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First time buyers face scarce supple due to council property

London Property has No Recession: Observations from Savills Auction

On Monday I went to The Royal Garden Hotel, Kensington to the Savills Residential Property Auction. The atmosphere of auctions has changed, and there were some shocking observations I made, both subjective and objective.

Key Points: First 50 Properties



Average Guide Price £259k
Average Bid (Sold) £288k
Average Bid(RNM) £324k
Average Highest Bid £301k
Average increase on Guide by Highest Bid 19%
  • Sellers’ Auction, High Prices & Reserve not met too often
  • Properties sold up to 205% of guide price
  • Reserves not met on over a third of properties Read more

House Prices increase £91 a day

The surge in property prices will reassure landlords and investors worried by reports suggesting the housing market faces a dramatic collapse.

Figures released by the Halifax yesterday also show how prices have rocketed over the past decade, giving property owners potential returns unmatched by any other form of investment.

Semi-dethatched properties have risen 111 per cent in ten years.

Halifax says the big winners over the past year have been detached houses which soared by 13 per cent – the equivalent of £91 a day – between June 2009 and June 2010 to stand at an average of £299,295.

But bungalows, flats, semis and terraced houses all spiralled upwards too, with price gains of between eight and nine per cent. The average cost of a detached home was 63 per cent more than the average house price during the second quarter of this year.

However semi-detached properties saw the biggest gains during the past decade with values soaring from an average £81,706 to £172,196 – and by £35 a day over past 12 months alone.

The average value of a terraced property jumped by 110 per cent during the decade while the price of bungalows rose by 109 per cent. In the past 12 months the average terrace house rose by £29 a day while bungalows went up £49 a day.

The value of detached homes rose by 102 per cent during the decade. Flats were the only property type not to double in value, though prices went up by an average of 81 per cent over the ten years and rose £35 a day in the year to June 2010.

Yesterday it was reported that house prices are set to rocket by 20 per cent in five years, fuelled by a shortage of homes. This would add £30,000 to the value of the average three-bed semi.

And last week July data from the Land Registry’s official House Price Index, based on actual sale prices, showed an annual increase of 6.7 per cent, taking the average property value in England and Wales to £166,798. The monthly change from June to July was an increase of 0.4 per cent.

Article adapted from the Daily Express, information from Halifax.

What does this mean in real terms for investors, firstly the long term capital gains from property are still strong, for the active investor the appreciation means that if they were to re-mortgage every year to pull out equity in order to reinvest (£91×365 daysx75%BTLmortgage=£24911) they can raise just under £25,000 per detached property or just under £10,000 per flat.

Using this appreciation, reinvested properly in finely selected properties that result in a cash flow surplus can support a great income stream as well as sustainable organic growth or your property portfolio.

If you want any advice or discussion of your options please email me Nirav@PropVestment.com

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Getting into the Mind of a Surveyor

Can you imagine what it is like to be a surveyor?  They have the power to make or break a market.  They made it for us on the way up and broke it for us on the way down.

Back in the days you would ask a surveyor to value a property at £60,000 which you had bought for £38,000 3 months ago and they would do it no problem.  You would remortgage and get a nice chunk to go and reinvest in more high yielding and high growth properties.

Now it is a different story.  You ask him or her to go and value a property you are trying to buy for £60,000 and they value it at £38,000.

So why do surveyors do this?  Well simply they are scared.  They are scared that the bank will come after them when the borrower has defaulted and all the property is worth is £38,000 when sold at auction.  If they put a value of £60,000 the bank could come after the surveyor for the difference i.e. £22,000.  The surveyor’s insurance will pick up the bill but the surveyor’s professional indemnity insurance rockets and the surveyor gets known as a bad surveyor.

Good surveyors in the bank’s books are the ones that down value.  The real pessimistic ones are the banks favourites.  But there is a point when the bank wants the surveyors to put an optimistic valuation.  Then the tide turns.

The surveyors that start valuing on the generous side start to get the work.  Ultimately the bank is safe because the surveyor has insurance.  So it becomes a game of who has the most balls.

We are not there yet.  But there will be a point when one of the banks says “I want to lend big time”.  Then there will be pressure from above on the surveyors to start valuing up properties.

Once other banks see what is happening they have two choices:

1. Do nothing and lose market share or

2. follow and compete by getting valuations that value up

The time of change will come back, tide will change and the cycle will circulate.

Article sourced from the view point and opinions of Ajay Ahuja of ahuja.co.uk

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