Is it easy to sell a house in East Dulwich?

[Jeremy]

Cyclemonkey Wrote:

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

> Jeremy - you are a bit behind the times

True in so many ways...

[Earl Aelfheah]

LondonMix Wrote:

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

> The average price of a terraced property in London

> is of ?569,906

> http://www.rightmove.co.uk/house-prices-in-my-area

> /marketTrendsTotalPropertiesSoldAndAveragePrice.ht

> ml?searchLocation=SE22

>

> The average price of a terraced property in SE22

> is 757,600

>

> http://www.rightmove.co.uk/house-prices-in-my-area

> /marketTrendsTotalPropertiesSoldAndAveragePrice.ht

> ml?searchLocation=SE22

>

> I can't find the original map but to me, that

> suggest a significant difference between average

> and SE22. However, I am happy to agree to

> disagree.

I suspect that if you looked at the average price in zones 1-2 though, ED would come out towards the cheaper end.

[LondonMix]

Maybe-- though I'm not sure why that matters.

ED like most places in zone 2 are relatively very expensive relative to London more broadly. These aren't averagely priced areas in part due to their location.

[johnki]

Help-ma-Moab -

Another way of trying to determine value is to identify the potential yield if you were able to rent the place out, for example if the place can be rented for ?1000 a month and is on the market for 250k the yield would be 4.8% (1k x 12 months/price)

I'm led to believe average yields in SE london are around 4.5% but I'd expect lower yields in the more 'prime' areas where capital growth is more likely or secure

[Jeremy]

Not sure that's such a hot idea, johnki. For a few reasons.. firstly rental rate can be just as subjective as the value (i.e. "falling in love" with it to borrow HMB's turn of phrase). Secondly, some types of property have a higher rental yield than others due to cheaper purchase price - e.g. ex-council properties, flats above shops, properties without gardens, etc.

[johnki]

Jeremy, you are right, it is subjective, the question was about value though, not how much you would pay for it. Undoubtably people act irrationally sometimes when they see a property they must have, however if you are trying to work out how much it's 'value' is yields are an indicator that can help

[Penguin68]

Another way of trying to determine value is to identify the potential yield if you were able to rent the place out, for example if the place can be rented for ?1000 a month and is on the market for 250k the yield would be 4.8% (1k x 12 months/price)

Doesn't quite work like that, I think. A rentier 'earns' from a house in 2 ways - changes in house value together with rental income. The return on rental income is based not on the absolute value of the house, but on the rentier's capital invested. So if I buy a flat valued at ?350k - and put in ?50k of my own capital than the ROCE is based on that ?50k and not the purchase price of the property. I will be paying back the loan (the interest element of which is allowable against tax) and if the property doubles in value I will now have an investment worth ?400k (made up of ?50k deposit and ?350k capital increase). Obviously house prices can go down as well as up. But estimating the 'value' of a house by assuming a ROCE of 4.5% (not unreasonable) and scaling up from the gross rental paid to estimate the property value doesn't I think work. Rentals are based on market forces - not underlying investment. After all, the rent for a particular property would be the same, one assumes, regardless of what the owner's investment was in it. In an economy where all property was rented, and in the same way, then you might be able to work this sort of sum, but not in a mixed economy.

[Henry_17]

Help-ma-moab,

This tool may help with the calculations Johnkl and Penguin are describing: http://investingsidekick.com/house-buying-vs-renting/

Henry

[Loz]

Penguin68 Wrote:

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

> The return on rental income is based not on the absolute value of the house, but on the rentier's capital invested.

> So if I buy a flat valued at ?350k - and put in ?50k of my own capital than the ROCE is based on that ?50k and not

> the purchase price of the property. I will be paying back the loan (the interest element of which is allowable against

> tax) and if the property doubles in value I will now have an investment worth ?400k (made up of ?50k deposit and ?350k

> capital increase). Obviously house prices can go down as well as up. But estimating the 'value' of a house by assuming

> a ROCE of 4.5% (not unreasonable) and scaling up from the gross rental paid to estimate the property value doesn't I

> think work. Rentals are based on market forces - not underlying investment.

That's true penguin68, but yields are a pointer as to whether a ROI is worth it or not. At the moment, a 3.5% yield (not at all uncommon in London) means that the return on renting is minimal, especially given the recent stall in house prices. 3.5% may sound a lot, but that is gross - after servicing debt (most BTL mortgages are 4%+), covering voids, plus maintenance and insurance is paid out, there is not a lot left.

Investors generally think yields should be a minimum of 5-7% to make a suitable ROI. So the rent market and the sales market are out of alignment in London at the moment. That will almost certainly correct in the longer term.

[Penguin68]

Investors generally think yields should be a minimum of 5-7% to make a suitable ROI. So the rent market and the sales market are out of alignment in London at the moment. That will almost certainly correct in the longer term.

With a rising property market many investors are happy if their rental income 'washes its face' (covers costs, including debt) - as the capital value of their investment increases (an increase they alone take the benefit from - their lenders simply having debt equity in the investment. [Like many home owners around here, my house 'earned' more than I did in the last 18 months, which I could have leveraged into additional debt to make further acquisition, but didn't!]. Rentiers can use increased valuations to leverage more debt and acquire more properties. Combine that with high(er) inflation (in the past) and that's a good business model - as debt becomes increasingly worth less. At the moment falling, or at least stagnating house prices and very low inflation make being a rentier less appealing. There may well be a correction in the market, but that might actually drive up rental charges, as other offsetting benefits from being a rentier atrophy, and there is a need to get your money do more than just wash it's face within the current account, as the capital values stagnate or reduce.

Alternatively, buy-to-let may look increasingly unattractive - if the market cannot sustain increased rental charges, in which case more properties may appear in the buy-to-live market - which will have a tendancy to reduce futher house prices and force the necessary corrections into the market.

Edited to add - If you think of property as an investment, then like any investor you can invest for income (dividends; in the case of property net rental) or capital appreciation - the capital appreciation route looks now less certain for domestic property - and the 'dividends' are not so compelling - so (maybe) investment in domestic property as a business will tail off - which should benefit those planning to buy to live - i.e. (still) the majority of those in the domestic property market.

[Earl Aelfheah]

Around the spring, when the market was soaring, a small number of properties in Ed started selling for over a million. I think this encouraged quite a few would be sellers into the market, shocked at the how much their houses may now be worth. Supply is up as a result and the frenzied panic of the spring (when there were lots of buyers competing for few properties) has dropped back (along with prices).

A number of 4 bedders have now come on the market at around 800k. Still a high price but at least a couple of hundred thousand less then even a month ago. I suspect things will level off now, for a while, (with maybe a brief pick up in the spring again, next year). Fundamentally, there is a huge issue in terms of affordability and no longer such an issue with supply.

[LondonMix]

A number of houses have sold for 1m and did so from late 2013.

What seems to no longer be possible is a relatively small house with a side return and loft extension selling for 1.2m and above:

http://www.rightmove.co.uk/house-prices/detailMatching.html?prop=45594374&sale=51852293&country=england

http://www.rightmove.co.uk/house-prices/detailMatching.html?prop=45753578&sale=51852341&country=england

[Beej]

do those two houses not utterly bore anyone else? no? Just me? No offence to anyone who lives in them.

[Jeremy]

They look OK... you can always redecorate you know! Space is the main thing for most people, I reckon.

[miga]

.

[LD929]

For ED standards, those houses are big.

[LondonMix]

Not really. Those houses have been extended on the ground florr and had double loft conversions but the original structure wasn't large. There are much larger houses on Upland Road, Friern Road, Underhill and Overhill and even Oakhurst not to mention Mundania and the large houses on Crystal Palace (I viewed over 100 houses when we were buying in the area and have lots of friends so have seen pretty much allt he housing stock in SE22).

Pre-extension these would have been bog-standard 3-bed homes of circa 1,000- 1,100 sft which is pretty average.

More and more homes in the area are undergoing these types of extensions so in 10 years time most homes will actually be 4-5 beds measuring 1,600-1,800 sqft.

To do extensions like this costs circa 110k assuming nothing else is wrong with the house. When you factor in the cost of moving, it makes sense for most people to extend rather than move these days. The stamp duty alone is tens of thousands (50k for a 1m quid property) before you factor in the higher purchase price as well.

My husband and I have done both ground floor and loft in our house and it makes the house seem so much bigger.

[dumpertruck]

miga Wrote:

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

> that second one 500k jul 2012 -> 1.25m jul 2014.

> yowzers.

Yes, the couple who bought it in 2012 did a fair amount of work to it - but not ?750k's worth.

It's probably lost about at least ?100K in value since July... ouch.

[LondonMix]

Yes, unless there were other issues with the house, I think 100-120k is what they spent and the market has moved since...

[Help-Ma-Boab]

As I embark on my search for my first flat down South I made the mistake of entering my rough budget into Rightmove and putting in my home postcode in Scotland. Could just about get this!

http://www.rightmove.co.uk/property-for-sale/property-38845354.html

[StraferJack]

they moved in two years ago, spend over a hundred grand and are selling now?

Unless there are family issues, what we have here is money grabbing, baseline inflating, greedy sods. Thanks for that guys... well done for being one of the many people creaming off money at the expense of other people

I don't mind wealthier people moving to the area and settling down, and I don't mind if that drives up prices. But when people do it just to make a buck and couldn't give a shite about the area?

[LondonMix]

To be fair, they probably intended to stay. Selling and moving to cheaper area and using the unanticipated increase in value in your house to have a better quality life isn't something I can be mad at anyone for.

For all we know, this might allow one of the two to start a business or live mortgage free and work less. They clearly weren't developers. Just people who happen to buy and sell at the right time after doing a lot of hard work.

[dumpertruck]

Not sure we should start putting the boot in. They may well have had every intention of staying and putting down roots, but then the market went nuts, their investment doubled in the blink of an eye... and they decided to cash in. Who wouldn't be tempted?

[Loz]

Help-Ma-Boab Wrote:

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

> As I embark on my search for my first flat down

> South I made the mistake of entering my rough

> budget into Rightmove and putting in my home

> postcode in Scotland. Could just about get this!

>

> http://www.rightmove.co.uk/property-for-sale/prope

> rty-38845354.html

My brother-in-law has just bought a lovely 3-bed house in a village not far out of Derby - ?175k. It would be worth at least ?650k (4x!) in ED.

[Jeremy]

If that house was bought for 500K in 2012, it must have been in one hell of a terrible state! I remember looking at houses at around the same time, it was impossible to get something in acceptable condition in a convenient location for under 600.