Overseas buyers active in Central London - does this mean you should be buying in Clapham too?

I came across this article the other day: Huge spike in Chinese property investors' interest in the UK post-Brexit. I think without clicking on the link you can get the jist of it. In essence the drop in value of the GBP has made property in London 10% cheaper overnight. Before the Brexit results 1 GBP bought you 9.8CNY. Today that same pound is only worth 8.8CNY. A nice discount if your money is in China and you happen to be in the market for a flat in the UK/London.

As I predicted in my previous articles, the weaker pound has indeed sparked mass interest from overseas. This is great news! Normally whatever happens in (Prime) Central London will have a ripple effect on the rest of the capital, so you can see more activity in zones 2, 3 and beyond in the next few months. People keep asking me whether Brexit has been detrimental to the market and truth be told it may have been, but combine it with other factors like the summer holidays (it's normally very quiet in the sales market this time of year) and the effects have been minimal if any. Once everyone comes back from summer holidays I trust it will be business as usual, with a stronger comeback due to increased numbers of foreign buyers.

I foresee that with £millions of foreign investment we will end the financial year on some significant capital appreciation. If you are after an investment property it probably is a good time to capitalise on seller's willingness to "do a deal" in order to move on as opposed to wager with uncertainty. Sadly for UK buyers their pound doesn't necessarily stretch 10% further, but nonetheless I do feel that now is a good time to buy - there are sellers out there looking to sell, summer holidays or not.

I've had a number of clients ask me as to whether they should hold off buying, and my answer has always been a resounding "no." Now is the time to buy, whether you're looking to add value or simply hold and rent it - rents are set to go up over the next few years, so if you are able to secure a good property at a good price this will pay dividends. If you are looking to sell on, the first time buyer market is still doing very well. Cater to that market and you cannot fail.

If you are looking to expand your portfolio or get into property investing, be it full time to replace your income or you just have some spare money to invest and you want to do this as a worthwhile investment strategy instead of getting 1% interest in the bank then reach out to me on jeroen@claphampropertyblog.com and let me tell you how to make the most from your assets.

Will the confidence continue in the Clapham Property Market?

I was interviewed by Brendan Quinn recently for his podcast and my sentiment is clear. The market is still strong and there is no holding back the buyers at recent auctions (auctions are always a good indicator of investor sentiment). So much so that some sellers have been upping their reserves to a level that could not be met. I think the days of achieving 50% over the guide are gone, so auctioneers are wise to set the reserves competitively and let the buyers decide the price. I note that some London auctions have had a fair few unsold where the expectations were too high; I believe this is due to a shift in demand for certain types of properties.

Click here to listen to the podcast

I had carried out due diligence for several clients on recent lots and they decided not to buy at the prices that they were going for as it didn't fit in with their particular strategy (buy to sell). Judging by the fact that the properties still sold they certainly were fit for those opting for a longer term strategy. Those buyers are clearly seeing these properties as hold and rent opportunities. They are buying more with yield in their sights than instant capital appreciation by adding value. Is this a better strategy?

It's certainly one to consider. Buy to Let is not a new phenomenon of course, and has done very well over the years, I can say this from personal experience and that of many of my clients. A caveat however is that more money is invested per property, perhaps limiting the number of properties an investor can buy - normally an investor will look to leverage to buy as many as they can, but if they are unable to "finance out," that is, lend on the increase in value they have created it will ultimately slow the market down; they can't buy as frequently/as many properties, so they will be just collecting rents until the time is right. On the plus side they will be better cushioned to rate rises, small market dips and voids should they be unable to find tenants for some reason. Not unwise.

As per my previous blog posts and many talks I have had recently I predict that London will see very high rent rises over the next few years due to the increased taxation on residential landlords - so perhaps a long term view is the right one?

I am not alone in thinking that rents will rise substantially over the next few years. The Tax Payers Alliance (formed to campaign against the recent changes in taxation for residential landlords) seems to agree. For the full article from the Tax Payers Alliance click here.

So if you are looking to invest in property with a view to buy, add value and resell, perhaps it's time to rethink? There are certainly still opportunities out there however so if you are aiming for the first time buyer market I feel you are nearly guaranteed to do well (and others agree judging by a recent article in the Property Reporter), providing you can find the properties at the right price. If you are considering a longer term strategy and a longer cycle per property - the market is looking good for landlords at the moment, and with further rent rises to come it would be worth considering more letting stock in your portfolio. If you are looking to make the most of your property investment why not drop me a line and start a dialogue? I'm on jeroen@claphampropertyblog.com.

PS I will be hosting an investor evening in Clapham in September - an ideal time to meet in person - so do keep your eyes peeled for more details with date, venue and guest speaker lineup.

How has the Brexit referendum affected your property in Clapham, Brixton & Surrounds?

Well it's been an exciting weekend, what with the fallout of various political parties due to the (to some surprising) results of the UK's referendum.

The journalists, as usual, are doing an outstanding job of reporting mass chaos. The dropping pound, crashing house prices (some predicted 20% drops) and all time low consumer confidence. That's all good and well, but personally I think it's a bit soon to make such wild predictions (ahem - assumptions) over one single weekend right after the referendum results.

Many a property investor, myself included, have already come out and spoke of the opportunity these times represent. Let's look at what's happening, and my thoughts on the short-medium term. Naturally as with any of these predictions, it's only my view as a property person with nearly 15 years of experience in the South London property market. I don't have a crystal ball, but here is my 2p worth:

1. The pound has dropped in value.
   This will actually help property prices in Prime Central London - a weaker pound means it's cheaper for wealthy foreigners to buy luxury flats. Ultimately the rest of London will benefit from this confidence (think ripple effect).
   
   
2. Another reason for accidental and small landlords to sell up.
   Increasing red tape in the past 18 months or so, combine with the reduction of mortgage interest being fully deductible from rental profits has already caused a few smaller landlords to think twice, choosing for "easier" investments. The uncertainty (in future capital gains) will certainly make up their mind to sell straight away if they aren't already. We'll see a lot more smaller, more affordable units coming to market, creating more supply.
   
   
3. First time buyers will see value and buy.
   Speaking to many of my estate agent colleagues up and down the country this morning I can assure you the mood is good - deals that have been agreed are certainly staying agreed. There are no signs yet of knee-jerk reactions. Goes to show that today's first time buyers will still be better off paying a mortgage as opposed to rent, as well as working to a long-term appreciation in their asset. Smaller landlords in my second point above will have already enjoyed medium-long term appreciation so they don't want a short term dip to eat into their total gains. Long term view buyers such as landlords will take the same view, although they may sit out for a month until the dust settles.
   
   
4. Savvy investors that "buy to sell" will focus on smaller units in order to satisfy demand from the FTBs in point 3 above.
   I make no secret about it, it's a market segment that keeps on giving. Some property investors love luxury flats in superb locations, but First Time Buyers are often overlooked. What are their needs, what are their wants? Property investors focusing on the average buyer who wants a touch of luxury without paying through the nose will do well.

So there you have it. In essence I think the momentum the property market has gathered over the last few years will remain, but there will be different players in the property game. What are your thoughts? Share in the comments below.

If you are looking for a portfolio review, or perhaps you are looking for advice to make your investments (current and future) yield better results then contact me on jeroen@claphampropertyblog.com. I help investors like you make better returns on their investment. I have done so for over a decade, with proven results. If you are interested in taking the next step on your investment adventure then reach out and I will expertly guide you through the process. I am actively looking for clients to invest with and for to expand the current successful portfolio. 

Have you been actively investing in the last two months?

You will have remembered my blog post about my recent purchases (http://goo.gl/JEHBjk). A fellow investor had asked me when the last time was that I did a property deal myself as opposed to advised from the sidelines; I had to admit it had been a while.

Fear not, I can assure you that progress has been made and I thought I'd share the progress. Building works have been now completed, changing the layout from a boxy flat to a lovely open-plan living space in order to maximise the light. As a result the flat feels much brighter and bigger and would certainly appeal to a first time buyer or even a rental investor.

Here are the before and after pictures, judge for yourself:

So there you have it. Marketing has commenced. I had gone against fellow agents' advice and ordered them to price it lower than their expectations (I know that agents can be zealous with pricing to win business) in an attempt to get more people through the door as opposed to less. More buyers, more offers, higher offers is my thinking. My estimated return of 20% was actually estimated at 35-40% by fellow agents, so goes to show that working on cautious figures brings a welcome surprise!

If you are looking to get in to property investment and you need to know where to get started drop me a line on jeroen@claphampropertyblog.com. I advise a number of select clients in order for them to get the best from their investments. Whether you have 1, 10 or just starting out - drop me a line. I am looking for further mentees for the next property transaction, so if you want to get involved and make a better return on your money than the savings account it's in then get in touch. I can help you invest your money and get you the returns you want.

Have you reviewed your rents for your Clapham & Brixton Investments?

It's nice to hear that rents are rising of course - this article found its way to my inbox:

http://www.express.co.uk/finance/personalfinance/667849/Rents-rise-uk-new-landlord-stamp-duty-tax-takes-effect and I thought I'd take a moment to write to you to let you know what you can do to improve your property investment returns in light of this news that new taxation istaking effect and rents are rising.

I had predicted this would happen to a great extent once the tax returns for would be filed at the end of the 2017 tax year (mortgage interest relief is reduced in 2017), but it seems however that many investors are upping their rents due to the increased costs in the rental sector. It's therefore important that you take advantage of increasing rental prices also, even if you haven't bought recently - here's the how and why.

Recent changes:

3% stamp duty surcharge on second homes (so basically any investment property) - this adds a whopping 3% to the purchase price, which of course means that investors will have to put more money into the property to begin with. This carries a cost of course, not just the extra 3% of the purchase price, but they will have to find the money, so borrowing costs will increase and naturally there will be an opportunity cost also. The stamp on a £400,000 investment property in Clapham for example will now be £22,000 instead of £10,000. That would mean an extra £12,000 on to a mortgage and at a BTL mortgage rate of 4% that would mean an extra £40 per month. "Not that much" I hear you thinking, but all in all investors are in it to make their investment work for them, they won't swallow these costs for the tenants! If you therefore assume an average £1500pcm flat will go up by £75-£100 anyway just because of increased annual demand, inflation and so on, it will now probably be worth closer to £1650!

Wear & Tear relief is now a thing of the past. Whereas in the past landlords have been able to claim 10% relief on their total gross rent, this cannot be done anymore. However it has been replaced with a "new fixtures" relief, so any replacement of items that do break or wear out during the tenancy can be offset. Not sure how this will work out, very much property dependant I would have thought.

Energy efficiency - from 1st April 2016 tenants can make reasonable requests for the landlord to make improvements to the energy efficiency of the property. My take on it is that this is a bit of a storm in a teacup, because the litmus test for "reasonable request" is that it must be able to be funded with no cost to the landlord... Nonetheless, more red tape means more work, and when landlords do work, they will want compensating for that, they're not putting their money on the line for no return! If your property is in band F or G then you are liable for a fine unless improved and re-inspected (from April 2018).

Section 21 - A load more protection for the tenants from "retaliatory evictions," the so-called "getting rid of troublesome tenants." Nobody wants tenants that complain every 5 minutes about repairs, but the law is really designed to protect a tenant from being given notice for asking for reasonable repairs. Don't get caught out though, if you want to serve S21 to get the tenants out for say a refurb or a higher rent you can't have any outstanding repairs at the time of serving the notice otherwise the notice is deemed invalid and they can stay on (they still have to pay and behave themselves according to the terms of the contract of course, it's not a get-out-of-jail card for non-payment of rent).

Right to Rent - More red tape, landlords are now working in partnership with the border patrol to ensure the tenants are legal in the UK. Fines for non-compliance are severe though, be warned!

Mortgage interest will not be fully deductible from the 2017 tax year onwards, so my thinking is that landlords that are geared to any extent will be passing on some of these costs to their tenants. Most BTL properties are mortgaged, so if you are lucky enough to have an unencumbered property you could see your margins increase significantly as you will be no worse off on your tax return.

So there you have it, a brief summary and by no means exhaustive. More work for you the investor, more red tape, and more costs. I predict that over the next few years we'll see some sharp rises in rents when more investors realise the increased costs, especially taxation, so be sure to review your rents. Don't be caught out and be sure you are getting a good market rent at a good occupancy rate. If you are after a rent review for your portfolio - whether in Clapham, Brixton, or a little further afield, I can certainly offer you my assistance. With nearly 15 years of experience of property sales, lettings, management in South London you can be assured of expert advice.

Email me on jeroen@claphampropertyblog.com and ask for a rent review today to make sure you're getting the most from your property. Advice is free and if you do decide to increase your rents I can guide you through the how and when.