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SEPTEMBER 2004
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Property and economic update
The Nationwide now indicate the average price of a house in England and Wales stands at £153,743. Similarly, Hometrack put the average England and Wales house price at £152,100. The Hometrack survey for August shows an overall price fall of 0.1% with the largest falls being centred around London and the South East. Overall, Hometrack recorded falling prices in 26 regions, static prices in 21 regions and increases in 10 regions. The north recorded most of the increases indicating that this is still the best region in which to invest. John Wriglesworth, Hometrack's housing economist says “Recent interest rate rises continue to take their toll on the housing market…and the recent housing boom now appears to be well and truly over. We do not, however, expect any housing market crash. In keeping with the overall trend of survey results, the Halifax house price index for August recorded a fall of 0.6% overall. House prices are therefore, undoubtedly coming down, but what is important is that this is not reflected across the entire country. Good growth areas still exist, and with the main commentators all in agreement that a housing market crash is highly unlikely some fantastic investment opportunities are out there for the taking. Now is a great time to buy Rates are on the way up and the market is slowing. People are starting to talk of a housing market crash, but serious property investors are quietly snapping up ever increasing numbers of property across the UK . Why? Well, by being selective they are grabbing some bargains. All the major market commentators agree that a slump in the housing market is highly unlikely, and I think we all agree that interest rates probably won't go much higher. This means that money is still cheap and property still offers great long term investment prospects. This is all good news, but the really great thing is that in a slower market, prices become more negotiable and developers will increase discounts in an effort to keep selling. This means that there are currently some great deals on offer and over the coming months the opportunities will only continue to get better. You need only observe the big property investors to see that the market currently offers huge potential. Whilst most people sit in the corner biting their finger nails and talking of the doomsday scenario invented by the media, the wise investor is embarking on a spending spree and buying up vast swathes of property across the country. As the Bank of England announce more bad news, and more people get nervous, these investors simply jump on all the great investments that become available as a result. The key to winning in this market is to keep your nerve. If you are ready to act when you see good opportunities you will make some of the best investment purchases you will ever make right now. The first step for getting better results by Jim Rohn We continue our focus on Jim Rohn's fantastic insights with this great article that shows us that everybody can achieve whatever they want to achieve with a little courage and belief. How dramatically we can change our results is largely a function of imagination. In 1960, it was a technological impossibility for man to travel into outer space. Within ten years, however, the first man stepped out onto the surface of the moon. The miraculous process of converting the dream into reality began when one voice challenged the scientific community to do whatever was necessary to see to it that America "places a man on the moon by the end of this decade." That challenge awakened the spirit of a nation by planting the seed of possible future achievement into the fertile soil of imagination. With that one bold challenge the impossible became a reality. - The Same Principle Applies To Every Other Area Of Our Life! - Can a poor person become wealthy? Of course! The unique combination of desire, planning, effort and perseverance will always work its magic. The question is not whether the formula for success will work, but rather whether the person will work the formula. That is the unknown variable. That is the challenge that confronts us all. We can all go from wherever we are to wherever we want to be. No dream is impossible provided we first have the courage to believe in it. © 1994 Jim Rohn International. For more information visit www.jimrohn.com “It is our attitude at the beginning of a difficult task which, more than anything else, will affect its successful outcome." William James 1842-1910, Psychologist and Author "A lot of people have ideas, but there are few who decide to do something about them now. Not tomorrow. Not next week. But today. The true entrepreneur is a doer, not a dreamer." Nolan Bushnell Founder of Atari Computer Switching mortgages It is surprising how little attention people pay to their mortgage once they have arranged it, but deals and rates change over time and you could be paying much more than you need to. Did you know that over 50% of UK mortgage borrowers are paying the lenders standard variable rate? The answer is to remortgage. Remortgaging, in effect, allows you to become a new borrower again and this enables you to take advantage of new deals and therefore save considerable amounts of money. As an example, if you have a £100,000 loan on a standard variable rate of 6.85 per cent and switch it to a 3 year tracker at 5.19 per cent, you could save yourself approximately £138 per month; this equates to a staggering £4,968 over the three year term. Remortgaging can not only save you money, you can also use the process to unlock some of the capital tied up in your property, to consolidate your other debts into a more favourable rate, to help fund home improvements, or to buy new property for investment. So what does it cost? Well the cost is made up of a number of fees, which vary according to the value of the property. These fees are usually:
As a rough guide, the costs of remortgaging a £50,000 loan are in the region of £750, without accounting for redemption penalties, but remember there are some loans available where some or all of the costs are paid for by the lender as part of a remortgage package. You may even be eligible for a product offering cash back. Check if you are liable for any redemption penalties from your last lender before you commit yourself to switching, in some instances this can be quite costly. If you have no penalties, you are ahead of the game, but if you do have penalties you will need to subtract their cost from the savings you would make by changing to a cheaper rate. Deciding which mortgage product to take can be daunting as there are literally thousands of mortgage products available at any one time, do you take a fixed rate, a capped rate, a discounted rate or a combination of these? Many personal finance sections of newspapers carry best buy tables for mortgages that will give you a rough guide to what is available. However, faced with so much choice and confusion, many people find that consulting an independent mortgage adviser takes the strain out of hunting for the right product. An independent adviser will have access to the entire mortgage market and can advise you on the best product to suit your needs and circumstances, saving you the trouble of trawling the high street. Property for Life now have a dedicated mortgage department with 2 highly experienced mortgage consultants who would be more than happy to help you. If you would like to speak with one of them, without obligation, please call 01252 737575 and ask for either Daryl or Ben. "In every adversity there lies the seed of an equivalent advantage. In every defeat is a lesson showing you how to win the victory next time." Robert Collier Writer and Publisher "Far away there in the sunshine are my highest aspirations. I may not reach them, but I can look up and see their beauty, believe in them, and try to follow where they lead." Louisa May Alcott 1832-1888, Author Throw out the 130% rule!!!
With recent increases in interest rates many buy to let lenders are reducing the amounts that they will lend on investment property, because of their lending criteria. What this means is that if you want to purchase investment property using a buy to let mortgage you will probably need to put in more of your own capital than you did 2 years ago when rates were at their lowest. This of course goes against the grain for most property investors as the golden rule should always be to put in as little money of your own as possible. Right? So what's the answer – find another strategy of course! One way is through lenders that will lend on a buy to let basis but do not take rental income into account. We have one lender that will lend up to 80% LTV on this basis. So if you have a 15% discount all you have to do is come up with a 5% deposit. This is but one strategy we have at our disposal. We have many other strategies for lending against residential property at 85% LTV that could suit you depending on your criteria. At Property for Life we pride ourselves on our ability to be creative and solve problems for our investors. Our policy is that investors shouldn't have to tie up large amounts of capital in deposits but should aim to keep their capital in reserve to cover any ups and downs they may experience in the investing cycle. If you would like more information on some of our mortgage solutions please speak to Daryl & Ben on (01252) 737575. "You gain strength, courage, and confidence by each experience in which you really stop to look fear in the face. You are able to say to yourself, 'I have lived through this horror. I can take the next thing that comes along.' You must do the thing you think you cannot do." Eleanor Roosevelt 1884-1962, Former First Lady and Lecturer "If you have a positive attitude and constantly strive to give your best effort, eventually you will overcome your immediate problems and find you are ready for greater challenges." Pat Riley Professional Basketball Coach Has the UK market peaked? Where should I buy now? No doubt most investors would realise that with the recent increases in interest rates the UK property market is cooling off rapidly. This is healthy and part of the normal cycle of investment. If we continued to have 20% growth year upon year then the chances for a major correction in the market would have been more likely causing the usual pain that is associated with this. We certainly don't anticipate there being any major slump in property prices in the UK just a much slower growth profile over the next few years. So you may ask yourself, if the UK market is slowing where should I invest next? Perhaps I should be looking at the new exotic markets of Eastern Europe such as Prague , Estonia , or Latvia ? Or maybe Spain , France , Turkey or Cyprus ? How about Australia or New Zealand ? And what about the good old USA ? Over the next few months we will be looking at expanding our property offerings to include some of these new and exciting markets. Focus on return on investment not just capital growth However, the one disadvantage about investing in a lot of these markets is that the investor is limited by what he can borrow. This has a knock on effect because in general terms the more money that you invest in each property the less is your return on investment. Let's give a very simplistic example of what we mean. Let's say that you have been offered a fantastic opportunity to buy in Prague where the price of a 2 bed apartment is only £50,000, with the prospect of 20% growth year on year. However because you are not a Czech citizen the most that the lender will lend on the property is 50% LTV. Therefore, you have to put in £25,000 with a capital growth of £10,000 per year. In simple nominal terms your return on investment (ROI) is 40% per annum. Not bad you may think! But let's look back at the UK market where you buy a £150,000 2 bed apartment with a 15% discount and the only investment required is a 5% (£7,500) deposit. The lender accepts the 15% discount as equity and so lends 80% LTV. OK so maybe capital growth will only be 5% year on year for this type of property. But what is the actual return on investment? Well the answer may surprise you. 5% growth on a £150,000 investment is £7,500 per annum. So if you had invested £7,500 and your growth is £7,500 per annum your ROI is 100%. That's why if you want to maximise your returns from property the key is to use your capital wisely and always calculate what your likely return on investment will be. What’s available? We currently have the following investment opportunities.
Please go to our website www.propertyforlife.com for full details Upcoming events The Property Investor Show, 17 th – 19 th September, Excel, Docklands, London. Look out for us at stand number 610 where we would be delighted to welcome you for a chat and to run through some of our latest investment opportunities. Also, our MD David Austin will be giving several talks as part of the show's seminar programme. On Friday afternoon at 16.30 he will be in seminar room 1 and on Sunday morning at 10.45 you will find him in seminar room 2. If you are interested in joining one of these seminars please visit the show website where you can book seats. The website is http://www.propertyinvestor.co.uk . As a valued member of ‘Property for Life' you should have already received an e-mail from us offering you the chance of obtaining some free tickets with our compliments. If you missed this or have not yet registered for your tickets you can still do so by following this link http://www.propertyinvestor.co.uk/register.asp and using our PROMOTIONAL CODE C111534 when completing the registration form. This will enable you to get your free admission to the exhibition. New registrations Our website now has a new registration form and we would like to extend a big welcome to those people who have completed it over the last month. You are now registered with one of the UK 's leading property investment consultancies and we look forward to working with you. We hope you enjoy the newsletter, if you would like to read more you can view all of our past issues at www.propertyforlife.com . 'Property for Life' Referral
programme The payments are made on an increasing percentage scale based on the number of purchases. These percentages are as follows:
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