17:26 PM, 2nd April 2013, About 9 years ago 13
I have had a ‘gut feeling’ that the property market would turn in 2013 for at least four years, however, until now I have not been able to provide any real justification as to why I believe the 2013 buy to let gold rush will occur.
A recent comment on our forum got me thinking about this again. It said something along the lines of …
“do you think property values will rise when the governments incentives to help fund deposits for first time buyers kicks in next year? I’m seriously thinking about bringing my plans forward and buying now in advance of the next property gold rush”
There are plenty of other reasons for the property market to turn such as; pent up demand from first time buyers, low interest rates on savings and the recent news of the banking crisis in Cyprus. In simple terms, more and more people will be looking at property as a safe haven, particularly in the UK.
The UK is one of the worlds most established property markets, especially in terms of buy to let financing. Unlike many other areas of the world deeply affected by recession, the UK is very different in terms of property supply and demand. In places like the USA, Dubai and Eastern Europe their property bubbles were inflated based on greed and availability of easy finance. The basis of property demand these countries experienced was fuelled almost entirely by market speculation, there wasn’t really as much demand for the living accommodation being built as people actually wanting to live in the properties they were speculating upon. The reality in the UK is very different. There seems to be little if any reasonable argument to suggest that the UK doesn’t need more property. Even during the 15 year property boom of 1993 to 2008 the UK figures were showing that supply of new property was significantly more than six figures below demand year on year!
There have been early signs of a property based recovery in the UK with buy to let lending having shown progress beyond other forms of lending for some time. This is explainable in part due to new investors entering the property market through frustration of the returns being made of their savings. The one thing that could really get the 2013 buy to let gold rush going though is the recent budget announcement for further support for first time buyers to get on the housing ladder. In my opinion, and apparently many others, giving more people the ability to buy without the need to save a 20% deposit will lead to increased property demand from the people who have been dubbed “Generation Rent”. This demand will not be met by supply.
The relaxation of planning rules to convert offices into residential accommodation looked promising in terms of increasing supply. However, the cost of these conversions is often higher than the end values of the developments, especially if they are outside Central London, so why would anybody do them?
The reality is that new build housing stock is selling for less than the cost to build in most parts of the UK. Until that changes, why would anybody build?
Property values have fallen much less in the UK than in other parts of the world. In fact, the only reason property values have fallen is is the availability of finance. Once that’s fixed, and it looks like it could be VERY soon, what’s going to happen to prices?
There is plenty of unfinished housing stock and many more developments which have slipped into receivership over the last 5 years. Rather than cutting their losses though, until now the banks have allowed these properties to be let. However, the days of reckoning are upon them and these developments are being sold for significantly less than the build cost. At last the banks are cutting their losses and re-capitalising. I look upon this as a window of opportunity, a grand sell off, but it will not last for long. When there are no more bargains left to be had and finance is readily be available again everybody will jump on the bandwagon. As the saying goes, “if you can see the bandwagon, chances are you’ve missed it”
Developments being sold off by official receivers and liquidators are being snapped up by cash rich groups. In many cases these groups are re-selling the properties at bargain prices and small margins to turn a fast profit. I know this because I have been seeing these deals first hand, almost on a daily basis for the last month or so. I suppose that’s one of the benefits of having been in this business for nearly quarter of a century and having made so many contacts! These bargains will not last though and I can already see the 2013 property gold rush gaining momentum.
In summary, I feel that 2013 will prove to be the best time to invest into property for at least 13 years.
If you would like to find out about the types of deals I’ve talked about in latter part of this article forget Estate Agents, Rightmove, show homes etc., they can’t be found there. The true bargains I’ve spoken of in this article are sold “off market” to people “in the know”. They are in a position to fund purchases quickly and with a decent deposit of 30% plus.
Many “Property Clubs” profess to offer services to investors with a desire to seek out such bargains but BEWARE, they charge massive fees and are often more focussed on the fees than providing the services they advertise.
I am, however, aware of one person who is retained by the sellers of these types of deals, therefore you pay nothing. His name is Kelvin, you may prefer to refer to him as “Your Property Concierge” 🙂
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