2nd July 2016
I had a very excited Estate Agent calling me up on the morning of the 24th June 2016. He was excited because he could finally start tying some deals up; given the result for the UK to leave the EU. The uncertainty in the market could be used to reduce the amount vendors have been asking for.
We have also been on the receiving end of this activity, a written offer I was expecting to come in for a building finally came in, it was a cheeky offer in the first place to begin with when it came in verbally, however when it came in writing it was at even less than what was promised due to ‘the change in the market’ I was told.
What’s changed? The building is still standing, same as it was yesterday.
How much of this activity is due to actual reality and how much of it is due to perception? Or does is not matter as perception eventually creates the reality?
Times of uncertainty are the best for purchasing property. Those who purchased in 2009, are sitting on tidy profits now.
Here we have many uncertain variables. Namely the pound is at its lowest since 1985; stock markets have plummeted; prices of property stock has dropped, Foxtons fell by 25% on Monday (27th June) and trading had to be suspended. Suspension occurs when the stock drops by 10% from their closing price the previous day. Many home builders have also taken hits.
This makes London property cheaper, I won’t say cheap.
Shrewd onshore buyers can benefit from the local instability. Foreign buyers have an added advantage by benefiting from the low pound, according to one agent these factors combined could make certain transactions 50% cheaper than prior to Brexit.
Many properties in the UK are owned through offshore trusts, on these types of transactions the deal can be done offshore without it ever registering on the Land Registry. The transaction can also be done in a foreign currency, without the need to touch the currently unstable sterling.
Three types of sellers always exist in the market place, the distressed, the dead and the divorced. The distinguishing feature is all three have to sell.
These are the sellers to look out for. Not those who have no real motivation to sell and are dipping their toes in the market just to see what they can get, you may get a slight discount depending on when you catch them, but this is flippant, the focus needs to be on the ones who have to sell. There is no choice in the matter.
The trick or art is to identify these motivated sellers.
Generally there are two methods of sale one is the auction, this gives the vendor an almost guaranteed sale; the other is through the agents, for which you risk whether accepting an offer is actually going to lead to a sale, and then comes the time period taken to achieve the sale, this is the other variable. The deal could be done in a week or it could drag on for several months.
We purchased one building in Notting Hill for a client which was a probate sale valued at around £3m, which we managed to conclude at £2.5m. The property is freehold and just outside the station. We have some interesting plans for this property which are in the midst of being executed.
The uncertainty in the market exists partly because everyone else is uncertain, panic is infectious, no one knows what the prices should be post Brexit.
There is one person I know who wants to purchase a new build as a home to live in, he found a property he wanted to offer on. Pre Brexit vote the developers were playing hardball, increasing the price each time he put forward an offer and claiming other offers were coming in for the same property – the usual games agents like to play. However post Brexit vote, the developer is now chasing the buyer.
Now the issue is the buyer does not know what to offer as there is no ruler to go by. All the comparable are pre Brexit.
He was asking me if there was a way to find out what the price should be using a local agent. I told him the local agent will probably be as clueless as he is. The price of the property will be whatever someone chooses to pay for it and the sellers accepts.
The share price of this particular developer has been the most hit amongst all the listed property companies. Their share price has dropped by 40%, and also had to be suspended from the stock market.
This does not mean all their properties have dropped by this amount, merely there are more sellers than buyers for this stock and hence the price of the stock has dropped, probably in anticipation of a further drop in price.
As a consequence of the heavy reduction in share price pressure might be caused from the top of the company to start accepting reduced price on properties, in order to get the sales going and to start to build confidence and momentum post Brexit.
At this point after a long time, the planets have aligned with the buyer. This opportunity does not come often, so I advised him to use this situation to its fullest. It comes only a few times during one’s life. This is a buyer’s market now and he should exploit it to the fullest.
However, there’s always a danger in overplaying this hand. This is a Buy to Live purchase, and so the main objective is not based on price as it’s a lifestyle purchase.
The current environment is a conducive one for buyers. Remember to offer low, as you can always go up but you can’t come down.
Give us a call, let someone who knows the terrain do the work for you.
The Real Deal
Maida Vale, London, W2
Purchase Price: £250k
- A large one bedroom flat in a well maintained ex local authority block
- Long lease
- Close to the amenities of Maida Vale
- Excellent buy and hold opportunity
Call us now to reserve!!
!Tips of the Week
Decision making and speed are two characteristics which separate the investors
who make money and those who do not. More people lose money by not making a decision
than making the wrong decisions when investing in property.
A good location doesn’t necessarily mean the best area in town when you are a
developer. A good location could be somewhere on the fringes of a good area that,
in time, can become part of that area.