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How I won the housing market without trying

theguardian.com

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Re: How I won the housing market without trying

#101

Post by NotableAlamode »

NotableAlamode wrote: post #48
AmirS2 wrote: post #37

Earlier quoted context omitted.

These buy-to-leave flats are generally newly built (and were bought off plan), in high rise buildings with concierge / security, so there are no worries about heating, burglary or squatting... I'd guess the price of these is around £350k - £1.5m (for a reasonable 1 - 3 bed flat in a new build), which is well within the reach of well off foreign middle class investors.

It is within reach, but it would be financially wildly imprudent to forgo the £1000 - £3000 monthly rental income that such properties would fetch. Bear in mind that you will have to pay council tax and other fixed costs anyway. It would be a desperately terrible investment, much worse than other, more liquid assets. The global middle class cannot afford such investments. Maybe members of the Saudi royal family, but…

It's interesting that I'm being downvoted for the message above. What's wrong with it?

Incidentally, I just had lunch with an architect and a guy who runs a building company, both London-based. I asked them about this. They both agreed that no sane investor would leave flats bought as investments empty. Investment means basically having tenants. The agreed that there is a media-driven moral panic about this. The architect said he had one client who had a 12 bed-room house in central London that was empty for most of the year ... that customer was a member of Kuwait royal family.

Re: How I won the housing market without trying

#102

Post by pjc50 »

barrkel wrote: post #95
pjc50 wrote: post #71

Earlier quoted context omitted.

50k is a 90th percentile salary for the UK as a whole and competitive for non-London non-senior management software dev jobs.

Perhaps the context of this thread has been lost. It started out with me asserting that you get poor return outside of London. Personally, I think there's little point in living in the UK outside of London. There's far nicer places to live if you're willing to take a hit in salary. (And no, I'm not British.)

What places would you suggest?

My argument was a PPP and quality-of-life one, really. Moving to Edinburgh has worked out quite nicely in that regard.

Re: How I won the housing market without trying

#103

Post by pjc50 »

lucaspiller wrote: post #97
brianmcc wrote: post #59

Earlier quoted context omitted.

There are pockets outside London where demand for developers is very high. Don't be fooled into thinking it's London or nothing for the UK workforce. I'm in Central Scotland, and there's a thriving tech thing going on here.

In my experience jobs outside of London have a much lower earning potential. I went to university in Devon, and there are a fair few tech jobs around there, but even as a senior developer with 10 years experience I wouldn't get much more than £40k. Instead I moved to London, and was getting more than that two years after I graduated. Sure London is more expensive, but if you don't mind commuting you can live further…

Central Scotland = Glasgow, Edinburgh and places along the M8 (eg Oracle at Linlithgow). http://en.wikipedia.org/wiki/Silicon_Glen also includes Dundee which isn't quite "central" but has a games cluster centered on Abertay.

It's a good way south of the centre of a map of Scotland, but it's the area where people are concentrated.

Re: How I won the housing market without trying

#104

Post by brianmcc »

lucaspiller wrote: post #97
brianmcc wrote: post #59

Earlier quoted context omitted.

There are pockets outside London where demand for developers is very high. Don't be fooled into thinking it's London or nothing for the UK workforce. I'm in Central Scotland, and there's a thriving tech thing going on here.

In my experience jobs outside of London have a much lower earning potential. I went to university in Devon, and there are a fair few tech jobs around there, but even as a senior developer with 10 years experience I wouldn't get much more than £40k. Instead I moved to London, and was getting more than that two years after I graduated. Sure London is more expensive, but if you don't mind commuting you can live further…

In general you're probably right. I guess it's finding the exceptions that are out there that's difficult, and as you say, for someone based in the south of England, the middle bit of Scotland is pretty obscure.

There is a body, IIRC, promoting Scotland and awareness of its growing activity in tech as a place to come and live and work. Perhaps not "Mission Accomplished" quite yet :-)

Re: How I won the housing market without trying

#105

Post by prostoalex »

duckingtest wrote: post #81

Real estate is so expensive around the world now because of unfair tax policies. True wealth creation is taxed mercilessly via a multitude of income taxes, while gains from real estate are often not taxed at all, even though they're completely unproductive. A person holding a land in the city for 25 years didn't make anything new, their profit is a direct zero-sum transfer from someone else. How is that fair? The net…

Extrapolating the data from the US http://taxes.about.com/od/statetaxes/a/property-taxes-best-a... the states with highest property taxes (New Jersey, New Hampshire) don't seem to be the economic powerhouses compared to the states with ultra-low property rates as the theory would imply. (The rates there are on "property value", so the rate for land value would be higher than indicated.)

> A person holding a land in the city for 25 years didn't make anything new, their profit is a direct zero-sum transfer from someone else.

For one, he took the opportunity risk of locking his liquid capital into a piece of land, which only accumulates property taxes, as opposed to owning a bond or a stock that pays dividend or interest. When you calculate the IRR, land doesn't necessarily come out ahead of S&P 500 over longer periods of time.

For two, he took on the appreciation risk - the land is not guaranteed to go up in value all the time.

Re: How I won the housing market without trying

#106

Post by prostoalex »

junto wrote: post #14

What is interesting, is that the policy makers have a financial interest in ensuring that the housing market does not crash. Therefore every time it should have crashed big time (2001, 2008), the BoE has propped it up by making sure that borrowing remained dirt cheap and the government made sure that the market stayed liquid (raising stamp duty levels for example). Every time they do this, they just exacerbate the pr…

> What is interesting, is that the policy makers have a financial interest in ensuring that the housing market does not crash.

Exactly. Moreover, the housing value is tied into things such as total wealth (which is why after the 2008 crash the wealth of middle-income and low-income Americans crashed, too much of it was tied up into housing equity), which then ties into economic outlook and consumer spending, which then ties into lending and all things finances.

Presidents and parliament members do get voted out when there's a severe contraction in consumer spending and generally depressive feelings about economic outlook.

Re: How I won the housing market without trying

#107

Post by prostoalex »

buro9 wrote: post #18

I saw a startup tweeting yesterday about a shared investment. The gist is that instead of investing in stocks and shares, you put your money into property and a shared structure gives you some % of the property in question. The startup actually owns the property, and there is some legal allocation of your portion, and they offer the means to exit your share of a property without the property itself needing to be sold…

This has been around, if you buy the house under LLC, you can divvy up the equity whichever way you want it.

How's liquidity provided when there's no "next investor"?

Re: How I won the housing market without trying

#108

Post by duckingtest »

prostoalex wrote: post #105
duckingtest wrote: post #81

Real estate is so expensive around the world now because of unfair tax policies. True wealth creation is taxed mercilessly via a multitude of income taxes, while gains from real estate are often not taxed at all, even though they're completely unproductive. A person holding a land in the city for 25 years didn't make anything new, their profit is a direct zero-sum transfer from someone else. How is that fair? The net…

Extrapolating the data from the US http://taxes.about.com/od/statetaxes/a/property-taxes-best-a... the states with highest property taxes (New Jersey, New Hampshire) don't seem to be the economic powerhouses compared to the states with ultra-low property rates as the theory would imply. (The rates there are on "property value", so the rate for land value would be higher than indicated.) > A person holding a land in t…

>the states with highest property taxes (New Jersey, New Hampshire) don't seem to be the economic powerhouses compared to the states with ultra-low property rates as the theory would imply

These are property taxes, not land taxes, unless the article is lumping them. A property tax doesn't provide incentives for more efficient use of land, on the contrary actually.

Even if they were land taxes, they would be way too small for a meaningful difference. Also the biggest effect would come from replacing income tax with land tax, as the most productive people would gain the most, and presumably invest the gain in whatever productive thing they're doing.

>For one, he took the opportunity risk of locking his liquid capital into a piece of land

>For two, he took on the appreciation risk

There's nothing valuable in risk. Your argument works even better for buying a piece of a rock for a million dollars and expecting profits, as the opportunity risk and appreciation risk are way higher than buying a piece of land.

Re: How I won the housing market without trying

#109

Post by vacri »

nl wrote: post #100
tonylemesmer wrote: post #38

Earlier quoted context omitted.

Individual loan products from lenders would have been slightly different to rate shown in the graph. So "almost 20%" isn't that far off.

I'm old enough to remember rates in the 80's (though not old enough to have had one!). And I have a loan now, and the rates almost exactly match the rates in that table. Here's another reference: http://www.abc.net.au/news/2007-08-08/the-reality-of-interes... 17% was as high as they got for mortgages.

Well, I guess my argument is completely blown out of the water because they peaked at 17% (I guess 17 is not near 20...) instead of 18-19%, and averaged around a couple of percentage points lower. Hardly a "pretty big exaggeration".

It doesn't change the fact that mortgages, regardless of the percentage rate, were still not 'easy' back then. The smaller mortgages were not being paid off with today's rates and today's pay packets. They also had fewer flexibility features (things like redraw or offset accounts).

Re: How I won the housing market without trying

#110

Post by prostoalex »

duckingtest wrote: post #108
prostoalex wrote: post #105

Earlier quoted context omitted.

Extrapolating the data from the US http://taxes.about.com/od/statetaxes/a/property-taxes-best-a... the states with highest property taxes (New Jersey, New Hampshire) don't seem to be the economic powerhouses compared to the states with ultra-low property rates as the theory would imply. (The rates there are on "property value", so the rate for land value would be higher than indicated.) > A person holding a land in t…

>the states with highest property taxes (New Jersey, New Hampshire) don't seem to be the economic powerhouses compared to the states with ultra-low property rates as the theory would imply These are property taxes, not land taxes, unless the article is lumping them. A property tax doesn't provide incentives for more efficient use of land, on the contrary actually. Even if they were land taxes, they would be way too s…

> These are property taxes, not land taxes, unless the article is lumping them.

I am not sure I understand. The property tax in the US is the tax on land + additions, both subjects to appraised value, so yes, the rates listed do include both.

> Also the biggest effect would come from replacing income tax with land tax, as the most productive people would gain the most

How would this be sustainable for farmers or ranchers? If they have to radically increase their prices to account for new 30% land value tax, does the society benefit or lose?

> There's nothing valuable in risk.

He provided liquidity to the market when somebody was willing to sell that piece of land. If you're taxing someone for providing liquidity, the price of the underlying good will plummet, as that removes incentives for current buyers, and then you're back to square one - low tax revenues collected from land owners.

> Your argument works even better for buying a piece of a rock for a million dollars and expecting profits

People do invest in gold and silver.

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