bg
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Post by bg on Jun 6, 2015 11:55:50 GMT
Thought I'd start a new thread about other investments (other than p2p).
Until recently I had been putting all my new cash into p2p. Now I've built up a reasonable portfolio (and experienced a particularly nasty default) I have decided to diversify away somewhat. I am already heavily into equities (about 50% of my investments) and while I think longer term they will do well and should remain the cornerstone of any investment portfolio I am slightly less comfortable now we are on the verge of tighter monetary policy - I will not add any new cash at these levels (in fact on a leg up I would trim). Property, I have flats I let out in London but I would not buy more - the yields are too low (even though I expect prices to continue rising).
Given I am massively bullish UK house prices (and this is borne out in the recent surge in mortgage approvals) particularly in the north (Norther powerhouse story, investment in rail infrastructure, London too expensive etc) I have recently exchanged on off plan new builds in Leeds, Manchester and Liverpool - even though I'm relatively unfamiliar with the towns/areas.
Does anyone have any view on this? In particular Manchester? Prices have been going up quickly of late, can it continue? Is a bubble forming? Salford Quays - does this growth story have legs, can it be sustained (like Canary wharf in London)?
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registerme
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Post by registerme on Jun 7, 2015 5:48:53 GMT
....... - does this growth story have legs, can it be sustained (like Canary wharf in London)? Canary Wharf did, ultimately, prove to have legs, but even just looking at the residential property around there hundreds, if not thousands, of flats were vacant and / or let at the cheapest rates possible for years. My point of reference is an uncle who was involved in the original development when it went bust, going out drinking there in 1989 when the flats were empty or let to students, and then working there from 1999 to 2014.
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Post by jevans4949 on Jun 7, 2015 7:15:29 GMT
Depends on which politician's hype you like to believe.
Just buying a house in Crewe for personal use, which is on HS2 route (the town, not the house). HS2 London-Birmingham doesn't open until 2026, Phase 2 (Manchester) not until 2032. So a long wait until that has any effect on the ground.
Still masses of development of flats going on in London.
Prices and rents (across the country, but especially in London) probably depend on whether the government really does get a grip on immigration, or find a way to overcome planning laws (which nobody has in 60 years).
One thing to look out for is student lets, especially in smaller towns where a growth in numbers is being planned.
Politician on Any Questions suggested that Northern Power House sounded like a good name for a night-club.
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Post by mrclondon on Jun 7, 2015 11:12:13 GMT
To my mind the prospects for house prices in a given area are a direct correlation to the employment prospects in that area. Whilst immigration / divorce / single by choice are relevant, the biggest single driver for housing transactions are employment related.
Salford Quays is now largely dependent on Media City employment, both owner occupiers but even more so BTL (remember AC lenders are financing several properties in the area for expats). There would be a VAST oversupply if Media City were to close ... and given it was a political creation, who knows what the future will hold for it. When I was looking to buy in Manchester in 1990 I felt Salford Quays (in its infancy) was overpriced given the little employment in the immediate area at the time (and no metrolink for access to city centre jobs), however it woud have been a better investment than just east of the city centre where I did own for ten years.
Good quality flats in the centre of any of our major cities are unlikely to be poor investments (choice of phrase deliberate) - providing there are amenities nearby (supermarkets etc) as most occupiers of such properties won't have a car. But as soon as you begin to look at smaller cities / very large towns the over supply of flats vs houses begins to be an issue (e.g Warrington). As a Mancunian, I am of course biased, but feel that of the three locations the OP mentioned, Liverpool is the weakest, given the major wealth creators in the area (employers paying above average salaries) are located some way out of Liverpool itself (e.g. the bio-tech cluster at Speke), and hence tend to look to Cheshire rather than Liverpool for housing.
Whether we like it or not, employment prospects in the South East (and London in particular) have been, and are likely to remain, significantly stronger than in the rest of the UK. A sizable proportion of my contempories from my school north of Manchester are now living in and around London, and I can see little prospect of any of us ever moving back north (despite being able to dramatically up-size property wise if we were to do so ! ). Osborne's Northern Powerhouse is obviously a very sensible strategy, but I feel its more a long term generational project, than one that will have much immediate impact.
In two areas of the north west (45 miles apart) that I have an interest in, property sales are close to non-existent in the mid/upper range price bracket. In both areas there is probably demand for just ONE house at say £400k per year. Which is fine if you are the 1 of 20 plus owners looking to sell that has the best match to what the one buyer is looking for this year. Simply knocking a few £k off the asking price isn't going to solve the problem if the demand isn't there in that overall price bracket. Both areas have seen a steady decline in major local employers over the last 40 years.
Holding property as a diversification in an investment portfolio is probably sensible, although I tend to think up-sizing your own residential property is probably the better route to achieve this (at least you can have the direct enjoyment of the property as well as it being an investment). Outside the south east, expecting house prices medium term to exceed RPI is probably a forlorn hope unless employment prospects change dramatically, as is the prospect of being able to sell a property in a reasonable time frame if the need arises.
But on the otherhand a sharp correction in London prices can never be ruled out ... following which diving in would likely be a very good investment.
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bg
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Post by bg on Jun 7, 2015 13:01:22 GMT
Holding property as a diversification in an investment portfolio is probably sensible, although I tend to think up-sizing your own residential property is probably the better route to achieve this (at least you can have the direct enjoyment of the property as well as it being an investment). Outside the south east, expecting house prices medium term to exceed RPI is probably a forlorn hope unless employment prospects change dramatically, as is the prospect of being able to sell a property in a reasonable time frame if the need arises. But on the otherhand a sharp correction in London prices can never be ruled out ... following which diving in would likely be a very good investment. Upsizing your residential property is great if you are just looking for capital growth - but i'm interested in the 8% (gross) yield you can get in Manchester/Leeds and then hopefully some capital growth on top. What a lot of people don't really consider with savings/peer to peer lending etc is the inflation element. It's all well and good when CPI is around zero but if/when (and i'm sure it will) CPI get's back to 3%+ then it dramatically eats into your returns (especially after tax). Assuming tax @ 40% and CPI at 3% then having a p2p portfolio yielding 10% (after losses) gives you a real after tax yield of only 3% - not quite so good. With a property, if you get 6.5% net yield then it's 3.9% after tax real yield (assuming HPI growth in line with CPI - and I think it will do better). Of course if you leverage up with mortgages then you can do way better than this (as inflation erodes the debt) as long as prices go up. If we ever get back to 4-5%+ CPI then you really want to be invested in hard assets. I really can't see a sharp correction in London property prices (certainly not in anything worth <£5m). There's too much of a supply/demand imbalance. Even during the height of the GFC prices didn't really dip that much. Having said that, I wouldn't invest now with many areas yielding only 2-3%.
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Post by yorkshireman on Jun 7, 2015 15:42:14 GMT
Just the sort of investment the North needs.
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Post by Deleted on Jun 7, 2015 17:06:32 GMT
Leeds has a fair amount of empty foreign owned property sold off plan, Leeds Uni (which is out of town a short way and to the north) is selling off old buildings to developers right, left and centre. I'd avoid. Mrs Bobo who is in the know more than me just sees a bubble.
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Post by mrclondon on Jun 7, 2015 19:21:36 GMT
Upsizing your residential property is great if you are just looking for capital growth - but i'm interested in the 8% (gross) yield you can get in Manchester/Leeds and then hopefully some capital growth on top. I can't help but think that sooner or later capital gains tax will be standardised at marginal income tax rates, so (assuming higher rate tax) it is probably prudent to budget on 40% or 45% tax on the capital gain. Personally I feel the gain from rental income of BTL will largely be wiped out by the eventual CGT compared to the up-sizing a residential property where you keep all the gain but have no rental income. 8% gross yield may be achievable on new build, but rental properties very quickly begin to look tired so unless you plan to replace flooring after every tenant and kitchens/bathrooms every 4 or 5 years you'll be forced to reduce the yield to minimise void periods (or eat into the yield with the continual refurbishments) as the latest crop of new builds will always attract tenants first. Unless of course, the property is in those areas where demand outstrips supply significantly (as is the case in London). As you have probably gathered I've no great belief in BTL as an investment that long term will yield a return that makes it worth the hassle, with the possible exception of HMO's which judging from the business plans we've seen on both AC & TC are worthwhile if you do the conversion yourself (and are in an area where you can secure the necessary permissions).
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Post by ablrateandy on Jun 8, 2015 9:20:01 GMT
mrclondon has exactly the same view as me on northern property. I know a few people who got stung on flashy apartments in Leeds and Manchester where actual sale values probably aren't back to where they bought them in 2006. Admittedly, they overpaid but it all got a bit moths to a flame. My biggest issue however is one that he very validly raised. At the end of the day, and certainly when we see rates rise, there is going to be a lot more delinquency and people will be borrowing less. Take, for example, my home town. My parents house would be valued by an agent at say 400k +. A very similar house went up for 320k (slightly worse view) and it just didn't shift at all. No viewings or anything. It's not that someone won't value it at 320k... it is just that they need to find the right buyer, and once you get over 4x earnings you lose market liquidity. It's one of five hundred houses that would be valued over 300k in a town where probably only half a dozen people earn over 80k. The same applies on rentals though - when mortgage rates rise, the breakeven for a BTL investor necessarily rises too. If wages don't rise with rates then people just can't afford those rent payments and you end up with an unrentable housing stock or more likely people undercutting each other desperate to make mortgage payments. Anyway, that's my excuse for avoiding BTL. I don't see a longevity or sustainable dynamic. I can see why people do it, but it doesn't convince me.
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shimself
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Post by shimself on Jun 8, 2015 16:28:53 GMT
TheHousecrowd of this parish are heavily into mankyland, low end mainly (sub 100K). Min invest 1k.
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Post by jevans4949 on Jun 10, 2015 8:53:41 GMT
A propos property investment, just saw propertypartner.co/ advertising on London Underground yesterday. Can't say anything about it, but looks plausible - in spite of its web address being registered in Colombia.
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coop
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Post by coop on Jun 30, 2015 15:06:26 GMT
Sounds like you have too much money already.
I would suggest investing in the cap in my hand.
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