Property and economic update
As was widely predicted the Bank of England increased the base rate one quarter of one per cent to 5.5% on the 10th of May. Will this be enough to bring inflation back within target? During March and April we ran an interest rate related survey on our web site and the results were somewhat surprising. Read on to see what was revealed.
Once again house prices rose across the UK during April. The Hometrack house price survey has revealed that prices rose 0.7% during the month, although most of this growth was driven by the London market. Nationwide believe the monthly increase to be a little higher at 0.9% bringing annual house price inflation to 10.2% and the average property price to £180,314.
The highest monthly increase was recorded by the Halifax who believe house prices to have increased by 1.1%, although this is their lowest recorded figure so far this year and the second lowest since July 2006.
Commenting on the figures Martin Ellis, chief economist at Halifax said: "Demand remains healthy which, together with tight supply, continues to push up prices. Good economic growth and a strong labour market will continue to support healthy housing demand".
What is becoming increasingly clear is that although we may experience a slowing in house price growth, there is very little likelihood of a crash.
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Interest rate survey results
For the six weeks prior to the interest rate decision last Thursday we ran an online survey to gauge public opinion regarding interest rate rises and house prices.
In total 1081 people completed the survey and the results have shown that generally people have a very positive outlook for the property market. The results of the 7 questions are shown below.
Are you feeling the pinch of interest rate rises? Have interest rate increases reduced you desire to buy? Over the next 12 months what do you think will happen to interest rates? At which level do you think interest rates will peak? Do you think that interest rate increases are necessary at the moment? Over the next 12 months what do you think will happen to house prices? Is now a good time to buy investment property?
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Buy to let all mapped out
As reported recently in the Sunday Telegraph, there are still bargains to be had and money to be made from buying to let. The newspaper recently published the first national survey of the market to help investors spot the best opportunities for 2007.
According to their survey the ideal buy-to-let area has a low percentage of housing stock that is privately rented (PRS)and a large 18-30s working population. Below are the Top 10 'Blue Chip' and 'Opportunity' hot spots, listed in alphabetical order.
2007 Blue Chip Market| Location | PRS | 18-30s |
|---|
| Birmingham | 11.0% | 23% | | Brighton and Hove | 20.4% | 26% | | Bristol | 18.0% | 59% | | Camden, London | 27.6% | 30% | | Edinburgh | 13.1% | 29% | | Leeds | 11.8% | 25% | | Liverpool | 14.3% | 24% | | Manchester | 17.6% | 30% | | Wandsworth, London | 36.6% | 30% | | Westminster, London | 36.6% | 30% | | Bubbling under: Barnet, Sheffield, Kensington & Chelsea, Bradford, Haringey, Ealing, Nottingham, Brent, Croydon, Kirklees, Newham, Cardiff, Coventry, Southampton, Newcastle upon Tyne, Leicester, Kingston upon Hull, Hammersmith and Fulham |
2007 Opportunity Market| Location | PRS | 18-30s |
|---|
| Barking and Dagenham, London | 6.3% | 24% | | Basildon, Essex | 5.2% | 24% | | Crawley, Sussex | 7.2% | 25% | | Halton, Cheshire | 6.2% | 22% | | Solihull, West Midlands | 4.9% | 18% | | South Bedfordshire | 6.3% | 20% | | South Lanarkshire | 5.9% | 20% | | South Ribble, Lancashire | 4.8% | 21% | | Thurrock, Essex | 6.7% | 24% | | Warrington, Cheshire | 5.9% | 21% | | Bubbling under: Dacorum, Carphilly, Docklands, Watford, Slough, Bracknell, Nuneaton, Flintshire, Rushmoor, Reigate & Banstead, Newcastle under Lyme, Gedling, Erewash, Knowsley |
One of Britain's leading housing experts says there is still great profit to be made in buy-to-let, but only if you do your homework first. 'Investors should act with their minds, not their hearts,' explains Richard Donnell, research director at the Hometrack property consultancy. 'You can't just look at a big city and say, 'I'll buy there', instead you need sophisticated information. We have identified two potential markets to help investors.
Donnell has created computer models based on what he believes are the key elements of the buy-to-let market, including data received from over 4,000 lettings agents; figures from the Office of National Statistics, the Land Registry, every local authority and hundreds of housing associations and businesses. Records of private and public housing stock; employment data; and demographic information extracted from the census, especially about the distribution of 18- to 30-year-olds working in the private sector, who are easily the biggest group of long-term tenants of buy-to-let property.
Donnell has factored in potential capital appreciation, too, for different types of property bought by investors in different areas. The result is Britain's first major assessment of the national rentals market and the only one to identify buy-to-let hot spots for the coming year.
Donnell's first market is what he calls the 'blue chip' list, consisting of locations akin to companies in the FTSE 100 stock market, i.e. long-standing, reliable places where rental returns have been solid in recent years. In each of these there is a high number of flats to rent already, but also a continuing large influx of 18- to 30-year-olds to take them up.
The second part of Donnell's work is the 'opportunity' market, which is riskier but may produce more spectacular returns for the brave investor. This includes Thurrock in Essex, where the massive Thames Gateway development and improved rail links are set to attract more industry, and Barking and Dagenham, hoping to benefit from spin-offs from the 2012 Olympics.
In these areas the housing supply is unlikely to keep up with demand in the near future. As a result, rents are set to rise and there may well be high levels of short-term capital appreciation too. 'Not all these places will be big winners but some could offer real opportunities for long-term returns,' Donnell says.
New towns built between 1930 and 1960, such as Basildon, Crawley and Warrington, feature heavily in the opportunity list as they are too young to have the schemes of new apartments seen in places like Bristol city centre, which is on the blue chip list, and they have no period homes available for conversion. As a result, there is a shortage of supply.
'Yet some of these 'opportunity' towns have a good supply of offices and are well connected to major employment centers,' Donnell points out. 'They may not be obvious investment choices but investors must be dispassionate. The return is what counts.'
Our exclusive buy-to-let map shows the distribution of the two markets around the UK, along with the two Top 10 lists. For each town we show the percentage of housing stock that is privately rented and the percentage of the working population aged 18-30.
The ideal buy-to-let area will have a low stock of accommodation for rent and a high number of young adults.
Richard Donnell stresses that there is no guarantee that his favoured areas will produce the highest returns, and warns that, as with every type of investment, a host of external factors may push profits up or down.
But he believes it is nonsense to describe buy-to-let as a dead duck just because the biggest markets have become very expensive to buy into, and have become over-supplied thanks to developers who failed to slow production of apartments. 'There are bargains to be had and money to be made. It's tougher than before,' he adds, 'that's all. So investors need to look before they leap.'
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"Within you right now is the power to do things you never dreamed possible. This power becomes available to you just as soon as you can change your beliefs." - Dr. Maxwell Maltz 1899-1975, Author."
"The majority of men meet with failure because of their lack of persistence in creating new plans to take the place of those which fail." - Napoleon Hill 1883-1970, Author
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Demographic trend towards childless couples
To ensure you buy top performing property investments it is wise to keep up to date with demographic trends. This helps you choose properties that will be in continuous strong demand by both owner occupiers (to push up the value of your property) and tenants.
More single people households
One of the strongest trends is the massive move toward lone person households. These are expected to grow significantly over the coming years and decades. It is widely believed that childless couples could overtake families as the most common type of household by 2026.
The combination of people living alone, single parent families and fewer couples having children will drop the average household size from 2.6 people as at the last census to about 2.3 people per household by 2026. To cope with the demand for accommodation for these smaller fragmented family groups the number of households nationwide is forecast to rise considerably.
So what type of property will suit this shift in population?
Many commentators are suggesting that with such strong growth expected in lone households, that there will be an increased demand for one bedroom apartments and studios and these would make good investments.
While I agree one bedroom apartments make great investments, and are an excellent entry for many beginning property investors, I would disagree that the majority of single householders will be satisfied with a one bedroom apartment or studio.
You will often get more value for money buying a 2 bedroom apartment or a larger 1 bedroom apartment with a study.
We have found that most single tenants still like the extra bedroom or study for their computer, or hobby or all that furniture that they have accumulated before they downsized. Buying that bigger apartment also opens your options to leasing the property to a couple.
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"When one door closes another one opens; but we so often look so long and so regretfully upon the closed door, that we do not see the ones which open for us." - Alexander Graham Bell 1847-1922, Inventor
"The secret of getting ahead is getting started. The secret of getting started is breaking your complex overwhelming tasks into small manageable tasks, and then starting on the first one." - Mark Twain 1835-1910, Writer
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Developing desire to succeed by Tom Hopkins
Here are three methods of developing a burning desire to succeed. They will work -- if you want them to.
1. The greatest obstacle to developing desire is a conviction that we'll never be able to fulfil it. So many people discourage desire to avoid the frustration they may encounter. If you don't have a burning desire to better your life, you're cheating yourself and your loved ones with phoney excuses. You're choosing a level of life that's poor compared to what you could have with the extra exertion you're capable of. It's all on your shoulders and there's no way you can shift a bit of the responsibility to anyone else.
2. Focus on the specific things you want. Make agreements with yourself. When I do this, I get that. Don't try to make yourself work for nothing.
3. Take it in steps. If you've never made more than minimum wage, don't aim for half a million dollars the first year. The essential element is faith in yourself.
I know former migrant farm workers who came out of the fields and make themselves wealthy. If your sunshine wants far outstrip your cold morning desire, have a talk with yourself, then have a lot more talks. Convince yourself you can succeed and will succeed.
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What's available?
We currently have the following investment opportunities.
UK property
Birkdale Court, 207-209 Tarbock Road, Huyton, Liverpool, L36 5XN
Perseverance Mill, Dewsbury Road, Elland, West Yorkshire, HX5 9AX
Luxaa Apartments, 79 Balby Road, Doncaster, DN4 0RE
Victoria Court, Valley Road, Meersbrook, Sheffield, S8
The Barge Arm, Gloucester Docks, Gloucester, GL1 2DN
Overseas property
If you are looking for quality overseas property you need look no further. Whether you want discounted French property with guaranteed rental returns, land in central Florida or something a little more exotic we can help. Our overseas property department is growing fast and we are currently offering exceptional opportunities in the following locations:
France . Most regions
Spain . Many regions
Cyprus - Paphos
Florida . Central and Northern
Brazil . North coast
Middle East - Dubai
Please go to www.propertyforlife.com/property for full details and look out for more great opportunities coming soon!
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Upcoming events
Over the coming months we will be running a number of property investment academy sessions as part of our ongoing academy programme. If you would like to attend a property academy session please call Katie on 01252 731060 or email katie@propertyforlife.com stating which session you would like to attend and how many places you require.
Academy Dates
PFL Property Investment Academy . Midland Hotel, Manchester . June 2nd
PFL Property Investment Academy . Hilton Hotel, Bracknell . June 9th
PFL Property Investment Academy . The Cumberland Hotel, London - 7th July
In addition we will be exhibiting at the Homebuyer Show North taking place at Manchester's GMEX exhibition centre from June 1st - 3rd. As part of the exhibitions seminar program, our MD David Austin will be presenting on every day of the show. Please go to www.propertyinvestor.co.uk/manchester/index.asp for details.
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Do you fancy a spending spree at one of the UK's leading department stores?
The new look Property for Life referral programme can offer you just that.
All you need to do is tell an interested friend about Property for Life and you could soon have a minimum of £250 in gift vouchers to spend in any John Lewis or Waitrose store.
Quite simply, for each person introduced by you who then purchases a property through us you will receive a cool £250 in John Lewis gift vouchers. If they purchase more than one property you will receive £250 in gift vouchers for each property they purchase. You could soon be well on your way to that spending spree.
Remember, the more people you introduce the more chance you have of grabbing at least £250. So why not tell your friends and family about Property for Life? Make sure they register on-line at www.propertyforlife.com/register/ and select the recommendation option at the end of the form and include your name in the 'other' box.
Please note that the referral programme is on a per property not a per person basis.
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