Jump to content

Search the Community

Showing results for tags 'crash'.

  • Search By Tags

    Type tags separated by commas.
  • Search By Author

Content Type


Forums

  • Property Hub
    • Housekeeping
    • Property in the news
    • Introduce yourself
    • General property discussion
    • I need advice!
    • Progress journals
    • Property Podcast discussion
    • Property Hub University
    • Chit-Chat
  • The Property Hub Summit

Calendars

There are no results to display.


Find results in...

Find results that contain...


Date Created

  • Start

    End


Last Updated

  • Start

    End


Filter by number of...

Joined

  • Start

    End


Group


Website URL


Skype


Location


Areas I invest in


About me


Property investment interests


My skills


My goals


Interests outside property

Found 9 results

  1. It's no secret that leveraged property investment has been very lucrative in recent decades, but people have been made bankrupt as well, especially in 2008. I'm trying to get to grips with how people with larger portfolios sleep at night with lots of mortgage debt to their name. Let's say I have one Buy-To-Let worth £200k with £150k debt against it and it's held in an SPV with a 20% personal guarantee (PG). The most I can lose personally is 20% of debt, so £30k. This isn't too scary, unless I've spent all my money it probably won't bankrupt me and it's not an insurmountable amount of money to rebuild. Anyone hoping to grow big though is going to one day end up with much more debt than this, perhaps they will end up with 20 of the same property, worth a total of £4M with £3M debt and the same 20% PG. Now they are personally liable for up to £600k! That's a much scarier amount. I can think of a few ways investors might justify these risks and I'd be interested to get your thoughts. A) prices will never fall more than 25% and so negative equity will never occur, and if the property needs remortaging at this price (which won't be possible without putting new money in because of the new value) then it can be easily sold to cover the debt. B ) before prices get anywhere near dropping by 25%, the government will step in to support the housing market C) The investor has sufficient other assets to cover any insolvency in their property portfolio I get the impression that a lot of people are either not thinking about this risk or thinking of A and B. In my eyes at the moment, only C is really that safe. If the properties are held personally or with a larger PG, then much more is at risk. As an investor grows their portfolio, they might be under the impression that they are unstoppable, but if they keep up a mortgage LTV of 75% across their portfolio, they are no more safe against bankruptcy than someone with a single property, and in fact have more to lose. Please let me know what you think, do you have a way to mitigate against these risks? Am I missing something? Thanks
  2. Hello, I have question for anyone who wants to contribute please.... How do you value a property in a 'hot' or quickly inflating market? For the last year or so, I have found it really challenging to confidently assess the value of residential property in the UK. The normal method I would use, which is mainly Rightmove/Zoopla sold prices for the street and immediately surrounding streets has started to bear very little resemblance to what properties are selling for in the current market. I started to pay more attention to the 'Under Offer' section on Rightmove to get a sense of buyer demand on pricing, but for most properties this is currently significantly higher than sold prices...showing that demand is causing fast inflation in most areas. I would previously usually ignore 'For Sale' prices as these are estate agent valuations, which are generally optimistic and often end up being negotiated down or reduced by the seller. However, it does seem in the current market that there are less properties being reduced in price than in previous years. As the majority of properties are bought with residential mortgages, RICS surveyors are obviously approving the valuations on these properties, even though they are often 10-30% higher than the previous sold prices in that local area. I would really like to get a better understanding of how this calculation is made. Are there certain tools, methods, formulas etc (other than the ones I mention in this post) that can be used to confidently tell that a property is correctly valued when it is priced significantly higher than previous sold prices in that area? I always used to ignore the Zoopla home values estimates https://www.zoopla.co.uk/home-values/ - these are so wide ranging that I felt I couldn't use them to accurately predict what most properties would sell for. However, recently I realised that they presumably include 'under offer' prices and some element of % market inflation into their value calculations...and now I am actually finding that the 'High' estimate in this tool is a closer indication to what most properties are selling for than using Rightmove sold prices. Do you include an element of market forecasting in the valuation, as a way of future proofing the risk? For example, if the Savills residential property forecast for that region shows a predicted 4% increase in the next year...would that be used as a buffer to offset the lack of proof available from sold prices due to the inflated value being paid for the property? It seems that as long as the mortgage deposit (e.g. a minimum of 10% for residential and 25% buy-to-let) is more than the uncertainty or margin of error around the valuation, that lenders are probably not too bothered about inflated values, because they know they could repossess the property and sell it for enough to cover their costs and profit? Obviously this scenario is very bad for the property owner who overpays and then has to sell but unfortunately one of the consequences of a housing crash. Finally, auction guide prices. These would usually be set at least 15-25% below what the same property would achieve on the open market, based on sold prices. However, I have recently looked at some new listings for upcoming auctions and many of the guide prices are higher than Rightmove sold prices for the area. This suggests to me that even the 'discount' end of the market is undergoing such strong inflation that valuing a property is more of a leap of faith than a considered calculation at the moment. How do you know that the prices properties are selling for are not overly inflated and would cause negative equity if the market crashes in the next few years? Obviously choosing high yielding BTL properties with the intention of holding them long term would mitigate this risk to a certain extent...but it would mean you wouldn't be able to remortgage to withdraw funds for further investment for potentially quite a long time. Any feedback and advice would be appreciated please. I am interested from both a BTL and flipping perspective, but also as a home owner. Many thanks, James
  3. I’d like to start a conversation about macro-economics and the effects that it might have on property investing. In particular, I’m going to challenge the notion that house prices always go up and highlight that the price rises which have been enjoyed by property investors for the past generation have been largely due to the steady decline in interest rates. Ultimately I’d like to find clarity on the question of whether property investment is still a good idea today and if so then is the same formula that worked previously still the best approach. I’ve tried to research this topic thoroughly but please do disagree with me and offer alternative ideas. What I say relates mostly to buy-to-let (BTL) investments that involve a mortgage. A) Let’s start with some fundamentals: property investors generate profit from two sources: rental income and capital growth. With rental yields where they are today (around 4-6% gross) it typically works out that the rental income is similar to the running cost of the property, and so the investor relies on capital growth to actually make profit. If you knew house prices were going to stay still for the next 30 years, would you still be interesting in BTL? B ) Having established that capital growth is important, let’s examine what causes it. For people to pay more for houses they have to be able to afford to pay more and this generally means one of two things: either they are earning more (wage growth) or they can access cheaper mortgages (interest rates falling). Rob & Rob have often talked about affordability on their podcast and explain how it’s this combination of wage and interest rate that determines what people can pay, not just how much they earn. Interest rates have been falling reasonably steadily now for several decades, meaning that year on year buyers have been able to afford bigger mortgages, pushing up house prices. This is demonstrated by the fact that, over this time, the house price-to-income ratio has increased substantially but the mortgage payment-to-income ratio has been relatively unchanged. A research paper by Victoria Monro of the Bank of England [1] estimated that over the past three decades about half of the housing price growth was due to wage growth and the rest due to falling interest rates. Therefore, if interest rates had not fallen, we would have seen half the price growth over the past three decades. C) So what happens next? Assuming interest rates will not go negative, two things can happen: either rates stay low or rates go up, and surely they will eventually go up. This means that investors will be relying on wage growth alone to push property prices higher and when rates do rise this will have an opposing effect as buyers are faced with higher mortgage payments. If rates slowly rise over the three decades back to the point they were 30 years ago, might we expect the roughly equal contributions of interest rate changes and wage growth to cancel out and house prices stay flat. D) Does this present risk to property investors? I’d really like to hear some opinions from you all. In my eyes there are some significant risks: If I were to purchase a BTL today and house prices stay flat, I might make a small or zero profit on the rental income. But this scenario is likely to occur as a result of interest rate rises, in which case my costs are going to go up and I could find myself in a scenario where I’m making a loss each year on running the property and there are no price rises to bail me out. If rates rise especially fast then house prices could even go down, but I’d be surprised if central banks would allow this to a significant extent. Any thoughts? E) Is there a particular strategy that could be safer? Please do make some suggestions. I for one have been wondering whether the era of capital growth is coming to and end and instead investors should be seeking to maximise rental income rather than capital growth. This would sustain a larger proportion of returns when the growth stops and give a stronger cushion as interest rates rise and increase the mortgage payments. Conclusion I’m proposing that rising interest rates over the coming years are likely to counter the effects of inflation and leave house prices standing still. This means that property investors no longer be able to rely on capital growth as part of their strategy. Furthermore, investors face a risk that their portfolios will no longer be viable with higher mortgage payments. Contrary to popular recommendation, higher income (lower capital growth potential) investments might be a safer bet for the next generation of investors. Ultimately, the central banks have control of the interest rate lever, will their decisions be likely to help or hinder investors? But what about the 18 Year Property Cycle?!? Aren’t we entering the boom phase?? Well I’ll be honest, I’m not sure I believe in the 18 year property cycle... it’s often easy to pick out a pattern when you go looking for one, that doesn’t mean it means anything. Perhaps the 18 year cycle has some validity resulting from human psychology and it certainly seems like people are expecting house prices to go up right now. But I believe there are larger forces at play – these people need to be able to afford it at the end of the day. We might see some more growth still, I’m not predicting a crash; new 95% mortgages could push the market a bit higher still as could wage growth. But otherwise the economic levers that inflate house prices don’t go any further, and eventually will start going back the other way. This won’t necessarily result in prices going down, if central banks decide to avoid that. But it could mean prices staying flat and costs going up, potentially rendering traditional BTL strategies unviable. Please feel free to agree, disagree and generally offer your thoughts on these fundamental issues. [1] Read abstract and see Table 3 from https://www.economic-policy.org/wp-content/uploads/2020/10/9100_UK-House-Prices-and-Decline-in-Risk-Free-Real-Interest.pdf
  4. Coronavirus with Crude Oil crash strikes in. All major indices are plummeting like in 2008, gold is picking up in value. UK Oil is almost rock bottom. UK goverment is trying to stimulate the economy, again! Should we be worried already? Is recession coming? Is 18-year cycle a MYTH? Major politics and public people are getting infected by the Coronavirus. What one of major politics will die due to Covid-19? Will this cause a panic? Will this whole uncertainty bring UK property market down in post-brexit era? Is there enough toilet paper for us in the world? None was scared about financial crash early 2008, but the tension is building up now and I am a bit worried... You can click on the image to zoom in. each line - green or red - represents 1 month period.
  5. Hi All, I listened to today's podcast and thought it was interesting to hear Rob say that he believes there will be a crash or correction to the property market in the next 18months! This does not follow the 18 yr property cycle theory. What are people's thoughts on this??? Should we hold back on investing further at the end of the year? Interesting...
  6. So, in the last week I have received three emails from three different sources claiming 2017 will see a property crash like we saw 10 years ago. Now, I'm not one to jump on the bandwagon but these are three different companies so it does me think that maybe there is something going on that I'm unaware of so wondering if anyone else has received similar emails or heard anything else? There has obviously been post Brexit comments and predictions as to what may happen but despite the value of the pound dropping, and then climbing again anyway, it has all been pretty quiet on the property front. I'm not one to name and shame but shown here are a few snippets from the latest email I've received: The main result of this latest email is to enroll in an 'Emergency webinar' later this week. So, is this just a marketing ploy to get people to panic and sign up for this or is there something going on that hasn't been mentioned at any point here in these forums.....and it is that latter point that makes me think this is just aimed at the more wary or new property investors.
  7. I've noticed property prices around where I live in south east London are dropping. I had a quote for my flat five month ago and prices since then (just by my observations) are now maybe £30,000 lower or more, plus nothing is moving. Two flats have just dropped the asking by £25,000 in the last couple of days. I'm curious why none of this is being reported in the media. So my question is - do you think we are headed for a London crash (as a French bank recently predicted of 30% to 50%) or are we just in a post-Brexit slump and prices will recover once the shock has worn off? In either case, how long do you think it will last for and are we better off getting out now before prices dive?
  8. I am a first time buyer - and have my deposit and everything set up to purchase my first home - however I am concerned there will be a potential crash/drop in property value as article 50 (brexit) is due to be signed this spring. Should I hold fire and wait to see what will happen to prices and not rush to buy now? Personally it is a good time for me to buy now but I dont want to make a massive mistake as it has taken me a lifetime to earn my first deposit. Thanks all
  9. What is your prediction for property bubble crash ?
×
×
  • Create New...