I've heard that the current fad in the 40somethings and 50somethings age group whooping up 2nd and possibly even 3rd properties as an investment for their retirements may come unstuck just at the time when they need to rely on their property investments most. With so many over 40s following this plan, there has been suggestion that somewhere in between 15 and 25 years time there is going to be such a glut of housing coming onto the market as people start to reap their rewards, the housing market it going to collapse and a lot of people will have 2nd houses which nobody will want, thus creating the collapse. Personally, I think this is perfectly reasonable forecast, unless of course *everybody* in the UK want will want to live on their own by then!
What a load of B£$%&^%s! Property investment has been going on since time began, (well not quite ), and these properties are being bought and sold all the time.
You cannot, on the one hand, have people say that all the buy-to-let properties are going to come onto the market in the next few years and cause a property crash, and then use them all again in 20-25 years, to cause another crash.
The fact is that those who actually keep the properties that long will probably enjoy the income from them until they die, and then hand them on to their heirs. If you sell at retirement, once the money is gone, it's gone, and who knows how long you might live.
Yes and a lot of people have lost a huge amount of money at it. Just ask big pension funds about their property experience in places like Japan and Hong Kong. Or UK in the late 80s. Investments go down as wll as up.
More likely one now and one in another 10 to 15 years - heck we might even squeeze a third in 25 years..
Just ask someone who has been in property investment whether all properties generate income all the time. There is also a general misconception that properties do not suffer depreciation, especially houses. If you think about it, most houses require a major refurbishment every 25 to 30 years and this cost can be substantial compared to the value.
Property is like any other market, it is driven by supply and demand. If supply outweighs demand prices go down etc. We have a market where there is diminishing demand because of unaffordable prices. This causes downward pressure on prices. Do the math on starter homes, average familty homes and average income. It does not work.
Why do some people believe its different this time? They said that about the stock market - improved producitivty etc etc etc Its aways different every time but prices obey market economics.
Personally, I would be very cautious about property investment. Technology is going to make it easier for people to work from home and it will not matter where the home is. Look at the amount of call centres for the UK now located in India. I could work anywhere in the world in my job and be as effective. Low cost video conferencing and communications make this possible. High local property costs mean high employment costs and that will mean employers looking to situate in lower cost regions - work the rest out.
I agree with you wholeheartedly. In fact I said more or less the same to someone a while ago who was purporting to be about to buy dozens of properties for investment to make his fortune.
However, none of what you say either supports the argument put forward in the first place, nor does it invalidate anything I said.
We will have a settling of the market over the next few years - it is happening down South as we speak, but prices are still rising in my part of manchester.
We may have a bit of a bust in 20-25 years aswell, probably after a couple more booms, but not for the reasons given, other than by coincidence.
Forecasting anything is very difficult the longer the timescale. The weather people can tell almost certainly tell you what will happen today, can probably tell you what will happen tomorrow, but have very little chance a month away. We have just taken a short notice holiday in France, based at least partly on a long range forecast saying it would rain here almost every day during my fortnight off!
Pundits can't agree what is due to happen to house prices in the short-term. You can make convincing cases for a continued rise due to an acceptance that low interest rates will be around a long time, a levelling of and stabilising, a small drop or a big drop.
They have no hope in forecasting with any precision a drop that far ahead. If you are given a ten year timescale then there is a chance that will include a drop in prices, but it is unlikely to be for the reasons you have given.
One thing is that the baby boomers have had an enormous impact on everything that happens economically in this country. They have also gained considerably at the expense of both the older and younger generations. They got new schools in the sixties, grants to go to university in the sixties and seventies, then pulled up the ladder behind them. They got miras in the eighties and its no surprise pensions have now become such a focus of attention. I'm sure there will be big changes in the housing market to match their changed situation, but I can't predict what they will be.
Think market correction, and that house prices are now in the region of 8.5 times yearly income v/s the long cycle average of 3.5 times yearly income with early signs of correction already in the Greater London Area. At the moment I would classify the UK housing market in the same class as the San diego housing market (Based firmly on the Greater Fool Principle).
Luckily for the younger generation the entry level economy is tending to weed out large numbers of the greater fools. Don't hate the baby boomers, we'll pick the quality of their nursing homes and the funding of the NHS. A simple privatization of nursing homes and a roll back of what NHS covers can quickly eliminate any benefit the baby boomers have enjoyed (think no coverage for gluttony induced health ailments).
It's possible we might go more continental and have more people renting. The problem is that basically any bubble is unsustainable - the buy to let market will have sorted itself out long before 2020 IMO.
It is the same as any other boom ; increased availability of rental properties means more vacancies, and lower rents as competition for tenants drives prices down. Some people on buy-to-lets will be unable to pay their mortgage and have to sell out ; this will cause prices to drop to a sustainable level.
I think you're confusing two different ideas. Quite a few people own extra properties as investments which they let out, but there's no particular reason those are likely to come on the market when people retire, they will mostly just keep taking the rent as extra income.
There are also some people who own two houses for their own use, with a view to eventually retiring to the cottage in the country and selling the main house. However, I don't believe that's a significant effect; most people can barely afford even one house, so the number rich enough to own two or more is likely to be a pretty tiny fraction.
It is just madness. Houses are consumer products and consumer products depreciate in value while become older.
Forecasting the future events is easier than timing. Don't you still have a possibility to lower the short interest rate in UK? How about your budget deficit?
The private property prices start to crash when the interest rates start to rise.
My opinion of the flow of events is: stock market crash -> bond market crash -> housing market crash.
What improved productivity? GDP growth rate has lowered to half in 50 years.
The relocation of call centers, IT and financial business hits first and hardest English speaking countries. British colonies strike back.
In other European countries and USA jobs are moved to Russia too, often to Sankt Petersburg.
Actually very few jobs move to russia, russia is a terrible place to do business and it is not financially safe in a country where even the banks can rob you. Would you stick investments in a country where the courts can take your property/investments just on a local person bribing them?
Jobs go to other countries, but not russia. or at least not many.
If people sell the houses they have bought when they get to retirement they are missing the whole point of 'buy to let for retirement' which is, IMO, to build up a portfolio with maximum borrowing, then making sure the loans are repaid at retirement date and then you live off the rental income. To sell and incur CGT, assuming rentals continue, doesnt make sense.
Homes are not optional, people have to live somewhere, so the demand for accommodation does not go down. People who can't afford to buy are renting instead, not sleeping under bushes. Prices do inded reflect affordability, but affordability for landlords is still pretty good as long as interest rates stay low.
People have been saying this for years, but it hasn't happened yet, indeed the concentration in southern England has been increasing. I work with people spread around Europe, and we do try to use VCs, but it's pretty hopeless. Phone conferences are a bit better, but I spend a lot of my time travelling to physical meetings.
Except perhaps to miss out the bit about repaying the loans. They can always live off the excess of rent over loan interest, and let their executors worry about repaying the loans by flogging the properties.
No, you've got to have a specific NVQ3. At present you can get a job in a Care Home with nothing, or an NVQ in engineering (example). When this rule comes in, you will have to have an appropriate NVQ3.
Care homes have been going bankrupt hereabouts for the last 4-5 years, why, my *Financial Adviser* even owned one that went bankrupt ;-)
This has happened because the government set very high standards for the accomodation which the local authorities couldn't afford to pay for.
This wouldn't by any chance have anything to do with creating work for the further education industry would it. The waitresses in our local pizza joint have done a 4 year honours degree in "International hospitality management". They are usually 22 - 23 before they have finished their "education" owing about £10k in student loans. This is just to serve pizzas and clear tables.
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