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…
The Fresh UK Property outlook 2011
After reading a few different articles regarding the state of the UK property market and realising we have not done a UK property article in a while, I thought I would share my view on the outlook for the UK property market for 2011.
The end of 2010 was an interesting time for the property market, with not a lot of people looking to move just before Christmas and the extreme weather conditions putting a further dampener on house sales. However, mortgage approvals and sales are still holding up and I would expect as we go into spring, house sales will increase and prices will follow suit.
With news today that the Consumer Price Index has risen to 3.7% the BOE may well decide to increase interest rates in the coming months to try and curb this. However, the recent Consumer Price Index will not be taking into account the increase in Vat which has just come into play. I feel that consumers will have purchased their products earlier due to the Vat increase and this would of course bolster the CPI albeit temporarily.
It seems that in the face of fiscal restriction increasing the interest rate to try and slow inflation could be a dangerous move by the BOE however is it something they have to do? I am unsure as to the strength of the economy coming out of this recession and feel that an increase in interest rates too early could cause another fall in house prices. But then again, does the economy need this in the long run? What we need to remember when looking at the property market is that, unless we have new consumers entering the market, then it could fall into stagnation and at the moment, it is still hard for a first time buyer to get on that first rung of the ladder.
First time buyers are the lifeline of the market they need to be buying to keep the market moving. But then again, say first time buyers have to turn to renting does this mean that the market will be bolstered by Investors for the time being until there are some more attractive lending options available for the first time buyer?
What do you think?
I know one thing’s for certain, by buying one of our UK property investments with built in equity and reliable tenants in good locations you will be either weathering a storm or riding a wave of success.
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.
A good time to invest in property
I was just reading an article by BBC news about how taking investment advice from your bank is a bad idea. I’m sure many people reading this article will have been asked to speak to one of the financial advisors available at their local bank, who will tell them that investing their money in one of the banks medium/high risk funds is a good bet and it will return x% and increase in capital by x%.
One of the ladies in the BBC news article had invested £100,000 into a “Cautious fund” and she quickly lost £40,000… unbelievable! Not only this, but the lady’s money was also decreasing at a faster rate because of the fact it was shrinking against the rate of inflation.
At a time of inflation coupled with low interest rates, ideally you would like to be in a position where you have an asset which is making you money and your borrowings on that asset are also, in real terms, shrinking while inflation is present. Your asset will be making you an increased amount of money with inflation and in comparison to your borrowings against it; the time at which you will have no outstanding finance will approach quickly. I am, of course talking about property.
It is no surprise that property investment has, for a long time, served as the main entry route to the forbes 100 rich list. The process of buying property in the right location at the right time and making sure the rent is going to cover the repayments you have on any borrowings, is just the start of it. The distance you can make your money stretch in property is insurmountable, by refinancing and keeping the cash flow on each property positive every month.
I have seen an article today from a top economic forecaster predicting that interest rates will remain at 0.5% until 2014; you may have also seen that the UK economy grew faster than expected last month inflation is at a rate of around 3% this typically means that the price of most goods and services are increasing at that rate and, ideally, your wage at work, as opposed to your borrowings on your property, which will be shrinking in comparison. Ideally I would be looking to invest in property now, take advantage of very little new build stock, the low interest rates available and use some of the positive cash flow generated every month to reduce my borrowings, so when interest rates do finally rise I am less susceptible to increased repayments.
See some of our UK investment opportunities here
Spring market bounce defies political fears
The traditional slowdown in the property market coming up to the election, was not enough to eradicate the increase in housing sales, enquiries and prices that come with the spring season every year.
As the election comes around people traditionally slow their searches for new properties, in a hope to not overexposing themselves to possible new policies, which could leave them struggling once the new government has been decided. One such new policy could be an agreement to hold the interest rates at a current low level, this will of course be beneficial to anyone looking to trade up in the housing market and possibly leverage themselves further against the value of their property, if interest rates were due to increase this could be a problem for would be house buyers as they may struggle to match the repayments.
On the other hand it is normal in Britain for the property market to have somewhat of an upsurge in interest during spring, this can be attributed, partly to the sun making house hunting a more pleasant experience and also, to the budget which is often announced late in March and provides more certainty to market conditions.
It is good to see this news, as now the new government has been decided and are getting to work, we would expect the current trend in new house buyers and a slow increase in house prices to continue, as people are given more certainty in the position they will be in, come the next few months. There are a few interesting policies being taken into government, it will be interesting to see what the Lib-Dems have in store with the new “safe start” mortgage, designed to stop new buyers slipping into negative equity.
News of the increase in prices and sales came from RICS this month, as they published their latest monthly survey of some 245 members of the RICS who work as estate agents.
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.
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!
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.
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!
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.
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.
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
Surf’s up… Invest before prices follow suit!
We love offering UK property here at Fresh Invest and none more so than the areas which are local to us. Now everyone wants a high yielding portfolio with great capital gains. The only problem being that often it is a case of the bigger the risk – the bigger the reward. This therefore means investing off plan and overseas.
However our most recent opportunity on the South Coast of the UK has all the makings of a great investment i.e:
- Massive Gentrification.
- A budding tourism scene.
- Large cash injections.
- Great discounts.
- A good rental market with possible very high yields (discussed later)
- Great Sea Front location… Never a bad thing.
Where in the UK is this so called “Investment Haven?”
Boscombe!
Yes that’s right sunny Boscombe close to Bournemouth has been receiving massive cash injections from the local government and is on the up!
Gentrification:
What does that mean? Well put simply it means “going up market” and with this comes increasing property prices and increasing rental prices. Which to you and me means Capital Growth and Rental yields Harry Redknapp has recently bought a flat in the area.
Tourism:
With the majority of the British public strapped for cash due to the current economic climate they will be looking to holiday in the UK. Not to mention the weakness of the pound this is making holidaying abroad a very expensive luxury.
Coupled with this is the development of the UK’s first artificial surf reef! That is sure to bring in some revenue for the surrounding area.
The newly refurbished “Beach Pods” Designed by Wayne Hemmingway (Red or Dead) have just been released for sale and have really bought a modern and vibrant look to the beachfront.
Yields:
One thing with property in holiday locations is that the rents chargeable can become massively inflated in the summer months meaning that if you could secure a long winter let and then regular summer lets you could be on to a property with a very high rental yield!
For more information on our Boscombe opportunity click here
Or freephone on 0800 043 69 56
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!
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!
