23rd June 2018
We had a property fall out of bed today. Not due to any lack of intention from the side of the purchaser, it is just that the mortgage fell through. A few missed payments on the existing mortgage and the mortgage application is refused, and the deal falls apart. The missed payments were not even in this country, the applicant is an expat.
The property was being purchased blind, on the basis of an 18 page property report done on the strength of the area. The report is a thorough analysis on the location, showing the impact of Crossrail, and analysing the effect this will have on property prices.
There are two very strong factors as to why this location will be increasing steadily over the next 5 -7 years. These were analysed in great depth. Neither factor has anything to do with the ongoing Brexit negotiations or indeed anything else in the economy. They are based on need alone. The need for shelter. This basic need is often forgotten in the property world.
Property prices are driven up by speculation and desire. Rarely does one look at the bottom of the pyramid and see that actually in the same way we all need to breathe and require food, we also need shelter. This sector in the market would be almost immune from any uncertainty in the economy. The same principles ensured Dominos profits actually increased by 11% in the third quarter in 2009, post credit crunch.
This demonstrates the bottom of the market may even thrive during times of economic uncertainty. The money floating around London has both domestic and international origins, this money will always be looking for a home, despite the environment. And there are few markets as safe as the UK.
This report establishes the case for the location, and a video confirmed the state of the property; and so, it was on this basis the client felt this was a very solid investment.
The mortgage issue has come out of the woodwork and threatens to derail the investment if it is not overcome. We are trying with another broker, however, I’m doubtful whether another broker can neutralise the missed payments.
The case may require a complete overhaul, and instead the applicants could be the children rather than the parents, which was the original intention. These events, therefore, may actually be a blessing in disguise; as this would tackle the issue of inheritance as well, which will be a problem sooner or later.
This issue may force them to think about and tackle this problem now rather than waiting for the inevitable to happen, and then tackling it from the backfoot from a reactive place.
This means there will need to be input from the accountant, lawyer and mortgage broker to make sure this happens in a holistic way, and to ensure there are no time bombs set up for the future.