Property Alert

London Hotspots

A good article by Ed Cumming in the newspapers today. He writes, ‘It may not have the same profile as the tube but the London Overground is quietly opening up unloved areas of the capital. As the capital’s property market continues to defy the pessimists, prime London is expanding. Money is spreading out of Zone 1 like an ink blot to less familiar places. They are the areas marked out by the revamped London Overground line.’

Where exactly will we see growth? Ed Mead at Douglas & Gordon takes up the story, ‘The new route will have a huge impact on people’s lives. In particular, the new line has opened up a stretch of south London from Clapham to the City. Previously that whole swathe across to Canary Wharf was a bit of a no-man’s land. It’s refreshing that the Government has shown some joined-up thinking on this. It’s a spectacular advance on the travel network that was there before.’ More to come.

Survey – Just Get One!

I’m always amazed at the number of buyers and investors who buy property without getting a survey or who rely on the mortgage lender’s less than adequate survey (less than adequate from the buyer’s and investor’s viewpoint as it’s simply to make sure the property’s resale will cover the mortgage in a worst-case scenario).

A new survey by RICS suggests some 20 per cent of buyers don’t bother with a survey. Surveyors Dacre, Son & Hartley comment, ‘When mortgage lenders require deposits of up to 20 per cent of the property’s value, which can put home buyers under a huge amount of financial pressure, it is inevitable that some will seek to save money by not having a survey. It is both very unwise and a false economy not to commission a survey, after working hard to save for a deposit. The last thing buyers need are unexpected bills for unforeseen repairs which are not a good introduction to home-ownership.’

Susan Armstrong bought a property on the basis of a mortgage lender’s drive-by valuation. ‘I realised pretty soon after moving in that there was something wrong. The walls ?were wet and there was an awful smell. When I peeled the paper off, the plaster was crumbling and there was black mould. I didn’t discover the remaining chimney breast until I decided to have the attic room properly converted. The builder was horrified when he saw it. He said that if the wood had given way the stone would’ve crashed through the ceiling onto my bed, which is directly below.’ Personally, I have always used a survey to negotiate a better deal so it often pays for itself that way.

Help To Buy Warning

As part of our revamp, we are about to put our property introductions on Rightmove so we were concerned by the latest story doing the rounds that ‘developers selling shared-equity homes under the Government’s Help to Buy scheme are advertising them on Rightmove at four-fifths of their real price.’

What these developers are doing is to remove the 20 per cent, taxpayer-funded share so that a house at £200,000 is priced as £160,000. Rightmove states, ‘We are aware that some developers are making use of Rightmove to advertise an ‘indicative price’ that takes into account the equity loan offered under Help to Buy. We know from previous research that awareness of government schemes among home movers is low and this approach can help raise awareness.’ A spokesperson from Taylor Wimpey adds helpfully, ‘We are trying to help customers understand the scheme and the options available.’ Food for thought.

Property Alert

Property Rent News

According to the latest buy-to-let index from LSL Property Services, every region in England and Wales has seen annual rent rises; the first time it’s happened since 2011. Average rents in England and Wales are up 3.9 per cent on a year ago. As such, ‘the average landlord in England and Wales could expect to make a total annual return of £9,496 per property over the next 12 months’.

David Brown, commercial director of LSL Property Services, makes some interesting points. ‘Landlords across the UK have increased the stock of rental properties by around 10 per cent since 2008 but the more fundamental squeeze is still coming from a lack of new building. Further increases in the rental stock will be dependent on sustained improvements in the availability of finance for landlords.’

‘However, new buy-to-let lending dropped in the first quarter, just as purchase prices are starting to move up more steadily. Price rises can be a double-edged sword for renters and landlords, not just owner-occupiers. On the one hand, landlords have already responded to mounting demand, and capital accumulation has made up more of many landlords’ total return than rental income in some areas. However, if property is more expensive to buy then in the long run it will always be more expensive to live in.’

What’s Your Yield?

Countrywide recently published yield data based on 50,000 properties across England, Scotland and Wales. Three and four bedroom properties achieve average yields of 6.2 per cent and 5.6 per cent respectively. However, smaller properties are seeing better yields and rents rising the most, with one and two bedroom properties seeing a 3.3 per cent year-on year increase.

‘We wanted to produce this data to show landlords and investors what sized properties are achieving in terms of rents and yields. As our data shows, one and two bedroom properties are providing greater yields than larger properties for landlords, 6.8 per cent average yields for one bedroom properties, means there are some really good opportunities for investors with relatively low budgets.’

‘For example, a one bedroom flat in Nottingham recently sold for £51,000 and is providing a rental yield of 6.9 per cent.  With rents rising, arrears falling and some significantly improved buy-to- let mortgage products compared to those available in the last two years, the findings are very encouraging for investors who are looking to start or expand their property portfolio this year.’

Commercial Property Update

Don Jordison of Threadneedle Property Investments – yes, noted – draws attention to commercial property investing. ‘While the investment case for commercial property may not hold the same excitement it commanded in the heady days of the rebound, observers anticipate good income returns, making the asset class attractive in the current environment.’

‘Historically, commercial property has tended to have a low correlation with equities and bonds, because the asset class does not necessarily react to market or economic conditions in the same way. Within property itself, there is scope for diversification because each sector has its own drivers and opportunities, while different locations, property types and tenants provide further opportunity to spread risk.’

‘The yield advantage of property over gilts represents a buying signal. For an asset-backed, relatively low-volatility investment, property offers a very attractive level of income. Over the long-term, income is by far the most important component of performance and is particularly appealing against a background of extremely low interest rates that look likely to remain that way for some time to come.’

That’s all for now – we are off to Bristol to take a look at a new student accommodation deal coming up there. It may be the best yet! If you are interested in student accommodation and have the funds to invest, do drop us a line to pre-register your interest.

Ranting On

Just a quick reminder that I’ve updated my blog this week with some new stuff. Now I think you’ve probably figured out by now that this has become a vehicle for me boring people about things that happen to be peeing me off. My wife and family will no longer listen, I have no friends, and so the burden falls on you.


Hidden within the diatribe (and not too carefully) is information that could make you rich, which is no bad thing. In any event, you usually get to have a laugh at my expense.

Take a look now by clicking here.

Look, I know you’re busy so I’ll make you this guarantee, if you click through and don’t enjoy or benefit from what you read, I’ll refund your  time in full. Can’t say fairer than that.

Business Plans Are History

I’ve always held the view that business plans can be a monumental waste of time, and it seems that the academic world may be catching up – or at least part of it.

Steve Blank is a serial entrepreneur, turned business school professor.  He argues that entrepreneurship is about getting out into the world and doing it, rather than researching and writing about it. Blank says that business plan classes and competitions are ‘dead in the water’ for new ventures.

My take on this is that creating a detailed business plan is often used as a device for procrastination by would-be entrepreneurs. And even the best thought out plan is pretty useless if  you take your product or service to market, and nobody buys it. It’s a bit like designing a car that will handle perfectly at 70mph without firstly ensuring that you have a means of making it start.

I’ve heard the correct sequence of events described in a number of ways, but probably the best is this…Ready, Fire, Aim. Test your ideas out in the real world as quickly as possible. You can do detailed planning later once you know you have something with potential. Don’t waste time planning diligently for something which may prove to be a non-starter.

Brand Revival!

I can’t pretend to have heard of Choc-ola, but I’m not sure I’d like it. It was a sweet chocolate milk drink, popular in the United States in the 1960’s and 70’s. It hasn’t been available for many years, but that just changed. Two Indianapolis entrepreneurs recently snapped up the trademark for $275, got hold of the recipe, and have relaunched the drink. They hope it will appeal to both old customers who want a taste of their youth, and a new market looking for something different. They already have a production deal with a major dairy and a contract to supply a 21 store chain of supermarkets.

As you might imagine, this got me thinking…How many interesting old brands are laying dormant out there? How cheaply might they be bought up? And might a bit of innovative marketing breath a bit of retro chic into something that is all but forgotten. This has got to be worth giving some thought to.

Pure FX Commentary

The pound enjoyed a great April, hitting multi-month highs against the euro, US dollar, Canadian dollar and Aussie. This is thanks to the UK dodging a triple-dip recession.

The euro looks set to fall in May as the European Central Bank has cut interest rates to a 0.5 per cent record low while the Eurozone recession is now forecast to extend into 2014.

The US dollar could strengthen as the US created 165,000 new jobs last month, 20,000 more than forecast, while unemployment fell -0.1 per cent to 6.5 per cent.

The Australian dollar is tipped to decline this month, as the mining boom officially turns kaput, while the RBA looks set to cut interest rates to an all-time low of 2.75 per cent.

Sterling Overview

The pound enjoyed a fantastic April, reaching two-month highs against the US, Australian and Canadian dollars, and a three-month high against the euro. Why? Because, against all odds, the UK avoided a triple-dip recession, instead expanding a surprise +0.3 per cent.

Moreover, from here the pound could continue to reach fresh heights. This is because:

With the triple-dip out of the way, the outlook for the UK is far brighter. This could continue to lift the pound.

With the UK economy in growth-mode, the Bank of England is unlikely to print more money. That will send sterling higher too.

The Eurozone is in worse shape than ever with its recession now set to extend into 2014. That will make the pound stronger, considered a safe haven?

Therefore, don’t be surprised to see the pound to continue to rise in May.

Euro Update

The pound hit its highest point against the common currency in three months in April and, moreover, could continue to climb. This is because:

The European Central Bank cut interest rates to 0.50 per cent this month. This makes the euro less profitable and so could weaken the currency.

The UK expanded +0.3 per cent in Q1 while the Eurozone recession is deepening. This could bring the euro down too.

Therefore, whist the euro remains relatively strong against the dollar this may not continue.

US Dollar

The pound enjoyed strong gains against the US dollar in April, hitting its highest point since early February. However, it’s unclear if sterling will continue to gain in May. This is because:

On the one hand, the Federal Reserve said this month that it may ‘increase’ its stimulus. This could weaken the greenback, because it involves printing more money.

On the other hand, the US created 165,000 jobs in April, 20,000 more than forecast, while unemployment fell to 7.5 per cent. This could strengthen the dollar.

Therefore, the pound may have reached its peak against the US dollar for the moment!

Australian Dollar

Sterling hit its highest point against the Australian dollar in two  months in April, gaining +3.44 per cent over the month. Moreover, it could continue to climb. Why? First, because the economic mood in Australia is quickly darkening, with some economists talking of a ‘protracted recession’ as the mining boom ends. Second, the Reserve Bank of Australia could soon cut interest rates to an all-time low of 2.75 per cent to support Australia’s economy.

New Zealand Dollar

Sterling stood still against the New Zealand dollar in April, gaining just +0.25 per cent across the month. However, odds are high the kiwi dollar will soon rise. Here’s why. The Reserve Bank of New Zealand is tipped to raise interest rates above 2.5 per cent next month to squelch an incipient housing boom. That will lift the kiwi dollar.
Second, New Zealand’s exports to China are booming, having risen 32.0 per cent in March compared to 12 months before. That too could lift the New Zealand buck.

Canadian Dollar

The pound hit a two-month high against the Canadian dollar in April, climbing +2.01 per cent across the month. Moreover, it could continue to climb in May. First, this is because the Bank of Canada is no longer set to raise interest rates above 1.0 per cent as had been forecast. This could bring the loonie dollar down. Second, Canada’s growth outlook for 2013 has been cut -0.3 per cent to just 1.5 per cent by the IMF. This too could weaken the Canadian dollar.

Brazilian Real

The real gained +1.01 per cent against the US dollar in April. Furthermore, it could continue to gain. Why? Well, first, because the US expanded less than forecast in Q1, at just 2.5 per cent. This has weakened the greenback. Second, Brazil’s central bank has begun what some see as a cycle of interest rate rises, increasing rates +0.25 per cent to 7.5 per cent in April. This could lift the real.

Turkish Lira

Turkey’s lira climbed +0.86 per cent against the US dollar across April and looks set to continue to climb. First, this is because the US expanded -0.5 per cent less than forecast between January and March, at just 2.5 per cent. That will weaken the buck. Second, Japan’s decision to print tens of billions of yen to beat deflation means money is pouring into Turkey. That should lift the lira.

Your Free Forecast

Get an exchange rate forecast from our friends at Pure FX. ‘To find out what we think will happen next to the exchange rate that is of most interest to you (UK sterling to euro to the US dollar to the Brazilian real), visit us at foreign exchange broker Pure FX, call us +44 (0) 1494 671800 or email back.  We’d be delighted to give you a free exchange rate forecast’.

The Delivery Stop

We’ve covered food delivery services here before, but I just heard a piece on local radio this morning, about two young guys who have started a delivery business with a twist.

The delivery stop only launched in January 2013, but they have already opened two new branches away from their home city of Sheffield. The idea is simple. Fast food companies like Macdonalds, KFC and Nando’s don’t deliver. Delivery Stop take orders over the phone, send a driver to the outlet and deliver the hot Food to a customers door within 45 minutes. Aimed at the student market, the service also includes other local restaurants popular with young people.

Delivery Stop charge a delivery fee and I’d imagine they also get a commission from some of the smaller restaurants they deal with. The two guys on the radio this morning claim the business is booming with over 900 calls taken on their very first day!

Could you copy this business in your area? If you live in a major town or city, the answer is almost certainly yes.

The Virtual Farmers Market

Farmers and small scale food producers usually have to rely on wholesale distributors to make the link to wholesale buyers like restaurants and specialist food retailers. In New York, New Jersey and Conneticut, there’s now a different solution. Farmers Web allows producers to sell their produce to restaurants and shops direct. It’s a low cost virtual farmers market.

I know little about the market here in the UK, but I’d imagine small scale food producers face a similar marketing problem. Could you set up a website like Farmers Web to help them get their goods to  the restaurant and specialist retail market? If this works in the US, I can see no reason why it wouldn’t work here too.

Property Alert

Welcome to today’s news and views…

US – More Good News

According to the latest quarterly report from the National Association of Realtors (NAR) in the US, the median existing single family home price rose in 133 of 150 metropolitan areas in Q1 2013. ‘The supply/demand balance is clearly tilted toward sellers in a good portion of the country. Inventory conditions are expected to remain fairly constrained this year so overall price increases should be well above the historic gain of 1 to 2 per cent above the rate of inflation. If home builders can continue to ramp up production, then home price growth is expected to moderate in 2014.’

‘Some of the previously hard-hit markets like Phoenix, Sacramento and Miami continue to experience a dramatic turnaround, while a new set of areas like Atlanta, Minneapolis and Seattle have begun to show strong signs of upward momentum. Even with rising home prices, there is still plenty of buying power in the market. Historically low mortgage interest rates and home prices that remain well below their peak mean most buyers can purchase well within their means, assuming they meet ongoing stringent credit standards.’ More to come.

Hot Tipped Markets

Talking commercial real estate now, we note that CBRE is stating that Dublin, Madrid and Milan are ‘the real estate markets to watch…as international investors search for higher yields’. CBRE predicts that ‘safe haven’ markets such as London will see total returns of between 3 to 8 per cent a year over the next five years. Recovering markets such as Dublin, it says, should see total returns of more than 9 per cent a year over that time. These markets are suited, please note, to ‘investors with the appetite to take on incremental risk’.

‘For some time there have been mentions of the ‘wall of money’ waiting on the sidelines for real estate. 2013 is likely to be the year where we see investors coming off the fence and deploying capital into locations such as Dublin and, further down the line, potentially Madrid as well. Over the next five years, we expect returns on prime assets in recovering markets and even good quality secondary in places such as the UK to exceed those in safe haven markets.’

Asia Prime Properties

A new report from Jones Lang LaSalle suggests that prime property prices in Asia, with the exception of Hong Kong and Singapore, are rising. Prices across the nine markets were up 2.2 per cent on a quarter-on-quarter basis and 6.1 per cent year-on-year. Indonesia led the way with prices in Jakarta rising 8.7 per cent between Q4 2012 and Q1 2013 and 32.9 per cent year-on-year.

Take note though that ‘falls are coming where governments have introduced measures to dampen market prices’. Prices are expected to drop by some 5 to 10 per cent in Hong Kong and Singapore this year. Jones Lang LaSalle in Hong Kong reports, ‘Unfortunately, with the current government continuing to adopt a heavy-handed approach in setting policy, volumes and prices are likely remain under downward pressure over the short-term.’ More to follow.