A risk too far?

[Borris]

It has been skewed somewhat by the over-performance of London property during the period though, but even for rest-of-UK the typical returns have been attractive and will probably remain so - which is bad news for people without access to capital for a house to live in.

And this is partly why this thread was heading into stormy water from post #1.

 

[Amarillo]

And this is partly why this thread was heading into stormy water from post #1.

I don’t see why. There are plenty of people who need to rent and have no access to social housing.

One of my tenants is Indian, working for John Lewis in the IT department. He emigrated on his own, set up home in one of my flats before bringing over his wife and child. Now he has residency he is looking to buy.

I have another tenant, an entrepreneur from Glasgow, moving to London to set up a branch of his business in London. I do not expect his tenancy to last more than one year.

My other three tenants are couples from Eastern Europe in a similar position to the first described, with residency but not in a position to buy.

A healthy private rental stock is as essential for the British economy as an effective social housing stock.

 

[Amarillo]

I generally find it useful to look at real rather than nominal returns, ie after inflation, which was about 24% over the past eight years. But still that would be a real capital appreciation return of about 4% per year.

That of course also reinforces your point about holding cash, which actually has a negative real return at the moment and that's not looking likely to change very soon.

In my view, predicting short term (ie up to three year) returns for any asset class is crystal ball gazing. But long term returns histories on the other hand are a very good guide. Over the past 50 years the real return premium for "risky" assets such as listed equities, over that for cash, has been about 4 per cent.

Over the past 35 years total returns from UK rental housing have been remarkably close to total returns from global equities (in sterling), and with significantly less volatility. So it has been a very good asset class to be in provided you don't need immediate liquidity and are rich enough to be able to hold several properties and so achieve some diversification. It has been skewed somewhat by the over-performance of London property during the period though, but even for rest-of-UK the typical returns have been attractive and will probably remain so - which is bad news for people without access to capital for a house to live in.

An advantage of UK housing over equities is the ease of leverage, certainly for small investors.

 

[Borris]

I don’t see why. There are plenty of people who need to rent and have no access to social housing.

Yes, that's true but by laying all of your investment cards on the table in such an honest and open way, it was always going to act as a magnifying glass on the woes of the housing market in general. With every soul having a need for a roof over their head it is a subject that effects everyone. With many not being able to even reach the first rung on the aspirational British house ownership ladder, any post about speculation on the housing market was always likely to attract adverse comment.

I'm not saying that you shouldn't have posted. You included it on the General Chit Chat forum so it's a perfectly legitimate subject to offer up. Saying that it is inapppropriate on a VW forum would be just like banning any conversation that wasn't about Calis at a club meet. All I am saying is that it was a controversial subject from the beginning due to people's varying circumstances and opinions.

 

[CALI FATE]

Yes, that's true but by laying all of your investment cards on the table in such an honest and open way, it was always going to act as a magnifying glass on the woes of the housing market in general. With every soul having a need for a roof over their head it is a subject that effects everyone. With many not being able to even reach the first rung on the aspirational British house ownership ladder, any post about speculation on the housing market was always likely to attract adverse comment.

I'm not saying that you shouldn't have posted. You included it on the General Chit Chat forum so it's a perfectly legitimate subject to offer up. Saying that it is inapppropriate on a VW forum would be just like banning any conversation that wasn't about Calis at a club meet. All I am saying is that it was a controversial subject from the beginning due to people's varying circumstances and opinions.

you are right Borris - nobody minds a bit of general chit chat and obviously there should be no censorship on what people want to chat about - but on this occasion i think it was the showy gracelessness that got up peoples noses

 

[Borris]

you are right Borris - nobody minds a bit of general chit chat and obviously there should be no censorship on what people want to chat about - but on this occasion i think it was the showy gracelessness that got up peoples noses

I can't speak for anyone else but if that was how this thread came across, then I don't think that was in any way intended. Amarillo has always been very open about his personal circumstances. That is the way he is. We all do things differently and shouldn't be judged too harshly for our forum persona.

Anyway enough from me. I'm off to cut the grass.

 

[The Merle]

I'm not sure I have quite said that: and I have certainly never believed that property always appreciates. But it is certainly right that I have never seen Californias as an appreciating asset.

Flats in SE London have stagnated over the past five years: this is the value appreciation estimate by Zoopla on one of my rental flats.
Over 1 Year - up 0.12%
Over 2 Years - up 1.94%
Over 3 Years - up 0.37%
Over 4 Years - down 1.02%
Over 5 Years - up 0.32%

Fortunately I bought 8 years ago: up 62% (Purchase price / current Zoopla estimate).

The picture for houses is little better, with our home appreciating by a Zoopla estimate of 8.13% over 5 years, but at least that is more or less in line with inflation.

Liquidating and stashing the cash in the bank at ~0.1% is not a sensible option. Liquidating and stashing in equities is possible but too risky over the short term. Staying put and keeping the ~5% gross rental yield using current value estimate; (or ~8% yield on purchase price); (or ~13% yield on purchase equity taking mortgage interest payments into account), is the most sensible option.

If I were to make a prediction it would be this. SE London house prices to continue to stagnate. The mini property boom outside London will end once the stamp duty holiday comes to an end and fall slightly over a number of years.

You need to use Rightmove sold prices and not zoopla guess values (awful at valuing property).
You will get more accurate figures (probably higher too).

 

[Lightning]

Remember to factor in the £6 to £16k cost of each heat pump to replace all the boilers. I hope there are subsidies for all this.

Climate change: Ban all gas boilers from 2025 to reach net-zero https://www.bbc.co.uk/news/science-environment-57149059

There is a discussion on LBC about heat pumps.

Government target of 600 000 a year to be installed each year for the next 7 years.

Total cost 42 Billion pounds, not including the upgraded insulation and radiators and separate water cylinder required to make heat pumps viable, as they operate at much lower temperature.

Proposed to mandate that all homeowners must install heat pumps upon house sale or major renovation. Vendor responsible for cost.

Required to meet the legal commitment of net zero carbon emissions target by 2050.

The cost for each house is £10 to £20k.

Madness.

 

[soulstyledevon]

There is a discussion on LBC about heat pumps.

Government target of 600 000 a year to be installed each year for the next 7 years.

Total cost 42 Billion pounds, not including the upgraded insulation and radiators and separate water cylinder required to make heat pumps viable, as they operate at much lower temperature.

Proposed to mandate that all homeowners must install heat pumps upon house sale or major renovation. Vendor responsible for cost.

Required to meet the legal commitment of net zero carbon emissions target by 2050.

The cost for each house is £10 to £20k.

Madness.

Heat pumps won’t work with older houses.
You can’t always add the insulation properties to make Heat pumps viable.
It’s like fitting a 1.0l Ford Fiesta engine to a Lamborghini Diablo...

 

[DrewVW]

The cost for each house is £10 to £20k.

Madness.

The counter argument is that not doing this would be madness. I'm not saying I agree, but I can see there is a need for a big hairy goal and to get things moving to counteract climate change. As a property owner, I don't believe I have a right to a financial return.

 

[Lightning]

Heat pumps won’t work with older houses.
You can’t always add the insulation properties to make Heat pumps viable.
It’s like fitting a 1.0l Ford Fiesta engine to a Lamborghini Diablo...

I don’t think it’s going to be optional. I agree though, old stone houses need to breathe, you can’t add internal wall insulation without causing damp problems.

 

[Lightning]

The counter argument is that not doing this would be madness. I'm not saying I agree, but I can see there is a need for a big hairy goal and to get things moving to counteract climate change. As a property owner, I don't believe I have a right to a financial return.

The green policies need to be practical, not alienate people. It makes sense for new builds, or maybe with subsidies, but expecting homeowners and landlords to stump up huge sums of money is simply not going to work.

 

[Cali Phillip]

Heat pumps won’t work with older houses.
You can’t always add the insulation properties to make Heat pumps viable.
It’s like fitting a 1.0l Ford Fiesta engine to a Lamborghini Diablo...

Our house started like that 9 years ago, no mains gas here or it was oil or tank gas. , The very poor insulation meant a heat pump wasn't viable, so opted for biomass and as funds allowed upgraded the insulation and improved solar gain.

 

[WelshGas]

There are alternatives to Heat Pumps.

Electric Boilers & Combi Boilers UK | Fischer Future Heat

Efficient electric boilers and combi-boilers from Fischer. The ideal alternative to gas and oil boilers, and air source heat pumps. Simple to install.

www.fischerfutureheat.com

 

[Lightning]

Our house started like that 9 years ago, no mains gas here or it was oil or tank gas. , The very poor insulation meant a heat pump wasn't viable, so opted for biomass and as funds allowed upgraded the insulation and improved solar gain.

I don’t understand how biomass is much better. The fuel has to be transported from source to property in a vehicle. This is a reason new efficient oil fired boilers are not recognised as any better than old inefficient oil fired boilers on an EPC.

 

[Lightning]

There are alternatives to Heat Pumps.

Electric Boilers & Combi Boilers UK | Fischer Future Heat

Efficient electric boilers and combi-boilers from Fischer. The ideal alternative to gas and oil boilers, and air source heat pumps. Simple to install.

www.fischerfutureheat.com

Electricity is usually a much more expensive way to heat a home.

 

[Amarillo]

Electricity is usually a much more expensive way to heat a home.

But I expect an electric boiler is cheap to buy and even cheaper to install. So if we assume an £8,000 purchase and installation saving, that would buy many years’ electricity. And if that electricity was paid by a tenant, I can have a pretty good guess at what many landlords would do!

 

[soulstyledevon]

Our house started like that 9 years ago, no mains gas here or it was oil or tank gas. , The very poor insulation meant a heat pump wasn't viable, so opted for biomass and as funds allowed upgraded the insulation and improved solar gain.

Unfortunately it’s not possible to insulate older houses without creating damp issues as @lighting has already mentioned.
I’m all for a Greener future, but let’s build new with Green in mind.

 

[Lightning]

But I expect an electric boiler is cheap to buy and even cheaper to install. So if we assume an £8,000 purchase and installation saving, that would buy many years’ electricity. And if that electricity was paid by a tenant, I can have a pretty good guess at what many landlords would do!

I think one of my very lovely long term tenants would just move out if I did that.

 

[vwsween]

There is a discussion on LBC about heat pumps.

Government target of 600 000 a year to be installed each year for the next 7 years.

Total cost 42 Billion pounds, not including the upgraded insulation and radiators and separate water cylinder required to make heat pumps viable, as they operate at much lower temperature.

Proposed to mandate that all homeowners must install heat pumps upon house sale or major renovation. Vendor responsible for cost.

Required to meet the legal commitment of net zero carbon emissions target by 2050.

The cost for each house is £10 to £20k.

Madness.

I feel sorry for those with multiple properties.

 

[Velma's Dad]

The government is going to have to come up with a big new set of incentives if heat pumps or other types of electric-powered heating (eg the electric boiler WG linked to) are going to be taken up.

I've just got quotes for an air source heat pump for our house - a Victorian house but now well insulated and with 5 yo condensing gas boiler and we already have UFH. Capital cost about £20k to start with. Then, even with the current incentive scheme (which ends next Mar) the annual running costs would still be slightly above our current gas costs when you substitute the real-world unit price difference between gas and electric for the planning assumptions the companies use in their modelling. That would save, in our case, several tonnes of CO2 a year but not a cheap way to reduce carbon.

As the grid decarbonises, which it is very rapidly, there'll have to be very strong 'price signals' (ie taxes) to reduce the cost penalty of using electric rather than gas. Politically that will be very hard to achieve.

Meanwhile, supporting better insulation is going to be the best most people can do but much UK housing is not suited to easy retrofitting. The potential condensation issues with internal wall insulation can be dealt with through careful design and implementation (we were lucky to be able to put on external wall insulation as the house was suited to that). But still it's not easy unless you're doing a major refurb.

 

[Lightning]

The government is going to have to come up with a big new set of incentives if heat pumps or other types of electric-powered heating (eg the electric boiler WG linked to) are going to be taken up.

I've just got quotes for an air source heat pump for our house - a Victorian house but now well insulated and with 5 yo condensing gas boiler and we already have UFH. Capital cost about £20k to start with. Then, even with the current incentive scheme (which ends next Mar) the annual running costs would still be slightly above our current gas costs when you substitute the real-world unit price difference between gas and electric for the planning assumptions the companies use in their modelling. That would save, in our case, several tonnes of CO2 a year but not a cheap way to reduce carbon.

As the grid decarbonises, which it is very rapidly, there'll have to be very strong 'price signals' (ie taxes) to reduce the cost penalty of using electric rather than gas. Politically that will be very hard to achieve.

Meanwhile, supporting better insulation is going to be the best most people can do but much UK housing is not suited to easy retrofitting. The potential condensation issues with internal wall insulation can be dealt with through careful design and implementation (we were lucky to be able to put on external wall insulation as the house was suited to that). But still it's not easy unless you're doing a major refurb.

Gosh that’s expensive, when you add the cost of the external wall insulation.
The incentive for landlords is that it will be illegal to let a property that doesn’t meet the required EPC rating, as they have started that journey already.
In the absence of an EPC of E today a landlord cannot issue a section 21 notice to evict a tenant. They will just keep upping the required rating.
They don’t need to use carrots.

 

[andyinluton]

I have been involved as a surveyor on a number of retrofit pilot schemes in London & am also involved in a number of conversions of offices to flats along with new build flats so have a fair bit of experience with the real results rather than just the theory - these are some that I have done:

Convert victorian 3bed semi to meet latest insulation regs, conservation area so all insulation internal & timber sash windows upgraded with draught stripping & double glazed units. heating changed to air source heat pump. Result £150k cost, heating performed well, reasonable cost to run in normal weather, lost approx 150mm off each external wall so rooms become smaller.

Convert Offices to flat - 1980s build so cavity walls, installed new high performance double glazed windows, all electric underfloor heating with megaflow electric hot water. Result horrendous electricity bills, one of studio flats 20ft x 10ft + shower room managed to top £400/month on the electricity bill. Due to the scheme being 124 flats we spent over £300k on a new substation as the existing supply couldn't cope.

New build flats - very well insulated but all lightweight construction so no heat retention in the structure. Generally use airsource heat pumps + megaflow for hot water. Cost is approx £5k more than using a gas boiler, heating bills for cold weather are extortionate as the pumps don't work well when its freezing outside. They are Ok in mild weather. A bigger problem is solar gain & flats overheating in hot weather, leading to the introduction on quite a lot of new builds of comfort cooling ie aircon.

By choice if I was building for myself I would always go for ground source heat pumps with wet underfloor heating. The underground temperatures are consistent so the performance of the pumps isn't reliant on the ambient air temperature. Costs an extra 30k or so to install, but once in the deep bores which are the expensive bit should last a lifetime.

 

[Velma's Dad]

Andy your real world experiences are really interesting to read.

When we virtually rebuilt our current Victorian house six years ago we went for fairly serious roof and floor, 100mm ext. wall insulation, upgraded windows (except south facing bedroom sashes). Hard to isolate the insulation costs from the whole project but not cheap. However house is now very snug and little gas-meter-spinning guilt. (Unfortunately no good deed goes unpunished as we'd used Kingspan for the external insulation and now we'll probably never be able to sell the house... )

This year I was looking at retaining the existing (efficient) gas boiler alongside an ASHP as a 'hybrid' system with the heat pump providing the base load - 60% of total. I am now getting cold feet (ha ha). I know you are right that a GSHP would be much better and I had toyed with putting one in as part of the original refurb, and would have swallowed the cost then but (illogically) it seems a lot of money to do it now. Still processing the 'sticker shock' of a £50k spend to save little or no money in the short term, hard to feel green with that size of bill up-front.

 

[andyinluton]

The ground source pumps would be far more cost effective if you could get say a clump of four houses wanting it , drill the deep bores where the four gardens meet & just have a trench back to each house, the cost would be about 70% less per house.
We have also done some shallow GSHP installations, for these you need a field & put a line of trenches about 2m deep running horizontally & lay out the pipework exactly like an underfloor heating installation - I am not as keen on this method as the pipes could get damaged in the future & at that depth a really really hard winter might affect the temperature. it also limits the future use of the field.