Unique Property Bulletins

The latest members’ bulletin on the Unique Property site lists some interesting items, but what really interests me is the way prices have come down for certain types of property.

I have over the years been featuring barns for conversion in Wales. I dont know why it is, but there seem to be more barns west of Oxford than there are to the east. For a while Devon was riddled with barns for conversion, and the number turned into an avalanche after the last foot-and-mouth scare. There are still barns available in Wales. The trouble is I think they are going to be available for a long time as they are priced well over the odds.

Some of the barns available in Wales cost £200,000 in their unconverted state. That is a ridiculous price. Compare that with a barn in Kent with a massive roof that looks to be in pretty good condition which is on the market with a guide price between £50,000 – £70,000.

There used to be a shortage of woodlands for sale, but that has also changed. There are woods for sale in the south all the time, and once again, prices are keen. A small site of approximately one hectare, again in Kent, is up for auction with a guide price of around £10,000.

There is even a double available. Half an acre of woodland with a barn shelter which might be developable.

Churches are on the market in ever growing numbers. When I first started the Unique property site there weren’t that many churches for sale. In fact, back then, everyone wanted a church they could convert into a home. Now the churches for sale are those that have already been converted. However, there is a rather nice Methodist chapel in Kent that is for sale at a very reasonable price. It looks rather nice, with some nice timbered beams, and would make a lovely home.

I am constantly being told that prices are still rising in London and the South-East but I cant see the evidence. In fact the latest Unique bulletin shows just the opposite. I think it is time I dusted off the old Auction Index to see how things are going. I suspect we may find that prices are at last sagging their way to a more affordable level. I’ll keep you posted.

john

Cheap Property for Sale

Cheap Property for Sale

Everybody wants cheap housing at the moment, so where is it?

First, let’s have a look at the regions.

In the North-East one of the cheapest areas is south of the Tyne, with Sunderland coming in pretty cheap.

On the other hand, if we come further south to the East Midlands the cheapest area is apparently the City of Nottingham. Everywhere else nearby is significantly more expensive.

Cheaper still is the North-West with Blackburn apparently the cheapest area.

Wales is cheaper still, but if we then move east into the West Midlands prices move up again, where they are slightly more expensive than the North-West.

Humberside has come up in the world with prices similar to those of the West Midlands.

I am skeptical of these figures. They certainly dont compare with what I see on a daily basis. That is borne out quite obviously when we come to East England. Maybe the prices in Peterborough are well up on most of the previously mentioned regions, but throughout East Anglia house prices are static, or dropping, and they do not represent value for money.

One of the big problems with all these figures is that they have to relate to something. Most people think I’m being silly when I say that the most important concept in maths is the equals sign. But when it comes to valuing something, money has no value on its own. It only has value as a means of exchange, in short, to get a deal, you have to have both sides happy with the equation. The equals sign is what joins the two sides. If there are inequalities then you dont have a deal..

So if there is not much well paid work in a region then there are not the pay packets to justify high house prices. In places such as East Anglia you also have large distances between big centres so that travel to work is expensive. With the current price of petrol that counts. Translated into simple maths that comes out as [not much money = low house prices].

As we come further south prices go up. However, that is not the whole of the story. The cheapest flats in the country are listed as being in Wales. The cheapest terraced houses are also listed in Wales. That of course is rubbish. There are terraced houses all across the north of the country with prices barely above £50,000, and such houses can be picked up for £30,000 without much trouble. And if the cheapest price of a terraced house in Rotherham is £69,000 then all I can say is someone isn’t looking.

These stats are not just wrong, they are plain silly. If you want cheap housing it can be found, but at a price represented in other ways. You wont find much well paid work about, or indeed much work at all, in cheap areas. Lincolnshire remains cheap, so does East Anglia. Wales is far more expensive than it should be. You can buy a derelict barn for £200,000. That’s insane for Wales.

Meanwhile there are bargains all over the place. You just need to be patient and to be clued up to the auction situation. I shall be looking into cheap deals in the auction market over the next few months. I may even start a cheap-as-chips section to the Unique Property Site. We’ll see how things turn out.

In the meantime I still maintain one of the cheapest ways into the housing market is to buy a de-commissioned pub, especially in the North-West. Some of these pubs have three-bed accommodation above, and some even have six bed flats upstairs. That means the pub could turn into a very big house or four reasonably sized flats. It’s a good way into the housing market and your pension at the same time.

In the last few months there have been several pubs advertised through the Unique Property Site at figures below £100,000. Many could have been turned into four flats. Even if you spent £10,000 per flat you could end up with four dwellings for less than £140,000 or £35,000 a flat (that’s cheaper than a flat in Merthyr Tydfil which is supposedly the cheapest area in the UK). You can live in one and rent the other three. After 25 years the mortgage is paid (by your tenants) and you have the equivalent of £1,500 a month coming in to live on.

In the meantime I will check out the bottom end of the market and get back to you.

John

Murcia

Murcia

The latest craze in Spanish property is the development of Murcia. Traditionally, this region of Spain has had a very low profile. It is the one region of Spain that other Spaniards tend to forget exists. It is not part of a larger grouping. It isn’t part of Andalucia, or indeed any of the other more well known departments. It also has a feel about it that is different from any of the other regions.

It has a very small coastal zone which they call the Costa Calida, or the Warm Coast, and there is an arm of land curving round in a crescent and sheltering a stretch of sea that is more like a lagoon and is called the Mar Menor (the little sea). The region is not well known, but it is getting built up like the rest of Spain’s Mediterranean coast. However, the guts of Murcia are the inland areas.

Traditionally it has been a very fertile vegetable and fruit growing region, and the whole of the flat plain that stretches from the sea due west is laid to truck farming. You drop down from the mountains that act as the boundary between Murcia and Andalucia, and you can see almost all the way to the coast across this vast plain.

Up in the mountains there is snow often beyond easter. When we drove through the area a week or so before easter earlier this year there was a scattering of snow all along the main highway, with great swathes of it covering the flanks of the peaks to the south and east.

In that respect Murcia is a miniature Spain all to itself. One is reminded of that little phrase Quien dice España dice todo, which means, he who speaks of Spain, speaks of everything. From snowy peak to warm sea; from rock to rich black loam; from backwoods shacks to glass and concrete high tech skyscrapers.

Like most Spanish cities, the town of Murcia is very modern. The building has been growing apace over the decades, and the town is ten times the size it was when I first wandered through here in the dark sleepy sixties.

But things are stirring in other ways. Paramount Pictures has chosen the region of Murcia for the construction of a new theme park and entertainment complex in Spain.

The theme park will take four years to construct and will open in 2015. It is to be built on 108 acres of land in Alhama de Murcia just 20 minutes from the new international airport at Corvera which supposedly opens in 2012, and 20 minutes from the beaches of the Mediterranean and the Mar Menor.

The first area called “City Adventure” will include three major attractions. One of them will be based on the film Titanic and will feature a huge reproduction of the ocean liner. This area will also host one of three roller coasters to be built in the park based on “The Italian Job” and a virtual reality feature entitled “Mission Impossible”.

The second area, “Lost Valley”, will feature a water ride recreating a trip down the Congo river along with a recreation of the crypt from Tomb Raider and a rollercoaster based on the legend of Beowulf.

Especially designed for children is the “Woodland Fantasy” area. A more tranquil offering, dominated by a large tree and featuring magic workshops and interactive adventures including one based on the “Spiderwick Chronicles”.

Plaza Futura is the cutting edge technology area which will feature Star Trek and a spectacular recreation of “War of the Worlds”. Not for the faint hearted this area will feature a passage of terror based on the feature film “Paranormal Activity”.

The centerpiece of the park will be an avenue flanked by hotels, restaurants and a shopping centre with a pavilion focusing on the attractions of the region of Murcia and Spain.

Over one billion Euros is to be invested in the park which will employ in excess of 10,000 people during the course of construction. The park will also contain an auditorium with capacity for 15,000 people and the largest convention centre in the region of Murcia capable of accommodating over 3,000 people in its main hall.

Great things to come, and this will obviously pull in the crowds. However, to the north of the city there is an interesting culture. It’s quite fascinating to look down on the broad growing zones from the hilltops, or from a low flying aircraft. At easter the countryside looks like some college scarf unrolled across the ground. You have the different colours of the crops coming into flower. There are the different coloured blossoms of the fruit trees. There is a wide swathe of red, then a swathe of white, then pink, then cerise, as almond changes to plum, to greengage, and so on.

And then there are the wines. They used to be pretty average, and not well known. However, things have changed quite drastically since I first stopped at a bodega on main street Jumilla. Back then I filled my goatskin with the local red, and it was a pretty nondescript drink which suited me well, but certainly had no class or finesse to it.

Some of the old styles still persist here, and one of the reds is still made in the traditional style. It is most definitely an acquired taste. I find it has a kind of mouldy taste to it. Apparently the younger folk in the area dont like it that much either. It is drunk mainly by the older people, who give it a special term which is not usually used in wine parlance – rancid. They dont mean it is going rotten, but that it has a slightly “off” flavour. Most definitely an acquired taste.

Move to the more modern vintages and the quality of the wines is in my opinion very good indeed. There is a clean sweet white wine which I was drinking only the other day. Curiously it is made from red grapes. Unlike so many white sweet wines it is not sickly or mucky in the mouth, but has a clean tang to the sweetness. I have several bottles in my cellar at the moment, but unfortunately I dont have my tasting notes from the rest of the wines I tasted on my last visit to that big bodega on main street. What I can say is that if you are a wine buff then this dusty country town with a definite hick feel to it is a place you should mark in red on your travel map.

Then you should journey north through a veritable Mondrian of orchard colours, pretty in spring, and delicious in summer.

I am beginning to get a taste for Murcia after all these years. I shan’t be settling here, but I will jump at the chance to visit again. It’s also a cheap neck of the woods. The coast is cheap nowadays with the sea-view business firmly lodged in crisis mode, but the countryside has always been cheap.

I also noted that this region is embracing the crisis in useful ways. Town after town has restaurants boasting not just the menu del dia, and the tasting menu, but also a super cheap (7 euros a three course meal with drink) menu crisis. I haven’t tried one, but if the meals back out in the wilds of the valleys in the north of Cadiz are anything to go by you cant go wrong.

john

Property Markets-2

Property Markets

Let’s start part two of this Property Market update with some figures.

In the first place I keep saying that rental costs and mortgage costs are roughly in equilibrium in the UK which means house prices are not about to collapse. That means, in the short term, house prices will remain roughly where they are. By short term I mean less than eighteen months.

On the other hand, if wages relative to inflation keep falling, then less money will be available for housing costs, and rents will come under pressure. That pressure may well start to show itself next year.

If rents come down, mortgage costs will start to look expensive. That will put pressure on house prices. If interest rates rise that will put more pressure on house prices. The medium term outlook therefore for house prices is for them to fall. By medium term I mean anything from 1-3 years.

The long term? Oh come on. Dont ask silly questions. Armageddon; the fairy Tinkabel arrives; take your pick.

Long term is a bit dubious owing to the fact that there are about 4,000,000 interest-only mortgages out there in the UK, As it happens, I have one myself. When the term is up (admittedly some considerable number of years away) what am I and my fellow unit holders planning to do? Redeem the darn thing? I should coco. We will all have to roll it over. And what terms will we be offered? At least my interest only mortgage represents less than 30% of the value of the house. In fifteen years time I hope it will represent quite a bit less. On the other hand, how many out there will be hovering close to the actual fire sale value of the house? Nasty!

According to figures published by various organisations the average buy to let (B2L) investor is getting between 4.5% and 7% gross return. Let’s say the general average is therefore 5.5%. If that’s gross then you have to take off insurance, maintenance, breakages, etc. The Inland Revenue, not noted for its generosity, allows 10% to cover all this. Hold on, if you are only getting a 5.5% return on the investment before taking off 10% for expenses………

Yikes, these guys are running on empty. Now what happens when the Bank of England raises interest rates by 1%? Suddenly you have several million mortgage holders going bust at a rather nippy rate of knots. What’s that going to do to the housing market?

Anyone looking to start a business in buy to let needs to take a course in therapy first.

But interest rates aren’t going to rise any time soon, are they? In fact, there is talk of lowering them still further.

Hmmm. Let’s move forward to 2014. Isn’t that when the Bank of England next needs to do some serious refinancing? If the UK is still limping pretty badly this time next year there is a serious risk that the UK will lose its AAA credit rating. That will put a nasty dent in the low interest rate scenario. It could very well lead to the UK having to raise interest rates to at least 1%. That’s enough to do damage to property businesses that are already running at next to no profit. That would lead to at least the worst B2L businesses selling up, which will naturally lead to more downward pressure on house prices.

We already have few first time buyers in the market. If the B2L buyers dry up, and instead become net sellers, then we have nothing driving the bottom end of the market.

With prices continuing to fall the whole scenario of 90% mortgages will also dry up. What sensible business is going to offer 90% finance on a commodity that is losing value by even 5% a year? In twenty-five months the deal will have gone negative.

90% mortgages are likely to disappear if things continue the way they are. The industry is looking at mortgages ranging between 50%-80%. That’s going to seriously impact on the number of buyers.

If the situation develops along those lines you are looking at a serious house price collapse.

Those of us who bought back in the early nineties dont care. We bought cheap. Our mortgages cost us peanuts, and the rent is still coming in. Even if rents drop 20% and mortgage costs double I still have a comfortable business model. But how many people bought property when I first put out my book on buy to let in 1993?

Nobody asks me to join any think tanks on this problem, but here is a thought.

The banks are going to have to set up some kind of arms-length businesses which will buy repossessed properties, and rent them out bringing in an income to service the debt that has built up on the under-water mortgages. I dont know how this would be affected by the regulations they are bound by, but I’m sure a very simple business situation could be legitimately set up to deal with the huge load of non-performing mortgages. I’ve even got a snappy little name for the new scheme: Rent to Redeem. Is that going to be the next property fad?

As you can see things are set to get much worse. After all, you simply cant have a situation where no-one’s making any money out of the real estate on which the country depends for its wealth. The UK no longer exports to the world. We have to rely on some sort of intrinsic wealth. If that is leaking away, we are all in big trouble.

Next week I’ll cast a gloomy eye on some other countries.

john