House Prices + Inflation
07 April 2011, 12:09 PM
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House Prices + Inflation
Had a slight shock to the upside last night after the estate agent gave me his view. Having got on the property ladder back in late 2004, near the highs of the market as it consolidated 
, i was hoping for a breakeven to slight increase in nominal terms regardless of the implications of inflation.
Having a look at the UK average house price performance in nominal terms seems that across the country the average price has appreciated 16.8% over the same period, when you apply the implications of inflation this performance comes down to -7.1%. (Nationwide House Price Index data)
To my delight personally i have seen a strong outperformance to this trend with a nominal appreciation of 31.6% and with the effects of inflation added into the calculation that suggests a rise of 6.5% over the period! Certainly not setting the world on fire, but bucking the trend never the less!
Since the peak of the market the data suggests a nominal fall of 11.8% and with inflation added into the mix a depreciation of 21% of your capital.....with inflation expected to stay high for the balance of the year before the fiscal balance shifts, obviously backing the economic recovery with this expectation, is this year a good year to be buying property if you can afford to? On the flip side for inflation to contain itself we will have to see interest rates rise, which makes the cost of financing a house purchase higher, so in turn does that continue to stall new buyers entering the market thus stripping demand, on the long term tack though in theory should keep rental market strong and there is finite space to build property and an expanding population so the power of demand will on the balance of probabilities return.....any other thoughts as housing market isn't my niche, i prefer to keep my assets in liquid financial instruments
Also thinking about foreign property as the States is capitulating and on a long term bet there has to be some value to be found over there i would assume....
, i was hoping for a breakeven to slight increase in nominal terms regardless of the implications of inflation.Having a look at the UK average house price performance in nominal terms seems that across the country the average price has appreciated 16.8% over the same period, when you apply the implications of inflation this performance comes down to -7.1%. (Nationwide House Price Index data)
To my delight personally i have seen a strong outperformance to this trend with a nominal appreciation of 31.6% and with the effects of inflation added into the calculation that suggests a rise of 6.5% over the period! Certainly not setting the world on fire, but bucking the trend never the less!
Since the peak of the market the data suggests a nominal fall of 11.8% and with inflation added into the mix a depreciation of 21% of your capital.....with inflation expected to stay high for the balance of the year before the fiscal balance shifts, obviously backing the economic recovery with this expectation, is this year a good year to be buying property if you can afford to? On the flip side for inflation to contain itself we will have to see interest rates rise, which makes the cost of financing a house purchase higher, so in turn does that continue to stall new buyers entering the market thus stripping demand, on the long term tack though in theory should keep rental market strong and there is finite space to build property and an expanding population so the power of demand will on the balance of probabilities return.....any other thoughts as housing market isn't my niche, i prefer to keep my assets in liquid financial instruments
Also thinking about foreign property as the States is capitulating and on a long term bet there has to be some value to be found over there i would assume....
07 April 2011, 12:21 PM
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Can't go wrong with housing. By as much as you can, whole streets if possible. I hear China has 64,000,000 empty, brand new apartments. By those, you'll soon be a billionaire. Good luck!
07 April 2011, 12:28 PM
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Travel to Ireland and buy a whole estate - they are there for the taking .... pay as much as you can possibly afford to secure the purchase and await the forthcoming upturn in house prices!
You can't lose - grab now while everyone is sitting on their hands.
You can't lose - grab now while everyone is sitting on their hands.
07 April 2011, 12:31 PM
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flights are booked!FYI you spell buy with a u in it!
Edit: This thread however shouldn't have u in it!
Last edited by alloy; 07 April 2011 at 12:33 PM.
07 April 2011, 12:50 PM
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2 estate agents actually 
I have no interest in selling up, it was more out of interest than something to follow through on, as i contemplate what i'm going to do with the bonus
Choices are stick to what im good at and reinvest in the financial markets or branch out and start accumulating a bit of a property portfolio....
I have no interest in selling up, it was more out of interest than something to follow through on, as i contemplate what i'm going to do with the bonus
Choices are stick to what im good at and reinvest in the financial markets or branch out and start accumulating a bit of a property portfolio....
07 April 2011, 01:21 PM
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Wouldn't trust valuations at all. Our flat was valued at 125k last July. Used this to part ex it against a new build house. Flat still sitting there, still unsold and now up for £105k!
Have a look on zoopla and look at what similar properties are going for in your area.
Have a look on zoopla and look at what similar properties are going for in your area.
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07 April 2011, 01:42 PM
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The number of flats and houses near me that have been for sale for 18+ months is staggering...
dunx
P.S. Sales only happen when BIG discounts are forthcoming...
dunx
P.S. Sales only happen when BIG discounts are forthcoming...
07 April 2011, 03:03 PM
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07 April 2011, 03:20 PM
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07 April 2011, 04:02 PM
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Not sure what area your in but my daughter is the letting agent in an Estate Agents in Cardiff and they are going before the advert goes up.
They have a waiting list as long as your arm and need more properties to satisfy demand. I think that anyone with a portfolio should be doing OK?
They have a waiting list as long as your arm and need more properties to satisfy demand. I think that anyone with a portfolio should be doing OK?
07 April 2011, 09:05 PM
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Estate agents will give you a flattering valuation to tempt you to market your house with them.
Look to see what houses near you have gone for recently to get a better idea of it's potential value.
Steve
Look to see what houses near you have gone for recently to get a better idea of it's potential value.
Steve
07 April 2011, 09:12 PM
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Estate Agents only know to get the property on their books, not spend any money on marketing, and then tell you that it needs to drop 20% at least to sell .....
07 April 2011, 10:13 PM
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A valuation is exactly what it says it is, a bes tguess to what your property may sell for in the current market condition, it is not a reflection on what you will actually sell it for and if you sold and purchased somewhere new to move upwards the appreciation would most likely be equal negating any actual gain.
the main thing is your happy that the valuation puts you on top of where you thought you would be and makes you happy :-)
the main thing is your happy that the valuation puts you on top of where you thought you would be and makes you happy :-)
08 April 2011, 06:47 AM
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Andy, one conclusion I've come to over the years is that you can't use national data to figure out your local market. Even though England is a relatively small place local markets differ widely. Central London, due to it's international appeal is an extreme example, but these variations happen all over the country.
The fact that there are whole estates empty in some god forsaken part of Ireland with no jobs means absolutely nothing to desirable parts of England.
And again just because huge discounts are being given on some new build Barratt shoe box sh4t holes up norf is no reflection on the price you have to pay for a house within a catchment area of a good school in London/SE
In terms of investment buying though you will have to put in quite a bit of effort if you want results. I don't need to tell you that the days of buying a flat off plan and then waiting for the capital appreciation are long long gone.
In this market you have to be aggressive and put the time in, and I know some people won't like this, but you have to be a vulture. You need to be in with an Estate Agent and see a number of properties each week and give low ball offers. What you are hoping for is to come across somebody who is desperate to sell because of job/marriage problems etc. I know it sounds callous but the people I know how are still making money from property operate like this.
Macroeconomics means there must be downward pressure on house prices over the next year or two, though don't expect it to be huge in the the desirable parts of London/SE if that is where you are looking. (unless the economy really goes off the rails)
I am intending to actively invest again during this time. The thing is though I have no other option, I can't do what you do. If I had the skill you seem to have with markets I wouldn't touch property with a barge pole, no way will property give anywhere near the the sort of return you get from your market plays in the next 5 years. (Unless you are very very shrewd and spend a lot of time on it)
So as I said I'll be investing in the next 6-18 months but not because I'm expecting fantastic returns. Just because its still a relatively safe investment for somebody like me who can't play the financial markets. I'm also assuming it will be the best time to buy as the job cuts bite and rate rises (or the fear of rate rises) take effect.
The fact that there are whole estates empty in some god forsaken part of Ireland with no jobs means absolutely nothing to desirable parts of England.
And again just because huge discounts are being given on some new build Barratt shoe box sh4t holes up norf is no reflection on the price you have to pay for a house within a catchment area of a good school in London/SE
In terms of investment buying though you will have to put in quite a bit of effort if you want results. I don't need to tell you that the days of buying a flat off plan and then waiting for the capital appreciation are long long gone.
In this market you have to be aggressive and put the time in, and I know some people won't like this, but you have to be a vulture. You need to be in with an Estate Agent and see a number of properties each week and give low ball offers. What you are hoping for is to come across somebody who is desperate to sell because of job/marriage problems etc. I know it sounds callous but the people I know how are still making money from property operate like this.
Macroeconomics means there must be downward pressure on house prices over the next year or two, though don't expect it to be huge in the the desirable parts of London/SE if that is where you are looking. (unless the economy really goes off the rails)
I am intending to actively invest again during this time. The thing is though I have no other option, I can't do what you do. If I had the skill you seem to have with markets I wouldn't touch property with a barge pole, no way will property give anywhere near the the sort of return you get from your market plays in the next 5 years. (Unless you are very very shrewd and spend a lot of time on it)
So as I said I'll be investing in the next 6-18 months but not because I'm expecting fantastic returns. Just because its still a relatively safe investment for somebody like me who can't play the financial markets. I'm also assuming it will be the best time to buy as the job cuts bite and rate rises (or the fear of rate rises) take effect.
08 April 2011, 07:48 AM
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Andy, one conclusion I've come to over the years is that you can't use national data to figure out your local market. Even though England is a relatively small place local markets differ widely. Central London, due to it's international appeal is an extreme example, but these variations happen all over the country.
The fact that there are whole estates empty in some god forsaken part of Ireland with no jobs means absolutely nothing to desirable parts of England.
And again just because huge discounts are being given on some new build Barratt shoe box sh4t holes up norf is no reflection on the price you have to pay for a house within a catchment area of a good school in London/SE
In terms of investment buying though you will have to put in quite a bit of effort if you want results. I don't need to tell you that the days of buying a flat off plan and then waiting for the capital appreciation are long long gone.
In this market you have to be aggressive and put the time in, and I know some people won't like this, but you have to be a vulture. You need to be in with an Estate Agent and see a number of properties each week and give low ball offers. What you are hoping for is to come across somebody who is desperate to sell because of job/marriage problems etc. I know it sounds callous but the people I know how are still making money from property operate like this.
Macroeconomics means there must be downward pressure on house prices over the next year or two, though don't expect it to be huge in the the desirable parts of London/SE if that is where you are looking. (unless the economy really goes off the rails)
I am intending to actively invest again during this time. The thing is though I have no other option, I can't do what you do. If I had the skill you seem to have with markets I wouldn't touch property with a barge pole, no way will property give anywhere near the the sort of return you get from your market plays in the next 5 years. (Unless you are very very shrewd and spend a lot of time on it)
So as I said I'll be investing in the next 6-18 months but not because I'm expecting fantastic returns. Just because its still a relatively safe investment for somebody like me who can't play the financial markets. I'm also assuming it will be the best time to buy as the job cuts bite and rate rises (or the fear of rate rises) take effect.
The fact that there are whole estates empty in some god forsaken part of Ireland with no jobs means absolutely nothing to desirable parts of England.
And again just because huge discounts are being given on some new build Barratt shoe box sh4t holes up norf is no reflection on the price you have to pay for a house within a catchment area of a good school in London/SE
In terms of investment buying though you will have to put in quite a bit of effort if you want results. I don't need to tell you that the days of buying a flat off plan and then waiting for the capital appreciation are long long gone.
In this market you have to be aggressive and put the time in, and I know some people won't like this, but you have to be a vulture. You need to be in with an Estate Agent and see a number of properties each week and give low ball offers. What you are hoping for is to come across somebody who is desperate to sell because of job/marriage problems etc. I know it sounds callous but the people I know how are still making money from property operate like this.
Macroeconomics means there must be downward pressure on house prices over the next year or two, though don't expect it to be huge in the the desirable parts of London/SE if that is where you are looking. (unless the economy really goes off the rails)
I am intending to actively invest again during this time. The thing is though I have no other option, I can't do what you do. If I had the skill you seem to have with markets I wouldn't touch property with a barge pole, no way will property give anywhere near the the sort of return you get from your market plays in the next 5 years. (Unless you are very very shrewd and spend a lot of time on it)
So as I said I'll be investing in the next 6-18 months but not because I'm expecting fantastic returns. Just because its still a relatively safe investment for somebody like me who can't play the financial markets. I'm also assuming it will be the best time to buy as the job cuts bite and rate rises (or the fear of rate rises) take effect.
I am very cautious on commiting capital to lesser liquid avenues, but i think looking at this avenue is prudent as i see a different picture for the macro environment in the next 10 years and it adds an element of diversity to how i work my money and gives me a tangible asset. However the housing market isn't something i've ever gave any attention towards as i've been so narrow minded not to expand out from what i know best. Food for thought though, but you are right the upside is likely to be 25-40% where as there are much better propositions in more liquid instruments that can yield a better result than that in a shorter space of time! The old adage "if it isn't broken, don't fix it" springs to mind
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