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Don’t believe the hype

31st March 2020

Interesting times.  Currently, we are being fed information regarding something we cannot see or have a grip off.  Therefore, we are lapping up all we are fed.  Even the official narrative does not make sense, even within its own narrative.

This is nothing new people.  It’s the same formula the world over.  Problem, Reaction, Solution.  The solution is where the attention should go.  Stripping of liberties and a cashless society is one agenda, although there are manifold agendas which will be fulfilled with this move.

The effect of this on the property market is to be analysed on two platforms which are interrelated; that of funding and property.  The reason why property is interrelated with funding is because nearly all transactions are funded with lending.

It is interesting to note 46% of base tracker rates have been pulled.

Lenders have begun to get more conservative on lending.

The way to get an instant snapshot of the property market is to look at the auction market, you will get instant data on how the property market is responding.

Comparables many a time are outdated, purely because the time from when the deal is agreed to when it is completed can take several months.  This means the prices are outdated.  Especially, when we are in a situation where the landscape is changing on a daily basis.

So, let’s look at the auctions.  One reputable auctioneer we know claims a 79% sales rate.  This, however, is the percentage of properties which have been sold, without taking into account the ones which have been withdrawn.

Here, the properties which were due to go on the market were 131.  The number that actually went to the market was 65.  And I suspect the reserve prices were lowered drastically to ensure they actually sell in the room.

This figure is very important as it attracts new business, it sets the auctioneer up for the next auction and new property intake.

Therefore, where you get instant information is very valuable as this industry is not like the stock market, where the information reflects the reality on the ground. There is a time lag between information and what’s going on at ground level.

There have been many times where I have bought deals based on what is going on at ground level, as the numbers did not match up to the deal.  All the comparables were outdated.

This week we were after two properties in an auction, on behalf of a client.  One which slipped through the net, the other we got post auction for a good price.

The one we got is in Harrow.  Listening to the auction on the web, there was a Mr P bidding on the property.  I would put money on this Mr P being a Mr Patel.

However, it didn’t fall in his lap, it dropped in ours.

The plan is to extend the building upwards and to the back, and then convert to an HMO; thereby upping the yield.

We feel it is better to have less rooms with higher quality, as you will then be differentiating yourselves from the other HMOs offered in the borough; which happen to be 17,000, currently.

Auctions, as mentioned in the previous article, are a great platform to purchase from.  There are a few added factors which will help you get a better deal.  We will be creating short videos soon, to explain what these are.  Do follow us on Facebook: SowandReapProperties, or Instragam: @sowandreaplondonproperty, to ensure you don’t miss out.

Suresh Vagjiani

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