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On Thu, 27 Apr 2006 22:15:24 +0100 Grunff wrote :

Yes you have a net income of say 3% but this should, over the long term, increase with inflation, whilst your capital also increases. The same would be true of investing in a blue-chip company where the yield would typically be 3% with a steadily increasing share price. So in pure investment terms I would suggest that buy-to-let properties are not overvalued.
My instincts are that house prices are what stockbrokers call fully valued - i.e. a quick gain is highly unlikely. What would be nice to have would be a collection of Daily Express front pages of the last few years that have alternately told people that house prices are set to double or crash.
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Tony Bryer SDA UK 'Software to build on' http://www.sda.co.uk
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wrote:

Considering that the majority of crashes have been "complete surprises", the best way to ensure that house prices keep climbing is to expect one.
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Mike Halmarack
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Tony Bryer wrote:

As would your 4.5% interest on a savings account.

But that's the flaw right there - what you're saying is that to make it a worthwhile investment, you are relying on the value of the stock to rise. This is fundamentally unsound for any type of stock. The return that a stock provides should not be contingent upon future increase in the value of the stock.

I would expect a higher yield, or I would not invest in that company :-)

I would say that in order for buy-to-let property to be at the right value to make a good investment it would need to provide a return of 6-7%. This means it would be slightly outperforming a savings account, and paying for the maintenance. There are very few properties that you can buy today in the UK which will provide you with that return.
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On Fri, 28 Apr 2006 13:19:37 +0100 Grunff wrote :

Why is it fundamentally unsound? 3% from a company that has every likelihood of growing year on year is much better than 10% from a company that is going downhill.
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Tony Bryer wrote:

Not what I meant. The value of an asset, be it stocks, property, or anything else, should only reflect the current return available from the asset, and not any possible future growth in the value of the asset.
In other words, if an asset is increasing in value purely because people believe that it will continue to increase in value (and not because it is providing a higher return) then it is not a sustainable situation.
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Grunff wrote:

But where will that correction come, reduction in house prices or increase in rents? The rental market is being flooded by novice landlords encouraged by gushing do-up-and-rent programs, but this is a (tv program) marketing bubble that will burst as more and more people notice that the ideal promoted by said programs is simply ballcocks.
So which will it be, and why? I would think rents have to increase, property values I dont know.
NT
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snipped-for-privacy@gmail.com wrote:

My observations in Kent are presently:
a) Everything, even in the crappier local towns, is hideously overpriced by any standard.
b) Houses around 200k are being sold in days/couple of weeks in a moderate percentage of cases, partly due to that being the max a wide band of people round here can manage if they get a silly mortgage. So the market is still apparantly boyant in one sector.
c) As previously mentioned, more expensive houses are languishing for ages - longer than normal. So something's changing.
d) People round here are starting to get worried about their jobs, bonuses are being cut etc.
e) The graph at the top of this page:
http://www.housepricecrash.co.uk /
looks (based on nothing more than previous trends) to be about to tip over good and proper.
I've put a fiver on it all crumbling in a couple of years or less. But I could be hideously wrong, because our economy is structurally different compared to ten years ago - more tie in with the EU (migrant workers for one) and China is currently excelling at flooding the UK with cheap products.
As our resident Professor of Economics explained to me the other month, economic models *can* be very accurate until something fundamental changes (world crisis, oil price goes mental etc) then all bets are off and you need to come up with a new model.
I don't really know, make my braincell hurt.
Cheers
Tim
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There still seems to be plently of property developers and landlords buying at present - in my neck of the woods, at least.
Mark
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