What you need to understand about the UK property market
Doom, gloom and more doom! The end of the world is nigh… or so most of the media would have you believe.
But is it really that bad?
Sure enough, there is a correction happening in the housing market - and its long overdue. All markets go in cycles so it had to happen sometime. Property investors have seen exceptional growth in recent years and frankly it makes no difference whatsoever to the long term fundamentals.
As a landlord, with a long term strategy, I am in fact pleased we are entering this phase in the property cycle as rents will increase over the next few years, and my monthly cash flow will increase, and it makes not a jot of difference what my properties are currently "worth" because I have no intention of selling them in the next 10 years.
According to every TV programme and newspaper you read every investor is fleeing the buy to let market and going bankrupt. But whilst some people who have overstretched themselves are in grave difficulty due to the changes in the market, many professional landlords are picking up bargain properties on a large scale and quietly building their portfolios. Are they being foolish?
Whose advice do you want to follow?
Ask yourself this: how many property investors are in the Times Rich List year after year (many of whom started from very little). Then consider how many financial journalists you have ever seen in that list. So the answer speaks for itself: Journalists know how to write stories to sell papers. Successful investors know how to make money.
Nick Hopkinson, a director of one of our partner property sourcing companies was recently interviewed by Anne Cuthbertson, the property editor of the Sunday Telegraph. She believes that Telegraph readers are keen to invest in Below Market Value (BMV).
Cuthbertson confirmed "our readers are actively looking for ways to exploit the credit crunch. Many of them have secure incomes and substantial cash to invest and will see the current market as an ideal time to buy property cheaply".
We agree that "cash is king” and while some people are struggling with repossessions, personal debt and higher mortgage payments, it's currently a great market for the financially savvy to pick up cash positive discounted property.
The benefits of buying property off a distressed seller or bagging a repossessed property bargain are obvious: the immediate buffer against any short term price falls and high yields delivering immediate cash flow.
However, attending auctions and trying to negotiate with desperate vendors directly can be very time consuming and risky if you don't have previous experience agreed Cuthbertson. "Working with a specialist agent who has a successful track record and understands your needs makes a lot of sense for the kind of busy, successful people who read The Telegraph".
Strike whilst the iron is hot!
"Specialist investment advisors are well placed to negotiate exceptional discounts for our busy clients at the moment" says Hopkinson, "our investors are buying houses and flats at 20+ percent BMV with high rent yields, often over 6 percent delivering immediate positive income currently. This opportunity was simply not around 3 months ago and will disappear as soon as the credit crunch eases. Now is the time to buy."
Despite all the doom and gloom merchants in the press that focus on what property prices are doing from one month to the next the prospects for property remain as good as they always have been.
Market fundamentals of chronic supply shortage and long term growing demand for residential property, particularly in London and South East England make this property a very sound long term investment, provided you have cash for deposits and budget properly for the long term. Longer term, UK residential property has consistently outperformed all other investments since reliable records have started in the 1950’s. Those fundamentals have not changed.
People who can see through the sensationalist stories in the media and have the courage of their convictions will stand to make large profits from purchases made in 2008 whilst weaker investors will inevitably flee the market and lose their money.
Our advice: Be strong and have a large salt shaker with you whenever you read a newspaper.
"Most people will see 2008 as a missed buying opportunity when they look back!" says Hopkinson "why not find out more?"
To find out about the latest BMV properties from our specialist property sourcing partners call our offices for a no obligation chat on 0845 230 5195 (weekdays 9am to 5pm), or fill out the enquiry form below.
Happy investing!
PS. Please note: No money down deals may still be possible in some cases. However, you will need £20,000+ investment cash to work with our partner companies.
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