RoShamBo

iTrader: (1)

Here is an idea re houses I am toying with.

Say my house is around £250,000.
I am lucky enough to have no mortgage.

I am no expert but i would think in the next couple of years that house prices will fall sharply (?)

If I sell my place just as the market turns - bank the £250,000 then rent for 12 months it will cost me £12,000 or so (£1000 per month for a place)

then I wait for prices to come right down (maybe even rent for 2 years)

So say I am looking at a property today for £500,000. I sell my place, rent & lose max £24k in rent over the 2 years.
While I am renting, house prices come down & the £500,000 property is now worth £350,000
So I "save" £150,000 less the £24,000 so £126,000 better off.

This does rely of course on the market falling but I see it coming at some point.

thoughts ?

Ro.

[Edited by RoShamBo - 11/28/2003 10:21:46 AM]

IanWatson

I can't see the market taking such a huge reversal - if/when interest rates go up there will definitely be a slow down, especially at the top end, but I think there will always be a demand in the home counties for houses round the 250k mark and just can't see values going down substantially.

I'm no housing market expert, just my gut feelings.

Edited to say - I also think you need to include the moving/selling costs in your calcs too - stamp duty, estate agency fees etc plus maybe even 10% of your rent to an agency.

[Edited by IanWatson - 11/28/2003 10:22:10 AM]

Scooby96

Factor in solicitors fees and stamp duty when you go to purchase again and it will be alot more than £24k + removals fees - probably near £30k - cant see property prices dropping much mroe than 10% so you'll be in the same boat as you are now!

Edited to say:

+ agents fees when you sell to go and rent - it all mounts up!!

[Edited by Scooby96 - 11/28/2003 10:29:31 AM]

workshy_fopp

Unless you live in a hugely overpriced London loft conversion, that is a total loser. 2 years rent is money down the pan, why not use that money for a buy to let. Dunno where you live, but I don't see the market going down, might slow down, but it's still doing 15-20% a year here and you won't get that return from a bank. Even if it only does 5% you won't beat that in a bank, plus you'll get taxed if you put all that money in a bank.

RoShamBo

iTrader: (1)

All good points.

People are saying "no way prices will fall that much"
However 6 years ago If I had said "house prices will go up 3 fold in the next few years" people would have laughed at me.

Ro.

Tiggs

mad idea....do a search on here. ppl have been saying prop prices are gonna crash for ages.

had you done this at ANY point where the likley hood of a crash has been rumoured to be high you would now be living in a cave...and not able to read this because broke ppl dont have PC's.

LG John

This is essentially no different to playing the 'shares' markets. You are gambling on a turn in the market in the direction you expect. If it works you'll make a lot of money but if it doesn't you'll loose a lot. If that kind of risk is for you then great but it takes a lot for most people to 'gamble' with their home!

Scooby96

SB - apart from the fact that property is less volatile than share prices.

I heard that property doubles in value every decade - as an average of accross the whole of the uk, obviously there will be regional fluctuations and the silly cities like London etc

MattN

If you took your 250k and used the interest to pay your rent it might work out. You should see 10k a year?

The real problem is knowing what the market will do. I think your risking alot assuming a 15% drop in a year.

At worst houses will slow down and only rise in line with inflation.

Don't worry about fee's and stuff as if you were planning on moving anyway just wanted to wait for the prices to drop you are still making the same number of transactions (2) just spread out. If you weren't planning on moving then factor them in.

Henrik

iTrader: (5)

What I don't understand is how people think that the property prices will keep rising and rising at 10-15% per year (or even 5%)... The fact of the matter is that if they do, people will not afford to buy anything in a very near future, and then there will be no buyers so no properties sold so no increase in the market.

If the prices were to continue going up at the rate they are today, we would need inflation at the same rate, and it's not currently (or is it?)...

Also, what happened at the end of the eighties?

I think there will always be fluctuations in every market like this, and I do believe that the property market looks a bit like the IT market did before the bubble burst...

Old_Fart

Its a bit of a gamble, but think about this instead:
You're looking at a £500k place losing 30%
Assume you keep your £250k place and it also loses 30%
You therefore lose £75k on your place and buy the new one saving £150k...net net you've 'made' £75k, and you were never at risk of getting killed if the market went up, and you didn't have to move 2 times in the interim. It all depends on your personal risk appetite.
Rgds
Chuck

NeilT

My parents are in the property dev. business (in Woking too) and they always see each purchase as a 25year investment - and, during that period the current value of that property will rise and fall in line with the current economic climate, but obviously after 25years, its will be worth far more than the price you've paid for it (taking into account mortgage rates etc).

Short terms gambles such as selling up and renting might pay off and leave you cash rich, but obviously it could all easily go the otherway....so all depends on your nerve to gamble

Neil







[Edited by NeilT - 11/28/2003 12:50:24 PM]

Scooby96

Just stick on the no 6 horse in the 3.30 at Haydock

J4CKO

iTrader: (1)

Dont forget, you WILL have to deal with Estate Agents and that would be the biggest downside to me.