Britain to become a nation of renters… but wait!
Having just seen a news article stating that Britain is to become a nation of renters, I felt that it contradicted slightly the other news I heard today which was that a leading mortgage provider are now offering a 100% LTV mortgage! Yes, that’s right, it’s back! Arguably the thing which started the whole credit crunch and recession we are currently experiencing in most westernised countries. I understand that, at the moment the terms to these types of mortgages are very onerous, but I feel it’s only a matter of time before these are widely available on better terms.
Obviously there is A LOT more to the credit crunch and the recession than the 100% mortgage, but I must say, when people are given the chance to purchase a house that they can ill afford, I start to get worried. Then again, maybe it is exactly what the market needs at this point to stop the UK turning into a “nation of renters” From my calculations; in most places it would definitely be cheaper to service a 100% LTV mortgage than rent a property. Crucially though, what would this do to house prices, if there is a massive drop off in the private rented sector? With less competition from renters, the currently healthy rental market may start to take a turn for the worse, landlords having to lower their market rent in order to attract tenants. Would this cause a sell off of some investor properties? Doubtful, as prices are not exactly at all time high levels at the moment. So as people may start to decide to Purchase rather than line the pockets of their landlords will we see a correction in rental yields which are very high at the moment, with property prices rising in accordance?
With the return of a 100% LTV mortgage there will now be the opportunity for people that had very little equity in their current house to upsize, this could free up FTB properties which can now be funded with new mortgages on the market. First time Buyer’s are often called the lifeblood of the market. Without new buyers in the market who will purchase all of the new supply from housebuilders?
What does all of this mean for those wishing to invest in UK property? I am a firm believer in a recent article I read in the Estates Gazette which gave a compelling argument for the fact that we need different methods to measure the UK property market these days, and the old method of an average wage multiplier to the average house price ratio should be overlooked. The reason stated in the estates gazette was the fact that property prices have continued increasing albeit very slowly over the past couple of years, but real income has been dropping, much due to the very high inflation we are currently experiencing. This is why other signals must be taken into account, one of which is always going to be mortgage availability and the cost of credit. Now availability is very high and the cost of credit is at an all time low are we just about to see a large increase in UK house prices?
Time will tell…
Student Property Investment – still a great buy
The student property market has been the focus of much debate over the past few weeks in the property industry. Still remaining strong and with more and more purpose built student blocks rising from the ground. But will the increased fees now payable to universities stifle the rental market as less people can actually afford to go? If they can afford to go are more students going to be looking towards the private rented sector and house shares to cut down their monthly overheads?
High Rise Student blocks have started popping up in most university student towns and cities as savvy developers see the potential for a 51 week tenancy agreement and maximising their rack rent by utilising as much of the available space in a building as possible by filling it with bedsits and communal spaces as opposed to self contained apartments.
High rise student blocks are often most popular with the overseas student market that will be coming over to the country and staying for a longer period of time often lets of 43 or 51 weeks, they tend to stay in the UK for the summer, they also normally pay higher fees, sometimes up to £20,000 per year making them a vital fee earner for UK universities.
London in particular is an area where student development is taking off and with figures recently released showing demand over the next few years and the supply that is currently in the pipeline, it could be only the overseas students that will be in a position to front the rising costs. The predicted shortfall of beds is 47,000 by 2016! In the new Nido scheme at Spitalfields students will be expected to pay up to £350 per week per person!
Even with the caps on overseas students that the government has proposed we feel the student property investment market is going to remain strong for a few years yet. As top universities start to charge higher fees in London maybe more students will start to look at smaller university towns and other large respectable locations may continue to grow.
To see our latest UK student property investment opportunities please click the link.
More strong news for Cape Verde Property Investment
The International Monetary Fund (IMF) have conducted their eighth and final review of the Cape Verde Islands and yet again it is fantastic news for anyone invested or interested in investing in Cape Verde Property.
The IMF have stated that they believe Cape Verde’s growth will continue through 2010 with inflation remaining low. This is good news for the islands that are already showing very strong growth indicators and are becoming a real investment hotspot.
The IMF have shown that they believe that “Real GDP” will be increasing at a rate of around 6-7% pa over the next 5 years (“Real GDP” is the size of an economy with allowances for inflation) meaning that the value of all goods and services produced or passing through the country will be increasing by 6-7% and therefore the size of the economy will be growing and people, on average, will be able to benefit from a better standard of living and companies can begin to grow, allowing more money to go back into the development of infrastructure.
Lots of the growth for these islands comes from increased Tourism and an increased level of investment in property and then infrastructure. Property prices on the island have been rising on average by around 15% per year. The islands have remained a relatively undiscovered gem in comparison to the Caribbean and its northern counterpart, the Canary Islands, where property prices can be as much as 40% higher. They are only a 5 hour flight from the UK, have a time difference of only GMT – 2hours and benefit from 360 days of sunshine per year. Tourism figures have been increasing year on year and the island of Sal has seen increases of around 27.5% per year, as the only island with a truly international airport.
All of this information leads to a great location for investment in property serving the tourist industry. The investment we are presenting at Fresh Invest takes full advantage of the increasing tourism figures and can realistically provide investors with a net rental income of £12,133 per year for an investment as low as £32,294. All of this in a beachfront, 5* resort that gives purchasers 5 weeks free use per year.
To find out more about our investment in Cape Verde click here.
For the report by the IMF click here.
Capital Gains Tax Increase – Fresh views
With news that the new Con/Lib coalition are to raise the tax due on Capital Gains for anyone selling a second property Fresh Invest shares it’s views on how this may affect the property investment market.
Firstly let’s decide why the government has decided to impose this new tax there are 2 main reasons:
- The previous government has run up an astronomical budget deficit – hence the note recently left by the outgoing treasury minister Liam Byrne, to the new chief secretary David Laws which stated “Dear chief secretary, I’m afraid there is no money. Kind regards and good luck! Liam.” For this reason it is imperative that the new government make a lot of cuts, to bring the level of this deficit to an acceptable level they need to recoup money from the tax payers and this new capital gains tax will do just that.
- The second reason is that because of the slack lending criteria over the past decade many people have bought up a large amount of property in small holiday towns throughout the south of England, through this they artificially increased the prices of all the houses around these areas and they are now financially out of reach of the average worker in those towns.
The government is therefore going to impose an increased Capital Gains Tax on all second home sales as a way of raising cash for themselves and a way of stopping people becoming too greedy and putting house prices out of reach for first time buyers in holiday locations throughout the UK.
Now what could happen as a result of an increase in Capital Gains Tax?
The big sell off – This first scenario would really depend on when the government decides to impose this new tax, if they decided to impose the tax from the new tax year i.e. 6th of April 2011 then I would suspect a big sell off of second homes in desirable locations, creating a very large influx of supply into the property market and without the demand to match, probable falls in prices.
The buy and hold – The other scenario, I believe would also depend on the time the new tax is imposed. I would suspect that if it was to be imposed straight away then second home owners and investors alike may decide not to sell their properties as the gains are no longer high enough. Hopefully this will not cause any form of stagnation in the already fragile property market.
One thing is for sure. This will slow down the purchasing of property just for the capital gains that come with it, as the risks may begin to outweigh the possible rewards .An advantage of this however will mean that investors do not inflate property prices further and therefore eliminate first-time buyers from the market. Hopefully this will lead to longer, sustained growth.
Maybe it’s time to look to the overseas property market for your significant capital growth?
What are your views?
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.
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.
Lack of property boosts asking prices
I’ve done it again!
If you remember i blogged in september regarding a lack of supply leading to increased prices, well it seems mortgage solutions agrees……better late than never! See their article here.
I personally i think they missed the biggest point which is the slow down in new build development. But you get the same result.
We still have a few new build developments with discounts available, if you are looking for a property investment click the link!
Another option is to buy a student property, some of our wealthiest investors specialise totally in student accommodation investment. A couple of them have yields close to 20% on massive portfolio’s!
Some investors don’t like the hassle of student property but if you have a management company set up all you need to do is collect the profits!
As lending relaxes property investment increases!
It’s what most of us have been waiting for, the small time frame between lenders relaxing their criteria and property prices increasing.
We all knew that lenders were going to need to increase their loan to value rates, and that when they did it would make a massive difference to the property investment market.
Over the past few months half decent rates had been reserved for investors with 40% deposits. Now i do not condone most no money down deals, i think they lead to more problems than they alleviate.
However! the case for the investor with a healthy 20% deposit should be heard, they have a large amount of equity in their property and should now be relatively safe from negative equity.
It seems the lenders now agree.
What are the new rates like?
Since the BOE base rate reached 0.5% products requiring a 15% deposit have risen from 169 to 231. And the number of products requiring just 10% upfront has gone up from 89 to 105 in the last month alone.
This is certainly a massive difference to a year or even 6 months ago.
Nationwide has already announced a new influx of deals, including some at 85% loan to value and they have also released some of their best rates at 70% ltv, from their previous at 60%.
They have even released a special 90% ltv rate for investors that hold one of their flexaccounts. These start at 4.63% for a 2 year tracker.
The Woolwich have also released details of their new 75% ltv rates, this is the first time the lender has made it to 75% for at least a year. The new mortgages include a lifetime tracker on 2.94% and 2 year fixed on 3.99%.
Abbey also have a new range out, these are exclusively for their current account customers. One of their best is a 90% ltv 3 year fixed rate at 5.99%, their cheapest mortgages are now available at 70% from 60%.
So why the sudden change?
It seems that lenders now believe that the worst is behind us, in short if they are offering 90% ltv mortgage they believe that property prices will not drop more than 10%, in fact they believe that prices will increase in the future, as now being reported in most news channels.
Just last month hsbc pledged to lend an extra £500m at 90% ltv by the end of this year!
Add this to the political pressure being put on lenders by the government, this was summed up by the governments own lending house northern rock as they released some of the best ltv rates seen for over a year!
So should i buy now?
If you are looking at getitng into property investment there has never been a better time to invest, there are still seller under pressure but now there is also the promise of some competitive rates. This means that not only can you buy cheap, you can also borrow cheaply!
We don’t expect this to remain the case for long so why not add or start your portfolio with some discounted property now!
Also check out our UK Buying Guide for handy hints and tips.
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!
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.
My predictions for the next 12-18 months…
Wow, what interesting times we live in! Property Prices seem to be on an elaborate rollercoaster depending on the area that you live.
One day prices are rising, the next falling, i think the property investment market needs some stabilisation so investors can find their legs again!
Personally i think this may be right around the corner.
I believe that for once the government may have actually got the result that they wanted, even if they will achieve it in a way i doubt they could have expected!
What do i mean?
It’s quite simply a matter of demand and supply and it’s one which could impact us all so pay attention!
Around 12-15 months ago the vast amount of new build property developers stopped starting new developments and started land banking. No property developer would start a site that they thought would actually lose them money!
This was fine at the time, there were more than enough new build developments going to keep most property investors happy, in fact if we are honest there were probably too many!
It’s easy to say that the UK needs to build x amount of housing to keep up with demand, but if that housing is mostly luxury apartments in city centres, way out of the price range of joe bloggs then it does not really equate!
What we are now seeing is the end of many large property developers redundant stock, most sites are now finished and developers are just about to start building again.
This will dramatically impact on property investors and property investment companies, how? because for the next 12 months + we will see little to no new build developments being offered.
“What of all the off plan deals” i hear you say.
Well if you put your hand in the fire and it gets burnt, you don’t go back for a second go do you?
If developers start offering off plan opportunities that is exactly what they will be doing!
It is a lose lose situation for a developer.
- They offer the property off plan and the prices continue to rise – Result – they have lost out on potential profit.
- They offer property off plan and prices drop – Result- what seemed a smart bet turns into disaster as property investors decide not to complete as the promised 25% discount has been eradicated by price decreases!
Summary – Developers can’t win!
So we are faced with developer not offering discount on their property until they have completed the site and explored every other selling option!
This has to be at least 12 months from now for even the quickest builders!
So what would i do?
Buy now!! Were on the way to a mini price rise where property investment demand suddenly rockets past supply!
If you can get it right you can grab the last of the good discounts now and sell or remortgage in 12 months time when prices have risen.
A property chain reaction
Anyone remember the speculation that was around only a couple of months ago with regards to the property price increases? “Yes they are increasing, but there are no new homes coming on to the market which means it cannot be sustainable”.
Well the average estate agent had 64 properties on their books during the traditionally slow month of August, up from 59 in July and the first rise since April, said the National Association of Estate Agents.
Well of course they did. Those people that were looking during the first quarter of this year were also very likely to have homes of their own, ready to go up for sale once they had tested the buyer’s market.
Now I know what you’re going to say… “Yes but these are second, even third-time buyers. We need first-time buyers back in the market before we can see a prolonged recovery.” Ok how about this “The number of first-time buyers who were actively looking in the market also rose during August, with this group accounting for 36% of all agreed sales, up from 22% in July.” With the availability of credit easing with more and more mortgage products coming onto the market, there are definitely a lot more opportunities for first-time buyers to jump on that first rung of the ladder.
Then of course we have the property Investors who have been coming back to the market recently, giving further uplift in demand. Obviously investors have been seeing hard times but investing in this climate can be highly lucrative you just need to research your investment opportunities properly (or let us do itJ). One market which has actually benefited from the recession is the Student buy to let market, with uni applications rising dramatically throughout the recession. For more information on the student property market please click here.
However if you are not looking for investment opportunities in the UK then you need to be looking towards emerging markets such as the Cape Verde islands or Brazil. Or if you’re not looking for property in particular then you should be looking towards carbon offsets (set to be one of the biggest commodity markets in the world) or If you would like to be more defensive take a look at our farm and forestry funds or vineyard opportunity with guaranteed returns.
Things are definitely starting to look up!
Property is back!
Many investors have read the news recently about the increase in property values.
Suddenly property investment is the new hot topic.
If you have any disposable income the chances are it’s in the bank or in shares.
In Shares? Well you’ve probably lost between 15%-40% on them over the last 18 months and can see no end in sight. Even if the market recovers it’s unlikely your shares will return to their previous levels for a few years yet.
In the Bank? Thats even worse, your probably getting a measely 3% interest per annum of which the bank is using your money to invest in various property funds returning 6%-8%.
Many investors do so for the long term, property investors are the same.
That’s not to say that purchasing and re-selling in a short space of time is wrong, in my mind that is a long term investment as you will more than likely use the profits to invest in further property.
If a stock market investor purchases some shares then sells a few weeks later after making a profit, we do not accuse him of investing for the short term. So why is flipping property sometimes frowned upon?
It’s “a means to an end” the “means” is to accrue as much capital as possible, the “end” is a target of a high yielding property portfolio.
Don’t get me wrong, this is not without it’s risks but smart investing in low density developments with proven values can be profitable.
Essentially it’s the same as developing, when you refurb a house you do so as quickly as possible. Why?
Because you want to sell your property in the same market conditions you bought it in.
Let me explain, you buy a 2 bed house that needs work and you have faith that at the time you bought it for a good price and that you can sell for more after some work.
The only way to make sure of that is to sell in the same market, if you wait too long and the market drops, thats eating away at your profit.
This is the same when purchasing property to flip, you want to know that the “bargain” that you bought last week you can sell straight away for a profit.
There’s one problem, have you seen it?
Why would a developer sell you a propeerty for less than he can sell it himself?
It seems unrealistic but it does happen.
The simple truth is that by marketing ALL of their properties at discounted prices they lose the option of returning to their previous prices if the market picks up.
I normally wait until it’s the developers year or half year end, if you can complete quickly and they have stock lying around you will normally get a good deal.
Then after their year end is passed they can carry on selling at market value safe in the knowledge that their units were not marketed at a discount.
This is the reason for the Fresh Invest client login, it allows developers to market certain properties that they do not want advertised to the public.
For further information on developers year ends and investing in property please contact us.
Economies of scale
One thing you will notice a lot in terms of property investment is the economies of scale that are involved.
What I mean is the bigger the purchase the bigger the discount. So essentially the best discounts are only available to those investors of a high net worth.
However here at Fresh Invest we like to try and please everyone. So we will aim to use the larger purchasing power of our Bulk Investors and filter the discounts obtained through to our investors that are only looking for individual buy to let properties.
So any of our investors can register an interest in our bulk deals, then once a Fund has secured the properties we can start to sell to the single investor on behalf of the fund, this will be at a greatly reduced from list price.
This is good for the bulk buyers, as often they can get an almost instant return on their investment with the added choice of a great profit or an income stream from whichever properties they chose to hold and let privately.
A typical example is one of our current Opportunities in London. The developer is offering these to the single investor at 10% discount. However we have now secured these apartments at a larger discount with the use of a fund and can now offer these to the single investor at a discount of 20% leading to an average saving of around £20,000 to the single investor.
At the moment we have an opportunity in Boscombe. Now if you purchase 3 units in Boscombe and the developer would entertain a 25% discount however for one property the developer would only give a 15% discount. If we can get a bulk buyer to negotiate a very feasible discount of 30% for 10 units then sell back to the individual investor at a rate of 20% or 25% off of list price, the individual investor has saved 5-10%
For more information on this register with fresh invest here
Student Property… Still holding strong!
The student property market has still been relatively unfazed by this recession. The strong returns are still available and it is still a growing market. Student applications rose by 9% for the student year commencing September 2009.
Not only is the student buy to let market growing but did you know about the various grants available to bring your property up to HMO standards accepted by universities and authorities…Yes that’s right the landlord accreditation scheme means that if you buy a property that you intend to let as an HMO it may have to be up to a certain standard e.g. 3 double plug sockets in the living room and even bedrooms of a certain size. Some local authorities will pay half of your refurbishment costs up to the sum of £4,000!!! Not bad hey?
With the traditional buy to let market in dire straits why wouldn’t you look towards this bustling market, and place your property in an area that will always be in demand?
The landlord accreditation scheme:
The landlord accreditation scheme is free to join. It differs from area to area. But here are some advantages of our local Landlord Accreditation Scheme:
- Access to funding to bring your property up to Accredited standard up to £4,000.
- Full property listings on the university’s website and accommodation list.
- Eligibility to join the “Head Leasing Scheme” (Full management service).
- The status of being publicly identified as a good landlord, including formal certification.
- Discounts on goods and services such as property insurance, Mortgages and Loans.
For more details on the landlord accreditation scheme in your chosen area or to use the Fresh Invest Property Sourcing service email us here
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!
Are you self invested?
How safe is your pension? Is it something you think about often?…. Maybe it should be
Now, more than ever is the time to be thinking about a SIPP in Investment Property.
Did you know that for the first time in history the number of over 60 year olds in Britain is larger than the number of under 16′s? The reason for this is “The Post World War Two Baby Boom”
Between 1946 and 1964 there was a dramatic change in the planets demographics. There was suddenly a huge increase in the amount of under 16′s.
Average growth in the population aged over state pensionable age between 1981 and 2007 was less than 1% per year. Between 2006 and 2007 the growth rate was 2%! Source: ONS
Because of this the government is going to have a very large increase in state pension payouts.
State pensions are Index linked therefore as long as the economy is in deflation your pension is decreasing in size.
So the outlook is bleak for your pension? Now is the time to change this!
Invest in any of our overseas property to see long term capital gains and great rental yields!
For example: Our most recent overseas opportunity is Dunas Beach Resort in Cape Verde. Now I strongly believe that that this is one location not to be underestimated! In terms of capital appreciation you are likely to see at least a 15% rise per annum during the course of the first two years. With rental yields estimated at 9.4% (Pessimistic) this is a great place to invest.
Not only is Cape Verde receiving massive Foreign Direct Investments but demographically they have an extremely strong population with only 6.7% over the age of 65 this puts Cape Verde in a great position for economic growth.
To see our Blog on Cape Verde click here
To view details of all our overseas investment property click here
Recent tax and legislation – How it affects the investor?
Empty rates taxation:
Central government still ignore property industry protestation, about the demolition of perfectly usable premises, to avoid Empty Rate charges.
Non domestic rates are collected by local government, but remitted to central government. This tax has been left in place during one of the world’s worst recessionary periods. Due to this lots of companies have folded and Chartered Surveyors have reported a 65% rise in available floor space.
The government have seen a massive drop in Stamp duty income while the housing market ground to a halt. I guess to recoup some of that lost tax income; they will remove the empty rate exemption for commercial property shooting themselves in the foot. Why? Many commercial property owners would rather demolish a building with little or no chance of a letting for several years than pay the rates. I expect the government call it “government led rejuvenation” or some such spin.
What this means for the investor:
In reality usable stock is being demolished. Local authority planners should bend over backwards to assist property owners to find alternative uses, before industrial and warehouse estates are raised to the ground, offices are turned to residential units and the High Street looks bombed out.
Residential landlord registration:
The government are considering the compulsory registration for all residential landlords. ARLA (association of residential letting agents) also suggest that to protect landlord’s rents and tenant’s deposits all letting agents should be registered. The scheme is designed to safeguard the tenant’s initial holding deposit and to act to resolve disputes concerning the deposit.
There are a growing number of unregulated letting agents who go out of business with the resultant loss of monies belonging to landlords and tenants. Most older recognised institutions, like the RICS have in place regulations to protect client’s monies.
What this means for the investor:
A more even playing field between regulated and unregulated agents and registered and unregistered landlords can only improve the market and make it more transparent.
If you are the landlord dealing with deposits, you must protect monies that do not belong to you and if you cannot satisfy the prospective tenant that deposit monies are protected, then you may lose a letting.
Tenants will be more inclined to go to the private investor managing his/her own property as they are offered protection for the deposit that will be required and a fair way to resolve disputes that effect the level of returned deposit.
No money down…..no thanks
Im amazed at the amount of investors that still look for no money down deals.
Now before anybody comments, im sure there are plenty of investors out there that do look for no money down deals whilst still having the funds to top up or secure a mortgage if need be.
However, i would guess that for every one of these type of investors there are another 5 that are simply trying to get something for nothing.
Why any investor would look to purchase an investment property with what is in essence 100% funding bemuses me.
Have they not seen what has happened over the last year?
By purchasing via a no money down deal you are in essence putting yourself in almost immediate negative equity, all the investor will need is to not be able to rent the property for a few months or a tenant to not pay the rent and the investor is in serious trouble.
For me, property investment will always have a very dominant place in an investment cycle, i wholeheartedly agree with the quote “there is never a bad time to buy property”.
This may seem a stupid quote to a few of you but i take it to mean “there is never a bad time to buy property” (if you are in it for the long term).
This makes much more sense and i believe is true.
If you are purchasing property to hold and rent then putting a certain amount into the mortgage is a must.
It allows you to get onto a competitive rate, does not put added pressure on your earnings and also gives you some equity if you need to utilise it in the future.
If you are looking to invest in the future, put some money in, be part of the solution, not the problem!
Are we in for a Mental May!
Kingsoak, Jennings Homes, Gleeson Homes, Crosby Homes, Bewley Homes, Antler Homes, Barratt Homes, Redrow Homes and last but not least Bellway Homes.
What do all of these developers have in common?
Their year ends are in either june or july!
So why does this make a difference to you and i?
Because most, if not all of these developers have debt to service.
They have share holders that expect a certain return from the compani9es they have chosen to invest with.
If these companies cannot make the necesary sales then there will be no dividend payouts. This will reduce their share price.
So, when May comes around many of the developers that have been telling you throughout the winter that they do not need to make sales, laughing off your offers of 30% discount, will probably take a very different tack!
Now don’t expect discounts to be at the levels that they were at the tail end of last year, they won’t be.
The property market is a strange animal, when the general economy seems to be worse than ever, developers will be telling you that they are doing plenty of sales.
Because of the shoring up of the banks by the Government, many will not be chasing developers at the same rate as they were last year so ultra enormous discounts will probably not be available.
This however may be a blessing, many of the developers have brought their pricing in line with RICS valuations, so although there are not massive discounts, there are real discounts! Hopefully over the next few months a sense of realism will return to the property investment market.
Personally i think that the much reported 40%-50% discount deals are long gone and to be honest, were only done by a handfull of developers selling whole developments on what would probably be classed as a bad site.
Investors should get used to the fact that the no money down deal is by in large gone, and even if they were available, anyone gearing their property at 100% in this market needs a straight jacket, not a property portfolio.
Anyway, lets see what the rest of May holds, im expecting some great opportunities.
Where have the big discounts gone…
Further to a previous blog, i’m encountering an increasing amount of “hard nosed” developers.
Now if these developers aren’t setting the world alight with their monthly sales figures, and their year ends are looming, why aren’t they accepting the kind of offers they were last year?
Well interestingly the Government has told them not to!
Controversial i know but true in many cases.
I find more and more developers that have had their assets reposessed, now more often than not the banks that have reposessed these assets have been given massive cash injections by the government.
Now you have all these developers that are partly or solely owned by a bank, the bank is owned by the government or has shares in them…
Now this is the interesting bit….The government will not let the banks take a penny loss on their existing debts, so if the land and the build of a scheme stands the developer in at say £10m, any offer under that will automatically be declined.
The result of this is that the property market does exactly what the government injected all of this money into the economy for it not to do! Which is stagnate.
Nobody buys or sells because the market is simply not there.
The Downfall of Exchange Bond
Today one of our investors sent us a very interesting bit of news about theexchangebond.com.
It appears they are going into administration.
This raises some important points for both developers and investors alike.
From an investors point of view, does this now mean that any investor whose off-plan purchase is looking a bit wobbly can now walk away from this purchase?
They have already exchanged contracts but any money paid was to the exchange bond.
The whole point of the exchange bond is that it promised that if on completion the investor was unable to complete, the exchange bond company would pay the deposit for the investor.
The exchange bond company would then persue the investor for the lost monies.
So…if the exchange bond company is no more, who chases the investor?
Does the developer take it upon himself, he should do but does he have a legal right to?
In legal terms the investor has exchanged with the developer so risks losing his deposit if he does not complete….but they didn’t pay a deposit did they!
If i’am correct, then we are likely to see a multitude of developers reducing previously sold units for a quick sale!
What of the developers that have bank funding and have been lent money on the strength of their exchanges, surely this must impact severely on them as well.
I predict interesting times ahead…
Has the market turned?
With the government warning first time buyers to step onto the property ladder now rather than wait Fresh Invest gives it’s views on the market as a whole and it’s thoughts of a reported market turnaround.
The property market has always been a fairly fast moving animal, where price rises and falls in other markets happen on a weekly basis, the price of a new build flat seems to change on a daily basis at the moment!
We are finding that the massive discount of the last quarter of last year and largely no longer available.
I was just last week given an opportunity by a major developer at 30% discount, 2 days later i put in an offer at 40% discount for a large number of units. I was told that this was double what they were willing to do!
Obviously this confused me somewhat, in the 4 days i had taken to get back to them they had sold a number of units and could therefore be more “bullish” with their prices!
I suppose this shows how quick you need to operate in this market. It must be fairly daunting for a newbie investor, being asked to invest in something worth a few hundred thousand pounds in just a couple of days!
Unfortunately, if you want to invest successfully this is generally the pace you need to work at!
