Monday, 18 April 2011

Property - The best time to buy is now

Don't buy property its about to crash - I've been hearing this from the so called experts for the last five years. But guess what? if the naysayers keep this up for long enough then there will come a time when they will be proven right. That could be tomorrow, a month from now or 10 years from now.  Despite the worst recession in a lifetime, or at least since 1930, property prices have held their values fairly well.  Has property crashed? No.  Has it moved downwards slightly? Then the answer is yes.  But let's put this in context.

Everything that we invest in moves in cycles. That is it has ups and downs. If you drew a circle on a piece of paper and hold it in front of you at the top is the high. At the bottom the low. Over a period of time any investment will complete a circle (cycle) of highs and lows. But interestingly the low in each investment is normally higher than the previous low. The highs tend to go higher.  This applies to property, commodities, shares etc.

Today and every day for the past five years I've been hearing that property prices are going to crash. But what is meant by a crash? If you think property prices will go back to where there were twenty years ago then I'm afraid you will be very disappointed. Inflation and wage rises over the last twenty years will ensure prices don't go that low.

Let me give you an example: A few months ago I was out for a drive with my step-father, who is now in his 80's.  We passed a house with a for sale sign.  He told me he used to own the house many many years ago.  He had bought it for £2000 and sold it for £4000.  He thought he had done really well doubling his money.  Later I checked the for sale price on the internet and the property was listed for £269,000.  Since my step-father bought and sold the property there have been several recessions and investment cycles. Even now house prices have reduced a little as a result of the credit crunch but I would consider it extremely unlikely that the price of the property listed for £269,000 would reduce to just £2000.

History shows us that despite house prices moving up and down on average houses will double in value every ten years. We know that everything moves in cycles and we are heading towards the bottom of the current cycle in the property market. However, if you can get mortgage financing then the best time to buy is now. 

No matter what investments you hold, nobody can predict the top or bottom of the investment cycles. The best most investors do is to read the 'change' signals and hope to get into the investment just after it hits the bottom and out of the investment when it has just hit the top of the cycle. An investor then rides the market until they see the signals for the next shift upwards or downwards.

The property market has been in a downward movement for about four years.  Indications are that we are nearing the bottom of the property market and may already have started the move towards the next boom market.  If we have reached the bottom then buying the house my step-father used to own for £269,000 would be a shrewd investment and you would then be in a good position to ride the next boom.  If we haven't reached the bottom then if you bought the property and lost a few thousand in value the losses would soon be wiped out as house prices start increasing again. Either way I believe now is the best time to buy property. If history repeats itself, and it usually does, in ten or fifteen years time the house will be worth over £500,000. Would you be happier waiting for it to reach that level or buy it now while it is worth £269,000. 

I know what I would be doing.  I'd be buying now at today's prices

Friday, 1 April 2011

Bond Scheme Runs Out of Money

As a landlord, when letting a property I take the risk that I will have a good tenant, capable of looking after the property, paying his/her rent on time and being a good neighbour.  Unfortunately, no matter how many checks I do I often  can't tell until the tenant is in the property how good they are going to be.

To protect against damage and rent arrears Landlords ask for Bonds.  I know that for a lot of tenants the cost of a bond is something they cannot afford and so over the years Bond Schemes have started to help tenants get into properties.  Schemes, such as, Solas Bond Scheme run here in Wales by the Welsh Assembly has been around for many years and is an organisation I have used for several years.

It concerned me last year when they started revoking guarantees on existing tenancies. Claims submitted to them at the end of last year were ignored.  It took months of emails and phonecalls to get the paperwork through to make the claim.

Since January, I have been making weekly phonecalls on progress with claims. After many excuses the claims were finally approved but not paid. So for the past few weeks I have been chasing every week for payment.

Today, I received a phonecall, only after threatening legal action, advising they have run out of money and can't make the payment until the new financial year.

What credibility does an organisation have if it can't pay it's claims.

Will I be taking on Solas Bond Scheme applicants again?  No
Will I recommend them to another landlord?  No