11 Newsletter

PROPERTY TRENDS ISSUE 12

Welcome to the February 2019 edition of Property Trends the monthly bulletin that focusses on property trends for residential property investors, landlords and tenants.

Our articles this month are:

  • London property pain continues…No end in sight to London property doldrums
  • 2019 looks bad for London…But will things be really as bad as they seem?
  • Shops are the new pubs…Shops set to go the same way as pubs
  • The Brexit house price bounce…Counter-intuitively, could Brexit cause a rise in house prices?

Editor


LONDON PROPERTY PAIN CONTINUES

london-property-market.jpgThe property pain for hard-pressed London homeowners trying to sell is not letting up one bit thanks to the uncertainty of Brexit, high stamp duty charges and “stretched affordability”.

According to research by UBS reported in the Financial Times in January, London homes are taking an average of 128 days to sell, over 4 months.

That compares to an average of 77 days in 2016.

Slowness in selling means sellers are being forced to drop their prices. UBS found that 39% of listed properties had been discounted.

The research revealed the average discount as 2.6%…but in Kensington & Chelsea the discount was over 4%.

There seems little prospect that London properties will sell faster in the near future. 

The predictions are for the London property market to remain sluggish in 2019.

Projected growth for London house prices in 2019:

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Cluttons is even more pessimistic – it believes London prices could fall by 10% over the next 18 months.

JLL is one of the few observers expecting London prices to climb in 2019 (by 1.5%).

However the dominant picture remains one of uncertainty.

A favourable Brexit outcome could lead to a “Brexit bounce” in the economy and house prices.

Conversely a “disorderly Brexit” could lead to price falls even greater than predictions, and something on the lines of Mark Carney’s worst case scenario of a 35% reduction over 3 years.

The most likely scenario is that London sellers will have to endure another year of pain as they wait months to find a seller, and will probably have to discount to do so.

There are however, few signs of a widespread collapse in prices.

One smart thing sellers can do as they wait for market conditions to move in their favour is to fix up and improve their home to maximise the price when they eventually sell. 

There are at least 40 ways to add value to a home.

Of course bad news for sellers is good news for buyers – especially first time buyers who, of course, don’t have to worry about selling a property before they can buy.

According to Hometrack, London prices fell by 1.67% in 2018, taking the average price of a property to £653,587. A further fall in 2019 will be great news for buyers.

If you are looking to buy in London, this year seems likely to be a good year. However, if you are looking to sell this may be the year where you sit tight and wait for things to improve.

8 fab ways to add value to your home (things to do to add value to your property)
Always add value before you sell (3 reasons to up your home’s value before selling)
Raise funds by remortgaging (borrow funds to add value by a remortgage)
40 ways to add value to a home (a must use action list for savvy homeowners)
The value of an extra room (adding value to a property by adding an extra room)
Is yours a “wow” property? (wow factors you can give your property when selling)

Dalton Barrett
Rebel Property Coach

Read other newsletters HERE

Read property blogs HERE

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2019 LOOKS BAD FOR LONDON
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Things are looking really bad for London house prices… but are things as bad as they seem?

Latest figures from the Office of National Statistics (ONS) show London house prices fell 0.3% in October 2018,  representing a 1.7% fall year on year.

The average value of a property in London was £473,609.

Nationally prices increased year on year by 2.7%, which was the lowest growth since July 2013.

The data confirms the two speed property market – with London, and increasingly the South, experiencing falling prices and the Midlands, North, Scotland and Northern Ireland still enjoying growth.

CAUSES OF THE DOWNTURN

It is easy to blame Brexit uncertainty for the falling London market. However other factors have undoubtedly played a big part in dragging down the capital’s prices, including:

  • Natural fall back in prices after London enjoyed stellar growth following the general financial crisis
  • The onerous 3% stamp duty surcharge imposed on buy to let landlords and second home owners from April 2016
  • More affordability questions and obstacles for portfolio landlords (persons with four or more mortgaged properties)
  • More stringent stress tests – typically BTL borrowers now have to show they can afford their borrowing at an interest rate of at least 5% and have rental cover of 145% (up from 125% previously).

PROSPECTS FOR 2019

Latest data from Rightmove shows that asking prices are falling across the country (down 1.7% in November and down 1.5% in December) and it is reasonable to expect these falls to lead to lower sale prices  generally – with London likely to be worst affected given its existing weakness. 

A lot seems to depend on how Brexit is resolved. A no deal Brexit seems likely to do severe damage to the economy as a whole and house prices in London could fall further. 

A favourable Brexit deal could lead to a bounce in house prices, a Brexit boom.

Any sort of economic decline as a result of Brexit could lead the government to make credit easier and even lower the impact of stamp duty in an effort to get the economy going again on the back of a healthy property market.

However, London’s prospects for the next three to six months at least appear grim.

It is a buyer’s market at the moment and things seem likely to get even better for buyers.

If you are a would-be first time buyer, now seems a good time to start searching for a bargain, and if you are a BTL landlord who has sat on your hands for a few years, now could be the time to start looking again in earnest.

The Brexit property boom (Why Brexit could cause a property mini boom)
First time buyers rising (the number of first time buyers continues to rise)
The slow death of buy to let (signs of the continuing decline of BTL)
The scary future for tenants (the perils of being a tenant long-term)
Asking prices continue to fall (Rightmove Dec 2018 – asking prices still falling)

Dalton Barrett
Rebel Property Coach

Read other newsletters HERE

Read property blogs HERE

WANT TO MAKE SURE YOU DON’T MISS A NEWSLETTER? SUBSCRIBE HERE


SHOPS ARE THE NEW PUBS

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They often say one person’s misfortune is another person’s gain. Over the coming years, that is increasingly going to be the case for small and not so small shops up and down the country.

Shops are going to close in their droves and that will present opportunities for property investors who can find profitable new uses for them.

THE STORY OF PUBS

Back in the nineties, pubs started to close down and few people realised what was happening.

Supermarkets were muscling in on alcohol by selling booze more cheaply and small pubs simply could not compete.

Chain pubs like Wetherspoons and Slug & Lettuce appeared on the scene and started to squeeze the life out of smaller pubs by offering food of predictable quality, cheaper beer prices and better looking bars. 

Then the smoking ban came along (in England on the 1st July 2007) and hit all pubs for six – large and small.  Escalating excise duties also did irreparable harm.

From 2007 to 2015, 7,000 pubs closed in the UK.

The big picture was that pubs had passed their sell by date. They could not cope with changing market conditions.

And guess what?

It’s happening again…with shops – small corner shops as well as big department stores. They are all under threat. They face the same fate as pubs.

THE STORY OF SHOPS

The UK is meant to be a nation of shopkeepers but that is well on the way to being consigned to the historical dustbin thanks to Amazon, Ebay and numerous other online retailers now ruling the retail market. 

Like it or not, shops are the new pubs…doomed to inevitable closure in huge numbers as a result of irresistible market changes –notwithstanding any soothing words you may hear from the latest “retail czar” battling to save shops on the high street.

High street retail royalty Marks & Spencer announced 17 store closures recently – the latest tranche of a total of 100 stores it intends to close by 2022.

Top retailer Sir John Timpson is quoted by the BBC as saying the UK has “twice as many shops as needed”.

Leading accountants PcW reported in November last year (2018) that shops are closing at the rate of 14 a day. The number of stores on our top 500 high streets fell by 1,123 in the first 6 months of 2018.

All this is desperately sad news for shopkeepers of all sizes, but it is also a fantastic opportunity for others willing and able to explore other uses for shops – uses such as residential, community, leisure and lifestyle.

If you are a property landlord or investor looking for “the next big thing”, you cannot go too far wrong by looking at shops.

You may even be able to benefit from the government’s new £675 million Future High Streets Fund.

With demand for shops tanking, they are in plentiful supply everywhere in the country and are a great bargain in many cases. They are versatile buildings, coming in all shapes and sizes – offering endless scope in terms of conversion, change of use and building.

A shop may be suitable for:

  • Residential conversion
  • Semi-commercial use, part commercial part residential
  • Change to new commercial use
  • Adding extensions
  • Demolition and new buildings
  • Title splitting.

If you want a property project full of possibilities and opportunities, buying a shop is as good an idea as any.

The Brexit property boom (Why Brexit could cause a property mini boom)
The slow death of buy to let (signs of the continuing decline of buy to let)
The scary future for tenants (the perils of being a tenant long-term)

Dalton Barrett
Rebel Property Coach

Read other newsletters HERE

Read property blogs HERE

WANT TO MAKE SURE YOU DON’T MISS A NEWSLETTER? SUBSCRIBE HERE

____________________________________________________________________________________________

THE BREXIT HOUSE PRICE BOUNCE

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There is growing talk of “a Brexit house price bounce” – a jump in house prices, starting in London, once the outcome of Brexit is known. Should you buy before or after the bounce?

Will there actually be a bounce?

The bounce is anticipated after two years of house price falls in London as a whole – down 0.5% in 2017 and down 0.8% in 2018.

Of course talk of a Brexit bounce is ultimately speculation – given the ongoing uncertainty as to how exactly Brexit will conclude.

However, there are a number of factors which suggest a bounce is well within the realms of possibility…

Why a bounce is possible

In London, where most property trends seem to start, there is clearly strong pent up demand, waiting to be released. Land Registry figures for the last quarter in 2018 showed that buyers were in short supply and transaction numbers were very low.

Observers are expecting a similar trend for the first quarter of 2019.

People want to buy and sell but economic and political uncertainty is putting them off. The stakes are high. The Brexit process could lead to a General  Election and a new Labour government led by Jeremy Corbyn, with a major policy shift for the economy.

There is currently talk of the Brexit withdrawal date being pushed back from the 29th March 2019 by extending the timetable using Article 50 of the Lisbon Treaty.

Therefore the uncertainty could continue months after the 29th March.

Whatever the position, Brexit clarity is likely at some point this year and that could be a boost for house prices – even if it does not turn out to be long term.

Of course there is no certainty of a recovery in house prices in the short to medium term. There could be the very opposite.  A “disorderly Brexit”, in a worst case scenario, could lead to a 35% fall in prices over three years as warned last year by Governor of the Bank of England Mark Carney. 

Many observers think so severe a fall is unthinkable in a climate of low interest rates and year after year failure to reach the government’s new homes target of 300,000 homes per year.

However, most commentators seem to accept that a major downturn in the economy post-Brexit could lower house prices across the country.

The alternatives

So how should you respond in the current situation?

If buying is on your agenda, is it best to buy now or should you wait until the position becomes clearer?

The difficulty of course is the behaviour of property prices…you can never be sure whether they are going to fall or rise.

If Brexit is put back and prices are likely to fall significantly further before any bounce, buying now would not be the best move.

If we are already at the bottom of the market, buying now would be smart. 

However, because of the uncertainty in predicting the movement of house prices, perhaps the best approach is to lay off trying to time or predict the market and simply buy when you want or need to buy, and can afford to do so.

Good time to buy

Whatever the position, now is as good a time as any to buy if you are looking to buy (a home or an investment) with the intention of holding for the long term, 10 to 20 years.

In that timescale, any error in your timing should correct itself – leaving you with the healthy capital growth most homeowners enjoy as a result of long-term property ownership.

Far from worrying whether prices are going to go up or down, your concern should be whether you can safely afford to buy without putting yourself under financial pressure which, given a significant upward swing in interest rates, would see you at risk of debt or even repossession.

Look to lessen the financial burdens and risks by purchasing with another person where possible.

Use the current uncertainty to drive down the asking price and bag yourself a bargain.

Focus on the financial aspects of buying

If there is an opportunity to benefit from the government’s Help to Buy initiatives (such as an equity loan, shared ownership or a Help to Buy ISA), it makes financial sense to do so – since government is unlikely to be able to fund these benefits indefinitely.

It is good practice to “stress test” your ability to afford the mortgage you will need.

Calculate whether you will be able to afford your mortgage and other essential expenditure if interest rates were to increase – say by 2% over the next 3 years.

If you are in an expensive part of the country and can’t afford to buy locally, you may want to continue renting and buy elsewhere using rentvesting as a strategy.

If a deposit is your biggest hurdle look at ways to raise a quick house deposit.

Conclusion

In the end, it is not about predicting a Brexit boom or bust and smartly taking advantage.

It is about realising the fact that property is at its kindest when seen and owned as a long-term investment.

If you buy as soon as you can afford to buy – fearlessly exploring all the options – and hold for a decade or two – you are likely to benefit from substantial capital growth – gaining enviable wealth, irrespective of short term market turbulence.

You may also find the following blogs of interest:

Cut spending – grow deposit (raise a deposit fast by cutting your spending)
Boost income – grow deposit (raise a deposit fast by increasing your income)
Buying a property fast (wacky and wicked ways to raise a deposit)
Raising a deposit (14 common ways to bag a deposit with ease)
Mum & dad to the rescue (ways parents/grandparents can help you to buy)
Government help to buy (government financial help for first time buyers)
More help from the government (right to buy, right to acquire and shared ownership)
Will you be too late? (why you may miss the government’s home purchase freebies)

Dalton Barrett
Rebel Property Coach

Read other newsletters HERE

Read property blogs HERE

WANT TO MAKE SURE YOU DON’T MISS A NEWSLETTER? SUBSCRIBE HERE

 


DISCLAIMER: This bulletin, which is provided for information purposes only, is fully intended to be accurate but no representation as to its accuracy is intended. It does not provide legal or any other advice to be relied upon. All liability to all persons acting or not acting on anything in this bulletin is disclaimed. NOTE: Where you require advice to rely on in any matter, it is best practice to consult and retain a suitably qualified expert in the relevant field.


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