The house prices in Britain grew at an average annual rate of at least 10 times higher than in other developed countries like Japan and Switzerland, and two times faster in the United States. The research by Policy Exchange, a right-wing think-tank, shows that since 1970, prices increased by over four percent a year after inflation.
House prices in Britain have risen for 13 consecutive years and in the past decade, the increase is particularly steep. The pricean average house rose by 70,000 € when Labor came to power in 1997 to today, nearly 200,000 pounds. During the same period the price index increased by only 30 percent.
If the owner of Sale & lock-in profits
All this suggests at first glance that an owner must sell now and then in the gains that have in recent years living on their purchases lock-to-let investment.
However, a simple analysis of the numbers that show how the value of propertyRisen is not always a clear indication that the type of value of assets. Any investor who has observed the rise in gold price in recent years, may review, also ob owners who have seen the value of their property investments to double in the first part of the millennium, only to see them go higher, the per value of the road until the end of 2007 is expected to grow to much of the capital, where they pointed out, have lost this vision made and sold.
An assessmentthe correct value of homes and investment residential real estate is much more complex than "prices have increased, and then sell much of their time.
We as the owners really need to understand the factors that the value of residential investment and pushing the housing market.
A key factor is accessibility.
Accessibility
The fact remains that the buy-to-let is investment in a property market that is still dominated by property owners. Therefore, an important factor in determining aPrice of a property is accessibility, in particular by the great majority of customers who purchase a property for owner occupation.
Traditionally, the key metric to earnings multiple of the average value of the property. Historically, this development was 3.5 times the average income of households, now stands at about 6 Some economists argue that this measure is most relevant results, due to a paradigm shift towards the low interest rates along term, which is many times higher than sustainable.
In the '80s, interest rates were mostly or near double digits in '90, probably average 6-7%. This is still high and the current level, especially if the fact that the loan, that the margins have declined to say, the borrower will pay the difference above the base rate. In the 90s ranged between 1-2% before the recent credit crisis, is reduced in some cases to zero needed to reduce the effective cost of a mortgage even more. Even today, after '> Credit crunch, you can get a tracker to life and 0.89% to 6.39% above the Bank of England base rate.
House-price "Bulls"
As the cabin "bull" (people who still believe we are in a growing market) argue that what is most relevant for evaluating the accessibility of housing is the proportion of household income each month to the care of the debt is paid housing. Finally, they argue, do not know, people think of multiples or margins to assess whether they can affordProperties.
His first idea of what it costs per month and what they have income after taxes and other families of vital importance. For the indication that we can put in the statistics of the Council of Mortgage Lenders (CML) are available. These statistics make interesting reading. The good news for the bulls is that the latest data on interest payments as a percentage of average family income of 18.8% was in November 07, which is well below the 27.1% achieved in firstPart of 1990, when the collapse of housing prices in the early '90s.
It should be noted, however, that the high level of interest rates, was 15% achieved on. It 'important that the growing number of the highest since 1992, when the housing market continues to languish in the depths of the housing is the last depression. Although these data are not conclusive it shows that by any measure, the cost of maintaining a ceiling mount housing debt toOn future increases in house prices.
Earnings
One measure that has always been popular with investors in property is the gross return.
For the home side with a good memory, may be able to remember if some were on a property of gross investment in double figures. E 'was also able to guarantee until relatively recently that many residential owners a fair return on their investment property. But for many homeowners that day went. Small Rentalincreases were not sufficient to maintain the values of capital increase and interest rates rising.
The result is that the latest Association of Residential Letting Agents (ARLA) review shows that recorded a gross turnover of less than 5% decline on average in the United Kingdom. This drops to 4.6% when taking into account the empty rental. If charges are for the administration is continuing, then the return may fall below 4%. All this means that many owners are now subject to an outflow of funds, which will remain with themfor a number of years, while increasing the rents and / or interest rates fall.
Housing "fully valued", said I should not sell?
In conclusion, then it appears at first glance that the British house fully evaluated. Therefore, the owner must sell now and lock their profits? The decision whether a buy-to-let as an investment property is not as simple as it seems at first to be a landlord. For example, here 5 things to consider before a landlord are set for theirbuy-to-let property for sale:
1 E 'the case of small capital gains tax (CGT)
The Chancellor is proposing a new tax system, with a range of 18% for all. However, this is still fairly close to one fifth of all profits made by the owner. If a landlord has its assets held for 10 years or so, which is a relatively high percentage of the total value of their assets so that they have significantly fewer assets to invest in alternative energies for sale.
2.The sale of a residential property investment is not cheap.
If a broker is involved, including costs and attorneys' and the new Home Information Pack (HIP), a landlord is probably a minimum of 1.5% of the value of their property and could easily be a 2.5 or 3% specific cases, property held as investment property in London.
Sell 3.On top of this, a landlord, their lives and / as an investment property to be judged best is probably associated with their buy-to-let free propertyThat is, without possession of the tenant.
In this way, a householder living as an investment property also appeal to almost 90% of the housing market, living in the property. This means that the investment property is empty and no rent is received during the sale period. A situation can be particularly painful for a host, where they hold a mortgage in place, not because they were absent only on rental income, but are having to pay for It Out "dead capital"while the property is sold. Even worse, each speculator knows they are opportunist and it is assumed that the owner is in trouble and has to sell. So prepare and just in time for this offer will be silly, if you're the lucky owner of a business "trophy" means the property.
4. Many owners also purchase residential property for security.
In a world of growing Family & Relationship resolution, with an additional property should be in worseis considered by many owners of an insurance against themselves or a member of his family homeless. In addition, many owners have invested much time and effort to acquire, renovate and decorate their buy-to-let investment so that the sale of its full buy-to-let as an investment property is a big step for many owners to maintain.
5.The 'another dilemma for owners is that a fund be released after the sale of their residential investmentProperties.
Many owners have "points" of previous investments in other asset classes such as shares. Whist the short-term gains are potentially higher, these investments are much more volatile than investing in physical assets such as residential real estate held as investment. Savings banks are currently attracting a large decrease in interest rates in the magnitude of 6%, but many experts predict that interest rates during 2008, which means that the interest rate as low as 4.5% couldEnd of the year, a substantial reduction in investment income.
Long-term rentals
The reality is that for the hosts is not easy to respond quickly to trends in the housing market. For example, to sell now and then wait 12 months to buy at a low level. For a start on a cost basis, the transaction costs of purchase and sale is scheduled for 5% for the establishment of an investment in terms of brokerage commissions, legal fees and the amount of stamp duty was then taken a.There are practical problems and the time of identification of an appropriate housing as an investment property, the agreement of the transaction and then left in a lettable condition, not to mention finding suitable tenants. This probably goes a long way to explain why a recent study has revealed the Alliance & Leicester, which was the average duration of the landlord that hold the investments planned for her 18 years. This means that most owners choose to pursue a long-term approach, and then "deny" anyShort-term weakness in the housing market.
Financial sustainability & Opportunities
An important goal for the hosts, now would be to ensure that their portfolio of investments in residential housing is financially sustainable. Owners must have their cash flow to concentrate and have a conservative view of projected future price of goods.
The nature of the housing market in crisis, seems to be the expected result for the housing market in the United Kingdom in 2008, which can be exploited to increaseResidential investment opportunities. Distressed sellers buy recovery-to-let as an investment property at auction, all to make good investment potential, if a landlord was a lot of research, not for a loan and invested in a cow "cash" with a traditional mortgage repayment. In this way an owner is protected by all downward turn in housing values, as the tenant pays for the costs associated in connection with such investments. A loan repayment providesever smaller amount of the loan that the owner of a net to protect, also live in times of little water falls in property values.
So my thought that the owner thinking of selling has to think through their decisions carefully and make sure they are comfortable, which is the right choice long term for them. Even for some landowners, who should see the current turmoil in the credit markets and the collapse in property prices as buying opportunity long term. Onewhat we are sure that the owners can no longer count on revenue account of the values of homes, which are used to in the past ten years. If a landlord decides to buy or sell, they should ensure that matches their investment strategy for this reality, "new".
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