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UK commercial property is hit by economic uncertainty

Falling occupier demand and increasing availability drove down commercial property rental expectations in the final quarter of 2011, according to the latest UK Commercial Market Survey from the Royal Institution of Chartered Surveyors.

Overall tenant demand continued to fall in the final three months of the year, with 13% more surveyors reporting decreases rather than increases in interest from prospective tenants. Notably, demand for commercial space in the capital also began to waiver for the first time in over a year, as London office space saw a notable downturn to a net balance of -19 per cent from +5%.

With demand falling back, in turn, overall availability continued to increase with a net balance of +16% of chartered surveyors reporting increases in vacant floor space. Retail and office space saw the most significant increases with net balances of +25 and +24% of surveyors reporting increases, while industrial space broadly stabilised with a net balance of +3%.

Falling demand and rising availability continued to impact on overall rental expectations which weakened over the quarter, moving further into negative territory, to -29%. The more adverse trend was visible in all parts of the UK with the headline rent expectations net balance even in London recording a negative result.

However, the report suggests that rents are still projected to nudge up in the capital's prime office sector.

Source: PropertyWire

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Part1: Trading in the Current Recessionary Property Market

As a property investor you should remember that the recessionary environment is “a purchasing opportunity”. A time to make wise investments and capitalise on the availability of discounted property. The property market operates in cycles of peaks and troughs being closely related to the availability of finance and/or cost of finance. Despite the overall buying opportunity presented by the current recession, the property investor should stick to some basic principles:

1. Purchase Cautiously– Have a short, medium and long term hold strategy. Consider the various scenarios carefully. For the holding strategy you should purchase at a discount, generate the highest possible cashflow, refinance and hold for the longer-term. Where trading property, seek out the most ‘fluid’ locations where transaction levels are still high and be active in that location. Have a consideration for who your purchaser would be and design, plan and create your property to suit the market.

2. ‘Go Multi’- Consider investing to create multi-occupancy and dividing into two or more units/titles for cashflow and forced capital appreciation.

3. Leverage with Joint Venture Partners (JV’s) in the 0.5% base rate environment– The current economic environment means savers are getting extremely poor returns from the conventional high street banks. Network and market yourself to potential investors. Prepare a summary of your experience and your potential to deliver a reasonable return on cash invested in your property investments. Provide a summary of the JV partnership and bring in experienced solicitors to represent your potential investors. Make the investing decision simple for your JV partners. The ideal scenario is that you provide the skill and management and the JV partner provides the equity finance.

4. Observe the global economic news and monitor the local economy- Whilst one of the most important factors in being successful in property is a good understanding of the local property market, we have always been of the opinion that a good investor should have a sound grasp of economics and understand the financial markets. It is good background knowledge and enables the investor to have insight beyond the local property market, enabling smarter transactions through the peaks and troughs of the market. In a recessionary environment the investor should became even more familiar with economic news and understand the implications of economic changes on the local, national and global economy. For example, consider the fact that some investors invested cautiously during 2005/6 when commercial property yields were at an all time low, first time buyers were being offered 100% mortgages and residential property investors were acquiring property mortgages without placing any funds into the investment (No Money Down). The wise investor would have seen an overheating property market and approached each property deal cautiously.

5. Boost Cashflow– Additional business income streams can be great for cashflow and enable you to take your property portfolio through the trough. Some possible complimentary revenue streams to consider are property maintenance services, residential lettings, acquisitions services for end users and property deal sourcing. With any business the key skills are sales and marketing, planning, resourcing, quality control and managing cashflow. Developing additional income streams in a recession can enable the investor to be in a better position when the market returns. By creating additional cashflow the investor can trade and compound property profits rather than holding for slower growth. The additional revenue streams provide a cashflow ‘backbone’.

How will 2012 change the way we live?

In the year ahead one thing is sure – whatever happens to the economy, the importance of the home will be paramount. 

The big question is what will happen to house prices? Savills has forecast “marginal” falls in the year ahead of around two per cent, followed by a 0.5 per cent increase in 2013 and a slow recovery that will bring a six per cent rise in 2016. “In 2016, prices will be what they were in 2006 but, taking inflation into account they will actually be at 2002 levels,” says Lucian Cook of Savills research.

New research from the website LoveHomeSwap.com, for people who want to exchange homes for vacations, shows that more than twice as many home owners are planning to swap in 2012 as in 2011.

 

Selling on the quiet

People may start selling very surreptitiously. “Discreet marketing” is the buzz phrase, which involves no advertising, no website, no sale board. The only people who know a house is on the market are serious buyers and buying agents. About 25 per cent of properties sold in recent months have been done this way

 

Middle classes stay in London

Over the next five years, says Savills, prices across London are expected to go up 19 per cent, followed by the South East at 15.7 per cent, but with the North continuing to suffer knocks. Everywhere else in the country has seen price falls since the peak (by 20 per cent in the South West), yet posh parts of London have gone up by more than 15 per cent, boosted by international buyers.


Source: The Telegraph

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100% Loans on repossessed properties in Spain

"Spanish Banks are prepared to lend over 100% on their own properties that have been repossessed, it has been revealed.

They are also selling them at rock bottom prices to attract buyers so that they can reduce the amount of property on their books.

According to Adam Cornwell, managing director of Feltrim International these are quality properties in desirable areas.

Recent reports from a leading risk adviser say banks have around €30 billion worth of property that they can’t sell.

Examples include a luxury beachside development close to Marbella at 50% off the developer’s 2007 price plus a 110% mortgage option with two years interest only. A one bedroom penthouse in Soto Serena, designed by archtiect Melvin Villarroel, with landscaped gardens, pools, gym and sauna, is available for €184,000 compared with €368,000 in 2007.

Investors can buy using very little, or none, of their own capital with the risk being entirely taken by the bank. This simply does not happen in any other distressed market in the world"

Source: PropertyWire

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UK Housing Market boosted by demand from first buyers

"A robust end of year mortgage market has meant that activity in the fourth quarter of the year outstripped that of a year ago, according to the latest Housing Market Activity Report by Connells Survey and Valuation.

The total number of valuations conducted during December declined by 14% on a monthly basis, a much smaller fall than the average drop of 20% between November and December since 2007.

The robust December performance contributed to increased demand for valuations in fourth quarter of 2011 as a whole with activity up by 3% compared to the previous quarter an up 71% compared to the fourth quarter of 2010. In fact, throughout the whole of 2011, there were 43% more valuations than in the previous year, the report shows.

Strong activity from both first time buyers and home movers helped boost activity in the final quarter of the year. There were 9% more valuations for first time buyers than in the previous quarter, an annual increase of 56%. Similarly, valuation activity for home movers grew by 6% on a quarterly basis, a 61% increase compared to the final quarter of 2010."

Source: PropertyWire

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Common Mistakes in Property Investment

Today we would like to highlight Six Common Mistakes in Property Investing:
 

1- Discipline - A property investor needs a disciplined approach to property investing. A well laid plan, executed with a clear wealth creation strategy. Many investors fail to analyse each deal in the context of an overall investment strategy.

 

2- Market awareness - Failing to recognise the phase of the property cycle. An astute investor should have an awareness of current financing trends in the property market. Property is a debt backed investment and the oversupply or undersupply of finance dictates the market conditions and the phase of the cycle. Property investors should understand the nature of the property market in which they are operating, enabling better investment decisions.


3- Not purchasing when the market has fallen - Recessionary environments are quite often considered to be the best environment for developing your property investing career. Investing and trading while the market is difficult can put you in good stead for an improving property market.

4- Not compounding property investments - Compounding is the key to obtaining the very best results. The investor should 'trade' and release equity to place in new investments 'rolling' equity to gain maximum return on capital.

5- Not leveraging with joint ventures - The investor should look to bring on Joint Venture partners and 'cash only' investors. A typical expample is where the cash investor injects 25%, the property investor undertakes all sourcing and project management duties and puts in 5%, obtaining conventional financing for the remaining 70%. This kind of arrangement can give great financial leverage.

6- Poor cashflow - The killer for every business. Trading, multi-letting, 'asset sweating' and adding complimentary business activities can ensure the growth and prosperity of your property investments.

Register with www.john-raiye.co.uk to get more free tips and wealth creation.
 

Our director is also offering a FREE One-to-One BUSINESS PLANNING CONSULTATION for UK based investors for the limited time only in January. There are only 10 spots left so reserve your place now by registering here!

Six Fundamentals in Property Investing

Today we would like to share with you our Six Fundamentals in Property Investing:
 
1- Define your strategy. What are you seeking from your investment? Is it a short-term trade or a long-term investment? The end position provides the platform for direction.
 
2- Ensure you stay disciplined. Revise your plan if required, but stick to your goal.

3- Seek opportunity to create real value. Property provides a platform for creativity and design. Research the local market and create the product that delivers returns.

4- Acquire as much information as possible on the vendor's reason for sale before negotiating the deal.

5- Ensure your purchase price enables instant leverage. Do your calculations and ensure you negotiate equity at the point of purchase.

6- Have a range of investment strategies to spread your risk.

A Gift and a FREE property planning consultation for your 2012 Investment Goals

 

A Free Gift from Ikos Investments


We hope you have defined your property investing goals and objectives for 2012.


We would like to share our Deal Analyser Tool to assist you with analysing your property deals this year.
 
 
This tool will enable you to assess the quality of your residential property deals


 
 
If you have any queries regarding the analyser please contact
marketing@ikos-investments.com
 
Please register at www.john-raiye.co.uk for more tips and advice on Property Business Planning.

 
Our director is also offering a FREE One-to-One BUSINESS PLANNING CONSULTATION to the first 15 UK based investors, who will register in the month of January!


 
Happy New Year and Best Wishes for 2012.

   

Expectations for 2012 suggest broad stability in house prices nationally

The UK residential property market is expected to be stable in 2012 with little change in prices overall. Analysts expect the Bank of England’s base rate to remain at 0.5% throughout the year and although there will be weak economic growth, high unemployment and mortgage funding pressures there are a lot of positives as well.

They point to affordability in the market place, a low lending rate, low levels of forced sales and a long term supply and demand imbalance as being good points for the year ahead.

"The housing market has proved highly resilient in recent months despite the weak economic recovery and the significant deterioration in the outlook for both the UK and global economies,’ said Halifax’s housing economist, Martin Ellis."

He expects that there will be broad stability in house prices nationally in 2012.

He also pointed out that largely as a result of low rates, typical mortgage payments for a new borrower have fallen from a peak of 48% of average disposable earnings in the middle of 2007 to 26% in the third quarter of 2011.

He also predicts some modest variations in house price movements across the country.

Source: Property Community

To read the full article please follow this link

A slow growth of property prices despite recession

Household finances might be in the doldrums but property prices still managed to creep up by 1% in 2011, according to the latest figures from the Nationwide.

The building society said that, while prices had dropped by 0.2% in December, over the year the value of the average house has risen to £165,798.

Meanwhile separate data from the Land Registry showed house prices in England and Wales increased by 0.3% in November, but were down by 1.9% year-on-year. Its index, which is based on completed transactions, put the average price of a property at £160,780.

The London housing market continued to show a life of its own, with prices rising by 5.5% over the course of the year. By contrast, prices in Northern Ireland fell by 8.7%. The only English regions to see prices fall were the north and north-west, with average prices down 1% and 1.2% respectively.

Nationwide said it expected prices to "move sideways or moderately lower" by the end of 2012 – but other house price pundits have been more candid. Buying agent and former estate agent Henry Pryor recently predicted a 10% fall in prices next year, believing homes are currently being overpriced by those trying to sell.

Rightmove, however, has predicted a 2% rise in prices in 2012, while Nationwide's main rival for mortgage business, Halifax, has predicted little change in house prices next year. It has said movement could be anywhere between -2% and +2%.

Source: The Guardian

To read the full article please follow this link