Reply to: IMF Warning - UK housing

[max]

I was thinking about it to keep me occupied while on the bench after this contract or during the winter in the sun.

Money only in a higher rate "I have written a book on it" kind of way.

PM me if I can contact these guys

Check out this blog...has some interesting insights on the economics of writing technical books

http://ejohn.org/blog/programming-book-profits/

[Diver]

It's called house sharing and has been going on for centuries. Do you not realize the drop in prices will affect you big time. A 30% drop will wipe off 60K from a 200K house and it's probably going to be worse. OK your headline yield will go up, but the caital base will crumble. You're gonna need some hefty rent rises to get back £60K any time soon

The BTL sector is very vunerable. Many will try to lock in gain this years by selling now to take advantage of the lower capital gains. Those that try to refinance expired 2 yr deals now face 8+% (factoring in the huge fees that are added on top). If the lower prices make the LTV slip below 80 or 85% then they can be foreclosed, if they don't top up the mortgage with their own money. Many new BTLer are facing up to real trouble. The problem for you is that there distress will affect your BTL property as many BTL type properties may drop potentially 50%.

My BTL properties were purchased and paid for many years ago
Property values and interest rates will have no affect on me whatsoever. the properties are worth a minimum of 60% more than when I bought them anyway, a drop in value of 60% would not affect me, as I am not intending to sell my properties for many years to come, if ever I may place them in trust for my granddaughters.

[BrilloPad]

It's called house sharing and has been going on for centuries. Do you not realize the drop in prices will affect you big time. A 30% drop will wipe off 60K from a 200K house and it's probably going to be worse. OK your headline yield will go up, but the caital base will crumble. You're gonna need some hefty rent rises to get back £60K and time soon

The BTL sector is very vunerable. Many will try to lock in gain this years by selling now to take advantage of the lower capital gains. Those that try to refinance expired 2 yr deals now face 8+% (factoring in the huge fees that are added on top). If the lower prices make the LTV slip below 80 or 85% then they can be foreclosed, if they don't top up the mortgage with their own money. Many new BTLer are facing up to real trouble. The problem for you is that there distress will affect your BTL property as many BTL type properties may drop potentially 50%.

How much a house is worth only matters if you are selling or not. If Diver had his house a long while and is planning to sell in a long while, does a short term drop matter?

Of course the house price drops are still speculation - though I am sure prices will go down 10% - does that mean they will drop 30%? Or 50%?

Of course, if I had money to invest now I would NOT be putting it into housing at this moment. But that does not mean one should liquidate an existing position.

It is sort of the difference between hard arbitrage and soft arbitrage.

[Turion]

already there, and demand is already increasing for rental properties. I have two renters sharing a house now (their choice) as they could not afford the lease individually.
I can see a major crisis coming for the property market though. a Drop of 15% in house values will cause a cascade, let alone 30%.
One thing I have noticed, the junk mail coming through the door recently, no longer contains the usual pile of mortgage and loan offers.

It's called house sharing and has been going on for centuries. Do you not realize the drop in prices will affect you big time. A 30% drop will wipe off 60K from a 200K house and it's probably going to be worse. OK your headline yield will go up, but the caital base will crumble. You're gonna need some hefty rent rises to get back £60K any time soon

The BTL sector is very vunerable. Many will try to lock in gain this years by selling now to take advantage of the lower capital gains. Those that try to refinance expired 2 yr deals now face 8+% (factoring in the huge fees that are added on top). If the lower prices make the LTV slip below 80 or 85% then they can be foreclosed, if they don't top up the mortgage with their own money. Many new BTLer are facing up to real trouble. The problem for you is that there distress will affect your BTL property as many BTL type properties may drop potentially 50%.

[BrilloPad]

One thing I have noticed, the junk mail coming through the door recently, no longer contains the usual pile of mortgage and loan offers

So all that money that was available to loan a few months ago - where is it now?

[Diver]

Originally Posted by The Lone Gunman View Post
...
If it stagnates or falls then get into BTL. People will still need somewhere to live so rents could get silly.

already there, and demand is already increasing for rental properties. I have two renters sharing a house now (their choice) as they could not afford the lease individually.
I can see a major crisis coming for the property market though. a Drop of 15% in house values will cause a cascade, let alone 30%.
One thing I have noticed, the junk mail coming through the door recently, no longer contains the usual pile of mortgage and loan offers.

[BrilloPad]

IMF Warning

Are they wrong?

Is the UK different?

Interesting graphic - I doubt the areas highlighted are the biggest risk. London must be the most overvalued?

[Turion]

a warning that houses will lose 30% of price - that would only take them back to what they were 2 and a half years ago. That's not much of a crash is it?

It's a big drop, and to recover would take a corresponding 50% rise! Prices have not gone up by 50% in 2.5 yrs.

No, sorry, in fact, it's way worse than that. Let me explain:

1. If that 30% drop takes place over 5 years, and the RPI averages 4%, then you are looking at a 50%+ drop in real terms!
   
2. If cash deposit rate averages 5% during that period, and your asset declines by 30% then compared to someone who sold up and put the cash on deposit you are 55%+ down!
   
3. If shares double in during that period, and your asset declines by 30% then compared to someone who sold up and put the cash on a FTSE tracker, you are 130% down. A real possibility

1 and 2 are very real. 3 is a possibilty. Shares are unlikely to fall during these next 5 years as they are still below the 1999 level and they average 4% dividend return. I know where my money is.

[AtW]

a warning that houses will lose 30% of price - that would only take them back to what they were 2 and a half years ago. That's not much of a crash is it?

Who says they won't continue falling in 2 years time? I'd say 30% drop is pretty much given - as people get desperate falls will only accelerate. This year at least 3 mln households will come off cheap rates to pay a lot more, give them 12-18 months and a lot of them will start crumbling. And then finally in 2 years people who got cheap rates in 2007 (at peak house prices) will be also coming off those deals. It may well be that London 2012 Olympics will be done on the cheap construction wise.

[thunderlizard]

a warning that houses will lose 30% of price - that would only take them back to what they were 2 and a half years ago. That's not much of a crash is it?

[snaw]

I know the guy who wrote the IBM TCP networking book back in the day. Didn't notice he was getting paid excessively more than anyone else. Super bright guy though, and well respected by his colleagues ...

[alreadypacked]

I personally know a couple of well respected technical authors in the MS/.NET arena.

Writing a technical book is:

1. Time consuming.
2. Hard work.
3. Not financially rewarding unless it is no.1 best seller for a few years.

So don't bother if you are doing for money.

I was thinking about it to keep me occupied while on the bench after this contract or during the winter in the sun.

Money only in a higher rate "I have written a book on it" kind of way.

PM me if I can contact these guys

[DimPrawn]

What about you, ever think about writing a book ?

I personally know a couple of well respected technical authors in the MS/.NET arena.

Writing a technical book is:

1. Time consuming.
2. Hard work.
3. Not financially rewarding unless it is no.1 best seller for a few years.

So don't bother if you are doing for money.

[Moose423956]

I'm sure the silver surfers will be along soon. Probably having their afternoon nap.

I just woke up. Did I miss something?

[alreadypacked]

I'm sure the silver surfers will be along soon. Probably having their afternoon nap.

What about you, ever think about writing a book ?