I have a 1 bed 'investment' flat thinking of selling - city centre Bristol - i was going to do this early 2023 but with recent events it looks like the economy and house prices could take a dip swiftly. It's in a good area, there's a lack of these properties in that area so should sell quickly at the moment priced correctly. I'm not buying another property.
My opinion has really changed over the past month, i thought we might be fine until next year but i'm beginning to think i might need to start the process immediately. Buyers will have less money with affordability, fuel bills and rising interest rates could well affect sales and prices. I now feel most of the cards are stacking against the housing market and maybe its best to cut and run now.
I know its a crystal ball type question, who knows...first world problems and all that - but what's people thoughts especially if you are in a similar situation?
I’m not looking to sell anything myself, but if I was and from what I can see, now is a good time. If you are quick, you maybe able to catch the in pre-Christmas market.
Supply is still limited and the demand is still good. Overvaluations are a problem, with surveyors down marking.
It’s not hit home yet and some people are burying their heads in the sand. I think next year will be really tough for a lot of people, unless the government are generous. If you do not need the money short term no problems the economy will bounce back, but a word of warning will your Tennent be able to pay the rent.
I´d say if you´re definitely going to offload it, then now´s a better time than waiting for next year when it´s almost certain to be declared an official UK recession AND both interest rates and inflation will be likely higher than they are now.
Good luck whatever you decide.
Honestly, I think you're about 3 months late selling, but if you really want to cash in rather than stick it out long term (until the current crisis is over) and can sell for a decent price now I would.
I recall folks on here talking about the impending property armageddon when the pandemic hit. The opposite happened. I suspect there is a fair bit of overstating the current recession - unemployment is expected to remain low and whilst it isn't easy, an extra couple of hundred quid a month on energy bills won't bankrupt the majority of people especially as we are in pay rise season due to labour shortages.
Finally it is almost certain some additional stimulus from the government will happen - either capped energy bills, tax cuts and in particular some incentive aimed at preserving the perennial British cash cow - the property market.
Just brings to mind what Warren Buffet said about Fear and Greed.
Not at all sure how/when the economy will bounce back. As said by others, the impact of energy prices on consumers has hardly had time to filter through and that’s before the price cap increase and winter. The focus is on domestic energy but businesses will be more badly affected as they don’t even have the price cap.Originally Posted by hilly10
If the OP’s property is modern and energy efficient then that’s a factor in its favour. Is there a mortgage and is it variable rate so potentially increasing outgoings? Is there a decent sitting tenant? Is there any “need” to be charging the maximum rent (to cover costs, provide an income, etc.)? Early 2023 isn’t far away so the answer’s probably sell now. Whether selling residential property is the right decision (from a general perspective) is another interesting question!
Fair point about Gov. interventions...Richy´s stamp holiday certainly did stick boosters under what coulda been an otherwise stagnant or falling market. You do see how far the perennial cash cow has in a sense been genetically modified or meddled with and how over the long term this can be harmful to society and the economy, why I seem to recall even you moaning about your small flat despite being in the top 0.1 per cent of earnings,!...still we are where we are.
Btw you try finding an extra couple of hundred quid per month for fuel if you´re on even the toppy average wage of 30 k p.a. with a kiddie or 2...god help the poor devils on a tenner an hour and there´s millions of them.
Last edited by Passenger; 29th August 2022 at 12:40.
The market could go either way, but the OP stated he's selling anyway. I'd say it's highly likely that selling now rather than spring 2023 would be better.
Maybe ask a couple of estate agents for a ‘rough’ valuation as that may impact your decision making? Where I am, property prices may flatline but they certainly won’t drop as most purchasers are retirees with spare cash or second home owners. Although I did hear that a lot of people started buying property across the Severn?
Sure but those categories of folks in general won't already have huge energy bills as they are far less likely to own large homes.
That being said it is important we look after the vulnerable in society and of course many people will be affected but let's remember we are in an environment where higher wages, higher pensions are pretty universal and that should mitigate some of the impact of what's coming, along with government stimulus to come, energy payments already in place etc.
It may be that a smaller dwelling such as a flat becomes all the more desirable given the lower energy footprint.
But is it only going to be a couple of hundred £ a month for energy bills. It’s forecast to be circa £550 to £650 by next April, so if your bills were average up to this new Oct price cap say £180 a month you will be now looking at a extra £400 a month, hardly small fry.
Last edited by hilly10; 29th August 2022 at 12:58.
I suspect we would be shocked if we knew just how many people are currently spending every penny that comes in each month. An extra £50pm is £600pa so what might be relatively easily manageable for a lot of us isn’t for many people.
Anyway, I think sell now is the best advice for the OP. Don’t think there’s much likelihood of prices increasing in the next 6 months if the alternative is a sale early 2023.
Well if people end up paying an extra £400 a month we are all screwed full stop but I suspect that's unlikely as the government knows this too. Let's see but I'd imagine significant assistance packages are on their way funded in part at least by levies on energy company profits.
Quite agree Ryan it’s totally unaffordable for the majority of homes, let’s hope next Monday the new PM has the answers.
Energy prices:
would I be too cynical in thinking the high energy prices are manufactured to help us meet Net Zero on time? Why have OUR energy prices gone up 50% so far, yet France and Germany and Portugal (I know people in each) have only gone up 5% ish. Why have ours gone up ten fold more than other countries importing their energy just the same?
Make the plebs cut their heating and lighting to reduce the emissions.....
Talking to people they seem genuinely worried about fuel prices, even those who didn’t care less about the pandemic.
If your going to sell anyway I’d look to sell now, although I’ve noticed houses not selling as quickly in my village as they were, lots were being sold before being advertised for sale but not at the moment.
Factor in another .5% or more Sept15 going to start to hurt those on the edge?
Seriously, EDF is govt owned, our govt does not have that option.
Where is this environment you mention R where higher wages and higher pensions are universal...for the majority of workers under 31 their salaries haven´t kept up with inflation since the 2008 crash. To be sustainably successful a city, a country has to be perceived as ´liveable´...I don´t believe shrinking dwelling sizes to try and keep up with world beating energy bills really fits anyones notion of ´liveable´...you could also add regularly having pooh in your rivers and beaches as another less than ideally ´liveable´ feature! Not for most folks anyway.
But I digress, sorry.
Last edited by Passenger; 29th August 2022 at 15:03.
If that figure of 5% increase in France Germany and Portugal are true then the government has some explaining to do. I can understand the French on Electricity as they own EDF and will sting us for as much as they can.
No explaining needed:
France ordered the price fixed. Response by EDF is to sue the govt for the £9bn cost of the policy.
Portugal benefited from a price cap in the short term but, electricity prices due to go up 40% soon.
Germany is actually paying the producers (on top of their massive profits) to keep consumer prices low.... Not sure how sustainable this will end up
Trouble is, things like this are just kicking the can down the road. As with all the Covid bail out money, it comes from somewhere - increased taxes and increased borrowing.
Still can’t believe that the Western world thought relying on Putin for our energy needs was sensible!!
I think you're overstating this. The majority of people are not getting pay rises of several thousand pounds. I know my energy bill is looking like it will be triple what it was two years ago. Prior to this I never worried about the heating now I'm feeling much less cautious.
Not read all but just put it on the market for your magic number and if it sell it sells.
Aside from the property pricing, it's probably worth considering the difficulty buyers may have in getting a mortgage. I'm working with a broker at the moment as I'm buying a new house with a mortgage - and his recent experience is lenders applying a much more stringent approval test and (I'd never heard of this before) lenders declining to mortgage a property where the lender already has a good number of properties mortgaged in the local area.
Lendor appetite for risk is reducing a lot these days. Maybe best to get shot of the property before other lenders get more nervous?
Op my daughters flat in central Bristol has gone up (by 6 figures)in the last 12 months she’s in the process of buying her ex out it does depend on location but there is still big demand for nice properties if you don’t need the money don’t sell
Or is it high energy prices give more tax revenue for the government to pay towards Covid costs / National debt?
Quick update on this situation, I quickly put the flat on the market and got a cash buyer for the asking price after a few weeks with lots of interest, viewings and some reasonable offers. I think this was partly due to the scarcity of similar properties on the market in a desirable area. Good luck to any other buyers or sellers, hope everything works out for you.
Well done OP.
Presumably you have exchanged contracts? If so, we’ll done. You got out at the top.
Nice one OP. Quite a lot of improvements around the docks & floating harbour since I was a student in the ‘80’s. It’s a nice location.
I’d be interested to hear how capital gains tax works on such a sale, assuming you’re selling for more than you paid for it.
Me & Mrs T-7 have a BTL in Bath, a 3 Bed semi, which webought about 17 years ago for £163,000. I’m guessing it’d fetch £400-450k if we sold right now.
It’s bringing in about £17k in rent a year for very little input from me & we’ve had well over £200k in rent since buying it.
So I’ll probably hang on to it…but for those who know….how is capital gains calculated, & is it just the sale price minus the purchase price minus the 2 lots of capital gains allowance x whatever %? Or are there other elements that come into play, like money spent on improvements over the years?
Last question - I'm sure repairs are deductable (but possibly on an annual basis from rental income, rather than in arrears on CGT), Improvements are not deductable.
Maintenance is offset against rent. Capital gains would only be offset against major works that were not offset against rent. Like an extension. You can not claim an expense twice. It’s either maintenance or capital.
You can deduct purchase and sale costs from the capital gains.
There is a good calculator on the HMRC website, the CGT will depend on your and your wife’s earnings.
Well done OP (subject to exchange). We toyed with selling ours earlier this year but got a new tenant in on a 12 month tenancy, in hindsight I wish we'd put it on the market with a fix due to expire next September.
You have obviously done extremely well over the years T-7, but the above now clearly illustrates how the property market is going to crash.
You are obviously safe, probably no mortgage, so will just will have less profit, but those new to BTL with high LTV and mortgage renewals soon are going to get crushed.
Your current 3.8% yield when savings rates are zero is great, but you can now get 4% savings rate risk free for a relatively short fix at the moment. Plus, you have the risk of maintenance, voids and just the general hassle.
Let's be generous and say rates top out at 5%, meaning home owners are predicted to pay rates 7% and BTLers 8% by next summer, for new mortgages/renewals.
Who is going to buy this at £450k? Homeowner repayment mortgage of £3181 for equivalent 100% value. Pay £3181pcm mortgage equivalent or rent at £1417pcm; less than half the cost of the mortgage?Tricky one that.
A BTLer is going to pay the £3000 just for an interest rate only mortgage for 100% purchase price equivalent. That's £36k per year mortgage equivalent payment for a £17k income, without including voids, maintenance etc.
Even if the price of the property dropped by 33% to £300k, 100% equivalent BTL interest only mortgage payment would exceed the rental income by 63%.
In fact at 8% mortgage interest rate, interest only, another BTLer would have to buy your property for £184k to get 0% gross yield. That is 60% less than your current highest valuation.
And, who in their right mind would want to gear themselves with debt while house prices falling, wiping out your deposit and potentially pushing you into negative equity.
Not trying to scare you Op, but encourage you to do the maths when planning on what you do with the property.
Unlike repayment mortages, interest only mortgages (as popular with BTLers) have a linear cost relationship with mortgages rates, and that will have a devastating impact unless you have a long fix.
Property prices are in for a significant fall. Based on affordability 35%+ is easily achievable, especially given sentiment has disappeared.
Rising wages with high inflation may stem this over time by increasing affordability, but this will likely only keep interest rates higher for longer.
You can argue over the sentiment, but the maths states the truth.
Beware EAs and mortgage brokers telling you all is fine. Don't trust those with a vested interest in making money out of you.
Last edited by noTAGlove; 2nd October 2022 at 13:36.
You seem very keen to talk the market down … whilst I’d agree the boom times are suspended I don’t see a crash all the time there is a shortage of property.
I don’t need to talk the market down, the maths does that for me.
Our resident “NoTag Financial Advice Services” spokesman strikes again with his predictions of doom backed up by his “absolute worst case possible” facts and figures. (That are often incorrect)
Take his “financial advice” with a pinch of salt.
OP, congrats for selling up and getting out. Well done!
Here we go, another highly leveraged panicking recent BTLer comes along to tell us everything is all fine, and there is nothing to see here.
35% correction. I'll be amazed if it anything near that.
Property is obviously a highly illiquid asset. These things can take years to play out as it did in the late 80s and early 90s. It took until 1995 before the last crash bottomed out, after it stared around 1989.
Year on year inflation disguises the true property price falls.
When I was living in Guildford during that time, flat prices dropped up to 40% over those 6 years, but inflation over those 6 years increase by nearly 40%.
So, take £100k in 1989. The time value of money 6 years later was £140k. Flat prices had dropped from £100k in 1989 to £60k in 1995.
So based on the time value of money, the flat prices had actually reduced by 57%. Compounding works in both directions.
If interest rates reach 6-7% then affordability is on par with the peak of the 90s crash, when interest rates where much higher, but proportionate values much lower.
Unless you are over 55 and lived inside South East England (that’s where the worst of the 90s crash was confined to) except for minor blips you will only have experienced a rising property market. Yes, that is you mr noble.
If inflation is sticky, the BoE has only two choices. Crash the property market, or follow the economics of Turkey and Argentina and start buying it all and risk hyperinflation.
My current bet is on the former because inflation can eventually destroy the country, but last week the BoE pivoted from their current QT policy to QE in a nanosecond when the markets broke, so who knows.
History never repeats itself, but it does often rhyme.
Last edited by noTAGlove; 2nd October 2022 at 15:21.
Markets don’t follow maths, they are driven by emotion, greed, fear and many other human factors. Maths is only a small part of the system.
You have to consider the supply shortage.
Lolz.
Bought my first BTL in 1999 when I was 21 and owned 7 properties by 2009. (Now own 4 properties and just bought a holiday let in North Norfolk)
Think I might know more about it than you mate.
Your fabulous facts and figures totally miss the bit where inflation works massively in our favour by also eating up the true cost of all the money that’s been borrowed to buy these properties.
Inflation might play a role in adjusting the true value of the asset but it also has the equal effect on adjusting the true value of your debt.
Since property has became a new investment tool for the masses, maths completely drives it. Greed and fear pull at the edges and at the extreme this can be significant.
Nobody has invested in property for 3% gross yields on offer; 27 years of appreciation keeps BTLers investing given wafer thin yields. The notion that there will always be a greater fool.
BTL died last week and it isn’t coming back anytime soon. The likelihood of mortgage interest payments quadrupling has killed that asset class off for 10 years.
The property market require fresh blood to function otherwise it dies. So, who is the fresh blood now that BTLers are kaput?
FTBs? Mortgages are lent based on affordability, and that just headed dramatically south. Banks will be valuing properties lower, and FTBs can command less of a mortgage for the same payment they can afford.
Plus let’s face it, every FTB out there at the moment are reading the papers and they will be scared sh1t less. Even the Daily Express is doom and gloom and that is saying something.
So without FTB and BTLers who will come to the rescue?
Good luck doubling your rent on a supply shortage to counter the potential quadrupling of debt cost.
Given your sentiment I assume you are going to sell your own home and rent, assuming you are a home owner.
Maths say that’s the way to go.
Nope, it is not an investment.
But don’t the maths suggest it would make sense to rent?
Why over pay for your accommodation?
I presume you understand the impact of gearing on a depreciating asset?
Let’s take the example from 1989. You bought a property at the peak for £100k with a 60%LTV, so you invested £40k of your own hard earned money.
By 1995 your property is worth £60k. You lost your whole £40k stake. That is a fact. Plus rent did not keep up with the mortgage interest payments which quadrupled. By 1995 you own 0% of the property and you snuffed your £40k away.
Not only that but you lost the ability to grow that 40% stake by other means, and if you kept up with inflation it would be worth £64k by 1995. You can now buy the flat out 100% outright, and have £4k to decorate it.
You can’t convince me that investing in a depreciating asset is a good idea. But, carry on convincing yourself.
Last edited by noTAGlove; 2nd October 2022 at 17:36.
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