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…

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!

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.

Well the average estate agent had 64 properties on their books during the traditionally slow month of August, up from 59 in July and the first rise since April, said the National Association of Estate Agents.

Well of course they did. Those people that were looking during the first quarter of this year were also very likely to have homes of their own, ready to go up for sale once they had tested the buyer’s market.

Now I know what you’re going to say… “Yes but these are second, even third-time buyers. We need first-time buyers back in the market before we can see a prolonged recovery.” Ok  how about this “The number of first-time buyers who were actively looking in the market also rose during August, with this group accounting for 36% of all agreed sales, up from 22% in July.” With the availability of credit easing with more and more mortgage products coming onto the market, there are definitely a lot more opportunities for first-time buyers to jump on that first rung of the ladder.

Then of course we have the property Investors who have been coming back to the market recently, giving further uplift in demand. Obviously investors have been seeing hard times but investing in this climate can be highly lucrative you just need to research your investment opportunities properly (or let us do itJ). One market which has actually benefited from the recession is the Student buy to let market, with uni applications rising dramatically throughout the recession. For more information on the student property market please click here.

However if you are not looking for investment opportunities in the UK then you need to be looking towards emerging markets such as the Cape Verde islands or Brazil. Or if you’re not looking for property in particular then you should be looking towards carbon offsets (set to be one of the biggest commodity markets in the world) or If you would like to be more defensive take a look at our farm and forestry funds or vineyard opportunity with guaranteed returns.

Things are definitely starting to look up!

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

www.freshinvest.co.uk

It is no secret that the UK property market has been hit hard by this recession, but with buyers “Flooding” back to the market there is only one way prices can go and that’s UP! Prices have been slowly rising over the past couple of months; as banks lessen the restrictions on their lending patterns and start to let the government’s efforts of quantitative easing, filter through to the consumer.

Sky news reported that last month there was on average 4 house hunters to every house on the market.

Now don’t get me wrong I know, as does everyone else, that the underlying reason for this recession has still not been rectified. The banks still have a lot of bad debt on their balance sheets and unemployment is still rising. But let’s paint one possible picture – The re-emergence of the buyer will see the seller take the opportunity to test the market. Now if these sellers can offload their property quickly enough, they will be able to take advantage of the current low interest rates to make the move that they have been waiting the last 18 months to achieve, for many this will be a movement up the ladder. We need to remember that there is 18 months worth of first time buyers waiting to make that first jump and this could be the fuel to fire the recovery.

If first time buyers do start flooding back to the market and property prices start to stabilise, maybe banks will be able to start lessening their restrictions on the credit driven companies , these may therefore be able to start employing again. If employment starts to rise then mortgage approvals will follow suit. Interest rates will have to rise but if people are in employment they will hopefully still be able to afford their repayments and if this happens in large quantities the banks will be in a much better position to survive this recession.

www.freshinvest.co.uk

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