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!
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.
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.
Balance your portfolio with alternative investments!
Here at Fresh Invest we have been working hard, attempting to provide our investors with the means to build and prosper from a balanced portfolio.
Why is it so important to build a balanced portfolio?
A balanced portfolio will perform well in every market. You need to prepare yourself for every eventuality, for example. If there is another fall in house prices, people are likely to look elsewhere for places to hedge their savings or pensions and hopefully provide them with an income. This will therefore push prices up in the relative sectors, as demand increases people will look to charge more of a premium.
As markets become more volatile than ever, you should be looking to put your hard earned savings and pensions into a range of products where the value is governed by an increasing demand and a decreasing supply, during varying economic climates.
How about UK farmland? Well let’s get one thing straight we cannot create more land, neither can we build upwards, agriculturally. UK Farmland has been growing in value by 15% pa over the past 3 years where other investments have been decreasing in value.
We always need land
Another point is that if the UK housing market was to recover there will be uplift in demand for farmland yet again as housing developers start to look for land to build on. Putting further pressure on price rises as resources are diminished. Now if this happened and you were lucky enough to purchase in an area where planning gain is possible for further housing, this could greatly increase the value of your land!
Not only can alternative investments provide safe returns in uncertain economic times, many of them can provide great taxation benefits such as capital gains and inheritance tax relief.
There is a vast array of alternative investments on the market at the moment and without specialist advice you may not end up with a balanced portfolio at all.
So speak to the experts www.freshinvest.co.uk
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!
