Streetwise Property Alert 23rd December 2013

Some news and views before we take a Christmas break…

EU Mortgage Directive News

The EU Mortgage Directive has been passed by the European Parliament to cover residential mortgages across member states. In essence, it should ensure that all home buyers across Europe are informed about the real costs of a mortgage; as members know, it’s not always easy to identify all the costs what with various introductory rates, assorted fees etc.

Antolin Sanchez Presedo, an MEP, is quoted widely, ‘For most families, a mortgage is the biggest and longest financial commitment they make. So we need these rules to drive progress towards an EU-wide mortgage market that is stable, integrated, and above all sustainable, with a high level of consumer protection, good information and balanced relations between lenders and borrowers.’ Note: this is not BTL-related. More to come for those of you who are taking out mortgages for second homes etc.

Dubai – More Positives

According to, property prices in Dubai are still rising and at a faster rate than those in Abu Dhabi. ‘Whilst Abu Dhabi’s property prices have increased over the course of this year, Dubai’s residential prices have risen more significantly, widening the gap in property values between the two emirates.’

The site seems to suggest that Dubai’s price rises have been triggered by solid fundamentals such as trade and tourism. If so, we note that only key areas and sectors, such as Jumeirah Village Circle and Palm Jumeirah, are experiencing such rises and, from what we can see, there is still substantial supply in the system. Progress, if you do, with caution. We have a short report coming in the New Year as we have two or three HNW & S investors visiting in the first week of January.

EU Mortgage Directive Review

Ray Boulger at broker John Charcol offers his thoughts on the EU Mortgage Directive. ‘It addresses a non-existent problem as far as the UK is concerned. The concept is based on the EU principle of harmonising everything – in this case of mortgage regulation – in all 28 member states. However, one size doesn’t fit all in the mortgage market any more than it does with the Euro! For example, well over 50 per cent of mortgages in the UK are arranged by a broker, whereas in some member states brokers are almost non-existent.’

‘The rationale of the Directive is that competition will increase because consumers will be able to obtain a mortgage from any lender in the EU, but in practice other barriers will prevent this from happening. In any case lenders who wish to lend in other EU states can already do so quite satisfactorily by setting up a subsidiary or branch in that country. One of the reasons few lenders offer mortgages on properties across borders is that the legal processes and credit reference agency information are different in every single member state and unless and until these differences are harmonised cross border lending is generally not viable.’ Let us know if you’d like to know
more about this Directive.

All for now, see you soon – meantime, have a happy and peaceful Christmas.

Dating Service For Married People

Dating agencies face a paradox which is far from unique – the more successful they are at their job, the quicker they lose their customers. It’s a problem which wasn’t lost on the owners Howaboutwe, who found their membership dwindling – not because they were bad, in fact quite the reverse. The solution they came up with could be a model for other businesses in the same position.

The company launched a new dating portal for married/committed couples with the aim of helping them keep the magic alive by getting out of their rut and out on the town. The site provides information and advice to help keep romance alive.

Every business that solves customer problems should ask themselves the following question – “What might my customer need next?” Once you have a relationship with a customer, it’s a shame to leave someone else to benefit from serving their future needs.

Don’t Run A Business – Licence Instead

For many people, the hassle and risk of running a business just isn’t for them. They have a great product or service idea but lack the skills or motivation to carry it forward. Rather than let the idea wither and die, there is a solution, one that leaves the production, marketing, research, sales, accounting and distribution headaches to someone else.

Licencing has grown in popularity in recent years. In the USA alone, it’s a $500 Billion industry. Many of the products you see on sale today have been developed by individuals and then licenced to major corporations in return for a royalty. Perhaps this type of arrangement could be something that would fit in with your plans.  For many, it’s the perfect solution

Streetwise Property Alert 20th December 2013

Welcome to today’s news and views…

Overseas Investing – What’s Next?

It’s often said that the first question you should ask when looking at an overseas property investment is, ‘What’s my exit strategy?’ As often as not, it is much easier to buy in than it is to get out at the other end. By and large, of course, it is ‘the other end’ where you make your profit. If your ‘other end’ has been Bulgaria, Dubai and, say, Spain in recent years, you may well be sitting on, and often part-financing, a depreciating asset which, other than for family holidays, is a pain in the neck/driving you mad/making you poor/making you feel ill. Insert your own worst case scenario.

It’s certainly a question that should be asked – and answered to your own satisfaction via due diligence and using a property lawyer etc – before you invest in any market. Turkey is, as an example, a market that interests many members at present, some for investment (mostly in Istanbul) and others for lifestyle (mostly along the coasts). Clearly, your criteria for each will be different although the ‘exit strategy’ question is valid to both.

How easy is to get to that exit point? As one member asked the other day, ‘What about the political situation?’ Those of you who have been with us this past decade will know by now that foreign investors – that’s us – are often welcome in the early stages when the economy needs a hand but become less popular, even unwelcome later on, typically with a change of government. Talking Turkey, we note a recent survey by the Association of Real Estate Investment Companies (GYODER) reveals that two-thirds of Turkish people are against property sales to foreigners. This is not a pop at Turkey – it has very many attractions – just a suggestion that you take an ‘exit strategy’ view from the start.

US – 2014 Outlook

Zillow, over in the US, has come out with a set of ‘hotspot’ predictions for 2014. Overall, they say US prices will rise 3 per cent in 2014. ‘In 2014, home value gains will slow down significantly because of higher mortgage rates, more expensive home prices, and more supply created by fewer underwater home owners and more new construction. For buyers, this is welcome news, especially for those in
markets where bidding wars were becoming the norm and bubble like conditions were starting to emerge.’

As ever, one average covers a huge area of often contrasting fortunes. To name their hotspots, Zillow considers a range of factors including population growth, employment/unemployment rates, supply and demand etc. The top 10? Salt Lake City, Seattle, Austin in Texas, San Jose in California, Miami, Raleigh in North Carolina, Jacksonville in Florida, San Diego, Portland in Oregon and Boston.

Ski Resort News

Luxury property agents Engel & Volkers report that there has been a 20 per cent rise in prices in the top ski resorts of Davos and Klosters over the past 18 months or so. The trigger was the Second Homes Initiative which has effectively cut off the supply of new properties.

‘People looking for a holiday home in these ski regions are particularly interested in high-quality equipment, a location close to the slopes, plenty of hours of sunshine and good views. Buyers pay exceptional prices if it means acquiring the exceptional.’

‘The largest buyer group in these regions has a permanent residence in Zurich and the surrounding area. International clients from Germany, the Netherlands and England are also demonstrating a confidence in the stability of these property markets.’ Interested? Let us know. We have contacts who are keen to write a short report; there will be a slight sales spin – a trade-off for a freebie – but not too much of one

That’s it, see you soon.

Superior Swimwear

Successful businesses often have their birth in a personal problem. So it was with Manchester student Alex Dixon when she was looking for swimwear for her own curvy figure. There simply weren’t the attractive designs which were available to those with smaller sized breasts.

With the help of a £2,500 government loan Alex set up Beach Bacchanal, which allows customers to have a hand in designing their own swimwear through online liaison. The key benefit is that the brand brings the styles which are normally only available for slimmer figures, to a wider audience with a D cup or above.

I don’t know much about women’s swimwear but I do know that mainstream clothing manufacturers seem to focus on a pretty narrow band of body shapes with what they offer, and that many people who fall outside of the ‘norm’ are left short changed.  Swimwear is just one area of clothing where this type of opportunity exists.

Learning From Google

Google haven’t done too badly over the past 15 years or so – are we agreed on that? Then it makes sense that we can all learn something from the way they operate…something we can use in our own businesses and enterprises.

The people at Google realised something important fairly early – it’s virtually impossible  to predict which products or services will take off and fly, and which will crash and burn fairly quickly. And so they don’t waste time perfecting an idea before launching it on the market. Teams are urged to launch quickly, perfect what’s working based on feedback from users, and drop the losers fast. It’s an approach that can be a little stressful from a customer service point of view (lots of people using products which aren’t properly developed) but as a vehicle for getting things done fast, it takes some beating.

One of the huge mistakes I see people making all the time, is perfecting an offering before even finding out whether enough people want it. Far better to have an imperfect product which everyone wants than a perfect one without a market.

Streetwise Property Alert 19th December 2013

Our friends, MAP, at, offer some timely tips to protect your property this winter…

On a regular basis, clean out your gutters removing any leaves and debris in order that any ice, melting snow or rain can flow freely.

Make sure downpipes are in good repair. This will aid with the correct flow of rain water.

To avoid burst pipes, insulate any exterior pipes with insulation sleeves.

Fix any small cracks in masonry. This will keep water from getting in between the bricks, expanding as it freezes and causing larger cracks.

Check pipes for small cracks and any small leaks and have them repaired to avoid leaks.

Service your heating system and chimneys at least once a year to prevent fire and smoke damage.

Heavy rain, snow or storms can cause weak trees or branches to break and fall, which may damage your home or cause injury to people, by trimming trees and removing dead branches before the winter sets in this will minimise the risk.

Are you in a flood risk area? If so, move any treasured possessions or important documents to a higher level.

Ensure the air bricks to the ground floor of your property are free from obstruction and that there is an adequate flow of air. This will reduce the risk of serious rot and damp beneath the timbers.

Have a specialist check any large trees near your property to avoid the risk of root damage to your property foundations.

A useful checklist from MPA at

If you’ve been thinking of donating to Martin House, the children’s hospice, please do so now. We are short of our target. Your donation will make a difference. It takes two minutes, that’s all. Instead of spending (yet another) £5 on (yet another) box of chocolates for (yet another) someone you don’t really like, give it to Martin House! They really need it. Thank you. See:

Streetwise Property Alert 18th December 2013

Lots of you seem to be asking about off-plan purchases at present. Some thoughts…

Use A Lawyer

Have the contract checked (before signing) by an independent lawyer. To profit from offplan flipping, you need to be able to assign (sell on) up to or at completion. An independent lawyer – i.e. not the developer’s nor the agent’s – can check to see the contract is assignable. It’s not always the case.

Just because the developer or agent says you can, doesn’t mean you can – you need it in black and white. As often as not, the contract will prohibit this. Many developers want to see the development fill and grow naturally rather than becoming a speculative investment for foreign investors. Some contracts state that you must own the property for a certain period of time thereafter, typically 12 months.

There are other issues. Even if selling in-between is possible, it is often easier said than done to call the top of the market. And most follow-on investors prefer to buy new from a developer than flipped from a fellow investor who is clearly making a profit from them. As ever, take independent legal advice before signing.

Due Diligence

Have you looked at supply and demand? Most investors don’t or, if they do, they don’t look ahead to completion and, as likely, delayed completion. Clearly, some thought needs to be given to what you are buying and its USP (unique selling point), if any. What, for example, is going to distinguish this ‘luxury apartment’ from others that may come to market at the same time?

You need to think how the supply of similar properties is going to alter over the next 12 to 18 months or whatever. You want to see a rising market but that generally brings increasing supply too. And the more new-build there is, the more competitive the prices will become at some stage and this will eat into your projected profits.

Look at demand as well and whether that’s likely to keep growing, particularly for the type of property you are buying. That ‘two-bed luxury apartment’ is much favoured by the international investor but may be less suited to the home market. If or when a market stalls it is often these apartments that remain empty.

The ‘What If?’ Principle

Work the ‘what if?’ of delayed completion. The biggest ‘if’ is ‘if’ the unit is built on time (or at all). Even in good times, this is far from certain and it’s becoming less so nowadays when developers are struggling with funding from new investors and banks. You need to consider what will happen if completion is delayed six months, 12 months or if it’s never completed.

Many investors borrow money for staged payments and struggle to keep up repayments as completion is delayed time and again. If the property is completed on time, a common ‘but’ is that part of the remaining development has not been completed or the developer hasn’t had the funds to put in all the infrastructure and facilities.

There is a ‘maybe’ as well – maybe, two years down the line, the market you are buying into today will be a very different one when it comes to selling on. Think how markets such as Bulgaria, Spain and Dubai turned.

Look Well Ahead

Have you looked beyond completion? Too many investors do all their calculations carefully but stop in 18 months; they don’t make plans for beyond completion. It’s wiser to have a plan of action that features various alternatives and exit strategies. What if you can’t flip for whatever reason?

The obvious alternative to flipping is to let the property out. Before signing, it’s worth doing your due diligence on the lettings market here – who rents, supply and demand, and so on. Failing that, you may wish to look at using it yourself as a second home.

Exit strategies are as significant. You make money when you sell, not when you buy. You need to think who might buy from you. A follow-on investor is the common assumption; but they may prefer one of the similar units over the road that the developer is releasing at a knock-down price. It may be better to look at a sale within the home market although many resorts are priced out of reach of local buyers.

The Bottom Line

Make sure you can work to the bottom line. The best case scenario is that everything unfolds exactly as planned and, 12 to 18 months after signing, you flip and pocket those profits. But it’s wiser to look at the worst-case scenarios and, just in case, make sure you can live with

Flipping tends to be something that occurs most with cheap, emerging hotspots where a ‘goldrush’ mentality seems to take hold and where investors reserve a number of apartments with the aim of flipping whilst knowing they wouldn’t be able to complete on them. Is that the sort of market you are moving into?

Before investing, but after taking professional advice and doing your due diligence, it’s worth looking at the worst things that could happen to see if you can live with them. For example, consider the currencies. What happens if a currency devalues? What happens if a developer does something wrong and fails to deliver? It’s not easy to sue a developer in a foreign country.

All for today, see you with more news and views tomorrow.

Eat What You See

Giving a unique twist to an established product or service can often give a competitive advantage. That’s the thinking behind Toronto based film event Mise, which provides guests with an entire menu of dishes, inspired by meals eaten by the film characters themselves.

The company aims to give viewers an additional sensory aspect to their experience of films. The first event offered a four-course meal featuring dishes from the 1996 film Big Night, which follows the story of two Italian brothers running a failing restaurant in the USA. As the characters on screen wash down a tomato consommé and antipasto sandwich, the audience gets to do the same. So far, Mise has created a menu for both Big Night and the Steve Martin film Planes, Trains and Automobiles, and more events are in the pipeline.

Is this an idea you could copy in your own location? Can you think of anything else that you could pair up with a film to make an enhanced experience for customers?

Streetwise Property Alert 17th December 2013

Welcome to today’s UK property-related news and views…

Identity Theft Reminder

We have, from time to time, reminded BTL investors about the dangers of identity theft, i.e. a tenant using your identity at the address. According to the Balgores Property Group, an estate and lettings agency group in Essex, identity fraud can be very serious. They give an example of a case in Newton Abbot in Devon where a property was sold in the landlord’s name and the money stolen. The tenant was eventually caught and ‘jailed for six years after admitting nine offences of fraud, theft and the dishonest use of a passport.’

‘This is an extreme and rare case. However, there are a lot of professional fraudsters out there that want to rent a property purely to secure an address from which they can carry out finance fraud. Often, they may be pay a few months’ rent in advance, with no intention of paying all the rent due during their tenancy. Many use the property as a PO box for the delivery of goods they have bought on stolen credit cards. They are very savvy and know they can live in a property for up to six months before a landlord possession order is enforced. In that time, they can run up thousands of pounds in credit card debt and of course rental arrears.’

‘These fraudulent tenants can provide authentic looking passports and utility bills. They are also very difficult to evict as they seem to know their way round the legal system. The only way landlords can protect themselves is by carrying out thorough tenant references including ID validation checks and taking out rent guarantee insurance, which will pay the rent in the event that the tenant defaults. All professional letting agents will be able to do this on a landlord’s behalf.’ We will update our ‘ID Protection’ article and let you have it shortly.

New-Build London News

According to Knight Frank, foreign investors buy about 70 per cent of new-build properties in central London. Will that change with the CGT changes announced in the autumn statement and due to come into force from April 2015?

The consensus view is ‘no, the market will continue to be driven by overseas investors’. Knight Frank’s Liam Bailey says, ‘Tax is not the primary driver for the majority of international buyers of residential property in London. The change to CGT rules brings the UK in line with other key investor markets, such as New York and Paris, where equivalent taxes can approach 35 to 50 per cent depending on the owner’s residency status.’

We note one article that states, ‘Developers that have benefited (from the foreign buyers) include Berkeley and Barratt Developments as well as British Land and Land Securities.’ If I might blow our own trumpet, not so loudly that Joe Public investors hear, we do have access to just about all off-plan deals in London for HNW & S investors. Food for thought?

Warning! Undeclared Income

Accountancy Live issues a warning we made a while ago – it bears repeating. ‘Buy-to-let and residential landlords who have avoided paying tax over the last few years have been given a final chance to disclose unpaid tax liabilities under the HMRC’s let property campaign. HMRC has published guidance for making a disclosure under the Let Property scheme which is open to all residential property landlords with undeclared tax liabilities.’

‘Landlords who wish to take part in the campaign have to notify HMRC and make a full disclosure including a formal offer of how much tax they intend to pay. This can be done online. Landlords taking part in the campaign can expect to pay less in penalties than would otherwise have been the case. The campaign is open to all residential landlords.’ Time to Google ‘Let Property Scheme’?

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See: Thank you!