Property and economic update

Data is now available for the final month of 2004, enabling us to see the pattern of house price inflation over the entire year. What becomes clear is that the market has slowed significantly since July; all the main market commentators are in agreement on this point. Overall price inflation for the year according to The Nationwide stands at 12.7%, with 11.4% of this gained in the first half of the year. Hometrack states that the average price of a house in England and Wales is £163,500 down from the peak of £167,700 in June.

Hometrack figures show an overall fall of 0.8% during December, with Northumberland, Bedfordshire and Warwickshire performing the worst. The Isle of White was the only Hometrack region to record an increase in price at 0.1%. The Nationwide paints a similar picture with an overall drop of 0.2% during the course of the month. However, both Alex Bannister of The Nationwide and John Wriglesworth of Hometrack are in agreement that the market, although remaining slow for the first half of 2005, will see much stronger performance in the second half of the year.

John Wriglesworth comments, "My confidence in a restoration of house prices is based on four key facts: household incomes are increasing by 5% per annum, unemployment is continuing to fall and lenders are increasing the multiples of income on which they will lend. Furthermore, interest rates are still historically low. There is no reason why any of these factors should dramatically change over the coming 12 months".

Portfolios increasing despite house prices

According to the Council of Mortgage Lenders, Landlords are continuing to grow their property portfolios despite the current stagnation in house prices.

In a recent survey of 1,300 private landlords, a huge 86% of those questioned said that they intended to maintain or increase their portfolios over the next 12 months. In fact, rather than static or falling house prices, most identified interest and rental rates as the major factors in their investment decisions. Given the current low level of interest rates, the unlikely prospect of significant price falls and the news that rental values are increasing, it is easy to see why they are not selling.

The CML discovered that the most likely factor causing them to reduce their property holdings would be rising interest rates and rental income being to low to cover mortgages. Only 6% of those questioned felt that they would choose to sell if prices stagnate and 14% would pull out if prices were to fall.

The CML also found that three quarters owned more than one property and two thirds had been in the market for more than three years. When asked how the properties are funded, two thirds said they used savings, with most of the remainder remortgaging their existing property to raise capital. Only 14% took out a bank loan to fund their investment.

Bob Pannell, head of research at the CML comments ”Up to now, the future intentions of buy to let landlords have been the subject of much conjecture but little real evidence. The topline survey evidence sets down a clear marker that landlords themselves broadly expect to maintain or increase their holdings, have a long term interest in rental property, and are unlikely to be spooked by the prospect of a slower market”.

Could house prices double in the next 6 years?

Is this really possible? Could house prices double by 2011? Well Simon Brown strategy director at trading analysis company Quantigma certainly thinks so. Here's what he has to say.

'Mortgage approvals down', 'average house price down', 'house price forecasts for next year down', 'more sellers than buyers'. These are typical statements and facts from banks, building societies, mortgage lenders and estate agents alike, which have depressed the market over the past six months.

So, will the value of our houses follow such predictions and for how long? Nobody will argue that the increases in interest rates from 3.75% to the current 4.75% have taken the heat out of the housing market, and that consumer spending has become slightly muted as spenders are unnerved by increased mortgage payments let alone a drop in bricks and mortar equity.

I believe that house prices will be the same in 12 months time, whether it be as a result of some further decreases over the next six months, followed by some gains over the following months, or simply a stagnant market. But what about 2006-2011?

As interest rates have probably peaked at 4.75%, the next 18 months may well see rates fall back down towards 3.5%-4%. This will increase spending power among house buyers. With the economy on steady growth and inflation under control, next year should be a year for consolidation, debt repayment and confidence building amongst consumers. 2006 may well see the start of an impressive five-year growth path in the UK housing market, fuelled by these local economics, with potential help from a weaker dollar, attracting funds into the UK for investment and 'the safe haven effect'. This five-year growth could easily exceed 100%, let alone the effect of the UK entering Europe and interest rates halving!

This is great news in an industry that seems to dwell on negativity. So why not join the professional investors and take the long term view.

"Get over the idea that only children should spend their time in study. Be a student so long as you still have something to learn, and this will mean all your life." - Henry Doherty

"Conditions are never just right. People who delay action until all
factors are favorable do nothing." - William Feather

Making Your Goals Count in 2005

As we enter into the New Year we all tend to have a heightened sense of the opportunities and possibilities that a new year can bring. As the threat of a property crash diminishes we can all see the enormous potential that the market holds for 2005, and many of us are now starting to attack it with renewed vigor. However, one very important point should be kept in mind, in order to take best advantage of the opportunity. It is essential to set some goals, some idea of what you would like to achieve and when. Goal setting really is the key to successful property investment as many successful property millionaires will testify. This article should give you a great starting point for creating your goals.

Goal-setting is powerful, partly because it provides focus. It shapes our dreams. It gives us the ability to hone in on the exact actions we need to perform to achieve everything we desire in life.

Also, goals provide long-term vision in our lives. We all need lots of powerful, long-range goals to help us get past short-term obstacles. Life is designed in such a way that we look long-term and live short-term. We dream for the future and live in the present. Unfortunately, the present can produce many difficult obstacles. But fortunately, the more powerful our goals (because they are inspiring and believable) the more we will be able to act on them in the short-term and guarantee that they will actually come to pass!

So, let's take a closer look at the topic of goal-setting and see how we can make it forceful as well as practical. What are the key aspects to learn and remember when studying and writing our goals?

1. Evaluation and Reflection .

The only way we can reasonably decide what we want in the future and how we will get there is to first know where we are right now and what our level of satisfaction is for where we are in life. So first take some time and think through and write down your current situation, then ask this question - is that okay?

The purpose of evaluation is to show you where you are so you can determine where you need to go. In other words, it gives you a baseline from which to work.

I would strongly encourage you to take a couple of hours this week to evaluate and reflect. I would urge you this month to see where you are and write it down so that as the months progress, and you continue a regular time of evaluation and reflection, you will see just how much ground you will be gaining - and that will be exciting!

2. What are Your Dreams and Goals?

One of the amazing things we have been given as humans is the unquenchable desire to have dreams of a better life, and the ability to establish goals to live out those dreams. Think of it: We can look deep within our hearts and dream of a better situation for ourselves and our families; dream of better financial lives and better emotional or physical lives. But what makes this even more powerful is that we have also been given the ability to not only dream but to pursue those dreams and not just pursue them, but the cognitive ability to actually lay out a plan and strategies (setting goals) to achieve those dreams. Powerful!

3. S.M.A.R.T. Goals.

S.M.A.R.T. means Specific, Measurable, Attainable, Realistic, and Time-sensitive.

I really like this acronym S.M.A.R.T., because we want to be smart when we set our goals. We want to intelligently decide what our goals will be so that we can actually accomplish them. We want to set the goals that our heart conceives, our minds believe and that our bodies will carry out. Let's take a closer look at each of the components of S.M.A.R.T. goals:

• Specific: Goals are no place to waffle. They are no place to be vague. Ambiguous goals produce ambiguous results. Incomplete goals produce incomplete futures.

• Measurable: Always set goals that are measurable.

• Attainable: One of the detrimental things that many people do - and they do it with good intentions - is to set goals that are so high they are unattainable.

• Realistic: The root word of realistic is "real." A goal has to be something that we can reasonably make "real" or a "reality" in our lives. There are some goals that simply are not realistic. This is in no way to say it shouldn't be a big goal, but it must be realistic.

• Time: Every goal should have a timeframe attached to it. One of the powerful aspects of a great goal is that it has an end, a time in which you are aiming to accomplish it. You start working on it because you know there is an end. As time goes by you work on it because you don't want to get behind. As it approaches, you work diligently because you want to meet the deadline. A S.M.A.R.T. goal has a timeline.

So evaluate and reflect, decide what you want, and be S.M.A.R.T. When you put these 3 key pieces together, you are putting yourself in a position of power that will catapult you toward achieving your greatest goals.

"Nothing will ever be attempted if all possible objections must
first be overcome." - Samuel Johnson

"Knowledge is power. Specialised knowledge or skills in your field enhances your promotability." - Brian Tracy

How to overcome void periods

One of the biggest concerns of investors who ask us for advice regarding their property investments is the worry of potential void periods and the impact on their cash flow.

The most effective risk management strategy for voids is in the careful selection of the correct investment property. Well located, attractive properties that are suited to their surroundings tend to have much lower vacancy rates than poorer located less attractive properties. By purchasing though Property for Life you can be sure that you are getting the very best rental properties, in the very best locations. However, vacancies will occur even with the best properties.

Without doubt, engaging a competent property manager will minimise your void period as property managers have access to a greater range of potential tenants than landlords who are trying to lease the properties themselves. Remember that wherever you purchase your property, we can put you in touch with well respected local agents who have extensive knowledge of the market in their particular area.

It is also critical to keep your property in a well presented condition both inside and (in the case of houses) out. After seeing a property on the internet many tenants drive past the property prior to ringing the agent. If it is unattractive from the outside they just drive straight on to the next one on their list. So if your property is vacant a few hours spent sprucing up the garden could work wonders. In the case of apartments, it is important to make sure that the management company suitably maintains the external and communal areas of the building.

Currently, one of the most difficult recommendations we make is to advise our clients that they should not increase their rent when their property becomes vacant. Often, the best course of action is to lower the rent slightly, say £5 or £10 a week to meet the market's expectations.

What we try to explain to them is that dropping the rent is better than having another week's vacancy. Think about it, if your property rents at £250 a week, for each week it is vacant you loose £250. This is about equivalent to a reduced rent of £5 a week over a 12 month period. Isn't it better to have a tenant in the property and then increase the rent in 12 months?

In some areas where there is an abundance of properties we also recommend that landlords give incentives, such as one week's free rent. Prior to Christmas, which is traditionally a slow time for renters, one landlord was actually offering a free DVD player to any new tenant who signed the lease in the month of December.

So you can see that the key to letting your property quickly is to be realistic with your asking price, adjusting it in response to the market conditions. In addition, creativity will enable you to gain an edge over your competition, so get those ideas flowing.

How to spot a bluffer

Can you tell if someone is bluffing? When investing in property it could be the difference between a lucrative deal and one that will cost you dearly, so here is some handy advice on how to identify a bluffer.

Ask direct questions. If you get a long-winded response, get suspicious.

Little in life is perfect. If an explanation or a case study sounds too good to be true, it probably is.

Insist on clarity. Jargon, verbosity and reference to unfamiliar people indicate that they may be trying to punch above their weight. If they can't make their point in simple terms they probably don't know as much as they say.

Look for the little telltale signs. Bluffers scratch their noses, touch their faces and rub their eyes more than usual.

Change the subject. If they don't listen and keep to the original thread, chances are they're in fear of losing the plot if they deviate from their script.

Probe for details and request specifics . For instance, ask for the exact location of the company they supposedly worked for this can usually trip up a bluffer fast.

Require figures to support wordy claims. Even an approximation will help you gauge how likely a story is. Ask for sources of data too.

Beware of ingratiating behaviour. If you get too many compliments it should ring alarm bells.

Show some doubt. Try raising an eyebrow or smiling quizzically if your not convinced. If they defend their stance too forcefully, it may be that you have just spotted a gap in their knowledge.

Need mortgage advice?

Maybe you're thinking of buying an investment property, or you need to release funds tied up in your house. Perhaps you just want to find the best mortgage rate for your own individual circumstances and cut your mortgage payments. Why not call our mortgage department today? Our resident mortgage advisers will give you the best possible advice to suit your requirements. Call them today on 01252 737575.

What’s available?

We currently have the following investment opportunities.

• Vulcan Works, Pollard Street , Manchester
• Barnsley Road , Sheffield
• Duke Street Mansions (Phase 2), Duke Street , Leicester
• Waterfield Mill, Balme Road , Cleckheaton
• The GM Building, Fore Hamlet, Ipswich

Please go to www.propertyforlife. com/discount_prop.php for full details and look out for more great opportunities coming soon!

Completions

Congratulations to those investors who have completed on their properties in Duke Street , Leicester. City centre apartments of this standard have proved themselves to be a great investment. As well as getting a 15% discount off market value and putting in low deposits upon exchange, many of these investors have benefited from fantastic capital growth over the build period giving them a great return on investment. These properties should easily attract good quality tenants as the rental market in Leicester is currently very strong. If you missed out on one of these apartments, take a look at Phase 2 of this development. Our web site has full details and units are currently selling fast, so don't miss out.

Make some extra money?

The ŒProperty for Life' referral programme is a great way to make extra money. Take a look at the table below to see just how much. If you know of anyone who is interested in purchasing investment property why not refer them to us. It's simple, if they buy you make money, and the more they buy the more money you make. Take a look at our website for full details http://www.propertyfor life.com/tellafriend.htm .

Back issues

Remember, you can read any of our back issues by following this link to our web site http://www.propertyforlife.com . If you missed one, or you want to read that really interesting article but can't remember where you put it, you will find it all here.