Is London at top of cycle?

How do people feel about London in the short-medium term i.e.2-5 years.

DO people think it is at the top of its cycle and in danger of a crash ?

Or is it anticipated that it will see reasonable single digit growth for the forseeable future?

I think it will flatten out in the next year as interest rates are expected to rise. However it should be steady until the Olympics

HTH

I think the whole of the UK is at the top of its cycle and a crash or stagnation is almost a certainty over the next 2-5 years.

Clearly London cannot continue growing at 30% per annum. Previous to this spurt it had grown massively between 2001-2004. I don't get the whole 'rich foreign investors' argument for proping up the whole of the London market. The top end properties maybe but the general population cannot afford to still see price increases.

The recent rate rises have also yet to take effect. I think in 6-9 months the whole market will be far more bearish.

I agree with ringledman. The Olympics are a bit of a red-herring. If there is to be a boost to property prices on the back of this project then it has already taken place. The BoE will continue to raise rates until both inflation and house prices moderate. Average prices are already out of the reach of most so it is difficult to see what could drive this market higher. Also bear in mind the current government's plan to dramatically increase the number of houses being built - this will obviously increase supply.

To boot - tightening credit markets have put a lot of private equity/LBO deals on hold. The health of the financial sector is a crucial determinant of London house prices and it looks as if this particular sector is heading towards a slowdown.

Belfast house prices are more expensive than London.

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Therefore maybe London is underpriced.

Then again, it may be that Belfast is vastly overpriced.

I would look at a selection of the bull/bear sites in the UK for any area you are thinking of buying in. As I have lived through a property crash and a severe downturn in the UK, I am a little bit bearish when it comes to property, so I only know of the bear site!:
http://www.housepricecrash.co.uk/forum/

podd said:

Belfast house prices are more expensive than London.

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Therefore maybe London is underpriced.

Then again, it may be that Belfast is vastly overpriced.

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WOW! 54% increase in a year, thats amazing

I think much of the price rises in Belfast have been driven by investors from the south. Wages are very low in Belfast compared to London.

Yields are lower in Belfast than in London when comparing to current prices.

It should also be noted that the number of properties for sale in NI has more than trebled since the beginning of this year.

Quite a substantial increase in supply!

It seems fairly obvious that London is a better bet than Belfast. (That's not to say London is a good bet, as obviously I nor anyone else knows).

yoganmahew, this "crash" site is a bit rubbish and only really full of negative comments so it doesn't give a balanced view. some of the areas people talk about is well outdated now.
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i bought a 2 bed apartment in Barking, East London for £140,000 in mid 2004, now valued at £185,000. it's a good big apartment right in the centre of barking town and will sell easily when the time comes round i.e. prob sell in 2015. it is let to Newham council on a 5 year lease at £820 pm and i have no outgoings for the property apart from the mortgage. property should always be viewed as a long term investment in the current climate.
i recently bought a 3 bed ex-local authority flat in enfield, en2 for £165,000, fixed it up and now worth about £210,000 but have let it on a guaranteed rent scheme to enfield council at £975 pm with no costs to me.
so i guess what i am saying is, if you can find the right property and get a good rent on it and tie in to a good fixed rate mortgage, then there is not a lot to worry about re. investment in London for example.
there is massive demand for housing from what i see. i dont do any private lets (too much hassle believe or not). i like letting to the council and i like to seek out properties that need work doing to them as i can add value straight away.
property investment is not easy and not for everyone and you need lots of contacts to make your life easier.
i also only buy in north east london and east london so everything is on my doorstep and easy to manage and i can use the same network of people within my area like the same plumber, electricians, handymen, etc.
lorna

lorna said:

yoganmahew, this "crash" site is a bit rubbish and only really full of negative comments so it doesn't give a balanced view. some of the areas people talk about is well outdated now.

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Hi Lorna, that's why I suggested looking for bull sites aswell. I explicitly say that I am a bear and that housepricecrash is a bear site. As it's title suggests, it will not give other than a negative view!

I'm not sure what you mean by your last point? Are you talking about people's views on what is a 'nice' area? Or a good area to invest in?

My point is it is not a good idea to listen only to people who tell you good things. To get a balanced view, you must also be aware of the negatives/risks involved.

Hi Lorna

What is opinion of propery purchase in Ilford town center

there is huge demand for rental properties in Ilford. London Borough of Redbridge and Newham are always looking for properties. in fact, i think ilford is a better bet than barking in hindsight. the travel links in to livepool street are fantastic and takes only about 15 mins. if you pick up the local papers on a friday from that area, you will see loads of adverts looking for accommodation for guaranteed rent schemes. The local councils dont have any properties of their own as they sold them all off years ago for pennies. in fact, the iraqi guy i bought the property off in enfield, en2 bought this property under the right to buy scheme for £44,000 ! he made £120,000 tax free in 3 years. this is how ridiculous local councils are. his wife has a council place too (pretended they split up) so they are living at it now ! and will do the same thing again no doubt. this kind of thing shouldn't be happening but is. You definitely wont go wrong with ilford. also, i would steer away from new builds, they are all overpriced. buy a solid house conversion with a long lease or better still if you can afford it, buy a house with a view to converting it into flats at a later date or buy a 2 bed maisonette. there is huge demand for accommodation for families and they get top priority on the council schemes. i have found that giving a 1 bed to a local council gets you either an alcaholic, a druggie, a teenager thrown out of home or a beggar of the streets. so go for a 2 + beds. in fact, there is big demand for large accommodation in east london as some of the nationalities in east london tend to have big families.

Hey Lorna,
I'm thinking of buying a 41 sq. mtr. 1 bed in the old highbury stadium in islington.

What do u think of the area and what do u think of tha price given it will take 2 years to cmplete?It costs 335,000 stg.

that's a huge amount of money for a one bed. you could buy a good 3-4 bed house for same money about 5 miles from there or even less. the service charges are probably going to be high too. this area is expensive already and very built up. i would be nervous about renting this property as you will need a high rent (but then you might find a footballer to rent it). i am more comfortable with guaranteed rent schemes as cash flow is very important once you own a substantial portfolio (or as some people might like to point out to me that the bank owns them, not me !). some serious arsenal fans would die to own a place here so it could be a good one. it is an extremely good looking development so if you have the money for this, i dont think you will lose in the long run but i suggest you dont go into this for a quick buck ! the higher the price, the higher the gamble, i guess.
i assume the postcode is N1 and not N7 ? have a look on www.rightmove.co.uk to compare rents and prices and also look at the sold prices on this site too. or use www.nethouseprices.com to see what properties have sold for in the N1 and N7 postcodes.

Hi Lorna

I purchased a penthouse in Ilford (vision 20 built by Gallard homes 20th floor) In your opinion how much rent should i acchieve per month when completed.This development is 1 year behind and wont be completed until August 2009

Thanks

lorna said:

i recently bought a 3 bed ex-local authority flat in enfield, en2 for £165,000, fixed it up and now worth about £210,000 but have let it on a guaranteed rent scheme to enfield council at £975 pm with no costs to me.

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Hi Lorna,

I'm a bit confused by your investment figures, the lowest (variable) rate I can find for BTL mortgages is 4.9%. 165,000 over 25 years is 954.98 for a repayment mortgage. That excludes legal, mortgage arrangement, stamp duty and the cost of fixing it up. It just doesn't seem like a very good return on your investment? And a bit risky at a variable rate.

What am I missing?

YM.

all my mortgages are interest only, not repayment, otherwise you couldn't do it. i am not concerned with paying off any of the mortgages as investments are based on a 10-15 year plan and then i am selling up. i bought a 1 bed for £60,000 in 2001 just as property was taking off which is now valued at £145,000 hence i am not bothered about paying off any of the loan as no matter what happens i will make money anyway even after paying CGT. i bought a 3 bed house for £125,000 in 2001 and its now worth £275,000 at least and no i havent paid a penny of the actual loan. i pay very little tax on the rent profits as all the interest is tax deductible, plus every other expense i can claim for including my accountants fees.
it may seem that i am sailing against the wind but i chose to do this and to be honest if the whole lot went belly up in the morning, then so be it. in for a penny, in for a pound. you've got x amount of time on this earth and take the chances you want to take.
and dont worry, of course i have a back up plan, i wont be homeless, i have my whole inheritance in ireland sitting idle so i guess i would escape to the country. its monopoly !

zxcvbnm said:

Hey Lorna,
I'm thinking of buying a 41 sq. mtr. 1 bed in the old highbury stadium in islington.

What do u think of the area and what do u think of tha price given it will take 2 years to cmplete?It costs 335,000 stg.

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I agree with Lorna. This is a trophy property and as a consequence you are being asked to pay a lot for it. Check out the cost of a similar sized one-bed in nearby Islington (which is a much nicer part of town); or cheaper Finsbury Park which is also close by.

Lorna has it sussed. She is buying getting 7% gross rental yields; getting guaranteed rent from councils for long periods of time; borrowing at UK resident mortgage rates (as opposed to Irish resident mortgage rates); and paying no letting and management fees.

However, Lorna's advantage over others is that she is on the ground; she is sticking to her own area that she knows best, so she knows the cost per sq ft she should be buying at; is in with the letting departments at the relevant councils, so she knows and understands the rental demands; and has the local handypeople available to do her property maintenance. Bit like a day trader in stocks and shares really, except the value of her portfolio did not drop 14% since the start of the year like the ISEQ has done (according to RTE this morning).

However, it is difficult for an Irish based investor (with a day job) to replicate what she is doing.