Reply to: New thread: house prices

[hugebrain]

It's one of those maths things

T

OK, how much do they pay in rent? If it is more than the mortgage repayments, why do they not just buy the house? If it is less than the mortgage repayments, why is the landlord holding on to the property?

For it to be profitable, the rent does not have to be more than the cost of the mortgage payments. The rent just has to cover the upkeep expenses and the difference between the mortgage payment and the risk-free rate of return on the mortgage amount.

The profit comes from the amount borrowed being depreciated by inflation.

[timh]

Just imagine how cantankerous some people here will have become in 30 years!

[Clippy]

There's a big new development just near my house, and they've just put up "assisted living" signs. Yes it's retirement flats.

I don't know what that says about the house market.

It says more about the local demographic, and maybe the population as a whole.

The number of old people is rising as we are living longer - great, another 30 years of this board to look forward to!

[VectraMan]

There's a big new development just near my house, and they've just put up "assisted living" signs. Yes it's retirement flats.

I don't know what that says about the house market.

[ASB]

aimed squarely at BTL (they have electric heating!)

Electric heating doesn't mean they are squarely aimed at BTL. It just means they are complying with current building regs.

Given the size of the development there will also be social housing on it. Can the housing association deal with those - round my way they can't get HA tenants on subsidised rents in the new build either.

[King Cnvt]

http://news.bbc.co.uk/1/hi/business/6730809.stm

UK house prices could rise to the equivalent of ten times average salaries by 2026, a newly-established think-tank has said.


Buy now whilst they're cheap!

[Bagpuss]

Buyers work on the "greater fool" theory, that it doesn't matter if they pay a stupid price for something, because an even bigger idiot will be along shortly to pay even more for it.

I invest based on the real income I expect. For real assets (property and shares) I expect them to broadly keep up with inflation and the "real income" is what I expect on top of that. My current expectations are

• for cash deposits and bond funds, the real return is the interest yield less the rate of inflation (currently about 6%-3% = 3%)
• for property, the real retun is the profit on the rent (currently 4.5% for commercial property, don't know for residential as I don't have any, but it's less than that.)
• for shares, the real retun is the reciprocal of the cyclically-adjusted PE ratio. (Currently expect 4.6% annual return on shares over and above inflation.)

You talk too much sense, you need some BTLs before it's too late

[IR35 Avoider]

But why will the new BTL buyer pay a higher price for it? Not for the rent. It must be that he too expects an increase in price that he can profit from later, even if he has to rent it at a net negative yield in the meantime.

Buyers work on the "greater fool" theory, that it doesn't matter if they pay a stupid price for something, because an even bigger idiot will be along shortly to pay even more for it.

I invest based on the real income I expect. For real assets (property and shares) I expect them to broadly keep up with inflation and the "real income" is what I expect on top of that. My current expectations are

• for cash deposits and bond funds, the real return is the interest yield less the rate of inflation (currently about 6%-3% = 3%)
• for property, the real retun is the profit on the rent (currently 4.5% for commercial property, don't know for residential as I don't have any, but it's less than that.)
• for shares, the real retun is the reciprocal of the cyclically-adjusted PE ratio. (Currently expect 4.6% annual return on shares over and above inflation.)

[Clippy]

Your question would fit nicely into the forums of:

www.housepricecrash.co.uk

Those guys there spend all day and every day discussing house prices. One guy has over 10000 posts - all about the same subject. Its's amazing how they can do this and keep each posting unique text, I think.

In fact, just for a laugh, I'll put a link to this posting on that site. Expect 10 or 15 new non-IT contractors to register on ContractorUK.com to write their views...

Don't bother!

[tim123]

What happens when he (& all the other landlords) raise the rents?

They're building an estate of 300 appartments aimed squarely at BTL (they have electric heating!) a few streets away from me, so that (a rent rise) just ain't gonna happen.

tim

[Bagpuss]

About the only thing in that statement that makes any sense is the word "simple" which describes you nicely.

And what is your theory then for rents stagnating while house prices rise?

and don't come up with the simple supply and demand answer because it's apparent there is lots of housing supply

[sasguru]

Wait till all BTL landlords form a cartel

[Rantor]

What happens when he (& all the other landlords) raise the rents?

It has been tried in various areas - the market tends not to support it and they end up with an empty property.

The pressure on rents is actually downward in many areas because of over-supply in some sectors (2 bed 'apartments' especially.)

[Troll]

Yep, you have IMHO hit the nail square on the head.

9 months ago I cashed out my 200K flat and rented a similar property. I'm paying 780 per month and I'm saving the 1000 a year that I previously paid in maintenance charges.

This is giving the landlord a return of little over 3% on the value of the property (tghough I'm sure that he paid much less for it) and I am more or less paying the rent out of the interest on my saying not owing a 200K flat.

By keeping the property, he's gambling on the price going up even more and I'm gambling on it not.

tim

What happens when he (& all the other landlords) raise the rents?

[KentPhilip]

Your question would fit nicely into the forums of:

www.housepricecrash.co.uk

Those guys there spend all day and every day discussing house prices. One guy has over 10000 posts - all about the same subject. Its's amazing how they can do this and keep each posting unique text, I think.

In fact, just for a laugh, I'll put a link to this posting on that site. Expect 10 or 15 new non-IT contractors to register on ContractorUK.com to write their views...