Having studied the UK property market religiously for the past couple of months, here's what I've discovered.
BTL investing: The problem with BTL interest only mortgages with the landlord putting in a small deposit, is that the arrangement fees added on by the banks are too high. They can be in the region of 3k per year or more. I honestly can't figure out how the new generation of BTL landlords are making money, as thousands of pounds are added onto the mortgage every year via the arrangement fees. I've seen that the more money the landlord puts in, the better deals you get from the bank, so if you are rich enough to put in say 75% or more as a deposit you will be offered very low arrangement fees and a better interest rate. The rich truly do get richer.
Property prices: Property prices are definitely going down. In Central London and a few select areas, prices are going up or holding steady, but mostly everywhere else I've seen, prices are stagnating or going down. There are still cash buyers around and the odd bidding war still takes place for certain properties. Using the "Propertybee" tool on Rightmove.com shows how long properties have been on the market, and how much they were reduced by. I'm seeing properties on the market which have not sold for almost a year. Some sellers will have to reduce their price. Lots of other sellers will simply take their house off the market, so don't expect a massive house price crash. Overall from what I've seen, my gut instinct tells me to expect a 20k drop by christmas.
Property condition: From going to viewings, I've noticed that no property is perfect. All of them are compromised in some way. The TV shows say you should choose a property in the right location next too good schools and shops and transport links etc, but in reality no location is perfect so you have to compromise on something. Maybe one rooms a funny shape, or the kitchen is old, or the gardens to small, or its a bit far from the shops, etc. One trick I've come across is to look at how close a property is to bus routes. People like to say a property is good if its close to train or tube transport, but I've seen that some cheaper properties are close to bus stops which can then take you to the nearest train station quickly. When renovating and redecorating properties, all properties I've looked at, even the ones in good condition needed a bit of minor redecoration here and there.
Building surveys: Most people do not do a full building survey, and only do a valuation survey which is cheaper and mandatory by the bank. I also noticed on TV shows that most buyers don't do the full survey. I estimate 9 out of 10 buyers do not do the full building survey. The reason is probably due to the cost which is about double the price of a normal survey. Also it slows things up a bit. I talked to my millionaire property mentor Mr Piper about this, and he said he never does full building surveys as its all about common sense. Obviously its worked out for him as he's now a multi-millionaire. In general I probably will do full building surveys to cover my back, but I would definitely consider taking the risk if my gut instinct told me to.
Demand for housing in the UK is as strong as ever, if not stronger. The only thing holding back the market is the banks unwillingness to lend. I reckon in 2 years things will be back to normal and the banks will once again offer mortgages to people who can't afford them. After all, everything else has returned to normal and the bankers are once again raking in huge bonuses. House prices in Britain whilst dropping, are still high relative to earnings, and they will stay high. Average earnings in the UK are 20k, average house price £220k that's why few people can afford a property without excessive bank lending. My gut instinct tells me that If prices were going to crash drastically they would have done so by now. The fact is, that Britain is an expensive place to live in and will remain so.
BTL investing: The problem with BTL interest only mortgages with the landlord putting in a small deposit, is that the arrangement fees added on by the banks are too high. They can be in the region of 3k per year or more. I honestly can't figure out how the new generation of BTL landlords are making money, as thousands of pounds are added onto the mortgage every year via the arrangement fees. I've seen that the more money the landlord puts in, the better deals you get from the bank, so if you are rich enough to put in say 75% or more as a deposit you will be offered very low arrangement fees and a better interest rate. The rich truly do get richer.
Property prices: Property prices are definitely going down. In Central London and a few select areas, prices are going up or holding steady, but mostly everywhere else I've seen, prices are stagnating or going down. There are still cash buyers around and the odd bidding war still takes place for certain properties. Using the "Propertybee" tool on Rightmove.com shows how long properties have been on the market, and how much they were reduced by. I'm seeing properties on the market which have not sold for almost a year. Some sellers will have to reduce their price. Lots of other sellers will simply take their house off the market, so don't expect a massive house price crash. Overall from what I've seen, my gut instinct tells me to expect a 20k drop by christmas.
Property condition: From going to viewings, I've noticed that no property is perfect. All of them are compromised in some way. The TV shows say you should choose a property in the right location next too good schools and shops and transport links etc, but in reality no location is perfect so you have to compromise on something. Maybe one rooms a funny shape, or the kitchen is old, or the gardens to small, or its a bit far from the shops, etc. One trick I've come across is to look at how close a property is to bus routes. People like to say a property is good if its close to train or tube transport, but I've seen that some cheaper properties are close to bus stops which can then take you to the nearest train station quickly. When renovating and redecorating properties, all properties I've looked at, even the ones in good condition needed a bit of minor redecoration here and there.
Building surveys: Most people do not do a full building survey, and only do a valuation survey which is cheaper and mandatory by the bank. I also noticed on TV shows that most buyers don't do the full survey. I estimate 9 out of 10 buyers do not do the full building survey. The reason is probably due to the cost which is about double the price of a normal survey. Also it slows things up a bit. I talked to my millionaire property mentor Mr Piper about this, and he said he never does full building surveys as its all about common sense. Obviously its worked out for him as he's now a multi-millionaire. In general I probably will do full building surveys to cover my back, but I would definitely consider taking the risk if my gut instinct told me to.
Demand for housing in the UK is as strong as ever, if not stronger. The only thing holding back the market is the banks unwillingness to lend. I reckon in 2 years things will be back to normal and the banks will once again offer mortgages to people who can't afford them. After all, everything else has returned to normal and the bankers are once again raking in huge bonuses. House prices in Britain whilst dropping, are still high relative to earnings, and they will stay high. Average earnings in the UK are 20k, average house price £220k that's why few people can afford a property without excessive bank lending. My gut instinct tells me that If prices were going to crash drastically they would have done so by now. The fact is, that Britain is an expensive place to live in and will remain so.
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