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  • Tax

    Stamp duty cut could fire up property market

    You couldn’t be more wrong. Property is easily the best investment at this stage of the economic cycle. With the power of leverage and the huge prices rises to come over the next 5 years you are going to miss out big time.



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    Maybe you should look at interest rates v property prices... the inverse correlation is telling... and the problem your theory has is that rates cant get any cheaper.. and peoples wages are maxed out. Where is all the money coming from your push these prices up 150% in your eyes.
    Interest rates have fallen since the highs of the 1980s and property prices have risen as they have fallen. This is the main reason prices have risen in the last 10 years. No more rate cuts no more price rises.
    It seems you just blindly believe in this cycle regardless of any reason for it to continue
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    If wages are maxed out how do you explain the huge price rises we’ve already seen in the South East? If you’re right then prices wouldn’t have risen anywhere near as much. Therefore you are wrong to place so much emphasis on the wages to house price ratio. In the North this ratio is far more benign than it is in the South anyway. House prices are much lower in the North so lots of scope for them to rise.

    A couple in Yorkshire on average wages could easily afford a house with a value of £200,000. Many houses range from £50,000 to £75,000. A price rise of 150% could easily be coped with by an average couple.
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    Joe 
    2013 cheap money thrown in by the government
    Mortgage terms extended to up to 40 years
    Interest rates down at about 0.5%

    An example
    In 2012 it would cost a couple 1169 pcm to borrow 200k over 25 years at 5 %

    Now the same 200k would cost 663 pcm to borrow over 35 years at 2%.

    But that couple can still afford 1169 a month so the amount they can borrow will have nearly doubled to 353k to keep the monthly payment the same at 2% interest over 35 years
    So they can now pay 75% more than they could 6 years ago

    Theres the huge affordability shift that allowed house prices to double

    Add stamp duty changes in 2014

    The introduction of help to buy in 2013/14 which added 40% to london property prices in 1 year, these are the causes of the rises.

    What exactly do you think will cause the next huge boom?
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    You seem to be picking up on various changes in the market at a micro level then putting your own interpretation on it and coming up with the wrong view of the macro picture. 

    You need to become a big picture person like what I am. This starts with education. You need to understand the 18 Year Property Cycle. This has all the answers you need and is the most important information a property investor should know about before investing in property. You also need to check out Ray Dalio’s Youtube video ‘How the Economic Machine Works to get an understanding of how the economy works. 

    I rely on hundreds of years of empirical evidence before making investment decisions. You appear to rely on hunches. 

    Think about it.
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    Interesting that DL who operates in North is saying she does not understand why FTBs are not buying perfectly good family houses at around £100k...

    So will they buy same place at £250k in 5 yrs when their wage growth may be say 10% to 15%?

    If FTBs do not buy - will PRS still step in as it did around 20 yrs ago - or will the tax hikes etc remain a disincentive?

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    There are lots of moving parts to the cycle. It isn’t useful to just focus on a few parts. For example house prices have risen more than 60% in the South East excluding London since the last crash whereas wages haven’t risen by anywhere near as much. This hasn’t stopped prices rising. In London the growth in house prices is over 90%.

    I do believe we are moving back to the norm of more people renting than owning. This trend will continue as the workforce becomes more mobile. Buying a house and putting down roots is not going to be realistic for young people who will have dozens of jobs in their lifetime. Renting is a much more flexible option for the workforce of the future.
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    Yes we would only need to lose 13% of owner occ group for rentals to equal owners

    Renting over a 60 plus yr adult lifetime will be a massive drain on income.

    A homebuyer today will spend 5 x the portion of net lifetime wages on property purchase compared to a 1970 buyer - which is itself maybe only 30 to 50% of the cost of lifetime private rental.

    That said almost half of all tenants (social/private combined) are claiming HB/LHA.

    Already there is a massive pension crisis in place for tenants who retire - who need a far higher pensions just to pay rent.

    We shall have to see how things pan out in reality.




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    Hi youngjoe, out of curiosity do you have a portfolio of your own?

    If yes, what value would you say it is and at what LTV are you currently?
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    Omega Property (Formerly SBS Ltd.)

    I am not professionally trained to give advice, generally posting for the benefit of the community or my own personal development.

    Of course I do. I own 10 BTLs and 2 HMOs. Value £1.2 million. I plan to buy at least 10 BTLs over the next 12 months and expect to become a millionaire by the end of the next 5 years. I’m not a greedy man.

    LTV 70/30.
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