Its going to get ugly out there

I haven't posted in a while but lets face it the news is going the way I predicted. The only question is how bad will it get. The USA is awful but will the UK be worse. We have seen the first falls in property prices in the UK (according to Hometrack) for a few years.

The problems though are considerable

House prices have increased 60% above their inflation adjusted yield. (i.e in the past it cost roughly the same to buy as rent its now 40% cheaper to rent (or 60% to buy)).

The only thing keeping prices high is the expectation of increases in capital value for buy to let and buy to bet investors. If this disappears they will sell, this will flood the market with properties looking to sell.

Many will not think of the difference. But I can give you one from bitter experience. I bought my first house in Cheylesmore Coventry. It soared in value and had nearly doubled in value in less than 12 months but I didn't sell it. I moved location and the house went on the market. The estate agents were crap (putting calls to a number I wasn't at) and prices started to fall.

Prices fell in Cheylesmore fater than almost anywhere else in Coventry.

Why?

The houses coming for sale were due to grandparents dying. They died at the same rate whether the market was boom or bust.

IT WAS A FORCED SALE.

So will buy to lets. People getting less in rent than their expenses will look to sell. This will push prices of properties down. Other buy to lets will not be able to remortgage as they do not have enough equity to satisfy a new lender. Their expenses will go up (possibly around 50%)

They will look to sell

Viscous cycle encourages more to sel et etc etc