands area houses only)

Furness BS - 5.48% No redemption & no arrangement fees.

thus giving you minimal up front costs and flexibility to sell / seek better deals as time goes by..........

Regards

Pete

[fse] 01/7/2002 13:40

Accountancy firm PricewaterhouseCoopers has warned that property in London is overvalued by approximately 31%.

[calamertuss] 01/7/2002 12:40

Bristol & West do the best deal for BTL. Flick through the "UK housing - the next bubble to burst" thread. Its a bit of a long thread but the info is there. regards Cala

[sabeen] 01/7/2002 12:36

Thanks Pete

I've just contacted Purple Loans, on the face of it, they seem to have a pretty keen 'buy to let' deal, but I am waiting for the details.

One other thought on the property market, I guess some real 'smart cookies' must have pulled out of the stock market during the technology boom to plough their gains into bricks and mortar. They must be sitting pretty at the momement. If the super smart money, starts to feel that the market is nearing the bottom (4 500 take say 10%???), and property near the top, they may switch back from property to stocks after the summer, this and the other factors (interest rates and unemployment etc.) may be enough to precipitate a down durn in property prices in the New Year. (London and SE say, 20%, and elsewhere approx. 10% imho??). But longterm (5-10 years), I still think property will be a solid if not spectacular investment, and better than a 'rip off' pension any day.

Is anyone into commercial property investments? It seems to me, that the valuations for shops and offices are not as extreme as residential property, and returns are more secure with FRI leases, and upward only rent reviews. Anyone have an opinion or knowledge of this sector?

[bristolbaz] 01/7/2002 11:57

sell now, rent, buy 3 or 4 properties in Cyprus, reap the rewards in two years when they join the EU

[energyi] 01/7/2002 11:20

independent financial adviser on site...

Remember "independent financial adviser" is a spin-term for:
commission salesman.

[skirbell] 01/7/2002 08:14

I've just got back from an 8 month jaunt around the world and the possibilities for buying property in foriegn countries looks very interesting. Of most interest is South Africa. My finacees uncle and aunt have just purchased a lovely 2 bedroom flat in Cape Town overlooking the Atlantic. This flat can be rented for 6 weeks in the high season, December to Jan, and this will cover the mortgage for the year. The rest of the time, they plan to either use it as a second property or rent it out to earn a bit. And the cost of the flat is far cheaper than properties over here.

Another alternative is to let the property out to us visiting Brits, who, quite frankly, are idiots when it comes to holidays and would be willing to pay any figure made up by travel agents. Set up your own web site and let the property for say, 400 GBP a week an short lets. That way you get to earn good money and in pounds rather than those flaky rands. Food for thought.

[muchos wonga] 01/7/2002 07:41

limeroad

We sold a property which were letting out in Sadly Broke (Bradley Stoke to those who don't know Bristol) about 4 years ago for about £70K. We used to make a small rental profit on it and made about £10K capital gain in 7 years but only because the Mrs got a staff discount on it when she originally bought it.

Five years ago, you could hardly give them away, not even to Buy To Letters. Now of course, its probably doubled in price and, as you say, its considered a bargain and probably being described as 'an up and coming area'.

[itsourpete] 01/7/2002 07:15

sabeen - there's far better deals available than the Legal & General deal you've been offered. Get hold of any of this month's MORTGAGE magazines at your local newsagents and do some research. The are BTL deals with no redemption penalties at any time available - allowing you the flexibility to sell when you like or switch mortgage deals whenever better deals come along.

Pete

[maxk] 01/7/2002 00:03

BB,

They will all be bankrupt by then. Who is going to pay the bill?

[limeroad] 30/6/2002 22:52

In Bristol there is a massive boom at the moment and has been for the last 5 years. EG my house 3 bed victorian house 5 years ago this August was £54,000 and £10,000 cheaper the year before, but now June 2002 is nearly £160,000 how ridiculous is that. It is now considered a bargain ! AND it is getting worse. Yeh sure Bristol is booming with lots of new business, jobs and 2 large universities but it has got to stop soon or there will be a lot of tears for sure, especially when the interest rates start creeping up to try to curb the retail spending boom and all. It is getting to the stage where even if you do have a house, it is too expensive to move elsewhere so your stumped. Or 200 year mortgage terms - even more ridiculous.