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No need to swim, if you can surf

31st March 2018

A deal which I have been working on, and almost expected to land in my lap, has fallen out of bed.  It happens.  It’s the nature of the beast.  The offer which nailed the deal came from none other than the freeholder.  The properties had extremely short leases, of just over six years.

The deal was not only good in terms of the discount in comparison to the block, but also in relation to the surrounding areas.  The prices close by are in the region of £1,700 per sq. ft. and above.  This site was worth £1,100 per sq. ft. post lease extension.

Last week’s article was focussed on why the current environment is conducive to plucking deals.  A deal was defined as a property which is priced below its comparables.  This certainly has a feel good factor to it, and is something to tell your colleagues about – once the deal is done of course.

It can be just as important to purchase in an area which is about to kick off.  What I mean by kick off, is there is a tremendous spurt in its growth in a short space of time.  This has notably happened to areas in and around London.  The rate of growth is surprising, and is often missed until the bulk of the wave has already risen.

When the mainstream press get hold of this it is often too late to catch the highest rise.

Two areas come to mind, one is Walthamstow and the other is Shepherd’s Bush.  The cost of an average home in Walthamstow has more than doubled over the last five years.

House prices in the area have risen sharply across districts close to the Olympic Park since London 2012, with E17 seeing the biggest property value increases.

In September 2012, the average property in Walthamstow would set an investor back £238,348.

However, a study by Halifax bank has found in 2017, the average home in the area was priced at £479,421.  You have a doubling of price over five years.

What’s interesting is at the 2012 level, the average price was less than £250k. This put the price of property in the borough within the range of the average couple who both earn an average income.  Together they would need to earn only £42,500 to qualify for a 85% LTV mortgage.

This put the borough within the reach of the desperate home for ownership first time buyer category.  This is the generation which has been priced out of the whole property ownership economy; fuelled by the supply of fiat money against actual finite resources.  At its bare core, this is the reason why houses cost and rise so much.  It is actually nonsensical to think a house price rises in general more than a good professional working person’s wage. But that is the reality of the current terrain.

It is therefore important to deeply research the geographic environment coupled with its property prices, in order to see which location will have the next spurt in prices.

If you can purchase a distressed property in this location you will have the ideal scenario.  When it comes to property investment you couldn’t get much better.

However, my opinion is that simply purchasing in these locations will allow you to sit back and ride gently off the naturally occurring wave.

We are currently conducting an in depth study in search of such a location.  We will soon have a report, which will be backed by on the ground numbers, as to why we believe this location will shoot in price in the coming few years.

Suresh Vagjiani

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