Be fearful when others are greedy, and be greedy when others are fearful”
Warren Buffett, October 2008
Why Buy Now?
Martin Roberts analyses current conditions in the property market...
With all the uncertainties of the current property market, it’s not surprising that many people are fearful of investing. As with all financial decisions, it’s important not to overstretch yourself and do anything that means that you’ll be worrying yourself to sleep at night. However, recent UK and World events, combined with the significant rise of property prices at home and abroad over the past decade have conspired to, ‘Yes, create very difficult conditions for some, but also to provide unprecedented opportunities for the shrewd investor.
Several key things have happened, which in isolation wouldn’t be significant but when brought together have resulted in some fairly extraordinary circumstances. Major house building projects which were initiated in the boom times a few years ago are now coming to fruitition at one of the most difficult periods in recent property history. Developers, desperate to recoup billions of pounds of investment are willing to accept what would have previously been considered ludicrous offers on new build property.
The unfortunate rise in repossessions has left banks and building societies with numerous properties on their books, and although they have to be seen to be getting the maximum price for these, the reality is that when they are released onto the market at auctions and through selected estate agents, they are happy to accept a fraction of the true value of the properties just to get some cash back in the coiffeurs.
Restrictions to the supply of money from traditional lending sources means that investment funds are much harder to come by, and therefore the number of people in financial position to be able to proceed with a purchase has dwindled.
The knock on affect of all of the above factors means that property prices are being driven down and those people with the cash to spend or the ability to raise it are in a hugely strong position.
"Now is the time to buy."
Graham Penny, Graham Penny Auctions
Serious professional investors and institutions realising this are further putting downward pressure on prices by negotiating aggressive discounts. As Graham Barton, Auctioneer with West Country Property Auctions says, “people aren’t looking for a deal anymore, they are looking for a steal”. He also adds rather poignantly that these large investors aren’t looking for vendors, they are looking for victims.
So where does this leave you if you are thinking about buying right now? The answer, quite simply is in a stronger position than you are likely to ever have been in or likely to be in again in the near future. If you can find the means to invest, you’ll either get property at a big discount from what you may have had to pay for it a year ago or you’ll end up being able to afford a much bigger or more desirable property for the same money.
“I skate to where the puk is going to be, not to where it has been”
Wayne Gretzky (Ice Hockey legend)
The 64 million dollar question of course, is will whatever you buy now going to drop further in price over the coming months and years. The answer, of course, is quite possibly so. However, if you negotiate a good deal now and pay an extremely attractive price for a property now, you’ll be shielded from any future falls in values. As the old adage goes, ‘You don’t make money when you sell a property, you make money when you buy it’. Paying the best possible price and negotiating the best possible deal is therefore paramount.
Clearly, you need to consider all the key elements surrounding a shrewd property purchase, and only be considering properties that have the likelihood of good medium to long term performance stacked in their favour. Rentability. Location. Uniqueness. Proximity to services and facilities and more - all of them need to be factored in and good research as ever is the key.
The secret is having access to good deals, knowing a good deal from a bad one, knowing what kind of properties will perform best, securing the best deal and being able to effectively finance it. That’s where myself and my team can help you with the information on this site, the deals that we’ve come up with and the property training seminars that we can give you.
But your starting point has to be a belief that now is the time to invest, and you should cast aside any doubts that that isn’t the case.
"Some of the stuff we are seeing is an absolute giveaway. Banks and building societies are so focused on getting rid of repossessed properties that they are just going through the motions of getting the best possible prices. But actually setting the reserves at unbelievably low levels. They’re focused on getting rid of the properties and getting money into their account before the year end, so they are selling at a price that the market will absorb without second thoughts. Recently we sold a modern 4 bedroomed detached house in Derby for £89,000 at auction. It had been previously on with an estate agent for a very realistic £159,950.
I reckon we’ve got another 6 to 12 months of these bargains and then no more".
Graham Penny, Graham Penny Auctions