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  • Property-a-holics

    Winners and losers in the property market



    It's certainly interesting times in the property market at the moment.  Lots of uncertainty and varying opinions on how it is all going to pan out.  There is talk of interest rate rises, a property "crash", and other negative happenings.

    Here are my views on the winners and the losers in the property market going forwards in the near future:

    Winners

    Cash buyers
    Those that keep their powder dry and seek out opportunity
    Those that have an equity buffer or cash buffer
    Those who have a Plan A, B, and C.

    Losers

    Developers who have stock coming to market
    People who have purchased off-plan
    Those looking to buy, refurb, and sell
    Those who sit and wait to call the bottom of the market.
    Anyone in negative equity and/or negative cashflow
    Those with large portfolios of low value properties
    Those who need to sell urgently or sell with vacant possession
    Those who don't crunch their numbers properly
    Those who do not take advantage of the very competitive mortgage rates we are currently enjoying.
    Those doing R2R SA and SA as demand drops off a cliff or prices have to be dramatically reduced to fill rooms.
    Those with no Plan B.

    There has been an interesting article this week about how developers must have another exit strategy other than sale:

    Andy Reid, director, intermediary and network at Oblix Capital, said:

    “We have noticed a trend that, while the prime units on a development are often sold quickly, there may be others that are hard to sell and, if an alternative solution isn’t found, a developer could be subject to default interest on the development loan – which can be very expensive.

    “Developers who find themselves in this situation have a number of choices.

    “They could refinance to retain the properties to rent out themselves, aim to sell to investors as a buy to let, or arguably the quicker and easier option is to buy themselves some extra time to sell the remaining units, with a development exit bridge".

    Full/source article 

    If interest rates go up, it will hit smaller developers first, as their margins will be slimmed even further due to higher borrowing costs.  Cash buyers will take advantage of securing deep discounts from distressed smaller developers and those who cannot sell.

    My list was non-exhaustive.  What would you add to my two categories?

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    "Losers

    Those looking to buy, refurb, and sell"

    ive gotta disagree on this point, the downside of uncertainty at selling point is offset by the advantage of reduced buying price

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    It's fine to disagree!  For clarification though, I meant people who purchased a few months ago with the intention to sell in a few months time.  I fear they may struggle without significantly dropping the price, but of course, that is only my opinion and happy to be proved wrong.  All speculation on my part based on things I have been hearing from people who's opinion I respect. Smile

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    But prices have been going up - at least they have around here. Unfortunately they have dropped where I was selling.

    I don't think your opening post considers the geographical variations. For example, after selling my southern property I will have 10 rental properties. The highest valuation is £180k, so that might be considered a large portfoli of low value properties by southern standards, but I don't see any reason why I should be a loser.

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    The point of my post was to spark commentary to tease out the real winners and losers - I just shared my thoughts to get the ball rolling.  Of course the UK is made up of thousands of micro-markets and sweeping statements can therefore never be made. Smile

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    As the man with one arm said ... “I poked the bear and lived,”

    :-o
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    Losers - Those with large portfolios of low value properties

    Interested to know why you think these will lose? And what are you considering as low value?

    Are 80-100k terraced houses in north england considered low value?
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    Slowly working towards financial freedom

    I was thinking less than that.  I went to Belfast last week to spend some time with Landlord Debt Advisory and they said that nearly all landlords in distress due to Section 24 were coming from the North.  They were landlords with low value properties in poor quality areas.  This somewhat goes against the various claims that highly leveraged landlords in the south east would be the ones who were most affected ....

    My belief is that poor quality areas and poor quality stock always suffer the most during any down turn, but that is just based on anecdotal evidence and my own 15 years of owning rental properties in both the north and the south east ...

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    So really nothing to do with the value or quality of their properties but instead the business model they have chosen, excessively leverage, insufficent profit to cover the costs etc.  Not that they can be found at fault for the effects of effectively a retrospective tax.
    Such landlords suffer disproportionately as having chosen to enter that sector of the PRS they have ,when things get tough, an asset that is very likely to be more difficult to sell and so lose even more resilience from their business.
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