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Too good to be true?

11th June 2016

The property market is nervous at the moment, there are reports in the press about the massive decline in property companies, due to this nervousness. This has been caused by fear that people will vote that we stay out of Europe which is what the opinion polls are suggesting. I’m no expert on the BREXIT issue. In truth I think most people don’t have a true grasp of the actual undercurrents of what is really going on. Their information comes from, and is formed by, the main stream media which is a propaganda machine, rather than a medium of true and actual information. The move towards a consolidated state is not something which is being done in isolation, it is a part of a global agenda with the main aim being centralisation of power.

The bottom line however is if we leave Europe it will be bad for property – in the short term. Testimony to this is the reaction of the property stocks on the market to the latest Brexit Polls which shows the nation is leaning towards leaving the EU.

As of 6th June 2016 the upmarket Berkeley Group was down 55p or 1.7% to 3184p, Persimmon slipped 23p to 2034p, and Barratt Developments dropped 7p to 571p.

It was a similar story on the mid-cap table, where Crest Nicholson fell 17p to 567p and Bovis Homes was down 16p to 978.5p. Even AIM-listed Telford Homes, which builds affordable flats in the capital, was not immune tumbling 3.48p to 366.02p.

The property market has taken some blows recently with two rounds of stamp duty hikes and another tax blow is on the horizon.

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Yet I believe the market will keep going upwards, it will shrug the blows, evolve and carry on its rise.

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Why? Due to fundamentals. The first being London is a very mature market, it’s a 500 year old Bull Market. There are records of property transaction being done this long ago.

The second is there is chronic lack of supply. They are not building enough units to accommodate demand. The demand arises for many reasons, for example net inward migration, break down of the family nucleus etc. Not even taking into account the money coming in from Overseas which uses London property like a safety deposit box. If the charges go up will they stop? I don’t think so.

Britain has history, and many countries have an infinity with ‘British Culture’. Quite a weird example of this is the British village built by the Chinese 19 miles outside of Shanghai at a cost of £500m, complete with the fake red telephone boxes. This is a symptom of the Chinese obsession with all thing British. It’s not just about the investment, they simply like the idea of owning a piece of London, and telling others they own a piece of London real estate.

I have a friend, who in truth is a bit of a bum. He doesn’t work; I don’t think he could even hold down a proper job, he’s simply not employable.

However, one good thing he has done is use me as a spring board to purchase property. The first property he purchased was with no money in his pocket. He managed to synchronise a mortgage together with another loan in order to purchase his first property.  The property was in Stonebridge Park, a terrible area to live, but cheap and prime for growth.

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This was a one bedroom flat which he managed to convert into a two bedroom. He then refinanced, although he had to approach two different lenders as the first lender figured out he was putting a plaster board up and trying to extract tens of thousands of pounds. The second valuer didn’t have a problem with this or perhaps missed this and the remortgage went ahead.

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Having got a taste, he then went on to purchase a mid terraced house outside of London, again with borrowed money as the deposit.  He then converted it into two one bedroom flats. They have been rented and refinanced several times since the purchase.

In a nut shell he has taken his money out from all three properties and is several thousand pounds better off than he otherwise would have been. All three were purchased in the good old pre credit crunch days. If you were clever with credit these were good times for the intelligent investor. Credit was so abundant you didn’t even need money to purchase property, simply the will to do so. I remember having once purchased property with no money and after the purchase I received £40k cashback.

The point being the appetite for London property is always going to be strong on a National and Global Level, it is not going to disappear.  Whatever rules come in, the market will evolve and roll with the blows.

The introduction of Crowd Funding in regards to property deals is a segment of the market which is big in the States and is taking off in the UK. This allows investors to invest in property without taking on the burden of ownership. Therefore no tenant issues, no taxation problems in regards to the proposed new changes etc. This is an exciting area to keep an eye on.

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We currently have a property deal which is reminiscent of the pre credit crunch days.  Once you invest, it is anticipated that you will be able to take your money out in 12 months, and still you will then own an income producing asset for the long term.

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I used to write about no money down deals during the pre credit crunch times. There were only a few readers who actually came and took advantage of this opportunity.  They actually went ahead and purchased property with no money in the deal. Most people said it was too good to be true, therefore it wasn’t for them.

This deal we have at the moment is the closest deal to a no money down deal I have seen for a while.  Call the office to get more information.

The Real Deal

Bayswater, London, W2 Purchase Price: £625,000

  • A bright two bedroom flat in an excellent location in very good condition
  • Long lease
  • Low service charges
  • Close to the open spaces of Hyde Park
  • Excellent buy and hold opportunity

Call us now to reserve!

!Tips of the Week

Look beyond your doorstep. Investing on your backdoor is often a safe but poor option. The question you should ask is: where will your money serve you best?

Big redevelopments and infrastructure projects create new local amenities and better transport links and provide a significant long-term boost to local house prices. Invest in areas with good redevelopment projects in the pipeline if you are looking for long term capital growth.

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