What do Dutch tulips, dot-coms and English real estate have in common?

In 17th century Netherlands a craze developed for the buying and
selling of tulip bulbs. Bulbs were traded for ever-higher prices with
some speculators making fortunes from the market. Unsurprisingly (with
hindsight) the fad proved unsustainable, and in 1637 panic selling
ensued resulting in many sustaining huge losses.

In the late 20th - early 21st century a craze developed for investment
in Internet businesses. The Internet was seen as breaking the mould of
traditional business. Existing business models were cast aside as dot-
com stocks were traded for ever-higher prices with some speculators
making fortunes from the market. Unsurprisingly (with hindsight) the
fad proved unsustainable, and panic selling ensued resulting in many
sustaining huge losses.

Dutch tulips and dot-coms were both bubbles that burst, but what of
English real estate? Let's review the facts...

Real estate has undergone a lengthy period of rapidly rising prices.
Nationwide data [http://www.nationwide.co.uk/hpi/historical.htm]
reveals that in quarter 1 of 1997 the average UK house price was
£55,810. By quarter 2 of 2007 (10.25 years) that figure had risen to
£181,810, a rise of more than 3 and a quarter times, or an average
annual increase in excess of 12%, far outstripping price and earnings
inflation.

The Daily Mail Aug 15th 2007 [http://www.dailymail.co.uk/pages/live/
articles/news/news.html?in_article_id=475396&in_page_id=1770] reports
the typical mortgage taken by first-time buyers has reached a record
3.37 times annual salary. The number of repossessions has recently
jumped 30% and the number of first-time buyers in June 2007 was the
lowest for two years.

Why? Possibly one or more of the following factors:

* The UK operates an extremely lenient immigration policy. According
to migrationwatchuk.org net foreign immigration reached 292,000 in
2005, excluding illegal immigrants of whom some 50,000 are detected
each year.

* Recent years have seen sustained periods of historically low
interest rates, thus allowing buyers to borrow more.

* Reduction in availability of affordable rented housing. Since 1980
many council tenants have taken advantage of legislation allowing them
to buy their homes at substantial discounts. The homes sold under this
scheme outweighs new properties becoming available for rental.

* The rise in the number of single households means more homes are
needed overall.

It all adds up to demand rising faster than supply, and when that
happens economics says prices will keep rising. The government has
recognized this with incoming PM Gordon Brown pledging to build 3
million new houses by 2020 (though he's unlikely to be in office long
enough to see it fulfilled).

So, what next? Is the boom sustainable, will it gently peter out, or
will the bubble burst just like the tulips and dot-coms?

Well, if I knew the answer with certainty I'd rush out and put my
house on it. But let's see what's most likely.

The only likely trigger for a crash is out and out recession, but that
seems unlikely. Figures from National Statistics [http://
www.statistics.gov.uk] show the number in work rising, the jobless
rate falling and annual GDP growth at a healthy 3%.

Housing isn't discretionary. Pretty tulips and dot-com stocks might be
nice to have, but shelter is one of life's necessities. Those that can
live with their parents will do so for longer. Others may rent
privately, but will soon realize it makes more sense paying their own
mortgage than someone else's. That's why price growth has remained
strong despite recent interest rises.

Figures published yesterday show inflation falling. Combined with
world stock market volatility it's unlikely the Bank of England will
rise interest gain any time soon.

So my guess is that fears of a housing market crash are greatly
exaggerated.

Web: http://personalmoneymanagement101.com/
Blog: http://personalmoneymanagement101.com/wp/

In uk.finance pmm101@googlemail.com wrote:

> The only likely trigger for a crash is out and out recession

Nope. A possibility that looks more likely by the day is that a crash
could be caused by mass unavailability of mortgages. How much is a house
worth if everyone has to bid with their own cash?

> but that seems unlikely. 

It's more likely that the recession which is coming will be caused by
house price deflation (and the causes of that) rather than the other way
around. 

> Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

As we all know, if you find a trend on a graph, that trend will continue
forever.

> Housing isn't discretionary. 

That's untrue too. A couple can choose to live with the in-laws when
they can't pay a mortgage. Singles can choose to flatshare when they
can't afford a mortgage. Then there are millions of immigrants who work
here to save to pay for a property back home. If there's a recession,
then they'll decamp to a country where they can still earn money,
leaving much empty property behind.

> Pretty tulips and dot-com stocks might be
> nice to have, but shelter is one of life's necessities. Those that can
> live with their parents will do so for longer. Others may rent
> privately, but will soon realize it makes more sense paying their own
> mortgage than someone else's. That's why price growth has remained
> strong despite recent interest rises.

Nope. Growth has remained strong because of the unprecendented
availability of credit at low rates. If you research the Tulip Bubble
(or the South Seas, Canals, Railways, or Stocks bubbles) you'll discover
that the availability of credit to the masses is the overweening common
factor. 

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

That may be true, because we're headed for deflation. Deflation is
extremely destructive of prices of assets which have been rising as a
result of a credit bubble, with falls of 67% to 90% being typical.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

wrote in message 
news:1187222582.202178.5030@a39g2000hsc.googlegroups.com...
>What do Dutch tulips, dot-coms and English real estate have in common?

You forgot "south seas".  Though god knows how you buy or
sell one :-)

tim

In uk.finance pmm101@googlemail.com wrote:

> The only likely trigger for a crash is out and out recession

Nope. A possibility that looks more likely by the day is that a crash
could be caused by mass unavailability of mortgages. How much is a house
worth if everyone has to bid with their own cash?

> but that seems unlikely. 

It's more likely that the recession which is coming will be caused by
house price deflation (and the causes of that) rather than the other way
around. 

> Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

As we all know, if you find a trend on a graph, that trend will continue
forever.

> Housing isn't discretionary. 

That's untrue too. A couple can choose to live with the in-laws when
they can't pay a mortgage. Singles can choose to flatshare when they
can't afford a mortgage. Then there are millions of immigrants who work
here to save to pay for a property back home. If there's a recession,
then they'll decamp to a country where they can still earn money,
leaving much empty property behind.

> Pretty tulips and dot-com stocks might be
> nice to have, but shelter is one of life's necessities. Those that can
> live with their parents will do so for longer. Others may rent
> privately, but will soon realize it makes more sense paying their own
> mortgage than someone else's. That's why price growth has remained
> strong despite recent interest rises.

Nope. Growth has remained strong because of the unprecendented
availability of credit at low rates. If you research the Tulip Bubble
(or the South Seas, Canals, Railways, or Stocks bubbles) you'll discover
that the availability of credit to the masses is the overweening common
factor. 

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

That may be true, because we're headed for deflation. Deflation is
extremely destructive of prices of assets which have been rising as a
result of a credit bubble, with falls of 67% to 90% being typical.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

wrote in message 
news:1187222582.202178.5030@a39g2000hsc.googlegroups.com...
>What do Dutch tulips, dot-coms and English real estate have in common?

You forgot "south seas".  Though god knows how you buy or
sell one :-)

tim

pmm101@googlemail.com wrote:
> * The UK operates an extremely lenient immigration policy. According
> to migrationwatchuk.org net foreign immigration reached 292,000 in
> 2005, excluding illegal immigrants of whom some 50,000 are detected
> each year.

Polish people on minimum wage are not buying £250k 1 bed flats in London.

> * Recent years have seen sustained periods of historically low
> interest rates, thus allowing buyers to borrow more.

Inflation has also been low during most of that period, meaning that real
interest rates are much higher.

> * Reduction in availability of affordable rented housing. Since 1980
> many council tenants have taken advantage of legislation allowing them
> to buy their homes at substantial discounts. The homes sold under this
> scheme outweighs new properties becoming available for rental.
> 
> * The rise in the number of single households means more homes are
> needed overall.
> 
> It all adds up to demand rising faster than supply, and when that
> happens economics says prices will keep rising. The government has
> recognized this with incoming PM Gordon Brown pledging to build 3
> million new houses by 2020 (though he's unlikely to be in office long
> enough to see it fulfilled).

Can you explain then, why rents in the private sector are not rising in line
with house prices.  If there was a shortage of demand for housing, they
would be.  In fact, rents have been rising at a much lower rate than
inflation in general.

> The only likely trigger for a crash is out and out recession, but that
> seems unlikely. Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

How about the credit crunch?  If banks can't get the funds in to lend out in
mortgages, that will stop people from being able to buy houses.

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

Libor is 6.38% as at the most recently available figures I have, up from 6%
a couple of weeks ago.  So it probably doesn't matter what the bank of
england says, interest rates have already shot up.

> So my guess is that fears of a housing market crash are greatly
> exaggerated.

My guess is they are not.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

> How about the credit crunch? If banks can't get the funds in to lend
> out in mortgages, that will stop people from being able to buy houses. 

It won't you know. This all happened in Japan in the 1990's but people
kept buying houses. They were just buying them with cash for 10% of
what they used to pay is all.

Can't see any reason why we'll be different.

FoFP

--
Then the Gods of the Market tumbled, and their smooth-tongued wizards
withdrew And the hearts of the meanest were humbled and began to believe
it was true That All is not Gold that Glitters, and Two and Two make
Four [Kipling] And the Gods of the Copybook Headings limped up to
explain it once more.

M Holmes wrote:

> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> 
>> How about the credit crunch? If banks can't get the funds in to lend
>> out in mortgages, that will stop people from being able to buy houses.
> 
> It won't you know. This all happened in Japan in the 1990's but people
> kept buying houses. They were just buying them with cash for 10% of
> what they used to pay is all.

Well yes, that will certainly happen to an extent, but people in negative
equity are less likely to sell voluntarily as they won't be able to redeem
the mortgage in order to do so.

In uk.finance pmm101@googlemail.com wrote:

> The only likely trigger for a crash is out and out recession

Nope. A possibility that looks more likely by the day is that a crash
could be caused by mass unavailability of mortgages. How much is a house
worth if everyone has to bid with their own cash?

> but that seems unlikely. 

It's more likely that the recession which is coming will be caused by
house price deflation (and the causes of that) rather than the other way
around. 

> Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

As we all know, if you find a trend on a graph, that trend will continue
forever.

> Housing isn't discretionary. 

That's untrue too. A couple can choose to live with the in-laws when
they can't pay a mortgage. Singles can choose to flatshare when they
can't afford a mortgage. Then there are millions of immigrants who work
here to save to pay for a property back home. If there's a recession,
then they'll decamp to a country where they can still earn money,
leaving much empty property behind.

> Pretty tulips and dot-com stocks might be
> nice to have, but shelter is one of life's necessities. Those that can
> live with their parents will do so for longer. Others may rent
> privately, but will soon realize it makes more sense paying their own
> mortgage than someone else's. That's why price growth has remained
> strong despite recent interest rises.

Nope. Growth has remained strong because of the unprecendented
availability of credit at low rates. If you research the Tulip Bubble
(or the South Seas, Canals, Railways, or Stocks bubbles) you'll discover
that the availability of credit to the masses is the overweening common
factor. 

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

That may be true, because we're headed for deflation. Deflation is
extremely destructive of prices of assets which have been rising as a
result of a credit bubble, with falls of 67% to 90% being typical.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

wrote in message 
news:1187222582.202178.5030@a39g2000hsc.googlegroups.com...
>What do Dutch tulips, dot-coms and English real estate have in common?

You forgot "south seas".  Though god knows how you buy or
sell one :-)

tim

pmm101@googlemail.com wrote:
> * The UK operates an extremely lenient immigration policy. According
> to migrationwatchuk.org net foreign immigration reached 292,000 in
> 2005, excluding illegal immigrants of whom some 50,000 are detected
> each year.

Polish people on minimum wage are not buying £250k 1 bed flats in London.

> * Recent years have seen sustained periods of historically low
> interest rates, thus allowing buyers to borrow more.

Inflation has also been low during most of that period, meaning that real
interest rates are much higher.

> * Reduction in availability of affordable rented housing. Since 1980
> many council tenants have taken advantage of legislation allowing them
> to buy their homes at substantial discounts. The homes sold under this
> scheme outweighs new properties becoming available for rental.
> 
> * The rise in the number of single households means more homes are
> needed overall.
> 
> It all adds up to demand rising faster than supply, and when that
> happens economics says prices will keep rising. The government has
> recognized this with incoming PM Gordon Brown pledging to build 3
> million new houses by 2020 (though he's unlikely to be in office long
> enough to see it fulfilled).

Can you explain then, why rents in the private sector are not rising in line
with house prices.  If there was a shortage of demand for housing, they
would be.  In fact, rents have been rising at a much lower rate than
inflation in general.

> The only likely trigger for a crash is out and out recession, but that
> seems unlikely. Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

How about the credit crunch?  If banks can't get the funds in to lend out in
mortgages, that will stop people from being able to buy houses.

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

Libor is 6.38% as at the most recently available figures I have, up from 6%
a couple of weeks ago.  So it probably doesn't matter what the bank of
england says, interest rates have already shot up.

> So my guess is that fears of a housing market crash are greatly
> exaggerated.

My guess is they are not.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

> How about the credit crunch? If banks can't get the funds in to lend
> out in mortgages, that will stop people from being able to buy houses. 

It won't you know. This all happened in Japan in the 1990's but people
kept buying houses. They were just buying them with cash for 10% of
what they used to pay is all.

Can't see any reason why we'll be different.

FoFP

--
Then the Gods of the Market tumbled, and their smooth-tongued wizards
withdrew And the hearts of the meanest were humbled and began to believe
it was true That All is not Gold that Glitters, and Two and Two make
Four [Kipling] And the Gods of the Copybook Headings limped up to
explain it once more.

M Holmes wrote:

> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> 
>> How about the credit crunch? If banks can't get the funds in to lend
>> out in mortgages, that will stop people from being able to buy houses.
> 
> It won't you know. This all happened in Japan in the 1990's but people
> kept buying houses. They were just buying them with cash for 10% of
> what they used to pay is all.

Well yes, that will certainly happen to an extent, but people in negative
equity are less likely to sell voluntarily as they won't be able to redeem
the mortgage in order to do so.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> M Holmes wrote:

>> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

>>> How about the credit crunch? If banks can't get the funds in to lend
>>> out in mortgages, that will stop people from being able to buy houses.

>> It won't you know. This all happened in Japan in the 1990's but people
>> kept buying houses. They were just buying them with cash for 10% of
>> what they used to pay is all.

> Well yes, that will certainly happen to an extent, but people in negative
> equity are less likely to sell voluntarily as they won't be able to redeem
> the mortgage in order to do so.

They'll throw the keys at the lenders and walk. Last time the banks could
wait for them to buy another house, gain some equity, and come after
them for the cash they still owe. This time, these people will neither
seek, nor be offered credit again in their lives and so there won't be
any new equity for the lenders to come after.

The main part of a debt-deflation, which is what this credit bust is
leading to, is that a whole bunch of credit is revealed to have never
been the money everyone thought it was, and it will vanish as the
morning dew. Lots of borrowers will lose, lots of lenders will lose and
lots of investors will lose.

Remember the old saw:

If you owe the bank a million Dollars, you're in trouble,

but if you owe the bank a billion Dollars, your bank is in trouble.

Remember that? well, here's the third line that we're about to become
more familiar with:

If you owe the bank a trillion Dollars, we're ALL in trouble.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

"Jonathan Bryce" <jonathan@localhost.localdomain> wrote...
> pmm101@googlemail.com wrote:
>> [...]
>> It all adds up to demand rising faster than supply, and when that
>> happens economics says prices will keep rising. The government has
>> recognized this with incoming PM Gordon Brown pledging to build 3
>> million new houses by 2020 (though he's unlikely to be in office long
>> enough to see it fulfilled).
>
> Can you explain then, why rents in the private sector are not rising
> in line with house prices.  If there was a shortage of demand for
> housing, they would be.  In fact, rents have been rising at a much
> lower rate than inflation in general.

Could it be because many people are speculating on the housing market by
buying-to-let, thereby artificially increasing the supply of rented
property?

Matti

Matti Lamprhey wrote:

>> Can you explain then, why rents in the private sector are not rising
>> in line with house prices.  If there was a shortage of demand for
>> housing, they would be.  In fact, rents have been rising at a much
>> lower rate than inflation in general.
> 
> Could it be because many people are speculating on the housing market by
> buying-to-let, thereby artificially increasing the supply of rented
> property?

That could be part of the story, but either way, someone who wants to live
in a house can do so without a significantly increasing expense.

On Wed, 15 Aug 2007 17:03:02 -0700, pmm101@googlemail.com wrote:

>Figures published yesterday show inflation falling. Combined with
>world stock market volatility it's unlikely the Bank of England will
>rise interest gain any time soon.

If you look at the record of the RPI since 1982, you will find that
the index has fallen or remained unchanged in every July except for
the three years 1988-89-90. 

The figures for July 2007 are what could have been expected.
-- 
Terry Harper
URL: http://www.btinternet.com/~terry.harper/

In uk.finance pmm101@googlemail.com wrote:

> The only likely trigger for a crash is out and out recession

Nope. A possibility that looks more likely by the day is that a crash
could be caused by mass unavailability of mortgages. How much is a house
worth if everyone has to bid with their own cash?

> but that seems unlikely. 

It's more likely that the recession which is coming will be caused by
house price deflation (and the causes of that) rather than the other way
around. 

> Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

As we all know, if you find a trend on a graph, that trend will continue
forever.

> Housing isn't discretionary. 

That's untrue too. A couple can choose to live with the in-laws when
they can't pay a mortgage. Singles can choose to flatshare when they
can't afford a mortgage. Then there are millions of immigrants who work
here to save to pay for a property back home. If there's a recession,
then they'll decamp to a country where they can still earn money,
leaving much empty property behind.

> Pretty tulips and dot-com stocks might be
> nice to have, but shelter is one of life's necessities. Those that can
> live with their parents will do so for longer. Others may rent
> privately, but will soon realize it makes more sense paying their own
> mortgage than someone else's. That's why price growth has remained
> strong despite recent interest rises.

Nope. Growth has remained strong because of the unprecendented
availability of credit at low rates. If you research the Tulip Bubble
(or the South Seas, Canals, Railways, or Stocks bubbles) you'll discover
that the availability of credit to the masses is the overweening common
factor. 

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

That may be true, because we're headed for deflation. Deflation is
extremely destructive of prices of assets which have been rising as a
result of a credit bubble, with falls of 67% to 90% being typical.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

wrote in message 
news:1187222582.202178.5030@a39g2000hsc.googlegroups.com...
>What do Dutch tulips, dot-coms and English real estate have in common?

You forgot "south seas".  Though god knows how you buy or
sell one :-)

tim

pmm101@googlemail.com wrote:
> * The UK operates an extremely lenient immigration policy. According
> to migrationwatchuk.org net foreign immigration reached 292,000 in
> 2005, excluding illegal immigrants of whom some 50,000 are detected
> each year.

Polish people on minimum wage are not buying £250k 1 bed flats in London.

> * Recent years have seen sustained periods of historically low
> interest rates, thus allowing buyers to borrow more.

Inflation has also been low during most of that period, meaning that real
interest rates are much higher.

> * Reduction in availability of affordable rented housing. Since 1980
> many council tenants have taken advantage of legislation allowing them
> to buy their homes at substantial discounts. The homes sold under this
> scheme outweighs new properties becoming available for rental.
> 
> * The rise in the number of single households means more homes are
> needed overall.
> 
> It all adds up to demand rising faster than supply, and when that
> happens economics says prices will keep rising. The government has
> recognized this with incoming PM Gordon Brown pledging to build 3
> million new houses by 2020 (though he's unlikely to be in office long
> enough to see it fulfilled).

Can you explain then, why rents in the private sector are not rising in line
with house prices.  If there was a shortage of demand for housing, they
would be.  In fact, rents have been rising at a much lower rate than
inflation in general.

> The only likely trigger for a crash is out and out recession, but that
> seems unlikely. Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

How about the credit crunch?  If banks can't get the funds in to lend out in
mortgages, that will stop people from being able to buy houses.

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

Libor is 6.38% as at the most recently available figures I have, up from 6%
a couple of weeks ago.  So it probably doesn't matter what the bank of
england says, interest rates have already shot up.

> So my guess is that fears of a housing market crash are greatly
> exaggerated.

My guess is they are not.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

> How about the credit crunch? If banks can't get the funds in to lend
> out in mortgages, that will stop people from being able to buy houses. 

It won't you know. This all happened in Japan in the 1990's but people
kept buying houses. They were just buying them with cash for 10% of
what they used to pay is all.

Can't see any reason why we'll be different.

FoFP

--
Then the Gods of the Market tumbled, and their smooth-tongued wizards
withdrew And the hearts of the meanest were humbled and began to believe
it was true That All is not Gold that Glitters, and Two and Two make
Four [Kipling] And the Gods of the Copybook Headings limped up to
explain it once more.

M Holmes wrote:

> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> 
>> How about the credit crunch? If banks can't get the funds in to lend
>> out in mortgages, that will stop people from being able to buy houses.
> 
> It won't you know. This all happened in Japan in the 1990's but people
> kept buying houses. They were just buying them with cash for 10% of
> what they used to pay is all.

Well yes, that will certainly happen to an extent, but people in negative
equity are less likely to sell voluntarily as they won't be able to redeem
the mortgage in order to do so.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> M Holmes wrote:

>> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

>>> How about the credit crunch? If banks can't get the funds in to lend
>>> out in mortgages, that will stop people from being able to buy houses.

>> It won't you know. This all happened in Japan in the 1990's but people
>> kept buying houses. They were just buying them with cash for 10% of
>> what they used to pay is all.

> Well yes, that will certainly happen to an extent, but people in negative
> equity are less likely to sell voluntarily as they won't be able to redeem
> the mortgage in order to do so.

They'll throw the keys at the lenders and walk. Last time the banks could
wait for them to buy another house, gain some equity, and come after
them for the cash they still owe. This time, these people will neither
seek, nor be offered credit again in their lives and so there won't be
any new equity for the lenders to come after.

The main part of a debt-deflation, which is what this credit bust is
leading to, is that a whole bunch of credit is revealed to have never
been the money everyone thought it was, and it will vanish as the
morning dew. Lots of borrowers will lose, lots of lenders will lose and
lots of investors will lose.

Remember the old saw:

If you owe the bank a million Dollars, you're in trouble,

but if you owe the bank a billion Dollars, your bank is in trouble.

Remember that? well, here's the third line that we're about to become
more familiar with:

If you owe the bank a trillion Dollars, we're ALL in trouble.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

"Jonathan Bryce" <jonathan@localhost.localdomain> wrote...
> pmm101@googlemail.com wrote:
>> [...]
>> It all adds up to demand rising faster than supply, and when that
>> happens economics says prices will keep rising. The government has
>> recognized this with incoming PM Gordon Brown pledging to build 3
>> million new houses by 2020 (though he's unlikely to be in office long
>> enough to see it fulfilled).
>
> Can you explain then, why rents in the private sector are not rising
> in line with house prices.  If there was a shortage of demand for
> housing, they would be.  In fact, rents have been rising at a much
> lower rate than inflation in general.

Could it be because many people are speculating on the housing market by
buying-to-let, thereby artificially increasing the supply of rented
property?

Matti

Matti Lamprhey wrote:

>> Can you explain then, why rents in the private sector are not rising
>> in line with house prices.  If there was a shortage of demand for
>> housing, they would be.  In fact, rents have been rising at a much
>> lower rate than inflation in general.
> 
> Could it be because many people are speculating on the housing market by
> buying-to-let, thereby artificially increasing the supply of rented
> property?

That could be part of the story, but either way, someone who wants to live
in a house can do so without a significantly increasing expense.

On Wed, 15 Aug 2007 17:03:02 -0700, pmm101@googlemail.com wrote:

>Figures published yesterday show inflation falling. Combined with
>world stock market volatility it's unlikely the Bank of England will
>rise interest gain any time soon.

If you look at the record of the RPI since 1982, you will find that
the index has fallen or remained unchanged in every July except for
the three years 1988-89-90. 

The figures for July 2007 are what could have been expected.
-- 
Terry Harper
URL: http://www.btinternet.com/~terry.harper/

In uk.finance pmm101@googlemail.com wrote:

> The only likely trigger for a crash is out and out recession

Nope. A possibility that looks more likely by the day is that a crash
could be caused by mass unavailability of mortgages. How much is a house
worth if everyone has to bid with their own cash?

> but that seems unlikely. 

It's more likely that the recession which is coming will be caused by
house price deflation (and the causes of that) rather than the other way
around. 

> Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

As we all know, if you find a trend on a graph, that trend will continue
forever.

> Housing isn't discretionary. 

That's untrue too. A couple can choose to live with the in-laws when
they can't pay a mortgage. Singles can choose to flatshare when they
can't afford a mortgage. Then there are millions of immigrants who work
here to save to pay for a property back home. If there's a recession,
then they'll decamp to a country where they can still earn money,
leaving much empty property behind.

> Pretty tulips and dot-com stocks might be
> nice to have, but shelter is one of life's necessities. Those that can
> live with their parents will do so for longer. Others may rent
> privately, but will soon realize it makes more sense paying their own
> mortgage than someone else's. That's why price growth has remained
> strong despite recent interest rises.

Nope. Growth has remained strong because of the unprecendented
availability of credit at low rates. If you research the Tulip Bubble
(or the South Seas, Canals, Railways, or Stocks bubbles) you'll discover
that the availability of credit to the masses is the overweening common
factor. 

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

That may be true, because we're headed for deflation. Deflation is
extremely destructive of prices of assets which have been rising as a
result of a credit bubble, with falls of 67% to 90% being typical.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

wrote in message 
news:1187222582.202178.5030@a39g2000hsc.googlegroups.com...
>What do Dutch tulips, dot-coms and English real estate have in common?

You forgot "south seas".  Though god knows how you buy or
sell one :-)

tim

pmm101@googlemail.com wrote:
> * The UK operates an extremely lenient immigration policy. According
> to migrationwatchuk.org net foreign immigration reached 292,000 in
> 2005, excluding illegal immigrants of whom some 50,000 are detected
> each year.

Polish people on minimum wage are not buying £250k 1 bed flats in London.

> * Recent years have seen sustained periods of historically low
> interest rates, thus allowing buyers to borrow more.

Inflation has also been low during most of that period, meaning that real
interest rates are much higher.

> * Reduction in availability of affordable rented housing. Since 1980
> many council tenants have taken advantage of legislation allowing them
> to buy their homes at substantial discounts. The homes sold under this
> scheme outweighs new properties becoming available for rental.
> 
> * The rise in the number of single households means more homes are
> needed overall.
> 
> It all adds up to demand rising faster than supply, and when that
> happens economics says prices will keep rising. The government has
> recognized this with incoming PM Gordon Brown pledging to build 3
> million new houses by 2020 (though he's unlikely to be in office long
> enough to see it fulfilled).

Can you explain then, why rents in the private sector are not rising in line
with house prices.  If there was a shortage of demand for housing, they
would be.  In fact, rents have been rising at a much lower rate than
inflation in general.

> The only likely trigger for a crash is out and out recession, but that
> seems unlikely. Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

How about the credit crunch?  If banks can't get the funds in to lend out in
mortgages, that will stop people from being able to buy houses.

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

Libor is 6.38% as at the most recently available figures I have, up from 6%
a couple of weeks ago.  So it probably doesn't matter what the bank of
england says, interest rates have already shot up.

> So my guess is that fears of a housing market crash are greatly
> exaggerated.

My guess is they are not.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

> How about the credit crunch? If banks can't get the funds in to lend
> out in mortgages, that will stop people from being able to buy houses. 

It won't you know. This all happened in Japan in the 1990's but people
kept buying houses. They were just buying them with cash for 10% of
what they used to pay is all.

Can't see any reason why we'll be different.

FoFP

--
Then the Gods of the Market tumbled, and their smooth-tongued wizards
withdrew And the hearts of the meanest were humbled and began to believe
it was true That All is not Gold that Glitters, and Two and Two make
Four [Kipling] And the Gods of the Copybook Headings limped up to
explain it once more.

M Holmes wrote:

> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> 
>> How about the credit crunch? If banks can't get the funds in to lend
>> out in mortgages, that will stop people from being able to buy houses.
> 
> It won't you know. This all happened in Japan in the 1990's but people
> kept buying houses. They were just buying them with cash for 10% of
> what they used to pay is all.

Well yes, that will certainly happen to an extent, but people in negative
equity are less likely to sell voluntarily as they won't be able to redeem
the mortgage in order to do so.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> M Holmes wrote:

>> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

>>> How about the credit crunch? If banks can't get the funds in to lend
>>> out in mortgages, that will stop people from being able to buy houses.

>> It won't you know. This all happened in Japan in the 1990's but people
>> kept buying houses. They were just buying them with cash for 10% of
>> what they used to pay is all.

> Well yes, that will certainly happen to an extent, but people in negative
> equity are less likely to sell voluntarily as they won't be able to redeem
> the mortgage in order to do so.

They'll throw the keys at the lenders and walk. Last time the banks could
wait for them to buy another house, gain some equity, and come after
them for the cash they still owe. This time, these people will neither
seek, nor be offered credit again in their lives and so there won't be
any new equity for the lenders to come after.

The main part of a debt-deflation, which is what this credit bust is
leading to, is that a whole bunch of credit is revealed to have never
been the money everyone thought it was, and it will vanish as the
morning dew. Lots of borrowers will lose, lots of lenders will lose and
lots of investors will lose.

Remember the old saw:

If you owe the bank a million Dollars, you're in trouble,

but if you owe the bank a billion Dollars, your bank is in trouble.

Remember that? well, here's the third line that we're about to become
more familiar with:

If you owe the bank a trillion Dollars, we're ALL in trouble.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

"Jonathan Bryce" <jonathan@localhost.localdomain> wrote...
> pmm101@googlemail.com wrote:
>> [...]
>> It all adds up to demand rising faster than supply, and when that
>> happens economics says prices will keep rising. The government has
>> recognized this with incoming PM Gordon Brown pledging to build 3
>> million new houses by 2020 (though he's unlikely to be in office long
>> enough to see it fulfilled).
>
> Can you explain then, why rents in the private sector are not rising
> in line with house prices.  If there was a shortage of demand for
> housing, they would be.  In fact, rents have been rising at a much
> lower rate than inflation in general.

Could it be because many people are speculating on the housing market by
buying-to-let, thereby artificially increasing the supply of rented
property?

Matti

Matti Lamprhey wrote:

>> Can you explain then, why rents in the private sector are not rising
>> in line with house prices.  If there was a shortage of demand for
>> housing, they would be.  In fact, rents have been rising at a much
>> lower rate than inflation in general.
> 
> Could it be because many people are speculating on the housing market by
> buying-to-let, thereby artificially increasing the supply of rented
> property?

That could be part of the story, but either way, someone who wants to live
in a house can do so without a significantly increasing expense.

On Wed, 15 Aug 2007 17:03:02 -0700, pmm101@googlemail.com wrote:

>Figures published yesterday show inflation falling. Combined with
>world stock market volatility it's unlikely the Bank of England will
>rise interest gain any time soon.

If you look at the record of the RPI since 1982, you will find that
the index has fallen or remained unchanged in every July except for
the three years 1988-89-90. 

The figures for July 2007 are what could have been expected.
-- 
Terry Harper
URL: http://www.btinternet.com/~terry.harper/

In uk.finance pmm101@googlemail.com wrote:

> The only likely trigger for a crash is out and out recession

Nope. A possibility that looks more likely by the day is that a crash
could be caused by mass unavailability of mortgages. How much is a house
worth if everyone has to bid with their own cash?

> but that seems unlikely. 

It's more likely that the recession which is coming will be caused by
house price deflation (and the causes of that) rather than the other way
around. 

> Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

As we all know, if you find a trend on a graph, that trend will continue
forever.

> Housing isn't discretionary. 

That's untrue too. A couple can choose to live with the in-laws when
they can't pay a mortgage. Singles can choose to flatshare when they
can't afford a mortgage. Then there are millions of immigrants who work
here to save to pay for a property back home. If there's a recession,
then they'll decamp to a country where they can still earn money,
leaving much empty property behind.

> Pretty tulips and dot-com stocks might be
> nice to have, but shelter is one of life's necessities. Those that can
> live with their parents will do so for longer. Others may rent
> privately, but will soon realize it makes more sense paying their own
> mortgage than someone else's. That's why price growth has remained
> strong despite recent interest rises.

Nope. Growth has remained strong because of the unprecendented
availability of credit at low rates. If you research the Tulip Bubble
(or the South Seas, Canals, Railways, or Stocks bubbles) you'll discover
that the availability of credit to the masses is the overweening common
factor. 

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

That may be true, because we're headed for deflation. Deflation is
extremely destructive of prices of assets which have been rising as a
result of a credit bubble, with falls of 67% to 90% being typical.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

wrote in message 
news:1187222582.202178.5030@a39g2000hsc.googlegroups.com...
>What do Dutch tulips, dot-coms and English real estate have in common?

You forgot "south seas".  Though god knows how you buy or
sell one :-)

tim

pmm101@googlemail.com wrote:
> * The UK operates an extremely lenient immigration policy. According
> to migrationwatchuk.org net foreign immigration reached 292,000 in
> 2005, excluding illegal immigrants of whom some 50,000 are detected
> each year.

Polish people on minimum wage are not buying £250k 1 bed flats in London.

> * Recent years have seen sustained periods of historically low
> interest rates, thus allowing buyers to borrow more.

Inflation has also been low during most of that period, meaning that real
interest rates are much higher.

> * Reduction in availability of affordable rented housing. Since 1980
> many council tenants have taken advantage of legislation allowing them
> to buy their homes at substantial discounts. The homes sold under this
> scheme outweighs new properties becoming available for rental.
> 
> * The rise in the number of single households means more homes are
> needed overall.
> 
> It all adds up to demand rising faster than supply, and when that
> happens economics says prices will keep rising. The government has
> recognized this with incoming PM Gordon Brown pledging to build 3
> million new houses by 2020 (though he's unlikely to be in office long
> enough to see it fulfilled).

Can you explain then, why rents in the private sector are not rising in line
with house prices.  If there was a shortage of demand for housing, they
would be.  In fact, rents have been rising at a much lower rate than
inflation in general.

> The only likely trigger for a crash is out and out recession, but that
> seems unlikely. Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

How about the credit crunch?  If banks can't get the funds in to lend out in
mortgages, that will stop people from being able to buy houses.

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

Libor is 6.38% as at the most recently available figures I have, up from 6%
a couple of weeks ago.  So it probably doesn't matter what the bank of
england says, interest rates have already shot up.

> So my guess is that fears of a housing market crash are greatly
> exaggerated.

My guess is they are not.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

> How about the credit crunch? If banks can't get the funds in to lend
> out in mortgages, that will stop people from being able to buy houses. 

It won't you know. This all happened in Japan in the 1990's but people
kept buying houses. They were just buying them with cash for 10% of
what they used to pay is all.

Can't see any reason why we'll be different.

FoFP

--
Then the Gods of the Market tumbled, and their smooth-tongued wizards
withdrew And the hearts of the meanest were humbled and began to believe
it was true That All is not Gold that Glitters, and Two and Two make
Four [Kipling] And the Gods of the Copybook Headings limped up to
explain it once more.

M Holmes wrote:

> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> 
>> How about the credit crunch? If banks can't get the funds in to lend
>> out in mortgages, that will stop people from being able to buy houses.
> 
> It won't you know. This all happened in Japan in the 1990's but people
> kept buying houses. They were just buying them with cash for 10% of
> what they used to pay is all.

Well yes, that will certainly happen to an extent, but people in negative
equity are less likely to sell voluntarily as they won't be able to redeem
the mortgage in order to do so.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> M Holmes wrote:

>> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

>>> How about the credit crunch? If banks can't get the funds in to lend
>>> out in mortgages, that will stop people from being able to buy houses.

>> It won't you know. This all happened in Japan in the 1990's but people
>> kept buying houses. They were just buying them with cash for 10% of
>> what they used to pay is all.

> Well yes, that will certainly happen to an extent, but people in negative
> equity are less likely to sell voluntarily as they won't be able to redeem
> the mortgage in order to do so.

They'll throw the keys at the lenders and walk. Last time the banks could
wait for them to buy another house, gain some equity, and come after
them for the cash they still owe. This time, these people will neither
seek, nor be offered credit again in their lives and so there won't be
any new equity for the lenders to come after.

The main part of a debt-deflation, which is what this credit bust is
leading to, is that a whole bunch of credit is revealed to have never
been the money everyone thought it was, and it will vanish as the
morning dew. Lots of borrowers will lose, lots of lenders will lose and
lots of investors will lose.

Remember the old saw:

If you owe the bank a million Dollars, you're in trouble,

but if you owe the bank a billion Dollars, your bank is in trouble.

Remember that? well, here's the third line that we're about to become
more familiar with:

If you owe the bank a trillion Dollars, we're ALL in trouble.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

"Jonathan Bryce" <jonathan@localhost.localdomain> wrote...
> pmm101@googlemail.com wrote:
>> [...]
>> It all adds up to demand rising faster than supply, and when that
>> happens economics says prices will keep rising. The government has
>> recognized this with incoming PM Gordon Brown pledging to build 3
>> million new houses by 2020 (though he's unlikely to be in office long
>> enough to see it fulfilled).
>
> Can you explain then, why rents in the private sector are not rising
> in line with house prices.  If there was a shortage of demand for
> housing, they would be.  In fact, rents have been rising at a much
> lower rate than inflation in general.

Could it be because many people are speculating on the housing market by
buying-to-let, thereby artificially increasing the supply of rented
property?

Matti

Matti Lamprhey wrote:

>> Can you explain then, why rents in the private sector are not rising
>> in line with house prices.  If there was a shortage of demand for
>> housing, they would be.  In fact, rents have been rising at a much
>> lower rate than inflation in general.
> 
> Could it be because many people are speculating on the housing market by
> buying-to-let, thereby artificially increasing the supply of rented
> property?

That could be part of the story, but either way, someone who wants to live
in a house can do so without a significantly increasing expense.

On Wed, 15 Aug 2007 17:03:02 -0700, pmm101@googlemail.com wrote:

>Figures published yesterday show inflation falling. Combined with
>world stock market volatility it's unlikely the Bank of England will
>rise interest gain any time soon.

If you look at the record of the RPI since 1982, you will find that
the index has fallen or remained unchanged in every July except for
the three years 1988-89-90. 

The figures for July 2007 are what could have been expected.
-- 
Terry Harper
URL: http://www.btinternet.com/~terry.harper/

"Jonathan Bryce" <jonathan@localhost.localdomain> wrote in message 
news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
> Matti Lamprhey wrote:
>
>>> Can you explain then, why rents in the private sector are not rising
>>> in line with house prices.  If there was a shortage of demand for
>>> housing, they would be.  In fact, rents have been rising at a much
>>> lower rate than inflation in general.
>>
>> Could it be because many people are speculating on the housing market by
>> buying-to-let, thereby artificially increasing the supply of rented
>> property?
>
> That could be part of the story, but either way, someone who wants to live
> in a house can do so without a significantly increasing expense.

There was an item on R5 last week about house prices and
BTL.  One guy phoned in to explain that he had bougth a
BTL and that the rent was 30% short of his mortgage.
He said that he thought this a good long term bet and
expected the rent/mortgage to reach parity in 2-3 years.
He's in for a big shock when he tries to up the rent by 10%
at the end of year 1.

tim

On 17 Aug, 12:09, "tim....."  wrote:
> "Jonathan Bryce" <jonat...@localhost.localdomain> wrote in message
>
> news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
>
> > Matti Lamprhey wrote:
>
> >>> Can you explain then, why rents in the private sector are not rising
> >>> in line with house prices.  If there was a shortage of demand for
> >>> housing, they would be.  In fact, rents have been rising at a much
> >>> lower rate than inflation in general.
>
> >> Could it be because many people are speculating on the housing market by
> >> buying-to-let, thereby artificially increasing the supply of rented
> >> property?
>
> > That could be part of the story, but either way, someone who wants to live
> > in a house can do so without a significantly increasing expense.
>
> There was an item on R5 last week about house prices and
> BTL.  One guy phoned in to explain that he had bougth a
> BTL and that the rent was 30% short of his mortgage.
> He said that he thought this a good long term bet and
> expected the rent/mortgage to reach parity in 2-3 years.
> He's in for a big shock when he tries to up the rent by 10%
> at the end of year 1.

Even so, he's buying a house and found someone else to pay 70% of the
costs.

Maybe you would prefer to be the tenant rather than the landlord in
this situation...

> tim

In uk.finance whitely525@yahoo.co.uk wrote:

>> There was an item on R5 last week about house prices and
>> BTL.  One guy phoned in to explain that he had bougth a
>> BTL and that the rent was 30% short of his mortgage.
>> He said that he thought this a good long term bet and
>> expected the rent/mortgage to reach parity in 2-3 years.
>> He's in for a big shock when he tries to up the rent by 10%
>> at the end of year 1.

> Even so, he's buying a house and found someone else to pay 70% of the
> costs.

If 90% of the mortgage is interest and 10% is capital repayments then
effectively he's paying 3 quid for every one Pound of house he's buying.

That doesn't seem very astute to me.

FoFP

-- 
Party, like it's 1929!

On Wed, 15 Aug 2007 17:03:02 -0700, pmm101@googlemail.com wrote:

>Figures published yesterday show inflation falling. Combined with
>world stock market volatility it's unlikely the Bank of England will
>rise interest gain any time soon.

If there's one thing that's been made crystal clear in the past month
it's that central banks no longer control the mortgage rate, the
bondholders do, and the bondholders have decided they need to increase
mortgage rates to compensate them for extra risk.

FoFP

-- 
Party, like it's 1929!

wrote in message 
news:1187358045.166304.42940@r29g2000hsg.googlegroups.com...
> On 17 Aug, 12:09, "tim....."  wrote:
>> "Jonathan Bryce" <jonat...@localhost.localdomain> wrote in message
>>
>> news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
>>
>> > Matti Lamprhey wrote:
>>
>> >>> Can you explain then, why rents in the private sector are not rising
>> >>> in line with house prices.  If there was a shortage of demand for
>> >>> housing, they would be.  In fact, rents have been rising at a much
>> >>> lower rate than inflation in general.
>>
>> >> Could it be because many people are speculating on the housing market 
>> >> by
>> >> buying-to-let, thereby artificially increasing the supply of rented
>> >> property?
>>
>> > That could be part of the story, but either way, someone who wants to 
>> > live
>> > in a house can do so without a significantly increasing expense.
>>
>> There was an item on R5 last week about house prices and
>> BTL.  One guy phoned in to explain that he had bougth a
>> BTL and that the rent was 30% short of his mortgage.
>> He said that he thought this a good long term bet and
>> expected the rent/mortgage to reach parity in 2-3 years.
>> He's in for a big shock when he tries to up the rent by 10%
>> at the end of year 1.
>
> Even so, he's buying a house and found someone else to pay 70% of the
> costs.

Once again.  How does owing a house that's 100% mortgaged
help anybody?

The only answer I can see that makes any sense is because
it is expected to increase in value, but what if it doesn't?

>
> Maybe you would prefer to be the tenant rather than the landlord in
> this situation...

Too right.  I'm renting a very nice apartment that someone
else has to pay all the maintenance costs on for less than
the cost of paying the mortgage on the same property.

The only reason that *I* have to buy it is if I believe that in
a few years time it will have increased in value by more than
the amount that I can earn investing the difference between
the rent and the theoretical mortgage.  I don't believe that
will be the case.

I could be wrong, but I have no illusions as to why I am
doing this, unlike the thousands of sheep who are trying
to jump on the housing escalator expecting it to go on
forever.

tim

In uk.finance pmm101@googlemail.com wrote:

> The only likely trigger for a crash is out and out recession

Nope. A possibility that looks more likely by the day is that a crash
could be caused by mass unavailability of mortgages. How much is a house
worth if everyone has to bid with their own cash?

> but that seems unlikely. 

It's more likely that the recession which is coming will be caused by
house price deflation (and the causes of that) rather than the other way
around. 

> Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

As we all know, if you find a trend on a graph, that trend will continue
forever.

> Housing isn't discretionary. 

That's untrue too. A couple can choose to live with the in-laws when
they can't pay a mortgage. Singles can choose to flatshare when they
can't afford a mortgage. Then there are millions of immigrants who work
here to save to pay for a property back home. If there's a recession,
then they'll decamp to a country where they can still earn money,
leaving much empty property behind.

> Pretty tulips and dot-com stocks might be
> nice to have, but shelter is one of life's necessities. Those that can
> live with their parents will do so for longer. Others may rent
> privately, but will soon realize it makes more sense paying their own
> mortgage than someone else's. That's why price growth has remained
> strong despite recent interest rises.

Nope. Growth has remained strong because of the unprecendented
availability of credit at low rates. If you research the Tulip Bubble
(or the South Seas, Canals, Railways, or Stocks bubbles) you'll discover
that the availability of credit to the masses is the overweening common
factor. 

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

That may be true, because we're headed for deflation. Deflation is
extremely destructive of prices of assets which have been rising as a
result of a credit bubble, with falls of 67% to 90% being typical.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

wrote in message 
news:1187222582.202178.5030@a39g2000hsc.googlegroups.com...
>What do Dutch tulips, dot-coms and English real estate have in common?

You forgot "south seas".  Though god knows how you buy or
sell one :-)

tim

pmm101@googlemail.com wrote:
> * The UK operates an extremely lenient immigration policy. According
> to migrationwatchuk.org net foreign immigration reached 292,000 in
> 2005, excluding illegal immigrants of whom some 50,000 are detected
> each year.

Polish people on minimum wage are not buying £250k 1 bed flats in London.

> * Recent years have seen sustained periods of historically low
> interest rates, thus allowing buyers to borrow more.

Inflation has also been low during most of that period, meaning that real
interest rates are much higher.

> * Reduction in availability of affordable rented housing. Since 1980
> many council tenants have taken advantage of legislation allowing them
> to buy their homes at substantial discounts. The homes sold under this
> scheme outweighs new properties becoming available for rental.
> 
> * The rise in the number of single households means more homes are
> needed overall.
> 
> It all adds up to demand rising faster than supply, and when that
> happens economics says prices will keep rising. The government has
> recognized this with incoming PM Gordon Brown pledging to build 3
> million new houses by 2020 (though he's unlikely to be in office long
> enough to see it fulfilled).

Can you explain then, why rents in the private sector are not rising in line
with house prices.  If there was a shortage of demand for housing, they
would be.  In fact, rents have been rising at a much lower rate than
inflation in general.

> The only likely trigger for a crash is out and out recession, but that
> seems unlikely. Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

How about the credit crunch?  If banks can't get the funds in to lend out in
mortgages, that will stop people from being able to buy houses.

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

Libor is 6.38% as at the most recently available figures I have, up from 6%
a couple of weeks ago.  So it probably doesn't matter what the bank of
england says, interest rates have already shot up.

> So my guess is that fears of a housing market crash are greatly
> exaggerated.

My guess is they are not.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

> How about the credit crunch? If banks can't get the funds in to lend
> out in mortgages, that will stop people from being able to buy houses. 

It won't you know. This all happened in Japan in the 1990's but people
kept buying houses. They were just buying them with cash for 10% of
what they used to pay is all.

Can't see any reason why we'll be different.

FoFP

--
Then the Gods of the Market tumbled, and their smooth-tongued wizards
withdrew And the hearts of the meanest were humbled and began to believe
it was true That All is not Gold that Glitters, and Two and Two make
Four [Kipling] And the Gods of the Copybook Headings limped up to
explain it once more.

M Holmes wrote:

> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> 
>> How about the credit crunch? If banks can't get the funds in to lend
>> out in mortgages, that will stop people from being able to buy houses.
> 
> It won't you know. This all happened in Japan in the 1990's but people
> kept buying houses. They were just buying them with cash for 10% of
> what they used to pay is all.

Well yes, that will certainly happen to an extent, but people in negative
equity are less likely to sell voluntarily as they won't be able to redeem
the mortgage in order to do so.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> M Holmes wrote:

>> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

>>> How about the credit crunch? If banks can't get the funds in to lend
>>> out in mortgages, that will stop people from being able to buy houses.

>> It won't you know. This all happened in Japan in the 1990's but people
>> kept buying houses. They were just buying them with cash for 10% of
>> what they used to pay is all.

> Well yes, that will certainly happen to an extent, but people in negative
> equity are less likely to sell voluntarily as they won't be able to redeem
> the mortgage in order to do so.

They'll throw the keys at the lenders and walk. Last time the banks could
wait for them to buy another house, gain some equity, and come after
them for the cash they still owe. This time, these people will neither
seek, nor be offered credit again in their lives and so there won't be
any new equity for the lenders to come after.

The main part of a debt-deflation, which is what this credit bust is
leading to, is that a whole bunch of credit is revealed to have never
been the money everyone thought it was, and it will vanish as the
morning dew. Lots of borrowers will lose, lots of lenders will lose and
lots of investors will lose.

Remember the old saw:

If you owe the bank a million Dollars, you're in trouble,

but if you owe the bank a billion Dollars, your bank is in trouble.

Remember that? well, here's the third line that we're about to become
more familiar with:

If you owe the bank a trillion Dollars, we're ALL in trouble.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

"Jonathan Bryce" <jonathan@localhost.localdomain> wrote...
> pmm101@googlemail.com wrote:
>> [...]
>> It all adds up to demand rising faster than supply, and when that
>> happens economics says prices will keep rising. The government has
>> recognized this with incoming PM Gordon Brown pledging to build 3
>> million new houses by 2020 (though he's unlikely to be in office long
>> enough to see it fulfilled).
>
> Can you explain then, why rents in the private sector are not rising
> in line with house prices.  If there was a shortage of demand for
> housing, they would be.  In fact, rents have been rising at a much
> lower rate than inflation in general.

Could it be because many people are speculating on the housing market by
buying-to-let, thereby artificially increasing the supply of rented
property?

Matti

Matti Lamprhey wrote:

>> Can you explain then, why rents in the private sector are not rising
>> in line with house prices.  If there was a shortage of demand for
>> housing, they would be.  In fact, rents have been rising at a much
>> lower rate than inflation in general.
> 
> Could it be because many people are speculating on the housing market by
> buying-to-let, thereby artificially increasing the supply of rented
> property?

That could be part of the story, but either way, someone who wants to live
in a house can do so without a significantly increasing expense.

On Wed, 15 Aug 2007 17:03:02 -0700, pmm101@googlemail.com wrote:

>Figures published yesterday show inflation falling. Combined with
>world stock market volatility it's unlikely the Bank of England will
>rise interest gain any time soon.

If you look at the record of the RPI since 1982, you will find that
the index has fallen or remained unchanged in every July except for
the three years 1988-89-90. 

The figures for July 2007 are what could have been expected.
-- 
Terry Harper
URL: http://www.btinternet.com/~terry.harper/

"Jonathan Bryce" <jonathan@localhost.localdomain> wrote in message 
news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
> Matti Lamprhey wrote:
>
>>> Can you explain then, why rents in the private sector are not rising
>>> in line with house prices.  If there was a shortage of demand for
>>> housing, they would be.  In fact, rents have been rising at a much
>>> lower rate than inflation in general.
>>
>> Could it be because many people are speculating on the housing market by
>> buying-to-let, thereby artificially increasing the supply of rented
>> property?
>
> That could be part of the story, but either way, someone who wants to live
> in a house can do so without a significantly increasing expense.

There was an item on R5 last week about house prices and
BTL.  One guy phoned in to explain that he had bougth a
BTL and that the rent was 30% short of his mortgage.
He said that he thought this a good long term bet and
expected the rent/mortgage to reach parity in 2-3 years.
He's in for a big shock when he tries to up the rent by 10%
at the end of year 1.

tim

On 17 Aug, 12:09, "tim....."  wrote:
> "Jonathan Bryce" <jonat...@localhost.localdomain> wrote in message
>
> news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
>
> > Matti Lamprhey wrote:
>
> >>> Can you explain then, why rents in the private sector are not rising
> >>> in line with house prices.  If there was a shortage of demand for
> >>> housing, they would be.  In fact, rents have been rising at a much
> >>> lower rate than inflation in general.
>
> >> Could it be because many people are speculating on the housing market by
> >> buying-to-let, thereby artificially increasing the supply of rented
> >> property?
>
> > That could be part of the story, but either way, someone who wants to live
> > in a house can do so without a significantly increasing expense.
>
> There was an item on R5 last week about house prices and
> BTL.  One guy phoned in to explain that he had bougth a
> BTL and that the rent was 30% short of his mortgage.
> He said that he thought this a good long term bet and
> expected the rent/mortgage to reach parity in 2-3 years.
> He's in for a big shock when he tries to up the rent by 10%
> at the end of year 1.

Even so, he's buying a house and found someone else to pay 70% of the
costs.

Maybe you would prefer to be the tenant rather than the landlord in
this situation...

> tim

In uk.finance whitely525@yahoo.co.uk wrote:

>> There was an item on R5 last week about house prices and
>> BTL.  One guy phoned in to explain that he had bougth a
>> BTL and that the rent was 30% short of his mortgage.
>> He said that he thought this a good long term bet and
>> expected the rent/mortgage to reach parity in 2-3 years.
>> He's in for a big shock when he tries to up the rent by 10%
>> at the end of year 1.

> Even so, he's buying a house and found someone else to pay 70% of the
> costs.

If 90% of the mortgage is interest and 10% is capital repayments then
effectively he's paying 3 quid for every one Pound of house he's buying.

That doesn't seem very astute to me.

FoFP

-- 
Party, like it's 1929!

On Wed, 15 Aug 2007 17:03:02 -0700, pmm101@googlemail.com wrote:

>Figures published yesterday show inflation falling. Combined with
>world stock market volatility it's unlikely the Bank of England will
>rise interest gain any time soon.

If there's one thing that's been made crystal clear in the past month
it's that central banks no longer control the mortgage rate, the
bondholders do, and the bondholders have decided they need to increase
mortgage rates to compensate them for extra risk.

FoFP

-- 
Party, like it's 1929!

wrote in message 
news:1187358045.166304.42940@r29g2000hsg.googlegroups.com...
> On 17 Aug, 12:09, "tim....."  wrote:
>> "Jonathan Bryce" <jonat...@localhost.localdomain> wrote in message
>>
>> news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
>>
>> > Matti Lamprhey wrote:
>>
>> >>> Can you explain then, why rents in the private sector are not rising
>> >>> in line with house prices.  If there was a shortage of demand for
>> >>> housing, they would be.  In fact, rents have been rising at a much
>> >>> lower rate than inflation in general.
>>
>> >> Could it be because many people are speculating on the housing market 
>> >> by
>> >> buying-to-let, thereby artificially increasing the supply of rented
>> >> property?
>>
>> > That could be part of the story, but either way, someone who wants to 
>> > live
>> > in a house can do so without a significantly increasing expense.
>>
>> There was an item on R5 last week about house prices and
>> BTL.  One guy phoned in to explain that he had bougth a
>> BTL and that the rent was 30% short of his mortgage.
>> He said that he thought this a good long term bet and
>> expected the rent/mortgage to reach parity in 2-3 years.
>> He's in for a big shock when he tries to up the rent by 10%
>> at the end of year 1.
>
> Even so, he's buying a house and found someone else to pay 70% of the
> costs.

Once again.  How does owing a house that's 100% mortgaged
help anybody?

The only answer I can see that makes any sense is because
it is expected to increase in value, but what if it doesn't?

>
> Maybe you would prefer to be the tenant rather than the landlord in
> this situation...

Too right.  I'm renting a very nice apartment that someone
else has to pay all the maintenance costs on for less than
the cost of paying the mortgage on the same property.

The only reason that *I* have to buy it is if I believe that in
a few years time it will have increased in value by more than
the amount that I can earn investing the difference between
the rent and the theoretical mortgage.  I don't believe that
will be the case.

I could be wrong, but I have no illusions as to why I am
doing this, unlike the thousands of sheep who are trying
to jump on the housing escalator expecting it to go on
forever.

tim

M Holmes wrote:

> In uk.finance whitely525@yahoo.co.uk wrote:
> 
>>> There was an item on R5 last week about house prices and
>>> BTL.  One guy phoned in to explain that he had bougth a
>>> BTL and that the rent was 30% short of his mortgage.
>>> He said that he thought this a good long term bet and
>>> expected the rent/mortgage to reach parity in 2-3 years.
>>> He's in for a big shock when he tries to up the rent by 10%
>>> at the end of year 1.
> 
>> Even so, he's buying a house and found someone else to pay 70% of the
>> costs.
> 
> If 90% of the mortgage is interest and 10% is capital repayments then
> effectively he's paying 3 quid for every one Pound of house he's buying.
> 
> That doesn't seem very astute to me.

Isn't it at least more astute than paying 10 quid for every pound?

In uk.finance Ronald Raygun <no.spam@localhost.localdomain> wrote:

>>> Even so, he's buying a house and found someone else to pay 70% of the
>>> costs.
>> 
>> If 90% of the mortgage is interest and 10% is capital repayments then
>> effectively he's paying 3 quid for every one Pound of house he's buying.
>> 
>> That doesn't seem very astute to me.

> Isn't it at least more astute than paying 10 quid for every pound?

Those folks who buy BtL flats and leave them empty really do puzzle me.
I don't expect they'll be around in six months though.

FoFP

-- 
Party, like it's 1929!

On 17 Aug, 15:05, M Holmes  wrote:
> In uk.finance whitely...@yahoo.co.uk wrote:
> >> There was an item on R5 last week about house prices and
> >> BTL.  One guy phoned in to explain that he had bougth a
> >> BTL and that the rent was 30% short of his mortgage.
> >> He said that he thought this a good long term bet and
> >> expected the rent/mortgage to reach parity in 2-3 years.
> >> He's in for a big shock when he tries to up the rent by 10%
> >> at the end of year 1.
> > Even so, he's buying a house and found someone else to pay 70% of the
> > costs.
>
> If 90% of the mortgage is interest and 10% is capital repayments then
> effectively he's paying 3 quid for every one Pound of house he's buying.
>
> That doesn't seem very astute to me.

So you think the tenant is the canny and astute one in this
situation..?


> FoFP
>
> --
> Party, like it's 1929!

On 17 Aug, 17:59, M Holmes  wrote:
> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>
> >>> Even so, he's buying a house and found someone else to pay 70% of the
> >>> costs.
>
> >> If 90% of the mortgage is interest and 10% is capital repayments then
> >> effectively he's paying 3 quid for every one Pound of house he's buying.
>
> >> That doesn't seem very astute to me.
> > Isn't it at least more astute than paying 10 quid for every pound?
>
> Those folks who buy BtL flats and leave them empty really do puzzle me.
> I don't expect they'll be around in six months though.

Why not..?  It is a more tax efficient way to purchase a house this
way than 'buying to live in'.

> FoFP
>
> --
> Party, like it's 1929!

wrote in message 
news:1187371063.664508.283520@57g2000hsv.googlegroups.com...
> On 17 Aug, 17:59, M Holmes  wrote:
>> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>>
>> >>> Even so, he's buying a house and found someone else to pay 70% of the
>> >>> costs.
>>
>> >> If 90% of the mortgage is interest and 10% is capital repayments then
>> >> effectively he's paying 3 quid for every one Pound of house he's 
>> >> buying.
>>
>> >> That doesn't seem very astute to me.
>> > Isn't it at least more astute than paying 10 quid for every pound?
>>
>> Those folks who buy BtL flats and leave them empty really do puzzle me.
>> I don't expect they'll be around in six months though.
>
> Why not..?  It is a more tax efficient way to purchase a house this
> way than 'buying to live in'.

No it's not, no tenant equals no rent, equals no income to
offset the mortgage against, equals no tax advantage.

tim

On 17 Aug, 18:58, "tim....."  wrote:
>  wrote in message
>
> news:1187371063.664508.283520@57g2000hsv.googlegroups.com...
>
>
>
>
>
> > On 17 Aug, 17:59, M Holmes  wrote:
> >> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>
> >> >>> Even so, he's buying a house and found someone else to pay 70% of the
> >> >>> costs.
>
> >> >> If 90% of the mortgage is interest and 10% is capital repayments then
> >> >> effectively he's paying 3 quid for every one Pound of house he's
> >> >> buying.
>
> >> >> That doesn't seem very astute to me.
> >> > Isn't it at least more astute than paying 10 quid for every pound?
>
> >> Those folks who buy BtL flats and leave them empty really do puzzle me.
> >> I don't expect they'll be around in six months though.
>
> > Why not..?  It is a more tax efficient way to purchase a house this
> > way than 'buying to live in'.
>
> No it's not, no tenant equals no rent, equals no income to
> offset the mortgage against, equals no tax advantage.

Only if it is empty all the time.  No sane landlord does that.

Once a tentant is found the landlord can bring forward any losses to
offset against income in the next tax year.


> tim- Hide quoted text -
>
> - Show quoted text -

In uk.finance pmm101@googlemail.com wrote:

> The only likely trigger for a crash is out and out recession

Nope. A possibility that looks more likely by the day is that a crash
could be caused by mass unavailability of mortgages. How much is a house
worth if everyone has to bid with their own cash?

> but that seems unlikely. 

It's more likely that the recession which is coming will be caused by
house price deflation (and the causes of that) rather than the other way
around. 

> Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

As we all know, if you find a trend on a graph, that trend will continue
forever.

> Housing isn't discretionary. 

That's untrue too. A couple can choose to live with the in-laws when
they can't pay a mortgage. Singles can choose to flatshare when they
can't afford a mortgage. Then there are millions of immigrants who work
here to save to pay for a property back home. If there's a recession,
then they'll decamp to a country where they can still earn money,
leaving much empty property behind.

> Pretty tulips and dot-com stocks might be
> nice to have, but shelter is one of life's necessities. Those that can
> live with their parents will do so for longer. Others may rent
> privately, but will soon realize it makes more sense paying their own
> mortgage than someone else's. That's why price growth has remained
> strong despite recent interest rises.

Nope. Growth has remained strong because of the unprecendented
availability of credit at low rates. If you research the Tulip Bubble
(or the South Seas, Canals, Railways, or Stocks bubbles) you'll discover
that the availability of credit to the masses is the overweening common
factor. 

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

That may be true, because we're headed for deflation. Deflation is
extremely destructive of prices of assets which have been rising as a
result of a credit bubble, with falls of 67% to 90% being typical.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

wrote in message 
news:1187222582.202178.5030@a39g2000hsc.googlegroups.com...
>What do Dutch tulips, dot-coms and English real estate have in common?

You forgot "south seas".  Though god knows how you buy or
sell one :-)

tim

pmm101@googlemail.com wrote:
> * The UK operates an extremely lenient immigration policy. According
> to migrationwatchuk.org net foreign immigration reached 292,000 in
> 2005, excluding illegal immigrants of whom some 50,000 are detected
> each year.

Polish people on minimum wage are not buying £250k 1 bed flats in London.

> * Recent years have seen sustained periods of historically low
> interest rates, thus allowing buyers to borrow more.

Inflation has also been low during most of that period, meaning that real
interest rates are much higher.

> * Reduction in availability of affordable rented housing. Since 1980
> many council tenants have taken advantage of legislation allowing them
> to buy their homes at substantial discounts. The homes sold under this
> scheme outweighs new properties becoming available for rental.
> 
> * The rise in the number of single households means more homes are
> needed overall.
> 
> It all adds up to demand rising faster than supply, and when that
> happens economics says prices will keep rising. The government has
> recognized this with incoming PM Gordon Brown pledging to build 3
> million new houses by 2020 (though he's unlikely to be in office long
> enough to see it fulfilled).

Can you explain then, why rents in the private sector are not rising in line
with house prices.  If there was a shortage of demand for housing, they
would be.  In fact, rents have been rising at a much lower rate than
inflation in general.

> The only likely trigger for a crash is out and out recession, but that
> seems unlikely. Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

How about the credit crunch?  If banks can't get the funds in to lend out in
mortgages, that will stop people from being able to buy houses.

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

Libor is 6.38% as at the most recently available figures I have, up from 6%
a couple of weeks ago.  So it probably doesn't matter what the bank of
england says, interest rates have already shot up.

> So my guess is that fears of a housing market crash are greatly
> exaggerated.

My guess is they are not.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

> How about the credit crunch? If banks can't get the funds in to lend
> out in mortgages, that will stop people from being able to buy houses. 

It won't you know. This all happened in Japan in the 1990's but people
kept buying houses. They were just buying them with cash for 10% of
what they used to pay is all.

Can't see any reason why we'll be different.

FoFP

--
Then the Gods of the Market tumbled, and their smooth-tongued wizards
withdrew And the hearts of the meanest were humbled and began to believe
it was true That All is not Gold that Glitters, and Two and Two make
Four [Kipling] And the Gods of the Copybook Headings limped up to
explain it once more.

M Holmes wrote:

> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> 
>> How about the credit crunch? If banks can't get the funds in to lend
>> out in mortgages, that will stop people from being able to buy houses.
> 
> It won't you know. This all happened in Japan in the 1990's but people
> kept buying houses. They were just buying them with cash for 10% of
> what they used to pay is all.

Well yes, that will certainly happen to an extent, but people in negative
equity are less likely to sell voluntarily as they won't be able to redeem
the mortgage in order to do so.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> M Holmes wrote:

>> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

>>> How about the credit crunch? If banks can't get the funds in to lend
>>> out in mortgages, that will stop people from being able to buy houses.

>> It won't you know. This all happened in Japan in the 1990's but people
>> kept buying houses. They were just buying them with cash for 10% of
>> what they used to pay is all.

> Well yes, that will certainly happen to an extent, but people in negative
> equity are less likely to sell voluntarily as they won't be able to redeem
> the mortgage in order to do so.

They'll throw the keys at the lenders and walk. Last time the banks could
wait for them to buy another house, gain some equity, and come after
them for the cash they still owe. This time, these people will neither
seek, nor be offered credit again in their lives and so there won't be
any new equity for the lenders to come after.

The main part of a debt-deflation, which is what this credit bust is
leading to, is that a whole bunch of credit is revealed to have never
been the money everyone thought it was, and it will vanish as the
morning dew. Lots of borrowers will lose, lots of lenders will lose and
lots of investors will lose.

Remember the old saw:

If you owe the bank a million Dollars, you're in trouble,

but if you owe the bank a billion Dollars, your bank is in trouble.

Remember that? well, here's the third line that we're about to become
more familiar with:

If you owe the bank a trillion Dollars, we're ALL in trouble.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

"Jonathan Bryce" <jonathan@localhost.localdomain> wrote...
> pmm101@googlemail.com wrote:
>> [...]
>> It all adds up to demand rising faster than supply, and when that
>> happens economics says prices will keep rising. The government has
>> recognized this with incoming PM Gordon Brown pledging to build 3
>> million new houses by 2020 (though he's unlikely to be in office long
>> enough to see it fulfilled).
>
> Can you explain then, why rents in the private sector are not rising
> in line with house prices.  If there was a shortage of demand for
> housing, they would be.  In fact, rents have been rising at a much
> lower rate than inflation in general.

Could it be because many people are speculating on the housing market by
buying-to-let, thereby artificially increasing the supply of rented
property?

Matti

Matti Lamprhey wrote:

>> Can you explain then, why rents in the private sector are not rising
>> in line with house prices.  If there was a shortage of demand for
>> housing, they would be.  In fact, rents have been rising at a much
>> lower rate than inflation in general.
> 
> Could it be because many people are speculating on the housing market by
> buying-to-let, thereby artificially increasing the supply of rented
> property?

That could be part of the story, but either way, someone who wants to live
in a house can do so without a significantly increasing expense.

On Wed, 15 Aug 2007 17:03:02 -0700, pmm101@googlemail.com wrote:

>Figures published yesterday show inflation falling. Combined with
>world stock market volatility it's unlikely the Bank of England will
>rise interest gain any time soon.

If you look at the record of the RPI since 1982, you will find that
the index has fallen or remained unchanged in every July except for
the three years 1988-89-90. 

The figures for July 2007 are what could have been expected.
-- 
Terry Harper
URL: http://www.btinternet.com/~terry.harper/

"Jonathan Bryce" <jonathan@localhost.localdomain> wrote in message 
news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
> Matti Lamprhey wrote:
>
>>> Can you explain then, why rents in the private sector are not rising
>>> in line with house prices.  If there was a shortage of demand for
>>> housing, they would be.  In fact, rents have been rising at a much
>>> lower rate than inflation in general.
>>
>> Could it be because many people are speculating on the housing market by
>> buying-to-let, thereby artificially increasing the supply of rented
>> property?
>
> That could be part of the story, but either way, someone who wants to live
> in a house can do so without a significantly increasing expense.

There was an item on R5 last week about house prices and
BTL.  One guy phoned in to explain that he had bougth a
BTL and that the rent was 30% short of his mortgage.
He said that he thought this a good long term bet and
expected the rent/mortgage to reach parity in 2-3 years.
He's in for a big shock when he tries to up the rent by 10%
at the end of year 1.

tim

On 17 Aug, 12:09, "tim....."  wrote:
> "Jonathan Bryce" <jonat...@localhost.localdomain> wrote in message
>
> news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
>
> > Matti Lamprhey wrote:
>
> >>> Can you explain then, why rents in the private sector are not rising
> >>> in line with house prices.  If there was a shortage of demand for
> >>> housing, they would be.  In fact, rents have been rising at a much
> >>> lower rate than inflation in general.
>
> >> Could it be because many people are speculating on the housing market by
> >> buying-to-let, thereby artificially increasing the supply of rented
> >> property?
>
> > That could be part of the story, but either way, someone who wants to live
> > in a house can do so without a significantly increasing expense.
>
> There was an item on R5 last week about house prices and
> BTL.  One guy phoned in to explain that he had bougth a
> BTL and that the rent was 30% short of his mortgage.
> He said that he thought this a good long term bet and
> expected the rent/mortgage to reach parity in 2-3 years.
> He's in for a big shock when he tries to up the rent by 10%
> at the end of year 1.

Even so, he's buying a house and found someone else to pay 70% of the
costs.

Maybe you would prefer to be the tenant rather than the landlord in
this situation...

> tim

In uk.finance whitely525@yahoo.co.uk wrote:

>> There was an item on R5 last week about house prices and
>> BTL.  One guy phoned in to explain that he had bougth a
>> BTL and that the rent was 30% short of his mortgage.
>> He said that he thought this a good long term bet and
>> expected the rent/mortgage to reach parity in 2-3 years.
>> He's in for a big shock when he tries to up the rent by 10%
>> at the end of year 1.

> Even so, he's buying a house and found someone else to pay 70% of the
> costs.

If 90% of the mortgage is interest and 10% is capital repayments then
effectively he's paying 3 quid for every one Pound of house he's buying.

That doesn't seem very astute to me.

FoFP

-- 
Party, like it's 1929!

On Wed, 15 Aug 2007 17:03:02 -0700, pmm101@googlemail.com wrote:

>Figures published yesterday show inflation falling. Combined with
>world stock market volatility it's unlikely the Bank of England will
>rise interest gain any time soon.

If there's one thing that's been made crystal clear in the past month
it's that central banks no longer control the mortgage rate, the
bondholders do, and the bondholders have decided they need to increase
mortgage rates to compensate them for extra risk.

FoFP

-- 
Party, like it's 1929!

wrote in message 
news:1187358045.166304.42940@r29g2000hsg.googlegroups.com...
> On 17 Aug, 12:09, "tim....."  wrote:
>> "Jonathan Bryce" <jonat...@localhost.localdomain> wrote in message
>>
>> news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
>>
>> > Matti Lamprhey wrote:
>>
>> >>> Can you explain then, why rents in the private sector are not rising
>> >>> in line with house prices.  If there was a shortage of demand for
>> >>> housing, they would be.  In fact, rents have been rising at a much
>> >>> lower rate than inflation in general.
>>
>> >> Could it be because many people are speculating on the housing market 
>> >> by
>> >> buying-to-let, thereby artificially increasing the supply of rented
>> >> property?
>>
>> > That could be part of the story, but either way, someone who wants to 
>> > live
>> > in a house can do so without a significantly increasing expense.
>>
>> There was an item on R5 last week about house prices and
>> BTL.  One guy phoned in to explain that he had bougth a
>> BTL and that the rent was 30% short of his mortgage.
>> He said that he thought this a good long term bet and
>> expected the rent/mortgage to reach parity in 2-3 years.
>> He's in for a big shock when he tries to up the rent by 10%
>> at the end of year 1.
>
> Even so, he's buying a house and found someone else to pay 70% of the
> costs.

Once again.  How does owing a house that's 100% mortgaged
help anybody?

The only answer I can see that makes any sense is because
it is expected to increase in value, but what if it doesn't?

>
> Maybe you would prefer to be the tenant rather than the landlord in
> this situation...

Too right.  I'm renting a very nice apartment that someone
else has to pay all the maintenance costs on for less than
the cost of paying the mortgage on the same property.

The only reason that *I* have to buy it is if I believe that in
a few years time it will have increased in value by more than
the amount that I can earn investing the difference between
the rent and the theoretical mortgage.  I don't believe that
will be the case.

I could be wrong, but I have no illusions as to why I am
doing this, unlike the thousands of sheep who are trying
to jump on the housing escalator expecting it to go on
forever.

tim

M Holmes wrote:

> In uk.finance whitely525@yahoo.co.uk wrote:
> 
>>> There was an item on R5 last week about house prices and
>>> BTL.  One guy phoned in to explain that he had bougth a
>>> BTL and that the rent was 30% short of his mortgage.
>>> He said that he thought this a good long term bet and
>>> expected the rent/mortgage to reach parity in 2-3 years.
>>> He's in for a big shock when he tries to up the rent by 10%
>>> at the end of year 1.
> 
>> Even so, he's buying a house and found someone else to pay 70% of the
>> costs.
> 
> If 90% of the mortgage is interest and 10% is capital repayments then
> effectively he's paying 3 quid for every one Pound of house he's buying.
> 
> That doesn't seem very astute to me.

Isn't it at least more astute than paying 10 quid for every pound?

In uk.finance Ronald Raygun <no.spam@localhost.localdomain> wrote:

>>> Even so, he's buying a house and found someone else to pay 70% of the
>>> costs.
>> 
>> If 90% of the mortgage is interest and 10% is capital repayments then
>> effectively he's paying 3 quid for every one Pound of house he's buying.
>> 
>> That doesn't seem very astute to me.

> Isn't it at least more astute than paying 10 quid for every pound?

Those folks who buy BtL flats and leave them empty really do puzzle me.
I don't expect they'll be around in six months though.

FoFP

-- 
Party, like it's 1929!

On 17 Aug, 15:05, M Holmes  wrote:
> In uk.finance whitely...@yahoo.co.uk wrote:
> >> There was an item on R5 last week about house prices and
> >> BTL.  One guy phoned in to explain that he had bougth a
> >> BTL and that the rent was 30% short of his mortgage.
> >> He said that he thought this a good long term bet and
> >> expected the rent/mortgage to reach parity in 2-3 years.
> >> He's in for a big shock when he tries to up the rent by 10%
> >> at the end of year 1.
> > Even so, he's buying a house and found someone else to pay 70% of the
> > costs.
>
> If 90% of the mortgage is interest and 10% is capital repayments then
> effectively he's paying 3 quid for every one Pound of house he's buying.
>
> That doesn't seem very astute to me.

So you think the tenant is the canny and astute one in this
situation..?


> FoFP
>
> --
> Party, like it's 1929!

On 17 Aug, 17:59, M Holmes  wrote:
> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>
> >>> Even so, he's buying a house and found someone else to pay 70% of the
> >>> costs.
>
> >> If 90% of the mortgage is interest and 10% is capital repayments then
> >> effectively he's paying 3 quid for every one Pound of house he's buying.
>
> >> That doesn't seem very astute to me.
> > Isn't it at least more astute than paying 10 quid for every pound?
>
> Those folks who buy BtL flats and leave them empty really do puzzle me.
> I don't expect they'll be around in six months though.

Why not..?  It is a more tax efficient way to purchase a house this
way than 'buying to live in'.

> FoFP
>
> --
> Party, like it's 1929!

wrote in message 
news:1187371063.664508.283520@57g2000hsv.googlegroups.com...
> On 17 Aug, 17:59, M Holmes  wrote:
>> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>>
>> >>> Even so, he's buying a house and found someone else to pay 70% of the
>> >>> costs.
>>
>> >> If 90% of the mortgage is interest and 10% is capital repayments then
>> >> effectively he's paying 3 quid for every one Pound of house he's 
>> >> buying.
>>
>> >> That doesn't seem very astute to me.
>> > Isn't it at least more astute than paying 10 quid for every pound?
>>
>> Those folks who buy BtL flats and leave them empty really do puzzle me.
>> I don't expect they'll be around in six months though.
>
> Why not..?  It is a more tax efficient way to purchase a house this
> way than 'buying to live in'.

No it's not, no tenant equals no rent, equals no income to
offset the mortgage against, equals no tax advantage.

tim

On 17 Aug, 18:58, "tim....."  wrote:
>  wrote in message
>
> news:1187371063.664508.283520@57g2000hsv.googlegroups.com...
>
>
>
>
>
> > On 17 Aug, 17:59, M Holmes  wrote:
> >> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>
> >> >>> Even so, he's buying a house and found someone else to pay 70% of the
> >> >>> costs.
>
> >> >> If 90% of the mortgage is interest and 10% is capital repayments then
> >> >> effectively he's paying 3 quid for every one Pound of house he's
> >> >> buying.
>
> >> >> That doesn't seem very astute to me.
> >> > Isn't it at least more astute than paying 10 quid for every pound?
>
> >> Those folks who buy BtL flats and leave them empty really do puzzle me.
> >> I don't expect they'll be around in six months though.
>
> > Why not..?  It is a more tax efficient way to purchase a house this
> > way than 'buying to live in'.
>
> No it's not, no tenant equals no rent, equals no income to
> offset the mortgage against, equals no tax advantage.

Only if it is empty all the time.  No sane landlord does that.

Once a tentant is found the landlord can bring forward any losses to
offset against income in the next tax year.


> tim- Hide quoted text -
>
> - Show quoted text -

In uk.finance pmm101@googlemail.com wrote:

> The only likely trigger for a crash is out and out recession

Nope. A possibility that looks more likely by the day is that a crash
could be caused by mass unavailability of mortgages. How much is a house
worth if everyone has to bid with their own cash?

> but that seems unlikely. 

It's more likely that the recession which is coming will be caused by
house price deflation (and the causes of that) rather than the other way
around. 

> Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

As we all know, if you find a trend on a graph, that trend will continue
forever.

> Housing isn't discretionary. 

That's untrue too. A couple can choose to live with the in-laws when
they can't pay a mortgage. Singles can choose to flatshare when they
can't afford a mortgage. Then there are millions of immigrants who work
here to save to pay for a property back home. If there's a recession,
then they'll decamp to a country where they can still earn money,
leaving much empty property behind.

> Pretty tulips and dot-com stocks might be
> nice to have, but shelter is one of life's necessities. Those that can
> live with their parents will do so for longer. Others may rent
> privately, but will soon realize it makes more sense paying their own
> mortgage than someone else's. That's why price growth has remained
> strong despite recent interest rises.

Nope. Growth has remained strong because of the unprecendented
availability of credit at low rates. If you research the Tulip Bubble
(or the South Seas, Canals, Railways, or Stocks bubbles) you'll discover
that the availability of credit to the masses is the overweening common
factor. 

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

That may be true, because we're headed for deflation. Deflation is
extremely destructive of prices of assets which have been rising as a
result of a credit bubble, with falls of 67% to 90% being typical.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

wrote in message 
news:1187222582.202178.5030@a39g2000hsc.googlegroups.com...
>What do Dutch tulips, dot-coms and English real estate have in common?

You forgot "south seas".  Though god knows how you buy or
sell one :-)

tim

pmm101@googlemail.com wrote:
> * The UK operates an extremely lenient immigration policy. According
> to migrationwatchuk.org net foreign immigration reached 292,000 in
> 2005, excluding illegal immigrants of whom some 50,000 are detected
> each year.

Polish people on minimum wage are not buying £250k 1 bed flats in London.

> * Recent years have seen sustained periods of historically low
> interest rates, thus allowing buyers to borrow more.

Inflation has also been low during most of that period, meaning that real
interest rates are much higher.

> * Reduction in availability of affordable rented housing. Since 1980
> many council tenants have taken advantage of legislation allowing them
> to buy their homes at substantial discounts. The homes sold under this
> scheme outweighs new properties becoming available for rental.
> 
> * The rise in the number of single households means more homes are
> needed overall.
> 
> It all adds up to demand rising faster than supply, and when that
> happens economics says prices will keep rising. The government has
> recognized this with incoming PM Gordon Brown pledging to build 3
> million new houses by 2020 (though he's unlikely to be in office long
> enough to see it fulfilled).

Can you explain then, why rents in the private sector are not rising in line
with house prices.  If there was a shortage of demand for housing, they
would be.  In fact, rents have been rising at a much lower rate than
inflation in general.

> The only likely trigger for a crash is out and out recession, but that
> seems unlikely. Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

How about the credit crunch?  If banks can't get the funds in to lend out in
mortgages, that will stop people from being able to buy houses.

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

Libor is 6.38% as at the most recently available figures I have, up from 6%
a couple of weeks ago.  So it probably doesn't matter what the bank of
england says, interest rates have already shot up.

> So my guess is that fears of a housing market crash are greatly
> exaggerated.

My guess is they are not.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

> How about the credit crunch? If banks can't get the funds in to lend
> out in mortgages, that will stop people from being able to buy houses. 

It won't you know. This all happened in Japan in the 1990's but people
kept buying houses. They were just buying them with cash for 10% of
what they used to pay is all.

Can't see any reason why we'll be different.

FoFP

--
Then the Gods of the Market tumbled, and their smooth-tongued wizards
withdrew And the hearts of the meanest were humbled and began to believe
it was true That All is not Gold that Glitters, and Two and Two make
Four [Kipling] And the Gods of the Copybook Headings limped up to
explain it once more.

M Holmes wrote:

> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> 
>> How about the credit crunch? If banks can't get the funds in to lend
>> out in mortgages, that will stop people from being able to buy houses.
> 
> It won't you know. This all happened in Japan in the 1990's but people
> kept buying houses. They were just buying them with cash for 10% of
> what they used to pay is all.

Well yes, that will certainly happen to an extent, but people in negative
equity are less likely to sell voluntarily as they won't be able to redeem
the mortgage in order to do so.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> M Holmes wrote:

>> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

>>> How about the credit crunch? If banks can't get the funds in to lend
>>> out in mortgages, that will stop people from being able to buy houses.

>> It won't you know. This all happened in Japan in the 1990's but people
>> kept buying houses. They were just buying them with cash for 10% of
>> what they used to pay is all.

> Well yes, that will certainly happen to an extent, but people in negative
> equity are less likely to sell voluntarily as they won't be able to redeem
> the mortgage in order to do so.

They'll throw the keys at the lenders and walk. Last time the banks could
wait for them to buy another house, gain some equity, and come after
them for the cash they still owe. This time, these people will neither
seek, nor be offered credit again in their lives and so there won't be
any new equity for the lenders to come after.

The main part of a debt-deflation, which is what this credit bust is
leading to, is that a whole bunch of credit is revealed to have never
been the money everyone thought it was, and it will vanish as the
morning dew. Lots of borrowers will lose, lots of lenders will lose and
lots of investors will lose.

Remember the old saw:

If you owe the bank a million Dollars, you're in trouble,

but if you owe the bank a billion Dollars, your bank is in trouble.

Remember that? well, here's the third line that we're about to become
more familiar with:

If you owe the bank a trillion Dollars, we're ALL in trouble.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

"Jonathan Bryce" <jonathan@localhost.localdomain> wrote...
> pmm101@googlemail.com wrote:
>> [...]
>> It all adds up to demand rising faster than supply, and when that
>> happens economics says prices will keep rising. The government has
>> recognized this with incoming PM Gordon Brown pledging to build 3
>> million new houses by 2020 (though he's unlikely to be in office long
>> enough to see it fulfilled).
>
> Can you explain then, why rents in the private sector are not rising
> in line with house prices.  If there was a shortage of demand for
> housing, they would be.  In fact, rents have been rising at a much
> lower rate than inflation in general.

Could it be because many people are speculating on the housing market by
buying-to-let, thereby artificially increasing the supply of rented
property?

Matti

Matti Lamprhey wrote:

>> Can you explain then, why rents in the private sector are not rising
>> in line with house prices.  If there was a shortage of demand for
>> housing, they would be.  In fact, rents have been rising at a much
>> lower rate than inflation in general.
> 
> Could it be because many people are speculating on the housing market by
> buying-to-let, thereby artificially increasing the supply of rented
> property?

That could be part of the story, but either way, someone who wants to live
in a house can do so without a significantly increasing expense.

On Wed, 15 Aug 2007 17:03:02 -0700, pmm101@googlemail.com wrote:

>Figures published yesterday show inflation falling. Combined with
>world stock market volatility it's unlikely the Bank of England will
>rise interest gain any time soon.

If you look at the record of the RPI since 1982, you will find that
the index has fallen or remained unchanged in every July except for
the three years 1988-89-90. 

The figures for July 2007 are what could have been expected.
-- 
Terry Harper
URL: http://www.btinternet.com/~terry.harper/

"Jonathan Bryce" <jonathan@localhost.localdomain> wrote in message 
news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
> Matti Lamprhey wrote:
>
>>> Can you explain then, why rents in the private sector are not rising
>>> in line with house prices.  If there was a shortage of demand for
>>> housing, they would be.  In fact, rents have been rising at a much
>>> lower rate than inflation in general.
>>
>> Could it be because many people are speculating on the housing market by
>> buying-to-let, thereby artificially increasing the supply of rented
>> property?
>
> That could be part of the story, but either way, someone who wants to live
> in a house can do so without a significantly increasing expense.

There was an item on R5 last week about house prices and
BTL.  One guy phoned in to explain that he had bougth a
BTL and that the rent was 30% short of his mortgage.
He said that he thought this a good long term bet and
expected the rent/mortgage to reach parity in 2-3 years.
He's in for a big shock when he tries to up the rent by 10%
at the end of year 1.

tim

On 17 Aug, 12:09, "tim....."  wrote:
> "Jonathan Bryce" <jonat...@localhost.localdomain> wrote in message
>
> news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
>
> > Matti Lamprhey wrote:
>
> >>> Can you explain then, why rents in the private sector are not rising
> >>> in line with house prices.  If there was a shortage of demand for
> >>> housing, they would be.  In fact, rents have been rising at a much
> >>> lower rate than inflation in general.
>
> >> Could it be because many people are speculating on the housing market by
> >> buying-to-let, thereby artificially increasing the supply of rented
> >> property?
>
> > That could be part of the story, but either way, someone who wants to live
> > in a house can do so without a significantly increasing expense.
>
> There was an item on R5 last week about house prices and
> BTL.  One guy phoned in to explain that he had bougth a
> BTL and that the rent was 30% short of his mortgage.
> He said that he thought this a good long term bet and
> expected the rent/mortgage to reach parity in 2-3 years.
> He's in for a big shock when he tries to up the rent by 10%
> at the end of year 1.

Even so, he's buying a house and found someone else to pay 70% of the
costs.

Maybe you would prefer to be the tenant rather than the landlord in
this situation...

> tim

In uk.finance whitely525@yahoo.co.uk wrote:

>> There was an item on R5 last week about house prices and
>> BTL.  One guy phoned in to explain that he had bougth a
>> BTL and that the rent was 30% short of his mortgage.
>> He said that he thought this a good long term bet and
>> expected the rent/mortgage to reach parity in 2-3 years.
>> He's in for a big shock when he tries to up the rent by 10%
>> at the end of year 1.

> Even so, he's buying a house and found someone else to pay 70% of the
> costs.

If 90% of the mortgage is interest and 10% is capital repayments then
effectively he's paying 3 quid for every one Pound of house he's buying.

That doesn't seem very astute to me.

FoFP

-- 
Party, like it's 1929!

On Wed, 15 Aug 2007 17:03:02 -0700, pmm101@googlemail.com wrote:

>Figures published yesterday show inflation falling. Combined with
>world stock market volatility it's unlikely the Bank of England will
>rise interest gain any time soon.

If there's one thing that's been made crystal clear in the past month
it's that central banks no longer control the mortgage rate, the
bondholders do, and the bondholders have decided they need to increase
mortgage rates to compensate them for extra risk.

FoFP

-- 
Party, like it's 1929!

wrote in message 
news:1187358045.166304.42940@r29g2000hsg.googlegroups.com...
> On 17 Aug, 12:09, "tim....."  wrote:
>> "Jonathan Bryce" <jonat...@localhost.localdomain> wrote in message
>>
>> news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
>>
>> > Matti Lamprhey wrote:
>>
>> >>> Can you explain then, why rents in the private sector are not rising
>> >>> in line with house prices.  If there was a shortage of demand for
>> >>> housing, they would be.  In fact, rents have been rising at a much
>> >>> lower rate than inflation in general.
>>
>> >> Could it be because many people are speculating on the housing market 
>> >> by
>> >> buying-to-let, thereby artificially increasing the supply of rented
>> >> property?
>>
>> > That could be part of the story, but either way, someone who wants to 
>> > live
>> > in a house can do so without a significantly increasing expense.
>>
>> There was an item on R5 last week about house prices and
>> BTL.  One guy phoned in to explain that he had bougth a
>> BTL and that the rent was 30% short of his mortgage.
>> He said that he thought this a good long term bet and
>> expected the rent/mortgage to reach parity in 2-3 years.
>> He's in for a big shock when he tries to up the rent by 10%
>> at the end of year 1.
>
> Even so, he's buying a house and found someone else to pay 70% of the
> costs.

Once again.  How does owing a house that's 100% mortgaged
help anybody?

The only answer I can see that makes any sense is because
it is expected to increase in value, but what if it doesn't?

>
> Maybe you would prefer to be the tenant rather than the landlord in
> this situation...

Too right.  I'm renting a very nice apartment that someone
else has to pay all the maintenance costs on for less than
the cost of paying the mortgage on the same property.

The only reason that *I* have to buy it is if I believe that in
a few years time it will have increased in value by more than
the amount that I can earn investing the difference between
the rent and the theoretical mortgage.  I don't believe that
will be the case.

I could be wrong, but I have no illusions as to why I am
doing this, unlike the thousands of sheep who are trying
to jump on the housing escalator expecting it to go on
forever.

tim

M Holmes wrote:

> In uk.finance whitely525@yahoo.co.uk wrote:
> 
>>> There was an item on R5 last week about house prices and
>>> BTL.  One guy phoned in to explain that he had bougth a
>>> BTL and that the rent was 30% short of his mortgage.
>>> He said that he thought this a good long term bet and
>>> expected the rent/mortgage to reach parity in 2-3 years.
>>> He's in for a big shock when he tries to up the rent by 10%
>>> at the end of year 1.
> 
>> Even so, he's buying a house and found someone else to pay 70% of the
>> costs.
> 
> If 90% of the mortgage is interest and 10% is capital repayments then
> effectively he's paying 3 quid for every one Pound of house he's buying.
> 
> That doesn't seem very astute to me.

Isn't it at least more astute than paying 10 quid for every pound?

In uk.finance Ronald Raygun <no.spam@localhost.localdomain> wrote:

>>> Even so, he's buying a house and found someone else to pay 70% of the
>>> costs.
>> 
>> If 90% of the mortgage is interest and 10% is capital repayments then
>> effectively he's paying 3 quid for every one Pound of house he's buying.
>> 
>> That doesn't seem very astute to me.

> Isn't it at least more astute than paying 10 quid for every pound?

Those folks who buy BtL flats and leave them empty really do puzzle me.
I don't expect they'll be around in six months though.

FoFP

-- 
Party, like it's 1929!

On 17 Aug, 15:05, M Holmes  wrote:
> In uk.finance whitely...@yahoo.co.uk wrote:
> >> There was an item on R5 last week about house prices and
> >> BTL.  One guy phoned in to explain that he had bougth a
> >> BTL and that the rent was 30% short of his mortgage.
> >> He said that he thought this a good long term bet and
> >> expected the rent/mortgage to reach parity in 2-3 years.
> >> He's in for a big shock when he tries to up the rent by 10%
> >> at the end of year 1.
> > Even so, he's buying a house and found someone else to pay 70% of the
> > costs.
>
> If 90% of the mortgage is interest and 10% is capital repayments then
> effectively he's paying 3 quid for every one Pound of house he's buying.
>
> That doesn't seem very astute to me.

So you think the tenant is the canny and astute one in this
situation..?


> FoFP
>
> --
> Party, like it's 1929!

On 17 Aug, 17:59, M Holmes  wrote:
> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>
> >>> Even so, he's buying a house and found someone else to pay 70% of the
> >>> costs.
>
> >> If 90% of the mortgage is interest and 10% is capital repayments then
> >> effectively he's paying 3 quid for every one Pound of house he's buying.
>
> >> That doesn't seem very astute to me.
> > Isn't it at least more astute than paying 10 quid for every pound?
>
> Those folks who buy BtL flats and leave them empty really do puzzle me.
> I don't expect they'll be around in six months though.

Why not..?  It is a more tax efficient way to purchase a house this
way than 'buying to live in'.

> FoFP
>
> --
> Party, like it's 1929!

wrote in message 
news:1187371063.664508.283520@57g2000hsv.googlegroups.com...
> On 17 Aug, 17:59, M Holmes  wrote:
>> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>>
>> >>> Even so, he's buying a house and found someone else to pay 70% of the
>> >>> costs.
>>
>> >> If 90% of the mortgage is interest and 10% is capital repayments then
>> >> effectively he's paying 3 quid for every one Pound of house he's 
>> >> buying.
>>
>> >> That doesn't seem very astute to me.
>> > Isn't it at least more astute than paying 10 quid for every pound?
>>
>> Those folks who buy BtL flats and leave them empty really do puzzle me.
>> I don't expect they'll be around in six months though.
>
> Why not..?  It is a more tax efficient way to purchase a house this
> way than 'buying to live in'.

No it's not, no tenant equals no rent, equals no income to
offset the mortgage against, equals no tax advantage.

tim

On 17 Aug, 18:58, "tim....."  wrote:
>  wrote in message
>
> news:1187371063.664508.283520@57g2000hsv.googlegroups.com...
>
>
>
>
>
> > On 17 Aug, 17:59, M Holmes  wrote:
> >> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>
> >> >>> Even so, he's buying a house and found someone else to pay 70% of the
> >> >>> costs.
>
> >> >> If 90% of the mortgage is interest and 10% is capital repayments then
> >> >> effectively he's paying 3 quid for every one Pound of house he's
> >> >> buying.
>
> >> >> That doesn't seem very astute to me.
> >> > Isn't it at least more astute than paying 10 quid for every pound?
>
> >> Those folks who buy BtL flats and leave them empty really do puzzle me.
> >> I don't expect they'll be around in six months though.
>
> > Why not..?  It is a more tax efficient way to purchase a house this
> > way than 'buying to live in'.
>
> No it's not, no tenant equals no rent, equals no income to
> offset the mortgage against, equals no tax advantage.

Only if it is empty all the time.  No sane landlord does that.

Once a tentant is found the landlord can bring forward any losses to
offset against income in the next tax year.


> tim- Hide quoted text -
>
> - Show quoted text -

In uk.finance pmm101@googlemail.com wrote:

> The only likely trigger for a crash is out and out recession

Nope. A possibility that looks more likely by the day is that a crash
could be caused by mass unavailability of mortgages. How much is a house
worth if everyone has to bid with their own cash?

> but that seems unlikely. 

It's more likely that the recession which is coming will be caused by
house price deflation (and the causes of that) rather than the other way
around. 

> Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

As we all know, if you find a trend on a graph, that trend will continue
forever.

> Housing isn't discretionary. 

That's untrue too. A couple can choose to live with the in-laws when
they can't pay a mortgage. Singles can choose to flatshare when they
can't afford a mortgage. Then there are millions of immigrants who work
here to save to pay for a property back home. If there's a recession,
then they'll decamp to a country where they can still earn money,
leaving much empty property behind.

> Pretty tulips and dot-com stocks might be
> nice to have, but shelter is one of life's necessities. Those that can
> live with their parents will do so for longer. Others may rent
> privately, but will soon realize it makes more sense paying their own
> mortgage than someone else's. That's why price growth has remained
> strong despite recent interest rises.

Nope. Growth has remained strong because of the unprecendented
availability of credit at low rates. If you research the Tulip Bubble
(or the South Seas, Canals, Railways, or Stocks bubbles) you'll discover
that the availability of credit to the masses is the overweening common
factor. 

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

That may be true, because we're headed for deflation. Deflation is
extremely destructive of prices of assets which have been rising as a
result of a credit bubble, with falls of 67% to 90% being typical.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

wrote in message 
news:1187222582.202178.5030@a39g2000hsc.googlegroups.com...
>What do Dutch tulips, dot-coms and English real estate have in common?

You forgot "south seas".  Though god knows how you buy or
sell one :-)

tim

pmm101@googlemail.com wrote:
> * The UK operates an extremely lenient immigration policy. According
> to migrationwatchuk.org net foreign immigration reached 292,000 in
> 2005, excluding illegal immigrants of whom some 50,000 are detected
> each year.

Polish people on minimum wage are not buying £250k 1 bed flats in London.

> * Recent years have seen sustained periods of historically low
> interest rates, thus allowing buyers to borrow more.

Inflation has also been low during most of that period, meaning that real
interest rates are much higher.

> * Reduction in availability of affordable rented housing. Since 1980
> many council tenants have taken advantage of legislation allowing them
> to buy their homes at substantial discounts. The homes sold under this
> scheme outweighs new properties becoming available for rental.
> 
> * The rise in the number of single households means more homes are
> needed overall.
> 
> It all adds up to demand rising faster than supply, and when that
> happens economics says prices will keep rising. The government has
> recognized this with incoming PM Gordon Brown pledging to build 3
> million new houses by 2020 (though he's unlikely to be in office long
> enough to see it fulfilled).

Can you explain then, why rents in the private sector are not rising in line
with house prices.  If there was a shortage of demand for housing, they
would be.  In fact, rents have been rising at a much lower rate than
inflation in general.

> The only likely trigger for a crash is out and out recession, but that
> seems unlikely. Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

How about the credit crunch?  If banks can't get the funds in to lend out in
mortgages, that will stop people from being able to buy houses.

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

Libor is 6.38% as at the most recently available figures I have, up from 6%
a couple of weeks ago.  So it probably doesn't matter what the bank of
england says, interest rates have already shot up.

> So my guess is that fears of a housing market crash are greatly
> exaggerated.

My guess is they are not.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

> How about the credit crunch? If banks can't get the funds in to lend
> out in mortgages, that will stop people from being able to buy houses. 

It won't you know. This all happened in Japan in the 1990's but people
kept buying houses. They were just buying them with cash for 10% of
what they used to pay is all.

Can't see any reason why we'll be different.

FoFP

--
Then the Gods of the Market tumbled, and their smooth-tongued wizards
withdrew And the hearts of the meanest were humbled and began to believe
it was true That All is not Gold that Glitters, and Two and Two make
Four [Kipling] And the Gods of the Copybook Headings limped up to
explain it once more.

M Holmes wrote:

> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> 
>> How about the credit crunch? If banks can't get the funds in to lend
>> out in mortgages, that will stop people from being able to buy houses.
> 
> It won't you know. This all happened in Japan in the 1990's but people
> kept buying houses. They were just buying them with cash for 10% of
> what they used to pay is all.

Well yes, that will certainly happen to an extent, but people in negative
equity are less likely to sell voluntarily as they won't be able to redeem
the mortgage in order to do so.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> M Holmes wrote:

>> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

>>> How about the credit crunch? If banks can't get the funds in to lend
>>> out in mortgages, that will stop people from being able to buy houses.

>> It won't you know. This all happened in Japan in the 1990's but people
>> kept buying houses. They were just buying them with cash for 10% of
>> what they used to pay is all.

> Well yes, that will certainly happen to an extent, but people in negative
> equity are less likely to sell voluntarily as they won't be able to redeem
> the mortgage in order to do so.

They'll throw the keys at the lenders and walk. Last time the banks could
wait for them to buy another house, gain some equity, and come after
them for the cash they still owe. This time, these people will neither
seek, nor be offered credit again in their lives and so there won't be
any new equity for the lenders to come after.

The main part of a debt-deflation, which is what this credit bust is
leading to, is that a whole bunch of credit is revealed to have never
been the money everyone thought it was, and it will vanish as the
morning dew. Lots of borrowers will lose, lots of lenders will lose and
lots of investors will lose.

Remember the old saw:

If you owe the bank a million Dollars, you're in trouble,

but if you owe the bank a billion Dollars, your bank is in trouble.

Remember that? well, here's the third line that we're about to become
more familiar with:

If you owe the bank a trillion Dollars, we're ALL in trouble.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

"Jonathan Bryce" <jonathan@localhost.localdomain> wrote...
> pmm101@googlemail.com wrote:
>> [...]
>> It all adds up to demand rising faster than supply, and when that
>> happens economics says prices will keep rising. The government has
>> recognized this with incoming PM Gordon Brown pledging to build 3
>> million new houses by 2020 (though he's unlikely to be in office long
>> enough to see it fulfilled).
>
> Can you explain then, why rents in the private sector are not rising
> in line with house prices.  If there was a shortage of demand for
> housing, they would be.  In fact, rents have been rising at a much
> lower rate than inflation in general.

Could it be because many people are speculating on the housing market by
buying-to-let, thereby artificially increasing the supply of rented
property?

Matti

Matti Lamprhey wrote:

>> Can you explain then, why rents in the private sector are not rising
>> in line with house prices.  If there was a shortage of demand for
>> housing, they would be.  In fact, rents have been rising at a much
>> lower rate than inflation in general.
> 
> Could it be because many people are speculating on the housing market by
> buying-to-let, thereby artificially increasing the supply of rented
> property?

That could be part of the story, but either way, someone who wants to live
in a house can do so without a significantly increasing expense.

On Wed, 15 Aug 2007 17:03:02 -0700, pmm101@googlemail.com wrote:

>Figures published yesterday show inflation falling. Combined with
>world stock market volatility it's unlikely the Bank of England will
>rise interest gain any time soon.

If you look at the record of the RPI since 1982, you will find that
the index has fallen or remained unchanged in every July except for
the three years 1988-89-90. 

The figures for July 2007 are what could have been expected.
-- 
Terry Harper
URL: http://www.btinternet.com/~terry.harper/

"Jonathan Bryce" <jonathan@localhost.localdomain> wrote in message 
news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
> Matti Lamprhey wrote:
>
>>> Can you explain then, why rents in the private sector are not rising
>>> in line with house prices.  If there was a shortage of demand for
>>> housing, they would be.  In fact, rents have been rising at a much
>>> lower rate than inflation in general.
>>
>> Could it be because many people are speculating on the housing market by
>> buying-to-let, thereby artificially increasing the supply of rented
>> property?
>
> That could be part of the story, but either way, someone who wants to live
> in a house can do so without a significantly increasing expense.

There was an item on R5 last week about house prices and
BTL.  One guy phoned in to explain that he had bougth a
BTL and that the rent was 30% short of his mortgage.
He said that he thought this a good long term bet and
expected the rent/mortgage to reach parity in 2-3 years.
He's in for a big shock when he tries to up the rent by 10%
at the end of year 1.

tim

On 17 Aug, 12:09, "tim....."  wrote:
> "Jonathan Bryce" <jonat...@localhost.localdomain> wrote in message
>
> news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
>
> > Matti Lamprhey wrote:
>
> >>> Can you explain then, why rents in the private sector are not rising
> >>> in line with house prices.  If there was a shortage of demand for
> >>> housing, they would be.  In fact, rents have been rising at a much
> >>> lower rate than inflation in general.
>
> >> Could it be because many people are speculating on the housing market by
> >> buying-to-let, thereby artificially increasing the supply of rented
> >> property?
>
> > That could be part of the story, but either way, someone who wants to live
> > in a house can do so without a significantly increasing expense.
>
> There was an item on R5 last week about house prices and
> BTL.  One guy phoned in to explain that he had bougth a
> BTL and that the rent was 30% short of his mortgage.
> He said that he thought this a good long term bet and
> expected the rent/mortgage to reach parity in 2-3 years.
> He's in for a big shock when he tries to up the rent by 10%
> at the end of year 1.

Even so, he's buying a house and found someone else to pay 70% of the
costs.

Maybe you would prefer to be the tenant rather than the landlord in
this situation...

> tim

In uk.finance whitely525@yahoo.co.uk wrote:

>> There was an item on R5 last week about house prices and
>> BTL.  One guy phoned in to explain that he had bougth a
>> BTL and that the rent was 30% short of his mortgage.
>> He said that he thought this a good long term bet and
>> expected the rent/mortgage to reach parity in 2-3 years.
>> He's in for a big shock when he tries to up the rent by 10%
>> at the end of year 1.

> Even so, he's buying a house and found someone else to pay 70% of the
> costs.

If 90% of the mortgage is interest and 10% is capital repayments then
effectively he's paying 3 quid for every one Pound of house he's buying.

That doesn't seem very astute to me.

FoFP

-- 
Party, like it's 1929!

On Wed, 15 Aug 2007 17:03:02 -0700, pmm101@googlemail.com wrote:

>Figures published yesterday show inflation falling. Combined with
>world stock market volatility it's unlikely the Bank of England will
>rise interest gain any time soon.

If there's one thing that's been made crystal clear in the past month
it's that central banks no longer control the mortgage rate, the
bondholders do, and the bondholders have decided they need to increase
mortgage rates to compensate them for extra risk.

FoFP

-- 
Party, like it's 1929!

wrote in message 
news:1187358045.166304.42940@r29g2000hsg.googlegroups.com...
> On 17 Aug, 12:09, "tim....."  wrote:
>> "Jonathan Bryce" <jonat...@localhost.localdomain> wrote in message
>>
>> news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
>>
>> > Matti Lamprhey wrote:
>>
>> >>> Can you explain then, why rents in the private sector are not rising
>> >>> in line with house prices.  If there was a shortage of demand for
>> >>> housing, they would be.  In fact, rents have been rising at a much
>> >>> lower rate than inflation in general.
>>
>> >> Could it be because many people are speculating on the housing market 
>> >> by
>> >> buying-to-let, thereby artificially increasing the supply of rented
>> >> property?
>>
>> > That could be part of the story, but either way, someone who wants to 
>> > live
>> > in a house can do so without a significantly increasing expense.
>>
>> There was an item on R5 last week about house prices and
>> BTL.  One guy phoned in to explain that he had bougth a
>> BTL and that the rent was 30% short of his mortgage.
>> He said that he thought this a good long term bet and
>> expected the rent/mortgage to reach parity in 2-3 years.
>> He's in for a big shock when he tries to up the rent by 10%
>> at the end of year 1.
>
> Even so, he's buying a house and found someone else to pay 70% of the
> costs.

Once again.  How does owing a house that's 100% mortgaged
help anybody?

The only answer I can see that makes any sense is because
it is expected to increase in value, but what if it doesn't?

>
> Maybe you would prefer to be the tenant rather than the landlord in
> this situation...

Too right.  I'm renting a very nice apartment that someone
else has to pay all the maintenance costs on for less than
the cost of paying the mortgage on the same property.

The only reason that *I* have to buy it is if I believe that in
a few years time it will have increased in value by more than
the amount that I can earn investing the difference between
the rent and the theoretical mortgage.  I don't believe that
will be the case.

I could be wrong, but I have no illusions as to why I am
doing this, unlike the thousands of sheep who are trying
to jump on the housing escalator expecting it to go on
forever.

tim

M Holmes wrote:

> In uk.finance whitely525@yahoo.co.uk wrote:
> 
>>> There was an item on R5 last week about house prices and
>>> BTL.  One guy phoned in to explain that he had bougth a
>>> BTL and that the rent was 30% short of his mortgage.
>>> He said that he thought this a good long term bet and
>>> expected the rent/mortgage to reach parity in 2-3 years.
>>> He's in for a big shock when he tries to up the rent by 10%
>>> at the end of year 1.
> 
>> Even so, he's buying a house and found someone else to pay 70% of the
>> costs.
> 
> If 90% of the mortgage is interest and 10% is capital repayments then
> effectively he's paying 3 quid for every one Pound of house he's buying.
> 
> That doesn't seem very astute to me.

Isn't it at least more astute than paying 10 quid for every pound?

In uk.finance Ronald Raygun <no.spam@localhost.localdomain> wrote:

>>> Even so, he's buying a house and found someone else to pay 70% of the
>>> costs.
>> 
>> If 90% of the mortgage is interest and 10% is capital repayments then
>> effectively he's paying 3 quid for every one Pound of house he's buying.
>> 
>> That doesn't seem very astute to me.

> Isn't it at least more astute than paying 10 quid for every pound?

Those folks who buy BtL flats and leave them empty really do puzzle me.
I don't expect they'll be around in six months though.

FoFP

-- 
Party, like it's 1929!

On 17 Aug, 15:05, M Holmes  wrote:
> In uk.finance whitely...@yahoo.co.uk wrote:
> >> There was an item on R5 last week about house prices and
> >> BTL.  One guy phoned in to explain that he had bougth a
> >> BTL and that the rent was 30% short of his mortgage.
> >> He said that he thought this a good long term bet and
> >> expected the rent/mortgage to reach parity in 2-3 years.
> >> He's in for a big shock when he tries to up the rent by 10%
> >> at the end of year 1.
> > Even so, he's buying a house and found someone else to pay 70% of the
> > costs.
>
> If 90% of the mortgage is interest and 10% is capital repayments then
> effectively he's paying 3 quid for every one Pound of house he's buying.
>
> That doesn't seem very astute to me.

So you think the tenant is the canny and astute one in this
situation..?


> FoFP
>
> --
> Party, like it's 1929!

On 17 Aug, 17:59, M Holmes  wrote:
> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>
> >>> Even so, he's buying a house and found someone else to pay 70% of the
> >>> costs.
>
> >> If 90% of the mortgage is interest and 10% is capital repayments then
> >> effectively he's paying 3 quid for every one Pound of house he's buying.
>
> >> That doesn't seem very astute to me.
> > Isn't it at least more astute than paying 10 quid for every pound?
>
> Those folks who buy BtL flats and leave them empty really do puzzle me.
> I don't expect they'll be around in six months though.

Why not..?  It is a more tax efficient way to purchase a house this
way than 'buying to live in'.

> FoFP
>
> --
> Party, like it's 1929!

wrote in message 
news:1187371063.664508.283520@57g2000hsv.googlegroups.com...
> On 17 Aug, 17:59, M Holmes  wrote:
>> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>>
>> >>> Even so, he's buying a house and found someone else to pay 70% of the
>> >>> costs.
>>
>> >> If 90% of the mortgage is interest and 10% is capital repayments then
>> >> effectively he's paying 3 quid for every one Pound of house he's 
>> >> buying.
>>
>> >> That doesn't seem very astute to me.
>> > Isn't it at least more astute than paying 10 quid for every pound?
>>
>> Those folks who buy BtL flats and leave them empty really do puzzle me.
>> I don't expect they'll be around in six months though.
>
> Why not..?  It is a more tax efficient way to purchase a house this
> way than 'buying to live in'.

No it's not, no tenant equals no rent, equals no income to
offset the mortgage against, equals no tax advantage.

tim

On 17 Aug, 18:58, "tim....."  wrote:
>  wrote in message
>
> news:1187371063.664508.283520@57g2000hsv.googlegroups.com...
>
>
>
>
>
> > On 17 Aug, 17:59, M Holmes  wrote:
> >> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>
> >> >>> Even so, he's buying a house and found someone else to pay 70% of the
> >> >>> costs.
>
> >> >> If 90% of the mortgage is interest and 10% is capital repayments then
> >> >> effectively he's paying 3 quid for every one Pound of house he's
> >> >> buying.
>
> >> >> That doesn't seem very astute to me.
> >> > Isn't it at least more astute than paying 10 quid for every pound?
>
> >> Those folks who buy BtL flats and leave them empty really do puzzle me.
> >> I don't expect they'll be around in six months though.
>
> > Why not..?  It is a more tax efficient way to purchase a house this
> > way than 'buying to live in'.
>
> No it's not, no tenant equals no rent, equals no income to
> offset the mortgage against, equals no tax advantage.

Only if it is empty all the time.  No sane landlord does that.

Once a tentant is found the landlord can bring forward any losses to
offset against income in the next tax year.


> tim- Hide quoted text -
>
> - Show quoted text -

"M Holmes" wrote
> If there's one thing that's been made crystal clear in the past month
> it's that central banks no longer control the mortgage rate, the
> bondholders do, and the bondholders have decided they need
> to increase mortgage rates to compensate them for extra risk.

They can't do that when it's capped at 'x% over base rate'.
Seems to me, the central banks still control all those mortgage rates!

In uk.finance pmm101@googlemail.com wrote:

> The only likely trigger for a crash is out and out recession

Nope. A possibility that looks more likely by the day is that a crash
could be caused by mass unavailability of mortgages. How much is a house
worth if everyone has to bid with their own cash?

> but that seems unlikely. 

It's more likely that the recession which is coming will be caused by
house price deflation (and the causes of that) rather than the other way
around. 

> Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

As we all know, if you find a trend on a graph, that trend will continue
forever.

> Housing isn't discretionary. 

That's untrue too. A couple can choose to live with the in-laws when
they can't pay a mortgage. Singles can choose to flatshare when they
can't afford a mortgage. Then there are millions of immigrants who work
here to save to pay for a property back home. If there's a recession,
then they'll decamp to a country where they can still earn money,
leaving much empty property behind.

> Pretty tulips and dot-com stocks might be
> nice to have, but shelter is one of life's necessities. Those that can
> live with their parents will do so for longer. Others may rent
> privately, but will soon realize it makes more sense paying their own
> mortgage than someone else's. That's why price growth has remained
> strong despite recent interest rises.

Nope. Growth has remained strong because of the unprecendented
availability of credit at low rates. If you research the Tulip Bubble
(or the South Seas, Canals, Railways, or Stocks bubbles) you'll discover
that the availability of credit to the masses is the overweening common
factor. 

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

That may be true, because we're headed for deflation. Deflation is
extremely destructive of prices of assets which have been rising as a
result of a credit bubble, with falls of 67% to 90% being typical.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

wrote in message 
news:1187222582.202178.5030@a39g2000hsc.googlegroups.com...
>What do Dutch tulips, dot-coms and English real estate have in common?

You forgot "south seas".  Though god knows how you buy or
sell one :-)

tim

pmm101@googlemail.com wrote:
> * The UK operates an extremely lenient immigration policy. According
> to migrationwatchuk.org net foreign immigration reached 292,000 in
> 2005, excluding illegal immigrants of whom some 50,000 are detected
> each year.

Polish people on minimum wage are not buying £250k 1 bed flats in London.

> * Recent years have seen sustained periods of historically low
> interest rates, thus allowing buyers to borrow more.

Inflation has also been low during most of that period, meaning that real
interest rates are much higher.

> * Reduction in availability of affordable rented housing. Since 1980
> many council tenants have taken advantage of legislation allowing them
> to buy their homes at substantial discounts. The homes sold under this
> scheme outweighs new properties becoming available for rental.
> 
> * The rise in the number of single households means more homes are
> needed overall.
> 
> It all adds up to demand rising faster than supply, and when that
> happens economics says prices will keep rising. The government has
> recognized this with incoming PM Gordon Brown pledging to build 3
> million new houses by 2020 (though he's unlikely to be in office long
> enough to see it fulfilled).

Can you explain then, why rents in the private sector are not rising in line
with house prices.  If there was a shortage of demand for housing, they
would be.  In fact, rents have been rising at a much lower rate than
inflation in general.

> The only likely trigger for a crash is out and out recession, but that
> seems unlikely. Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

How about the credit crunch?  If banks can't get the funds in to lend out in
mortgages, that will stop people from being able to buy houses.

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

Libor is 6.38% as at the most recently available figures I have, up from 6%
a couple of weeks ago.  So it probably doesn't matter what the bank of
england says, interest rates have already shot up.

> So my guess is that fears of a housing market crash are greatly
> exaggerated.

My guess is they are not.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

> How about the credit crunch? If banks can't get the funds in to lend
> out in mortgages, that will stop people from being able to buy houses. 

It won't you know. This all happened in Japan in the 1990's but people
kept buying houses. They were just buying them with cash for 10% of
what they used to pay is all.

Can't see any reason why we'll be different.

FoFP

--
Then the Gods of the Market tumbled, and their smooth-tongued wizards
withdrew And the hearts of the meanest were humbled and began to believe
it was true That All is not Gold that Glitters, and Two and Two make
Four [Kipling] And the Gods of the Copybook Headings limped up to
explain it once more.

M Holmes wrote:

> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> 
>> How about the credit crunch? If banks can't get the funds in to lend
>> out in mortgages, that will stop people from being able to buy houses.
> 
> It won't you know. This all happened in Japan in the 1990's but people
> kept buying houses. They were just buying them with cash for 10% of
> what they used to pay is all.

Well yes, that will certainly happen to an extent, but people in negative
equity are less likely to sell voluntarily as they won't be able to redeem
the mortgage in order to do so.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> M Holmes wrote:

>> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

>>> How about the credit crunch? If banks can't get the funds in to lend
>>> out in mortgages, that will stop people from being able to buy houses.

>> It won't you know. This all happened in Japan in the 1990's but people
>> kept buying houses. They were just buying them with cash for 10% of
>> what they used to pay is all.

> Well yes, that will certainly happen to an extent, but people in negative
> equity are less likely to sell voluntarily as they won't be able to redeem
> the mortgage in order to do so.

They'll throw the keys at the lenders and walk. Last time the banks could
wait for them to buy another house, gain some equity, and come after
them for the cash they still owe. This time, these people will neither
seek, nor be offered credit again in their lives and so there won't be
any new equity for the lenders to come after.

The main part of a debt-deflation, which is what this credit bust is
leading to, is that a whole bunch of credit is revealed to have never
been the money everyone thought it was, and it will vanish as the
morning dew. Lots of borrowers will lose, lots of lenders will lose and
lots of investors will lose.

Remember the old saw:

If you owe the bank a million Dollars, you're in trouble,

but if you owe the bank a billion Dollars, your bank is in trouble.

Remember that? well, here's the third line that we're about to become
more familiar with:

If you owe the bank a trillion Dollars, we're ALL in trouble.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

"Jonathan Bryce" <jonathan@localhost.localdomain> wrote...
> pmm101@googlemail.com wrote:
>> [...]
>> It all adds up to demand rising faster than supply, and when that
>> happens economics says prices will keep rising. The government has
>> recognized this with incoming PM Gordon Brown pledging to build 3
>> million new houses by 2020 (though he's unlikely to be in office long
>> enough to see it fulfilled).
>
> Can you explain then, why rents in the private sector are not rising
> in line with house prices.  If there was a shortage of demand for
> housing, they would be.  In fact, rents have been rising at a much
> lower rate than inflation in general.

Could it be because many people are speculating on the housing market by
buying-to-let, thereby artificially increasing the supply of rented
property?

Matti

Matti Lamprhey wrote:

>> Can you explain then, why rents in the private sector are not rising
>> in line with house prices.  If there was a shortage of demand for
>> housing, they would be.  In fact, rents have been rising at a much
>> lower rate than inflation in general.
> 
> Could it be because many people are speculating on the housing market by
> buying-to-let, thereby artificially increasing the supply of rented
> property?

That could be part of the story, but either way, someone who wants to live
in a house can do so without a significantly increasing expense.

On Wed, 15 Aug 2007 17:03:02 -0700, pmm101@googlemail.com wrote:

>Figures published yesterday show inflation falling. Combined with
>world stock market volatility it's unlikely the Bank of England will
>rise interest gain any time soon.

If you look at the record of the RPI since 1982, you will find that
the index has fallen or remained unchanged in every July except for
the three years 1988-89-90. 

The figures for July 2007 are what could have been expected.
-- 
Terry Harper
URL: http://www.btinternet.com/~terry.harper/

"Jonathan Bryce" <jonathan@localhost.localdomain> wrote in message 
news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
> Matti Lamprhey wrote:
>
>>> Can you explain then, why rents in the private sector are not rising
>>> in line with house prices.  If there was a shortage of demand for
>>> housing, they would be.  In fact, rents have been rising at a much
>>> lower rate than inflation in general.
>>
>> Could it be because many people are speculating on the housing market by
>> buying-to-let, thereby artificially increasing the supply of rented
>> property?
>
> That could be part of the story, but either way, someone who wants to live
> in a house can do so without a significantly increasing expense.

There was an item on R5 last week about house prices and
BTL.  One guy phoned in to explain that he had bougth a
BTL and that the rent was 30% short of his mortgage.
He said that he thought this a good long term bet and
expected the rent/mortgage to reach parity in 2-3 years.
He's in for a big shock when he tries to up the rent by 10%
at the end of year 1.

tim

On 17 Aug, 12:09, "tim....."  wrote:
> "Jonathan Bryce" <jonat...@localhost.localdomain> wrote in message
>
> news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
>
> > Matti Lamprhey wrote:
>
> >>> Can you explain then, why rents in the private sector are not rising
> >>> in line with house prices.  If there was a shortage of demand for
> >>> housing, they would be.  In fact, rents have been rising at a much
> >>> lower rate than inflation in general.
>
> >> Could it be because many people are speculating on the housing market by
> >> buying-to-let, thereby artificially increasing the supply of rented
> >> property?
>
> > That could be part of the story, but either way, someone who wants to live
> > in a house can do so without a significantly increasing expense.
>
> There was an item on R5 last week about house prices and
> BTL.  One guy phoned in to explain that he had bougth a
> BTL and that the rent was 30% short of his mortgage.
> He said that he thought this a good long term bet and
> expected the rent/mortgage to reach parity in 2-3 years.
> He's in for a big shock when he tries to up the rent by 10%
> at the end of year 1.

Even so, he's buying a house and found someone else to pay 70% of the
costs.

Maybe you would prefer to be the tenant rather than the landlord in
this situation...

> tim

In uk.finance whitely525@yahoo.co.uk wrote:

>> There was an item on R5 last week about house prices and
>> BTL.  One guy phoned in to explain that he had bougth a
>> BTL and that the rent was 30% short of his mortgage.
>> He said that he thought this a good long term bet and
>> expected the rent/mortgage to reach parity in 2-3 years.
>> He's in for a big shock when he tries to up the rent by 10%
>> at the end of year 1.

> Even so, he's buying a house and found someone else to pay 70% of the
> costs.

If 90% of the mortgage is interest and 10% is capital repayments then
effectively he's paying 3 quid for every one Pound of house he's buying.

That doesn't seem very astute to me.

FoFP

-- 
Party, like it's 1929!

On Wed, 15 Aug 2007 17:03:02 -0700, pmm101@googlemail.com wrote:

>Figures published yesterday show inflation falling. Combined with
>world stock market volatility it's unlikely the Bank of England will
>rise interest gain any time soon.

If there's one thing that's been made crystal clear in the past month
it's that central banks no longer control the mortgage rate, the
bondholders do, and the bondholders have decided they need to increase
mortgage rates to compensate them for extra risk.

FoFP

-- 
Party, like it's 1929!

wrote in message 
news:1187358045.166304.42940@r29g2000hsg.googlegroups.com...
> On 17 Aug, 12:09, "tim....."  wrote:
>> "Jonathan Bryce" <jonat...@localhost.localdomain> wrote in message
>>
>> news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
>>
>> > Matti Lamprhey wrote:
>>
>> >>> Can you explain then, why rents in the private sector are not rising
>> >>> in line with house prices.  If there was a shortage of demand for
>> >>> housing, they would be.  In fact, rents have been rising at a much
>> >>> lower rate than inflation in general.
>>
>> >> Could it be because many people are speculating on the housing market 
>> >> by
>> >> buying-to-let, thereby artificially increasing the supply of rented
>> >> property?
>>
>> > That could be part of the story, but either way, someone who wants to 
>> > live
>> > in a house can do so without a significantly increasing expense.
>>
>> There was an item on R5 last week about house prices and
>> BTL.  One guy phoned in to explain that he had bougth a
>> BTL and that the rent was 30% short of his mortgage.
>> He said that he thought this a good long term bet and
>> expected the rent/mortgage to reach parity in 2-3 years.
>> He's in for a big shock when he tries to up the rent by 10%
>> at the end of year 1.
>
> Even so, he's buying a house and found someone else to pay 70% of the
> costs.

Once again.  How does owing a house that's 100% mortgaged
help anybody?

The only answer I can see that makes any sense is because
it is expected to increase in value, but what if it doesn't?

>
> Maybe you would prefer to be the tenant rather than the landlord in
> this situation...

Too right.  I'm renting a very nice apartment that someone
else has to pay all the maintenance costs on for less than
the cost of paying the mortgage on the same property.

The only reason that *I* have to buy it is if I believe that in
a few years time it will have increased in value by more than
the amount that I can earn investing the difference between
the rent and the theoretical mortgage.  I don't believe that
will be the case.

I could be wrong, but I have no illusions as to why I am
doing this, unlike the thousands of sheep who are trying
to jump on the housing escalator expecting it to go on
forever.

tim

M Holmes wrote:

> In uk.finance whitely525@yahoo.co.uk wrote:
> 
>>> There was an item on R5 last week about house prices and
>>> BTL.  One guy phoned in to explain that he had bougth a
>>> BTL and that the rent was 30% short of his mortgage.
>>> He said that he thought this a good long term bet and
>>> expected the rent/mortgage to reach parity in 2-3 years.
>>> He's in for a big shock when he tries to up the rent by 10%
>>> at the end of year 1.
> 
>> Even so, he's buying a house and found someone else to pay 70% of the
>> costs.
> 
> If 90% of the mortgage is interest and 10% is capital repayments then
> effectively he's paying 3 quid for every one Pound of house he's buying.
> 
> That doesn't seem very astute to me.

Isn't it at least more astute than paying 10 quid for every pound?

In uk.finance Ronald Raygun <no.spam@localhost.localdomain> wrote:

>>> Even so, he's buying a house and found someone else to pay 70% of the
>>> costs.
>> 
>> If 90% of the mortgage is interest and 10% is capital repayments then
>> effectively he's paying 3 quid for every one Pound of house he's buying.
>> 
>> That doesn't seem very astute to me.

> Isn't it at least more astute than paying 10 quid for every pound?

Those folks who buy BtL flats and leave them empty really do puzzle me.
I don't expect they'll be around in six months though.

FoFP

-- 
Party, like it's 1929!

On 17 Aug, 15:05, M Holmes  wrote:
> In uk.finance whitely...@yahoo.co.uk wrote:
> >> There was an item on R5 last week about house prices and
> >> BTL.  One guy phoned in to explain that he had bougth a
> >> BTL and that the rent was 30% short of his mortgage.
> >> He said that he thought this a good long term bet and
> >> expected the rent/mortgage to reach parity in 2-3 years.
> >> He's in for a big shock when he tries to up the rent by 10%
> >> at the end of year 1.
> > Even so, he's buying a house and found someone else to pay 70% of the
> > costs.
>
> If 90% of the mortgage is interest and 10% is capital repayments then
> effectively he's paying 3 quid for every one Pound of house he's buying.
>
> That doesn't seem very astute to me.

So you think the tenant is the canny and astute one in this
situation..?


> FoFP
>
> --
> Party, like it's 1929!

On 17 Aug, 17:59, M Holmes  wrote:
> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>
> >>> Even so, he's buying a house and found someone else to pay 70% of the
> >>> costs.
>
> >> If 90% of the mortgage is interest and 10% is capital repayments then
> >> effectively he's paying 3 quid for every one Pound of house he's buying.
>
> >> That doesn't seem very astute to me.
> > Isn't it at least more astute than paying 10 quid for every pound?
>
> Those folks who buy BtL flats and leave them empty really do puzzle me.
> I don't expect they'll be around in six months though.

Why not..?  It is a more tax efficient way to purchase a house this
way than 'buying to live in'.

> FoFP
>
> --
> Party, like it's 1929!

wrote in message 
news:1187371063.664508.283520@57g2000hsv.googlegroups.com...
> On 17 Aug, 17:59, M Holmes  wrote:
>> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>>
>> >>> Even so, he's buying a house and found someone else to pay 70% of the
>> >>> costs.
>>
>> >> If 90% of the mortgage is interest and 10% is capital repayments then
>> >> effectively he's paying 3 quid for every one Pound of house he's 
>> >> buying.
>>
>> >> That doesn't seem very astute to me.
>> > Isn't it at least more astute than paying 10 quid for every pound?
>>
>> Those folks who buy BtL flats and leave them empty really do puzzle me.
>> I don't expect they'll be around in six months though.
>
> Why not..?  It is a more tax efficient way to purchase a house this
> way than 'buying to live in'.

No it's not, no tenant equals no rent, equals no income to
offset the mortgage against, equals no tax advantage.

tim

On 17 Aug, 18:58, "tim....."  wrote:
>  wrote in message
>
> news:1187371063.664508.283520@57g2000hsv.googlegroups.com...
>
>
>
>
>
> > On 17 Aug, 17:59, M Holmes  wrote:
> >> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>
> >> >>> Even so, he's buying a house and found someone else to pay 70% of the
> >> >>> costs.
>
> >> >> If 90% of the mortgage is interest and 10% is capital repayments then
> >> >> effectively he's paying 3 quid for every one Pound of house he's
> >> >> buying.
>
> >> >> That doesn't seem very astute to me.
> >> > Isn't it at least more astute than paying 10 quid for every pound?
>
> >> Those folks who buy BtL flats and leave them empty really do puzzle me.
> >> I don't expect they'll be around in six months though.
>
> > Why not..?  It is a more tax efficient way to purchase a house this
> > way than 'buying to live in'.
>
> No it's not, no tenant equals no rent, equals no income to
> offset the mortgage against, equals no tax advantage.

Only if it is empty all the time.  No sane landlord does that.

Once a tentant is found the landlord can bring forward any losses to
offset against income in the next tax year.


> tim- Hide quoted text -
>
> - Show quoted text -

"M Holmes" wrote
> If there's one thing that's been made crystal clear in the past month
> it's that central banks no longer control the mortgage rate, the
> bondholders do, and the bondholders have decided they need
> to increase mortgage rates to compensate them for extra risk.

They can't do that when it's capped at 'x% over base rate'.
Seems to me, the central banks still control all those mortgage rates!

In uk.finance pmm101@googlemail.com wrote:

> The only likely trigger for a crash is out and out recession

Nope. A possibility that looks more likely by the day is that a crash
could be caused by mass unavailability of mortgages. How much is a house
worth if everyone has to bid with their own cash?

> but that seems unlikely. 

It's more likely that the recession which is coming will be caused by
house price deflation (and the causes of that) rather than the other way
around. 

> Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

As we all know, if you find a trend on a graph, that trend will continue
forever.

> Housing isn't discretionary. 

That's untrue too. A couple can choose to live with the in-laws when
they can't pay a mortgage. Singles can choose to flatshare when they
can't afford a mortgage. Then there are millions of immigrants who work
here to save to pay for a property back home. If there's a recession,
then they'll decamp to a country where they can still earn money,
leaving much empty property behind.

> Pretty tulips and dot-com stocks might be
> nice to have, but shelter is one of life's necessities. Those that can
> live with their parents will do so for longer. Others may rent
> privately, but will soon realize it makes more sense paying their own
> mortgage than someone else's. That's why price growth has remained
> strong despite recent interest rises.

Nope. Growth has remained strong because of the unprecendented
availability of credit at low rates. If you research the Tulip Bubble
(or the South Seas, Canals, Railways, or Stocks bubbles) you'll discover
that the availability of credit to the masses is the overweening common
factor. 

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

That may be true, because we're headed for deflation. Deflation is
extremely destructive of prices of assets which have been rising as a
result of a credit bubble, with falls of 67% to 90% being typical.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

wrote in message 
news:1187222582.202178.5030@a39g2000hsc.googlegroups.com...
>What do Dutch tulips, dot-coms and English real estate have in common?

You forgot "south seas".  Though god knows how you buy or
sell one :-)

tim

pmm101@googlemail.com wrote:
> * The UK operates an extremely lenient immigration policy. According
> to migrationwatchuk.org net foreign immigration reached 292,000 in
> 2005, excluding illegal immigrants of whom some 50,000 are detected
> each year.

Polish people on minimum wage are not buying £250k 1 bed flats in London.

> * Recent years have seen sustained periods of historically low
> interest rates, thus allowing buyers to borrow more.

Inflation has also been low during most of that period, meaning that real
interest rates are much higher.

> * Reduction in availability of affordable rented housing. Since 1980
> many council tenants have taken advantage of legislation allowing them
> to buy their homes at substantial discounts. The homes sold under this
> scheme outweighs new properties becoming available for rental.
> 
> * The rise in the number of single households means more homes are
> needed overall.
> 
> It all adds up to demand rising faster than supply, and when that
> happens economics says prices will keep rising. The government has
> recognized this with incoming PM Gordon Brown pledging to build 3
> million new houses by 2020 (though he's unlikely to be in office long
> enough to see it fulfilled).

Can you explain then, why rents in the private sector are not rising in line
with house prices.  If there was a shortage of demand for housing, they
would be.  In fact, rents have been rising at a much lower rate than
inflation in general.

> The only likely trigger for a crash is out and out recession, but that
> seems unlikely. Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

How about the credit crunch?  If banks can't get the funds in to lend out in
mortgages, that will stop people from being able to buy houses.

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

Libor is 6.38% as at the most recently available figures I have, up from 6%
a couple of weeks ago.  So it probably doesn't matter what the bank of
england says, interest rates have already shot up.

> So my guess is that fears of a housing market crash are greatly
> exaggerated.

My guess is they are not.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

> How about the credit crunch? If banks can't get the funds in to lend
> out in mortgages, that will stop people from being able to buy houses. 

It won't you know. This all happened in Japan in the 1990's but people
kept buying houses. They were just buying them with cash for 10% of
what they used to pay is all.

Can't see any reason why we'll be different.

FoFP

--
Then the Gods of the Market tumbled, and their smooth-tongued wizards
withdrew And the hearts of the meanest were humbled and began to believe
it was true That All is not Gold that Glitters, and Two and Two make
Four [Kipling] And the Gods of the Copybook Headings limped up to
explain it once more.

M Holmes wrote:

> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> 
>> How about the credit crunch? If banks can't get the funds in to lend
>> out in mortgages, that will stop people from being able to buy houses.
> 
> It won't you know. This all happened in Japan in the 1990's but people
> kept buying houses. They were just buying them with cash for 10% of
> what they used to pay is all.

Well yes, that will certainly happen to an extent, but people in negative
equity are less likely to sell voluntarily as they won't be able to redeem
the mortgage in order to do so.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> M Holmes wrote:

>> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

>>> How about the credit crunch? If banks can't get the funds in to lend
>>> out in mortgages, that will stop people from being able to buy houses.

>> It won't you know. This all happened in Japan in the 1990's but people
>> kept buying houses. They were just buying them with cash for 10% of
>> what they used to pay is all.

> Well yes, that will certainly happen to an extent, but people in negative
> equity are less likely to sell voluntarily as they won't be able to redeem
> the mortgage in order to do so.

They'll throw the keys at the lenders and walk. Last time the banks could
wait for them to buy another house, gain some equity, and come after
them for the cash they still owe. This time, these people will neither
seek, nor be offered credit again in their lives and so there won't be
any new equity for the lenders to come after.

The main part of a debt-deflation, which is what this credit bust is
leading to, is that a whole bunch of credit is revealed to have never
been the money everyone thought it was, and it will vanish as the
morning dew. Lots of borrowers will lose, lots of lenders will lose and
lots of investors will lose.

Remember the old saw:

If you owe the bank a million Dollars, you're in trouble,

but if you owe the bank a billion Dollars, your bank is in trouble.

Remember that? well, here's the third line that we're about to become
more familiar with:

If you owe the bank a trillion Dollars, we're ALL in trouble.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

"Jonathan Bryce" <jonathan@localhost.localdomain> wrote...
> pmm101@googlemail.com wrote:
>> [...]
>> It all adds up to demand rising faster than supply, and when that
>> happens economics says prices will keep rising. The government has
>> recognized this with incoming PM Gordon Brown pledging to build 3
>> million new houses by 2020 (though he's unlikely to be in office long
>> enough to see it fulfilled).
>
> Can you explain then, why rents in the private sector are not rising
> in line with house prices.  If there was a shortage of demand for
> housing, they would be.  In fact, rents have been rising at a much
> lower rate than inflation in general.

Could it be because many people are speculating on the housing market by
buying-to-let, thereby artificially increasing the supply of rented
property?

Matti

Matti Lamprhey wrote:

>> Can you explain then, why rents in the private sector are not rising
>> in line with house prices.  If there was a shortage of demand for
>> housing, they would be.  In fact, rents have been rising at a much
>> lower rate than inflation in general.
> 
> Could it be because many people are speculating on the housing market by
> buying-to-let, thereby artificially increasing the supply of rented
> property?

That could be part of the story, but either way, someone who wants to live
in a house can do so without a significantly increasing expense.

On Wed, 15 Aug 2007 17:03:02 -0700, pmm101@googlemail.com wrote:

>Figures published yesterday show inflation falling. Combined with
>world stock market volatility it's unlikely the Bank of England will
>rise interest gain any time soon.

If you look at the record of the RPI since 1982, you will find that
the index has fallen or remained unchanged in every July except for
the three years 1988-89-90. 

The figures for July 2007 are what could have been expected.
-- 
Terry Harper
URL: http://www.btinternet.com/~terry.harper/

"Jonathan Bryce" <jonathan@localhost.localdomain> wrote in message 
news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
> Matti Lamprhey wrote:
>
>>> Can you explain then, why rents in the private sector are not rising
>>> in line with house prices.  If there was a shortage of demand for
>>> housing, they would be.  In fact, rents have been rising at a much
>>> lower rate than inflation in general.
>>
>> Could it be because many people are speculating on the housing market by
>> buying-to-let, thereby artificially increasing the supply of rented
>> property?
>
> That could be part of the story, but either way, someone who wants to live
> in a house can do so without a significantly increasing expense.

There was an item on R5 last week about house prices and
BTL.  One guy phoned in to explain that he had bougth a
BTL and that the rent was 30% short of his mortgage.
He said that he thought this a good long term bet and
expected the rent/mortgage to reach parity in 2-3 years.
He's in for a big shock when he tries to up the rent by 10%
at the end of year 1.

tim

On 17 Aug, 12:09, "tim....."  wrote:
> "Jonathan Bryce" <jonat...@localhost.localdomain> wrote in message
>
> news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
>
> > Matti Lamprhey wrote:
>
> >>> Can you explain then, why rents in the private sector are not rising
> >>> in line with house prices.  If there was a shortage of demand for
> >>> housing, they would be.  In fact, rents have been rising at a much
> >>> lower rate than inflation in general.
>
> >> Could it be because many people are speculating on the housing market by
> >> buying-to-let, thereby artificially increasing the supply of rented
> >> property?
>
> > That could be part of the story, but either way, someone who wants to live
> > in a house can do so without a significantly increasing expense.
>
> There was an item on R5 last week about house prices and
> BTL.  One guy phoned in to explain that he had bougth a
> BTL and that the rent was 30% short of his mortgage.
> He said that he thought this a good long term bet and
> expected the rent/mortgage to reach parity in 2-3 years.
> He's in for a big shock when he tries to up the rent by 10%
> at the end of year 1.

Even so, he's buying a house and found someone else to pay 70% of the
costs.

Maybe you would prefer to be the tenant rather than the landlord in
this situation...

> tim

In uk.finance whitely525@yahoo.co.uk wrote:

>> There was an item on R5 last week about house prices and
>> BTL.  One guy phoned in to explain that he had bougth a
>> BTL and that the rent was 30% short of his mortgage.
>> He said that he thought this a good long term bet and
>> expected the rent/mortgage to reach parity in 2-3 years.
>> He's in for a big shock when he tries to up the rent by 10%
>> at the end of year 1.

> Even so, he's buying a house and found someone else to pay 70% of the
> costs.

If 90% of the mortgage is interest and 10% is capital repayments then
effectively he's paying 3 quid for every one Pound of house he's buying.

That doesn't seem very astute to me.

FoFP

-- 
Party, like it's 1929!

On Wed, 15 Aug 2007 17:03:02 -0700, pmm101@googlemail.com wrote:

>Figures published yesterday show inflation falling. Combined with
>world stock market volatility it's unlikely the Bank of England will
>rise interest gain any time soon.

If there's one thing that's been made crystal clear in the past month
it's that central banks no longer control the mortgage rate, the
bondholders do, and the bondholders have decided they need to increase
mortgage rates to compensate them for extra risk.

FoFP

-- 
Party, like it's 1929!

wrote in message 
news:1187358045.166304.42940@r29g2000hsg.googlegroups.com...
> On 17 Aug, 12:09, "tim....."  wrote:
>> "Jonathan Bryce" <jonat...@localhost.localdomain> wrote in message
>>
>> news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
>>
>> > Matti Lamprhey wrote:
>>
>> >>> Can you explain then, why rents in the private sector are not rising
>> >>> in line with house prices.  If there was a shortage of demand for
>> >>> housing, they would be.  In fact, rents have been rising at a much
>> >>> lower rate than inflation in general.
>>
>> >> Could it be because many people are speculating on the housing market 
>> >> by
>> >> buying-to-let, thereby artificially increasing the supply of rented
>> >> property?
>>
>> > That could be part of the story, but either way, someone who wants to 
>> > live
>> > in a house can do so without a significantly increasing expense.
>>
>> There was an item on R5 last week about house prices and
>> BTL.  One guy phoned in to explain that he had bougth a
>> BTL and that the rent was 30% short of his mortgage.
>> He said that he thought this a good long term bet and
>> expected the rent/mortgage to reach parity in 2-3 years.
>> He's in for a big shock when he tries to up the rent by 10%
>> at the end of year 1.
>
> Even so, he's buying a house and found someone else to pay 70% of the
> costs.

Once again.  How does owing a house that's 100% mortgaged
help anybody?

The only answer I can see that makes any sense is because
it is expected to increase in value, but what if it doesn't?

>
> Maybe you would prefer to be the tenant rather than the landlord in
> this situation...

Too right.  I'm renting a very nice apartment that someone
else has to pay all the maintenance costs on for less than
the cost of paying the mortgage on the same property.

The only reason that *I* have to buy it is if I believe that in
a few years time it will have increased in value by more than
the amount that I can earn investing the difference between
the rent and the theoretical mortgage.  I don't believe that
will be the case.

I could be wrong, but I have no illusions as to why I am
doing this, unlike the thousands of sheep who are trying
to jump on the housing escalator expecting it to go on
forever.

tim

M Holmes wrote:

> In uk.finance whitely525@yahoo.co.uk wrote:
> 
>>> There was an item on R5 last week about house prices and
>>> BTL.  One guy phoned in to explain that he had bougth a
>>> BTL and that the rent was 30% short of his mortgage.
>>> He said that he thought this a good long term bet and
>>> expected the rent/mortgage to reach parity in 2-3 years.
>>> He's in for a big shock when he tries to up the rent by 10%
>>> at the end of year 1.
> 
>> Even so, he's buying a house and found someone else to pay 70% of the
>> costs.
> 
> If 90% of the mortgage is interest and 10% is capital repayments then
> effectively he's paying 3 quid for every one Pound of house he's buying.
> 
> That doesn't seem very astute to me.

Isn't it at least more astute than paying 10 quid for every pound?

In uk.finance Ronald Raygun <no.spam@localhost.localdomain> wrote:

>>> Even so, he's buying a house and found someone else to pay 70% of the
>>> costs.
>> 
>> If 90% of the mortgage is interest and 10% is capital repayments then
>> effectively he's paying 3 quid for every one Pound of house he's buying.
>> 
>> That doesn't seem very astute to me.

> Isn't it at least more astute than paying 10 quid for every pound?

Those folks who buy BtL flats and leave them empty really do puzzle me.
I don't expect they'll be around in six months though.

FoFP

-- 
Party, like it's 1929!

On 17 Aug, 15:05, M Holmes  wrote:
> In uk.finance whitely...@yahoo.co.uk wrote:
> >> There was an item on R5 last week about house prices and
> >> BTL.  One guy phoned in to explain that he had bougth a
> >> BTL and that the rent was 30% short of his mortgage.
> >> He said that he thought this a good long term bet and
> >> expected the rent/mortgage to reach parity in 2-3 years.
> >> He's in for a big shock when he tries to up the rent by 10%
> >> at the end of year 1.
> > Even so, he's buying a house and found someone else to pay 70% of the
> > costs.
>
> If 90% of the mortgage is interest and 10% is capital repayments then
> effectively he's paying 3 quid for every one Pound of house he's buying.
>
> That doesn't seem very astute to me.

So you think the tenant is the canny and astute one in this
situation..?


> FoFP
>
> --
> Party, like it's 1929!

On 17 Aug, 17:59, M Holmes  wrote:
> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>
> >>> Even so, he's buying a house and found someone else to pay 70% of the
> >>> costs.
>
> >> If 90% of the mortgage is interest and 10% is capital repayments then
> >> effectively he's paying 3 quid for every one Pound of house he's buying.
>
> >> That doesn't seem very astute to me.
> > Isn't it at least more astute than paying 10 quid for every pound?
>
> Those folks who buy BtL flats and leave them empty really do puzzle me.
> I don't expect they'll be around in six months though.

Why not..?  It is a more tax efficient way to purchase a house this
way than 'buying to live in'.

> FoFP
>
> --
> Party, like it's 1929!

wrote in message 
news:1187371063.664508.283520@57g2000hsv.googlegroups.com...
> On 17 Aug, 17:59, M Holmes  wrote:
>> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>>
>> >>> Even so, he's buying a house and found someone else to pay 70% of the
>> >>> costs.
>>
>> >> If 90% of the mortgage is interest and 10% is capital repayments then
>> >> effectively he's paying 3 quid for every one Pound of house he's 
>> >> buying.
>>
>> >> That doesn't seem very astute to me.
>> > Isn't it at least more astute than paying 10 quid for every pound?
>>
>> Those folks who buy BtL flats and leave them empty really do puzzle me.
>> I don't expect they'll be around in six months though.
>
> Why not..?  It is a more tax efficient way to purchase a house this
> way than 'buying to live in'.

No it's not, no tenant equals no rent, equals no income to
offset the mortgage against, equals no tax advantage.

tim

On 17 Aug, 18:58, "tim....."  wrote:
>  wrote in message
>
> news:1187371063.664508.283520@57g2000hsv.googlegroups.com...
>
>
>
>
>
> > On 17 Aug, 17:59, M Holmes  wrote:
> >> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>
> >> >>> Even so, he's buying a house and found someone else to pay 70% of the
> >> >>> costs.
>
> >> >> If 90% of the mortgage is interest and 10% is capital repayments then
> >> >> effectively he's paying 3 quid for every one Pound of house he's
> >> >> buying.
>
> >> >> That doesn't seem very astute to me.
> >> > Isn't it at least more astute than paying 10 quid for every pound?
>
> >> Those folks who buy BtL flats and leave them empty really do puzzle me.
> >> I don't expect they'll be around in six months though.
>
> > Why not..?  It is a more tax efficient way to purchase a house this
> > way than 'buying to live in'.
>
> No it's not, no tenant equals no rent, equals no income to
> offset the mortgage against, equals no tax advantage.

Only if it is empty all the time.  No sane landlord does that.

Once a tentant is found the landlord can bring forward any losses to
offset against income in the next tax year.


> tim- Hide quoted text -
>
> - Show quoted text -

"M Holmes" wrote
> If there's one thing that's been made crystal clear in the past month
> it's that central banks no longer control the mortgage rate, the
> bondholders do, and the bondholders have decided they need
> to increase mortgage rates to compensate them for extra risk.

They can't do that when it's capped at 'x% over base rate'.
Seems to me, the central banks still control all those mortgage rates!

In uk.finance pmm101@googlemail.com wrote:

> The only likely trigger for a crash is out and out recession

Nope. A possibility that looks more likely by the day is that a crash
could be caused by mass unavailability of mortgages. How much is a house
worth if everyone has to bid with their own cash?

> but that seems unlikely. 

It's more likely that the recession which is coming will be caused by
house price deflation (and the causes of that) rather than the other way
around. 

> Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

As we all know, if you find a trend on a graph, that trend will continue
forever.

> Housing isn't discretionary. 

That's untrue too. A couple can choose to live with the in-laws when
they can't pay a mortgage. Singles can choose to flatshare when they
can't afford a mortgage. Then there are millions of immigrants who work
here to save to pay for a property back home. If there's a recession,
then they'll decamp to a country where they can still earn money,
leaving much empty property behind.

> Pretty tulips and dot-com stocks might be
> nice to have, but shelter is one of life's necessities. Those that can
> live with their parents will do so for longer. Others may rent
> privately, but will soon realize it makes more sense paying their own
> mortgage than someone else's. That's why price growth has remained
> strong despite recent interest rises.

Nope. Growth has remained strong because of the unprecendented
availability of credit at low rates. If you research the Tulip Bubble
(or the South Seas, Canals, Railways, or Stocks bubbles) you'll discover
that the availability of credit to the masses is the overweening common
factor. 

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

That may be true, because we're headed for deflation. Deflation is
extremely destructive of prices of assets which have been rising as a
result of a credit bubble, with falls of 67% to 90% being typical.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

wrote in message 
news:1187222582.202178.5030@a39g2000hsc.googlegroups.com...
>What do Dutch tulips, dot-coms and English real estate have in common?

You forgot "south seas".  Though god knows how you buy or
sell one :-)

tim

pmm101@googlemail.com wrote:
> * The UK operates an extremely lenient immigration policy. According
> to migrationwatchuk.org net foreign immigration reached 292,000 in
> 2005, excluding illegal immigrants of whom some 50,000 are detected
> each year.

Polish people on minimum wage are not buying £250k 1 bed flats in London.

> * Recent years have seen sustained periods of historically low
> interest rates, thus allowing buyers to borrow more.

Inflation has also been low during most of that period, meaning that real
interest rates are much higher.

> * Reduction in availability of affordable rented housing. Since 1980
> many council tenants have taken advantage of legislation allowing them
> to buy their homes at substantial discounts. The homes sold under this
> scheme outweighs new properties becoming available for rental.
> 
> * The rise in the number of single households means more homes are
> needed overall.
> 
> It all adds up to demand rising faster than supply, and when that
> happens economics says prices will keep rising. The government has
> recognized this with incoming PM Gordon Brown pledging to build 3
> million new houses by 2020 (though he's unlikely to be in office long
> enough to see it fulfilled).

Can you explain then, why rents in the private sector are not rising in line
with house prices.  If there was a shortage of demand for housing, they
would be.  In fact, rents have been rising at a much lower rate than
inflation in general.

> The only likely trigger for a crash is out and out recession, but that
> seems unlikely. Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

How about the credit crunch?  If banks can't get the funds in to lend out in
mortgages, that will stop people from being able to buy houses.

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

Libor is 6.38% as at the most recently available figures I have, up from 6%
a couple of weeks ago.  So it probably doesn't matter what the bank of
england says, interest rates have already shot up.

> So my guess is that fears of a housing market crash are greatly
> exaggerated.

My guess is they are not.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

> How about the credit crunch? If banks can't get the funds in to lend
> out in mortgages, that will stop people from being able to buy houses. 

It won't you know. This all happened in Japan in the 1990's but people
kept buying houses. They were just buying them with cash for 10% of
what they used to pay is all.

Can't see any reason why we'll be different.

FoFP

--
Then the Gods of the Market tumbled, and their smooth-tongued wizards
withdrew And the hearts of the meanest were humbled and began to believe
it was true That All is not Gold that Glitters, and Two and Two make
Four [Kipling] And the Gods of the Copybook Headings limped up to
explain it once more.

M Holmes wrote:

> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> 
>> How about the credit crunch? If banks can't get the funds in to lend
>> out in mortgages, that will stop people from being able to buy houses.
> 
> It won't you know. This all happened in Japan in the 1990's but people
> kept buying houses. They were just buying them with cash for 10% of
> what they used to pay is all.

Well yes, that will certainly happen to an extent, but people in negative
equity are less likely to sell voluntarily as they won't be able to redeem
the mortgage in order to do so.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> M Holmes wrote:

>> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

>>> How about the credit crunch? If banks can't get the funds in to lend
>>> out in mortgages, that will stop people from being able to buy houses.

>> It won't you know. This all happened in Japan in the 1990's but people
>> kept buying houses. They were just buying them with cash for 10% of
>> what they used to pay is all.

> Well yes, that will certainly happen to an extent, but people in negative
> equity are less likely to sell voluntarily as they won't be able to redeem
> the mortgage in order to do so.

They'll throw the keys at the lenders and walk. Last time the banks could
wait for them to buy another house, gain some equity, and come after
them for the cash they still owe. This time, these people will neither
seek, nor be offered credit again in their lives and so there won't be
any new equity for the lenders to come after.

The main part of a debt-deflation, which is what this credit bust is
leading to, is that a whole bunch of credit is revealed to have never
been the money everyone thought it was, and it will vanish as the
morning dew. Lots of borrowers will lose, lots of lenders will lose and
lots of investors will lose.

Remember the old saw:

If you owe the bank a million Dollars, you're in trouble,

but if you owe the bank a billion Dollars, your bank is in trouble.

Remember that? well, here's the third line that we're about to become
more familiar with:

If you owe the bank a trillion Dollars, we're ALL in trouble.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

"Jonathan Bryce" <jonathan@localhost.localdomain> wrote...
> pmm101@googlemail.com wrote:
>> [...]
>> It all adds up to demand rising faster than supply, and when that
>> happens economics says prices will keep rising. The government has
>> recognized this with incoming PM Gordon Brown pledging to build 3
>> million new houses by 2020 (though he's unlikely to be in office long
>> enough to see it fulfilled).
>
> Can you explain then, why rents in the private sector are not rising
> in line with house prices.  If there was a shortage of demand for
> housing, they would be.  In fact, rents have been rising at a much
> lower rate than inflation in general.

Could it be because many people are speculating on the housing market by
buying-to-let, thereby artificially increasing the supply of rented
property?

Matti

Matti Lamprhey wrote:

>> Can you explain then, why rents in the private sector are not rising
>> in line with house prices.  If there was a shortage of demand for
>> housing, they would be.  In fact, rents have been rising at a much
>> lower rate than inflation in general.
> 
> Could it be because many people are speculating on the housing market by
> buying-to-let, thereby artificially increasing the supply of rented
> property?

That could be part of the story, but either way, someone who wants to live
in a house can do so without a significantly increasing expense.

On Wed, 15 Aug 2007 17:03:02 -0700, pmm101@googlemail.com wrote:

>Figures published yesterday show inflation falling. Combined with
>world stock market volatility it's unlikely the Bank of England will
>rise interest gain any time soon.

If you look at the record of the RPI since 1982, you will find that
the index has fallen or remained unchanged in every July except for
the three years 1988-89-90. 

The figures for July 2007 are what could have been expected.
-- 
Terry Harper
URL: http://www.btinternet.com/~terry.harper/

"Jonathan Bryce" <jonathan@localhost.localdomain> wrote in message 
news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
> Matti Lamprhey wrote:
>
>>> Can you explain then, why rents in the private sector are not rising
>>> in line with house prices.  If there was a shortage of demand for
>>> housing, they would be.  In fact, rents have been rising at a much
>>> lower rate than inflation in general.
>>
>> Could it be because many people are speculating on the housing market by
>> buying-to-let, thereby artificially increasing the supply of rented
>> property?
>
> That could be part of the story, but either way, someone who wants to live
> in a house can do so without a significantly increasing expense.

There was an item on R5 last week about house prices and
BTL.  One guy phoned in to explain that he had bougth a
BTL and that the rent was 30% short of his mortgage.
He said that he thought this a good long term bet and
expected the rent/mortgage to reach parity in 2-3 years.
He's in for a big shock when he tries to up the rent by 10%
at the end of year 1.

tim

On 17 Aug, 12:09, "tim....."  wrote:
> "Jonathan Bryce" <jonat...@localhost.localdomain> wrote in message
>
> news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
>
> > Matti Lamprhey wrote:
>
> >>> Can you explain then, why rents in the private sector are not rising
> >>> in line with house prices.  If there was a shortage of demand for
> >>> housing, they would be.  In fact, rents have been rising at a much
> >>> lower rate than inflation in general.
>
> >> Could it be because many people are speculating on the housing market by
> >> buying-to-let, thereby artificially increasing the supply of rented
> >> property?
>
> > That could be part of the story, but either way, someone who wants to live
> > in a house can do so without a significantly increasing expense.
>
> There was an item on R5 last week about house prices and
> BTL.  One guy phoned in to explain that he had bougth a
> BTL and that the rent was 30% short of his mortgage.
> He said that he thought this a good long term bet and
> expected the rent/mortgage to reach parity in 2-3 years.
> He's in for a big shock when he tries to up the rent by 10%
> at the end of year 1.

Even so, he's buying a house and found someone else to pay 70% of the
costs.

Maybe you would prefer to be the tenant rather than the landlord in
this situation...

> tim

In uk.finance whitely525@yahoo.co.uk wrote:

>> There was an item on R5 last week about house prices and
>> BTL.  One guy phoned in to explain that he had bougth a
>> BTL and that the rent was 30% short of his mortgage.
>> He said that he thought this a good long term bet and
>> expected the rent/mortgage to reach parity in 2-3 years.
>> He's in for a big shock when he tries to up the rent by 10%
>> at the end of year 1.

> Even so, he's buying a house and found someone else to pay 70% of the
> costs.

If 90% of the mortgage is interest and 10% is capital repayments then
effectively he's paying 3 quid for every one Pound of house he's buying.

That doesn't seem very astute to me.

FoFP

-- 
Party, like it's 1929!

On Wed, 15 Aug 2007 17:03:02 -0700, pmm101@googlemail.com wrote:

>Figures published yesterday show inflation falling. Combined with
>world stock market volatility it's unlikely the Bank of England will
>rise interest gain any time soon.

If there's one thing that's been made crystal clear in the past month
it's that central banks no longer control the mortgage rate, the
bondholders do, and the bondholders have decided they need to increase
mortgage rates to compensate them for extra risk.

FoFP

-- 
Party, like it's 1929!

wrote in message 
news:1187358045.166304.42940@r29g2000hsg.googlegroups.com...
> On 17 Aug, 12:09, "tim....."  wrote:
>> "Jonathan Bryce" <jonat...@localhost.localdomain> wrote in message
>>
>> news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
>>
>> > Matti Lamprhey wrote:
>>
>> >>> Can you explain then, why rents in the private sector are not rising
>> >>> in line with house prices.  If there was a shortage of demand for
>> >>> housing, they would be.  In fact, rents have been rising at a much
>> >>> lower rate than inflation in general.
>>
>> >> Could it be because many people are speculating on the housing market 
>> >> by
>> >> buying-to-let, thereby artificially increasing the supply of rented
>> >> property?
>>
>> > That could be part of the story, but either way, someone who wants to 
>> > live
>> > in a house can do so without a significantly increasing expense.
>>
>> There was an item on R5 last week about house prices and
>> BTL.  One guy phoned in to explain that he had bougth a
>> BTL and that the rent was 30% short of his mortgage.
>> He said that he thought this a good long term bet and
>> expected the rent/mortgage to reach parity in 2-3 years.
>> He's in for a big shock when he tries to up the rent by 10%
>> at the end of year 1.
>
> Even so, he's buying a house and found someone else to pay 70% of the
> costs.

Once again.  How does owing a house that's 100% mortgaged
help anybody?

The only answer I can see that makes any sense is because
it is expected to increase in value, but what if it doesn't?

>
> Maybe you would prefer to be the tenant rather than the landlord in
> this situation...

Too right.  I'm renting a very nice apartment that someone
else has to pay all the maintenance costs on for less than
the cost of paying the mortgage on the same property.

The only reason that *I* have to buy it is if I believe that in
a few years time it will have increased in value by more than
the amount that I can earn investing the difference between
the rent and the theoretical mortgage.  I don't believe that
will be the case.

I could be wrong, but I have no illusions as to why I am
doing this, unlike the thousands of sheep who are trying
to jump on the housing escalator expecting it to go on
forever.

tim

M Holmes wrote:

> In uk.finance whitely525@yahoo.co.uk wrote:
> 
>>> There was an item on R5 last week about house prices and
>>> BTL.  One guy phoned in to explain that he had bougth a
>>> BTL and that the rent was 30% short of his mortgage.
>>> He said that he thought this a good long term bet and
>>> expected the rent/mortgage to reach parity in 2-3 years.
>>> He's in for a big shock when he tries to up the rent by 10%
>>> at the end of year 1.
> 
>> Even so, he's buying a house and found someone else to pay 70% of the
>> costs.
> 
> If 90% of the mortgage is interest and 10% is capital repayments then
> effectively he's paying 3 quid for every one Pound of house he's buying.
> 
> That doesn't seem very astute to me.

Isn't it at least more astute than paying 10 quid for every pound?

In uk.finance Ronald Raygun <no.spam@localhost.localdomain> wrote:

>>> Even so, he's buying a house and found someone else to pay 70% of the
>>> costs.
>> 
>> If 90% of the mortgage is interest and 10% is capital repayments then
>> effectively he's paying 3 quid for every one Pound of house he's buying.
>> 
>> That doesn't seem very astute to me.

> Isn't it at least more astute than paying 10 quid for every pound?

Those folks who buy BtL flats and leave them empty really do puzzle me.
I don't expect they'll be around in six months though.

FoFP

-- 
Party, like it's 1929!

On 17 Aug, 15:05, M Holmes  wrote:
> In uk.finance whitely...@yahoo.co.uk wrote:
> >> There was an item on R5 last week about house prices and
> >> BTL.  One guy phoned in to explain that he had bougth a
> >> BTL and that the rent was 30% short of his mortgage.
> >> He said that he thought this a good long term bet and
> >> expected the rent/mortgage to reach parity in 2-3 years.
> >> He's in for a big shock when he tries to up the rent by 10%
> >> at the end of year 1.
> > Even so, he's buying a house and found someone else to pay 70% of the
> > costs.
>
> If 90% of the mortgage is interest and 10% is capital repayments then
> effectively he's paying 3 quid for every one Pound of house he's buying.
>
> That doesn't seem very astute to me.

So you think the tenant is the canny and astute one in this
situation..?


> FoFP
>
> --
> Party, like it's 1929!

On 17 Aug, 17:59, M Holmes  wrote:
> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>
> >>> Even so, he's buying a house and found someone else to pay 70% of the
> >>> costs.
>
> >> If 90% of the mortgage is interest and 10% is capital repayments then
> >> effectively he's paying 3 quid for every one Pound of house he's buying.
>
> >> That doesn't seem very astute to me.
> > Isn't it at least more astute than paying 10 quid for every pound?
>
> Those folks who buy BtL flats and leave them empty really do puzzle me.
> I don't expect they'll be around in six months though.

Why not..?  It is a more tax efficient way to purchase a house this
way than 'buying to live in'.

> FoFP
>
> --
> Party, like it's 1929!

wrote in message 
news:1187371063.664508.283520@57g2000hsv.googlegroups.com...
> On 17 Aug, 17:59, M Holmes  wrote:
>> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>>
>> >>> Even so, he's buying a house and found someone else to pay 70% of the
>> >>> costs.
>>
>> >> If 90% of the mortgage is interest and 10% is capital repayments then
>> >> effectively he's paying 3 quid for every one Pound of house he's 
>> >> buying.
>>
>> >> That doesn't seem very astute to me.
>> > Isn't it at least more astute than paying 10 quid for every pound?
>>
>> Those folks who buy BtL flats and leave them empty really do puzzle me.
>> I don't expect they'll be around in six months though.
>
> Why not..?  It is a more tax efficient way to purchase a house this
> way than 'buying to live in'.

No it's not, no tenant equals no rent, equals no income to
offset the mortgage against, equals no tax advantage.

tim

On 17 Aug, 18:58, "tim....."  wrote:
>  wrote in message
>
> news:1187371063.664508.283520@57g2000hsv.googlegroups.com...
>
>
>
>
>
> > On 17 Aug, 17:59, M Holmes  wrote:
> >> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>
> >> >>> Even so, he's buying a house and found someone else to pay 70% of the
> >> >>> costs.
>
> >> >> If 90% of the mortgage is interest and 10% is capital repayments then
> >> >> effectively he's paying 3 quid for every one Pound of house he's
> >> >> buying.
>
> >> >> That doesn't seem very astute to me.
> >> > Isn't it at least more astute than paying 10 quid for every pound?
>
> >> Those folks who buy BtL flats and leave them empty really do puzzle me.
> >> I don't expect they'll be around in six months though.
>
> > Why not..?  It is a more tax efficient way to purchase a house this
> > way than 'buying to live in'.
>
> No it's not, no tenant equals no rent, equals no income to
> offset the mortgage against, equals no tax advantage.

Only if it is empty all the time.  No sane landlord does that.

Once a tentant is found the landlord can bring forward any losses to
offset against income in the next tax year.


> tim- Hide quoted text -
>
> - Show quoted text -

"M Holmes" wrote
> If there's one thing that's been made crystal clear in the past month
> it's that central banks no longer control the mortgage rate, the
> bondholders do, and the bondholders have decided they need
> to increase mortgage rates to compensate them for extra risk.

They can't do that when it's capped at 'x% over base rate'.
Seems to me, the central banks still control all those mortgage rates!

In uk.finance pmm101@googlemail.com wrote:

> The only likely trigger for a crash is out and out recession

Nope. A possibility that looks more likely by the day is that a crash
could be caused by mass unavailability of mortgages. How much is a house
worth if everyone has to bid with their own cash?

> but that seems unlikely. 

It's more likely that the recession which is coming will be caused by
house price deflation (and the causes of that) rather than the other way
around. 

> Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

As we all know, if you find a trend on a graph, that trend will continue
forever.

> Housing isn't discretionary. 

That's untrue too. A couple can choose to live with the in-laws when
they can't pay a mortgage. Singles can choose to flatshare when they
can't afford a mortgage. Then there are millions of immigrants who work
here to save to pay for a property back home. If there's a recession,
then they'll decamp to a country where they can still earn money,
leaving much empty property behind.

> Pretty tulips and dot-com stocks might be
> nice to have, but shelter is one of life's necessities. Those that can
> live with their parents will do so for longer. Others may rent
> privately, but will soon realize it makes more sense paying their own
> mortgage than someone else's. That's why price growth has remained
> strong despite recent interest rises.

Nope. Growth has remained strong because of the unprecendented
availability of credit at low rates. If you research the Tulip Bubble
(or the South Seas, Canals, Railways, or Stocks bubbles) you'll discover
that the availability of credit to the masses is the overweening common
factor. 

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

That may be true, because we're headed for deflation. Deflation is
extremely destructive of prices of assets which have been rising as a
result of a credit bubble, with falls of 67% to 90% being typical.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

wrote in message 
news:1187222582.202178.5030@a39g2000hsc.googlegroups.com...
>What do Dutch tulips, dot-coms and English real estate have in common?

You forgot "south seas".  Though god knows how you buy or
sell one :-)

tim

pmm101@googlemail.com wrote:
> * The UK operates an extremely lenient immigration policy. According
> to migrationwatchuk.org net foreign immigration reached 292,000 in
> 2005, excluding illegal immigrants of whom some 50,000 are detected
> each year.

Polish people on minimum wage are not buying £250k 1 bed flats in London.

> * Recent years have seen sustained periods of historically low
> interest rates, thus allowing buyers to borrow more.

Inflation has also been low during most of that period, meaning that real
interest rates are much higher.

> * Reduction in availability of affordable rented housing. Since 1980
> many council tenants have taken advantage of legislation allowing them
> to buy their homes at substantial discounts. The homes sold under this
> scheme outweighs new properties becoming available for rental.
> 
> * The rise in the number of single households means more homes are
> needed overall.
> 
> It all adds up to demand rising faster than supply, and when that
> happens economics says prices will keep rising. The government has
> recognized this with incoming PM Gordon Brown pledging to build 3
> million new houses by 2020 (though he's unlikely to be in office long
> enough to see it fulfilled).

Can you explain then, why rents in the private sector are not rising in line
with house prices.  If there was a shortage of demand for housing, they
would be.  In fact, rents have been rising at a much lower rate than
inflation in general.

> The only likely trigger for a crash is out and out recession, but that
> seems unlikely. Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

How about the credit crunch?  If banks can't get the funds in to lend out in
mortgages, that will stop people from being able to buy houses.

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

Libor is 6.38% as at the most recently available figures I have, up from 6%
a couple of weeks ago.  So it probably doesn't matter what the bank of
england says, interest rates have already shot up.

> So my guess is that fears of a housing market crash are greatly
> exaggerated.

My guess is they are not.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

> How about the credit crunch? If banks can't get the funds in to lend
> out in mortgages, that will stop people from being able to buy houses. 

It won't you know. This all happened in Japan in the 1990's but people
kept buying houses. They were just buying them with cash for 10% of
what they used to pay is all.

Can't see any reason why we'll be different.

FoFP

--
Then the Gods of the Market tumbled, and their smooth-tongued wizards
withdrew And the hearts of the meanest were humbled and began to believe
it was true That All is not Gold that Glitters, and Two and Two make
Four [Kipling] And the Gods of the Copybook Headings limped up to
explain it once more.

M Holmes wrote:

> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> 
>> How about the credit crunch? If banks can't get the funds in to lend
>> out in mortgages, that will stop people from being able to buy houses.
> 
> It won't you know. This all happened in Japan in the 1990's but people
> kept buying houses. They were just buying them with cash for 10% of
> what they used to pay is all.

Well yes, that will certainly happen to an extent, but people in negative
equity are less likely to sell voluntarily as they won't be able to redeem
the mortgage in order to do so.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> M Holmes wrote:

>> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

>>> How about the credit crunch? If banks can't get the funds in to lend
>>> out in mortgages, that will stop people from being able to buy houses.

>> It won't you know. This all happened in Japan in the 1990's but people
>> kept buying houses. They were just buying them with cash for 10% of
>> what they used to pay is all.

> Well yes, that will certainly happen to an extent, but people in negative
> equity are less likely to sell voluntarily as they won't be able to redeem
> the mortgage in order to do so.

They'll throw the keys at the lenders and walk. Last time the banks could
wait for them to buy another house, gain some equity, and come after
them for the cash they still owe. This time, these people will neither
seek, nor be offered credit again in their lives and so there won't be
any new equity for the lenders to come after.

The main part of a debt-deflation, which is what this credit bust is
leading to, is that a whole bunch of credit is revealed to have never
been the money everyone thought it was, and it will vanish as the
morning dew. Lots of borrowers will lose, lots of lenders will lose and
lots of investors will lose.

Remember the old saw:

If you owe the bank a million Dollars, you're in trouble,

but if you owe the bank a billion Dollars, your bank is in trouble.

Remember that? well, here's the third line that we're about to become
more familiar with:

If you owe the bank a trillion Dollars, we're ALL in trouble.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

"Jonathan Bryce" <jonathan@localhost.localdomain> wrote...
> pmm101@googlemail.com wrote:
>> [...]
>> It all adds up to demand rising faster than supply, and when that
>> happens economics says prices will keep rising. The government has
>> recognized this with incoming PM Gordon Brown pledging to build 3
>> million new houses by 2020 (though he's unlikely to be in office long
>> enough to see it fulfilled).
>
> Can you explain then, why rents in the private sector are not rising
> in line with house prices.  If there was a shortage of demand for
> housing, they would be.  In fact, rents have been rising at a much
> lower rate than inflation in general.

Could it be because many people are speculating on the housing market by
buying-to-let, thereby artificially increasing the supply of rented
property?

Matti

Matti Lamprhey wrote:

>> Can you explain then, why rents in the private sector are not rising
>> in line with house prices.  If there was a shortage of demand for
>> housing, they would be.  In fact, rents have been rising at a much
>> lower rate than inflation in general.
> 
> Could it be because many people are speculating on the housing market by
> buying-to-let, thereby artificially increasing the supply of rented
> property?

That could be part of the story, but either way, someone who wants to live
in a house can do so without a significantly increasing expense.

On Wed, 15 Aug 2007 17:03:02 -0700, pmm101@googlemail.com wrote:

>Figures published yesterday show inflation falling. Combined with
>world stock market volatility it's unlikely the Bank of England will
>rise interest gain any time soon.

If you look at the record of the RPI since 1982, you will find that
the index has fallen or remained unchanged in every July except for
the three years 1988-89-90. 

The figures for July 2007 are what could have been expected.
-- 
Terry Harper
URL: http://www.btinternet.com/~terry.harper/

"Jonathan Bryce" <jonathan@localhost.localdomain> wrote in message 
news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
> Matti Lamprhey wrote:
>
>>> Can you explain then, why rents in the private sector are not rising
>>> in line with house prices.  If there was a shortage of demand for
>>> housing, they would be.  In fact, rents have been rising at a much
>>> lower rate than inflation in general.
>>
>> Could it be because many people are speculating on the housing market by
>> buying-to-let, thereby artificially increasing the supply of rented
>> property?
>
> That could be part of the story, but either way, someone who wants to live
> in a house can do so without a significantly increasing expense.

There was an item on R5 last week about house prices and
BTL.  One guy phoned in to explain that he had bougth a
BTL and that the rent was 30% short of his mortgage.
He said that he thought this a good long term bet and
expected the rent/mortgage to reach parity in 2-3 years.
He's in for a big shock when he tries to up the rent by 10%
at the end of year 1.

tim

On 17 Aug, 12:09, "tim....."  wrote:
> "Jonathan Bryce" <jonat...@localhost.localdomain> wrote in message
>
> news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
>
> > Matti Lamprhey wrote:
>
> >>> Can you explain then, why rents in the private sector are not rising
> >>> in line with house prices.  If there was a shortage of demand for
> >>> housing, they would be.  In fact, rents have been rising at a much
> >>> lower rate than inflation in general.
>
> >> Could it be because many people are speculating on the housing market by
> >> buying-to-let, thereby artificially increasing the supply of rented
> >> property?
>
> > That could be part of the story, but either way, someone who wants to live
> > in a house can do so without a significantly increasing expense.
>
> There was an item on R5 last week about house prices and
> BTL.  One guy phoned in to explain that he had bougth a
> BTL and that the rent was 30% short of his mortgage.
> He said that he thought this a good long term bet and
> expected the rent/mortgage to reach parity in 2-3 years.
> He's in for a big shock when he tries to up the rent by 10%
> at the end of year 1.

Even so, he's buying a house and found someone else to pay 70% of the
costs.

Maybe you would prefer to be the tenant rather than the landlord in
this situation...

> tim

In uk.finance whitely525@yahoo.co.uk wrote:

>> There was an item on R5 last week about house prices and
>> BTL.  One guy phoned in to explain that he had bougth a
>> BTL and that the rent was 30% short of his mortgage.
>> He said that he thought this a good long term bet and
>> expected the rent/mortgage to reach parity in 2-3 years.
>> He's in for a big shock when he tries to up the rent by 10%
>> at the end of year 1.

> Even so, he's buying a house and found someone else to pay 70% of the
> costs.

If 90% of the mortgage is interest and 10% is capital repayments then
effectively he's paying 3 quid for every one Pound of house he's buying.

That doesn't seem very astute to me.

FoFP

-- 
Party, like it's 1929!

On Wed, 15 Aug 2007 17:03:02 -0700, pmm101@googlemail.com wrote:

>Figures published yesterday show inflation falling. Combined with
>world stock market volatility it's unlikely the Bank of England will
>rise interest gain any time soon.

If there's one thing that's been made crystal clear in the past month
it's that central banks no longer control the mortgage rate, the
bondholders do, and the bondholders have decided they need to increase
mortgage rates to compensate them for extra risk.

FoFP

-- 
Party, like it's 1929!

wrote in message 
news:1187358045.166304.42940@r29g2000hsg.googlegroups.com...
> On 17 Aug, 12:09, "tim....."  wrote:
>> "Jonathan Bryce" <jonat...@localhost.localdomain> wrote in message
>>
>> news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
>>
>> > Matti Lamprhey wrote:
>>
>> >>> Can you explain then, why rents in the private sector are not rising
>> >>> in line with house prices.  If there was a shortage of demand for
>> >>> housing, they would be.  In fact, rents have been rising at a much
>> >>> lower rate than inflation in general.
>>
>> >> Could it be because many people are speculating on the housing market 
>> >> by
>> >> buying-to-let, thereby artificially increasing the supply of rented
>> >> property?
>>
>> > That could be part of the story, but either way, someone who wants to 
>> > live
>> > in a house can do so without a significantly increasing expense.
>>
>> There was an item on R5 last week about house prices and
>> BTL.  One guy phoned in to explain that he had bougth a
>> BTL and that the rent was 30% short of his mortgage.
>> He said that he thought this a good long term bet and
>> expected the rent/mortgage to reach parity in 2-3 years.
>> He's in for a big shock when he tries to up the rent by 10%
>> at the end of year 1.
>
> Even so, he's buying a house and found someone else to pay 70% of the
> costs.

Once again.  How does owing a house that's 100% mortgaged
help anybody?

The only answer I can see that makes any sense is because
it is expected to increase in value, but what if it doesn't?

>
> Maybe you would prefer to be the tenant rather than the landlord in
> this situation...

Too right.  I'm renting a very nice apartment that someone
else has to pay all the maintenance costs on for less than
the cost of paying the mortgage on the same property.

The only reason that *I* have to buy it is if I believe that in
a few years time it will have increased in value by more than
the amount that I can earn investing the difference between
the rent and the theoretical mortgage.  I don't believe that
will be the case.

I could be wrong, but I have no illusions as to why I am
doing this, unlike the thousands of sheep who are trying
to jump on the housing escalator expecting it to go on
forever.

tim

M Holmes wrote:

> In uk.finance whitely525@yahoo.co.uk wrote:
> 
>>> There was an item on R5 last week about house prices and
>>> BTL.  One guy phoned in to explain that he had bougth a
>>> BTL and that the rent was 30% short of his mortgage.
>>> He said that he thought this a good long term bet and
>>> expected the rent/mortgage to reach parity in 2-3 years.
>>> He's in for a big shock when he tries to up the rent by 10%
>>> at the end of year 1.
> 
>> Even so, he's buying a house and found someone else to pay 70% of the
>> costs.
> 
> If 90% of the mortgage is interest and 10% is capital repayments then
> effectively he's paying 3 quid for every one Pound of house he's buying.
> 
> That doesn't seem very astute to me.

Isn't it at least more astute than paying 10 quid for every pound?

In uk.finance Ronald Raygun <no.spam@localhost.localdomain> wrote:

>>> Even so, he's buying a house and found someone else to pay 70% of the
>>> costs.
>> 
>> If 90% of the mortgage is interest and 10% is capital repayments then
>> effectively he's paying 3 quid for every one Pound of house he's buying.
>> 
>> That doesn't seem very astute to me.

> Isn't it at least more astute than paying 10 quid for every pound?

Those folks who buy BtL flats and leave them empty really do puzzle me.
I don't expect they'll be around in six months though.

FoFP

-- 
Party, like it's 1929!

On 17 Aug, 15:05, M Holmes  wrote:
> In uk.finance whitely...@yahoo.co.uk wrote:
> >> There was an item on R5 last week about house prices and
> >> BTL.  One guy phoned in to explain that he had bougth a
> >> BTL and that the rent was 30% short of his mortgage.
> >> He said that he thought this a good long term bet and
> >> expected the rent/mortgage to reach parity in 2-3 years.
> >> He's in for a big shock when he tries to up the rent by 10%
> >> at the end of year 1.
> > Even so, he's buying a house and found someone else to pay 70% of the
> > costs.
>
> If 90% of the mortgage is interest and 10% is capital repayments then
> effectively he's paying 3 quid for every one Pound of house he's buying.
>
> That doesn't seem very astute to me.

So you think the tenant is the canny and astute one in this
situation..?


> FoFP
>
> --
> Party, like it's 1929!

On 17 Aug, 17:59, M Holmes  wrote:
> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>
> >>> Even so, he's buying a house and found someone else to pay 70% of the
> >>> costs.
>
> >> If 90% of the mortgage is interest and 10% is capital repayments then
> >> effectively he's paying 3 quid for every one Pound of house he's buying.
>
> >> That doesn't seem very astute to me.
> > Isn't it at least more astute than paying 10 quid for every pound?
>
> Those folks who buy BtL flats and leave them empty really do puzzle me.
> I don't expect they'll be around in six months though.

Why not..?  It is a more tax efficient way to purchase a house this
way than 'buying to live in'.

> FoFP
>
> --
> Party, like it's 1929!

wrote in message 
news:1187371063.664508.283520@57g2000hsv.googlegroups.com...
> On 17 Aug, 17:59, M Holmes  wrote:
>> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>>
>> >>> Even so, he's buying a house and found someone else to pay 70% of the
>> >>> costs.
>>
>> >> If 90% of the mortgage is interest and 10% is capital repayments then
>> >> effectively he's paying 3 quid for every one Pound of house he's 
>> >> buying.
>>
>> >> That doesn't seem very astute to me.
>> > Isn't it at least more astute than paying 10 quid for every pound?
>>
>> Those folks who buy BtL flats and leave them empty really do puzzle me.
>> I don't expect they'll be around in six months though.
>
> Why not..?  It is a more tax efficient way to purchase a house this
> way than 'buying to live in'.

No it's not, no tenant equals no rent, equals no income to
offset the mortgage against, equals no tax advantage.

tim

On 17 Aug, 18:58, "tim....."  wrote:
>  wrote in message
>
> news:1187371063.664508.283520@57g2000hsv.googlegroups.com...
>
>
>
>
>
> > On 17 Aug, 17:59, M Holmes  wrote:
> >> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>
> >> >>> Even so, he's buying a house and found someone else to pay 70% of the
> >> >>> costs.
>
> >> >> If 90% of the mortgage is interest and 10% is capital repayments then
> >> >> effectively he's paying 3 quid for every one Pound of house he's
> >> >> buying.
>
> >> >> That doesn't seem very astute to me.
> >> > Isn't it at least more astute than paying 10 quid for every pound?
>
> >> Those folks who buy BtL flats and leave them empty really do puzzle me.
> >> I don't expect they'll be around in six months though.
>
> > Why not..?  It is a more tax efficient way to purchase a house this
> > way than 'buying to live in'.
>
> No it's not, no tenant equals no rent, equals no income to
> offset the mortgage against, equals no tax advantage.

Only if it is empty all the time.  No sane landlord does that.

Once a tentant is found the landlord can bring forward any losses to
offset against income in the next tax year.


> tim- Hide quoted text -
>
> - Show quoted text -

"M Holmes" wrote
> If there's one thing that's been made crystal clear in the past month
> it's that central banks no longer control the mortgage rate, the
> bondholders do, and the bondholders have decided they need
> to increase mortgage rates to compensate them for extra risk.

They can't do that when it's capped at 'x% over base rate'.
Seems to me, the central banks still control all those mortgage rates!

In uk.finance whitely525@yahoo.co.uk wrote:

>> >> Those folks who buy BtL flats and leave them empty really do
>> >> puzzle me.  I don't expect they'll be around in six months though. 

>> > Why not..? It is a more tax efficient way to purchase a house this
>> > way than 'buying to live in'. 

>> No it's not, no tenant equals no rent, equals no income to offset the
>> mortgage against, equals no tax advantage. 

> Only if it is empty all the time.  No sane landlord does that. 

According to the comics 600,000 flats in Britain are left empty by their
owners. They buy purely for the house price gains and don't want their
shiny new properties sullied by actual tenants.

FoFP

--
Party, like it's 1929!

In uk.finance whitely525@yahoo.co.uk wrote:
> On 17 Aug, 15:05, M Holmes  wrote:

> So you think the tenant is the canny and astute one in this
> situation..?

Yup. I myself am a tenant even though I could buy a house for cash.

FoFP

-- 
Party, like it's 1929!

In uk.finance Tim  wrote:
> "M Holmes" wrote
>> If there's one thing that's been made crystal clear in the past month
>> it's that central banks no longer control the mortgage rate, the
>> bondholders do, and the bondholders have decided they need
>> to increase mortgage rates to compensate them for extra risk.

> They can't do that when it's capped at 'x% over base rate'.
> Seems to me, the central banks still control all those mortgage rates!

My thinking was that they control what new mortgages can be set at.
Inasmuch as that's a key driver of prices, it's an important power.

FoFP

-- 
Party, like it's 1929!

In uk.finance pmm101@googlemail.com wrote:

> The only likely trigger for a crash is out and out recession

Nope. A possibility that looks more likely by the day is that a crash
could be caused by mass unavailability of mortgages. How much is a house
worth if everyone has to bid with their own cash?

> but that seems unlikely. 

It's more likely that the recession which is coming will be caused by
house price deflation (and the causes of that) rather than the other way
around. 

> Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

As we all know, if you find a trend on a graph, that trend will continue
forever.

> Housing isn't discretionary. 

That's untrue too. A couple can choose to live with the in-laws when
they can't pay a mortgage. Singles can choose to flatshare when they
can't afford a mortgage. Then there are millions of immigrants who work
here to save to pay for a property back home. If there's a recession,
then they'll decamp to a country where they can still earn money,
leaving much empty property behind.

> Pretty tulips and dot-com stocks might be
> nice to have, but shelter is one of life's necessities. Those that can
> live with their parents will do so for longer. Others may rent
> privately, but will soon realize it makes more sense paying their own
> mortgage than someone else's. That's why price growth has remained
> strong despite recent interest rises.

Nope. Growth has remained strong because of the unprecendented
availability of credit at low rates. If you research the Tulip Bubble
(or the South Seas, Canals, Railways, or Stocks bubbles) you'll discover
that the availability of credit to the masses is the overweening common
factor. 

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

That may be true, because we're headed for deflation. Deflation is
extremely destructive of prices of assets which have been rising as a
result of a credit bubble, with falls of 67% to 90% being typical.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

wrote in message 
news:1187222582.202178.5030@a39g2000hsc.googlegroups.com...
>What do Dutch tulips, dot-coms and English real estate have in common?

You forgot "south seas".  Though god knows how you buy or
sell one :-)

tim

pmm101@googlemail.com wrote:
> * The UK operates an extremely lenient immigration policy. According
> to migrationwatchuk.org net foreign immigration reached 292,000 in
> 2005, excluding illegal immigrants of whom some 50,000 are detected
> each year.

Polish people on minimum wage are not buying £250k 1 bed flats in London.

> * Recent years have seen sustained periods of historically low
> interest rates, thus allowing buyers to borrow more.

Inflation has also been low during most of that period, meaning that real
interest rates are much higher.

> * Reduction in availability of affordable rented housing. Since 1980
> many council tenants have taken advantage of legislation allowing them
> to buy their homes at substantial discounts. The homes sold under this
> scheme outweighs new properties becoming available for rental.
> 
> * The rise in the number of single households means more homes are
> needed overall.
> 
> It all adds up to demand rising faster than supply, and when that
> happens economics says prices will keep rising. The government has
> recognized this with incoming PM Gordon Brown pledging to build 3
> million new houses by 2020 (though he's unlikely to be in office long
> enough to see it fulfilled).

Can you explain then, why rents in the private sector are not rising in line
with house prices.  If there was a shortage of demand for housing, they
would be.  In fact, rents have been rising at a much lower rate than
inflation in general.

> The only likely trigger for a crash is out and out recession, but that
> seems unlikely. Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

How about the credit crunch?  If banks can't get the funds in to lend out in
mortgages, that will stop people from being able to buy houses.

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

Libor is 6.38% as at the most recently available figures I have, up from 6%
a couple of weeks ago.  So it probably doesn't matter what the bank of
england says, interest rates have already shot up.

> So my guess is that fears of a housing market crash are greatly
> exaggerated.

My guess is they are not.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

> How about the credit crunch? If banks can't get the funds in to lend
> out in mortgages, that will stop people from being able to buy houses. 

It won't you know. This all happened in Japan in the 1990's but people
kept buying houses. They were just buying them with cash for 10% of
what they used to pay is all.

Can't see any reason why we'll be different.

FoFP

--
Then the Gods of the Market tumbled, and their smooth-tongued wizards
withdrew And the hearts of the meanest were humbled and began to believe
it was true That All is not Gold that Glitters, and Two and Two make
Four [Kipling] And the Gods of the Copybook Headings limped up to
explain it once more.

M Holmes wrote:

> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> 
>> How about the credit crunch? If banks can't get the funds in to lend
>> out in mortgages, that will stop people from being able to buy houses.
> 
> It won't you know. This all happened in Japan in the 1990's but people
> kept buying houses. They were just buying them with cash for 10% of
> what they used to pay is all.

Well yes, that will certainly happen to an extent, but people in negative
equity are less likely to sell voluntarily as they won't be able to redeem
the mortgage in order to do so.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> M Holmes wrote:

>> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

>>> How about the credit crunch? If banks can't get the funds in to lend
>>> out in mortgages, that will stop people from being able to buy houses.

>> It won't you know. This all happened in Japan in the 1990's but people
>> kept buying houses. They were just buying them with cash for 10% of
>> what they used to pay is all.

> Well yes, that will certainly happen to an extent, but people in negative
> equity are less likely to sell voluntarily as they won't be able to redeem
> the mortgage in order to do so.

They'll throw the keys at the lenders and walk. Last time the banks could
wait for them to buy another house, gain some equity, and come after
them for the cash they still owe. This time, these people will neither
seek, nor be offered credit again in their lives and so there won't be
any new equity for the lenders to come after.

The main part of a debt-deflation, which is what this credit bust is
leading to, is that a whole bunch of credit is revealed to have never
been the money everyone thought it was, and it will vanish as the
morning dew. Lots of borrowers will lose, lots of lenders will lose and
lots of investors will lose.

Remember the old saw:

If you owe the bank a million Dollars, you're in trouble,

but if you owe the bank a billion Dollars, your bank is in trouble.

Remember that? well, here's the third line that we're about to become
more familiar with:

If you owe the bank a trillion Dollars, we're ALL in trouble.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

"Jonathan Bryce" <jonathan@localhost.localdomain> wrote...
> pmm101@googlemail.com wrote:
>> [...]
>> It all adds up to demand rising faster than supply, and when that
>> happens economics says prices will keep rising. The government has
>> recognized this with incoming PM Gordon Brown pledging to build 3
>> million new houses by 2020 (though he's unlikely to be in office long
>> enough to see it fulfilled).
>
> Can you explain then, why rents in the private sector are not rising
> in line with house prices.  If there was a shortage of demand for
> housing, they would be.  In fact, rents have been rising at a much
> lower rate than inflation in general.

Could it be because many people are speculating on the housing market by
buying-to-let, thereby artificially increasing the supply of rented
property?

Matti

Matti Lamprhey wrote:

>> Can you explain then, why rents in the private sector are not rising
>> in line with house prices.  If there was a shortage of demand for
>> housing, they would be.  In fact, rents have been rising at a much
>> lower rate than inflation in general.
> 
> Could it be because many people are speculating on the housing market by
> buying-to-let, thereby artificially increasing the supply of rented
> property?

That could be part of the story, but either way, someone who wants to live
in a house can do so without a significantly increasing expense.

On Wed, 15 Aug 2007 17:03:02 -0700, pmm101@googlemail.com wrote:

>Figures published yesterday show inflation falling. Combined with
>world stock market volatility it's unlikely the Bank of England will
>rise interest gain any time soon.

If you look at the record of the RPI since 1982, you will find that
the index has fallen or remained unchanged in every July except for
the three years 1988-89-90. 

The figures for July 2007 are what could have been expected.
-- 
Terry Harper
URL: http://www.btinternet.com/~terry.harper/

"Jonathan Bryce" <jonathan@localhost.localdomain> wrote in message 
news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
> Matti Lamprhey wrote:
>
>>> Can you explain then, why rents in the private sector are not rising
>>> in line with house prices.  If there was a shortage of demand for
>>> housing, they would be.  In fact, rents have been rising at a much
>>> lower rate than inflation in general.
>>
>> Could it be because many people are speculating on the housing market by
>> buying-to-let, thereby artificially increasing the supply of rented
>> property?
>
> That could be part of the story, but either way, someone who wants to live
> in a house can do so without a significantly increasing expense.

There was an item on R5 last week about house prices and
BTL.  One guy phoned in to explain that he had bougth a
BTL and that the rent was 30% short of his mortgage.
He said that he thought this a good long term bet and
expected the rent/mortgage to reach parity in 2-3 years.
He's in for a big shock when he tries to up the rent by 10%
at the end of year 1.

tim

On 17 Aug, 12:09, "tim....."  wrote:
> "Jonathan Bryce" <jonat...@localhost.localdomain> wrote in message
>
> news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
>
> > Matti Lamprhey wrote:
>
> >>> Can you explain then, why rents in the private sector are not rising
> >>> in line with house prices.  If there was a shortage of demand for
> >>> housing, they would be.  In fact, rents have been rising at a much
> >>> lower rate than inflation in general.
>
> >> Could it be because many people are speculating on the housing market by
> >> buying-to-let, thereby artificially increasing the supply of rented
> >> property?
>
> > That could be part of the story, but either way, someone who wants to live
> > in a house can do so without a significantly increasing expense.
>
> There was an item on R5 last week about house prices and
> BTL.  One guy phoned in to explain that he had bougth a
> BTL and that the rent was 30% short of his mortgage.
> He said that he thought this a good long term bet and
> expected the rent/mortgage to reach parity in 2-3 years.
> He's in for a big shock when he tries to up the rent by 10%
> at the end of year 1.

Even so, he's buying a house and found someone else to pay 70% of the
costs.

Maybe you would prefer to be the tenant rather than the landlord in
this situation...

> tim

In uk.finance whitely525@yahoo.co.uk wrote:

>> There was an item on R5 last week about house prices and
>> BTL.  One guy phoned in to explain that he had bougth a
>> BTL and that the rent was 30% short of his mortgage.
>> He said that he thought this a good long term bet and
>> expected the rent/mortgage to reach parity in 2-3 years.
>> He's in for a big shock when he tries to up the rent by 10%
>> at the end of year 1.

> Even so, he's buying a house and found someone else to pay 70% of the
> costs.

If 90% of the mortgage is interest and 10% is capital repayments then
effectively he's paying 3 quid for every one Pound of house he's buying.

That doesn't seem very astute to me.

FoFP

-- 
Party, like it's 1929!

On Wed, 15 Aug 2007 17:03:02 -0700, pmm101@googlemail.com wrote:

>Figures published yesterday show inflation falling. Combined with
>world stock market volatility it's unlikely the Bank of England will
>rise interest gain any time soon.

If there's one thing that's been made crystal clear in the past month
it's that central banks no longer control the mortgage rate, the
bondholders do, and the bondholders have decided they need to increase
mortgage rates to compensate them for extra risk.

FoFP

-- 
Party, like it's 1929!

wrote in message 
news:1187358045.166304.42940@r29g2000hsg.googlegroups.com...
> On 17 Aug, 12:09, "tim....."  wrote:
>> "Jonathan Bryce" <jonat...@localhost.localdomain> wrote in message
>>
>> news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
>>
>> > Matti Lamprhey wrote:
>>
>> >>> Can you explain then, why rents in the private sector are not rising
>> >>> in line with house prices.  If there was a shortage of demand for
>> >>> housing, they would be.  In fact, rents have been rising at a much
>> >>> lower rate than inflation in general.
>>
>> >> Could it be because many people are speculating on the housing market 
>> >> by
>> >> buying-to-let, thereby artificially increasing the supply of rented
>> >> property?
>>
>> > That could be part of the story, but either way, someone who wants to 
>> > live
>> > in a house can do so without a significantly increasing expense.
>>
>> There was an item on R5 last week about house prices and
>> BTL.  One guy phoned in to explain that he had bougth a
>> BTL and that the rent was 30% short of his mortgage.
>> He said that he thought this a good long term bet and
>> expected the rent/mortgage to reach parity in 2-3 years.
>> He's in for a big shock when he tries to up the rent by 10%
>> at the end of year 1.
>
> Even so, he's buying a house and found someone else to pay 70% of the
> costs.

Once again.  How does owing a house that's 100% mortgaged
help anybody?

The only answer I can see that makes any sense is because
it is expected to increase in value, but what if it doesn't?

>
> Maybe you would prefer to be the tenant rather than the landlord in
> this situation...

Too right.  I'm renting a very nice apartment that someone
else has to pay all the maintenance costs on for less than
the cost of paying the mortgage on the same property.

The only reason that *I* have to buy it is if I believe that in
a few years time it will have increased in value by more than
the amount that I can earn investing the difference between
the rent and the theoretical mortgage.  I don't believe that
will be the case.

I could be wrong, but I have no illusions as to why I am
doing this, unlike the thousands of sheep who are trying
to jump on the housing escalator expecting it to go on
forever.

tim

M Holmes wrote:

> In uk.finance whitely525@yahoo.co.uk wrote:
> 
>>> There was an item on R5 last week about house prices and
>>> BTL.  One guy phoned in to explain that he had bougth a
>>> BTL and that the rent was 30% short of his mortgage.
>>> He said that he thought this a good long term bet and
>>> expected the rent/mortgage to reach parity in 2-3 years.
>>> He's in for a big shock when he tries to up the rent by 10%
>>> at the end of year 1.
> 
>> Even so, he's buying a house and found someone else to pay 70% of the
>> costs.
> 
> If 90% of the mortgage is interest and 10% is capital repayments then
> effectively he's paying 3 quid for every one Pound of house he's buying.
> 
> That doesn't seem very astute to me.

Isn't it at least more astute than paying 10 quid for every pound?

In uk.finance Ronald Raygun <no.spam@localhost.localdomain> wrote:

>>> Even so, he's buying a house and found someone else to pay 70% of the
>>> costs.
>> 
>> If 90% of the mortgage is interest and 10% is capital repayments then
>> effectively he's paying 3 quid for every one Pound of house he's buying.
>> 
>> That doesn't seem very astute to me.

> Isn't it at least more astute than paying 10 quid for every pound?

Those folks who buy BtL flats and leave them empty really do puzzle me.
I don't expect they'll be around in six months though.

FoFP

-- 
Party, like it's 1929!

On 17 Aug, 15:05, M Holmes  wrote:
> In uk.finance whitely...@yahoo.co.uk wrote:
> >> There was an item on R5 last week about house prices and
> >> BTL.  One guy phoned in to explain that he had bougth a
> >> BTL and that the rent was 30% short of his mortgage.
> >> He said that he thought this a good long term bet and
> >> expected the rent/mortgage to reach parity in 2-3 years.
> >> He's in for a big shock when he tries to up the rent by 10%
> >> at the end of year 1.
> > Even so, he's buying a house and found someone else to pay 70% of the
> > costs.
>
> If 90% of the mortgage is interest and 10% is capital repayments then
> effectively he's paying 3 quid for every one Pound of house he's buying.
>
> That doesn't seem very astute to me.

So you think the tenant is the canny and astute one in this
situation..?


> FoFP
>
> --
> Party, like it's 1929!

On 17 Aug, 17:59, M Holmes  wrote:
> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>
> >>> Even so, he's buying a house and found someone else to pay 70% of the
> >>> costs.
>
> >> If 90% of the mortgage is interest and 10% is capital repayments then
> >> effectively he's paying 3 quid for every one Pound of house he's buying.
>
> >> That doesn't seem very astute to me.
> > Isn't it at least more astute than paying 10 quid for every pound?
>
> Those folks who buy BtL flats and leave them empty really do puzzle me.
> I don't expect they'll be around in six months though.

Why not..?  It is a more tax efficient way to purchase a house this
way than 'buying to live in'.

> FoFP
>
> --
> Party, like it's 1929!

wrote in message 
news:1187371063.664508.283520@57g2000hsv.googlegroups.com...
> On 17 Aug, 17:59, M Holmes  wrote:
>> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>>
>> >>> Even so, he's buying a house and found someone else to pay 70% of the
>> >>> costs.
>>
>> >> If 90% of the mortgage is interest and 10% is capital repayments then
>> >> effectively he's paying 3 quid for every one Pound of house he's 
>> >> buying.
>>
>> >> That doesn't seem very astute to me.
>> > Isn't it at least more astute than paying 10 quid for every pound?
>>
>> Those folks who buy BtL flats and leave them empty really do puzzle me.
>> I don't expect they'll be around in six months though.
>
> Why not..?  It is a more tax efficient way to purchase a house this
> way than 'buying to live in'.

No it's not, no tenant equals no rent, equals no income to
offset the mortgage against, equals no tax advantage.

tim

On 17 Aug, 18:58, "tim....."  wrote:
>  wrote in message
>
> news:1187371063.664508.283520@57g2000hsv.googlegroups.com...
>
>
>
>
>
> > On 17 Aug, 17:59, M Holmes  wrote:
> >> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>
> >> >>> Even so, he's buying a house and found someone else to pay 70% of the
> >> >>> costs.
>
> >> >> If 90% of the mortgage is interest and 10% is capital repayments then
> >> >> effectively he's paying 3 quid for every one Pound of house he's
> >> >> buying.
>
> >> >> That doesn't seem very astute to me.
> >> > Isn't it at least more astute than paying 10 quid for every pound?
>
> >> Those folks who buy BtL flats and leave them empty really do puzzle me.
> >> I don't expect they'll be around in six months though.
>
> > Why not..?  It is a more tax efficient way to purchase a house this
> > way than 'buying to live in'.
>
> No it's not, no tenant equals no rent, equals no income to
> offset the mortgage against, equals no tax advantage.

Only if it is empty all the time.  No sane landlord does that.

Once a tentant is found the landlord can bring forward any losses to
offset against income in the next tax year.


> tim- Hide quoted text -
>
> - Show quoted text -

"M Holmes" wrote
> If there's one thing that's been made crystal clear in the past month
> it's that central banks no longer control the mortgage rate, the
> bondholders do, and the bondholders have decided they need
> to increase mortgage rates to compensate them for extra risk.

They can't do that when it's capped at 'x% over base rate'.
Seems to me, the central banks still control all those mortgage rates!

In uk.finance whitely525@yahoo.co.uk wrote:

>> >> Those folks who buy BtL flats and leave them empty really do
>> >> puzzle me.  I don't expect they'll be around in six months though. 

>> > Why not..? It is a more tax efficient way to purchase a house this
>> > way than 'buying to live in'. 

>> No it's not, no tenant equals no rent, equals no income to offset the
>> mortgage against, equals no tax advantage. 

> Only if it is empty all the time.  No sane landlord does that. 

According to the comics 600,000 flats in Britain are left empty by their
owners. They buy purely for the house price gains and don't want their
shiny new properties sullied by actual tenants.

FoFP

--
Party, like it's 1929!

In uk.finance whitely525@yahoo.co.uk wrote:
> On 17 Aug, 15:05, M Holmes  wrote:

> So you think the tenant is the canny and astute one in this
> situation..?

Yup. I myself am a tenant even though I could buy a house for cash.

FoFP

-- 
Party, like it's 1929!

In uk.finance Tim  wrote:
> "M Holmes" wrote
>> If there's one thing that's been made crystal clear in the past month
>> it's that central banks no longer control the mortgage rate, the
>> bondholders do, and the bondholders have decided they need
>> to increase mortgage rates to compensate them for extra risk.

> They can't do that when it's capped at 'x% over base rate'.
> Seems to me, the central banks still control all those mortgage rates!

My thinking was that they control what new mortgages can be set at.
Inasmuch as that's a key driver of prices, it's an important power.

FoFP

-- 
Party, like it's 1929!

On 19 Aug, 18:12, M Holmes  wrote:
> In uk.finance whitely...@yahoo.co.uk wrote:
> >> >> Those folks who buy BtL flats and leave them empty really do
> >> >> puzzle me.  I don't expect they'll be around in six months though.
> >> > Why not..? It is a more tax efficient way to purchase a house this
> >> > way than 'buying to live in'.
> >> No it's not, no tenant equals no rent, equals no income to offset the
> >> mortgage against, equals no tax advantage.
> > Only if it is empty all the time.  No sane landlord does that.
>
> According to the comics 600,000 flats in Britain are left empty by their
> owners. They buy purely for the house price gains and don't want their
> shiny new properties sullied by actual tenants.

I doubt it, myself.  I know some rich landlords who have allowed their
flats in northern cities to be repossessed, apparently because they
can't be bothered to pay the service charge.  It's all too much effort
for a 70k investment.  But that is hardly common.  And now council tax
can be charged at higher rates on empty properties, there is greater
incentive to get a tenant.

The other thing is that an empty property is more at risk of
vandalism, certainly harder to insure.  The sensible thing is to keep
it empty until the right tenants are found; the 'right' tenant is
basically like a house-sitter that pays rent.







> FoFP
>
> --
> Party, like it's 1929!

In uk.finance pmm101@googlemail.com wrote:

> The only likely trigger for a crash is out and out recession

Nope. A possibility that looks more likely by the day is that a crash
could be caused by mass unavailability of mortgages. How much is a house
worth if everyone has to bid with their own cash?

> but that seems unlikely. 

It's more likely that the recession which is coming will be caused by
house price deflation (and the causes of that) rather than the other way
around. 

> Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

As we all know, if you find a trend on a graph, that trend will continue
forever.

> Housing isn't discretionary. 

That's untrue too. A couple can choose to live with the in-laws when
they can't pay a mortgage. Singles can choose to flatshare when they
can't afford a mortgage. Then there are millions of immigrants who work
here to save to pay for a property back home. If there's a recession,
then they'll decamp to a country where they can still earn money,
leaving much empty property behind.

> Pretty tulips and dot-com stocks might be
> nice to have, but shelter is one of life's necessities. Those that can
> live with their parents will do so for longer. Others may rent
> privately, but will soon realize it makes more sense paying their own
> mortgage than someone else's. That's why price growth has remained
> strong despite recent interest rises.

Nope. Growth has remained strong because of the unprecendented
availability of credit at low rates. If you research the Tulip Bubble
(or the South Seas, Canals, Railways, or Stocks bubbles) you'll discover
that the availability of credit to the masses is the overweening common
factor. 

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

That may be true, because we're headed for deflation. Deflation is
extremely destructive of prices of assets which have been rising as a
result of a credit bubble, with falls of 67% to 90% being typical.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

wrote in message 
news:1187222582.202178.5030@a39g2000hsc.googlegroups.com...
>What do Dutch tulips, dot-coms and English real estate have in common?

You forgot "south seas".  Though god knows how you buy or
sell one :-)

tim

pmm101@googlemail.com wrote:
> * The UK operates an extremely lenient immigration policy. According
> to migrationwatchuk.org net foreign immigration reached 292,000 in
> 2005, excluding illegal immigrants of whom some 50,000 are detected
> each year.

Polish people on minimum wage are not buying £250k 1 bed flats in London.

> * Recent years have seen sustained periods of historically low
> interest rates, thus allowing buyers to borrow more.

Inflation has also been low during most of that period, meaning that real
interest rates are much higher.

> * Reduction in availability of affordable rented housing. Since 1980
> many council tenants have taken advantage of legislation allowing them
> to buy their homes at substantial discounts. The homes sold under this
> scheme outweighs new properties becoming available for rental.
> 
> * The rise in the number of single households means more homes are
> needed overall.
> 
> It all adds up to demand rising faster than supply, and when that
> happens economics says prices will keep rising. The government has
> recognized this with incoming PM Gordon Brown pledging to build 3
> million new houses by 2020 (though he's unlikely to be in office long
> enough to see it fulfilled).

Can you explain then, why rents in the private sector are not rising in line
with house prices.  If there was a shortage of demand for housing, they
would be.  In fact, rents have been rising at a much lower rate than
inflation in general.

> The only likely trigger for a crash is out and out recession, but that
> seems unlikely. Figures from National Statistics [http://
> www.statistics.gov.uk] show the number in work rising, the jobless
> rate falling and annual GDP growth at a healthy 3%.

How about the credit crunch?  If banks can't get the funds in to lend out in
mortgages, that will stop people from being able to buy houses.

> Figures published yesterday show inflation falling. Combined with
> world stock market volatility it's unlikely the Bank of England will
> rise interest gain any time soon.

Libor is 6.38% as at the most recently available figures I have, up from 6%
a couple of weeks ago.  So it probably doesn't matter what the bank of
england says, interest rates have already shot up.

> So my guess is that fears of a housing market crash are greatly
> exaggerated.

My guess is they are not.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

> How about the credit crunch? If banks can't get the funds in to lend
> out in mortgages, that will stop people from being able to buy houses. 

It won't you know. This all happened in Japan in the 1990's but people
kept buying houses. They were just buying them with cash for 10% of
what they used to pay is all.

Can't see any reason why we'll be different.

FoFP

--
Then the Gods of the Market tumbled, and their smooth-tongued wizards
withdrew And the hearts of the meanest were humbled and began to believe
it was true That All is not Gold that Glitters, and Two and Two make
Four [Kipling] And the Gods of the Copybook Headings limped up to
explain it once more.

M Holmes wrote:

> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> 
>> How about the credit crunch? If banks can't get the funds in to lend
>> out in mortgages, that will stop people from being able to buy houses.
> 
> It won't you know. This all happened in Japan in the 1990's but people
> kept buying houses. They were just buying them with cash for 10% of
> what they used to pay is all.

Well yes, that will certainly happen to an extent, but people in negative
equity are less likely to sell voluntarily as they won't be able to redeem
the mortgage in order to do so.

In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:
> M Holmes wrote:

>> In uk.finance Jonathan Bryce <jonathan@localhost.localdomain> wrote:

>>> How about the credit crunch? If banks can't get the funds in to lend
>>> out in mortgages, that will stop people from being able to buy houses.

>> It won't you know. This all happened in Japan in the 1990's but people
>> kept buying houses. They were just buying them with cash for 10% of
>> what they used to pay is all.

> Well yes, that will certainly happen to an extent, but people in negative
> equity are less likely to sell voluntarily as they won't be able to redeem
> the mortgage in order to do so.

They'll throw the keys at the lenders and walk. Last time the banks could
wait for them to buy another house, gain some equity, and come after
them for the cash they still owe. This time, these people will neither
seek, nor be offered credit again in their lives and so there won't be
any new equity for the lenders to come after.

The main part of a debt-deflation, which is what this credit bust is
leading to, is that a whole bunch of credit is revealed to have never
been the money everyone thought it was, and it will vanish as the
morning dew. Lots of borrowers will lose, lots of lenders will lose and
lots of investors will lose.

Remember the old saw:

If you owe the bank a million Dollars, you're in trouble,

but if you owe the bank a billion Dollars, your bank is in trouble.

Remember that? well, here's the third line that we're about to become
more familiar with:

If you owe the bank a trillion Dollars, we're ALL in trouble.

FoFP

-- 
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four          [Kipling]
And the Gods of the Copybook Headings limped up to explain it once more.

"Jonathan Bryce" <jonathan@localhost.localdomain> wrote...
> pmm101@googlemail.com wrote:
>> [...]
>> It all adds up to demand rising faster than supply, and when that
>> happens economics says prices will keep rising. The government has
>> recognized this with incoming PM Gordon Brown pledging to build 3
>> million new houses by 2020 (though he's unlikely to be in office long
>> enough to see it fulfilled).
>
> Can you explain then, why rents in the private sector are not rising
> in line with house prices.  If there was a shortage of demand for
> housing, they would be.  In fact, rents have been rising at a much
> lower rate than inflation in general.

Could it be because many people are speculating on the housing market by
buying-to-let, thereby artificially increasing the supply of rented
property?

Matti

Matti Lamprhey wrote:

>> Can you explain then, why rents in the private sector are not rising
>> in line with house prices.  If there was a shortage of demand for
>> housing, they would be.  In fact, rents have been rising at a much
>> lower rate than inflation in general.
> 
> Could it be because many people are speculating on the housing market by
> buying-to-let, thereby artificially increasing the supply of rented
> property?

That could be part of the story, but either way, someone who wants to live
in a house can do so without a significantly increasing expense.

On Wed, 15 Aug 2007 17:03:02 -0700, pmm101@googlemail.com wrote:

>Figures published yesterday show inflation falling. Combined with
>world stock market volatility it's unlikely the Bank of England will
>rise interest gain any time soon.

If you look at the record of the RPI since 1982, you will find that
the index has fallen or remained unchanged in every July except for
the three years 1988-89-90. 

The figures for July 2007 are what could have been expected.
-- 
Terry Harper
URL: http://www.btinternet.com/~terry.harper/

"Jonathan Bryce" <jonathan@localhost.localdomain> wrote in message 
news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
> Matti Lamprhey wrote:
>
>>> Can you explain then, why rents in the private sector are not rising
>>> in line with house prices.  If there was a shortage of demand for
>>> housing, they would be.  In fact, rents have been rising at a much
>>> lower rate than inflation in general.
>>
>> Could it be because many people are speculating on the housing market by
>> buying-to-let, thereby artificially increasing the supply of rented
>> property?
>
> That could be part of the story, but either way, someone who wants to live
> in a house can do so without a significantly increasing expense.

There was an item on R5 last week about house prices and
BTL.  One guy phoned in to explain that he had bougth a
BTL and that the rent was 30% short of his mortgage.
He said that he thought this a good long term bet and
expected the rent/mortgage to reach parity in 2-3 years.
He's in for a big shock when he tries to up the rent by 10%
at the end of year 1.

tim

On 17 Aug, 12:09, "tim....."  wrote:
> "Jonathan Bryce" <jonat...@localhost.localdomain> wrote in message
>
> news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
>
> > Matti Lamprhey wrote:
>
> >>> Can you explain then, why rents in the private sector are not rising
> >>> in line with house prices.  If there was a shortage of demand for
> >>> housing, they would be.  In fact, rents have been rising at a much
> >>> lower rate than inflation in general.
>
> >> Could it be because many people are speculating on the housing market by
> >> buying-to-let, thereby artificially increasing the supply of rented
> >> property?
>
> > That could be part of the story, but either way, someone who wants to live
> > in a house can do so without a significantly increasing expense.
>
> There was an item on R5 last week about house prices and
> BTL.  One guy phoned in to explain that he had bougth a
> BTL and that the rent was 30% short of his mortgage.
> He said that he thought this a good long term bet and
> expected the rent/mortgage to reach parity in 2-3 years.
> He's in for a big shock when he tries to up the rent by 10%
> at the end of year 1.

Even so, he's buying a house and found someone else to pay 70% of the
costs.

Maybe you would prefer to be the tenant rather than the landlord in
this situation...

> tim

In uk.finance whitely525@yahoo.co.uk wrote:

>> There was an item on R5 last week about house prices and
>> BTL.  One guy phoned in to explain that he had bougth a
>> BTL and that the rent was 30% short of his mortgage.
>> He said that he thought this a good long term bet and
>> expected the rent/mortgage to reach parity in 2-3 years.
>> He's in for a big shock when he tries to up the rent by 10%
>> at the end of year 1.

> Even so, he's buying a house and found someone else to pay 70% of the
> costs.

If 90% of the mortgage is interest and 10% is capital repayments then
effectively he's paying 3 quid for every one Pound of house he's buying.

That doesn't seem very astute to me.

FoFP

-- 
Party, like it's 1929!

On Wed, 15 Aug 2007 17:03:02 -0700, pmm101@googlemail.com wrote:

>Figures published yesterday show inflation falling. Combined with
>world stock market volatility it's unlikely the Bank of England will
>rise interest gain any time soon.

If there's one thing that's been made crystal clear in the past month
it's that central banks no longer control the mortgage rate, the
bondholders do, and the bondholders have decided they need to increase
mortgage rates to compensate them for extra risk.

FoFP

-- 
Party, like it's 1929!

wrote in message 
news:1187358045.166304.42940@r29g2000hsg.googlegroups.com...
> On 17 Aug, 12:09, "tim....."  wrote:
>> "Jonathan Bryce" <jonat...@localhost.localdomain> wrote in message
>>
>> news:mZadnQ0Th5jdIFnbnZ2dnUVZ8qTinZ2d@eclipse.net.uk...
>>
>> > Matti Lamprhey wrote:
>>
>> >>> Can you explain then, why rents in the private sector are not rising
>> >>> in line with house prices.  If there was a shortage of demand for
>> >>> housing, they would be.  In fact, rents have been rising at a much
>> >>> lower rate than inflation in general.
>>
>> >> Could it be because many people are speculating on the housing market 
>> >> by
>> >> buying-to-let, thereby artificially increasing the supply of rented
>> >> property?
>>
>> > That could be part of the story, but either way, someone who wants to 
>> > live
>> > in a house can do so without a significantly increasing expense.
>>
>> There was an item on R5 last week about house prices and
>> BTL.  One guy phoned in to explain that he had bougth a
>> BTL and that the rent was 30% short of his mortgage.
>> He said that he thought this a good long term bet and
>> expected the rent/mortgage to reach parity in 2-3 years.
>> He's in for a big shock when he tries to up the rent by 10%
>> at the end of year 1.
>
> Even so, he's buying a house and found someone else to pay 70% of the
> costs.

Once again.  How does owing a house that's 100% mortgaged
help anybody?

The only answer I can see that makes any sense is because
it is expected to increase in value, but what if it doesn't?

>
> Maybe you would prefer to be the tenant rather than the landlord in
> this situation...

Too right.  I'm renting a very nice apartment that someone
else has to pay all the maintenance costs on for less than
the cost of paying the mortgage on the same property.

The only reason that *I* have to buy it is if I believe that in
a few years time it will have increased in value by more than
the amount that I can earn investing the difference between
the rent and the theoretical mortgage.  I don't believe that
will be the case.

I could be wrong, but I have no illusions as to why I am
doing this, unlike the thousands of sheep who are trying
to jump on the housing escalator expecting it to go on
forever.

tim

M Holmes wrote:

> In uk.finance whitely525@yahoo.co.uk wrote:
> 
>>> There was an item on R5 last week about house prices and
>>> BTL.  One guy phoned in to explain that he had bougth a
>>> BTL and that the rent was 30% short of his mortgage.
>>> He said that he thought this a good long term bet and
>>> expected the rent/mortgage to reach parity in 2-3 years.
>>> He's in for a big shock when he tries to up the rent by 10%
>>> at the end of year 1.
> 
>> Even so, he's buying a house and found someone else to pay 70% of the
>> costs.
> 
> If 90% of the mortgage is interest and 10% is capital repayments then
> effectively he's paying 3 quid for every one Pound of house he's buying.
> 
> That doesn't seem very astute to me.

Isn't it at least more astute than paying 10 quid for every pound?

In uk.finance Ronald Raygun <no.spam@localhost.localdomain> wrote:

>>> Even so, he's buying a house and found someone else to pay 70% of the
>>> costs.
>> 
>> If 90% of the mortgage is interest and 10% is capital repayments then
>> effectively he's paying 3 quid for every one Pound of house he's buying.
>> 
>> That doesn't seem very astute to me.

> Isn't it at least more astute than paying 10 quid for every pound?

Those folks who buy BtL flats and leave them empty really do puzzle me.
I don't expect they'll be around in six months though.

FoFP

-- 
Party, like it's 1929!

On 17 Aug, 15:05, M Holmes  wrote:
> In uk.finance whitely...@yahoo.co.uk wrote:
> >> There was an item on R5 last week about house prices and
> >> BTL.  One guy phoned in to explain that he had bougth a
> >> BTL and that the rent was 30% short of his mortgage.
> >> He said that he thought this a good long term bet and
> >> expected the rent/mortgage to reach parity in 2-3 years.
> >> He's in for a big shock when he tries to up the rent by 10%
> >> at the end of year 1.
> > Even so, he's buying a house and found someone else to pay 70% of the
> > costs.
>
> If 90% of the mortgage is interest and 10% is capital repayments then
> effectively he's paying 3 quid for every one Pound of house he's buying.
>
> That doesn't seem very astute to me.

So you think the tenant is the canny and astute one in this
situation..?


> FoFP
>
> --
> Party, like it's 1929!

On 17 Aug, 17:59, M Holmes  wrote:
> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>
> >>> Even so, he's buying a house and found someone else to pay 70% of the
> >>> costs.
>
> >> If 90% of the mortgage is interest and 10% is capital repayments then
> >> effectively he's paying 3 quid for every one Pound of house he's buying.
>
> >> That doesn't seem very astute to me.
> > Isn't it at least more astute than paying 10 quid for every pound?
>
> Those folks who buy BtL flats and leave them empty really do puzzle me.
> I don't expect they'll be around in six months though.

Why not..?  It is a more tax efficient way to purchase a house this
way than 'buying to live in'.

> FoFP
>
> --
> Party, like it's 1929!

wrote in message 
news:1187371063.664508.283520@57g2000hsv.googlegroups.com...
> On 17 Aug, 17:59, M Holmes  wrote:
>> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>>
>> >>> Even so, he's buying a house and found someone else to pay 70% of the
>> >>> costs.
>>
>> >> If 90% of the mortgage is interest and 10% is capital repayments then
>> >> effectively he's paying 3 quid for every one Pound of house he's 
>> >> buying.
>>
>> >> That doesn't seem very astute to me.
>> > Isn't it at least more astute than paying 10 quid for every pound?
>>
>> Those folks who buy BtL flats and leave them empty really do puzzle me.
>> I don't expect they'll be around in six months though.
>
> Why not..?  It is a more tax efficient way to purchase a house this
> way than 'buying to live in'.

No it's not, no tenant equals no rent, equals no income to
offset the mortgage against, equals no tax advantage.

tim

On 17 Aug, 18:58, "tim....."  wrote:
>  wrote in message
>
> news:1187371063.664508.283520@57g2000hsv.googlegroups.com...
>
>
>
>
>
> > On 17 Aug, 17:59, M Holmes  wrote:
> >> In uk.finance Ronald Raygun <no.s...@localhost.localdomain> wrote:
>
> >> >>> Even so, he's buying a house and found someone else to pay 70% of the
> >> >>> costs.
>
> >> >> If 90% of the mortgage is interest and 10% is capital repayments then
> >> >> effectively he's paying 3 quid for every one Pound of house he's
> >> >> buying.
>
> >> >> That doesn't seem very astute to me.
> >> > Isn't it at least more astute than paying 10 quid for every pound?
>
> >> Those folks who buy BtL flats and leave them empty really do puzzle me.
> >> I don't expect they'll be around in six months though.
>
> > Why not..?  It is a more tax efficient way to purchase a house this
> > way than 'buying to live in'.
>
> No it's not, no tenant equals no rent, equals no income to
> offset the mortgage against, equals no tax advantage.

Only if it is empty all the time.  No sane landlord does that.

Once a tentant is found the landlord can bring forward any losses to
offset against income in the next tax year.


> tim- Hide quoted text -
>
> - Show quoted text -

"M Holmes" wrote
> If there's one thing that's been made crystal clear in the past month
> it's that central banks no longer control the mortgage rate, the
> bondholders do, and the bondholders have decided they need
> to increase mortgage rates to compensate them for extra risk.

They can't do that when it's capped at 'x% over base rate'.
Seems to me, the central banks still control all those mortgage rates!

In uk.finance whitely525@yahoo.co.uk wrote:

>> >> Those folks who buy BtL flats and leave them empty really do
>> >> puzzle me.  I don't expect they'll be around in six months though. 

>> > Why not..? It is a more tax efficient way to purchase a house this
>> > way than 'buying to live in'. 

>> No it's not, no tenant equals no rent, equals no income to offset the
>> mortgage against, equals no tax advantage. 

> Only if it is empty all the time.  No sane landlord does that. 

According to the comics 600,000 flats in Britain are left empty by their
owners. They buy purely for the house price gains and don't want their
shiny new properties sullied by actual tenants.

FoFP

--
Party, like it's 1929!

In uk.finance whitely525@yahoo.co.uk wrote:
> On 17 Aug, 15:05, M Holmes  wrote:

> So you think the tenant is the canny and astute one in this
> situation..?

Yup. I myself am a tenant even though I could buy a house for cash.

FoFP

-- 
Party, like it's 1929!

In uk.finance Tim  wrote:
> "M Holmes" wrote
>> If there's one thing that's been made crystal clear in the past month
>> it's that central banks no longer control the mortgage rate, the
>> bondholders do, and the bondholders have decided they need
>> to increase mortgage rates to compensate them for extra risk.

> They can't do that when it's capped at 'x% over base rate'.
> Seems to me, the central banks still control all those mortgage rates!

My thinking was that they control what new mortgages can be set at.
Inasmuch as that's a key driver of prices, it's an important power.

FoFP

-- 
Party, like it's 1929!

On 19 Aug, 18:12, M Holmes  wrote:
> In uk.finance whitely...@yahoo.co.uk wrote:
> >> >> Those folks who buy BtL flats and leave them empty really do
> >> >> puzzle me.  I don't expect they'll be around in six months though.
> >> > Why not..? It is a more tax efficient way to purchase a house this
> >> > way than 'buying to live in'.
> >> No it's not, no tenant equals no rent, equals no income to offset the
> >> mortgage against, equals no tax advantage.
> > Only if it is empty all the time.  No sane landlord does that.
>
> According to the comics 600,000 flats in Britain are left empty by their
> owners. They buy purely for the house price gains and don't want their
> shiny new properties sullied by actual tenants.

I doubt it, myself.  I know some rich landlords who have allowed their
flats in northern cities to be repossessed, apparently because they
can't be bothered to pay the service charge.  It's all too much effort
for a 70k investment.  But that is hardly common.  And now council tax
can be charged at higher rates on empty properties, there is greater
incentive to get a tenant.

The other thing is that an empty property is more at risk of
vandalism, certainly harder to insure.  The sensible thing is to keep
it empty until the right tenants are found; the 'right' tenant is
basically like a house-sitter that pays rent.







> FoFP
>
> --
> Party, like it's 1929!

Tim wrote:

> "M Holmes" wrote
>> If there's one thing that's been made crystal clear in the past month
>> it's that central banks no longer control the mortgage rate, the
>> bondholders do, and the bondholders have decided they need
>> to increase mortgage rates to compensate them for extra risk.
> 
> They can't do that when it's capped at 'x% over base rate'.
> Seems to me, the central banks still control all those mortgage rates!

Only existing loans are capped at that level, and only a few base rate
trackers are on those terms.

On Fri, 17 Aug 2007 15:46:02 +0100, "tim....."
 wrote:

>
> wrote in message 
>news:1187358045.166304.42940@r29g2000hsg.googlegroups.com...
>
>Once again.  How does owing a house that's 100% mortgaged
>help anybody?
>
>The only answer I can see that makes any sense is because
>it is expected to increase in value, but what if it doesn't?
>
>>
>> Maybe you would prefer to be the tenant rather than the landlord in
>> this situation...
>
>Too right.  I'm renting a very nice apartment that someone
>else has to pay all the maintenance costs on for less than
>the cost of paying the mortgage on the same property.
>
>The only reason that *I* have to buy it is if I believe that in
>a few years time it will have increased in value by more than
>the amount that I can earn investing the difference between
>the rent and the theoretical mortgage.  I don't believe that
>will be the case.

The reason why I bought a house rather than renting is that it is hard
to find a good landlord that _will_ actually do the maintenance
and one that does not change his/her mind and decide to sell up.
I got fed up with moving every year.

M

>> "M Holmes" wrote
>>> If there's one thing that's been made crystal clear in the past month
>>> it's that central banks no longer control the mortgage rate, the
>>> bondholders do, and the bondholders have decided they need
>>> to increase mortgage rates to compensate them for extra risk.
>>
> "Tim" wrote:
>> They can't do that when it's capped at 'x% over base rate'.
>> Seems to me, the central banks still control all those mortgage rates!
>
"Jonathan Bryce" wrote
> Only existing loans are capped at that level, ...

It's only the existing loans that could have a problem with
the sudden change in circumstances;  on any future loans,
the borrower will already know the score from the outset.

"Jonathan Bryce" wrote
> ... and only a few base rate trackers are on those terms.

It's more than just "a few", isn't it?