Singing Pig

Hi

I thought people might find the following news item I received this morning interesting. I did as it adds to my own personal feeling that the downward curve of the market may be starting to ease, with my observation that sold boards are starting to appear again on the streets and STCs are starting to appear on rightmove. Is this an early sign of at least some in the media deciding it's time to put a positive spin on property?....

  

Over the hill 

By Chris Marshall | 00:01:00 | 06 September 2008

Andaine:

I did as it adds to my own personal feeling that the downward curve of the market may be starting to ease

 

False dawn, I fear.

Agree with Londoner!  I think it will get worse before it gets better .... However, confidence is everything in financial markets, so we need more positive pieces like this to help improve market sentiment and also improve confidence with the general public.  It's a bit of a "chicken and egg" situation ...

Londoner:

Andaine:

I did as it adds to my own personal feeling that the downward curve of the market may be starting to ease

 

False dawn, I fear.

Agreed!  I'm very much a 'glass half full' kind of person, but there comes a time when you have to face reality and the reality is that this is the most serious financial crisis in our lifetime.  For me, its a case of battening down the hatches, and seeing how things pan out.

I agree with you both - now is a time to stay cautious and cash-flow positive.

I agree that you should stay cashflow positive, but there are great buying opportunities out there.Properties are not selling at the auctions and you can get away with very low offers after the auction.I see alot of opportunity that will evaporate when the market recovers in 2-3 years time. Then people will say, I should have bought when I had the chance. However, it is better to be safe than sorry.

Warren Buffet has been spending big time now that the market has crashed. He says be greedy when everyone else is scared and sell when everyone else is buying-something like that anyway.

It depends on where you are I think.

My plan has always been to stick in my own area where I know the rents, properties, renters, and game plan. At the moment the sort of property which used to be a great cashcow for me doesn't stack.

 

Studios costing £200 a week to rent (£10,400 a year gross, max) and £240,000 to buy. That's a gross yield under 4.5% (and of course a service charge to pay with the studios) and it doesn't work for y figures.

 

Even 30% off those sale prices would be  £168,000 to buy and a gross yield of about 6% and the service charge of £2.4k a year means that it isn't worth the aggro. From the 1990s it also seems that studios crash harder than bigger places and the risk isn't worth it on the type of rental return you would get from these places.

 

Studios is where I got going. In 4.5 years in the mid-90s I bought 11 studios close together for  an average of £45,000 each, the average service charge was then £1,400 a year and the average rent £115 a week (£5,980 a year gross max). That was a gross yield off over 13% and yield after service charge of 10.1% and was a good stack.

 

I sold most of thse studios in 2005-2007 because the stacks were so bad and I could not see much further capital appreciation coming and that is a decision I was pleased with at the time and I sold for an average of £225,000 . Even after CGT paid, I got relief and spread it over 3 years CGT, it was a much better return in other investments.I missed the market high by about £20,000 per prop but calling the exact top of the market is very hard to do except afterwards and better just before than just after I think.

Don't get me wrong I'm not saying now is a bad time to invest in properties but it all depends on where and the exact figures.  In the area I invest in now is not the time but I'm keeping a very close eye on the market.

The bottom is a long way off still. However, it will feel much like that house prices are in freefall when we are actually there. You can only see market bottoms with hindsight. The fact that some people are calling it now almost proves we are not there yet. When everyone agrees that the market will keep falling for ever, only then will it be bottoming.