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…
Property market 2011 – Fresh Views
Where does UK property and interest rates go from here? Economy shrinking, Inflation rising and rental values apparently falling…
Let’s start off here. If an economy is contracting this typically means that unemployment is rising, the reason for this is that, the size of an economy is measured on GDP (Gross Domestic Product) this is the total amount in pounds of everything circulating through the economy in a given year.
The formula for GDP is C + I + G + (X-M) = GDP
Where C = Consumer expenditure, I = Investment, G = Government expenditure and X – M = exports minus imports i.e. the total value added to products in this country.
If people are spending less, people are making less profit. If inflation is present it should be easier for GDP to increase as prices are rising, but the figure given as -0.5% is “real terms GDP” this is the total increase having taken into account inflation. Now, inflation can do two things it can lead to further spending or it can stop spending and send an economy into negative growth (much like it, seemingly has here) the reason it can do two things are:
1. Inflation can lead on to further inflation as people decide to purchase goods early before prices rise further. Resulting in further rises.
2. Inflation can lead to negative growth as people begin to slow their spending habits as prices hit certain levels i.e. a £9.99 CD becoming a £10.19 CD, the psychological effect of this small rise can damage sales, but the shop has no choice but to raise prices as prices of other goods and services are rising.
However I don’t feel that the negative growth can be solely attributed to increasing prices etc. What must be taken into account is the good old weather of the UK! Because of the poor weather conditions we suffered in December much of the country was unable to get to work and even unable to go out and spend.
But there are two significant ways for a government to battle inflation at the scary 3.7% it currently is and that is… raise VAT, or raise interest rates.
VAT has been raised from the beginning of 2011 and I feel we are yet to see the full effect of this in the figure of 3.7% inflation which was given at the beginning of the year. But now there are lots of rumours of an interest rate hike on the back of this as well, which should of course slow down inflation, but could quite easily send us back into negative growth and further stagflation where growth is stagnant and inflation is still present.
Now if interest rates were to rise I feel there will be lots of unhappy landlords on Tracker Mortgages, especially when rental values are apparently falling (this is taken from a generalised figure, which we try not to rely on too much in this industry) but this will normally mean less in the landlords pocket and in some cases, more out of their pocket!
Further to this we have the savers. Savers have had a particularly hard time throughout the recession, low interest rates and constant inflation means that at no point have they really been “better off” apart from possibly sheltering from losses in certain markets.
We still firmly believe that purchasing property through us on one of our developments is your best way to 1. Build up a portfolio for your retirement or 2. Make a “hands-off” profit, for years to come… or 3. Both!
We have some excellent investment opportunities at the moment; both UK Property and Overseas Property please contact us for more details. In times like these it really pays to think Fresh 
Act now or forget your pension
Pensions, Savings, Isa’s….
What do all of these have in common?
Well other than shocking returns, the chances are that over half of you are relying on one of these come retirement.
Forgive my scepticism, I can only talk from past experience, you see I’ve got a share portfolio which I’m looking to for a pension, I’ve had this for 7 years and rather than make me any money, it’s actually fallen 3% in value.
The news is full of programmes investigating the current financial crisis; no avenue of investment seems to be safe.
Panorama recently investigated the vast fees and commissions some pension companies take from their clients, in one case a lady’s net return over 21 years was just 3%…it would have been 4% if she had not been paying various charges!
Now I’m sure that there are other pensions that would return her a larger sum but as she pointed out, how do you know which are any good?
Well the answer is, you really don’t…
Why Property?
For years I have tried to educate clients as to the benefits of investing in property as your pension. Not only do you benefit from any rental returns after mortgage payments but you will also over a number of years, benefit from capital growth.
It has been widely documented that property prices have taken a tumble in many locations, however if you buy smart and at a good price you massively reduce your risk.
The average pension pot in the UK is around £33,000; now for many of you it may not be too late to do something about this.
Below I will show you a simple way to make your money work for you in property.
Let’s take a 35 year old male that wants to retire at 55.
- Purchase a 1 bed apartment for £150,000. (Multiple locations across the south coast)
- Deposit needed £30,000 (20%)
- *Repayment Mortgage over 20 years = £735 pcm (4% interest rate)
- Rent PCM = £750 pcm (average for this price and location)
- Management Cost £75 pcm (10%)
- Additional payments = £60 pcm.
*Remember this is a repayment mortgage, not interest only, the long term goal is to pay this mortgage off over 20 years.
If you look at the £60 as your pension payments, in 20 years time you will have a pension pot worth £150,000, not taking into account any growth; giving you a return of £750 pcm.
Now the chances are that there will be capital growth during this period, if we take it at just 5% per year, your property will be worth £397,995 in 20 years time.
Rental also historically increases over time, if we take 5% here as well, your £750 would be worth £1,990 pcm in 20 years.
In Conclusion:
When investing in stocks and shares, it is extremely hard to get an idea of what they will be worth come retirement time. Brokers and IFA’s will bombard you with figures, but for the most part it’s a shot in the dark.
One thing that not is historical data on property and rental growth, this can be proved, as can the UK’s desperate need for more property and the demand for rental property in certain areas.
Many of you probably own a house and have done for a number of years, cast your mind back 20 years and recall the re-sale and rental values then. See what I mean?
In short:
- £30,000 investment in property now
- £60 pcm top up
Should provide you with…
- An asset worth £397,995 in 20 years time
- Income of £1,990 per month.
The Alternative:
Keep ploughing money into a product you’re not in control of and you probably don’t understand.
For information on how you can make your pension work best for you contact Fresh Invest on 01243 527327 or email info@freshinvest.co.uk.
My top 5 places to invest for 2010 – Part 2!
As you saw in last weeks blog, i delved into my top 5 places to invest in property for 2010.
The first 3 were Cape Verde, Barbados and Barcelona.
Below are the last 2, and perhaps the most interesting.
4. Mallorca:
Known to many, invested in by few….
Mallorca is one of the most visited islands in Europe, most of us have been there be it on a lads holiday or a family one!
What many people don’t know is that because of building restrictions prices have not been effected by the global downturn anywehere near as much as their close neighbour Spain.
We have a villa in Puerto Pollensa and in 15 years have not seen it lose money, also long term lets are easy to obtain in the winter, it yields around 11% per year AFTER mortgage payments!
Combine this with an average 3 weeks use per year and it looks like a great investment.
As the cost of far away holidays spiral and many long haul operators upping prices or going under altogether, holidays closer to home tick boxes for many people.
The fact that more and more people are buying second homes in Mallorca combined with laws on future building means that prices are sure to steadily increase in the near future and with a vibrant holiday market rentals will follow suit.
Conclusion:
Risk = Low
Returns = Medium
Yields = Medium
Minimum cost to invest = £30,000
5. The UK
Well you knew it was coming didn’t you!
Ok the returns may not be as much as the countries mentioned earlier BUT many of you will have the market knowledge to know a “good deal” when you see it.
In this market many property investors that do look to invest are loking at minimising their risk as much as possible, for the masses that means not moving out of their comfort zones.
I’ll always tell you that using a property investment company is the way to go, they charge very little, normally get paid by the developer and have market knowledge and contacts that can only be gained by years in the business.
We have seen some really great stock recently, from tenanted apartments in Chorley yielding over 8% to townhouses in Chichester (where we are based) yielding close to 9% when let to students under an HMO license.
Check out our UK property investments for more information.
Conclusion:
Risk = Low
Returns = Medium
Yields = Medium
Minimum cost to invest = £20,000
To Finish……These are my 5 places to invest in 2010, i would hope that by 2011 i will have invested in at least 3 of them. If you have a location you are looking at and a reason why, post it below!
My top 5 places to invest for 2010 – Part 1
The property market in many countries has taken a real hit over the last few years, however this sometimes is not a bad thing.
If your looking at property investment as an alternative to stocks and shares then the time may be ripe to invest.
Below are my top 5 places to invest.
1. Cape Verde:
When looking for an overseas investment opportunity the first thing you should always ask yourself is “would i go there”. If the answer is no, the chances are your not in the minority.
The next question is, if you would go there, why?
For me Cape Verde offers a unique proposition, 360 days worth of sun that you can access via a 5 hour flight.
Combine these 2 points and it narrows the field down considerably; quite honestly the competitors i’ve either been to or i’d never want to.
The reason for this is as follows, not only does Cape Verde have a Caribbean climate but also a laid back lifestyle unlike many of its competitors.
The Prices are still relatively low compared to the likes of Tenerife and some Caribbean islands, this is mainly due to the infancy of the islands that make up Cape Verde.
This will not be the case for long, already some major 5 star hotel operators are building on the islands of Sal and Boavista, this will increase tourism and put more pressure on Airline operators to increase their flights.
One such 5* hotel operator is Sol Melia – the worlds largest hotel resort operator, they are taking over the running of our Dunas Beach Resort investment opportunity.
Conclusion:
Risk = Medium
Returns = High
Yields = High
Minimum cost to invest = £33,640.
2. Barbados:
If you have deeper pockets abd want slightly less risk then Barbados may be for you, offering the true 5* lifestyle with prices to boot.
The reason i think this is a good investment is that even though prices are high, you can still achieve yields in excess of 10%, as witnessed in our opportunity on the West Coast Barbados.
Yields this good along with the knowledge that you are investing in the holiday makers favourite Caribbean island means that occupancy rates should remain strong. Most other Caribbean islands are so far behind that no threat to this crown seems anywhere near appearing.
Demand is Barbados is so high it has become the place for celebrities to have second homes, as proved by a host of premier league footballers, golfers and tv personalities.
Conclusion:
Risk = Low
Returns = Medium
Yields = High
Minimum cost to invest = £64,990.
3. Spain – Barcelona:
I love Barcelona, its my favourite city by a long ways.
Sea, Sun, Football, Great Beaches, Great Nightlife andf now a grand prix! I don’t know another city that offers so much.
I also think its a bit of a hidden gem, 1 bed apartments on the outskirts of Barcelona can be picked up for around €160,000 and if you can rent them for 40 weeks of the year you should be on for close to a 8% yield. Not bad for one of the most cosmopolitan cities in the world.
Demand will always be strong because of the sheer size and climate of Barca.
Combine this with the fact that house prices in Barcelona have hardly been effected by the global financial crisis and you know that values will remain robust in all but the most dire of circumstances.
Conclusion:
Risk = Low
Returns = Medium
Yields = Medium
Minimum cost to invest = £27,111
Too see what numbers 4 and 5 are, click here!
The new era of overseas property investment
In the past investing in property overseas was an arduous process, finding a suitable property was not the problem, it has always been the due diligence involved in an overseas purchase. Are you buying in the right location for Capital Growth? Will you be able to let your apartment or villa for long enough to cover your repayments on any finance used? What is happening to the local property market at present? Is there a long and complicated buying process? Will your apartment or villa be up to the standard promised by the developer? The questions can continue forever.
Investors are of course and rightly so, more tentative about investing overseas because of the reputation that some overseas developers have given the market when they, ran out of money or built a development that was subpar and then scarpered before the investor could so much as ask for their money back. But the thing that attracted investors to the overseas market in the first place is that chance of finding the property in a location that will provide you with capital growth and a large positive cash flow to line your pockets every month, with the added benefit of a free holiday.
Now we carry out a full due diligence test on all of our developments and our due diligence test on overseas property is second to none. However without any request from ourselves or our investors, we have just received one of the best partners for our due diligence tests that money could buy. The hotel operator!
When you purchase an investment property in an overseas development that is due to be run by a hotel operator, as soon as the agreement is made the developer is not now building to the standard of the investor, they are now building to the very high standard of a hotel operator and if they don’t, they risk losing the operator. Not only will the standard of your property be of the upmost quality but you now have somebody with a large web presence to promote your apartment for you, meaning that your apartment or villa is tenanted as often as possible and you are therefore provided with a handsome return. The hotel operators will of course also carry out very strict due diligence on the location to make sure that it is in a location where occupancy can be maximised and therefore your return can be maximised which will, in turn, add value to your investment.
We have 2 overseas developments that fit this bill exactly at present:
The developer of Dunas Beach Resort has recruited “Sol Melia” to run the resort upon completion. Sol Melia are the largest resort operator in the world and are constantly winning awards for their dominance in the market and the quality of their resorts. The build cost of this resort in relation to any others on island is double and they have already completed one resort on the island and the results speak for themselves.
The developer of our properties on the West Coast of Barbados has recruited Mango Bay Resorts to carry out the hotel operations on site. Mango Bay constantly receive fantastic reviews for their operations on Barbados and their average occupancy is 80% which, in our resort, would give investors a return of up to 23% per year! The developer also offers purchasers the chance to help with the design of their apartment on line throughout the construction period.
Ladies and Gentlemen this is the future of overseas property investment!
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!
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!
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
Conclusions of 2009 – Opportunities for 2010
2009 – A year when then the smart investor used their time to set them up for 2010.
I think you will be in the minority if you haven’t suffered some kind of hardship this year, many investors have seen thier dreams of retirement severely set back.
This has not been confined to property, if you had shares or your money in some banks you could be in a worse situation!
So what should this year have taught the average investor?
1. The only way to build a profitable portfolio for the long term is by investing smart.
For me that means keeping at least 20% worth of equity in any property so you build yourself a buffer to combat any drop in values.
Investors have been stung by dropping loan to value rates, an unwillingness by lenders to remortgage on to rates previously offered has seen investors have to increase the equity in their properties, leaving them severely stretched.
Over the last 2 years i have seen investors with portfolio’s worth in excess of £100m go bankrupt, how can this be i hear you say.
What some property investors seem to misunderstand is that if you have a portfolio worth £100m, with lending on it of £90m. You actually have a portfolio worth £10m. If property prices drop 10%, what is the worth of your portfolio…Nothing!
If this happens you are entirely reliant on the income that your portfolio brings in, investors too highly geared normally cannot withstand more than a couple of months of empty properties.
2. Property Investment is not a get rich quick scheme – investors that use it as such usually find they have leveraged too high.
I am one of the biggest exponents of flipping property, i think that if you have the time and the know how it is possible to make decent profit this way but it is entirely dependent on a couple of factors.
Firstly, you need a massive amount of knowledge of the local market, this is not something that can be learnt quickly, so for this reason either keep to one area or find yourself a property specialist that you trust completely.
Secondly, always have another exit strategy, so if you are buying to re-sell, make sure that if worst case you can’t do this immediately, you can let the property out and pay your mortgage that way.
I have refurbed properties for over 6 years and we are also in the middle of developing apartments, i value every property investment opportunity by the number of exit strategies it provides.
3. The good times will come again, use times like these to research the market and decide where the best profits will be made next year and in the future.
If i could focus on the single most important factor i have taken from 2009 it’s that within the next month or so the vast majority of new build developers will completely run out of stock.
At Fresh Invest we are in contact with all major new build developers and 9 months ago all of them decided to stop all build that wasn’t already past footings. This decision was made because the last thing the market needed at that point was more new build stock. They are all building again now but this has created a back log where all finished sites have been sold and the next tranche of stock is still around 6 months away.
We have seen average discounts reduced from 40% 9 months ago, to 15%-20% now, and thats if you can find any stock. We have 2 developments left on our books which are selling at around 2 a day.
The first 6 months of 2010 will see property prices increase due to a lack of supply and increased demand as more confidence seeps back into the market.
I would take the first few months of 2010 to pick up the last pieces of good quality discount property around, there is only 1 way values are going to go in 2010.
New Opportunities through Fresh Invest:
1. We are launching a scheme that should give clients access to lender stock, for property investors looking to pick up great quality buy to let property in a particular area this is the one!
2. We are working hard on some student schemes, these should yield over 8%, have really low interest rates and start at around £80,000. With massive demand and industry professionals flocking to this market this is definitely one for the future!
Student Property Report 2009-2010
In a market where many investors have seen rental voids, capital values decrease and Ltv rates decrease, why are many of the UK’s most renowned investors focusing on Student Accommodation?
If you look at the simple economics, student accommodation really does sell itself.
In short, you can purchase a property that will rent at a much higher value to students than an equivalent unit would to a private individual. You also do not have the downfall of rental voids! In fact, many landlords are filling their units 6 months in advance!
Many investors want hands off investments with high returns and no rental voids.
If this is you, look no further.
Demand:
Where rental demand in the residential sector is prone to peaks and troughs, student number have continued to rise from 1.8 million in 1996-97 to approaching 2.4 million in 2009-10*.
Indeed early indications are that the economic conditions have led to even more people looking to higher education.
UCAS data revealed that UK university applicants rose 10% between 2008 and 2009 and overseas applicants rose 13.6% during the same period.
“Overall student numbers are likely to remain stable and in the medium-term there is unlikely to be a substantial uplift in student places as caps remain in place. However, the expectation is that the proportions of both overseas and postgraduate students will continue to grow, underpinning future demand for private professionally managed halls.” Knight Frank
Supply:
Private Student Development is still made up of the 4 main service providers, UNITE, UPP, Opal and Liberty Living. The majority of students have to rely on halls for their accommodation with a small percent benefitting from access to private operated rooms.
Many university run halls are found to be outdated and lacking in necessary facilities. This creates demand for private accommodation but with development finance so hard to come by, this accommodation is nowhere near keeping up with demand.
“Student Numbers are growing at 15 times the rate of new supply in London” Savills
Prospects:
Student accommodation rents have increased by 5% p.a for the last 6 years with growth increasing right into the 2009/10 academic years. Compare this to residential and commercial rents which have both fallen overall during this period and you start to understand what makes this market so appealing.
“Student Housing delivers income during uncertain economic times” Savills
As student accommodation is commercial by class this has also seen an increase in values, this sectors robustness is highly attractive to a growing number of investors who want high capital growth that can be depended on for the long term.
Even in the midst of a global downturn occupation levels for good quality purpose built private accommodation is close to 100% with rental levels for 2010 predicted to increase by at least 5%.
Yields and Values:
Although the rentals gained have not been hit by the credit crunch, one side that has been impacted has been the finance student developers have been able to find. Because of a lack of this many new build schemes have not got off the ground.
If we factor this and the fact that university applications have steadily increased we have a demand/supply scenario which is drastically in the favour of the buy to let investor with student property in their portfolio.
Compound this with the fact that many universities cannot afford to build the necessary accommodation themselves and we have a scenario where these same universities cannot grow to their potential because of this lack of accommodation.
Universities have always relied on private developers to make up the deficit that their own student halls cannot fill.
With many student developers not building because of the lending constrictions, small investors are starting to fill the void with new build 4/5 bedroom houses. These normally comply with the rigorous build accreditations and rent for a lot more than residential lettings.
Through this lack of supply yields have risen steadily and values have followed, we envision this to be the case for the foreseeable future. The student market is continually growing and with many universities operating on shoestrings it falls to the private student developers to build in their place.
How we can help:
You will have seen by previous posts, blogs and emails that Fresh Invest have faith in the student market as a valid buy to let option.
For this reason we are due in the very near future to bring you a selection of landmark student pods which can be bough individually as “completely hands off” investments.
These properties will come already tenanted with high yields and great commercial mortgage options.
Below is an example of a property we are close to agreeing an exclusive for.
Financial Example.
1 bed student pod – First Floor – From £90,000
- Deposit Needed – £31,500
- Rental achievable – £541 (£125 per week)
- Mortgage – £58,500
- Mortgage Payments – £138 pcm (RBS, 65% LTV @ 2.83% Tracker)
- Service Charge and Ground Rent: £70 pcm
- Positive cashflow of £333 pcm!
Register your interest for these opportunities here.
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.
Property Investment – Why you actually have no choice!
I have noticed many of our investors are holding off investing in buy to let property, instead choosing to make doubly sure that the market is on its way to a recovery before jumping in.
Not a bad idea, it certainly mitigates your risk in the property investment market.
But! are you not missing out on the very time when developers are looking to do discounted deals?
Developers are no different from us, they want to make as much profit as possible which means getting the very best price they can.
If you want to sell your car, your only going to discount it if you really need to.
If suddenly all other cars dissapeared and yours was one of the only ones available you would think you were on to a winner and charge top whack!
This is what will happen with new build property soon. The property investment market is recovering and new build property supply is decreasing!
Soon 20% discounts on new build property will only be available in the very worst developments or the largest bulk opportunities.
When this happens it will be no use complaining you have missed the boat, it will have sailed and you will face the choice of not investing at all or paying top prices for buy to let property.
If you have £20,000 spare at the moment you have 3 choices as far as i can see.
1. Leave it in a savings account.
You will probably achieve 3% on your money but it is relatively safe.
2. Invest it in shares.
But what shares? most people have probably seen their share portfolio’s decrease by at least 30% over the last year so do you want to risk it again? even if you do only the very highest risk shares wiull give you the kind of returns that you can expect from a buy to let property.
3. Buy to Let Property Investment.
Just this week we have sold 15 units in 2 different developments, one in Gravesend in Kent, £21,000 into a mortgage gets you a return of 8% and clear profit of £300 per month. One in Salford costs £20,000 into a mortgage and a return of nearly 9% with profit of £330 per month.
Most of these units are already let, one of our bulk purchasers rented 5 apartments in Gravesend in one day. We only offer property in areas where we know there is high demand.
We are seeing more investors buy now than for many years, all of those that are not have to ask themselves why not? Are you perhaps missing out when others are taking advantage of this unique situation?
We know 2 things for definite.
1. The property market will recover at some point.
2. The yields you can achieve today are some of the highest we have ever seen.
These 2 points make it impossible not to at least consider property as an investment strategy.
Quite simply, if you want a good return on your money with little risk and the prospect of high capital growth do you really have a choice?
3 Reasons why you should start investing in property again.
Property Investment….over the last 18 months probably the furthest thing from your mind!
So why start investing now?
1. Mortgage rates are relatively low.
Ok so the ltv rate isn’t great but the actual rates are pretty good and with our economy suffering i believe there is little chance of the boe base rate increasing.
An average 65% ltv mortgage on a new build flat is around 5% with second hand property mortgages available from 75% at 5% rate.
In historical terms the rate is a lot lower than it has been for a long while.
As ever, if you are building a property investment portfolio you need the mortgage rates to remain fairly low to allow you to repay the mortgage loan, another up shot is that when buy to let mortgages recover the ltv rates will increase, allowing you to remortgage.
2. Property supply is at an all time low!
With most new build developers choosing to stop building last year we now face the fact that it will take these housebuilders a year to get new schemes out of the ground.
This will mean that for around a year from now new properties will be some what of a rarity. New build property accounted for a massive part of the property bought last year, without this supply and with increasing demand prices are sure to increase.
UK Property Investment has always relied to a large part on developers willing to discount their property for either bulk sales or quick completions but if they have no stock….
3. It’s cheaper to buy than rent.
Recent research has shown that for the first time in ages it is actually cheaper to buy than rent, well outside of London anyway!
Abbey found the average rent of £434pm compares to a mortgage payment of £382pm (with a 25% deposit). That’s a saving of £52pm. People in Wales and the north west would save on average £90pm. We can also overpay or save whilst interest rates are low.
So for those looking to start in property investment now looks like an ideal time.
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
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!
Property Investment – Do You Now Have a Choice?
Well lets look at the positives.
As my nan always says….you’ve always got your health!
To which i respond …..I’ll need it when I’m sleeping rough!
Seriously though, many people face the very real prospect of having to increase their pensions and savings to the level they were previously at, the only trouble is, they have even less time to do it!
2 Years ago your savings and pension values would most probably be well on their way to keeping you in the style you had become accustomed.
No Longer, you now have to think fairly seriously about increasing the value of your savings, so whats the best way to do that?
As far as i can see, 2 options come to mind.
1. High risk, but potentially high reward share dealing.
2. Property
Let me discredit the first one quickly, if you have never dealt with shares before i wouldn’t recommend such drastic action, if you fancy giving your hard earned to a broker think seriously about the fact it will probably end up with a banker who had a large part to play in losing you that money in the first place!
So we come to property investment.
Hardly surprising as that is what you do for a living i hear you say!
True, it’s also what i know best.
However it also produces returns of between 6-13% along with the capital growth which will undoubtedly occur whilst investing at the bottom of the market.
Look abroad and the yield can sometimes be up to 20% with capital growth upwards of 15% per annum.
In the past, many investors have discounted property because of the “risk” attached.
Unfortunately these same investors now may not have much of a choice!
If you need your pension to return you a decent amount and do not have 40 years in which to grow it you may simply have to look at property as an investment vehicle.
I’m currently looking at property in London that returns 7% and overseas property in Cape Verde that returns 12%.
Similar London property was selling 2 years ago at £400,000, now on the market at £270,000. If we reach the prices of yesteryear there is £130,000 profit for you.
The units in Dunas Beach Resort, Cape Verde look set to return in the region of £10,000 per year; and if capital growth continues in the area, they should only cost me £2,000 to purchase outright!
If the circumstances above sound familiar, we can help. Find me at Fresh Invest Limited.
Or call me freephone on 0800 043 69 56.
Cape Verde – The Caribbean For Europe
How many of us wish we could afford a holiday home abroad? Silly question? It’s probably all of us!
What puts you off?
1. Price
2. Being able to let it out?
3. Security?
4. Flight times?
5. Guaranteed sunshine?
Well all may not be doom and gloom, there are a few overseas developers that have taken the step of building property that is packaged in such a way as to be affordable and relatively “hands off”.
Obviously the most important factor in purchasing an overseas property is price. Our most recent “fresh” investment is in Cape Verde, the units start from £72,000 and any prospective investor will need to find 35% deposit to purchase.
Where this development comes into its own is that you can release money from your existing home to fund the deposit or alternatively source a secured loan. The developer will then pay the interest on this loan for you until completion, at which time the interest will be added to your completion price.
An interesting point to note is that Cape Verde property has been increasing by 15% per annum over the last few years, even bucking the current financial crisis. If this continues you will have made 30% worth of profit on your investment before completion, as this is 2 years off. If you then want to secure a mortgage on your chosen unit, you can do so at 75% ltv of its valued price. Realistically you could find that you actually only need to find 5% deposit, as the other 30% will have been taken care of by the capital appreciation.
As far as letting the unit is concerned, you have the option of opting in or out of a rental pool, if you opt in, all management is taken care of, leaving you free to keep the profit. At the moment 5* hotels in cape verde are running at 95% occupancy, a recent study showed a 9.5% yield based on just a 65% occupancy. Best part, you get 5 weeks personal use per year! So now you have a holiday home that not only makes you significant profit each year but also only conceivably cost you £3,600!
Security? It’s a 5* resort so security will be of a maximum, their will be creche’s for your children and the entire community is gated. Flight times? if your from the UK your there in 5 hours, half the time of most Caribbean destinations! Guaranteed Sunshine? Yes, all year round dropping to 24 centigrade over Christmas! For more details of how we can source you a great investment contact Fresh Invest Ltd.
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
Student property…the last bastion of buy to let!
Many investors have felt the pinch recently regards their buy to let investments.
In fact, if you aren’t on a tracker mortgage you could be severely stretched.
Now here is the interesting bit….
Did you know the average amount a student will pay per week is £66.48?
Areas and their average rent per week.
City Average Rent Per Week (£) Index*
London – 102.85
Middlesex – 83.97
Cambridge – 82.98
Guildford – 82.37
Surrey – 81.15
Exeter – 77.54
Chester – 77.12
Chichester – 75.00
Oxford – 74.71
Brighton – 73.71
Kent – 72.24
Bournemouth – 71.11
Bristol – 70.84
Warwick – 70.75
Eastbourne – 70.67
Durham – 68.95
Reading – 68.89
Loughborough – 68.81
Hatfield – 68.35
Doncaster – 68.04
Colchester – 66.67
Portsmouth – 66.49
Plymouth – 65.26
Falmouth – 64.76
It makes interesting reading doesn’t it?
The thing to do is look at what you can pick up a typical 4 bedroom house for in these areas.
Now of course some of these areas are fairly affluent so finding the right property at a good price may be harder than you think.
Take a look at the prices you can pick 4 bed houses up in the following locations!
1. Exeter – 77.54 – Price for a 4 bed house £150,000, Yield = 10.75%
2. Chester – 77.12 – Price for a 4 bed house £145,000, Yield = 11.06%
3. Eastbourne – 70.67 – Price for a 4 bed house £160,000, Yield = 9.18%
4. Doncaster – 68.04 – Price for a 4 bed house £100,000, Yield = 14.15%
5. Colchester – 66.67 – Price for a 4 bed house £120,000, Yield = 11.55%
6. Durham – 68.95 – Price for a 4 bed house £110,000, Yield = 13.03%
So yields of between 9% and 13% are possible in some locations.
Demand:
So your traditional b-t-l is up against 30 other investors all who are struggling to let their property out, you thought you bought in a regeneration area but unfortunately due to the economy it hasn’t quite worked out how you wanted it to.
Sound familiar?
Did you know some of the universities in the areas above literally turn away hundreds of students every year because there is nowhere for them to live.
In fact, my local university in Chichester turned away 280 students last year and has talked about leasing property off of major builders in an effort to keep up with demand!
Problems:
Every buy to let investor who has been in the market for more than 5 minutes has probably looked at HMO property, normally they are put off by the various restrictions and the fact that the management of the properties is that much more difficult than a traditional b-t-l.
I don’t think it has to be, by buying smart and doing a bit of work up front you can marginalize a lot of the risk involved.
Also, put a management company in charge, there are good ones available that will look after all aspects for you, they aren’t cheap but they do make your job a lot easier.
Conclusions:
It won’t be for everybody but it’s definitely worth considering and a lot of hmo investors tell me that once you understand the various regulations, it actually provides a great rental income! You can also sleep a lot sounder knowing that your various properties will ALWAYS be in demand!
At Fresh Invest we will provide a sourcing and thorough vetting service to find you the best property for your needs.
Where is everybody putting their savings?
The recent drop in the base rate has had a dramatic impact on peoples pensions and savings, this is a fact..
So what are these people doing to alleviate this problem?
The answer more often that not is nothing.
I think the british public faces a real awakening when they stick their heads up above the sand and look at the state of their pensions/savings.
Now my job is to sell property, that is what i’m good at and that is what makes me money. In this market it should be the easiest sell possible.
My pitch would go somewhat like this….savings making you 2% max, pension value has collapsed and shows no sign or changing, buy a 2 bed flat in a good location and secure between a 5% and 9% yield along with long term capital growth.
Anyone that has ever sold property for an investment knows the challenges we face regards peoples perception of this as an investment. It is widely known as a high risk investment with fantastic gains but also devestating losses.
Now i would argue that if you do not over expose yourself, take a long term view and purchase wisely there is never a bad time to buy property.
The point remains the same, if you want your money in a fairly safe long term investment vehicle, do you really have a choice?
