Getting into buy to let property business

[estebanrey]

lol ok and while we're at it with this whole arbitrary wealth distribution nonsense should the state just seize the assets of multinational corporations etc...

who gets to keep what? how do you decide how to allocate houses? you realise communism has completely failed

Failed like your ability to read the thread....

I have no problem with capitalism, you're not trying that American technique of implying anyone who has a gripe with house prices is a communist are you?

Again, I'm not a communist or even socialist and housing is one of the only areas I'd support some form of restrictions in what you can and can't do because, call me Che Gevera here but, I tend to think it's more important to have a society where housing is affordable for all then one where a select few can feather their pension pots whilst watching everyone else around them struggle and paying them rent.

This tactic of accusing anyone of being a communist because they have a gripe with the prices of one thing (which IMO is a fundamental part of life, shelter) then they must support fully fledged communism is just lame.

I don't want everyone to be given a free house when they're 18 and I don't think it's unfair that some people live in mansions whilst others live in a bedsit, that would be communism.

My only gripe is how it has become unaffordable for people on average (not basic or low paid but just average) wages to get on the property ladder. This is a problem and one the government have a duty to look at and tackle where possible. If you don't think huge parts of the population wanting, but not being able to buy a home is a problem then you are either extremely naive, or you are making money from property and don't want housing to become more affordable as it'll mean lowering your 'turnover'.

 

[estebanrey]

How can you arbitrarily reduce house prices and mortgages by 50% - pay for it all with magic beans? - just force all the international banks currently operating in the UK's market to take a big hit... essentially a seizure of assets by the state - that won't work out well, would be illegal to start with but supposing some future left wing govt did try it we'd fall out with all our international trade partners, trash the UKs credit rating and economy and make us poorer than the average eastern european state - suddenly your 50% reduction in house prices is meaningless when everyone is earning even less than 50% of what they were before and still can't afford houses.. not to mention not having a banking system left.

Obviously when I made that claim I was talking ideal worldism and not promoting an actual policy.

Let me come at it a different way, why up until the mid-90s were houses so much more affordable than now and can't we reverse the clear massive hike we've seen over the last 20 years.

I'm not advocating something that's never happened before here, this notion of houses being 10-15 time the average salary nowadays is a completely new thing, all I'm asking is what caused this bubble in the first place and could we do something to reverse that trend a little so at least the majority of people in this country can afford to buy a house?

 

[p1RATE]

i'm all ears, well, eyes

FOGL - a risk worth taking imo. They will be looking for oil again soon and there are a lot of political factors keeping the big boys out for the time being.

 

[dowie]

Obviously when I made that claim I was talking ideal worldism and not promoting an actual policy.

Let me come at it a different way, why up until the mid-90s were houses so much more affordable than now and can't we reverse the clear massive hike we've seen over the last 20 years.

I'm not advocating something that's never happened before here, this notion of houses being 10-15 time the average salary nowadays is a completely new thing, all I'm asking is what caused this bubble in the first place and could we do something to reverse that trend a little so at least the majority of people in this country can afford to buy a house?

low interest rates for one thing... greater availability of credit - I don't think anyone really wants to reverse that too much - if its truly a bubble as you suggest then it will adjust downwards in time - I wouldn't be too sure though - more likely the market will stagnate over time - either way, the idea of massive govt intervention is likely not going to end well.

also - re your other post ref: 'communism' - you can't start claiming on one hand that you're capitalist and then on the other hand put forward views demonstrating the complete opposite... no I didn't fail to read your comments, your comments were simple inconsistent with each other - state seizure of assets and attempts to arbritrarily control/distribute private wealth isn't consistent with capitalism but has been a common feature of left wing socialist and communist govts

 

[Greebo]

Well house prices for some time have historically been way out of proportion to salaries and they need to drop.

My bank manager was telling me that the number of BTL houses repossessed has risen greatly (probably from people chancing their arm and buying one house at the peak, not people who do it for a living owning 20+ houses)

House prices need to drop IMO. Hence why I say that now is not perhaps the best time to buy a BTL house.

 

[dowie]

Well house prices for some time have historically been way out of proportion to salaries and they need to drop.

not necessarily - depends how far you look back - you could say that they've been unusually cheap for a generation or so. Go back to people's grandparent's generation/great grand parents... what were conditions like then say 100 years ago... 2 parents, 5 kids living in a 2 bedroom miner's cottage etc...

don't think the average person had much disposable income back then after rent/food

 

[mr tommo]

Less costs to be fair, which are significant if financing that original 200k

I assumed that as he was stating that the break even point was 25 year, that it was a cash purchase. Otherwise a 25% deposit of £50k would have "break even" point at just 5 years.

Bloody parasites!

FOGL - a risk worth taking imo. They will be looking for oil again soon and there are a lot of political factors keeping the big boys out for the time being.

Jesus! How on earth can you recommend a wildcat oil drill it he Falklands as a much better investment?!

Maybe you should also tell him about BOR who are also drilling in themfslklands and just lost 75% of their value overnight after an unsuccessful drill in the falklands too.

I'm all for the stockmaket and it's made me some good money over the last 18 months, but it is NOT a better investment than making a bit of money from renting a house out.

Losing 75% overnight is commonplace with small cap oil exploration.

 

[[TW]Fox]

That semi will yield a return of £375 (absolute worst case)up to £430PM.

The beauty is, 25% deposit is only £15k to get started.

That property would cost me £275pm on a mortgage. Putting a minimum of £100 per month in my pocket. That's an 10% return on investment per year.

Errr?

Surely not - lets say you get mortgage at £275 a month and you get £400 a month for it. Thats £125 a month.

Less..

Tax at 20% or more
Management fees
Repairs/maintenance
Cost of any unoccupied periods

Infact it's sound like overall you will be lucky to see 50 quid let alone 100 quid a month? Not saying its not worth doing - as even if you break even it's worthwhile - but your sums seem wrong to me.

 

[Greebo]

not necessarily - depends how far you look back - you could say that they've been unusually cheap for a generation or so. Go back to people's grandparent's generation/great grand parents... what were conditions like then say 100 years ago... 2 parents, 5 kids living in a 2 bedroom miner's cottage etc...

don't think the average person had much disposable income back then after rent/food

Okay fair enough. I should have specified since the war or something

Here's some info

http://www.mortgageguideuk.co.uk/housing/uk-house-price-index.html

Adjusted for inflation a house today on average costs 141% more than in 1975

Since 1983 they have risen by 101% and 61% since 2001.

http://monevator.com/historical-uk-house-prices/

I have another one somewhere which I can't find which shows that a house used to cost 4 times your salary at any previous peak since 1920. Now it's some like 8 times your salary.

Houses have moved way ahead of peoples salaries and hence why they are not affordable for most people. Hence why there is a good renting market as people have no choice.

In the long term this can't continue and prices must drop.

 

[[TW]Fox]

Adjusted for inflation a house today on average costs 141% more than in 1975

And what percentage of an average persons income does an average mortgage on an average house today take, versus the same in the 70's or 80's where interest rates were often 15% and take home pay far lower?

 

[estebanrey]

And what percentage of an average persons income does an average mortgage on an average house today take, versus the same in the 70's or 80's where interest rates were often 15% and take home pay far lower?

This chart goes back to 1980 and is average house price vs average wage...

So the long term average is 4 times your salary, in the 80s and during the housing slump in the 90s this dropped below that so it was a good time to be a first time buyer but it also proves how out of whack they are now at nearly 5 and half times the average, though this has dropped since 2007.

 

[dowie]

Okay fair enough. I should have specified since the war or something

no need for the roll eyes...tis just the idea that historically x happened when in reality its a small portion of history...

Here's some info
[...]

I have another one somewhere which I can't find which shows that a house used to cost 4 times your salary at any previous peak since 1920. Now it's some like 8 times your salary.

you don't need to provide info to back up something that wasn't in dispute in the first place...

Houses have moved way ahead of peoples salaries and hence why they are not affordable for most people. Hence why there is a good renting market as people have no choice.

In the long term this can't continue and prices must drop.

that's the bit I will dispute because its without basis other than 'because they used to cost x they should cost x again' - tis perfectly feasible for them to stagnate for a bit and steadily increase over time, tis perfectly feasible for houses to stay a a higher multiple of the average salary - not everyone *has* to own a house.

Also homes are different these days - there are far greater numbers of people living alone so you have extra demand for 1 or2 bedroom flats, divorce rates are higher, people get married later. Also you're not going to cram multiple kids into bedrooms these days (unless you're a *****) Whereas people might have had 5 kids in a 2 bedroom house 100 years ago they're more likely to want 2 kids and a 4 bedroom house these days....

 

[Jez]

I assumed that as he was stating that the break even point was 25 year, that it was a cash purchase. Otherwise a 25% deposit of £50k would have "break even" point at just 5 years.

I don't really understand this "break even" lark. You are buying an asset, you are positive from day one often substantially so once renovation work and resale suitability are sorted.

But anyway, the thread has gone too far to keep humouring the green eyed monsters. Good luck with your plans going forward (i got your return mail)

 

[[TW]Fox]

This chart goes back to 1980 and is average house price vs average wage...

I didnt ask that. Nobody hands over £200k in cash for a house so its irrelevent.

I asked what percentage of take-home pay a mortgage represents now versus, say, 1985.

 

[dowie]

This chart goes back to 1980 and is average house price vs average wage...

So the long term average is 4 times your salary, in the 80s and during the housing slump in the 90s this dropped below that so it was a good time to be a first time buyer but it also proves how out of whack they are now at nearly 5 and half times the average, though this has dropped since 2007.

you realise you've completely missed the point the previous poster was making - he was asking about the average portion of salary spent on mortgage payments not the average house price in terms of a multiple of the average salary...

its quite a key point really - the average % of income spent on mortgage payments in 1985 was around 20%... it was just over 10% in 2003... houses became more affordable thus prices rose.... its now back at circa 20%... there was a peak of 27% in 1990 - you'll find there was a housing slump then...

if interest rates rise significantly you might find house prices falling as they become less affordable, at the moment however, in the current climate, it doesn't look like rates will rise much over the next couple of years - currently the average mortgage on a house is as affordable as it was in 1985...

 

[Greebo]

And what percentage of an average persons income does an average mortgage on an average house today take, versus the same in the 70's or 80's where interest rates were often 15% and take home pay far lower?

Okay I'll play

1975
average house price £10,388
average wage £3,161.60
Average Mortgage rate 12.1%

Mortgage cost: £1333.56 per annum (100% loan)
Proportion of average wage = 42%

2012

average house price £246,235
average wage £26,000
Interest rate 5% (best figure I could find as an average)

Mortgage cost: £17,470.92 per annum (100% loan)
Propotion of average wage = 67%

You have to remember that after 1978 interest rates started dropping substantially except for a blip in 1989.

It's bad even if you compare back to just 2001

average house price £146,568
average wage £24,250
Interest rate 8%

Mortgage cost: £13,730.28 per annum (100% loan)
Propotion of average wage = 56%

 

[Jez]

I didnt ask that. Nobody hands over £200k in cash for a house so its irrelevent.

I asked what percentage of take-home pay a mortgage represents now versus, say, 1985.

While i understand your point and agree with it re affordability; it is all money, regardless of soucring and people should never forget that just because it is typically financed over a long term and often at a low rate A good example of people losing sight over this comes up whenever you have a conversation re things such as conveyancing fees. I have heard many people dismiss the difference of £1000 between a good value package and a local one, as being immaterial when purchasing something for £200k. This is quite obviously nonsense, but they lose sight as the £200k does not feel "real" to them - when it really is. £1000 is £1000. £200k borrowed or not, is £200k.

Dont underestimate cash buyers too, a lot of people buy houses in cash (including myself, and i wish my house was only £200k) I compete with them and there does not seem to be a shortage from where i am standing....

 

[bloodiedathame]

Okay I'll play *snip

Out of interest do you have your hands on groceries, energy bills, vehicle running costs and council tax comparisons? Long shot I know but worth looking in to.

 

[cm1179]

Out of interest do you have your hands on groceries, energy bills, vehicle running costs and council tax comparisons? Long shot I know but worth looking in to.

but these are surely balanced out a little with the cost of electrical goods?

it's 1983! you want a toaster? that's £85 please! (ok i may be off a little there ....... or am i?)

 

[dowie]

current mortgages represent about the same % of income as they did in 1985