Fear and loathing in Britain’s favourite asset class

On a small island with a lot of people, there is one type of asset that has become a national religion for Britons, and that is residential housing. You can’t lose with bricks and mortar, is written through the national psyche like the lettering on a stick of rock. It runs so deep within the national character that we have the common spectacle of well-off people preying on the poor by buying up houses to rent to others on a onesy-twosy basis, using the terrible security of tenure in British rental housing facilitated in the Housing Act 1996 to extract cash from those who can’t get a mortgage because they are too poor.

Thatcher handing something over that wasn’t hers to give – an early RTB house deeds

So rich people use their better creditworthiness to borrow money to buy houses to let, renting them out to poor people who can’t borrow money to buy houses, and making a tidy profit. They even claimed back the tax on the mortgage interest, a privilege denied to the poor saps who are buying a house on a mortgage to live it it. I am pleased to say that this nasty little anomaly has been canned now 😉 Britain has too few houses as it is for people who want to buy-to-live, they don’t need BTL (buy-to-let) middlemen inserting their money funnel into the punters’ wage packets sponsored on the government’s dime.

When the Ermine was a child, this job of landlording to families was largely done by the councils and the poor and even the modestly well-to-do had the option of renting with an adequate security of tenure, but those days were lost when Thatcher bought the votes of the sitting council tenants by selling the council housing stock to them at a knock-down price. The official version of this is of course a roaring success

the policy of giving tenants the Right to Buy on advantageous terms their council houses gave immense pleasure to many who had never imagined being able to possess a place of their own and pass it on to their children. People were ecstatic.

Well, they would be. You always make friends dishing out free money, and it was the discounts (a.k.a. free money) given with Right to Buy that made the impact

 the Right to Buy had benefited a large number of individual households but it has also had an uneven impact spatially and socially, has added to residualisation in social renting and has had an adverse strategic impact on housing. The discounts provided under the Right to Buy had inflated the demand for home ownership. In the longer term transfers to private renting further diverted resources to meet higher rents in the private sector rather than providing additional or affordable housing.


Looking back over the history of RTB it is apparent that, rather than the symbolism associated with a legal Right, it was the manipulation of levels of discount that were key to the operation of the policy. The Right to Buy with lower discounts would have had much less impact.

Which is how we got from my London grammar school days when about half the kids lived in council houses, including some of the ones whose parents were white-collar workers, to today where almost half of all local authorities in England no longer have any significant council housing.

Housing is to the Ermine as Moscow was to Napoleon

Rule 1, on page 1 of the book of war, is: “Do not march on Moscow”. Various people have tried it, Napoleon and Hitler, and it is no good.


So it is with the Ermine – the greatest personal finance error I have ever made was buying a house in 1989. I have never managed to beat that level of numbskullery despite greater resources. Now I hope that this is an indication of actually using the intervening 30 times round the sun to improve the art of being human, but let’s face it, the bar was set very low for the depths of financial folly I needed to avoid plumbing again. I moved once since that first house, because a two-up-two down was okay for a bachelor Ermine but when DxGF moved in it was time to get some more space, which is the entirely average three-bed semi I am in now.

When I bought it in the dog days of the dotcom boom, I bought the new house before completing on the old house. That sort of thing makes moving a lot easier, and you can get decoration and rewiring done much easier in an empty house. I hate being a function of other people, so housing chains rub my fur up the wrong way and make me snarl. The amount I had lost on the old house meant I could carry the old house with a combination of savings and a hefty 0% interest loan on a credit card, I had a 90% mortgage on the new house.

I am looking at moving again, and it is a significant distance across country. Retiring is a good time to think about where you want to live, as the limitations placed by working are lifted. It’s not necessary to move, but I find the the dreary journey halfway round the M25 to get past the carbuncle of London more and more irritating, now I have the time and the money to travel more. On the other hand, a retiree needs to think about the human setting, so we want to move to an area where we already know a number of people, so in our case that is westwards but not particularly northwards.

Stoney Littleton Long barrow. One of the many megalithic sites that draw me westwards as a retiree. No, I’m not planning to live in it 😉

We own this house outright, and have stocks and non-residential land assets, the combination is considerably more than the sort of house we are looking at buying.If I put the stocks together with the proceeds from the land assets and cash I hold, I have enough to buy a house of the sort I want before selling the current house. Trouble is all the stocks are in my ISA. Some of the cash is with NS&I ILSCs, ideally I would prefer not to sell that either. Some of it is in my SIPP, had I jumped to it I would have drawn out to just below the higher rate tax threshold last month, but I failed to engage brain there.

I get to do that this month, drawing ~43k gross, and pay £7k in tax. I can chill about that because I would have paid 41% in tax had I not used the SIPP when I earned the money. So I am still 21% better off, and indeed I got the Brexit boost on that last year since it was in some international exUK index fund.

I started to sell out of some of the ISA, though of course keeping the cash in the wrapper until the last moment. I started with the crap, the sorts of things one acquires in a HYP but turned out to be a really bad idea. Many years ago I came to the conclusion that while I may do okay on buying, I have no talent for selling, which is why in the HYP I don’t sell out of the crap. Some of it even came good – dogs like RSA eventually crossed the loss to breakeven to profit mark simply by paying dividends. Some didn’t, I followed Warren Buffett into Tesco, and, well, ’nuff said, eh? At least I had illustrious company in the cock-up. I paid less than WB[ref]I bought into some of the suckouts, which reduced more my overall cost of acquisition. But TSCO was still a falling knife, and WB is still a better investor than me[/ref], but he bailed faster. As Buffett said (p18)

In the world of business, bad news often surfaces serially: You see a cockroach in your kitchen; as the days go by, you meet his relatives.

I ain’t got Buffett’s talent, I was far too trigger-happy as a seller, so I needed to stop that. That trigger-happiness shows even in my actions here – although I believed I was going to liquidate the entire ISA to raise the cash at the time, I started shooting dogs first. A different way of looking at reversion to the mean might have started to liquidate from the top, after all those are the greatest gains to be crystallised. Once a mutt’s lost > 50% most of the damage has been done 😉

you had it coming to you, bud. There is a school of thought that says you should actively seek out dogs, but I’ve waited many years for my ISA mutts to turn, they aren’t just last year’s disreputable hounds

Shooting the dogs was easy. Most of them I’ve had for a long time and they’ve never come good. Now a fifth of my ISA is cash, and I’ve run out of hounds to put up against the wall.I had about a twentieth of the ISA as mutts, I sold about a twentieth of good stuff before I just couldn’t do it any more, and a tenth I carry in cash because you never know when buying opportunities may show up.

exchanging equities for housing felt that I was marching to Moscow. No good would come of it…

Look at the housing market now. It is up in the sky [ref]Equities are also up in the sky now, although some of that is the Brexit effect making them look higher. But they’ve been tracking up since 2009… However, the tax sheltering of my ISA has a separate value of its own, I would be in deep shit with the changes to dividend taxation if I had to hold it unwrapped[/ref]. We have the economic damage[ref]or short-term adjustment to liberation pains if you are a Brexit booster[/ref]  of Brexit coming down the pike, inflation is lifting which may bode rising interest rates and the market is softening. That’s not necessarily a bad thing for me, as I am looking to move upmarket. I’m not carrying any debt once all is settled so rising interest rates don’t trouble me, but they sure as hell will trouble others in the market carrying a huge mortgage based on affordability at 2%. Which will depress prices, because if they can’t pay they won’t pay.

This play by Dario Fo was big in the early 1970s inflationary oil shock. The title could be the anthem for Britain’s overstretched mortgagees as Brexit inflation starts to bite and interest rates rise. According to Wikipedia, Pluto Press was a division of the Socialist Workers Party when this was published.

I looked at what I have left in the ISA and I simply couldn’t bring myself to press the sell button, and exchange stocks, something of value, for housing, because I loathe the housing asset class. Couldn’t do it even on a temporary basis, as I searched for something else to sell from the ISA and would have had to mine the good stuff I began to feel sick, and an old recording started to play out in the back of my mind. A recording first made in 1990 through to 1992, when I froze in that first house to save money for the mortgage and subsisted on peas, economy bean soup mix[ref]I just took a look for bean soup mix and I’m chuffed that they still do this, though the price looks astronomical to me. This stuff explodes in volume when you cook it so the young Ermine could stretch a packet of it a very long way, more than a week ISTR. Note that it’s a lot cheaper if you buy the parts from your local store catering to local Asian consumers and mix ’em up yourself rather than buying from Sainsbury’s[/ref] and rice while I watched one neighbour get repossessed and the other side jump before that happened. Interest rates came within a hair’s-breadth of 15% p.a. Intellectually I can tell myself that things are really different this time because I am not buying as a leveraged buyer with a mortgage, but it’s no good. I drank the water from that polluted well before and was sick for ten years. Sure, I’ve taken losses in the stock market, but never got to lose more than I had to start with…

Repairing the ISA

I need to go fix the damage I did to my ISA estate by trying and failing to convince myself I was going to liquidate it to bridge the housing purchase. I can’t honestly say I am that sad to see the back of the dogs, though they did of course serve as a sort of memento mori reproaching me to the tune of “Self, you aren’t such a fantastic hot-handed stock-picker – I am TSCO and I remind you that you had absolutely no ‘king idea of what you were doing trying to slipstream Warren Buffett, so don’t get so full of cock”. I have a limit order on some gold that should go through this week, because God knows what the pound will do over the next couple of years, and it’ll bring down the cash to 10% where I’m easy with it. There is a case to be made that a fellow with no unwrapped holdings any more should hold his gold outside tax wrappers, because I don’t have so much that CGT would be a hassle, and gold doesn’t pay dividends which are troublesome outside a tax shelter nowadays. But I just need to get it to a holding position for now. And my Charles Stanley ISA needs to go back into VWRL and L&G Dev World ExUK where it was, so I get to eat a load of transaction costs for my thumb-sucking indecision. Bummer. Still beats the hell out of losing all that ISA tax sheltering. At least I stepped back from the brink. Obviously I’m not putting my £20k new contribution into the ISA while I need short-term float, because I have till nearly this time next year to get round to that.

There’s the smell of decay in the air on housing

A grizzled snout sniffs the air, and I smell the sickly scent of putrefaction in the housing market, the scent the youthful Ermine  insouciantly ignored. One of the things that puzzles me about housing now is the shocking compression of prices. When I was buying my first house[ref]Although it was a similar time of excessive valuations, the distorting factor then was couples were rushing to buy to get dual MIRAS tax-relief on 60k rather than 30k, I presume they were targeting the semidetached sector with a view to having kids, whereas now the focus is on get anything[/ref] on the  terraced places were about £45k, and semis were about £60k[ref]this was in 1989, the 2016 inflation adjusted amounts are £102740 and £137000 respectively[/ref]. Where I am looking Zoopla tell me terraced houses are about £214k and semis are £248k. It’s as if the entry-level prices have been skyrocketed proportionally, whereas the incremental costs to get something better has reduced. The terrace to semi ratio was  1.3 in the late 1980s and has fallen to 1.16 – you get a lot more for a little bit extra, and this still sort of holds going up to detached places, which command less of a premium than I expected. It is as if first-time buyers are flattening themselves, artificially boosting the crummy end of the housing market. Looking at my existing area this ratio is about 1.2. Only another 10% on my house would get me a detached house over the road. Of course Zoopla could be full of crap, but these differentials seem very squeezed to me.

The Ermine’s twitchy snout has picked up the last ten of the one real housing recessions we’ve had this millennium, so I am prone to false alarms, that early experience of housing is a distorting lens through which I look at Britain’s favourite asset class. It’s why I am not a BTL landlord, and property is a lot less than half my net worth. This is not because fundamentally I have a beautiful nature full of compassion for my fellow man, after all if I am not a BTLer then some other person will step into the breach. I am not a BTLer because I am shit scared of the asset class, it’s hateful because of what it did to me, it’s illiquid, it depreciates much faster with a tenant than an owner-occupier, and there seems a shedload of miscellaneous aggravation that goes with the whole patch.

Everything is vile about buying and selling houses in England. I haven’t done it for almost twenty years, and while the experience wasn’t great then, many things seem to have become worse. For starters, exactly what reason does an estate agent have to exist in the 21st century? The cheeky blighters seem to want to see proof of capital assets before taking an offer to a vendor, which is not easy in a distant town with ratty internet connections[ref]in the usual way, everything a mobile phone does, like providing a tethered data connection works, but badly and only a ghost of what it should be[/ref] and no printer. This was an absolute blinder on me and was definitely not the case 20 years ago. I suspect there was also some subtle discrimination too, if I had shiny shoes and dressed in a sharp suit I might have been given the benefit of the doubt. But seriously, WTF is the point of an estate agent? I use rightmove to search[ref]I do appreciate the irony of using something owned by a bunch of estate agents, but at least they follow my limit and requirement instructions properly[/ref], the days of receiving endless offers of places 200% overbudget through the post aren’t something I want to go back to. Rightmove and other Internet sites actually listen and don’t show things that are overbudget. I would have thought the Internet would have fixed the problem of estate agents by eating their lunch by now, but it appears not.

I’m also unlucky enough to be selling into a gently softening market sector in Suffolk and a slightly appreciating one where I want to go. Some of that is because of who I am and what I want to buy. I want a detached place because I don’t want to hear people’s kids, pets and domestics, we want more garden, and stairs if any only in a straight line. I don’t want to see children’s trampolines and plastic toys, or people fixing cars in their front gardens. I don’t want to hear traffic from main roads, and I have no interest in new houses, which are tiny and too close together. I don’t want a ‘period property’ which is a maintenance and energy efficiency hazard. I don’t want anything near a river or less than 40m above sea level because of flooding amplified by climate change, low-lying parts of the target region has had problems with this in recent years. Something built from the late 1950s to 1970 is probably about right.

I am competing with old gits like me who have a working life behind them, and what I am selling is a 3 bed semi which is a typical family home. Families made hay with all the child-friendly largesse Labour showered them with in the times of plenty, and are feeling the draught now.  Hence the softening market my end. Countering that I am looking to move somewhere where there appears to be zero professional work to be had for forty miles[ref]I am, of course, looking at this with the jaded eyes of an ex-big company careerist, not the dynamic go-getting entrepreneurial sort that the powers that be hope will drag Britain out of the shit in the years to come[/ref] which tends to be the way for attractive places because work is usually a blot on the landscape.

The design of the conveyancing system in England is foul, where there is no commitment from the buyer and seller until exchange of contracts; something done so much better in Scotland and probably just about any other First World country. The English way brings out the worst in both the buyers and sellers, making evil shits of us all. Requiring a 10% escrowed deposit forfeited if either side welch on the deal would improve that no end. Hopefully being a cash buyer will help the power balance for me there, and not having a chain will help with selling. Time will show.

How about joining my fellow countrymen on the never-never?

How about borrowing? It’s all the rage on this septic isle, I hear. I can breeze way past the average UK household non-mortgage debt of £13,000 and lift the old stats a bit. Normally the Ermine has the same attitude to debt as a vampire has to sunlight, but:

I have the cash, but it’s tax-embargoed in my ISA and SIPP. Unlike the rest of the country, with their rising credit card debt, PCP car loans and whatnot in need of government help to bail them out of their fiscal stupidity, I actually have the money to back the loan. As long as I pay less than 20% over the life of the loan I am better off borrowing the money than paying the extra 40% tax on it taking it from my SIPP, which I need to clear down to £3600[ref]which is the amount non-earners can put in a pension[/ref] before reaching normal retirement age for my main pension.

I can’t get a mortgage, because I am too old and mortgage affordability is all about income. I would have thought a DB pension payable in three years time would be good enough as an income but it has to already be in the process of being drawn, and the SIPP doesn’t count because I draw in variable amounts a year according to need. The credit card company won’t give me an increase in credit limit to use the balance transfer stunt that worked when I bought my first house, because I am poor in their eyes, under the railway arches poor..

MBNA to Ermine – “Swivel on this, bud. You may, of course, beg us on bended knee and we may graciously reconsider your request”. Ermine thinks to self “well up yours too then”. There are other ways to skin this cat.

In 1989 two credit card firms loaned me £15k, the equivalent of £34,000 today at 0% interest to reduce my mortgage LTV. And they got paid back on time. In those far-off days you didn’t have to declare anything other than income on a mortgage application and there were no credit reference agencies. The 20-something year old Ermine doing the most gormless thing in his financial life with no capital was deemed a better risk than the grizzled mustelid of today who actually has capital assets several times the putative loan. No. I’m not bitter and twisted. Really I’m not 😉

I have been a small-time ~5k Zopa lender since 2013 until now when I recalled that to build up reserves, and curiously enough Zopa offered me a decent amount for five years at 3.4%. They had a much better repayment structure too. You have the take the loan for a long term, so that the repayments aren’t too high, but for a part bridging loan I don’t need to keep the loan for the term. Normally if you take a loan for five years, you don’t save any interest repaying it early. With Zopa it seems there is a fixed fee of .6% you pay if you have the loan for a microsecond or all the way to five years, plus 3.2% p.a. As such carrying the loan for six months would cost 2.2% of the loan – much less than a normal five year loan for that APR.

I liked Zopa, though in the end their 25k lending limit isn’t really enough to put much of a dent in the ISA. But I’ve often had the odd tax, ISA filling or CGT need to defer liquidating unwrapped shares from one tax year to another and I wish I’d thought of them before. I’ve used credit card 0% offers for these applications, but the trouble is one has to borrow about twice as much as needed (and pay the arrangement fee of ~2% of the total) because of the requirement to pay down the loan at 5% of the residual a month. Zopa is a much better match for that sort of thing.

In the end I raised the loan privately. It seems commercial lending to punters is axiomatically all about income, so it will always be mismatched to FI/RE folk. The takeaway from that when interest rates are low is don’t pay off your mortgage early – you will often need flexibility as you thread your way in early stages of FI/RE, particularly before you reach your DC pension age (55 at the moment). That mortgage gives you flexibility, and the tax-free pension commencement lump sum is a good fit to paying down the capital – effectively you redeem the capital with deferred pre-tax income.

BTL-ers score several hits on the Ermine by proxy

BTL owners are bad news for owner occupiers, for different reasons than why they are bad for tenants and for first-time buyers. As an owner-occupier you want to move away from such areas. BTLers are strapped for cash, and they aren’t there in person to deal with the consequences of their or their tenants’ actions. It slightly disturbs me that all the regions I used to live have gone downhill. My parents’ place in SE London used to be an owner-occupied zone where they were among the poorer on the block, over nearly 50 years it became a dump where Stephen Lawrence was murdered, I had a pushbike locked to itself half-inched from their drive in the 1990s, they got robbed in the early 2000s. I wouldn’t dream of living there if you paid me and provided an armed guard. And it’s gone BTL, because, well, it’s London.

Two places I had a bedsits in west London seemed to have descended into high streets of dirty chicken shops, betting joints and fast food retail. I guess the areas were already fully landlorded, but landlords in those days used to really own the places they rented, tending to be on a professional and larger scale. The blight of BTL mortgages started in 1996, around the time the AST was enacted, so BTL landlords could know that they could kick tenants out on reasonably short order. The area I bought my first house in Ipswich in ’89 has become a BTL rental dump with frequent mattresses on the street and much multiple occupation, and towards the end I had a pushbike nicked from my own back garden – not particularly to do with the BTL-ers but bike thieves prey on studenty neighbourhoods and BTL had made it studenty, so it was worth doing over for bikes. I’m beginning to suspect this downhill drift is a curse on me, but at least so far I’ve jumped in time…

Hopefully the BTL thing will be reined it a bit by not letting the BTLers squeeze real people who couldn’t get tax relief on mortgage interest payments, the poor devils are so desperate that first time buyers sometimes try to masquerade as BTL buyers to get round the way the system is stacked in favour of BTL buyers. I’m going to watch carefully for the presence of BTL in the next place I go.

BTLers have other adverse effects on housing – the market has slowed after being pumped because the buy-to-let brigade are finally getting soaked on tax on the same basis as real people who actually live in the houses they buy. It is perhaps a reason for the softening where I am, I’ve noticed more To Let signs and when you look on Zoopla they have been recent sales , so BTL was over this area like a rash a couple of years ago.

And finally I take an incidental hit in needing to front the extra BTL secondary home ownership stamp duty tax for the time I have two houses. I have zero ambition to become a BTL landlord, but I have to drum up an extra £10k because of the guilt by association and presumably have to fight HMRC to get it back.

But UK property is hopelessly overpriced?

Yes. It’s a foul asset class that has screwed me royally before. It will no doubt screw me royally again, at least to the tune of the difference between what I sell my current house for[ref]when owning two houses there is the risk of the market running against me over the difference. Although every other Briton believes you can’t go wrong with property I know from experience you can, and the current falling trend in the housing market is against me if I buy first and sell later, so I will try and minimize that period. Being a cash buyer and chainless seller has some value in the transactions, which may compensate a little for what I lose across the gap.[/ref] and the price of what I buy. But for the bulk of the transaction I will be selling a hopelessly overvalued asset to buy a similarly hopelessly overvalued asset. I have another 20-30 years of healthspan if I am lucky. Waiting another two years for the existential clusterfuck that is Brexit to make all of us poorer may save me money if there’s a housepricecrash,[ref]HPC’s wishful thinking gives them an even worse house price prediction crystal ball than the Ermine, they predict a perma-status of impending house price crash, pretty much the last 100 of the one retrenchments we’ve had[/ref] but it is 10% of that healthspan. The gimlet-eyed older Ermine is more able to take the hit than the fresh-faced twenty-year old Ermine who was shafted by the 1989 housing market. In theory a softening market is good for someone going upmarket, but the devil is in the detail, and there is always devil in anything to do with UK residential property.


55 thoughts on “Fear and loathing in Britain’s favourite asset class”

  1. You are totally correct re. estate agents – how do they even still exist? We bought our current, tiny, almost-new 2 bed in 2013 and the estate agent couldn’t answer a single question we asked. They simply seemed to be people who turned up with a key. It doesn’t surprise me that you are looking West – lots of historic places in Wiltshire but I noticed that picture was of Somerset. Have you considered Herefordshire? You would get a lot of house for your money. I have lived here for nearly 20 years and couldn’t recommend it enough – very few Chavs outside the towns! You can even have your own barrow, eventually!



  2. Ermine – a wonderful rant but why go west?

    Why go to a trendy expensive area (2nd homes?) full of people

    Go north.

    Hull/North Lincs Wolds. More birding than you shake a stick at.

    Make more friends (us yorkshire folk are friendly – ok nosey)

    Links to the continent via the Hull/Rotterdam ferry.

    You will get a decent house for any southern garret you are living in.

    All that stress/worry – why put yourself through it.

    Anyway 8 months FI/RE’d at my end and life is gently ticking along with less hassle.



    1. I loved the Linconshire wolds when I accidentally passed through after visiting Lincoln ISTR. When Easter is out of the way and it warms up a tad I am going to get in my camper van and stay there for a while. I absolutely didn’t expect to find hills like that, and the lie of the landscape, the patchwork of towns and countryside is lovely.

      But I don’t know anyone there 😉 I do know a fellow at Hull, young Ben at Frith Farm who has started a community supported agriculture scheme there. He worked for us to learn the ropes and absolutely saved our bacon when someone moved on at short notice. And talking of bacon he learned from us that he didn’t want to keep pigs because they are a pain and need too frequent looking after 😉


  3. Interesting article – thanks. I have a dim view of housing too and weirdly since I paid off my mortgage a couple of years ago I feel even more anxious about it. I plan to move this year and my preferred option is to start out renting in the area I’m moving to – who knows, it might suit me long term. It seems odd, as I’ve not rented anything for thirty years, but I’m just not prepared to fork out nearly 0.5M for a 2 bed terrace in the town I want to live in. Renting seems to me to offer better value, and as you remark there is now clearly downward pressure on rents and prices. In fact I’m finding selling my own place very slow – no offers so far after 6 weeks on the market, compared to three or four within a week of first placing it on the market a couple of years ago before getting cold feet about moving. I’ve not found a lot of UK originated writing supporting rent vs buy, or tools like the NYTimes one for unpacking the financial details of the decision, but the price/rent ratio is near 30 where I am headed so it looks a good indication to rent to me. Received opinion, in the press and among friends, is solidly behind buying as the sensible choice ‘as property prices always go up and houses are the best investment’. And ‘rent is dead money’ of course. I dunno… I quite like the idea of using the funds from selling my house to spin off enough for rent and hopefully a bit more, then if I fancy going somewhere else, or a mega strom blows the roof off, I just go. I think I would get a better place renting than I can afford to buy as well, and I don’t give a monkeys if it is on a river. In your case renting for a bit would save you the 10k for owning a second home for a bit – I’d not hope for much sympathy from HMRC on recoving that. One aspect of renting that may stick in my craw though is the stupidly extortionate level of ‘fees’ – most agents want 6 weeks rent as a ‘deposit’ on top of charges for credit checks, ‘inventory’ and so on. I believe these things are supposed to be addressed by some new legislation but I’ve seen no evidence of anything changing in the details of rentals over the past few months.

    Just an observation on BTL – it is odd, don’t you think, that there is no EasyLets or Virgin Property (at least in the ordinary market – I’ve an idea Virgin do high end vacation homes or something. oh yeah – here it is http://www.virginlimitededition.com/en/ – not quite BTL in Smethwick, is it?). If BTL is such a good idea how come these guys don’t bother with it? I think that it would be great though, if there were a couple of big national chains specializing in property rentals. Levels of service to tennants would improve and moving between homes in the same group would be a doddle. I’m sure Richard B must read SLIS so get on it Rich!


    1. Wow, half a million sods for a 2 bed terrace, I feel your pain!. We are considering the renting idea but there’s a lot of aggravation in renting for a short while, though we have identified somewhere that does that for a price and standard that we could live with.

      The trouble with renting in the UK is the dreadful power imbalance that is all on the landlord’s side. In any other European country 5renting for a year would be a reasonable thing to do and you wouldn’t be at the risk of being out on your ear in six months time if the landlord’s daughter couldn’t get a job and wanted to evict you or crap like that. A more professional rental sector would make the UK a better prospect there, but too many people have skin in the status quo.

      Monevator had an article on renting over buying, and to be fair to him he eats his own dog food there, but the rest of his property articles tend to be of the buy preference! I’m probably an outlier because I had such a horrible experience at the start of my working life, and I still haven’t really got over it.

      I’m still of the buy persuasion but then I’ll get a lot more for a shade over half of what you’re looking at, plus I’m already in this overvalued asset class. But it really does surprise me how much of their total networth Brits have in res property, most people my age seem well over half NW in property, and some of these guys are still carrying mortgages. Some compound that with leveraged BTL..

      Definitely with you that we could use a more professional approach to landlording than we have now. Perhaps a rise in interest rates and/or a fall in prices could shake some of our amateurs out of the market. At the peak of the early 1990s crash over 3 million households were in negative equity, that was a hell of a lot of hurt!


  4. @Simon @Mattman – the most restrictive part of my choice of destination is the human dimension, because I suspect it is who you know and hang out with that’s a big part of growing older with grace and awareness. We recently lost a good friend who was only a couple of years older than me. I want to be somewhere where I can walk to the pub with people I know, have an expectation to getting to know more people and sharing interests, which puts me in a town or very big village as well as generally west.

    That’s important as well as the location – I want a landscape of interest, easy access to interesting megalithic sites the rest of the UK for holidays. And I know one college friend in Wales and one in Normandy, it would be easier to get to see these guys. I will, of course lose some good people here although I’d hope to always find a welcome in Ipswich 😉

    So I have very restricted choices. from the human dimension. I was surprised at Jim SHMD’s latest Retirement Society post because he struck me as a fellow who was far, far more outgoing and gregarious than I am. But perhaps that made me very careful to cherish this human dimension and fool with it at my peril. The human setting in a wider sense is much more important to a retiree than where you are.


      1. It is a good part of the attraction. Dunno if it’s just me but my copy of TMA has the most dreadful perfect binding. Put it like this, it’s just as well it comes in a slip case because it’s almost a loose-leaf collection of pages by now. But Cope’s writing is a nice change from some of the drier site reports, a great read even if in kit form!


      2. My copy is exactly the same. Started falling apart within a few days. The European version he did as a follow up is fine though.


      3. At least it’s not me, was considering getting a secondhand copy but it sounds like that would have the same problem 😦


  5. You aint seen nothing yet, wait till you see the scum that try to buy your house at a knock down price. I sold my mothers house when she was forced into a “care home” ( another bunch of bandits you will come across later in life). Easy to sell an empty house no chain ! you must be joking, sold to a lady who was actually fronting for a builder took 3 months to complete with continual threats to pull out, we are not buying if you don,t remove the garden furnature, then 1 week before completion we are not buying if you don’t remove the garden shed WTF.


    1. Ah, the good old English way of conveyancing, eh. As I said, it makes evil shits of us all 😦

      But I can carry the two houses for not a lot. So I would tell your builder fronting lady to sling her hook. In some ways the buyer is the one who incurs a lot of the costs (although maybe not in that case of your cash buyer) through legal searches and survey fees.

      Mind you, as a seller I might be tempted to favour people buying with a mortgage because they need skin in the game. Those cash buyers, you really can’t trust the blighters 😉


  6. Thankfully S-L-I-Somerset (& Shropshire) domains are still up for grabs for you 😉

    Good luck with the move. I hope the process is as smooth as it can be for you. Personally, I am also very reluctant to move primarily due to the hassle & inconvenience of the experience. The first time I bought the EA actually managed to fail to relay my offer correctly (to include carpets & curtains… not exactly a tricky thing to relay) to the seller, but thankfully i had made the offer in writing, & so between me & the sellers we forced the EA to soak up their mistake in lower % fees from the sale.


    1. Now that would be tempting fate 😉 Interesting that it was the EA that cocked this up, I’d have thought that fell into conveyancing and that tiresome fixtues and fittings legal form.

      Mind you, there seems a lot of interpretation possible. When my Mum sold her London place I put ‘sold as seen on the viewing’ on that form as she’d moved out leaving a shedload of detritus from 50 years of living there. I thought it was worth a go but never really expected to get away with it, but it worked. Okay so the buyer got a few white goods, some decent furniture, a ladder but he got a shitload of mismatched plates and general trash that I’d have expected to have to pay house clearance to lose. And the poor blighter exchanged just after the Brexit referendum was announced.


  7. It’ll be very interesting hearing how your experience goes & everyone human will sympathise with the needless hassle encountered that we all dread….. condolences.

    * Why not go with an online-only estate agent for a fraction of the selling fee? I’ve heard good things about some of these outfits, some still have estate agents (despite no high street presence) if you want to deal with mobile people with local knowledge.

    * Maybe the fact that housing type is compressed with the starting price so high is because so few starter/smaller/cheaper ones are built, to have any effect?

    * You’re going to have to change the name of this illustrious site 🙂

    * Why not hold your nose & rent for a year or two to avoid duplicating costs while seeing if brexit/election uncertainty drops the price of the place you haven’t yet bought? [after having sold the old place at the top] Or conversely, buy outright, then take out a mortgage on the place a bit later when you can get a better deal as pension incomes kick in to tick their boxes?

    * I know an estate agency in SW London who said rents are gently coming down now …..& he covers a relatively good area, so maybe we’ve reached peak lunacy. Atom bank just launched a 5 year fixed-rate at 1.29%, so just possibly, this might mean the bubble is at least deflating – if that’s what it takes now to hoover new buyers/cannon-fodder up at the bottom end & keeping the pyramid standing? [ leaning tower of Ponzi ? 🙂 ]


    1. > Why not go with an online-only estate agent for a fraction of the selling fee?

      Mrs Ermine is in favour of that, and what I am selling is pedestrian, so it sort of supports that. My amazement at the existence of EAs was on the buying side, and my gazumping offer being blocked for a lack of shiny shoes and/or instant proof 😉

      > [after having sold the old place at the top]

      Now while I still have some fond and probably misplaced pretensions that an unholy mix of CAPE and experience might give me a feel of valuations in the stock market, I really know from experience I have zero talent on housing. Having written this piece housing might go up 10% this year for all I know.

      > then take out a mortgage on the place a bit later when you can get a better deal as pension incomes kick in to tick their boxes?

      But what asset would I buy 🙂 I have earned all the money I will ever have, and have a low prospect of earning enough to buy myself out of a cock-up. I won’t buy leveraged assets again. I could earn my way out of the 1989 cock-up, but I am all out of human capital now.

      I’m good for two houses, cash, though I had to borrow to defend my ISA allowance of about 3/4 of a house, and have a pension on top. Sometimes it’s good to know when to hold ’em, and when to fold ’em. As far as leverage is concerned, this is the time to fold ’em 😉

      > maybe we’ve reached peak lunacy

      As JMK never said

      “Markets can remain irrational a lot longer than you and I can remain solvent.”


    1. I lived there in my secondary school years. Now a pale reflection of what it was, although perhaps that says something about me too – I’d hate to live in London again, even if I could afford to live in a better part of town. And if I did, I would definitely want to be north of the river and avoid the south-east.


      1. I lived there on and off in the 1990s, and it always struck me as an odd sort of place. For starters, for SE London it was very white. Also, whilst at some point in its history, it had clearly been quite a well-to-do place, I found myself turned off by its 1960s high street, chavy/delinquent locals, and.. not to mention its being bisected by the Rochester Way relief road.


      2. My parents looked at a house near the Rochester Way in the late 1960s, fortunately the solicitor picked up the plans for the relief road so they ended up further south than Well Hall.

        I quite liked the high street because there’s no shopping centre there. Of course it’s now charity shop, betting shop, betting shop, money shop, charity shop, dirty fried chicken shop. But at least no soulless shopping centre, which is rare.


  8. As a fellow INTJ, I suspect you are worried about having less in assets than you think you have. Don’t forget the sate pension you will get eventually. With no dependents, it is a lot easier to live on less. My father retired at 57 with a relatively small pension but with a paid-off house (and state pension) he and my mum seem to do OK. I don’t think state P will be means-tested for some time yet – there will be many other cuts first. The UK pension report projection pdf makes interesting (if dry) reading. Consider Herefordshire! Reasonable motorway access (M5/M50). This is an example of prices.


    1. Well, valuations of both equities and housing are very high, so it’s reasonable to suspect I have less than the headline figures 😉 But I am old enough to be likely to get some of the SP before they eventually means test it, and indeed are paying my Class 2 NI contributions while they’re still there to pump it up a little. I have 35 years but much contracted out, so some extra uncontracted out years will increase it.

      That house does look good value!


  9. I consider my “investment” in real estate to be the most unrewarding one I’ve ever made. Never got a penny out of it yet although I don’t pay rent on my digs.
    I moved from a supposedly high cost area to a lower cost one 12 years ago but just broke even – although we got a new, nicer, better insulated place that meets our needs much more closely than the old one did. Had I waited I’d have done much better financially but I would have missed out on a decade of grandkids, clear skies and no traffic hassles.
    I used a realtor to sell and never regretted it – just get the dam’ thing out of the way and get on with your life. It was amazing how little interest I had in the old place when the decision was made.
    We had family nearby but knew nobody in the town we came to. It didn’t take long to fit in though – just do some sort of volunteer work and you are all set.
    Our town has a hospital even though it’s small and we are not far from excellent care in Ottawa. That was a must in any move we made.
    Bottom line – where you live should be made as a lifestyle, not economic decision. In my case we owned two houses for a week – too long in my opinion.


    1. There’s much to be said for he simplicity of using an EA but the conveyancing system in England means that neither side is committed in any way almost to the end, so there is much to-ing and fro-ing in the runup. I’m not sure if this is done between the estate agents or between the conveyancers.

      > We had family nearby but knew nobody in the town we came to.

      I think if you have family nearby then perhaps that makes the move easier. I don’t have extended family in the UK and being childfree makes the network of friends more important to us. On the upside, we get to choose them 😉

      Certainly the experience of running the farm here showed me it’s easy to connect with a lot of people via shared projects!

      I’d agree it’s a lifestyle choice though. After all we will be buying a bit more into an asset class I detest to get a better quality of life. Sometimes you have to hold your nose and do it, and in the end I can’t take the money with me at the end…


      1. Do not for a moment imagine that we moved to an exotic new place like Singapore or Costa Rica. Although we had not visited Almonte before moving here, my wife and I both spent our formative years in Eastern Ontario and we are just a bit further east and north of where we grew up.
        In many ways this move took me back 50 years in terms of attitudes, worldview, geography. It’s a really cool spot besides – one of the 10 small towns in Canada you’d want to visit.


  10. Am I right in thinking that most ISAs are now “flexible” so that you can withdraw what you like in the tax year and put that amount back (plus this year’s allowance) so long as you do it in the same tax year?

    Thus you could have used your ISA funds to buy the new house so long as you are confident (which of course, you can’t be) of selling your old house before the end of the tax year and using those funds to replace what you took out of the ISA.

    Of course this would work best if you bought at the beginning of the tax year – that gives you almost 12 months to sell your house.


    1. Thanks for the tip – I hadn’t gone that way because I very much do not read the flexible ISA guidance in that way. I read it as applying to this year’s contribution only. So if on April 6th I contributed 20k then I could withdraw 20k in cash any time up to 5 April 2018, and provided I got it back in before 5 April 2018 I would be OK despite having paid in £40k over the tax year.

      MSE seems to think this applies only to cash ISAs. Their description matches your interpretation. In that case perhaps I could have sold up, transferred the S&S ISA to a cash ISA and played this game, putting the cash back in to the cash ISA, then transferring it into a S&S ISA. Which is certainly an interesting possibility, and one I may use in a year or two to effectively borrow against my main pension PCLS to reduce the amount of tax I need to pay on the SIPP next year. I would have liked to have seen someone do that. Although one can’t be sure of selling the house in a tax year, one could use a bridging loan for a couple of weeks to lob the cash into then out of the cash ISA over the TY rollover.

      I’m confused as to which interpretation is right, HMRC’s seems to be at variance with MSE 😦


  11. I’m certainly no expert, so may be wrong. I thought you could sell your shares within a S&S ISA and then take out that cash – i.e. you wouldn’t have to formally t/f to a Cash ISA. The MSE article says “cash held within a stocks and shares ISA can also be flexible”.

    The Govt link just refers to cash (which could be all your ISA savings over the years) but unhelpfully the example only shows a sub-1 year amount. However the old rules were that any cash taken out could be replaced but counted against the current year’s limit. I read the Govt text to mean this was no longer so, thus you could take out whatever cash you had, put it back, and still have the full current year’s allowance to use.

    This link says “Withdrawals of current year’s subscriptions can be replaced in any Isa. If the amount withdrawn exceeds the amount subscribed to the Isa in the current tax year, the excess is treated as a withdrawal of previous years’ subscriptions. Previous year withdrawals can be replaced but only to the Isa account from which they were withdrawn.” https://www.moneymarketing.co.uk/issues/11-february-2016/do-investors-really-want-osbornes-flexible-isa/

    The policy paper also references taking out earlier years’ cash – https://www.gov.uk/government/publications/individual-savings-accounts-increasing-flexibility-for-savers/individual-savings-accounts-increasing-flexibility-for-savers

    However both these links are from before the actual thing came live.

    I guess the lack of info is that very few people would want to take out years’ worth of cash and be able to replace it before the end of the tax year.


    1. You are indeed right. TD direct say

      Please be aware we do not currently offer a Flexible Stocks and Shares ISA.

      which sort of implies they do exist. And indeed looking at my Charles Stanley account they say

      From 6th March 2017 all Charles Stanley Direct ISAs will become Flexible ISAs. This means you will be able to withdraw cash from your ISA account, and return it in the same tax year (on or before the 5th April), without it affecting your annual ISA allowance.

      and since my CS account is largely in cash I now have a £40k slush fund I didn’t know about. Thank you for the heads up. I don’t expect to need that much so I’ll probably shove half of it back into the markets but it’s really nice to know I have this facility!


    2. I asked Charles Stanley this question explicitly via secure messaging, and it is as you say:

      I can confirm that your understanding of the flexible ISA rules is correct. You are able to withdraw any amount of cash from your ISA and then replace it in the same tax year as the withdrawal, without the replacement counting against your annual allowance. That means your example of withdrawing £20,000 would allow you to then pay in up to £40,000 into your ISA with ourselves in the current tax year, or pay back £20,000 into this ISA and then use your allowance elsewhere with another provider.


      1. @Richard @Ermine – Yes, you definitely can withdraw and repatriate the full balance of an ISA (cash or S&S) as long as it is within a single tax year. It is not limited to that years annual contribution.

        I went through this with both my ISA manager and directly with HMRC as soon as the new as there are a number of scenarios I can envisage where this might be very useful for me and one of them is the “temporarily owning two properties to break a housing chain” situation.


      2. It’s amazing, isn’t it, and hasn’t got the attention it deserves. In the end I couldn’t bring myself to do it, and not all S&S ISA providers support flexible ISAs, But it’s a really remarkable opportunity. In the house situation, one could use this to dramatically shorten the duration of a bridging loan to just across the weeks either side of the tax year, getting some much-needed control and accuracy into the costs.


      3. I wonder if these flexibility rules could extend to me selling up a bit of this years (fully subscribed) S&S ISA such that I can open a LISA?


      4. I think you can. This link says “However, where you have subscribed some or all of your £20,000 allowance in the current tax year to a Flexible ISA and you withdraw any part of that subscription, you will be able to use that amount again – either to re-subscribe to the Flexible ISA, or to subscribe to a Cash ISA or an Innovative Finance ISA or to a Lifetime ISA (if you are aged between 18 and 39).”

        This link says the same but omits the references to the LISA http://www.moneysavingexpert.com/savings/flexible-ISAs

        So…not sure. I’d ask your current provider with the intention of using them for the LISA. They should know whether they’d allow it.


  12. Simple living in Wiltshire? Or will you leave the blog behind when you go? And what about the farm? Why do you need to move away – presumably the human factor is strongest where you are now, having been built for decades?
    I think it’s not trivial trying to embed in a community later in life (or really at any time, but there are life stages where it’s easier to find people as they are looking too). My strongest friendships are the ones that are thirty years old…fortunately some of them are still close enough to see regularly.


    1. The farm is in the process of transition to the community themselves, which is challenging but a good move. It probably needs to develop more along the community and perhaps also education role. There seems to be a passion for particularly the latter that I don’t really understand, but if it is what people want, and there seems to be support, then it’s all to the good.

      Going west would take me closer to two people I’ve known since university. Curiously enough one of the things that brought the idea of a move clearer was losing a friend to cancer who was only a few years older than I am. That sort of thing made us think about what we wanted from the life we have left. I found not that many work friendships stuck, and many of my work peer group are now into the heavily involved with childcare for small grandkids phase, which is all-encompassing. Whereas I found some older friendships stayed, and start to grow as their adult children leave home and they move away or some of the people are childfree and retire – curiously now all my closest college friends have retired in their mid 50s.

      There are pros and cons and many known and unknown unknowns , but I am a little bit too young to quite get the ‘Dunroamin’ sign made yet 😉


  13. Cheers for the link and good luck with the move, ermine. Worth considering chucking your spare ISA cash at some new Dogs seeing as you’ve gotten rid of some old ones?


    1. My dogs were mangy mutts that had been decrepit for years. At yours have only recently fallen on hard times! Not sure I have the taste to try that tilt at this time high up in the business cycle.


  14. I’d second the suggestions to go oop north. You’ll get a lot more bang for your buck and t’folk are friendlier (Q: How do you know if someone is from Yorkshire? A: Don’t worry, they’ll tell you).

    On the whole rent/buy point, I take the view that since everyone needs somewhere to live; by owning a place you’re effectively ‘neutral’ on housing. Running costs of a home are explicit if you bear them yourself as the owner or implicit via the rent, because the landlord sure as hell won’t be paying for it from the sweat of their own back.

    Renters are ‘short’ housing and open to the caprices of the UK AST landscape. Second homers, BTLers or buy-before-you-sellers are ‘long’ and have geared up to a very illiquid and undiversified asset class. Risky at the moment given the febrile Brexit backdrop.

    Given you’ve got the means, it seems mad to stint yourself if you want to trade up to a nicer pad.


    1. It’s so darn cold oop north though, I am a soft southerner!

      Interesting angle on being neutral housing because everyone needs to live somewhere. It might make me feel a little better on spending more on what has always been a vile asset class for me, other than its use value.


    2. “Q: How do you know if someone is from Yorkshire? A: Don’t worry, they’ll tell you”

      I rather like the (I hope slightly tongue-in-cheek ! :-)) Bill Bryson comment “I love Yorkshire and Yorkshire people. I admire them for their bluntness …if you want to know your shortcomings, you won’t find more helpful people anywhere.”

      Personally, I find Geoff Boycott’s occasional tell-it-like-it-is kick up the backside when England have had a collective brain-left-in-locker-room session rather refreshing in this day and age too ! I could do better with a stick’a rhubarb, etc !! 😉

      Dunno what’s going on down in Hampshire at the moment – following on, Jeez.


  15. Best of luck with the move Ermine. I’ve followed your blog from very early days and always felt a close bond. We’re about the same age, I too worked for “the firm” and I too disliked the corporate mentality and needed a big change in life but didn’t know what it was. The thing is, I enjoy work and didn’t feel the need to retire early but had enough of the “man”, the performance reviews and the stress. If I mention the word “Cisco” you’ll know what game I was in. My solution – I found a low stress IT job working for a decent crowd. The gross pay is around half of what I used to earn (but not the net). I don’t miss the money – and I can do the job with my eyes closed so no stress.

    This all entailed a house move from the South Yorkshire area to the beautiful Usk valley in South Wales. I really thought it would be hard to sell and easy to buy but how wrong was I. We sold the house in a couple of months and rented on a farm near Monmouth. The next 12 months we looked long and hard to buy a house but nothing met our criteria (the estate agents we found to be totally useless, no interest at all that we were cash buyers, ready to move in an instant etc). It turned out that the farmer was converting an old barn on the hill on the other side of the valley which we had watched being built. We always knew that it would be a rental property and had dismissed it because of the “buying is good, renting is bad” mantra but one weekend after viewing another dismal property the farmer invited us to look round the barn which was nearing completion. One step over the threshold and WOW….. funny how your beliefs can evaporate in an instant. We are now in the exact house that we wanted all along. Ok, we now rent long term but the money in the bank (and shares etc) covers quite a substantial amount of the rent and a couple of percentage points rise in interest rates will see us break even. Also the farmer/landlord is the salt of the earth, nothing is too much of a problem for him. And…. we’ve never been happier. A glass of wine on the patio overlooking the river valley on a sunny evening and all is well with the world.

    Sorry about the long posting but if there is a message here, the lesson learned for me is – be careful in sticking to long held beliefs as they may not bring you the happiness you seek. I now tell people that buying is absolutely the right decision when you are young. When you get to my (our) age, it’s not cut and dried.

    Here’s wishing you good fortune.


    1. Interesting – I guess a lot of my prejudices against renting are from a more than 35 year old recollection of renting on endless serial ASTs and house sharing. I was never able to bring myself to spend more on renting than the minimum though I had enough to do better, because of the whole renting is dead money mantra. Although I have seen a shocking amount of dead money go into buying!

      Having a decent landlord and some stability may well change renting. I’ve only been at the bottom end of that market and it was unremittingly horrid. But I’d imagine for both landlord and tenant a bit higher up the scale it could work to mutual benefit.

      I now tell people that buying is absolutely the right decision when you are young.

      Trouble with buying when you’re young is that you may need to move for work at someone else’s whim. Once you’ve got rid of that as a constraint some people may have a more fixed idea of where they want to be and have more choice. There again, I meet a lot of older people on campsites who do a lot of touring. I couldn’t live such a peripatetic life happily, but each to their own!


  16. I wonder what your advice would be for someone looking to get on the ladder? I cannot resolve the rent/buy argument and have not been able to for years. I’m in a somewhat unique position (aren’t I a special snowflake.)

    I’ve saved well and have about 100k at 29years old (largely index funds/pension and some cash.) I live in Northern Ireland and do well in my area of expertise within software development. That said, I feel like I’ve hit a soft ceiling unless I move to management or contracting. The unique part is my soon to be wed fiancee has chronic fatigue syndrome and cannot work. I’m a bit worried about the risk factor of the house and losing the option of geo-arbitrage with a mortgage. I’m hoping we can get her to a comfortable state for living but I’m acting as though she will never work and bring in money.

    In terms of property, I’m looking at a few areas in a 10-mile radius of Belfast I can commute via my bicycle…my insight stops there….no kids on the horizon but have been looking at 3-beds we could make a project and not lose too much money on.


    1. I am the last person to go to for pointers on UK res property, but here are some thoughts for what it’s worth:

      Low interest rates have jacked up prices sky-high (I don’t know about the specific N.I. market which I believe is slower than elsewhere in the UK). The whole thing looks and feels like a bubble, to me it feels like 1989 again. But then I tend in that direction. Take a look at this for a similar view.

      Factors in your particular case are that it’s easier to get a mortgage from a steady job, so if you are thinking of contracting then that might mean a year or so of not having easy access to a mortgage. If the NI market is lower than the rest of the UK it will be less into bubble territory, against that there is the uncertainty of Brexit and the specific border issues

      You say you have 100k but this includes your pension, the pension is out of the running for buying a house till you put another quarter century on your age. The Lifetime ISA gives you a way to do either or a mix, but the limit of £4000 (+£1000 from the government) a year will take some time to build up.

      I can pay the overvalued prices now because I am already in the asset class, the only real money I am putting in is the difference, which is probably less than 100k. What I buy is overpriced, but what I am selling is also overpriced.

      I can eat a halving in housing, it could cost me a real cost of £50k if I wanted to sell (and arguably if I waited a couple of years I could save spending that). Whereas if it were the younger me in your position starting out buying a house of say £300k with a 20% deposit and the market tanked 50% I would be underwater on the mortgage by £120k right off the bat, and would be unable to move without finding that. That’s rough, and constrains your ability to geo-arbitrage in a very big way. I waited for nearly ten years and still took a bath on the price of that house, but I had experienced enough career progression that that was manageable.

      So if the younger Ermine were looking but with the older Ermine’s head on his shoulders I wouldn’t buy into this market now with 80% LTV. As an asset class UK housing doesn’t do that much different from shares but the cycles are slower and the volatility a little lower. That’s a bastard if you were born at such a time that you want to buy a house and the housing market is at a high, because you get to put your life on hold for the long cycle time, or you buy into high valuations with leverage like I did.

      OTOH if you buy in with 100k from equity holdings you will have got the 20% Brexit boost and equity valuations are high, so you’re buying overvalued stuf with overvalued stuff, not so bad. Those shares will tank sometime too.

      If you were buying something for £130k (which sounds very low to me) then you could argue you’re not that leveraged, with say 25% LTV, if you took a 40% drawdown to 65k you’d still be on less than 50% LTV and could look at it as an opportunity to move upmarket, which would have suffered a similar drawdown. If prices really are that low in NI and you have that enough capital to get well below 50% LTV you’re nowhere near as badly exposed as I was. And a 50% drawdown is very high, it did happen 1989 to 1995, but I was buying at a price well above long-term averages. Whereas if you bought now even the guys at houspricecrash seem to say prices are slightly below the long-run averages. Which I find hard to believe, but I would say you’re unlikely to see a 50% suckout like I did!

      So if you really can get the LTV down that much then you’re in a better place to take the risk…


    2. Hi Nick, Ermine,

      I’m in a very similar situation! I’m 36, living in Northern Ireland with about £100k of savings, of which £40k is pension.

      My (recent) wife and I are casually house-hunting and I share similar fears to Ermine. House prices are high because interest rates are low.

      We’re looking at putting down 15 – 20% on houses up to the £180k mark, as I’ve estimated that we could still afford the mortgage if interest rates went to 5% and we both had to work minimum wage jobs.

      What worries me most is the potential fall in value if (when) interest rates rise. I will, like Ermine, look back and wish I’d waited just a few more years, during which time our deposit would have grown and we’d be paying less for the house.

      My best guess, based on a decent history (back to the 1950s) of house prices and interest rates (as well as demographics, which are also a major factor) is that house prices, at least in Northern Ireland, are not THAT high – maybe 10%-20% above fair value

      I think I’ve decided that I’m happy to buy IF the house bowls us over and offers us a better quality of life than our rental property AND we don’t stretch ourselves.

      Sadly (or fortunately, but only time will tell), we’ve yet to find somewhere that we love at the budget we’ve set ourselves.


  17. Hey Ermine,

    I’m curious what you think your 29year old self would do in todays times? You sound extremely down on the housing market in the UK, therefore I imagine you’d get shot of the UK altogether and move elsewhere to prosper?

    Thank you for your reply to my previous conundrum. I clearly didn’t explain myself well but your answers still covered things nicely!




    1. It’s hard to say, because a mid-fifties year old head doesn’t have a good handle on the opportunities for work starting nowadays. Before a certain infamous vote, a younger me would certainly have tried to study in Europe because that could be done cheaper than in the UK, and there is an argument that Britain doesn’t value/pay its engineers and scientists enough, though I have to say I don’t personally have too much complaint there. So moving for work could have been a way forward. After all, thirty years ago I moved out of the housing hell-hole that is London because of the price of housing. I do appreciate that since then premium jobs have concentrated geographically despite improved communications. We were all going to telework from the beach or our rural idylls when the Web started to take off in the mid 1990s. Nobody told us about globalisation and BPO, which meant these teleworking jobs got outsourced beyond the UK rather than into our chichi village retreats.

      With housing I accept that we will probably lose about half of the uplift, ie about 50k, over the next few years. It’s not magnified by gearing. The headline value of the house will fall more IMO, but then I am buying overvalued crap with overvalued crap for the amount my house is worth, so that comes out in the wash. That is very, very different from the situation facing my 29 year old self buying into the asset class for the first time with gearing. If we stay in the house for another 20 years then the difference will be lost in the lift due to inflation, which kills your money by about half every 15 years. But we will, of course, still have lost a fair chunk of the 50k in real terms due to the time value of money. That’s life – the opportunity for us is now.


  18. Hey James,

    where are you looking in terms of your house hunt? I must say I’m amazed there aren’t more tools to help find an ideal house based on individual circumstances. As mentioned I’ve basically drawn a radius on google maps, yet I cannot find anyone doing anything more complex than this!?

    I’d agree with your evaluation of the NI housing market. I guess my concerns come with the loss of disposable income and increased risk. All of a sudden my saving rate implodes and options begin to narrow.

    We were looking at comber but it surprised me that there wasn’t much gained in terms of a favourable price difference or land as you moved out, it all seemed pretty similar!

    Have you been using any decent resources to help you in your hunt?




    1. Hi Nick,

      I’m using PropertyPal mostly. I then use Google Maps for street view and Google Earth for surrounding area / garden aspect.

      We’re looking North, as my wife is from Newtownabbey and now works in Carrick. Her parents live in Newtownabbey too, so that will be nice if/when we have a family!

      We’re in South Belfast at the moment, renting a gorgeous duplex apartment, but it’s far too expensive for us to buy here.

      We’re finding lots of nice houses in Newtownabbey and Carrick, but sometimes Carrick can be a bit uninspiring in terms of large housing estates.

      There are some that are surprisingly nice, with south facing gardens and/or views of the lough / harbour though.


  19. Have you not googled the 18 year housing cycle ? It’s 12 years up and 6 years down. It fits pretty well if we go back through time.

    1989 was a peak, 6 yrs down = 1995, which was the low point. 12 yrs up = 2007, which we all know was the peak and 6 yrs down = 2013. So the next peak will be 2025.

    Now London has a different cycle makeup to Newcastle. The further north you go the longer the down time and shorter up time. Because you are still staying down south i would say your cycle is going to be more like 5 down yrs and 13 up.

    I think london is currently in the one year cool off phase of the up swing. This will be moving higher in london still again.

    I wonder, though, if what actually happens in London is a really quick charge up at the beginning of an upswing and then stagnation for many years after while the rest of the country plays catch up. London then turns negative for a 4 year period and as it enters a new upswing the north is actually finishing its peak.

    I try and look at prices in yorkshire where i am based and it does seem peak prices were being achieved in 2009 for some properties (well past the peak).

    Anyway this cycle is real and can be used very effectively based on where you are in the country.

    For me i based BTL buying on it when i discovered the cycle in 2010. I started expanding my BTL’s in 2012/13/14/15/16. All have achieved great capital growth, but i buy and renovate and this is my job. All houses get 11-15% yields and i have done really well out of them. Buying now is harder, unless i want to go further north, but i want to work in my own area and i am not an arm chair BTL. I do everything myself from putting new windows in to laying the carpets.

    Housing without doubt has been my saviour. I also have share savings in my ISA. Lost pretty much 60% of all my holdings after i focused on the banks. The worst period in my life, but the houses kept paying out and saved me.

    Housing has been very much safer and more wealth producing than the stock market. You would also have the same opinion, but because you bought at a peak, you have struggled to make property work for you.


    1. I was entirely unaware of a postulated 18-year cycle – it seems mainly a US thing from Google but observation does show that housing cycles in the UK are also slow. Indeed it shows timing when you enter the market is critical, since an average mortgage term is 25 years you’re in big trouble if you start off at the wrong point.

      Housing has been very much safer and more wealth producing than the stock market.

      I would beg to differ, but I think your experience is the more general case. It is the lift i nthe stock market (and after a screw-up in the dotcom bust) which means i can buy before selling. But I do accept that the stock market is also overvalued at the moment.

      Still, if the next peak is due for 2025 then I look forward to not finding out I will lose about half the upgrade difference as I currently expect to do, but I’m not counting on it 😉


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