Why does the price of property always increase? Medium to long term this is certainly the case. Speculators may comment the bubble will soon burst, but experience shows all that happens in a downturn is prices deflate marginally for a finite period of time, and then they carry on their march upwards.
It is simple, money is infinite, it can be printed at will, and property is finite and fixed. Therefore, as you print more of it, the less value it will have and the more the price of fixed assets will increase.
Many people are saying property is overvalued, however I have been hearing this over the last decade. How do you establish whether something is overvalued? It would be interesting to contrast property against a real measure of wealth, gold being the obvious choice.
According to the House Price Index, as of July 2016 the average house price in the UK is £216,750. The current price of an ounce of gold is £1,001. This means you will need 216 ounces of gold to purchase a property in the UK.
The ratio reached its most extreme in favour of property in 2004, then the average UK house cost 720 ounces of gold.
This means in gold terms property has fallen by almost 70% since 2004. Yet in cash term it’s risen by 43%.
In 1980, the average UK house could be swapped for less than 70 ounces of gold. In the last three years, UK houses have risen by about 60% in value against gold.
The attempt of trying to value such an asset against property is rather confusing, and therefore is not a means to govern the real value of property. This is probably to do with the complex factors which affect the demand and supply of a precious metal.
However, there are two advantages property has over gold, one is it produces a monthly income, and the other is it can be geared reasonably easily.
The bottom line is no one can really ascertain whether property is overvalued. The current market looks shaky for sure, some segments and locations more so than others.
The shrewd investor buys in this environment; the current market comes as a god send for buyers.
The best course of action for those with limited funds is to purchase with the focus of yield in mind. Therefore, whether the property price rises or falls, it has no bearing on month to month yield.
There are means and ways to achieve high rentals. Currently we are closing a deal in W1 where we expect the rental yield to be 8% per annum. We are also looking to enhance the rental in a Kingsbury home from £1,700pm to £2,550pm net. Call the office now to find out how we can make this happen for you.
Don’t have kittens when you see the damage!
There was a landlord who was unwilling to pay for a check in, inventory and check out. He found a couple to rent his lovely one bedroom flat, they stayed in it for quite some time and the landlord felt he had no reason to visit the property as there had been no problems.
The end of the tenancy came and the landlord arranged to do the checkout himself as he had done the check in himself too.
When the landlord went to the property after the tenants had left, he noticed a small amount of cat fur all around the property, in the corners of the living room and all over the carpet. Not only this, but the wallpaper and the curtains had also been shredded.
The landlord wanted to deduct costs for this damage, however when one doesn’t have an inventory at the start of a tenancy it makes it tricky, or neigh on impossible to deduct costs.
As part of the service we will negotiate deposit deductions with the tenants.
So I contacted the couple, however they did not agree to the costs. They argued that they had been good tenants and that obviously they didn’t have pets in the flat as the agreement did not allow pets at the property.
The tenants took the case to the TDS and asked them to take a view, and as the landlord had no inventory there was nothing the landlords could do, as it was one person’s word against another.
It did look like the tenants were going to get away with it, however we took a long shot and checked their Facebook profile! Low and behold there were several photos of two cats taken at the property, including one that had the comment "my fury babies are at their new home."
This evidence secured costs from the deposit, for damages caused by pets which was £500; but not for other repair works, which totaled around £1,850 as there was no inventory in place.
l Cost of repair works £1,850
l Pet deductions from deposit £500
l Cost of inventory for this property £190
All this could have been avoided if regular inspections had been carried out and the landlord had paid for a check in, inventory and checkout!
Call me to find out how I can help you.
