Trying to buy a house in this area is near impossible

[Blackcurrant]

StraferJack Wrote:

-------------------------------------------------------

> i wouldn't mind jailing anyone who uses the phrase

> "rental yields"

>

> I take your point (if not necessarily agree) about

> buy-to-let being unnatractive at these levels -

> but rental yields aside you are still getting

> other people to pay your mortgage. Even at a loss

> every month you end up with an asset much more

> valuable than your no-paid-for mortgage

Yes but the gain is based entirely on price speculation, so it's pure gambling. It would only take a tiny hike in the bank rate to turn sentiment when the market has drifted so far from rational means of valuation. An investor might as well bet all their money on bitcoin or gold - equally crazy.

[StraferJack]

I'd rather they did do that instead of hoovering up limited housing stock to be honest

[Penguin68]

An investor might as well bet all their money on bitcoin or gold - equally crazy.

Well, that puts paid to the stock market, to any form of currency speculation, to investing in any form of asset or raw material - so goodbye to all City activity. Even the insurance business is one based on risk - ask any Lloyds Name of the 1980s or before.

And, by the way, if there is a downturn in house price assets then you may also expect any revenues from rentals to fall as well - as people are able to afford to move out of the rental to the purchase market with falling house prices.

ALL investments carry risk - and hoping to live off rentals alone destroyed many 19th century familes, who had previously lived well as rentiers.

[motorbird83]

DaveR Wrote:

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> BTW, has anybody actually paid ?1 million yet for

> a 'normal' ED house?

Yep:

http://www.rightmove.co.uk/house-prices/detailMatching.html?prop=42438371&sale=50402987&country=england

http://www.rightmove.co.uk/house-prices/detailMatching.html?prop=39909598&sale=50172515&country=england

This last one is also pretty close and given these properties would have gone under offer back in late summer, I imagine many extended 4-bed terraces could now fetch ?1m

http://www.rightmove.co.uk/house-prices/detailMatching.html?prop=40926643&sale=50668643&country=england

[strae]

Amusingly, the 2 houses you point out are right next to each other and exchanged one day apart!

motorbird83 Wrote:

-------------------------------------------------------

> DaveR Wrote:

> --------------------------------------------------

> -----

> > BTW, has anybody actually paid ?1 million yet

> for

> > a 'normal' ED house?

>

> Yep:

>

> http://www.rightmove.co.uk/house-prices/detailMatc

> hing.html?prop=42438371&sale=50402987&country=engl

> and

> http://www.rightmove.co.uk/house-prices/detailMatc

> hing.html?prop=39909598&sale=50172515&country=engl

> and

>

> This last one is also pretty close and given these

> properties would have gone under offer back in

> late summer, I imagine many extended 4-bed

> terraces could now fetch ?1m

>

> http://www.rightmove.co.uk/house-prices/detailMatc

> hing.html?prop=40926643&sale=50668643&country=engl

> and

[Blackcurrant]

Penguin68 Wrote:

-------------------------------------------------------

> An investor might as well bet all their money on

> bitcoin or gold - equally crazy.

>

> Well, that puts paid to the stock market, to any

> form of currency speculation, to investing in any

> form of asset or raw material - so goodbye to all

> City activity. Even the insurance business is one

> based on risk - ask any Lloyds Name of the 1980s

> or before.

>

> And, by the way, if there is a downturn in house

> price assets then you may also expect any revenues

> from rentals to fall as well - as people are able

> to afford to move out of the rental to the

> purchase market with falling house prices.

>

> ALL investments carry risk - and hoping to live

> off rentals alone destroyed many 19th century

> familes, who had previously lived well as

> rentiers.

The point I was making is that investors value assets by looking at the income they produce, e.g. with shares you might look at price to earnings ratio or dividends. Gold and bitcoin produce no income so are purely speculative. If people buy property without considering rental yield, they are making a purely speculative bet just like a bet on gold or bitcoin. Given how high house prices in London have now risen, and how far values have drifted from sensible measures based on rental yield, I reckon most sales must be to prospective owners rather than investors.

Any market can drift away from fundamentals when herd mentality sets in, but eventually reality will reassert itself. That means that a correction is on the cards. Either rental yields are going to rise dramatically or prices are going to fall. The government clearly wants the former as it is doing everything in its power to push up wage inflation, but so far with little success. They certainly don't want a house price crash as it will cause solvency problems in banks (whose main assets are loans secured against property) and bring on another credit crisis. But they aren't really in control of things, so I think a price fall is very much on the cards, particularly in London.

[strae]

Seems we have a few posters on this thread who are calling a bubble and awaiting the day of reckoning. How did this group make out in 2007/08? Did you all pounce and buy your dream homes for a fraction of the price?

I am not sure I know of anyone in London who:

1. Was forced to sell at the bottom (negative equity maybe, but mortgage payments much lower than rents definitely)

2. Whose house is now not worth more in absolute number of pounds since then

3. Whose historical mortgage is not "cheaper" relative to current offers

I do know a few people who were renting, and sitting on a deposit for a house patiently waiting for the crash, who then found themselves facing:

1. A market with fewer homes for sale that were actually desirable (i.e. buy to let stock not the same as family house)

2. Much more difficult and expensive mortgage market

3. Devaluation of their savings due to inflation being higher than savings interest rates

I was one of them.

Thx to QE/BoE, patient/risk-averse savers didn't exactly do well and its hard to make the case that aggressive risky behaviour was punished. At least not in London. Why do we think it's going to be any different?

[Penguin68]

The point I was making is that investors value assets by looking at the income they produce, e.g. with shares you might look at price to earnings ratio or dividends

That is simply not true - many shares (e.g. Microsoft) do not pay dividends ever, or for very long periods of time - day-traders are wholly uninterested in dividend earnings, as are many of those who 'play' the stock exchange - and certainly many of those who operate hedge funds - certainly some share owning strategies (LTBH - long time buy and hold) are interested in dividend as well as capital returns - and some types of fund (i.e. pension funds) are looking for dividend earnings, but for many who buy stock and shares it is the share price movement (up or down - taking account taking short positions) which are of interest.

Investers absolutely do not value assets by analysing incomes in many cases - hence dot com bubbles etc. You will see asset values identified by income streams on programmes such as Dragon's Den - but this type of funding (when funders take significant stakes in businesses) is unusual. I am not saying that 'most' inverstors are right - there are many who will properly attack 'casino' banking for instance - but punters do (very often) look for price changes, not dividend flows.

Investor sentiment rarely appears rational - so those investing in domestic property are no more irrational than (most) other investors. Share and other price crashes are no more a symptom of 'reality' as share or other price bubbles. Markets 'correct' themselves by smoothing peaks and troughs - but the real (I make something or do something and get paid for it) economy has long been completely divorced from financial and other markets. 'Bank Rate' used to mean something - but very few people have been able to borrow at 0.5% or anything near that for a very long time (including banks themselves - hence the issues about LIBOR).

Speculation on house prices is as sensible, or mad, as any other speculation. If you believe the market is close to a peak, then buying isn't a good idea as a peak implies an ensuing trough, but if the slope is still rising (and demand from outside the UK on the London housing market still looks strong, particularly as people fly other risk areas) then buying on the up is still a good idea (and then selling on the 'peak' if you aren't buying a home but an investment.

[Loz]

StraferJack Wrote:

-------------------------------------------------------

> i wouldn't mind jailing anyone who uses the phrase "rental yields"

You have a better phrase to describe the money made form rentals?

> I take your point (if not necessarily agree) about

> buy-to-let being unnatractive at these levels -

> but rental yields aside you are still getting

> other people to pay your mortgage. Even at a loss

> every month you end up with an asset much more

> valuable than your no-paid-for mortgage

Most BTL mortgages are interest-only, so the capital never gets paid down. ?400K at 4% gives you interest of ?1333 per month, on a property that would probably rent out for 1400-1700 at the moment. So not much left there for costs like insurance, repairs/repainting, appliances, agents (if used), etc. So you are relying entirely on the capital growth of the property. And that, at the moment is a big risk.

It's usually people who aren't Landlords that paint such a rosy picture of renting properties. If it was such easy money, why don't they do it themselves? Answer: because reality is, unsurprisingly, rather different.

[StraferJack]

Not saying it's "easy" money

But I am saying it's taking housing stock and putting it in the hands of fewer people. Btl might be a riskier bet now but fair to say it has been booming. And whilst those who can do it, it has fuelled house prices. So it has been at the expense of people who simply want to own their own home

[????]

Also, BTL has become a reasonable choice for pensions since the late 1990s, especially for thsoe in the private sector whose Final salary schemes and private pension schemes* were dealt an enormous blow by Good old Gordon's tax grab on dividends - this has been pretty disastrous for those that don't have guranteed pensions underwritten by the state, so that has pushed many people into property. Not just 'spare' cash and luxury but a decision on what the hell am I going to retire on by those in the private sector.

*the latter were also vastly optimistic in return terms too but this was massively conmpounded by GBs stealth tax

[StraferJack]

I'm pretty sure pensions have suffered because of global financial mismanagement much more than a small petty grab by GB. Private companies have been rolling back their pensions for yonks - they are met with no resistance so why wouldn't they?

and the wisdom of property-as-pension isn't being disagreed with. But it is what it is - those with assets/money taking more at the expense of those who don't

and a sustainable map for future old age generations it ain't

[Otta]

I fully accept that public sector workers are lucky to have pensions, but I do feel the need to add that most of us are not getting the pensions we uused to get. Cilil Service and Police still doing pretty darn well, but my pension scheme is nowhere near as good as the one I got when I started in public sector 12 years ago.

Just to add some balance.

[AnotherEDer]

Getting away from the debate on BTL here, but do you think the current market conditions will alter the process for mid chain purchases? For instance, the idea was always to accept an offer on your current property BEFORE going hunting for your next purchase.

But with so little supply, which means so much pressure, will sellers now wait to secure their next house before accepting offers on their own place (especially as it seems almost guaranteed they won't have problems finding a buyer). Risky for the whole chain I realise, but isn't the alternative that the first time buyers at the bottom of the chain could be waiting months & months for the second part of the chain to find something?

[Ramble66]

There's too much competition to do that.

You basically have to submit your CV when you out in an offer.

We started looking before putting our flat on the market and it soon became clear we would never have our offer accepted until we had a buyer.

When we put in a offer we were expected to supply solicitors details for ourselves and our buyer, our deposit, our mortgage agreement, our buyers details all before the estate agent would put our offer forward.

When we put the flat on the estate agent just said it was tough on the buyers if we didn't find anything and decided to pull out.......

[gm99]

One thought on all of this concerns the surveyors doing valuations for mortgage lenders - who should surely be the voice of reason when everyone else is losing their minds (or are all of these purchases primarily cash?). At what point does short-term market behaviour outstrip middle to long-term fundamentals and result in surveyors down-valuing? Any surveyors reading this and can offer an informed opinion?

[AnotherEDer]

I see. But you weren't worried that your buyers would pull out? And during the period of searching for a new place, were you paying estate agent fees?

[Otta]

AnotherEDer Wrote:

-------------------------------------------------------

> Getting away from the debate on BTL here, but do

> you think the current market conditions will alter

> the process for mid chain purchases? For instance,

> the idea was always to accept an offer on your

> current property BEFORE going hunting for your

> next purchase.

>

> But with so little supply, which means so much

> pressure, will sellers now wait to secure their

> next house before accepting offers on their own

> place (especially as it seems almost guaranteed

> they won't have problems finding a buyer). Risky

> for the whole chain I realise, but isn't the

> alternative that the first time buyers at the

> bottom of the chain could be waiting months &

> months for the second part of the chain to find

> something?

My colleague is in this situation, she put her place on the market before Christmas and got an offer very quickly. Unfortunately though she can't find anything in the area she wants to move to, and is seeing the prices rise month by month. She thinks the buyers will pull out very soon, and she's starting to think that she won't afford anything now. Only bonus I guess is that if her buyers pull out now, she may find that her place has gone up in value a bit...

[v_the_gelfling]

I started looking for a house whilst speaking to agents. I decided which agent to use and then found a house at the weekend and made an offer. Today has been a manic rush of photographers etc coming round with the view of going on the market tomorrow and hopefully selling quickly given the conditions. The house owner has taken their property off the market for one week whilst we find a buyer.

[Ramble66]

We only pay estate agent fees if we sell.

There are so few properties on the market and as prices are rising it would be silly for buyers to pull out.

We haven't heard back from the surveys yet. I would be surprised if there was some 'undervaluing'.

[BB100]

Beware of buying property on that Catford Greyhound site. When i saw the plans a few years ago at a sham of a public consultation there was a circular thing on the plan and the rep refused to tell me what it was. I only asked out of interest but his refusal to tell me was very suspicious and I never found out. They also wouldn't tell me how many car park spaces they planned - obviously not enough.

Catford property is historically cheap because of the lack of decent schools and the town centre has drunks and drug dealers ever present.

[Lowlander]

gm99 Wrote:

-------------------------------------------------------

> One thought on all of this concerns the surveyors

> doing valuations for mortgage lenders - who should

> surely be the voice of reason when everyone else

> is losing their minds (or are all of these

> purchases primarily cash?). At what point does

> short-term market behaviour outstrip middle to

> long-term fundamentals and result in surveyors

> down-valuing? Any surveyors reading this and can

> offer an informed opinion?

We just re mortgaged through Nationwide, and the surveyor valued the property at 15% less than the EA's maximum. Which was still 1/3 more than we paid for the place in 2011.

[aileking]

In my experience the estate agents valuations are still under what people are willing to pay. I've now offered on eight properties (unsuccessfully) and all of them have sold for well over asking price (ranging from ?8000 to more than ?50,000 over the asking price). One property I looked at was taken back off the market and then three months later sold for ?100,000 more than the original asking price (from ?339K to ?445K in 3 months!). Most have gone for around ?25-50K more than asking price. This is properties in the surrounding areas (Forest Hill, Honor Oak, Nunhead, Ladywell, Catford) in the ?300-350K range. I've been basically looking for a year so this is all based on actual sold prices as reported by Rightmove. It's been said before but it's easy to accept what you can and can't afford but the trouble is that for the last year that has changed on a monthly basis (and when you think you can afford something as it is ?10-15K under your max budget you find out you can't as people are putting bids at ?30-?50K over asking). I also wonder if the mortgage evaluations at some point will start stalling the process.

[miga]

.

[fazer71]

^ THIS

It's a double tax on earned income.

It's already been taxed so it's a double tax,,, how on earth is that OK ??? Weird Socialist thinking here me thinks.

The very rich avoid paying IHT so everyone else gets relatively poorer and that's not good.

It should be scrapped or properly applied.

Should be inflation linked, it's now become a stealth tax.

Shocking.

The problem with house prices is the lack of houses if councils build on all the empty plots of land they own then there wouldn't be a housing shortage.