bearishbull said:
JohnBoy said:5% looks good compared to Irish rental yields but it is still a poor return compared to the alternatives available to a UK investor. Moreover, currency movements (unless you are hedged) will ultimately neutralise the differential between euro funding and sterling return.
to an investor looking at these properties you need to ask yourself why a 5% (gross I assume) rental yield is an acceptable return from a medium risk asset class in a country where you can get 5% on deposit.
it seems to me that a lot of these properties are being sold to overseas investors because the locals cannot see value in them
propertyprof said:You would be getting 5% in the city centre and higher in the suburbs plus there is great chance of capital growth in the southern suburbs imo
Propman said:If you are new buyer in Manchester, the deals are getting better. In recent days, I have seen deals with guaranteed rental income (meaning no voids) for 5 years @ 5.4% net yields (no letting or management charges, service charge or ground rent to pay).
JohnBoy said:capital growth is impossible to predict. the value of any investment ought to be based on the present value of future cash flows - a yields of 5%-6% would not generate adequate net income to make this investment attractive as an income generator. consequently, the greater part of the future value is speculative as it relies on capital gains.
The definition of net yield I am using is:JohnBoy said:5.4% net yield is bloody impressive - this means that the gross yield must almost 9% assuming you are funding this via a € mortgage. are you sure that these figures are correct? if so then there is a lot more value here then I would have thought.
JohnBoy, we will just have to agree to disagree that "the value of any investment ought to be based on the present value of future cash flows".JohnBoy said:capital growth is impossible to predict. the value of any investment ought to be based on the present value of future cash flows - a yields of 5%-6% would not generate adequate net income to make this investment attractive as an income generator. consequently, the greater part of the future value is speculative as it relies on capital gains.
JohnBoy said:you are right there is no point in rehashing the Great Property Debate. property price inflation in the UK actually has picked up again this year but if it does not calm down again you ought to expect at least one more rate increase from the BoE.
Just on the "capital growth strategy" point being quite naive, a capital growth strategy is how 99% of investors in Irish property have made money in Ireland in the last 10 years. They certainly have not made money from an income strategy.bearishbull said:north of england wages are far lower than south east. cost of finance is also significantly higher. rates rose today which was a suprise when many buyers were expecting a cut soon. i think there'll be significant price falls in manchester in next year. a capital growth strategy is specualtion plus theres little growth left in uk market . any capital growth has to be eventually underpinned by fundametals, the "capital growth strategy" advocated here seems quite naive.
I didnt say all capital growth stategies were flawed,just ones that are based on near pure speculation, there were many fundamentals like undersupply and economic growth that fuelled the irish boom and made a capital growth stategy viabel and attractive .just because prices have risen dramatically recently doesnt mean speculators will emerge with those paper profits , past performance is no guide to future performance. irish prices still are appreciating fast so why dont you have all your money in there? theres more to a capital growth strategy than riding a speculative wave. Theres tons of properties coming online in northern england where prices have actually fallen in many places during last year, speculating in a market where theres oversupply or close to oversupply rising interest rates and economic uncertainty seems naive.Propman said:Just on the "capital growth strategy" point being quite naive, a capital growth strategy is how 99% of investors in Irish property have made money in Ireland in the last 10 years. They certainly have not made money from an income strategy.
On UK fundamentals, the short term outlook is not as strong as other markets but if you have a long (10+ years) term strategy, then UK property still looks undervalued.