There are serious concerns about where the property prices will go in the coming years. House prices in London have fallen for the fifth quarter in a row, this is as a consequence of a combination of high prices, stamp duty increases, and the uncertainty surrounding Brexit. Despite this, London is far more expensive than the rest of the UK, at about £500K; more than twice the national average. There are dire predictions of further drops expected, of between 25-30%. Therefore, why should someone purchase in this environment?
If this is what is being put out in the main stream media, this is a good thing from an investment angle. It acts like a firewall, which prevents the retail investors from entering the market. As a consequence of this influx, Auction Houses which were traditionally the domain of property dealers have become infested with end user buyers. Consequently, rather than auctions becoming a place to pick up deals, they have become a dumping ground for problematic properties for unsuspecting novice buyers.
You may question the wisdom of purchasing given the market will fall further. However, with the masses being kept away, there are very few real buyers left in the market. And there are those amongst the sellers who absolutely have to sell, regardless of the market.
There are two types of deals one should consider in this market. One is where the exit is immediate and you’re buying well below the current market price. In order to ascertain what the current market price is, you will often need to rely upon the trustable advice of a local agent – perhaps this is a contradiction or certainly a rare combination. The other is to negate the expectation of capital growth completely. What I mean by this is to focus exclusively on yield alone. Yields have dropped in London, as a consequence of sharp rising prices. A 4% - 5% yield in London now is a rarity.
The way to achieve this is to aim for largish properties, which can be converted to HMOs. In many boroughs there is no requirement for planning, the HMO status can be achieved through a licence. This could boost your yield closer to 10%. This means you actually have a cash flow from your investment.
Irrespective of where the market goes, this cash flow is almost guaranteed every month. In fact, when the market is unstable, the number of renters increase and thereby boost the demand, thereby potentially increasing the amount achievable. We are currently looking at a derelict building in North West London. The property looks like it needs a complete refurb internally. It’s so bad that they are not allowing any viewings inside. This is a good sign, as again it will keep most people away. From the square footage, it appears we can achieve nine rooms in this building; giving a conservative expected yield of 8%.
Of course, the main bulk of money made in property is through capital growth. So, whilst going for the yield one must still be mindful of the location.
Agony Agent is here to help
Q: Do I need to be worried about Japanese Knotweed?
A: Japanese Knotweed could end up costing £1,000s in damages, drop a property’s value or even result in a refusal of a mortgage. If you have Japanese Knotweed, it is imperative that you act quickly to have this removed. But “what am I looking for?” you may ask. If you prefer to carry out your own search of your garden then the plant can be recognised by its lime-green bamboo-like stem, that is speckled purple and red. The leaves are heart-shaped with sprouts having a reddish tinge and turning a lime green.
In the summer they produce lots of little cream flowers. Once you have had a look over your garden it might be worth popping your head over both your neighbours’ fences, as although your garden may be ok, Japanese Knotweed can grow up to 10cm per day! This means there is a high chance of it spreading into your garden, very quickly. So, keep a watchful eye on theirs too.
Now, this plant can be very resilient as its roots can grow to a depth of 2m - 3m, and can spread up to 7m from a parent plant. Even after you have had a go yourself of removing it on the surface, the roots may still be there and can remain capable of growing still; and may do so for up to twenty years! So, like any other weed it can come and re-grow at any time. If Japanese Knotweed is left to grow untreated, it has the potential to cause structural damage to a property, drains, paving, paths, driveways and boundary walls!
The best and easiest way to deal with this destructive plant is to first identify if you have it. Take a picture of what you think maybe Japanese Knotweed, and send it across to a professional. More often than not, there will be no charge for information, or just to look at a picture at this point. They will then advise you on a course of treatment, which I would highly recommend you taking. If this has already entered your garden or started to grow up your walls, then you will urgently need to take action.
If you are experiencing any property related issues or find yourself in need of advice, then please do contact our office for some initial free independent advice.
Richard Bond
