Reply To: Spain, Ireland and threats to the property boom


Money to invest put it under the mattress! Cash will soon be king! But what currency or maybe gold? Decisions are soon going to become a lot tougher.

Apparently something like 3% of all UK housing stock is currently empty. I’m sure the new build city centre Meto lifestyle apartments that are springing up in every town and city are contributing to this. What people really want are 3 and 4 bed family homes near jobs and good school. The market can’t always deliver what is needed.

In the UK demand for property has been and still is artificially high due to the current low barriers to entry of obtaining lots of debt, and the assumption that it’s wise to take on that debt, due to the current perception where people believe property makes you money as opposed to costs you money (beware when the shoeshine boy/hairdresser starts giving BTL tips!) As prices have risen, rental yields have fallen. People have continued to make discretionary purchases of property (BTL, Fly to let, holiday homes etc) based on the assumption that capital growth and income will out strip operating and borrowing costs.

Sentiment in the UK regarding property investment has been changing slowly over the last 18 months I think that’s about to accelerate. I have a wide circle of friends and business associates, many of whom own properties abroad and BTL in the UK. Two years ago everyone was bullish but recently people seem increasingly honest/negative about rental cashflow/operating costs and the ability to liquidate overseas investments for a sensible profit. Many came very late to the UK BTL market and (especially in the 2 bed flat market have little if any capital growth over the last few years), cost are going up and rents are pretty static. The fact that many mew’d the deposits out of the ‘equity’ in their family home increses the exposure. It doesn’t take much for sentiment to turn really negative and it doesn’t take a huge increase (above the long term average) of people to become distressed seller to turn the market.

Apologies if this appears a poorly constructed rant.

As with the previous post all JMO.