quote:

Originally posted by stateofplay:
Remember the days when you had to ask the Bank Manager if you wanted a loan? Dress up in your best suit and try and convince this guy that you were worthy of credit and that you could pay it back. I was refused a loan for £200 to buy a car, because; "the car was too cheap and would be unreliable and cost me more to maintain". OK, so how about I borrow £500 and get a better car? "you cannot afford to repay a loan of that size". Bugger. And then a few years later they introduced something called credit scoring and hey presto! I got my loan.

I've been in an identical position years ago. I wanted a loan for £200, the bank would only give me one for a drawing board to begin my design practice but not to implement it. I had to listen to the opinions of my 'betters' on my desire for credit and watch while areas were regenerated without my 'contribution' which cost me a fortune.
As recently as five years ago I had to listen to the judgement of some Building Society's 'Financial Adviser' in a bad suit about my proposal. If I'd have been able to take up the opportunity, which she made sure I didn't, I'd have made an extra 200k that year.

Fortunately my wife is now in a position to support our business without having to explain myself to such people. My prayers are gratitude at being delivered from the hands of such experts.

quote:

Originally posted by cakehead:
The laws of supply and demand are the biggest drivers of house prices.

Whilst that statement is of course a fundamental fact of economics, I believe it gets mis-interpreted. Namely as it is spun by those in the real-estate industry.

The mis-interpretation is that there is a shortage of supply per se.

This is not the case, the supply is only short to satisfy the overfed speculative demand.

Using the Supply/demand statement one could presumably conclude that over the last 12 mths the worlds Gold/copper supply vanished causing prices to soar.....only for a sudden glut to hit the market in the last 7 days. Clearly that is rubbish.

Sure "true investment/speculation" in real-estate makes only up only a small number of purchases. But of those owner-occupier purchases how many have been for a much larger property than is required because as well as a home "it's a jolly good investment".

All this talk of immigrants and demographics for this "supply shortage" is rubbish.....the "false demand" is the problem.

quote:

Originally posted by cakehead:

quote:

Originally posted by BTLOptingOut:

quote:

Originally posted by cakehead:
Cheap credit is a human right.

Have you been on the bottle? What a bizarre claim!

Nope, I'm stone cold sober. I remember the sixties and seventies when my parents had to buy things on credit and, if they could get it at all, could expect to pay up to a third on top. Such practices are immoral.
Advocates of stemming cheap credit believe people are too stupid to know what to do with their money. It's a patronising, top-down approach. Loans generate industry and employment by supporting entrepreneurship and intellectual properties.

I understand where you are coming from....I think your use of "human right" is somewhat OTT though

There is a shortage of properties with wide demographic appeal. Take away the city centre bijou flats, the 2-bed terraces in dodgy areas and the rest of the places you can't grow into or get out of fast enough and there is an absense of property at affordable prices.
Private developers see no profit in affordable 3 bedders when you can turn out 'luxury' 4 bedroom detached at £450k a pop.
Within seven miles of my place you can buy houses for £75,000. Unfortunately people don't want to live there and I certainly wouldn't.

Okay BTL-OO, Human rights may be over-egging things a bit but you don't have to be born chippy to feel got at when you are refused affordable credit because someone is judging you on your manner, accent or background rather than your proposal.
It's easy to forget the stultifying dead hand of convention in the financial sector twenty-five years ago, the tweedy managers, hand ledgers and the imperious bluestocking tellers. Gimme financial democracy every time.

quote:

Originally posted by cakehead:
There is a shortage of properties with wide demographic appeal. Take away the city centre bijou flats, the 2-bed terraces in dodgy areas and the rest of the places you can't grow into or get out of fast enough and there is an absense of property at affordable prices.
Private developers see no profit in affordable 3 bedders when you can turn out 'luxury' 4 bedroom detached at £450k a pop.
Within seven miles of my place you can buy houses for £75,000. Unfortunately people don't want to live there and I certainly wouldn't.

I think we agree, just drawing slightly different conclusions.

The supply is not short per se. There are as many empty houses now and no more people on the streets than there ever was.

The demand (expectation) in recent years has changed. We've gone through a credit bubble with a 'have it now' culture.

My argument is that this expectation can and will swing back. A moderate rise in interest rates, cheap labour and unemployment can re-align these un-realistic life-style expectations.

I'm not talking 15% interest rates, as we had in '90, here. Just a 1-2% could put bring many peoples current lifestyles crashing down.

Fed has raised base rates from 1% to 5% in the space of 18mths. The period of ultra low interest rates is coming to an end.

When the supply/demand equation changes I'm not expecting it to be due to less immigrants.

quote:

Originally posted by BTLOptingOut:

quote:

Originally posted by cakehead:
There is a shortage of properties with wide demographic appeal. Take away the city centre bijou flats, the 2-bed terraces in dodgy areas and the rest of the places you can't grow into or get out of fast enough and there is an absense of property at affordable prices.
Private developers see no profit in affordable 3 bedders when you can turn out 'luxury' 4 bedroom detached at £450k a pop.
Within seven miles of my place you can buy houses for £75,000. Unfortunately people don't want to live there and I certainly wouldn't.

I think we agree, just drawing slightly different conclusions.

The supply is not short per se. There are as many empty houses now and no more people on the streets than there ever was.

The demand (expectation) in recent years has changed. We've gone through a credit bubble with a 'have it now' culture.

My argument is that this expectation can and will swing back. A moderate rise in interest rates, cheap labour and unemployment can re-align these un-realistic life-style expectations.

I'm not talking 15% interest rates, as we had in '90, here. Just a 1-2% could put bring many peoples current lifestyles crashing down.

Fed has raised base rates from 1% to 5% in the space of 18mths. The period of ultra low interest rates is coming to an end.

When the supply/demand equation changes I'm not expecting it to be due to less immigrants.

I feel you may be underestimating the effects of immigration on the property market. In the sixties the demand for cheap textile labour from the subcontinent meant whole swathes of the country's housing was given over to homing such people. Go further back and it's Irish or West Indian or Jewish emigres who take up the cheaper end of the market. We're that kind of country and always have been. It makes for a vigorous economy.
I let a house to Polish people. Their manners are impeccable and they are honest and hardworking. Right now they are at the lower end of the financial spectrum but they are bright and grafters and won't be there for long but make up the next aspirant middle class. Pricey housing/rising interest rates puts pressure on the rental market just as it did in the early nineties. We can argue about the detail but that's how things are.

Just popped back onto the board and wanted to address a few of the replies to my original message.

My question was whether property was the SAFEST form of investing not necessarily the best or highest returning.

I am concerned that pensions are mis-managed and that there is a black hole that will come home to roost. Look at the problem that the Royal Mail have declared recenently, I can't help but feel that a loan at commercial rate from the government is not going to resolve that defecit.

Shares can and have crashed spectacularly over recent times and this is put down to "corrections". The FTSE hovers around the same amount with peaks and troughs. The trick is to find the former and avoid the latter.

With investment property there have been rises and people expect a level of fall, but do we honestly believe that there will be a fall comparible to shares or the fact that it will dissapear all together like a pension could.

quote:

Pricey housing/rising interest rates puts pressure on the rental market just as it did in the early nineties. We can argue about the detail but that's how things are.

But the detail shows that sweeping statements such as "pressure on the rental market" is somewhat flawed.

The detail shows that rental rates have remained stagnant, average yeilds are at less than 5% whereas historicaly they were above 11%.

http://www.telegraph.co.uk/money/graphics/2006/05/14/ccecag14big.gif

If rental rates are at an all time low then surely the supply/demand argument states that there is an supply outstrips demand here.

As you are a BTL'er and I am an STR'er it is obvious that our conclusions for this sector differ. I guess only time will tell whose forcaste is the better....

quote:

Originally posted by Bletsoe:
My question was whether property was the SAFEST form of investing not necessarily the best or highest returning.

I do agree that property is more stable than shares, commodities or other forms of investment. Hence it is less prone to short term fluctuations.

The downside is that the returns are less spectacular too.

The returns can become spectacular through leverage.

But leverage can work both ways....you can leverage a loss as well as a gain. Through leverage it is possible to lose your shirt in property as it is in shares.

So in answer to your question....

Yes I believe property is a fairly secure long term investment.....but no more so than a highly diversified long term share/commodity portfolio.

The trick with any investment is not to buy at the peak.

With lax credit, shares, commodities and real-estate are all at peaks.

Cash is currently king.

Long term a diversified portfolio of property, shares, commodities and cash isimportant.....over speculate in any one of them and you are exposed.

I haven't mentioned Pensions as they are just a tax wrapper for any of the above investments....unless you are with an underfunded company scheme.

quote:

Originally posted by Simulcra:
This statement puzzles me??? If the normal citizen of this country cannot afford basic housing then how can LOW PAID immigrants afford it?

I think what he is saying is that because of the mass influx of immigrants they require a roof over their head. This means they need property to rent, which a landlord with a house can provide.

quote:

Originally posted by kinster:
I think what he is saying is that because of the mass influx of immigrants they require a roof over their head. This means they need property to rent, which a landlord with a house can provide.

If this is the case, then surely rents would go up? If rents go up, can immigrants on low paid jobs afford the rent? Vicious circle!

For what its worth, rents in the south west are static and have been for a few years.

quote:

Originally posted by reverand:

quote:

Originally posted by kinster:
I think what he is saying is that because of the mass influx of immigrants they require a roof over their head. This means they need property to rent, which a landlord with a house can provide.

If this is the case, then surely rents would go up? If rents go up, can immigrants on low paid jobs afford the rent? Vicious circle!

For what its worth, rents in the south west are static and have been for a few years.

yes they can. do you know there are like 10+ people sharing 2 bed homes in the UK? You read about how many cocklepickers were sharing a small house? This is how they live.

quote:

Originally posted by reverand:
If this is the case, then surely rents would go up? If rents go up, can immigrants on low paid jobs afford the rent? Vicious

Thats some of the points on debate reverend, some of us believe that immigration, asylum seekers, european workers etc will help ensure risk of saturation is minimal an demand for low value housing is propped up by these people coming to the country so if prices were to fall then with any joy rents wouldnt, hence hang on til the storm blows over.
A lot will get housing benefit

quote:

Originally posted by Mike99:
so if prices were to fall then with any joy rents wouldnt, hence hang on til the storm blows over.

The rules for the rental sector are more demand/supply orientated than sales. Demand in sales can be partially fueled by sentiment & speculation wheras leased is more centred around need.

If prices do fall then I don't anticipate a correspoding reduction in rents.

Just as rents remained relatively stable on the price boom I would expect them to remain fairly stable on the way down.

If anything rents may rise as some of the lease supply is removed from market due to repossession.

If your BTL business is built on a firm financial footing (yeild) then you should be able to weather a storm.

However I have a feeling that many Jonny-come-latelys BTL empires do not have such a firm business case and are weighted heavily on the expectation of capital appreciation.