Thoughts on property prices

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j2 lot
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Thoughts on property prices

Post by j2 lot » Thu May 14, 2020 5:42 pm

I am now in the fortunate position to be looking to invest in some rental properties. I was about to offer on a couple of local flats in January but a family bereavement meant I missed the closing date. There are a few other properties I viewed and was considering when the world imploded and viewing & conveyancing stopped so there’s nothing can be done in the short term & interestingly the earlier properties appeared back on the market as the deal apparently wasn’t concluded & fell through.
So, as per title will there be a drop in prices due to general downturn, will pent up demand over the last few months keep prices stable or even result in a rise .... discuss.
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ed
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Re: Thoughts on property prices

Post by ed » Thu May 14, 2020 8:36 pm

Good question.

Rents are on a downward trend in Edinburgh in my experience. (Possibly overdue!) Short term lets are flooding the market and too much uncertainty over students and when term will restart.

I can’t see how you could go wrong long term but the current restrictions on being able to move are frustrating. (To say the least!!)
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c8rkh
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Re: Thoughts on property prices

Post by c8rkh » Thu May 14, 2020 8:50 pm

The impact of AirBnB lets being down, the lack of movement etc I think evidences that there may be a few enforced sales if this continues for too long.

Could be some bargains coming up.
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Re: Thoughts on property prices

Post by douglasgdmw » Fri May 15, 2020 8:15 am

I have a rental property up in Aberdeen which I share with my sister.

Due to the downward trend in rental values, reduced benefits from the government (e.g. 10% offset of wear & tear has been abolished) and me earning a decent salary, has meant that the return I get has reduced dramatically over the 4 years that we have had the flat.

Due to the lack of "professional" demand in Aberdeen, the last couple of years has meant that we have had to rent to students. Our 2 female students came out of the property a month ago and after the inspection it looks like they have cost us far more than the deposit due to the state they have left the place in - nothing dramatic but the amount of touch up to walls and the possible replacement of sofa/mattresses due to staining means we are going to be well out of pocket.

Having a couple of properties on your books may mean that you can get a better return, however even with management fees the previous view of rental properties generating a decent income for an individual means you have to be in for the very long term and hope that property prices rise to generate a substantial return.

Also something to bear in mind is the "hassle" factor - as even with a management company you still have to spend your own personal time chasing things, paperwork and obviously the hassle of filling out a Self Assessment each year - this is where Dom has been a godsend for me making sure I am not doing anything outside of the tax rules :D

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Re: Thoughts on property prices

Post by Dominic » Fri May 15, 2020 9:12 am

douglasgdmw wrote:
Fri May 15, 2020 8:15 am
I
Also something to bear in mind is the "hassle" factor - as even with a management company you still have to spend your own personal time chasing things, paperwork and obviously the hassle of filling out a Self Assessment each year - this is where Dom has been a godsend for me making sure I am not doing anything outside of the tax rules :D

George
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j2 lot
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Re: Thoughts on property prices

Post by j2 lot » Fri May 15, 2020 10:17 am

I will do that Dom, long over due a catch up and need some of your financial wisdom sprinkled on my finances. :thumbsup :D
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j2 lot
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Re: Thoughts on property prices

Post by j2 lot » Fri May 15, 2020 1:01 pm

To respond to some of the other points:
It is expected to be a long term investment
I have time to invest in running of any property as I am now semi retired.
Property is to boost my pension & part time work income so a steady rental amount is the ideal (& has to be better than current interest returns)
My brother & I already rent out our old family home down south so know the hassle factor that can be involved in renting.

I know the only price that matters is when you buy and when you sell but I don’t want to pay more than I need to if the market is going down. I guess timing is everything!
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greido
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Re: Thoughts on property prices

Post by greido » Fri May 15, 2020 3:20 pm

Agree, timing is everything and I think prices will fall slightly in the short term and there will be bargains to be had as I expect there will be a lot of distressed sellers, especially when furlough ends and we can see the lie if the land. Depending on what happens in the wider economy will drive property values.
Where I am with property at the moment is observing what happens and plan to add to my portfolio with an eye on long term growth. I believe that in order for the government to pay off the debts being racked up by the Covid crisis is to devalue money via inflation, therefore, buying at the right time should prove to be worthwhile in the long run.
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Re: Thoughts on property prices

Post by Rosssco » Fri May 15, 2020 4:26 pm

I may be being a little over-simplistic, but it seems more likely short-term prices will fall rather than rise on the back of a very deep local and global recession / depression. Although no doubt there will be localised hot spots that will still be very attractive. A certain percentage will also likely shift to home working over the next few months / years in all probability, meaning inner city properties may become less attractive.

Lastly, we might see more government action (tax reductions, cutting of red tape) to try to boost affordable housing as a method to invigorate the economy in the medium term, which depending on the property type, may weigh on values..
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robin
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Re: Thoughts on property prices

Post by robin » Sat May 16, 2020 10:18 am

Hi,

What is it that attracts you to property instead of say stocks and shares?

I've thought about it a few times and never persuaded myself it was a good use of cash.

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j2 lot
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Re: Thoughts on property prices

Post by j2 lot » Sat May 16, 2020 11:30 am

I think I am more comfortable with something tangible that is always going to have a value and in the meantime provides a monthly cash return.
I have dabbled in shares but there is a risk of total collapse, and the money invested is effectively my pension so I can’t afford to loose it all.
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robin
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Re: Thoughts on property prices

Post by robin » Sat May 16, 2020 1:50 pm

Interesting point of view. Historically despite many ups and downs, neither class of asset has faced complete wipeout across the whole market, but individual cases have in each.

For example, Enron returned essentially zero to its investors.

People who invested in properties in off plan rental properties just before 2008 crash were in many cases left with nothing - they might have taken possession but couldn't ever get a tenant before the bank lost faith and foreclosed on the loan. Whatever equity the buyer put in was clearly lost. If you were unlucky you had to put more money in to pay the difference between the firesale price achieved by the bank and what you owed them!

Total loss is best avoided by diversification. It's hard to diversify property unless you've got multi-millions to invest.

I would seek independent financial advice before committing "effectively my pension" funds to some properties or pretty much any other investment for that matter! You don't have to take their advice, but they should help describe the risks and returns associated with each class of asset.
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j2 lot
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Re: Thoughts on property prices

Post by j2 lot » Sat May 16, 2020 5:34 pm

Useful thoughts Robin, appreciated, & financial advice is next step. I see property as a safer bet in that I will be purchasing outright so non occupancy and crash in value doesn’t pose a risk other than upkeep. The downside is it’s not easily cashed in if the need arises whereas stocks can be sold quickly. I guess I know more about property than I do about shares although still a novice on property too.
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Re: Thoughts on property prices

Post by Lazydonkey » Sat May 16, 2020 7:30 pm

We are selling Shell's flat this year after getting rid of mine a few years ago. For us the hassle outweighed the benefits. I reckoned every call from my letting agent cost me £500 min.

My flat went down £10k in 10 years and Shell's looks like it might make about the same in 12 years.

I guess if it's a cash purchase then it's a different matter but for us, when finance was involved it's not something i'd rush to do again.
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Thoughts on property prices

Post by campbell » Sat May 16, 2020 11:20 pm

What Robin said.

If you can self-maintain / self-manage your rentals, there is a living to be made. I know someone doing this (just). But otherwise ...

... Get a referral to a good IFA and start from there.

I can suggest 2 to get you started ;-)
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