Time to get of the fence
The past year has been a strong one and a very busy one for us, we are gearing up for a busier coming year with properties breaking ceilings, this sentiment has also been echoed by Allsops, the largest auctioneer in the UK, which recorded a massive £58m total at its final UK residential sale of the year on 18th December at a period which is traditionally a slow time for property. This has been the largest December residential sale on record since 2007 giving a success rate of 87%.
Commenting on the day, auctioneer Gary Murphy said “this has been one of the most exciting sales that I can remember. Prices were staggering, particularly for London property. Bidders were not holding back and it’s apparent that there’s a high level of Confidence in the market. Purchasers are very comfortable competing for the larger lots. In all 10 lots were sold for more than £1m contributing £17.51m to the total. 2014 is going to be a great year for the residential auction market I think”.
UK house prices are set to rise by up to 8% in 2014, building on the surprise gains made in 2013, according to the most bullish forecasts by economists and property professionals.
A round-up of seven surveys by banks, surveyors and estate agents shows widespread forecasts of further growth, with gains in all parts of the country, not just London and the south-east. Government initiatives to boost mortgage lending have restored confidence to the property market and driven demand.
The most optimistic forecasters are predicting an 8% rise in prices next year, which would add almost £20,000, or £1,600 a month, to the most recent Office for National Statistics average house price of £247,000.
The normally pessimistic Capital Economics said it expected house prices to rise by 5% next year, and even admitted that could be an underestimate.
The further roll out of Help to Buy in early 2014, which will see major lenders such as Santander and Barclays offer 95% loans, is set to bring new borrowers into the market as it will open up more options for those with just 5% to put down as a deposit.
The Royal Institution of Chartered Surveyors is forecasting 11% increases in London, but said it expected the east of England and east Midlands to record rises of 10%. Knight Frank is forecasting a rise of 8.4% in London, and 7.6% in the wider south-east and in the south-west. Looking further forward, Savills has said it expects the wider south-east to outperform London over the next five years, with Bournemouth, Brighton and Windsor among the towns expected to see average prices soar by 32% while London records gains of 24.4%, just behind a national average of 25%.
As you can see, most predictions are based on the whole of the housing market in the UK, some at best divide the UK up into a few segments.
However even when dividing it up into segments the property market should not be viewed so simply. Even when you consider central London alone there is much variation in this Time to get of the fence patch. There are areas which will rise higher than the central London market as a whole, others which will ride with the natural rise of the market and others which will lag behind. This is how statics are calculated, the prices which lag behind are compensated by the high rising properties.
Even in this small patch there exists a lot of variations from street to street; 100 yards can make a lot of difference here. For example one of the areas I believe will rise very strongly in the next couple of years is the area closely in and around Queensway and Bayswater. The reason being the royal family of Brunei has purchased 75% of the properties on this street including the ice rink, it has big plans for this location, it has been reported £500m has been injected into this location.
Some other areas and segments of the market which I believe are under valued currently are buildings with commercial elements on the ground floors close to the cross rail stations on Oxford Street. The reason is the commercial parts are currently difficult to rent out to new tenants and existing ones are suffering due to the drop in passing trade. You will get a sub market rent until the stations open, then the these properties will command a superior rent, rents will rise higher than what they were previously. The real money as always will be made on the capital value of these properties, they will spike in value. Generally the market tends to be short sighted and many do not want to wait to cash in.
There are two ways of purchasing a good deal, one is to buy instantly below market value, the other is to predict where the price of the property will go in the future. Buying a discounted property means you have gained from day one, it’s a bird in hand. However it is not easy to find properties with a good level of discount in these locations.The other method, is something not everyone will see, in fact very few will be able to read and predict accurately where the market will go.
It’s easy most of the time to see a below market priced property but not always, the reasons being sometimes, especially in the current environment, the prices which you see on the net are outdated. They do not reflect what’s going on on the ground. The stats online of sold properties are likely to be 3 to 6 months old. These in turn would have probably been agreed 3 months prior to the deal finally completing, this means the figures cannot always be relied upon. Areas like Shepherd’s Bush and ealing are heating up almost on a weekly basis. With local unbiased knowledge you can figure out whether you’re purchasing a deal or not.
However to purchase something based on research and vision is another less used way and this may yield you even greater profits, as not many people are able to see trends and have the foresight necessary to see where the market will go.
We are looking at a market which will be buoyant in the coming year, so if you have been sitting on the fence in regards to investing in property now is the time to call us.
- A large property comprising of 18 flats
- Rental income guaranteed for 10 years starting at £175k, rising with RPI
- Strong location next to the station
- Just been refurbished with £500k being spent
- Solid yield and rising capital value
- Purchase price of £2.2m
Sow & Reap
A Property Investment Company
!Tips of the Week
An excellent way to exploit the riding property market is to use the government help to buy scheme, this will allow you to purchase a £600k property for only £30k deposit.
Don’t get carried away with buying BMV properties, remember to see what’s happening in the local area as well.