The Property Dip - Time To Quit? BMV Roundup Oct 2008
by Graham Brown (
LoveProperty)
According to Seth Godin,
the Dip is the manifestation of the belief that
"The old saying is wrong-winners do quit, and quitters do win."
We're certainly going through the real estate property industry
Dip right now. RICS says it's a
30 year low in property sales and there's certainly no shortage of property investors quitting and heading back to their day jobs or worse still, filing for bankruptcy.
On the one had, pundits reflect the professional sentiment -
we have tasted the beginnings of the meltdown but may have saved ourselves from being forcefed the full 3 courses.
So what exactly should we be quitting?
There is Still a Pulse...
You could be convinced otherwise that things are really that bad, there's still a number of
ready made BMV deals coming through the pipeline, some markets are still bearing up (
according to the agents and
Rhett Lewis), some lenders such as Nationwide have made tentative moves to
cut their rates,
others are still bullish such as
Vanessa Warwick and some are just
fed-up with the naysayers.
Paragon claim that landlord rental demand is "strong" and the
FT reports that agent activity is on the way up, so what gives?
What is suffering right now is property investment that was the easiest foot on the ladder for would-be pundits - ie the product of
common sense.
Some talk of the unravelling of buy to let scams. Sale and rent back is also coming under tighter supervision with the latest
NLA announcements.
Either way, time to quit means time to give up on the old business model.
Bottom Fishing - not there yetBut it's maybe too earlier to proclaim a brave new dawn for the
Property 2.0 investor, we have still to hit the capitulation point that analysts refer to as "the bottom" - the point at which assets would be going out of fashion, which for those that are selling will last an eternity but for the rest of us - a few days.
Mark Harrison recommends that we take a straw sample of our own immediate environment to see if the credit crunch is real.
His analysis of the credit crunch and the average Joe is very interesting, worth reading, suggesting that there is still some length in this one before we reach the turnaround.
While pundits claims we are out of the woods and that
prices could rightside themselves by 2010, I'd err on the side of caution for the meantime. FT's aptly named feature section "
Financial Panic" leads with "
The panic passes but the causes remains". The paper continues to suggest (
through Landlord Zone) that we still have a 30% correction (drop) to run before we get there and
latest research from Savills suggests that all markets are exposed.
Rob Best also provides a good insight into the
current state of the lending markets and what it means to us as investors.
Emerging markets a safe haven? Maybe not in the short term if you take the advice of
this blog, although there'll always be a market squirreled away somewhere that developers will tells us is recession-proof.
This time it's Canada (apparently).
What lies on the other side?The money markets are still disfunctioning and there are 5 good reasons why they may never return to the good old bad old days of the early 21st century (
download the free ebook on the future of BMV investing). We can see evidence of this in the current
lack of appetite for lending. Although lending rates should recede, lenders are imposing
increasingly punitive terms on their mortgages (such as axeing all
85% LTV BTL mortgages) to frighten off all but the most diligent and persistent of investors.
Hip Consultant provides a reasonable analysis of recent developments.
Robert Peston (BBC) reports that the wholesale markets inactivity is forcing banks to reduce their lending and as ever,
property investors are at the mercy of the US financial markets (
download Ebook here).
We also still have a hyperactive
LIBOR refuses to come down to market representing more expensive borrowing (
although the LIBOR has eased slightly in last week) and the spectre of higher oil prices.
Donald Trumps makes a good point for all investors in paying more attention to
OPEC than their central bank as an indicator to recovery.
Still economic woes don't curtail all market activity, here's some good news...Now is a good time to own an apartment building according to
Bigger Pockets, providing us with 15 reasons to take the plunge.
John Lee of
PropertyCow reckons that
he can make good even 15% BMV deals that most would now be throwing away due to inability to raise adequate finance.
And if your tenants feel the themselves and stop paying, then fear not because there are plenty of ingenious ways to name and shame them.
Here's one such method I recently became aware of through Property Owl.
Plus, there are still plenty of determined entrepreneurs out there - just check out
Graham Brown's Property Radio interview with
Rhys Morton and
Tom Sanderson regarding the adventurer spirit (
link here).
Find yourself stuck with a development you can't sell off quick enough? As housebuilders are forever
cooking up new ways to move their stock, one creative developer
has decided to raffle off his £1.7m development to the lucky ticketholder. On examination of the numbers, he's onto a good thing - wins both ways. As they say, necessity is the mother of invention and he's certainly come up trumps with this one. However, don't get too excited - looks like the Gambling Commission have cottoned on to a similar scheme for a £1m house down in Devon (
thanks to Rat&Mouse for the tip).
So I'll leave you with the outro provided by the agents
Alexandre Boyes who are putting a brave face on everything (hat tip to
FindaProperty blog):
We’ll move again, don’t know where, don’t know when,
But I know we’ll move again, some sunny day.
Keep smiling through, just like you always do,
‘Til the billions drive the credit crunch away.
For more information on beating the credit crunch, check out my
20 Links for BMV investors to help beat the credit crunch or dowload the Free Ebook written by LoveProperty members:
Free EBOOK - 5 Things You Can Do Monday Morning to Reduce BMV Risk in the Coming Global Financial MeltdownTechnorati Tags: credit cunch, bmv, nmd deals, ready made deals, property investment, mortgages, graham brown, the dip, vanessa warwick, 85% LTV, robert peston, libor, john lee, rhys morton, tom sanderson, property cow, nla, property 2.0, ebook, rob best, mark harrison, rhett lewis, landlord, financial panic,
faces the same pressures. In response, just as the Japanese did before, we can expect the Chinese state enterprises to invest in Philippines property. For the Japanese the interest was property and mining assets in the USA and Australia. For the Chinese, I think we will see a broader spread of investments, but clearly insofar as property is concerned the Philippines is the best place. Why? Well the country is already familiar to them. There are already a lot of Chinese-owned resorts, Chinese people living in the Philippines, and thus Chinese cultural influences. For Chinese private investors too there are opportunities for business, as well as the ability to invest from a strong currency, as well as providing some security away from an uncertain political regime. You can be sure that China is not shifting from communism to capitalism, but rather the collectivist fascist model embraced by its Western counterparts. Even the Philippines is not free from this trend. We are going to see more government spending in China, more public education, insurance, etc. The Philippines, with tax receipts of just 17% of GDP, looks relatively good.
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