Editor's blog

ON THE BRINK ?

Which way is the property market heading? And should it matter? In days gone by houses were bought with whatever cash people had but the rise of mortgages has changed that scenario forever and changed also the value of property upwards in the process.

So it should come as no surprise, that when the banks tighten the screws on lending, values dive south. This is accentuated in the north of the Country with its huge over supply of terraced houses and few people to buy them. Historically location has been one of the other significant factors.

Today this combination is just as important. Whether banks want to atone for the last few years of horror or try to put themselves in a better public light is another question but there is an easing of cash supply and banks are beginning to make more mortgages available. It can’t be wrong to continue to have a base rate of 0.5% and there is a possibility that the Euro problem will be solved.

Things could happen quickly on the financial markets if that becomes the case and you wonder who is going to be left behind. The Coalition have little option but to pursue their current policies and good luck to them. But they will also know that to be re-elected there needs to be a reasonable feeling of prosperity, or for that to be realistically on the way. And that means the floating voters need to feel easy about the value of their houses so they can feel comfortable spending again. So lets’ hope common sense prevails and we have seen the worst.

January 2012

It’s too early to say if the proposals coming out of the budget relating to housing are going to help. Anything to help the first time buyer is going to be good such as the Government’ s idea to help with the large deposit that banks are so busy enforcing. Will that really encourage buyers when that money will still have to be repaid at some stage and the value of this new investment could well drop? Buyers still have to do their research and take a view on that score.

Enabling more new houses to be built by easing planning laws for new builds and stamp duty for multiple apartments and change of use in some commercial properties to residential is all grist to the mill.

Sentiment cannot be overlooked and it is going to take time for the doom and gloom that has so dominated the scene (particularly if you are a vendor) to disappear.

But it’s a step in the right direction. Even better will be maintaining Bank of England interest rates at the current level and persuading the banks to get on and lend!

The Thai currency has been performing very well lately, with it expanding past 70 THB to the pound. In addition, the British property market is showing signs of recovery, which makes Thai buyers happy to invest there. This paired with trepidation over the future of the Thai property market and the economy as a whole makes London investment all the more attractive for wealthy Thais.

In order to understand the investment attraction of London properties, one must understand the potential Thai buyers. Typically, those Thais interested in making large purchases in the UK fall into one of the following categories:

• Wealthy Thais looking for investment opportunities abroad with a more stable return on investment than the potentially fluctuating Thai market.

• Wealthy Thais looking for a secondary residence outside Thailand. London properties offer the type of high society image that wealthy Thais are looking for.

• Many Thais see great value in sending their children abroad for educational purposes. English schools are held in high regard by elite Thais, with the current prime minister having graduated from Oxford.

With these types of Thais actively looking for property investments abroad, property owners in London can expect to be selling units to Thai buyers this year.

In order to meet the demand from Thai investors, some new property companies have been targeting Thais specifically, often to good results. Sales just this year of properties in London to Thai buyers have topped 1 billion Thai baht in value. The high class firms which target the Thai market often hold private face-to-face meetings with potential buyers both in Thailand and in the UK. In addition, in order to generate broader attention, these property companies often hold exhibitions or take place in existing ones in Bangkok, the huge capital city of Thailand. Common locations for these events include Muang Thong Thani and BITEC, both large multi-purpose arenas with exhibition space.

The most popular types of property for Thai investors are two-bedroom condominiums, due to their affordable price and livability. In addition, many Thais are going to work in London, opening high-end restaurants and service-based locations. The Thai connection with London will likely increase in the coming years, as more companies take note of the purchasing power of Thai buyers.

It looks as if rental demand is strong again as increasing numbers of people are unable to find the deposit to buy a house. The banks continue to make it as difficult as possible for the young to get on to the step ladder of home ownership so there is little alternative for them to do other than rent.

However as a result it is looking as if current house prices can sustain a yield well in excess of savings in those banks themselves, so the buy to let market is still considered viable. Indeed the relatively small amount of property coming on the market could well prevent a further large fall in prices if buyers continue to have confidence in the investment at that level.

Many people think there are still dramatic falls likely in the value of houses but if investors pile in at returns so much higher than you can receive from a bank/building savings account, you have to wonder if that will really happen.

Until the banks release cash and take into account those of us who just want to make a living and make our way through life with an owned house in a traditional way , how can all this change?

What I wonder now, when everything in the property market is so flat and knowing how we instinctively want to own our own house- our castle you might say, is this our opportunity to buy- it is your call!

It’s becoming clearer that the housing market has a long way to go before sellers are going to be in a strong position again unless you are selling something very special. Unfortunately there is not a lot of good news for them this Autumn.

So what influences are coming to bear? Firstly the continuous barrage of unsettling views on interest rates which seem almost designed to talk the economy down rather than provide helpful guidelines. Ie when will interest rates go up and when they do to what level?

Secondly, the banks’ disinclination to lend mortgages without a large deposit is cutting out swathes of buyers who would have been there a few years ago.

A build up in the number of houses available to buy is becoming apparent. That in itself could be good but the public spending cuts are emphasizing the north/ south Country divide to such an extent that the demand for houses in the North is affected, creating even greater uncertainty.

Valuers are very thoughtful when writing their reports for a mortgage company. Comparable sales are important for the protection of their backs, as they can be sued when a repossession takes place. There could well be sales used as comparables where sellers feel that they have to sell and if these are agreed at below the going rate for one reason or another you can see a downward spiral happening.

Even the Coalition’s ideas on education could affect values. For example housing in the catchment areas of popular schools may not continue to have that element of extra value if the rules change. Indeed the new ‘free schools’ may not be in those traditional areas at all so will prices increase ?

These are uncertain times for us all and who knows how the economic situation is going to turn out when there is so much disagreement among even the forecasters themselves. However if you have the cash, now could well be a very good opportunity. There’s a silver lining for someone somewhere in all this!