I believe it is a good time to buy with all the negativity the market in my area Reading (Berkshire)it is possible to get property at about 20% discount from peak , I can with the rise in rents get a yeild on HMO property in excess of 11% not as good as the 20% in the 90's but a great improvement on the recent past.

My only thoughts are tenant demand that seems good at the moment , will the slowdown impact employment signifiacantly next year? And so will many of my eastern european workers disappear ? Or as they seem to still be finding jobs will it be more English workers in which case no problem as Housing benefit can be claimed

I would be interested in peoples views

Regards

Paul

Paul,

I don't understand how BMV at 20% represents a good buying opportunity.

I think that UK property will fall greater than this amount due to nominal falls and real term falls due inflation over the next 5-10 years.

Property prices are likely to undershoot their mean increase and an overall fall of 40% is probably likely before finally bottoming out.

In such circumstances I cannot see how the current market is a buying opportunity. Most current BMV deals still mean that the yield only just covers costs on an interest only mortgage.

In essence then people are betting on capital appreciation from their 20% discount paid. This will either take 10+ years to see out or they will lose a great deal of capital once adjusting further losses against inflation.

The numbers just don't stack up unless you are paying in cash and even then you need to get at least a 35-45% discount to cover for future capital losses through inflation.

The USA has never before seen such large nominal falls in value. Property always went up as they say (losses were usually only made through inflation increase).

The UK house price graphs are heading the same way as the US. There is going to be a serious erosion in property values (both nominally & real) before we get anywhere near the bottom.

To only get a 20% discount off the peak price represents a risky investment in my opinion.

Many thanks for the response that's very helpful

From this I interpret that price expectations are of a 20 to 25% nominal fall from peak , which is what I am currently looking at at auction and with estate agents .

Based on a positive cashflow after all costs ( yeild of 12%) and prices not moving for 4 years it still sounds like a good investment ,as long as tenant demand holds up. Which is a risk as employment is likley to shrink, so transient tenants are likely to go to those areas of the world where there are more opportunities or go back home

Clearly after taking inflation of 4 to 5% this will reduce the real price by 40% in several years but this is not particularly important if not purchasing property for immediate capital appreciation but for income from rents. There are plently of people who can finance now jumping in as the income yeilds are now staring to be much more reasonable

Paul you have to ask yourself, after accounting for all costs and taking into the rent you will receive will you make more NET profit than putting your cash in the bank over the next 4 years?

In my opinion I doubt it.

Except in the current conditions rentals are surely going to rise? I would have thought...

Hi

I would agree that as people are not buying they will rent , I would be interested to know how this will balance against the many immigrants who will return home if they have no work as a result of the likley increasing unemployment next year . This is a clear concern as there are so many eastern europeans who may return to their more boyant economies.

In relation to making more to having my money in a bank would certainly be easier !the only reason I will is because I manage the rental of my own properties and I have based my calculations on the full purchase price at an interest rate of 7% , I have a 3 year deal of 5.89% + 2% fee

Regards

Paul

I have a friend who runs the lettings department for an agency in Chippenham. They usually turnover 25-30 properties per month. In September the figure was 45, their best month for 5 years!

They are taking on more staff in lettings at the expense of the second hand sales team, which is drastically depleted.

Rgds Alan

But a lot of rental properties are coming onto the market from "accidental landlords" - people who have to move but can't sell. I won't be buying just yet as I want to see how the economy performs over the next 12 months - my guess.... badly. That will impact further on house prices and will probably dampen demand from tenants.
Huw

Paul,

Keep to the fundementals... the property markets is heading the wrong way : down.

Even with discounts I would be very wary to step in at this point in the UK from an investment viewpoint. Prices were [with hindsight] inflated. I predict further falls and uncertainly for at least a year and more likely 2-3 years.

Invest in other countries that are in a different point in the curve : or look for other investments.

Don't catch a falling knife - and beware of a dead cat bouncing.

Many Thanks for the advice Alan

In view of the happenings on the market this week I think I will hold on, particularly as my mortgage company have decided to withdraw their mortgage offer which I have never heard of before but understand they have run out of money and have underfunded their commitments.

The trouble I have is knowing when we will hit the bottom in prices .

Regards

Paul