UK Property Investment Blog

FROM: Property Investment Specialists

It’s clear to us that there are a lot of investors out there assessing the UK market and deciding that now might be the time to start snapping up property and expanding their portfolios.

Martin Greinger is the Head of Portfolio Development for a popular UK property sourcing service. There is no-one better placed to tell you the type of demand there is for UK property right now.

We caught up with Martin between phone calls to ask him a few questions.

Martin, what demand are you seeing for property sourcing?

The demand is certainly growing and has been steady since the turn of the year. The media has helped by outlining the drop in prices over the last year and savvy investors realise there is an opportunity right now. Although we may not be at the bottom, we are fairly close and over the next 6 months is the time to increase your UK portfolio.

Waiting until the market is right at the bottom is risky as you could then be competing with an influx of investors and rising prices. Investing when it is a buyer’s market allows you to make aggressive offers on properties – especially distressed properties – more than compensating for any further drop in prices.

Low prices also give higher rental yields and immediately cash-flow positive investments – with capital growth to come in the longer term.

What are clients after? Are yields important or is it capital growth?

Yield is the major buzz word right now as investors realise capital growth is not possible – certainly in the short term. A strong gross yield of 7%+ is required by most resulting in a positive cash flow month on month. The combination of achieving a low price in a solid rental location – driven by our analysis and local knowledge – is paying dividends.

This is not to say we are ignoring capital growth, far from it. Our intrinsic property value research takes us to the strongest locations that will come out of the recession first; these are the areas we expect to grow the quickest. By looking at the economic factors behind each location we can predict its potential and point our investors in the right direction.

We have already done research on a number of locations and successfully sourced property there. We have realized that property is usually cheap for a reason and we would not want our investors buying into an area that is not going to recover from the recent downturn.

Are there active buyers or is it mostly “observers”?

There is a mixture of both to be honest; I will always have clients who like to watch what is happening from a distance. Those who are buying are doing so because they see an opportunity where developers and agents need to sell in order to balance the books. Where I can pull a number of investors together we can negotiate better prices by buying in bulk and cash is certainly king right now. Cash buyers can carry a lot of weight into price negotiation.

One other important aspect is finance; although the banks have tightened up I am still seeing many buy to letters obtain suitable mortgages for their investments. It is all about speaking to the right people and doing your research.

Do people know where they want to invest or are they led by our IPV research?

Again this is a mixture of both. Some investors approach me with a set brief and ask me to work to that, it is clear that many do not like to step out of their comfort zone, say 20 miles from their home. I can understand this as it makes management so much easier although it does restrict your potential.

The investors who ask for our research will have a set plan; they know how much they have to spend and want us to tell them where. Our research can be adapted to all parts of the UK and is similar to the work we did in CEE between 2004 – 2008. If someone wants us to look at the whole of England we can break it up into counties or major cities. First of all I will need to know their objectives, timescales and budget, then we can start to build a brief and discard the locations that do not fit.

If someone wants to buy in bulk we will look at locations that are not oversupplied and have a need for good rental properties; rent is important at the moment so void periods need to be avoided. It is therefore important to be conservative with our figures; overestimating rental income can make an investment look a lot better than it actually is.

So what types of opportunities are the sourcing team uncovering?

Each brief is different so we are finding a great variety in our sourcing results. Many investors prefer newer build property as it is less management intensive although apartments are not to everyone’s taste. We are coming across excellent bulk buys so it comes in useful if we have three or four investors all looking for similar location with a similar budget; this is where our negotiating can save clients a lot of money.

Because we go to the source rather than locate property from the office we can cut out the middlemen and get the best possible prices. Speaking to people face to face and looking around sites is proving our tactic right now and it is really working.

Whilst I don’t want to give actual examples, we are seeing properties at much less than half the price they were selling for 2 years ago and with great rental potential.

What insights can you give our clients about UK investment property?

Don’t tie yourself down to one location; with the UK in the state it is and with so many businesses and industries under threat it would be dangerous to rely on one city. If you are based in Bristol, explore Cardiff and Swansea, likewise if you are in Manchester, ask your self what is happening in Bolton and Liverpool.

Also, there are a lot of great property buys out there, it is just a case of searching them out. When we are on the road we use tried and tested techniques to find out what is available, how low an offer is likely to be accepted and rental figures to back up the investment.

What insights can you give our clients about UK investment property?

Finally, and probably most importantly, do our key clients believe now is the time to buy and why?

Yes and no. We have been instructed by a number of our high net worth clients to source property for them. This is a good sign for the smaller investor because they can jump on the back of some of their deals, thus forcing the price even lower.

Some clients are playing the waiting game and will buy during and after the Summer. Mortgages have some part to play in this and reports that prices are still falling.

We know from talking to many others in the industry that there is a lack of good quality stock and this is an area we honestly believe we can help with. The deals that have gone through this year have been examples of that and provided our investors with excellent cash flow positive properties.

Thanks, Martin.

The press may be all doom and gloom at the moment, but the property market certainly isn’t. In fact it seems to be getting better and better with each passing month.

In a recent report released by the Royal Institution of Chartered Surveyors, they experienced – for the third month running – an increase in property interest of up to 16%.

An increase that backs up the growing theory that buyers and investors alike are returning to the property market.

But the Royal Institution of Chartered Surveyors are not the only ones to feel this surge in interest, the National Association have also reported a similar uptake.

Discussing these details in their January report, they found during the first 2 weeks of January, that the number of first time buyers investing in property more than doubled to 22.5%, whilst the number of registered buyers rose to 14.5%.

This sudden burst in interest is not that far off what is considered to be the first signs of a market recovery. The NAEA for example witnessed a surge of property sales topping on average 4 per estate agent during these same 2 weeks, compared to their 6 property sale average during November and December.

Now whilst the recession has still got a way to go, all of these figures when placed side by side, equal optimistic news for the property market!

Having lost a lot of consumer confidence during the onset of the credit crunch, the fact that 22% of these sales were due to property investors, proves that confidence is returning.

And it is not only property investors who are feeling the pull of the property market.

With property prices now 17.2% cheaper than they were this time last year, the appetising appeal of these properties is attracting a lot of interest.

The only obstacle left for obtaining these incredible deals is getting a mortgage – something that as an investor you won’t have to worry about if you take the first step towards your property success.

The Bank of England may have only cut their interest rates down to 1% last week, but the impact of such a change has already been felt by homeowners who have got tracker deals.

With many verging on the edge of falling into negative rates, mortgage lenders have confirmed that whilst they will not pay their customers for their loans, homeowners will not have to pay a single penny of interest on their mortgage. Meaning many homeowners are now looking forward to months of no repayments.

Now whilst not all tracker deals will fall into this category, this interest rate cut can still offer great savings for investors.

Those who were lucky enough to get Cheltenham & Gloucester’s minus 1.01% tracker deal (to the Bank of England’s 1% base rate), on a £100,000 property, can look forward to monthly repayments of only 8p.

8p compared to the £500+ increase in profits they will experience from renting out their properties on the buy-to-let market, if using the tried and tested Property Mentor scheme

Even those with repayment mortgages are now benefiting from lower monthly repayments. An investor who has a property worth £100,000 for example at an interest rate of 0.5% would only have to pay as little as £355 a month to own it. Not bad when most £100,000 properties have repayments of £600 a month.

Now factor into the equation that rental prices have risen by 20% in the last year and these falls in monthly repayments could prove to be a great asset.