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Post by bracknellboy on May 17, 2014 20:17:25 GMT
...However there are another couple of factors which may also have an impact one way or another on the house price bubble. Firstly the recovery in the buy to let market probably encourage by low interest rates and rising rentals. In most parts of the UK it is not too difficult to acquire a property spend max 5% of cost on tarting it up and then getting a rental of 6%+ of original cost. Buy to let mortgages are still available well below this figure and if you get your sums right it is still possible to make a good margin after all costs are taken out. Plus with a rising market there is the potential for capital growth in the future. ...
The recovery in BTL (no idea whether it was a recovery or simply an increase) I would surmise was driven by a few factors: 1. The drop in prices (which did occur). If the size of the letting demand side and supply side (the number of units available for let) stayed the same, then a drop in house/flat values de facto drives up yields. 2. The tightening of the mortgage market, specifically lenders requiring larger LTVs (and therefore larger deposits), put the nut crackers on precisely those who are the primary rental market consumer i.e. those who would otherwise be first time buyers and who don't have property equity as a deposit. In turn that meant that people who might otherwise be moving off rental into ownership did not. Thus increasing the rental demand side, and supporting an increase in rents in absolute terms even as property value/prices dropped. A double +ve whammy for rental yields. So while prices may have dropped and mortgage rates came down - in theory making property more affordable - the tightening of LTVs did not make it more accessible for the bulk of those renting. The natural counter balance to downward pressure on prices (greater affordability = net move from renting to ownership) for 'first time buyer' type property wasn't there.The upward pressure was when those with access to capital woke up (I didn't) and moved into BTL.
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merlin
Minor shareholder in Assetz and many other companies.
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Post by merlin on May 18, 2014 6:52:58 GMT
I am not totally familiar with the BTL market but bought properties (2 & 3 bedroom executive apartments) in South Surrey three years ago and they have done very nicely thank you. Similar properties to mine have sold in the last couple of months for around £100k more than I paid for them and two to BTL. This is about a 30% increase over my total purchase costs. All let on short hold agreements with about 80% occupancy at an average rental of £18k pa and no problem finding new tenants. However rentals would appear to not be keeping pace with rising house prices so BTL may not be so attractive in the near term.
This of course could be a function of the South East. My agent tells me there is still an acute shortage of quality property coming on the market to sell and to rent in Surrey. However asking around in Wales about BTL there seems to be hot spots like Cardiff and cold ones like West and mid Wales. However there still is an active market for BTL.
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Post by bracknellboy on May 18, 2014 7:33:46 GMT
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Post by batchoy on May 18, 2014 8:29:51 GMT
The thing is I don't wholly agree with the premise that there is a shortage of homes, and it is this that is driving up price. I live in North Hertfordshire right on the commuter line into London. Look in the local papers and there are plenty of properties for sale all be it at ridiculous prices,and all be it that there are very few that would be consider to be 'first time' buyer properties. However go to the rental pages and there are pages and pages of properties for rent and they are overwhelmingly one and two bedroom 'first time buyer' properties that have been bought up by people as BTL investment. A good example being the estate where I bought my first house in the late 1980's, about 100 purpose built first time buyer properties initially sold as joint equity, today from conversations with estate agents and following the property pages in the local press I would estimate that the estate is now over 90% BTL, so the properties are there but they have been effectively removed from the market by BTL investors.
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Post by davee39 on May 18, 2014 8:44:51 GMT
Sorry, but I must inject a political dimension here.
Once upon a time Social Housing was provided as a public service by Local Authorities (Council Houses). While many aspired to own a property these provided a fallback. Right to buy, an end to public housing provision (or at least a drastic scaling back via housing associations) led to the BTL boom and also increases in Housing benefit, a public subsidy to private landlords (Bedroom tax?). BTL is clearly a win-win if money is available on cheap mortgages, house prices are rising and the taxpayers help pay the rent.
I have no knowledge of the London market, but my limited experience suggests some very high prices are demanded for some very miserable properties. As Mark Carney has indicated the BOE cannot Build houses, but the Government CAN. My proposal is that the Government borrows specifically to build and improve housing stock, introduces emergency apprenticeships to produce skilled tradesmen and contracts with building companies to get on with it!. Closing Heathrow and building Boris Island would provide plenty of land for Housing with good transport links.
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j
Member of DD Central
Penguins are very misunderstood!
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Post by j on May 18, 2014 8:59:23 GMT
Sorry, but I must inject a political dimension here. Once upon a time Social Housing was provided as a public service by Local Authorities (Council Houses). While many aspired to own a property these provided a fallback. Right to buy, an end to public housing provision (or at least a drastic scaling back via housing associations) led to the BTL boom and also increases in Housing benefit, a public subsidy to private landlords (Bedroom tax?). BTL is clearly a win-win if money is available on cheap mortgages, house prices are rising and the taxpayers help pay the rent. I have no knowledge of the London market, but my limited experience suggests some very high prices are demanded for some very miserable properties. As Mark Carney has indicated the BOE cannot Build houses, but the Government CAN. My proposal is that the Government borrows specifically to build and improve housing stock, introduces emergency apprenticeships to produce skilled tradesmen and contracts with building companies to get on with it!. Closing Heathrow and building Boris Island would provide plenty of land for Housing with good transport links. I would also add that if you look you can find 'cheap' properties in the capital. Some 2-3 years ago, a friend of mine who lives there managed to find a 2-bed flat, quite decent size & condition on 2 floors, albeit in not a posh area, but still a nice area with good transport links & some green surrounding fields for the princely sum of £115k. Through periods when he doesn't use the property (in & out of country due to work), he rents it for £1k pcm, yielding 10.4% !! I would struggle to get half this rate where I live, an area where Londoners in their old age relocate to & retire comfortably after selling their properties in London & move up here to retire nicely on the gains they made from their houses after buying much cheaper properties here & living off the difference (plus whatever pension they might have)
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Post by parag on May 18, 2014 9:03:38 GMT
Sky News is airing an interview with Mark Carney about this in the next few minutes
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