[Closed] Buy to let- would you right now?

Screw the price down substantially.

There's more price slippage to come.

BTW that's putting all your eggs in one basket.

However basically we would only get the capital growth no monthly income.

This sounds like the important part. What sort of period are you looking at? Given the uncertainty in the market at the moment it is likely that in the short to medium term your capital growth could be zero or even negative. If you factor in all your costs for the purchase and administration, and look at the risks then I'm not sure it makes sense if it's really that marginal.

Clearly there may be some benefits of owning all of the residential units, but your entire investment is also locked up in the same place - with the same risks/exposure.

Whilst in terms of management effort three units in a block may sound efficient in portfolio terms its very risky.

Especially as you say: [i]However basically we would only get the capital growth no monthly income[/i]

Without getting surplus income to amortise your loans yoou are reliant on the capital growth to make your return. If you are exposed to just one market thats not that smart.

I own a buy to let in London, my own house in Worcestershire and hold shares in property companies, house builders then other FTSE companies in my ISAs to give a wider portfolio exposure to my savings and investments. This years ISA will probably be in Utilities and Banks. All for medium to long term holds.

In terms of BTL yields my own flat (and recently corroborated by some analyisy ive done for a client on 1,400 flats) net yields (that is after operating costs and transaction costs) are in the order of 3.5% in London*.

That's not great (although it's better than in the shires). But it also reflects the problem of over-gearing - 75% LTV with a 3.5% income yield means that your interest rate has to stay below 4.8% ish to keep above water unless you can count on rent inflation, and Id be cautious about that. I havent increased my tenant's rents for 3 years (mainly because Im a nice guy but also because he's a good tenant and for the sake of £50 a month increase in rent Id rather keep him)

* work out what it is for the flat you're looking at if you think it's that much different to London.

BTW thats not to say that I wouldnt BTL right now, but Id probably look at lower gearing (50% max) so that I cant get wiped out in a short term capital value fall, and would then just extend my hold until equity returns and recover losses.

Have you factored in what happens when interest rates return to the normal sustainable level.
On £300K a 1 or 2 % rise in rates will have a significant effect on the repayments and the rent might not cover it . Rent rises are annual and are dictated by market forces.

Unless you have the money in the bank (gaining little interest) probably not the best investment, factoring admin, rates e.t.c

Looking at keeping it ten years. Its a fantastic flat but the owner is only going to sell at top price. Otherwise she will rent it out. Limited market tho as its a big flat but loads of stairs - however one of the best flats in the area.

The larger flat would have a £210 000 mortgage on it costing £750 - 900 pcm ( roughly depending on fixed or variable rate) and rental of around £1000 pcm, the smaller one £90 000 with a payment of around £400 pcm and a rental of £500

of course i would expect rentals to increase over ten years

that data gives you an "Interest Cover Ratio" (ICR) of around 1.1 to 1.2

If you're interested, none of the banks nor clients I meet for work (in the commercial world) would accept less than 1.5 ICR in this market.

I wouldnt be comfortable at much less than this figure either unless I could get a 5-10 yr fixed rate that had an initial ICR around 1.25 and there was eveidnce that there wasnt local pressure on rents to fall in the short term.

Stoner - I dinnae understan' what you mean by 3.5 % income yield. Please help a financial incompetent

Edit - intrest cover ration- the amount the rent is more than teh interest?

At variable rates now the sums are good - but the higher figure is a fixed rate at 2% above what it is now

Would you make the same investment in a different property across town on the same numbers right now? If not then you'd be investing for sentimental reasons. Would you put the same money into a (hypothetical, well run) managed property fund? If all of these add up to yes, then go for it. What's your plan for the end of the mortgage when the loan is to be repaid?

TJ have you factored in all the other costs associated with renting out a property?

Maintenance fees for the flat (ground rent)
Ongoing maintenance costs over and above the ground rent
Landlords insurance
Any other insurance policies associated, e.g. one on the boiler

Also, do your calculations take into consideration the total likely revenue generated in a year or are they just looking at it on a monthly basis? It looks like you’re assuming a 10 month rental period which is a reasonable way to assess the ‘investment’ but you could find that there are periods where you have say a two year occupancy, followed by a three month wait for the next tenant. Overall the investment would still work, but you’re then into financing the mortgage from your own cash for a three month period. It’s important to know how long you could go on financing the mortgage yourself for whatever reason. This is especially important when you come to sell the flat because you would have to assume that the flat will be vacant while you’re marketing it (although it doesn’t have to be this way) and therefore you could be financing the mortgage costs for maybe six months.

If you’re just holding for capital appreciation, then you should think about the risk you’re taking and the likely level of return. How long is medium term? If it’s less than five years then my opinion (and it is just an opinion) is that you’re being way too optimistic; if it’s more than 10 years less than 15, then that would seem realistic. Also the rate of the mortgage is one thing, but BTL mortgages tend to have very high set up costs, sometimes as much as £1500. You can offset these costs against any profit made.

When you do sell, you’ll be taxed on the profits. I am not sure if it would be treated as a capital gain or as income but remember that returns on pensions savings are not taxed (and indeed you get tax relief on savings) until you draw them down and then it would be at the lower rate of income tax.

There is still a heck of a lot of uncertainty for everyone. Have you run through the worst case scenario – you lose your job and you lose your tenant at the same time? What are the consequences, how long could you finance the costs for etc?

Think of it like this. If you’re only hoping to make a capital appreciation return, then that’s a big risk. If the rental income makes any kind of profit over and above the interest and ongoing management costs, you’re taxed on that; if it doesn’t make any kind of profit, then you’re holding a very expensive, very illiquid asset in the hope that it appreciates and appreciates enough to cover not just the costs of buying, owning and selling, but enough also to justify the risk.

So how much return is enough to justify? Hard to say without really quantifying the risk, but it’s high so maybe 6-7% would be the minimum to hope for? Is there much evidence that the return will be that high year on year? Bear in mind that you need that for each year you’re holding it, not just total return. If you made 7% return over five years, that ends up being the square root of **** all on a yearly basis.

I am a forced landlord as a result of meeting my now wife and not selling the property I owned. It can be a major headache as it’s not the kind of thing you can easily exit from and there tend to be very high costs associated with doing that, which then means you end up staying in when perhaps you should cut your losses and exit.

Capitalsim TJ you are letting the side down
It is risky as you have th efollowing risks/assu,ptions - any of which being wrong screw you
1.you can rent the flats
2. the property price will increase
3. rents will be greater than interest payments
4.can you sell it at the end?
5. can you service the mortgage if you have no one renting?
I am not sure you will achieve all these for 10 years. Given stoners estimates of earning potential that is alot of risk for very little gain IMHO

IMHO prices will fall or be stable for a while now. You can only sell houses if new people join the market, these new people's earnings are not sufficient to buy the average house [in some cases any house] therefore they cannot enter the market therefore the market is in danger of collapse/reallignment.

By the time you have factored in the insurance for the property . The gas servicing , plus any one of a myriad of potential expenditure ( Cooker , boiler, fridge , freezer, carpets on sale /re-let as tennants tend to be less careful you will be on a looser. With margins that low , unless you can get a better , longer fixed rate you will be very close to break even .

Plus factor in potential loss of rent , tennants not paying , professional fees for any PAT testing , mtg arrangement fee s

I can see the appeal , but there must be better places for your money

Mine.- mtg £330 / income £540. hth .

With it being in the same stair the management stuff is easy and it is a fantastic flat in a fantastic location

In ten years? sell up all 3 properties and take out the equity.

Even after doing the huge mortgages to buy the 3rd flat i would have £200 000 equity in the original flat.

I have to go out now but any more thoughts is helpful

Ta chaps

yield is the ratio of income to capital.

your net income yield is your annual rent less costs of e.g. buildings insurance, service charge, management fee, annual effective agency fee, void rent (i.e. deduct expectations of no rent in a normal market), possibly annualised capital expense such as carpet/decoration/kitchen refresh divided by the total capital cost of the asset acquisition (Price + fees + SDLT)

London lettings turnovers average around 20-30% pa, i.e. people move once every 3-4 years. However that is an average across furnished and unfurnished lets and Id say unfurnished trunovers are great than that.

So you could work iut out a bit like mine:

Gross rent = £1083pm x 12 = 12,996
less
Service charge (incl insurance) = 1,300
Management fee @ 5% = 650
One month void in every two years = 500
7% agency fee in every two years = 450
Refresh costs = 200

Net income = 9,896 pa

divided by capital cost + SDLT + fees

(275,000 x 103% + 500 ) = 283,750

= 3.5%

In ten years? sell up all 3 properties and take out the equity

But that's selling 3 properties in the same place. Might be straightforward, but could also be difficult.

With it being in the same stair the management stuff is easy and it is a fantastic flat in a fantastic location

Get rid of the emotion and start thinking of it as a simple, cold business opportunity.

these lefties have too much empathy for the commercial world 😉

Also remember that if you are looking at around a 10 year outlook, the chances are interest rates will probably be way higher in the next few years and if you don't get capital growth you'll end up with massive mortgage payments which you won't be able to cover by rental increases.

Then if a tenant moves out and you can't rent or sell the flat you're in a world of financial trouble.

I'm sure you asked the exact same question a few months ago.

I'd be more worried about getting a nightmare tenant, causing the other to leave, or become difficult to find new tenants and making your own place hell. With the bad tenants I've had previously, one would not affect the others since they are spread around town.

these lefties have too much empathy for the commercial world

Be careful!!! 😉

TJ I was all set to send you some calcs but stoner has done it. On his numbers I wouldn't do it as it doesn't look like a good return. Relying on capital growth only is what has killed lots of potential BTL investors returns. As others said you need to get beyond the romance of owning the whole floor and look at it as a cold business decision.

BTW, with respect to stoner, the yield is misleading in a way as although you are buying for 300k you are borrowing the capital. So your deposit is geared, and as an investment you might prefer to consider looking at the yieled as a percentage of what you invest - ie your deposit. It will look like a considerably healthier percentage return.

I'd be more worried about getting a nightmare tenant, causing the other to leave, or become difficult to find new tenants and making your own place hell. With the bad tenants I've had previously, one would not affect the others since they are spread around town.

This is a meaningless fallacy (sorry) the people next door could be mentalers whether you own next door or not, the risk is the same.

Ta chaps - plenty of food for thought. I have to say you are not giving me the ammunition I need to persuade Mrs TJ its a good idea.

Mr Tall - hence considering fixed rate mortgages although what I have been offered right now is fixed at 2% above normal variable rate. At the variable rate I could get right now the sums are much much better - hundreds a month profit but clearly thats no basis to gamble on as rates must rise

I am certainly factoring in a rate rise of 2 %+ in 5 years and having 2 months of no rent each year

Yeah! Yeah! Yeah! Have you forgotten, it's a nice flat! 🙄

I have been going through mortgage applications, they were running an affordability test at 7%. Interest rates are definitely going to rise considerably.

Most of the banks are now gouging buy-to-let customers by an extra 1-1.5% on a standard deal.

I would be very careful, the rental market/interest rate equation doesn't have to move too far before you will start having to make up mortgage payments out of your own pocket.

TJ,

Unless the fixed rate is for a 10 year term, future interest rates are still a major factor in your decision unless you are expecting decent capital growth or the ability to make capital payments.

IMHO, BTL works best on smaller properties as the yields tend to be higher than on £300k+ properties as the rents are usually proportionately higher and the capital sums involved are lower (although at the lower and of the market you're more likely to get problem tenants).

As with any investment, there's a risk/reward payoff but it does seem you'd be putting all your eggs in one basket.

BTW, with respect to stoner, the yield is misleading in a way as although you are buying for 300k you are borrowing the capital.

toys - the use of a yield in the industry is handy as a comparison for cost of funds. You are talking about geared returns which I would be cautious of using in this instance as it masks the susceptability of this investment to interest rate risks (I call it the "trumpet of possibility" 🙂 - graph returns as a function of rental growth/interest rate costs and LTV and you'll see what I mean... )

long term (ungeared) total returns would actually be net yield + rental growth in perpetuity + capital growth in perpetuity which crudely might be considered to be 3.5% + RPI swap + RPI swap = 8.5% but that's a very long hold to get anything like that return... especially if its a ground rent LLH as thats a wasting asset.

Ta chaps

There is no ground rent - its freehold, major buildings works completed so no roof bills likely, in the last ten years the flat has doubled in price or more than, in 20 yrs its 6 times what it was.

because of the flat and the location the odds of capital rise are very good

odds of capital rise are very good

lets hear these odds then bookie....
😉

How bouyant is the market for 1,000pcm rentals, or as you said around 1k? Even if the figures look good on paper, is the market big enough to keep you in the big money?

toys - the use of a yield in the industry is handy as a comparison for cost of funds. You are talking about geared returns which I would be cautious of using in this instance as it masks the susceptability of this investment to interest rate risks (I call it the "trumpet of possibility" - graph returns as a function of rental growth/interest rate costs and LTV and you'll see what I mean... )

I agree totally I always take account of interest rate movement in my calc of geared yield. Also the deposit gearing yield is much more susceptible to changes in costs. A mate of mine bought btl's on 95% mortgages back in the crazy days, he argued that the smaller the deposit the higher the gearing (true) but even replacing a boiler ruined his profit.

I'm Harry Cautious anyway as we always work on the possibility of int rates going to 10%. You can't find BTL properties that will tolerate 10% any more, hence I haven't bought anything. All mine have got masses of equity, I can currently still be profitable at 16% base rate, but then we have lifetime trackers on all our btl's of 0.7% over base, and managed to buy low in the late 90's and early noughties 😀

I'm Harry Cautious anyway

mine's ungeared 😉

We've just refinanced (@50%) the development loan we took to build the barn. Mrs S (also boring finance person like me) and I disagree on the yield curve so we've split the mortgage in two - her half is fixed @ +3% for 2yrs then SVR, my half is fixed for 5yrs @ +4%. It's a riot of fun and laughs in our household 🙂

Haven't read the whole thread yet but this line jumped out at me:

I am looking at this for a medium term investment - something towards the pension pot. However basically we would only get the capital growth no monthly income.

Unless you're getting the place very very cheap I wouldn't count on capital growth for some time. If the rental yield is only enough to cover the mortgage what will you do if house prices drop 10 or even 20 percent? Have you factored in repairs, void periods etc?

IMPO prices are going to go down for some time, wether that's in nominal or real terms is the gamble. We're actually house hunting now but only because we actually need more space and I've put the missus off for the last three years! I'm expecting to lose money on it, even in the medium term, but don't have a whole lot of choice and it will be our home. I wouldn't invest in property now, in 2-3 years maybe but not now.

mine's ungeared

Ungeared as in you have no finance on your btl?

Our first BTL was making 18% gross yield (income/purchase price) in 2000, now it makes 20.1% gross yield on what we owe as we re-mortgaged but rents are up somewhat since then too..

I wouldn't invest in property now, in 2-3 years maybe but not now.

Trying to predict the future is madness, just do your sums on what today has to offer, factor in Stoners "trumpet of possibility" and decide. Unless you have done a full analysis then you will never know if sitting on your money means you will miss out, or if you should go and invest..

Ungeared as in you have no finance on your btl?

yup.

In summer 2007 I felt that the market was topping out so was about to put the flat on the market, but Id only had my new tenant in for a few months and didnt want to give them a load of upheavel so held back. Idiot 😉

So we've decided to just hold on to it. Quite wierdly though the flat has continued to show some capital growth and is now worth more than it was in summer 2007. Still will probably hold on to it for a while. We bought it in 2001 for about £175k so IRR has been about [s]5%pa [/s] 9%* ungeared since then. No amazing, but nice and steady and relatively low stress.

I finally managed to make the most of my market call when I bought the barn site development plot for a good price at the very bottom of the market (Summer 2009)

* Doh! Who'd hire an analyst who cant do his sums right? 😉

major buildings works completed so no roof bills likely,

That's not the only expense. Kitchens, bathrooms, carpets? A new boiler would cost £1000's (and unless it's new will probably be needed inside your 10 year timeframe).

Would you let furnished or unfurnished? Expect to repaint the place every 5 years(?) or less to keep it smart. Furniture will likely start to look tatty at a similar age - tenants never look after things as well as you would. Appliances (Fridge/washing machine/dishwasher) only have a life of about 5 years.

in the last ten years the flat has doubled in price or more than, in 20 yrs its 6 times what it was. Because of the flat and the location the odds of capital rise are very good

So maybe all the price rises have happened....past performance is not a guide to the future. You could gamble that the area will outstrip others but as pointed out - all your eggs in one basket on that so if it goes the other way you're down on them all.

From experience over 10 years in London -

One month void in every two years = 500

7% agency fee in every two years = 450

Refresh costs = 200

What can you buy for £200? The Gas Safety Check will cost you half that. If you're renting furnished you're allowed to set off 10% of the rent against maintenance/replacement of furnishing - that's a better guideline.

I wouldn't base anything on current variable rates - on this investment you really need to fix unless you've got a lot of cash to pick up the losses when rates, inevitably, rise. It'll take a lot of willpower to keep funding annual losses on this in the hope of capital gains that probably won't come through for some time longer.

I'd not touch it - good luck.

From experience over 10 years in London -

One month void in every two years = 500

Looks very conservative - if you're assuming new tenants every 2 years it's hard not to have a gap of at least a few weeks so this is best case, not a contingency.

7% agency fee in every two years = 450

7% would be nice...could easily be 10%. And most charge for extensions as well (though you can usually negotiate a lower rate for them) I'd assume 7% p.a. on average.

Ive had two lots of two weeks void in 6 years. But its an attactive flat for tenants which is why we bought it in the first place. (and one month of £1000pm rent void every two years is....£500pa)
My lettings agency agreement is 7% of first years rent and no renewal fee (I hate renewal fees, theyre unconscionable. I threatened to remove the Co's agency and management work if they continued to charge me one)

as for refresh, most capital refresh should be factored into the yield IMO (asset maintenance), but you're right, if you were to do it properly you would amortise a full refurb on a 10 yr deprec cycle into your calcs. £200 covers deep clean, gas cert and a lick of paint by me.

Well, that all seems pretty straightforward then!

And lucky tenant - living next door to the landlord ! Fun fun fun.

but what a landlord eh?!?!

I have a part [1/4] share in an apartment in an expensive part of London [SW6] - we were bequeathed it so don't have a mortgage on it

We've had it over 2 years & only just gone into the black
We had a lot of work to do and let the tenant have a 50% discount whilst the work was going on
Work isn't cheap in that part of the world, some of the costs were eye-watering

I wish we'd just sold it now

I've had two lots of two weeks void in 6 years. ..... (and one month of £1000pm rent void every two years is....£500pa)

We probably average about the same but I still consider than lucky.

I hate renewal fees, theyre unconscionable.

most capital refresh should be factored into the yield IMO (asset maintenance),

sure - but I didn't see a line for that.

I think you're model is right but just it doesn't contain any contingency - which is where all the risk is in the buy to let market at the moment. A bit of stress testing is needed - could you finance/stomach a broken boiler, jump in interest rates and 3 month void.

I can't help thinking the buy to let market still contains a huge amount of risk for the UK housing market. A lot of people who couldn't sell over the last couple of years switched to renting, and there were already a huge number of BTL landlords who were over geared and relying on capital gains. They've all been protected by record low interest rates. Rates are only going one way and with slow growth, less money washing around, average household £500 worse off than a year ago, etc etc, there's a lot to go wrong.

simon - we're at cross purposes on...the purpose of the yield. It isnt for stress testing. A yield is an initial steady state comparison with the cost of funds.

By all means stress test cashflows and look at worst cases for interst rates or voids etc, but that's not the calculation I was showing.

My observation from this thread:

It's quite telling how posters who rabidly support Labour and Gordon Brown, are the same ones who bought their house/flat in the late 90s/early 00s plus a load of BTL and have done very nicely indeed thankyou out of the ensuing ridiculous housing bubble nurtured by Brown.

Coincidence?

How about a bit of hedging. If I've understood you correctly, you already own a small flat on the same floor.

Sell the smaller, and buy the bigger.

Although, knowing the location, I'd be tempted to max out and go for it. There is only you and mrs TJ to think about if it goes horribly wrong, and the risk is minimal IMHO.

It's quite telling how posters who rabidly support Labour and Gordon Brown, are the same ones who bought their house/flat in the late 90s/early 00s ...

you new here? 😉

It's quite telling how posters who rabidly support Labour and Gordon Brown, are the same ones who bought their house/flat in the late 90s/early 00s ...

I've been following this thread from the beginnign and the only person who has stated that they bought their BTL's in the late 90's early 00's was me? And I don't rabidly support Gordon Brown or Labour? Where is your evidence that I do?

Nope, had more or less this discussion before on here, in fact.

As someone else has alluded to - rabid socialists/anti-capitalists who turn out to be up to their necks in BTL... Oh, the ironing! 🙄 😆

Come on Biscuit Powered answer?

TBF I think you've mistakenly conflated toys & me & gt1972 etc with rabid anticapitalists. Not sure youd find three less likely Gordon Brown fans in here* 🙂

* without wishing to presume too much of their politico-economic tendencies...

toys19, where did I specifically refer to you exactly?

toys19, where did I specifically refer to you exactly?

By quoting me exactly.

Nobody else has said on here when they bought their BTL's other than me.

Stoner-

we're at cross purposes on...the purpose of the yield.

Absolutely. Serves me right for responding to multiple posts in one mail..

Ta for the thoughts chaps.

there would be no agency fees - we don't need an agent having the expertise between us to do without. I was counting on 2 month with no rent each year to allow some slack but I hadn't allowed anything for refurbishment - but it needs nothing now.

Another aspect is that the bathroomand kitchen are dated - it could be rented as it is but would it be worth updating the kitchen and bathroom and going for a luxury / high spec market? Its very near the scottish government buildings

Very helpful anyway chaps - gives me sumnmat to think on

Biscuit Powered - Member

My observation from this thread:

It's quite telling how posters who rabidly support Labour and Gordon Brown, are the same ones who bought their house/flat in the late 90s/early 00s plus a load of BTL and have done very nicely indeed thankyou out of the ensuing ridiculous housing bubble nurtured by Brown.

dunno if that is aimed at me but I am no labour supporter - or certainly not a blind one and I bought and made my paper profit under the tories. Twice 🙂

Here's a radical idea - why don't you do something socially useful with your money instead of preventing yet another young family from affording basic stable accommodation? I thought you were a socialist? BTL "investors" are far worse spivs than bankers and ought to be taxed accordingly - eg a nice juicy wealth tax on your 2nd/3rd/Nth properties.

Draftcapitals

its not basic family accommodation, there is a shortage of good rental property locally, I am a ecomentalist not socialist altho the two have features in common, I need to do something to gain some pension as the tories are hell bent on removing the pension I have worked for

draftcapitlas, for you to call us spivs is the greatest compliment a man of your stature and reputation could afford, I thank you.

BTL Investors are just like any other business and are taxed accordingly. All the things you buy are marked up by someone else and the market drives the price, simples. Unless you are an anti market socialist or communist you should probably reflect on your own actions in the market place and see what effect [b]you[/b] have on others.

If you really have dropped out of the system and really don't partake in any wealth transactions then I truly and honestly applaud you, its a very brave and upstanding character who can do that. Singe minded and dedicated.

> ... a man of your stature and reputation could afford, I thank you.

I assume by that you mean the entire younger generation who have been priced out of property by BTL "entrepreneurs"? I think you have little idea how much resentment and anger my generation has for those that have pulled the property "ladder" up after them so we can fund your pensions instead of being able to afford to have families ourselves. What is the average age of a first time buyer now? 37? How is that sustainable?

Don't be too smug, congratulating your financial aptitude for buying early into the biggest housing bubble in history. And don't kid yourselves you're doing us a favour by allowing us to rent your properties when we'd far rather have a fair chance to buy our own.

Thanks for the advice re: smugness I'll listen to all the advice I can. 😆

I hardly think you can blame the participants in the market, we just took the opportunities as they came to us, and the truth is you would have done the same. You wouldn't have been able to afford to buy in 20 years ago either, it's only because of the increased relative wealth at the time, which has now evened itself out.

But it appears that you haven't actually dropped out of the capitalist system as you seem to have some desire to buy a slice for yourself and don't seem to be able to get over your resentment to be able to do something positive. Tough. If you want to be part of the market you have to expect the ups and the downs. If you don't like it either do something about it or leave the system don't bleat about it. There are opportunities a plenty out there. MTFU

As others have said, investing all of your money in one property is risky, especially on the top floor. What would happen if the roof needed repairing?

Pieface - all repairs are shared, entire building has just had a very expensive ( over a million) Scottish heritage spec restoration including a complete new roof.

If you buy the flat now, will you then be responsible for the common repairs bill for all three flats and how will you pay that?

Pawl - no - the common repairs share for flat 1 would not be my responsibility. Paid by the seller

Thanks toys19 for your nonsense about housing being no more affordable 20 years ago than it is now. Unfortunately the stats don't agree with you (if you divide through by inflation and by average UK earnings, housing is 60% more expensive now than 20 years ago, despite 20 years ago being towards the top of the previous bubble, which deflated by approx 1995).

But you go on believing you are some sort of Warren Buffet for having some cash at the right time, and go on feeling good about being part of the generation that loaded itself up with suffocating debt and now wishes to pass it on to my generation, all the while trying to absolve yourself of guilt despite voting in successive governments that facilitate credit binges, keep interest rates at virtually zero, remove mortgage regulation (self certified income for PAYE? wtf?), punt debt down the line (PFI), etc etc.

Apologies to TandemJeremy as this is somewhat off topic, but I strongly believe there are more ethical and moral investments out there than property.

TJ's got something to sell
to the capital's homeless
at the Crossroads Hotel
for the no-fixed-aboders

Where you can live life in style
you can sleep in a closet
and if you flash him a smile
he'll take your teeth as deposit

There's bats in the belfry
the windows are jammed
the toilets ain't healthy
and he don't give a damn.

😉

draftcapitals - I understand totally where you're coming from. The younger generation have been effectively priced out of the housing market for now, but to blame the entire BTL/professional landlord community for this is misguided.

I'll not go into essay mode, but would say that the housing bubble is largely a result of the credit bubble that has it's roots in the banking and political sectors. Easy access to cheap credit drove speculation, the 'you can never go wrong with bricks and mortar' mantra drove sentiment, and so house prices went up each year by more than a lot of people can earn. Add in the massive raid on pensions in the late 90s and the tax breaks made available to BTL and the natural market reaction is to dive in.

Again, I understand your anger and frustration but IMO you need to direct it towards the policy makers and their puppet masters.

And by the way, I'm late 30s, don't currently own a home, earn a lot more than the national average wage and have a large deposit, yet I still can't afford to buy a (what I'd consider) suitable home for my family where we live (Hants) without borrowing 5+ times my salary.

It's a mess.

Apologies to TandemJeremy as this is somewhat off topic, but I strongly believe there are more ethical and moral investments out there than property

Please wont someone think of the tofu factories?

property prices - more a result of overpopulation/under supply than BTLers? Most rent in many European countries.

TJ, firstly listen to Stoner and Toys, they've run the numbers, this looks like a very skinny investment. Am reading your comments, you are not being impartial and you need to be.

Secondly, speaking as a banker, you know the guys who caused the credit crunch. Well back in 2005/2006 I worked with some guys from the US who could see the housing market bubble building and were trying to position themselves and our clients for the fallout. Read about it here

http://en.wikipedia.org/wiki/The_Big_Short

I am looking at this for a medium term investment - something towards the pension pot. However basically we would only get the capital growth no monthly income.

When I saw that I had a little chill go down my back. That is the credit crunch in two sentences.

> property prices - more a result of overpopulation/under supply than BTLers?

Sure... nothing to do with 125% mortgages, 8x salary (or 8x whatever salary you pretend you have, we won't bother to check), mortgage equity withdrawal or preferential tax regimes for BTL. Nothing to do with the media perpetuating that high house prices are good or endless property porn TV.

tonyd - you're right of course. People operate within the legal/tax framework they find themselves and take advantage in ways that maximise their own personal wealth, with zero thought for the effects on society as a whole. Humans are selfish by nature.

But to be told we should MTFU by people who should be applauding us working ourselves into an early grave with nothing to show for it to pay for their overvalued slums does grate somewhat.

draftcapitals has a point and nicely put sir. Babyboomers better enjoy their autumn years 'cause the rest of us are going to be paying for it for the next 50yrs.

Babyboomers better enjoy their autumn years 'cause the rest of us are going to be paying for it for the next 50yrs

+ 1 for this sentiment allthough inflation will redress the balance somewhat.

Sure... nothing to do with 125% mortgages, 8x salary...

Well the thing is here that the demand was very high compared to supply so what do you think would happen if those high mortgages weren't given? Prices wouldn't have gone up so much but many people would haven't been able to buy and would want to rent. Thank goodness for all those BTLers increasing rental supply to give them a nice affordable place to live 😉 BTW, BTL doesn't interest me.

Well OK, BTLers obviously increased demand on buying property but I am unaware of how much influence they had. People have been investing in property to let out for a long time, maybe the problem is it was made more available to more than just the rich?

mcboo - I am listening hence the thread. It has both answered some questions and asked some questions of me.

clearly I need to be sure its a decision of the head not the heart. It has been very helpful the comments folk have made.

Its just such a shame to miss out on this flat. It really is a fantastic property and I am convinced over ten years will make substantial capital gains - location is fantastic and there are few flats like it in the area.

My feeling now is that I cannot do this at the asking price. However its very hard to value the flat and I think the owner is being optimistic. So I might be in the position of making a low offer and see if anyone out there wants to pay more.

Thanks again

Well draftcapitals I don't think you have your facts right.
My point about affordabilty wasnt about the ave wage vs average hosue price, it was about what a lender was prepared to give you. In 1990 not many people could get a mortgage to afford a house, we went through a boom when everyone could get one, and guess what we are back to the position where not many people can get a mortgage to afford a house. That shows you the relative values of things.
According to the CML in 2006 BTL was 11% of the mortgage market, it went up to 21% in 2007 and now its down to 5% so I don't see how this is driving or ever was driving prices. So somewhere between 79% and 95% of people driving prices are residential owners. Blame them. Every man and his dog has remortgaged on the back of the property boom to release equity, and every one was trading up to make money one way or another. I think you need to blame everybody.

In truth all that money that was released into the market place has driven inflation but also provided us with a massive amount of material wealth and comfort. 2 cars per family, flat screen TV's we have got loads of kit. I'll bet your house mr Draftcaptils is spartan and you have never taken advantage of what was the state of affluence we were in.

BTW I'm not overconfident about my status as an investor. When I bought it was a no brainer and I stopped buying a long time ago. I was convinced we were at the top of the market in 2001, 2,3,4,5,6,7 by 2008 I was sure the world had gone mad but if I had continued to invest as others did I would be considerably richer than I am now. I am no seer or predictor of things.

In summary the blame for your perceived woes are really with the govt and bankers, and about 79% of the remainder goes on the residential investors, and I'll take the 22% if it makes you feel better but I don't think you should direct it all at us. If you don't want to be told to MTFU don't start it by calling us spivs or anything else. Do some thinking before you bash the keyboard in future.

Teej yep.....bottom line though, even though you love this flat, you arent actually going to live in it yourself. It's just an asset. By all means lever up a little more than you should to get that house you always wanted, at least the upside is tax free. Not BTL though.

Oh and welcome to the shoddy world of capitalism. Your halo has slipped a little but dont worry fella I will catch it!