Buy to Let is Back.... Be Afraid!! (Excellent summation)
...And the UK govt has a "high property price" policy
==========================


As you know I don't often start threads, but I found this article on Lovemoney.com and, more importantly, the comments from a poster named Twoflower, and thought I should post it here.

http://www.lovemoney.com/news/the-property...?source=1000425

Twoflower said.....

Good post.

It's not just the UK, a similar thing has happened in Bratislva, the average wage is around 9k per year, starter flats (communist built) cost 110k. People are still buying them. Rental of a simliar flat cost more than the average person monthly wage, so only couples rent. Forget about buying house without parents help.

This way of living is common across the world. I feel we may be seeing a shift in ownership from the many to the few across Europe and UK. I believes theres no reason why mortgages should be 3x earning and there's no majic wand that will grant you a nice house in a nice area if you work hard and play to the rules.

We have already seen that the banks will not be allowed to suffer the effects of their mal investment or poor business decisions. I was hoping to be able to buy a place for cash right now. No chance. Prices are going up. So we keep saving.

And those trinkets you talk about are not even available on a normal wage over here. So enjoy them.

John Doe,
Thanks for starting the thread. It is a good subject, well worth discussing.
But, as you may know, I will want to take the opposite point-of-view, so here goes...


My quick reaction is: Get over it.
Isnt there more to life than owning a property ??

Let the over-anxious suckers payup, and their banks lose money, eventually prices will return to reality
(Please dont take this personally, I just wanted to put an opposing view strongly.)

The counter argument to this thread is:
The Psychological state of "Waiting to Buy"
You may already be in a better place !

I agree the philosophy of owning isn’t necessarily the most healthy, and I see arguments both for and against.

However, it does have attractions when - as has been pointed out on the other thread The Psychological state of "Waiting to Buy"
- we do not have secure tenure agreements for rental in the UK (at least, not many people).

Having STR’d twice in the last 5 years and rented in between, we have been forced to move at short notice twice (due to landlords deciding to sell). While this is inconvenient, having a wife and 2 year old at home, it would be a major problem if I had two older kids in schools and my wife was back at work.

If we had the tenant protection available in Germany, I am sure we would still be renting.

Personally, I never had any problems as a tenant in the UK. Maybe I was lucky.

Others who have had "hassle" as tenants, may be driven to buy, even when the cyclical timing was wrong.

I think people make their own luck - I think its safe to say that you did your homework before renting?

There are some dodgy landlords out there, so tenants need to learn how to sus them out

Heres my advice:

If possible speak to previous tennants, neigbours or even the agent. Try to find out the LL status - are they a long term pro, overleveraged BTL or an accidental landlord?

Aways do a Land Registry search. For just £2 you can do an online search, which not only confirms that the LL owns the property, but also gives details of the price paid, and details of any mortgager.

Tell the LL you will be writing to the mortgager to inform them of your tenancy - this will only rattle the LL if they have somthing to hide. I once had deposit & fees returned without quible when I made this threat - the LL had first told me there was no mortgage, which LR proved was a lie.

Put in your own ground 2 notice - My tenancy ceases liability for rent as soon as the LL misses a payment.

Thanks for the info Sonic.

We have always rented through a major agent, (four properties in eight years) and asked each time if the owners would be likely to sell.

While two of the properties we rented through these agents had no problems, in the other two we had been told the owners were long term letters and were not going to sell.

I like the idea of the ground 2 notice, I will look this up, although I'm not sure the agents we use will go for it, (that is if we decide to STR again next year just before the election and the IR rises )

Yes I suppose so, but an Englishman’s home is his castle!

Besides, I found the piece more a comment of the fact that an average man on an average wage should be able to afford the average house, on one salary, so that one partner can look after the kids while the other works.

It is the endless profiteering of the banks that has lead to this ridiculous situation where prices have risen so much, that couples both need to work to keep even a modest roof over their heads. This has a real knock-on effect on society.

As the house prices have risen, mortgage payments have risen and rents have followed, draining away money that could otherwise be spent in the real economy.

The banks are the only ones making money from this (even now!). The higher the house prices, the more interest paid - even with low rates.

Can’t our so-called leaders see this and do something about it?

If they refuse, you have to ask why?

I put it to them that they have nothing to fear if they have nothing to hide - it's just my way of making sure they are telling the truth about their financial status. If this term is refused than I would ask the LL to consent to a credit check, again available online for about £20

If LL refuses both then I walk away

Wouldnt that be nice !

If the home is small enough, and remote enough, it may even be possible today.

But the reality is, the UK is not as wealthy as it used to be, and far too much of its welath is tied up in property, and the government (wrongly IMHO) sees it as its role to protect that wealth with a "high price policy"*

The good news is, like many government programs, the "high price policy" looks destined for failure.

= = = = =
* from elsewhere:

1/
===QUOTE===Tired of waiting, on 22 November 2009 - 09:13 AM, said:

Regarding housing, the UK Labour government objective is "to keep families in their homes", and avoid "evil" repossessions. And, put like that, it is unsurprisingly supported by the vast majority of the population.

At the begining of the crash, Gordon Brown said he would do "whatever it takes" to stop the crash. We laughed at his "Canutean" hubris. But now, after all this QE, record breaking deficits, and the prospect of Britain loosing the past decade, and never catching up, we are no-longer laughing.

Dr., Gordon Brown is crazy. And, worse: a good proportion of the population wants to believe in him.
===UNQUOTE===

"Keeping people in their homes" is really:
Temporarily allowing people to enjoy record low rates so they can be fooled into thinking they can afford homes that were over-priced and over-financed when they bought them:" It is not helping people, it is deceiving them into thinking everything is okay. Those who can see through the deception are being given a second chance to sell.

Fools believe in the Leader of the Fools


2/
===QUOTE===Tired of waiting, on 22 November 2009 - 02:20 PM, said:
Yes, of course.

It is even worse than that. To put in a very simple way, hoping "the people" gets it:

The policy of this LABOUR (!) government is to keep housing EXPENSIVE!
===UNQUOTE===

Yes. A "high price policy, popular amongst homeowners.
But there is a younger generation coming up, the "property disposssessed", who should be clever enough to
vote for someone else. And prudent and careful people should see the recklessness of their policies.

I wrote about this two years ago:
THE RICH FEAST IN LONDON HAS LEFT A PROPERTY BUBBLE IN ITS WAKE
Is this going to be followed by a Huge Hangover and an attack on the Super-Rich?
July 5, 2007

Back in London for the summer, I find myself amazed at the silence of the Property Peakees and their less affluent cousins, the Property Dispossessed. The former have seen their paper property wealth rise, while the latter have been left off the housing ladder, and found it difficult to get the media or politicians to take any interest in their economic frustrations.
. . .
+ The reigning Labour government did little to discourage the influx of the wealthy, because they saw few immediate negative consequences of this trend. And also, because barriers to this wealth might have brought down property prices in London, causing negative ripples throughout the economy. The other parties, and the Conservatives in particular, remained silent about rising wealth inequality, because of their ideological support for free markets and wealth creation. The middle classes also remained silent, because "trickle-down" in the property market meant that their properties were also rising in value, and on paper, the property-owning middle classes were also getting more wealthy as property prices rose. For those willing to borrow against that wealth, Mortgage Equity Withdrawals meant more spending cash, and more money to invest in other properties.

+ Those without property, the First Time Buyers looking to enter the market, complained, but for a long time have found it difficult to find a voice. There was no political discussion and hardly any media outlets for venting their frustration of being left behind. They watched helplessly, as the wealth-generating property engine took off and lifted out of sight. Others, who were more willing to shoulder the risk took on heroic amounts of debt to participate in the rising property bubble. The natural home for those who felt dispossessed by the wealth gap was the Labour party, but that party has been co-opted by praise and political patronage from those who had benefited from Britain's miracle economy. Of course, in hindsight, it was not a miracle at all, but a debt fueled bubble.

SO THIS is where things stand now, as the former Chancellor Gordon Brown, who was one of the principal architects of the so-called miracle, has taken over as the new prime minister. He is proud of the decade of strong growth, but few beneficiaries of that growth have been willing to look behind the curtain, and see how it has been engineered. The UK economy is in a debt-bloated bubble, which has well-suited the wealthy, and those many workers and professionals in the City and Estate Agencies that have benefited from the rapid growth in asset values (and debt) which have brought matters to their current over-stretched condition. But so-called miracle has not delivered much at all in the way of increases in the disposable incomes of the average voter. Such income gains as have been seen, have been mostly eaten up by higher taxes,
. . .
A wake-up call that property has become too risky, would soon put prices even lower, as alert investors and the over-geared suddenly rush for the exits. Then the market might find itself in an even more dangerous phase. If and when prices fall far enough that the Peakees find themselves with negative equity, then the real stress will begin. At that point, many will be trapped with expensive debt, and no exit. The banks will not allow them to sell the properties, unless they can cover the full mortgage amount. Many will have stretched to buy, so they will not have the extra funds to cover the mortgage shortfall, and so they will be stuck continuing to make the debt repayments, unless they are willing to face bankruptcy. Many could find themselves as virtual debt slaves while the market continues to slide. Some will sell, and also bank foreclosure will rise, just as they have in the US. There is a possibility that the UK may face years of property falls, and a market that does not find its low until it has fallen by 20-30% lower, or even more. If banks back away from their aggressive lending to BTL investors, then the market will need to find substantial buying from FTBers in order to reach stability. Many dropped out of chasing property at much lower prices, many will need prices to be 30% lower or more before they become truly affordable again.

/more: http://www.financialsense.com/fsu/editorials/2007/0705.html

== ==

Two years ago, and still accurate about the situation of today

...and now: yet another "new policy"...

It's time to give up the dream of home ownership, says minister
By Andrew Grice, Political Editor
People should get used to idea of long-term renting, housing spokesman argues

The era in which all Britons aspire to own their own home may be coming to an end, according to the Housing minister, John Healey. In a controversial speech, he suggested that Britain may be moving towards a European model, with renting on a roughly equal footing with buying. He said home ownership had fallen from 71 per cent of households in 2003 to 68 per cent today, noting that this trend began in 2005, well before the recession. "I'm not sure that's such a bad thing," he said.

Mr Healey, a close ally of Gordon Brown, challenged the assumption behind housing policy under both the Tories and Labour since Margaret Thatcher introduced legislation to allow council tenants to buy their homes 30 years ago this month. It led to two million homes being sold to tenants. "You don't need to be a grocer's daughter to know it is not a good idea to have all your eggs in one basket," Mr Healey told the Fabian Society. "Yet not even a drop in the housing market can convince people not to use their home as a store of wealth." He said almost a third of people rely on their home to top up pensions. "The property piggybank is unsustainable and unfair," he added.

The number of first-time buyers getting parental assistance has doubled in just three years to four out of every five.

"Increasingly, those without the property-funded 'Bank of Mum and Dad' are finding it hard to buy homes of their own," Mr Healey said. The gap has widened in the recession, during which the average age of first-time buyers getting parental assistance has stayed the same but the average age of a first-time buyer without parental help has risen from 33 to 37. "As housing wealth is passed from parents to children, inequality is compounded over the generations," he said.

Mr Healey stressed that a similar status between forms of housing tenure did not mean hostility to home ownership, and emphasised a need to find new ways to support those who wanted to become homeowners.
. . .
The minister said: "We need new choices in tenure - more opportunities for everyone to have a decent, secure, affordable home. That means increasing the diversity of tenures, allowing people to move more easily between tenures and putting them on a more-equal footing with home ownership, as they are in other European countries."

Gains from rising house prices were tax-free, encouraging people to make their home their main investment, he said. He floated the idea of allowing people who rent tax-free savings bonds "to build assets and store wealth".

He went on: "Renting will be more stable, more secure, of a better standard, and probably more common an option. There will be more and new options for those on lower and middle incomes, those who are less likely to get access to social housing."
/more: http://www.housepricecrash.co.uk/forum/ind...howtopic=132387

Asian WSJ:
Their American Dream: Buy, then Default and Rent
(Is this the "revenge of the deadbeats")
=================================

Thanks to a rare confluence of factors, a growing number of US families are concluding it's better not to own

People's willingness to abandon their own piece of America illustrates a paradoxical change wrought by the housing bust: even as it tarnishes the near-sacred image of home ownership, it might be clearing the way for an economic recovery.

...a growing number of US families are concluding that the new America dream home is a rental.

Some are leaving behind their homes and mortgages right away, while others are simply halting payments until the bank kicks them out. That's freeing up cash to use in other ways.

Shana Richey has a family of five. She has defaulted on a mortgage, where she is owing about $230,000 more than the home is worth, and moved into a nearby home that she is renting.

She's says, "It's just a better life. It really is." She has more cash to spend.

Ms. Richey's family of five used some of the money to buy season tickets to Disneyland, ands plans to take a Carnival cruise to Mexico in March.
. . .
US home ownership has charted its biggest decline in more than two decades, falling to 67.6% s of September from a peak of 69.2% in 2004. And more renters are on the way... Credit firm Experian forecast that "strategic defaults" by homeowners who can afford to pay are likely to exceed one million in 2009, more than four times 2007's levels.
. . .
21 Million US households may wind up owing more than their homes are worth... Losses to banks and investors could exceed $400 Billion. The flip side of those losses is massive debt relief for those who stop paying mortgages that they cannot afford.
. . .
4.8 Million American households are estimated to have not paid their mortgages in the last three months. And the savings is estimated at $5 Billion a month.

Renting well and cheaply in the UK is just as bad as trying to get value for money when buying. In many parts of the UK, especially the south, a take home salary of a grand a month will not rent you much once you add in council tax, energy and the cost of getting to work. In some parts of the south you can pay £500+ a month to rent a room. Property, it's what puts the Great in Great Britain.

What is so astonishing to me is how long TPTB are dragging this out.
Back in 2003 I thought a crash was imminent. Gradually I revised my view and stated in a poll on HPC that I thought it would be 2009 before prices really dropped. But I have not seen the drops I was expecting in the UK.

Anyone between 30 and 45 who did not buy before the massive bubble might have to wait another ten years before they finally let the market reach the "correct" level. I fear by then many will be too old to obtain a mortgage so will have to have ready cash available.

I suspect many will move overseas and live unhappily but sufficiently well in a foreign land not because they really want too but because they fear that there is no other path for avoiding poverty in old age and they would rather suffer the racism than the hunger.

Prices are only being kept up by reduced mortgage approval levels now that self-cert and fast track have been removed. Only those that can afford to buy are buying. Imagine all those people living on estates in the south where the average price is £150grand+ for a two bed, where do they get their dodgy mortgages now to afford it?

Mortgage approvals (by 2007, self cert and fast track reached 47% of approvals).

Oct 09 57,345 30/11/2009
Sep 09 56,215 29/10/2009
Aug 09 52,317 29/09/2009
Jul 09 50,123 01/09/2009
Jun 09 47,584 29/07/2009
May 09 43,414 29/06/2009
Apr 09 43,201 02/06/2009
Mar 09 39,230 01/05/2009
Feb 09 37,937 30/03/2009
Jan 09 31,000 02/03/2009

Dec 08 31,000 30/01/2009
Nov 08 27,000 02/01/2009
Oct 08 32,000 01/12/2008
Sep 08 33,000 29/10/2008
Aug 08 32,000 29/09/2008
Jul 08 33,000 01/09/2008
Jun 08 36,000 29/07/2008
May 08 42,000 30/06/2008
Apr 08 58,000 02/06/2008
Mar 08 64,000 29/04/2008
Feb 08 72,000 02/04/2008
Jan 08 73,000 29/02/2008

Dec 07 72,000 30/01/2008
Nov 07 83,000 04/01/2008
Oct 07 89,000 29/11/2007
Sep 07 100,000 29/10/2007
Aug 07 106,000 01/10/2007
Jul 07 112,000 30/08/2007
Jun 07 113,000 30/07/2007
May 07 113,000 29/06/2007
Apr 07 109,000 31/05/2007
Mar 07 114,000 02/05/2007
Feb 07 120,000 29/03/2007
Jan 07 121,000 01/03/2007

Dec 06 115,000 30/01/2007
Nov 06 131,000 04/01/2007
Oct 06 129,000 N/A
Sep 06 124,000 N/A
Aug 06 118,000 N/A
Jul 06 117,000 N/A
Jun 06 119,000 N/A
May 06 115,000 N/A
Apr 06 108,000 N/A
Mar 06 117,000 N/A
Feb 06 115,000 N/A
Jan 06 121,000 N/A

Dec 05 120,000 N/A
Nov 05 115,000 N/A
Oct 05 111,000 N/A
Sep 05 105,000 N/A
Aug 05 103,000

There are some big funds eyeing up UK residential property.

The future may be that new builds are built to order for major institutions who can manage with yields at the current level.

For the rest of us it will be very tough as usual to buy if that transpires.

Is it the Dubai and Greece Sovereign Wealth funds by any chance?

The US system is obviously better as it allows house prices to correct quicker as homeowners can walk away if they are underwater - the housing debt gets written off and that money can then go back into the economy which helps the recovery and jobs. The situation in the UK means that the economy is going to be dragged down for years to come with the dead weight of massive housing debt just like Japan had.

Low inflation and wage deflation coupled with a much bigger bubble than the late 80's means it's going to take many indebted homeowners an incredibly long time to get out of negative equity. Funny how a home can quickly become your prison in the UK and take away your freedoms if you are not careful.

Is anyone else seeeing a North / South split? I'm really not seeing this mini bounce up here, asking prices are still not realistic but new builds which developers have to shift do seem to be coming down. I'm seeing "flippers" who maybe bought the first phase of a new build are pricing themselves 20% above the phases which are coming onto the market now.

yes, it seemed to stop at about Milton Keynes which is about where the commute into London gets to be a greater pain than the time cost of getting there and one of the reasons why MK was built where it was.

The slide continues - It is "the time of year" for cuts, but asking prices are showing a new trend

Property asking prices fell for the second month in a row during December, according to Rightmove.

14 Dec 2009

Property asking prices fell for the second month in a row during December as the market suffered its traditional seasonal slowdown, research showed today.

The 2.2pc drop left the average property put up for sale in England and Wales during the four weeks to December 5 nearly £5,000 cheaper at £221,463, according to property website Rightmove.

House price falls hit 20pcBut despite the fall, which came as the number of homes for sale hit its lowest level for 21 months, house prices are still 1.7pc higher than they were 12 months ago.

All areas of the country saw a fall in asking prices during the month, except East Anglia, where they rose by 0.5pc.

The North saw the biggest price slide at 5.8pc, followed by the North West and South East, both at 4.3pc.

/more: http://www.telegraph.co.uk/finance/persona...h-in-a-row.html