The Fresh UK Property outlook 2011
After reading a few different articles regarding the state of the UK property market and realising we have not done a UK property article in a while, I thought I would share my view on the outlook for the UK property market for 2011.
The end of 2010 was an interesting time for the property market, with not a lot of people looking to move just before Christmas and the extreme weather conditions putting a further dampener on house sales. However, mortgage approvals and sales are still holding up and I would expect as we go into spring, house sales will increase and prices will follow suit.
With news today that the Consumer Price Index has risen to 3.7% the BOE may well decide to increase interest rates in the coming months to try and curb this. However, the recent Consumer Price Index will not be taking into account the increase in Vat which has just come into play. I feel that consumers will have purchased their products earlier due to the Vat increase and this would of course bolster the CPI albeit temporarily.
It seems that in the face of fiscal restriction increasing the interest rate to try and slow inflation could be a dangerous move by the BOE however is it something they have to do? I am unsure as to the strength of the economy coming out of this recession and feel that an increase in interest rates too early could cause another fall in house prices. But then again, does the economy need this in the long run? What we need to remember when looking at the property market is that, unless we have new consumers entering the market, then it could fall into stagnation and at the moment, it is still hard for a first time buyer to get on that first rung of the ladder.
First time buyers are the lifeline of the market they need to be buying to keep the market moving. But then again, say first time buyers have to turn to renting does this mean that the market will be bolstered by Investors for the time being until there are some more attractive lending options available for the first time buyer?
What do you think?
I know one thing’s for certain, by buying one of our UK property investments with built in equity and reliable tenants in good locations you will be either weathering a storm or riding a wave of success.
A good time to invest in property
I was just reading an article by BBC news about how taking investment advice from your bank is a bad idea. I’m sure many people reading this article will have been asked to speak to one of the financial advisors available at their local bank, who will tell them that investing their money in one of the banks medium/high risk funds is a good bet and it will return x% and increase in capital by x%.
One of the ladies in the BBC news article had invested £100,000 into a “Cautious fund” and she quickly lost £40,000… unbelievable! Not only this, but the lady’s money was also decreasing at a faster rate because of the fact it was shrinking against the rate of inflation.
At a time of inflation coupled with low interest rates, ideally you would like to be in a position where you have an asset which is making you money and your borrowings on that asset are also, in real terms, shrinking while inflation is present. Your asset will be making you an increased amount of money with inflation and in comparison to your borrowings against it; the time at which you will have no outstanding finance will approach quickly. I am, of course talking about property.
It is no surprise that property investment has, for a long time, served as the main entry route to the forbes 100 rich list. The process of buying property in the right location at the right time and making sure the rent is going to cover the repayments you have on any borrowings, is just the start of it. The distance you can make your money stretch in property is insurmountable, by refinancing and keeping the cash flow on each property positive every month.
I have seen an article today from a top economic forecaster predicting that interest rates will remain at 0.5% until 2014; you may have also seen that the UK economy grew faster than expected last month inflation is at a rate of around 3% this typically means that the price of most goods and services are increasing at that rate and, ideally, your wage at work, as opposed to your borrowings on your property, which will be shrinking in comparison. Ideally I would be looking to invest in property now, take advantage of very little new build stock, the low interest rates available and use some of the positive cash flow generated every month to reduce my borrowings, so when interest rates do finally rise I am less susceptible to increased repayments.
See some of our UK investment opportunities here
What will the election mean to the property market?
This election could mean boom or bust to the already fragile property market in the UK.
As we all know, possibly the largest challenge facing the new government will be our economy. The 3 big parties have outlined the steps they will take to try to deal with the £170bn deficit in the UK’s finances.
With it looking increasingly like a hung parliament, what will be the main points of debate from these parties on our property market?
Listed below are some of the key points of each party.
Conservative:
- Scrap home information packs
- Keep the £250,000 stamp duty threshold for the foreseeable future
- Add a new 5% stamp duty threshold for £1m properties from April 2011
- Increase inheritance tax threshold to £1m
- Regards Northern Rock, they have not stated whether they will consider remutualisation
- Include more local initiatives rather than large scale regional building plans
- Will look to split state and part owned banks into 2 parts, retail and investment
Labour:
- Add a new 5% stamp duty threshold for £1m properties from April 2011
- Keep the homebuyer direct scheme for low earners
- Keep Home Information Packs
- The £250,000 stamp duty threshold is due to expire in March 2012
- 10,000 affordable homes to be built a year by 2014
- Northern Rock: Manifesto pledge to consider remutualisation as an option, ‘while ensuring the sale generates maximum value for the taxpayer.’
- Will look to break up large banks but probably not into retail and investment
- Maintain the standard interest rate on the Support for Mortgage Interest Scheme at 6.08 per cent until December 2010.
Liberal Democrats:
- Charge VAT on new homes
- 1% “supertax” on homeowners with properties worth over £2m.
- Create a new “Safe Start” mortgage that keeps buyers from slipping into negative equity
- Propose a green loan for people to invest in home energy efficiency and micro-renewables
- Get rid of home information packs and keep energy performance certificates
- Consider remutualisation regards Northern Rock
- Will split state and part owned banks into retail and investment
- Concentrate on local rather than large regional building plans.
Fresh Invest is a property investment company with the aim of maximising our investor’s funds whilst minimising their risk. For more information see www.freshinvest.co.uk or phone 0800 043 69 56.
SIPP’s, The leaders debate and the £59 pension
After watching the leader’s debate last night, one thing stuck in my mind, it wasn’t any particular party policy (at the moment it seems they all have flaws somewhere) it was… the poor old lady that is currently having to live on £59 per week as her state pension!
The thing that I find the worst about this is that, we all know that by putting our pension in the hands of the government, we are never truly in control. I, like many others, like to be in control of my finances and this is where I would like to make the case for the Self Invested Personal Pension (SIPP) known.
Not only do I like to know how much of a pension I will have to live on come retirement age, but I would also like to be able to increase this amount which will either mean me retiring earlier than originally planned or living a more prosperous retirement period. The only way you can truly take control is by utilising the money in the form of a SIPP. There are fantastic benefits available for people putting money into a SIPP such as attracting tax relief at your tax rate; this means that if someone is taxed at 40% the government will add 40% to any contributions they make towards their SIPP!
Another advantage to a SIPP is the ability to borrow up to the value of 50% of your SIPP to increase your buying power this means; if an investor has a pension value of £100,000 they can then borrow a further £50,000 against this, giving a purchasing power of £150,000.
I believe that the only real way to have a secure and happy retirement is to use a SIPP to invest in property, be it in the UK or Overseas. The returns available in our Cape Verde Investment for example, show that if an investor had a pension value of around £84,000 they could increase this figure to around the £300,000 mark in 10 years, and still have an apartment providing a net profit per year of £12,000! This is based on pessimistic figures, assuming that growth isn’t as good as it has proven to be over the past few years.
We think now is a fantastic time to invest in any property with your SIPP, especially those in Cape Verde; which is a real emerging country currently receiving 15% growth per annum and tourism increases of around 27.5% pa expected to top 1,000,000 per year by 2015.
For more information on investing in property with the use of your pension including unlocking frozen pensions contact info@freshinvest.co.uk
UK home owners take advantage of low interest rates
BBC news reported last week that homeowners have been paying off record amounts of their mortgages over the course of the past year. In total UK homeowners paid off £22.3bn last year! We believe this is great news for the housing market and therefore the property investment market.
The reason for this is simple:
When the banks dropped their interest rates, UK home owners on a tracker or variable rate mortgage had 2 choices:
- Spend their increased discretionary income as they wish living a better lifestyle with luxury goods or,
- Invest their increased discretionary income back into their property.
Now this piece of news shows that the majority of UK homeowners have chosen to do the latter…
Well done UK! The reason this is so good for us as a nation is that we, and therefore the banks, are now not so heavily leveraged on our properties and when the Bank of England inevitably raises the interest rates, we will still be able to afford the repayments on our now smaller borrowings.
This piece of reassuring news can put your mind at rest that the UK house prices should remain buoyant and we will not see the “dead cat bounce”
Others will argue that the idea of lowering interest rates is to get the UK homeowners to spend their increased discretionary income in the consumer markets, However, I don’t agree.
As interest rates dropped UK homeowners continued to keep the consumer markets ticking over as they paid off their mortgages. It would seem we have got through the hard stage and now we are in a good position to continue spending in the consumer markets, whilst maintaining our now lower mortgage repayments… Either way we see this as good news!
Thinking about investing in multiple units?
Finally a sensible policy for the purchase of multiple properties has been mentioned by the government, which should give the buy to let market a boost.
Rather than buy to let investors paying stamp duty for an entire bulk purchase, the government is looking at charging bulk buyers per individual property. Because of this, bulk purchasers of property are more likely to stay below thresholds for higher stamp duty rates.
Current stamp duty rates are as follows:
£125,000 – £250,000 = 1%
£250,000 – £500,000 = 3%
£500,000+ = 4%
See below for some figures on how this new policy would help you if you are looking to purchase multiple properties.
The current figures:
10 properties @ £150,000 = £1,500,000
Current stamp duty bill = £60,000
Anticipated figures:
10 properties @ £150,000 = £1,500,000
Anticipated stamp duty bill = £15,000
As you can see, on this particular transaction you would be saving 75% from your stamp duty tax bill!
Another new policy from the government could lead to barriers for Real Estate Investment Trust’s being lifted, this would allow REIT’s to invest in residential property and owners would hold shares in actual bricks and mortar rather than the REIT itself.
For a list of our bulk investment opportunities see here
See the article in The Times here
Spending cuts for universities….Great News for investors!
The UK Government has announced they are looking to implement spending cuts in the region of £350m for the 2010/2011 academic year.
Now many people may think this is a major set back to investors investing in student accommodation, but in actual fact that could not be further from the truth.
What this actually means is that Universities have to concentrate their funding on their core facilities. For instance, up keep of their academic buildings is obviously very important, where as building accommodation for students is secondary.
You may argue that without the accommodation, attendances will drop. Actually this may not be the case.
What the university is hoping for is that third party developers will step in and build for them.
This has always been a much maligned area for Universities because they know that the more accommodation they own, the more revenue they will generate.
Problems arise when spending is cut, they can’t afford to develop so are almost completely reliant on commercial developers.
In short, third party commercial developers have the universities over the proverbial barrel!
Take a look at our Student Property Buyers Guide for more information!
Close to a deal for forestry at Copenhagen
It looks like alternative investments are going to recieve a well deserved boost after some firm negotiations have been getting under way in Copenhagen.
Unless you have had your head buried in the sand for the past few months you will know that climate change is the “Hot Topic.” The reason climate change is a hot topic, is that world leaders have finally opened their eyes to reveal a world that is years away from possible catastrophe.
Leaders of the world are gathering in Copenhagen from the 7th of December to the 18th to “thrash out” a deal whereby rich westernized countries will have to pay the less economically developed countries for what we have done to the planet while we were growing.
You’re a property investment company why are you interested in climate change?
Well apart from the obvious - This affects all of us!
The reason we have taken such a serious interest in these climate change debates is that, we know that when all the world powers are getting together to discuss climate change business opportunities are going to arise… and they have, but luckily we have a readily packaged investment for you to:
- Profit by up to 100% pa
- Make a real difference to the environment by saving the rainforests.
Have a look at our Carbon Credit Investment or read our Carbon Buyers Guide.
“Climate talks near deal to save forests” New York Times
With stability grows confidence!
Shopping at the weekend I was amazed at how busy all the shops were, now I know it’s christmas and all that but perhaps this could be the final piece of the puzzle that will lead to us climbing out of recession.
It does seem for the first time in months that the public are not as worried as they were about the economy.
According to the times, people are more optimistic about the economy than at any time over the last 18 months.
What are the reasons for this?
- We have just had the highest october high street sales for 7 years.
- The pound rose to it’s highest level against the dollar.
- The ftse closed up 92.5 points, at a two week high.
- Alistair Darling is looking at cutting business taxes to encourage people to have faith in labour.
What do people think about these facts?
Is this a result of the “quantitive easing” which we (the public) are going to be penalised for after the elections?
or
Is this the start of Britain pulling itself out of recession?
Could the points above be the catalyst that leads to us out of our economic quagmire?
What does this mean for the property investment market?
In my opinion it means that the worst is now firmly behind us, the increased confidence on the high street coupled with the low supply of new build property coming on the market means robust values.
Investors can now take advantage of a unique position in the property investment market. There are still a small amount of reposessed property and good discounted new build units available which if bought now are sure to increase in value over the next year.
Investors purchasing these can then re-mortgage on much better loan to value rates.
The property investment market is ripe at the moment, will investors choose to invest or wait until the moment has passed and lament on a missed opportunity?
As always, we will probably see both.
If you want details of some of our UK Buy to Let Opportunities at the moment please let us know, they are selling fast!
Act on CO2… with a high yielding investment
The Carbon Credit Investment market is a hot topic at the moment owing lots of thanks to the words “Act on CO2” and the Copenhagen climate change summit or “COP15”
“Act on CO2” is the slogan of the governments advertising campaign to try and cut the emissions of UK households. It is big news from the TV Commercial to the News.
For this reason Fresh Invest are offering a fantastic opportunity to participate in this phenomenal growth market, for an entry price of just £25,000
The Carbon Emissions market is expanding rapidly year on year; in 2008 it doubled to an estimated value of more than $126 billion.
Research conducted by New Energy Finance claims the carbon market will reach $360 billion by 2012 and if the US introduces its own cap and trade scheme, as expected, it could rise to circa $1.9 trillion by 2020.
How would this effect investors in Carbon Credits?
The increase in market size is being driven by one thing….demand.
Reasons for an increase in demand include:
- Carbon Reduction Commitment – introduced next April. This will rank 5000 UK businesses according to their net carbon emissions.
- US Cap and Trade – companies will be encouraged to cut emissions, whatever they can’t cut they must trade.
- Less economically developed countries becoming more westernised in their day to day lives, carbon emissions per head will dramatically increase. These will need to be offset.
- Public Relations – Companies are beginning to lose business as they are seen as “dirty”. The only way to change this will be to cap and trade.
- Advertising – From much publicised conferences, to television commercials and news, “ACT on CO2” are the “buzz words” for the 21st century.
- COP-15 – 192 nations will be represented at this climate change conference in December that will put in place guidelines for countries to reduce their CO2 emissions.
So what is a carbon credit?
Each carbon credit is equivalent to 1 tonne of carbon dioxide. It is a commodity tradable on markets similar to the stock market. *You will not have to trade your credits yourself.
How do you make a carbon credit/where do they come from?
A carbon credit is issued by either the Voluntary Carbon Standard or the CDM (Clean Development Mechanism) Executive board.
Credits are issued to projects which are, in effect, carbon negative so they actively reduce the amount of CO2 in our atmosphere
What do they do and what are they used for?
At the moment it seems carbon credits are becoming more and more important everyday.
Put simply – Everybody has a carbon footprint which is measured in tonnes. So say I do 7,000 miles in my car per year – by doing these 7,000 miles my car will have emitted 2.4 tonnes of carbon dioxide, now if I wanted to offset this I would have to buy 3 carbon credits. (Probably at a price of around £11 each)
How do big companies use Carbon Credits?
A big company will use their carbon credits in much the same way as an individual would. However they have more emissions to offset than you or I.
Where you or I would be offsetting 1 car and 1 house a major supermarket chain would need to be offsetting the emissions of: All of their stores, All of their lorry delivery fleet, all of their production lines etc… you get the idea?
How can I, as an investor profit from Carbon Credits?
Fresh Invest are offering its investors the opportunity to purchase Carbon Credits at 50 pence per credit!
The minimum investment is £25,000 and for this you will receive 50,000 credits at 1,000 credits per year for 50 years.
For the first 3 years our partner will guarantee you a return of 12%.
From years 3 to 50 you will sell directly to the end user through our partner who is also a carbon broker.
free phone on 0800 043 69 56 or go to www.freshinvest.co.uk
I predict it in september, the halifax and sky news predicts it in october!
Looks like my predictions were true, as the halifax reported on october 6th – article.
If you remember i wrote an article last month predicting that with most developers only just starting to build again there will be a massive drop in supply of property.
The Halifax states “a combination of increased demand and a shortage of properties on the market had pushed prices up in recent months”.
Now i think we all know that this increase is definitely due to ease, its supported by a lack in supply but against that you need to show an increase in unemployment and a definite lack of competitive mortgage products.
My further prediciton is that we will see a mini blip in prices followed by a mini crash then probably stability for the future.
Carbon Credits and Forestry Offsets
A blog about Carbon Credits as: An investment, A growing market and a possible lifesaver.
Did you hear about San Francisco Airport being the first airport to install carbon offset kiosks in their terminals? HOW EXCITING IS THAT?!
As far as I am concerned this is a fantastic idea. The easier it is for people to offset their carbon emissions the better! The carbon offset kiosk is about 5ft tall and fully automated so doesn’t need anyone to run it on a day to day basis. Now bear in mind that around 18 million flights are made per year carrying around 1 billion passengers… How’s that for a target market? 1 billion bored passengers waiting for inevitably delayed flights. Nothing else to do but think about how the flight they are just about to embark upon is going to damage the planet that little bit more.
Now I know what the worry in this process will be. “So I pay around £10 for this credit, in the understanding that someone, somewhere has stopped 1 tonne of co2 entering the atmosphere.”
I will explain why this works in terms of a forestry project.
When you give money to the offset company they will:
- Use the money to purchase forestry which has sequestered CO2.
- Pay indigenous or local people to look after this forestry thereby stopping it from being cut down for monetary gain.
- By preventing the logging of this forest you will stop trapped CO2 from entering the atmosphere.
The opportunity:
This is where we come in.
As you can see the carbon credit market is growing and this latest piece of news alone could bring a further £10 billion per year of income to the market. Obviously this is a massive claim and it would mean that every airport would have to install many of these kiosks and every passenger would have to purchase around one credit for each flight, even though, the chances are, they are using more than this.
Now we are offering an opportunity, in this market where you could make returns of 100% pa for 47 years!
How can we do this?
One of our partners has started a company which purchases land out in the Brazilian rainforest. The trees on this land have a massive amount of carbon stored in them and if he wasn’t preserving these trees they would be illegally logged and then the carbon which is currently stored would be released, furthering the damage to our atmosphere.
For our partners fantastic efforts he is rewarded with 1 carbon credit by the voluntary carbon standard for every tonne of CO2 which he prevents from entering the atmosphere. These credits currently trade at around £11 each in the market.
This is where you come in.
- We will offer you the chance to buy these credits from our partner at a price of 50 pence per credit!
- The minimum investment is £25,000 and for this you will receive 50,000 credits at 1,000 credits per year for 50 years.
- For the first 3 years the project manager will guarantee you a return of 12%.
- From years 3 to 50 you will sell directly to the end user through our partner who is also a carbon broker.
- The price for these credits is currently hovering around the £11 mark this would lead to a return of 44% pa on your invested money. Not bad hey!
There are 2 types of carbon credit: CER’s (certified emission reductions) and VER’s (verified emission reductions).
CER’s can trade at anything up to around £30 per credit.
VER’s can trade at anything up to around £15 per credit.
By purchasing from our forestry offset you will be purchasing VER’s
How could you make returns of 100% pa?
For the last few years there has been a lot of controversy over what category forestry offsets should be traded as. At the Copenhagen climate change summit in December this year, it is highly likely that forestry will be named as a “clean development mechanism” or CDM therefore producing CER’s. The reason for this is that current clean development mechanisms such as wind farms or solar farms actually create carbon when they are built as I’m sure you can appreciate. However forestry does not emit any carbon to put in place, the trees are already there, all we are doing is making sure they are not forested for monetary gain.
If forestry offsets become CER’s the project managers or investors can sell the credits at a higher price. This money can then filter through to the local people looking after the forests. Furthering the need to sustain rainforests rather than deplete them. Basically “the forest will be worth more alive than dead”
p.s. It’s already started. The UNFCCC have already named 3 forestry projects as clean development mechanisms.
If you would like more details on our fantastic forestry opportunity Click here
Further reading
This is the website for the Copenhagen climate change summit and articles relating the forestry. http://en.cop15.dk/Frontpage/Search+result?query=forestry
Invest In UK farmland for financial security!
Farmland as an alternative investment is a relatively “untapped” market at present.
Why is this? Well investing in farmland often means that you will have to be of a high net worth so unless you can scrape together a few million pounds it is… I’m afraid to say out of most individuals reach.
This is because farmland is currently selling at around £5,000 per acre. This doesn’t sound too bad but farms are normally sold in massive lot sizes.
Why would you want to invest in farmland?
Firstly let’s look at what the prices of agricultural farmland are governed by:
- Increasing demand from house builders as the population of the world increases.
- Increasing demand from farmers that need to provide food for this growing population.
- Increasing demand from power stations that need to decrease their non renewable resource consumption to help the UK stay in Line with the Kyoto Protocol.
- Decreasing resources as more and more planning permission is granted for new homes, renewable power stations and renewable energy projects such as wind farms. The supply of bare agricultural land is running out and one thing is for sure we cannot create more!
The cumulative result of this has been values increasing by 15% year upon year.
Farmland is something which every human being needs to live. In its purest form it provides us with a means to grow food and rear cattle therefore providing the means to eat for the whole population.
A quote from H.R.H Prince Charles recently in the Richard Dimbleby lecture read “That which sustains us must itself, also be sustained” This means that the whole ecosystem of this world needs to be restored at the same or at a faster rate than it is diminished. The Amazonian rainforest alone releases 50 billion tonnes of water vapour into the atmosphere every day! This makes our climate cool and makes this planet inhabitable. Deforestation is currently operating at a rate of; the size of a football pitch every 4 seconds! One of the great problems with deforestation is the rate at which it impacts on our environment. Not only does all of the CO2 sunk by the trees get released into the atmosphere when they are burnt. But there are now less natural CO2 sinkers in the environment and when trees are not sinking CO2, they are not producing oxygen, the very air we breathe.
Our reliance upon nature’s non-renewable resources is 25% greater than nature can self sustain. Fossil fuels such as coal, petroleum and natural gas are being used at too fast a rate. The sustainability of these fossil fuels is something which is being tackled by the Kyoto Protocol.
The Kyoto Protocol is an obligation made by all countries to cut their use of non renewable resources by 80% by 2050. Here is where we can come back to farmland and the growing market that is renewable crops and the land underpinning it. As Power stations throughout the UK start to follow the trend and invest heavily in harnessing the power of renewable resources, this may well drive up the prices of green energy crops such as Miscanthus grass which is a co-burner to be used with coal in the production of electricity. Now this may well increase your annual yield through higher revenues, but with this, the land itself should increase in value as it is now worth more to the investor.
So let’s recap
- The price of farmland is steadily increasing as demand increases and supply decreases.
- Farmland value has increased on average by 15% year on year.
- It is a diminishing resource that needs to be sustained.
- It will help the UK contribute to their Kyoto protocol obligations.
- More and more people are starting to see the benefits of being “Armchair Farmers”.
- There is around £11 billion of borrowing secured on assets worth over £170 billion, excluding stocks and growing crops.
- It is the foundation of the built environment!
Remember the secret to success is to balance your portfolio. Where better than UK farmland?
Balance your portfolio with alternative investments!
Here at Fresh Invest we have been working hard, attempting to provide our investors with the means to build and prosper from a balanced portfolio.
Why is it so important to build a balanced portfolio?
A balanced portfolio will perform well in every market. You need to prepare yourself for every eventuality, for example. If there is another fall in house prices, people are likely to look elsewhere for places to hedge their savings or pensions and hopefully provide them with an income. This will therefore push prices up in the relative sectors, as demand increases people will look to charge more of a premium.
As markets become more volatile than ever, you should be looking to put your hard earned savings and pensions into a range of products where the value is governed by an increasing demand and a decreasing supply, during varying economic climates.
How about UK farmland? Well let’s get one thing straight we cannot create more land, neither can we build upwards, agriculturally. UK Farmland has been growing in value by 15% pa over the past 3 years where other investments have been decreasing in value.
We always need land
Another point is that if the UK housing market was to recover there will be uplift in demand for farmland yet again as housing developers start to look for land to build on. Putting further pressure on price rises as resources are diminished. Now if this happened and you were lucky enough to purchase in an area where planning gain is possible for further housing, this could greatly increase the value of your land!
Not only can alternative investments provide safe returns in uncertain economic times, many of them can provide great taxation benefits such as capital gains and inheritance tax relief.
There is a vast array of alternative investments on the market at the moment and without specialist advice you may not end up with a balanced portfolio at all.
So speak to the experts www.freshinvest.co.uk
Latest Buy to Let News…
Bank of Scotland will cease business from 01/07/2009, thus leaving even fewer lenders to choose from in this challenging market.
After a brief period of lenders lowering their rates last week saw rates rise due to the increase in SWAP rates. BM Solutions raised their but to let rates by up to 0.6% in one move with Platform also increasing by 0.6%.
It has been announced also that Leeds Building Society will no longer lend on new build flats on a buy to let basis. The market is certainly challenging and previous lenders are still showing no signs of re entering the market to ease the pressure.
Please be aware that the remaining current lenders will only lend on a certain percentage of a development and once this exposure limit is reached they will not lend anymore on the site.
Once certain lenders have reached their exposure limits obtaining a mortgage for sites/developments may become extremely difficult or sometimes impossible so please ensure you do not leave it till the last minute to enquire about or to arrange a mortgage.
Discounts drop as new build property runs out
As a property investment company we are uniquely placed to gather real time information on the UK property market.
These are our thoughts.
Well it’s simple supply and demand really.
As the market started to drop last year and various buy to let mortgages disappeared off the market many developers either land banked of sold off previously earmarked developments.
We are now starting to see the impact of this.
Less property coming onto the market means more potential buyers for the property that is left.
This in turn means that a new sense of confidence has appeared in the market.
Before, sellers may have had one or two viewings; they now have ten or twelve.
The only reason we have not seen a massive surge in prices is the remaining problem, which is loan to value rates.
However, this is also due to change.
We have it on good understanding that the Government is due to force a “must lend” initiative on lenders which is due in the next 6 weeks.
When this comes around I think we will see the end of any discounts whatsoever.
Until builders start to build again there simply is not the need for the developers to do deals.
Property Investment companies have always based their success on bulk selling units for a greater discount than an individual will obtain direct.
When the developer simply does not have the units to bulk sell our service becomes obsolete, for the time being anyway.
My Conclusion:
Buy at a discount whilst you can, you may not get another chance for a long while and you can bet that the investors that are prudent will have to take a massive hit on mortgage interest rates in the future, let’s face it, they won’t go down any more!
Invest before the next Step Up!
Sky news has reported that buyers are flooding back to the UK property market. Is it now time for everyone to jump on the band-wagon?
It is no secret that the UK property market has been hit hard by this recession, but with buyers “Flooding” back to the market there is only one way prices can go and that’s UP! Prices have been slowly rising over the past couple of months; as banks lessen the restrictions on their lending patterns and start to let the government’s efforts of quantitative easing, filter through to the consumer.
Sky news reported that last month there was on average 4 house hunters to every house on the market.
Now don’t get me wrong I know, as does everyone else, that the underlying reason for this recession has still not been rectified. The banks still have a lot of bad debt on their balance sheets and unemployment is still rising. But let’s paint one possible picture – The re-emergence of the buyer will see the seller take the opportunity to test the market. Now if these sellers can offload their property quickly enough, they will be able to take advantage of the current low interest rates to make the move that they have been waiting the last 18 months to achieve, for many this will be a movement up the ladder. We need to remember that there is 18 months worth of first time buyers waiting to make that first jump and this could be the fuel to fire the recovery.
If first time buyers do start flooding back to the market and property prices start to stabilise, maybe banks will be able to start lessening their restrictions on the credit driven companies , these may therefore be able to start employing again. If employment starts to rise then mortgage approvals will follow suit. Interest rates will have to rise but if people are in employment they will hopefully still be able to afford their repayments and if this happens in large quantities the banks will be in a much better position to survive this recession.
You don’t need a crystal ball, just look to the past!
Everybody seems to be waiting with baited breath for sure signs that the property market is on the up.
I liken it to being a child just about to take that first jump on your bmx, you spend all day making the jump then all gather at the top of the hill ready to go. Then you all stop, look at each other, daring the other to go first.
This is how i see many of us in the property market.
Nowone wants to be the first, we all need to know that someone has taken that jump before us!
If we take a quick history trip back to the second half of 1992, the market was just beginning to emerge from the doldrums of the late 80′s.
If we use Halifax’s figures, the average price in 1990 was £69,000, by 1992 it was £61,000, however, as we entered the millenium it has climbed to £81,500, a 15% increase.
In London prices has skyrocketed from £76,000 to £142,000!
This explains the recent increase in viewings in the capital.
The other explanation is easily explained if you look at the typical house buyer at the moment.
They fall directly into the middle age, middle class category.
These individuals were either at university or not on good enough wages to take advantage of price increases in the early 90′s. However, since then many have worked hard and are now in a solid job, having regularly paid off their mortgage.
These are the types of people that see an opportunity, they are also the people that are in the best position to take advantage of it.
The downturn in the market has resulted in the North/South divide widening again, where most southerners seem to have a larger amount of equity, this has allowed them to ride out the downturn in relative safety; whislt also paying off massive chunks of their mortgage thanks to the low base rate.
Because of this they are now in the ideal position to pray on an underperforming market.
Lenders are heavily favouring investors with large deposits and good jobs which is exactly the demographic many of these investors fall into.
Whilst i still think the property market has another 10% drop in it, i’m buying, the reasons?
I would rather pick up a high yielding property off a desperate seller in a declining market than a property off a confident seller in a buoyant market.
If you are worried about the 10%, offer 10% below market value, your more likely to get it now and take advantage of low mortgage rates than after the market has turned!
It’s all the NINJAs fault!
As we all sit around wondering why our shares are worth 50% of their initial value and our savings are returning a staggering 2% per annum, i think its time to blame NINJAs, or more importantly, the people that lend them money!
If your thinking, he’s finally lost it, hold on and let me explain.
I’m not talking about the type of NINJAs that wear black pyjamas and lurk in dark places! Im talking about “No Income, No Job, No Assets” N.I.N.J.A.s.
It’s because the lenders lent money to these massively high risk characters that we are in the poaition we are today.
There is a reason NINJAs do not own their own houses and it’s generally because they can’t afford both the deposit and the monthly mortgage payments. With 100% mortgages available many high risk applicants decided the time was ripe to take their first step onto the ladder.
Suddenly all the spare cash that was swilling around at the beginning of the century was quickly used up, much to the lenders delight.
Bankers then took all of these loans, mixed in some better ones and sold them to other banks who found the high interest rates attractive.
The problem arose when these “fixed rate” mortgages came to fruition!
Suddenly Joe Blogs went from paying an affordable rate to one miles outside his comfort zone, they default on their payments and the heavily traded loans that were made are found out to be be worth about the same as the paper they were printed on!
This may have been manageable if their hadn’t been over $1 trillion worth of these loans in the market!
Any lender with a high risk business model eventually came a cropper as banks bit the bullet and decided to stop lending to one another.
From there on i’m sure you all pretty much know the story, banks are “helped out” by the Government and we all eventually suffer.
One point worth noting is that the banks that took these massive gambles that eventually doomed us all were rewarded by being taken over by the Government!
Interesting seeing that if any small business owner made such a colossal cock up we would be on the street before we could say Northern Rock!
