Posted by markharrison on January 25, 2008
You probably know some of the rules of the Haiku art form, as taught in infant school:
- Three lines
- Syllables per line: 7 in the first, 5 in the second, 7 in the last
What most people don’t realise is that in Japanese culture there are two additional rules:
- Some reference to the season, normally through weather or trees (“Plum Blossom” is actually a hint that we’re in Spring)
- The first two lines should appear to contradict each other, but the third line should resolve the contradiction
So, here is my Haiku for today’s UK property market:
Mortgage Approvals Slow Down
Nothing is for sale
Sun shines, No UK Market
Let’s take those one by one
- Mortgage Approvals Slow Down. Yesterday, the FT reported that mortgage approvals declined last month to the lowest level in 10 years.
- Nothing is for sale. My local estate agent reports, as of this morning, that he has ZERO 2-bedroomed properties for sale. (Around here, 2-beds are the staple of the investor market).
- Sun shines. OK, it really is sunny down here in West Sussex, to the extent that I actually washed the car yesterday.
- No UK Market. See below 🙂
No UK Market – the FT report was about the UK as a whole, but that’s completely meaningless from the perspective of the typical buyer. The typical buyer, let’s call her Susan, wants to buy, say, a 2-bed flat in Croydon… she’s not worried about whether there are 4-bed houses for sale in Cardiff… because she has friends and a job in Croydon, and frankly a five hour commute each way isn’t going to feel a good trade-off for two extra bedrooms and garden.
In parts of the UK in 2007, we saw big rises. In other parts we saw small falls. The same (though possibly with everything a bit lower, so small rises and big falls) is likely to happen in 2008.
As an investor, that means that I’m (to a certain extent) not fussed about “average house prices” – all that matters to me is what I can buy THAT property for, and what I could rent THAT property for.
2008 is going to be a GREAT year for contrarian property investors. The more people scared about a property crash, the more motivated sellers 🙂
As an aside, I _do_ realise that part of the contradiction between the first two lines of the poem was timing – the mortgage advances were for December, the lack of 2-bedroom houses near here is for January, but the main point still stands.
Posted in Property Investment | Tagged: Property Investment, UK Property, YourPropertyExpert | Leave a Comment »
Posted by markharrison on January 23, 2008
UK readers “of a certain age” will no doubt remember the book of which I’m talking, but if ever there were a need for the cover, it is now.
The BBC’s Robert Peston has provided a summary of a speech by Mervyn King, the Governor of the Bank of England.
As Mr. Peston says:
Mervyn King said that central banks could not fix the fundamental problems in money markets
A quick recap of what happened:
- For several years, US banks have been lending mortgages in a fairly cavalier manner (translation: in a way that would certainly be illegal under UK rules)
- They did this because they could “sell on” the mortgage debt, and make a profit not only by selling it on, but by providing on-going “processing services”
- This happened to a much, much smaller extent in the UK, where this type of transaction was dominated by Northern Rock
- Towards the end of last year, the number of people with deep pockets wiling to buy this mortgage debt got small. (The problem was ACTUALLY that a small number of huge banks got worried about their own cash reserves, and decided to stop spending for a month or two.)
- Because of this, some of the banks that had been assuming they could sell on the debt suddenly couldn’t. One of these (and the biggest in the UK) was Northern Rock, which went to the Bank of England asking to borrow a lot of money.
- Word of this got out, there was confusion about what was happening, and queues formed in the streets of people wishing to withdraw their savings from NR (despite the fact that, in most cases, these were covered by the UK’s Financial Services Compensation Scheme anyway.)
Despite Mr. King’s words of warning (and let us not forget that he tries to use speeches to STOP problems happening), I’m not worried for UK property investors.
In fact, so far in January, some of the US “backers” have gone through their accounts, realised that their cash position wasn’t as bad as they’d feared, and started buying again. (Their concern was never that they’d run out of cash, merely that they’d let their cash levels get lower than the levels required by a complex formula enforced by the US goverment.)
However, it’s clear that some lenders in the are still running scared.Overall, though, things are actually looking UP for property investors (in a bizarre kind of way.)
- UK Interest rates went down in December.
- Most analysts believe they’ll go down again next month… and in the middle of the year… and towards the end of the year, so finish about .75% lower than they are today.
- One of the scarey statistics – the so-called “BaseRate to LIBOR spread” (see my report at the end of November) has actually got rather better in the last six weeks.
At the moment, it’s possible that one of three things will happen:
- Interest rates will come down OR
- House prices will come down OR
Now, why would those be bad for investors expecting to buy rather than sell over the next year?
And, may I remind you, in the last YourPropertyExpert.com survey (which was, to be fair, in August last year, just before the NR stuff), a staggering 83.6% of investors said they expected to buy in the next 12 months, 14.3% said they’d hold, and only 2.1% said they’d sell.
Of course, if your whole strategy has been to “buy gifted deposit offplan flats in the hope that the market goes up, and don’t worry that there’s a shortfall between the rent and the mortgage”, then maybe the words “DON’T PANIC” aren’t appropriate!
Posted in Northern Rock, Property Investment | Tagged: Bank of England, Interest Rates, Property Investment, YourPropertyExpert | Leave a Comment »
Posted by markharrison on January 3, 2008
Yup, it’s early January again, the time of year when everyone makes a prediction about house prices.
Myra Butterworth, in the Telegraph writes (based on Halifax Estate Agents views):
- House prices in the South of England and Scotland are to soar […]Most of the country will see property values remain the same in 2008.
Over at the Times:
- … Estate agency Savills thinks [London] prices will rise by an average of 5 per cent in 2008.
- [nationally] more surveyors are reporting price falls, than price rises.
According to the BBC:
- For the first time since 1995, this could be a year in which property prices actually fall. […]However, that is not what most experts are predicting.
But Capital Economics remains contrarian:
- We expect house prices to fall 5% next year and by a further 8% in 2009, wiping out the gains of the last 18 months.
Back in November 2004, I wrote an article called “Prediction, Prophecy and Gambling” – the “current facts” in the article are, obviously, out of date, but the conclusion:
What we actually know is that, over the long term, house prices broadly go up in line with inflation, and over the short and medium terms, they vary wildly up and down with no detectable logic.
The moral of this story is not that you should never buy property in the hope that prices will go up over the next few years. The moral is that you should understand what you are doing – and be aware that a purchase in the hope that prices will go up over the next few years is a gamble, not an investment.
I still stand by that!
Posted in Property Investment | Tagged: Capital Economics, House price, price forecasts, YourPropertyExpert | Leave a Comment »
Posted by markharrison on November 28, 2007
According to a report by Moneyfacts, over the last two years, the average mortgage arrangement fee was:
- £441 in November 2005
- £827 now
That’s an increase of over 87%, which is getting close to having doubled.
The trend behind this has been of lenders wanting to quote low headline rates, but make up their profits by charging such fees. About the worst culprit was Northern Rock, who have been charging such fees as 3.5% on some mortgages.
In September 2006, I wrote an article on the impact of fees, which was beginning to grow then. You can
What I said at the time is still true. Iwrote:
The way that I decided to treat the fees was to treat them as short-term loans, that had to be paid off during the course of the mortgage.
The difference, of course, is that those fees have got much, much bigger in the interim.
The conclusion I came to last year is something I also still stand by:
You can probably guess the punchline – I STRONGLY recommend that you go and see an independant financial advisor to present you different mortgage options…
… but I also recommend that you sit down with him/her and ask them how they are treating fees when comparing different products.
Posted in Northern Rock, Property Investment | Tagged: Mark Harrison, Northern Rock, Property Investment, YourPropertyExpert | Leave a Comment »
Posted by markharrison on November 21, 2007
Following the feedback about putting my Negotiation for small businesses slides online, I’ve updated my “Property Negotiation” slides.
These are from the 45 minute version of the talk I’ve given for organisations like the National Federation of Residential Landlords, and others.
If you run a networking event, and would like me to come and give this presentation (or any of my other presentations, please get in touch.)
You should be able to read the slides online here, or download them to your own PC.
And finally, thanks to Chris Brogan for his brilliant idea of using Flickr to find photos licenced under Creative Commons for use in this slideshow. Thanks also to the photographers (credited in the slides) for sharing their photos in this way.
Posted in Investor Psychology, Negotiation, Negotiation Presentation, Property Negotiation, Training course | Tagged: Buy to Let, Property Negotiation, YourPropertyExpert | 1 Comment »