Buy To Fret

#3
Indeed. Even with my poor knowledge of economics - when demand is more than supply=price rises.
 
#4
Optimism and denial are a wonderful human traits. Classic effect of an asset bubble bursting. Yes, the market will eventually rise but it has to bottom out first. Clever money is on a 40% drop in house prices before this point is reached.
 
#5
A 40% drop would be lovely... but i can't see it happening, that would mean the average price would drop from circa £180K to £108K.

Banks would have to be in a lot of trouble to not be able to afford to lend people that kind of money.
 
#6
#7
msr said:
Only in the short term.

With continued immigration etc in mind: http://business.timesonline.co.uk/tol/business/economics/article4456362.ece

Prices will recover.

msr
but with increasing unemployment will also govern the market levels of rent...

Property will of course recover but doubt anytime soon, the over inflation of the market is a prime cause of the current problems. Those who invested in property as a long term investment as opposed to short term will as always weather the storm.

I also think as 'Counter-Bluffer-Ops' says that 40% should be the floor, and also the finger crossing and LaLaLa im not listening of those that are going to take the hit wont stop it happening.
 
#8
The trouble is no-one knows for sure as its predicting human behaviour, not an economic pattern. There still exists as huge shortfall in houses in UK, made worse now by the major builders pausing construction projects. Given that even when they were building the shortfall existed, this is now compounded.

The drop in value is linked to peoples ability to raise the monies to buy. If those expecting to lose money go firm, and people are unable to get affordable or favourable mortgages then the whole thing halts on the edge of the much predicted 40% collapse. But for that collapse to materialise then people have to sell at lower and lower prices. Many of which will be unable to do so as they will sit in negative equity, so the number of hosues being sold, or able to be sold will be driven by those who MUST sell or bank foreclosures.

Given that banks will want to ride out the losses they will be less likely to foreclose in the short term when the values are falling, as they will only increase the fall, and their direct losses.

If, money become fluid again, banks can lend there will be a bow wave of mortages from all those who want houses but have been unable to buy, hence likely that the supply demand basic principle will come back into effect. This time made articifically worse by the sudden demand, vs the less than previous construction.

The big question of course is, when rather than if, the money markets will begin to move again, and of course as others have said how much has been wiped off the paper value of the housing stock.

Of course those who call this correctly will make a good deal of money, as with all other investments. the rest of us less gifted will just have to ride it out.
 
#9
Papa_Lazarou said:
Given that banks will want to ride out the losses they will be less likely to foreclose in the short term when the values are falling, as they will only increase the fall, and their direct losses.
This is the crux can they ride it out they have overextended them selfs way past there deposits and although they have started new share issues are not the majority of shareholders being financial institutions i.e. insurance also at this time somewhat over extended.

I suspect that the banks will have to perhaps change how they do veiw and action repossessions but we are talking about banks here and tradition fails show them to be that thoughtful.

The house market has always been in the state of more demand than supply, since i suspect when moved from tentage, but there also needs to be a vibrate job market and infrastructure also to ensure that property is taken up.

How many places still have streets and streets of derelict and crumbling property, cheap to pick up that even long game property developers havent bothered with.
 
#10
if you are thinking of buying its a waiting game.
things are up in the air at the moment and the BOE are holding the base rate at 5%, if they drop it, there will be an increase in inflation causing more problems.
mortgage deals are not to hot at the moment so just hold out before you buy. Its difficult to say when is the time to buy but two decreases in the BOE base rate is a sign of recovery.
dont hold out too long though, as soon as the base rate falls, property prices go up!
if you think all property will fall 40% and your gonna snap up a bargain for the price of a naafi break then your dreaming.
depreciation hits the big houses first
300k house becomes 210k
85k house becomes 60k
BUT the 85k house is more desirable as it is affordable on a high interest mortgage, sellers will therefore hold out for closer to the original asking fee.
the seller of the big house will have a long wait if he wants the original asking price.
Property always recovers, it might take 5 years, it might take 10 or even 15, but in the long term its better than any other kind of investment
 
#11
Counter-Bluffer-Ops said:
Optimism and denial are a wonderful human traits. Classic effect of an asset bubble bursting. Yes, the market will eventually rise but it has to bottom out first. Clever money is on a 40% drop in house prices before this point is reached.
Oh I truely hope so. I only own half of my house on one of these fandangled shared ownership things. If prices fall by 40% I can buy the second half of my property for about £40k.

Woohoo!
 
#12
More good news for the 1 Bn The Buy To Fret Fusiliers. 90% of mortgage deals pulled, and of these the best are only for those with at least a 30% deposit.

Most buy-to-fretters, of course, no longer have a 30% deposit - the hot money now must be on a frenetic rush to dispose of their oh-so-illiquid and rapidly depreciating assets during the course of 2009.

http://www.telegraph.co.uk/finance/...y-to-let-mortgage-deals-have-disappeared.html
 
#13
Interesting but cruel. There are two problems that this policy manifests.

1. It will stop dead new buy to let punters. Not necessarily a bad thing. Trouble is the only other possible buyers are new buyers looking for property to live in rather than invest. Typical buy to let properties are most suitable to first time buyers. How many of them have access to 20-30% deposit even at current depressed prices?

which leads to

2. If there are no buyers then we are looking at another big reduction in the price of property before new buyers will be tempted/can afford to be back in the market.

Now I don't have a lot of sympathy for those property empires like Anthea Turners squeeze, Grant Bovey who lived the high life, milked it and assembled a £100m of debt rather than equity but I do have time for smaller investors who have been assembling their pensions. I can't believe it is in the banks best interests to screw these people. It would be self defeating.


Does anyone here want to tell us of their problems in remortgages? Any good news stories of banks realising that supporting their current customers may be in their own best interests?
 
#14
in_the_cheapseats said:
Interesting but cruel. There are two problems that this policy manifests.

1. It will stop dead new buy to let punters. Not necessarily a bad thing. Trouble is the only other possible buyers are new buyers looking for property to live in rather than invest. Typical buy to let properties are most suitable to first time buyers. How many of them have access to 20-30% deposit even at current depressed prices?

which leads to

2. If there are no buyers then we are looking at another big reduction in the price of property before new buyers will be tempted/can afford to be back in the market.

Now I don't have a lot of sympathy for those property empires like Anthea Turners squeeze, Grant Bovey who lived the high life, milked it and assembled a £100m of debt rather than equity but I do have time for smaller investors who have been assembling their pensions. I can't believe it is in the banks best interests to screw these people. It would be self defeating.


Does anyone here want to tell us of their problems in remortgages? Any good news stories of banks realising that supporting their current customers may be in their own best interests?
Current depressed prices? :)

If we go Japanese then the future looks even worse:

Spectator.

Anyone who brought into property speculation or used equity release since 2003/2004 and has a chance of high negative equity on a property may well be in trouble. As people can't sell they become reluctant landlords. If they own or have enough income they can afford to undercut rent's placing more strain on BTL Landlords.

The landlord has few choices, try to ride out the recession and voids, funding the shortfall between income and expenses from his own savings/job. Praying all the while that it's a quick one until the repo fairy comes knocking. The bank will get it's pound of flesh either way.

Sell now pricing 30% or more below peak value to tempt a sale. If he has the equity or can afford the loss.

If he owns, or has been on a repayment mortgage for a good number of years then he can sit tight, keep the good tenants happy and continue to provide reasonably priced accommodation. Then he's got the joys of trying to figure out the market bottom to expand his portfolio.

Although in some ways it could be seen to be poetic justice, The BTL brigade drove the market since Gordon raped the Pensions. They effectively priced out the FTB's destroying the foundations. Now the FTB's are going to end up picking over the carcasses of those repossessed property portfolio's. Or not - It takes a certain demographic to want to live in a hastily thrown up newbuild flat, listening to the neighbours every grunt and groan.

House prices compared to inflation:

House prices against inflation.

Would indicate that there is still some way to go before before the market correction is complete. Though average price to average earnings may be a better indicator. But the picture is even gloomier:

Average House Price to Earnings.

The bulk of mortgages on offer at the moment would seem require a 25% LTV and 5% interest rate. This would indicate that the banks expect further falls above 10% but below 25%. And they're the ones holding all the poo at the moment, so they should have an angle on just how bad it smells.

Mortgage wise - I believe they are out there, but just require a return to our parents way of thinking. You are going to have to prove to the Bank Manager you can afford it, know how to budget and have a good track record handling money - a return to traditional British values. :)

Apologies for the gloomy outlook but who knows? Gordon is so busy trying to rape the future in order to re-inflate the debt bubble that the housing market crash could prove to be the least of our worries.
 
#15
hmmm, all very well and good, but given that you now need between 20-40% for a mortgage you need to live somewhere in the meantime.
 
#16
Rent from a professional landlord.

Don't forget to ask for a credit check on the landlord before you sign the tenancy agreement :) , wouldn't want the property being repoed from under you.

It's not like the UK has a shortage of property.

According to The Empty Homes Agency, there are an estimated 870,000 empty homes in the UK and enough empty commercial property to create 420,000 new homes.
About one in 20 homes in the country is empty. Once you start looking, you'll see them everywhere.
BBC
 
#17
Don't believe everything the news tells you.
Her indoors and I own a buy to let property, the drop in interest rates have seen the mortgage payments cut in half. The tennant gets the rent a little lower and we all win.
It can sit there for years if the selling market stay crap.
 
#18
jagman said:
Don't believe everything the news tells you.
Her indoors and I own a buy to let property, the drop in interest rates have seen the mortgage payments cut in half. The tennant gets the rent a little lower and we all win.
It can sit there for years if the selling market stay crap.
Good on you, the people it will catch out or the one's who are overextended, multiple properties with no equity/on an IO mortgage. If/when rates move up the ones with equity will be able to fix, those without will be at the mercy of the market.

As long as it remains cheaper to rent than buy you should be quids in. Once that situation reverses then High LTV requirements would I think naturally depress people making the jump. Unless prices drop so low that a 25% deposit today is less than a 5% deposit at 2007 prices.
 
#19
apfsdsdu said:
jagman said:
Don't believe everything the news tells you.
Her indoors and I own a buy to let property, the drop in interest rates have seen the mortgage payments cut in half. The tennant gets the rent a little lower and we all win.
It can sit there for years if the selling market stay crap.
Good on you, the people it will catch out or the one's who are overextended, multiple properties with no equity/on an IO mortgage. If/when rates move up the ones with equity will be able to fix, those without will be at the mercy of the market.

As long as it remains cheaper to rent than buy you should be quids in. Once that situation reverses then High LTV requirements would I think naturally depress people making the jump. Unless prices drop so low that a 25% deposit today is less than a 5% deposit at 2007 prices.
Don't get me wrong, we have two mortgages that under todays circumstances we simply wouldn't get.
There are no more tracker mortgages (which has seen hundreds a month drop off our main mortgage) and the deposit needed now would probably make it impossible.
As long as interest rates remain sensible life is not bad, when we bought we allowed for a reasonable hike in interest rates in our budget, Interest rates went the way of the Titanic which has more than compensated for the loss in value of both properties over the last year or so.

There will be changes in property value and interest rates over the years to come (as always) but they reckon the value of our house has dropped around 15% in the time we've owned it but the drop in interest rates mean we will pay almost 20% less for the house in terms of mortage repayments. As long as the drop in value remains close to the long term drop in interest costs then I'm not worried.
Should interest rates go through the roof and property value remain poor then the bank will find itself with a house to auction.

With the buy to let property, its on a rental mortgage. The cost of that mortgage plummets with the interest rates. With the extra margin a little can go into the bank and the tennant gets a cheaper rent. It allows it to remain atractive to tennants.

Of course if interest goes to early 90's levels the whole job is fooked.
 
#20

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