SIPPS shock as Brown shelves tax loophole for residential property.

The level of indebtedness is miles higher these days so it won't need unusually high interest rates to bring down the house of cards IMO. The pips are already squeaking for many with the base rate at 4.5%

Incidentally, the last crash started in 89/90 when interest rates were about 8 or 9% (off the top of my head) I don't think they went upto 15% until 1992, when prices had already fallen considerably, and they didn't stay that high for long though clearly far higher than they are today.

Its not just interest rates that do the damage and in fact UK rates may eventually even have to come down which would be a clear sign that the economy is even more f>cked than "doommongers" like me think it is.

Reply to
Crowley
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The crisis in newbuilds. IMO big falls are around the corner which will lead the general market down......

quote : "It cites an example of a new two-bed flat in Nottingham initially valued at £250,000. A second valuation, taking into account prices paid elsewhere in the same development, reduced it to only £170,000- so buyers with big mortgages could wind up with negative equity if they need to sell." Thats an initial overvaluation of over

30%.....the price which some suckers will have paid for it.

Sunday Times

Home Supplement. 11th Dec

Worth what you Paid for it?

Valuers of city flats are accused of rubber-stamping developers' inflated price tags, finds Graham Norwood

Buyers of new city-centre flats may be paying tens of thousands more for their properties than they are worth, according to the Council of Mortgage Lenders.

The CML, whose members handle 98% of UK Lending, accuses some valuers - who should independently assess a property's worth ahead of a mortgage being agreed- of simply rubber-stamping developers asking prices.

It has twice written to the Royal Institute of Chartered Surveyors (Rics) complaining about the problem, and says some valuers failed to consider whether flats were overpriced and may not have known about price cuts secured on similar properties nearby.

It cites an example of a new two-bed flat in Nottingham initially valued at £250,000. A second valuation, taking into account prices paid elsewhere in the same development, reduced it to only £170,000- so buyers with big mortgages could wind up with negative equity if they need to sell. ... Since 2000, there has been a proliferation of such properties. Estate agent Knight Frank says almost 4,000 were built across Leeds, Liverpool, Manchester, Newcastle, and Sheffield in the year to April alone; more are at planning stage or still being built.

Leeds has another 7,000 city centre flats coming on; Manchester has

4,800; Sheffield, 3,300; Liverpool, 4,500; and Newcastle, 1,700. Add "anticipated" development (which may be built after 2008), and there's another 15,000-plus units across these centres.

It is a similar story in Bristol, Birmingham, Nottingham, and Southampton. About 175,000 new homes in London have been approved, but have not yet been started. About 90% are flats, and most are "Turkey Twizzlers": basic two-bed, two bathroom flats, built mainly for buyers who rent to young professsional sharers.

Calculating the real value of these properties can be hard. Developers often try to sell the first ones in the development at full price, to influence valuers assessments of later flats in the scheme. There are also industry rumours that developers have sold first flats to friends and family at inflated prices, again to establish a precedent to influence later valuations.

Those most likely to be lured into paying an inflated price are people buying just one flat, either to live in or to rent. Wealthier, large-scale landlords or professional consortiums are unlikely to suffer: they can secure big price cuts as they buy flats in bulk.

Andrew Smith of Rics dismissed CML concerns as "an unspecified allegation, and as such it is not on the top of our agenda". He was "90% sure" no written complaint had been received, but admitted the issue of "wonky valuations" had been raised by CML at routine meetings. Smith said Rics members follow procedures set out in what industry insiders call the "red book". This says valuations should be based upon a mix of asking prices, incentives and comparisons with similar homes on sale in the second-hand market.

The CML's claim is the latest blow for buyers of such flats. An oversupply has seen prices drop; more falls are predicted for next year, particular in the north, and rental yield forecasts are gloomy.

from yesterday's HOME section of the Sunday Times.

Reply to
Crowley

What an insulting name for what is, to be frank, the bleeding obvious size to build.

tim

Reply to
tim (moved to sweden)

On Tue, 6 Dec 2005 15:03:27 +0000, Richard Faulkner mysteriously appeared thru the usenet mist to inform us thus...

5) 'antipathy' in my case and of a growing number of people. Not to be confused with apathy.
Reply to
hummingbird

This autumn saw increasing numbers of wannabe BTL'ers attracted by SIPPs The boost they gave the housing market has now been snuffed out in one fell swoop by Brown shelving the plan.

Also evidence of increasing numbers struggling with debts and changing to interest only mortgages.

It all points in one direction IMO. Big crisis for the housing market and falling prices.......

13/12/2005

Buy-to-let investors soar prior to SIPPs u-turn

Mortgages Direct has revealed buy-to-let mortgages increased by 16 per cent in November as investors geared themselves up for the tax-free residential property investment opportunities in self-invested personal pensions (SIPPs).

This has now been snubbed out by the Government, as the Chancellor scraped the tax break earlier this week.

Peter Gladdy, director of Mortgages Direct commented: "The original proposed changes to SIPPs, where residential property was to become a valid SIPP investment had already boosted the number of buy to let mortgages, as investors were realising the opportunities to boost their pension funds. The Government's U-turn on SIPPs in the pre budget report is clearly bad news for pension holders who were planning on feathering their retirement nest with tax- free residential property.

"However the renting market is fairly buoyant in this current climate, with many potential homeowners sitting on their hands, waiting to see which way prices will go and therefore opting to rent instead. Landlords are responding proactively to the demand and to the upward trend of rents. The established investor, who takes a long term, professional approach to buy-to-let will continue to buy selectively and carefully."

With the Bank of England refusing to drop the base rate any further this month, borrowers are continuing to feel the squeeze. The number of borrowers opting for interest only repayments has increased to 39% from

26% last month.

Peter Gladdy added: "It is surprising that more borrowers are opting for interest only repayment. This is not advisable unless a comprehensive repayment method is in place. Borrowers are evidently still feeling the squeeze on their finances. The Bank of England has clearly missed the chance to provide the much needed boost to the consumer and homebuyer's confidence over the Christmas period."

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Reply to
Crowley

M Holmes wrote

A group of three-storey apartments built close to me have been selling so slowly that at least three have come on the market again before all the new ones have been sold. We are just not a nation of apartment dwellers.

Reply to
Gordon

In message , Crowley writes

Squeeze??? Almost the lowest rates for how long?

I've got about 20 years to sort out a repayment method on various interest only mortgages - probable worst case scenario will be to sell and downsize.

???

Reply to
Richard Faulkner

Exactly. Its crazy. Rates historically low at 4.5% yet "borrowers are continuing to feel the *squeeze*".

Just shows how over-borrowed many are.

It doesn't need higher rates to do the job this time.

Reply to
Crowley

Not round my way it isn't. At least one in three properties are empty at any one time and rents are 20% below those achievable 6 years ago.

tim

Reply to
tim (moved to sweden)

Would that be in Sweden?

Reply to
Fred

No, that would be at my UK address.

tim

Reply to
tim (moved to sweden)

Hmm. What I was trying to ask was where? because in my parts, rents have risen albeit slightly in the past few years.

Reply to
Fred

Hmm. What I was trying to ask was where? because in my parts, rents have risen albeit slightly in the past few years.

Reply to
Fred

In message , Crowley writes

Are they really squeezed, or is it media hype.

I am conscious that many people may be reigning in expenditure, (including me), but that isnt necessarily because they are squeezed.

Definitely not.

Reply to
Richard Faulkner

Thats also the impression I get. The surfeit of rental property in recent years with the growth of BTL seems to have kept rents down at the same time as property prices were rising causing yields to fall below that achievable from your average hassle-free savings account.

Some BTL'ers kept buying property for capital gain rather than yield but now prices have stalled and begun to fall in most areas its difficult to see what attraction remains for investors.

Reply to
Crowley

I don't think its just media hype as I get the impression that most of the media are only just starting to become aware of the magnitude of the problem.

There's increasing anecdotal evidence that the UK's record £1.3 trillion of debt is starting to bite......debt counsellors have recently been reporting a massive upturn in cases, repossessions have increased 66%YOY (albeit from a low base), slowdown in retail spending, slowdown in the house market, and this latest report I've just posted "The number of borrowers opting for interest only repayments has increased to 39% from

26% last month."

I've read recently that UK consumers have spent 5 years earnings in the past 3 years (or thereabouts) and a spending/house-buying/holidaying party of that magnitude is bound to have repercussions eventually.

Having said that I think its only the profligate minority who are going to come really unstuck. Those who live within their means should be OK though unemployment is a dark horse.

Reply to
Crowley

Outside M25, less than an hour (by train) from London.

tim

Reply to
tim (moved to sweden)

Ha! That's what early retirement does to one, eh?

Why else then? I'd say it's because they are feeling squeezed, but of course not necessarily by interest rates.

Reply to
Ronald Raygun

May be they are just "consumered out" - like me? :)

Reply to
Doug Ramage

Perhaps I should have added "by interest rates", as that was what the previous post referred to as doing the squeezing.

Having said that ..... I am sure that there will be an element of confidence involved, (or lack of it), in many people who are not particularly squeezed.

Reply to
Richard Faulkner

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