Where the market is really heading...
Brett Alegre-WoodChairman, YPC Group
Hey Guys,
I thought I would share with you how the market is changing despite all the negative chatter you may be hearing.
Have a read of this email from James, he is concerned that discounts are dropping as the market returns to normality. I will explain further the implications and more importantly the benefits of this.
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Hey mate,
Just wanted to express my concerns about discounts and where I think they are headed in the very near future.
This week alone, I have had 4 separate developers come back to me and explain either how they decided not to sell/ they have received a higher offer/ they are going to hold out and try and sell them to home owners at a lesser discount ALL despite having signed our Heads of Terms and being keen on getting the first development done with us and starting the relationship! All 4 developments had one thing in common, they were all discounted by 23% - 25%.
I'm getting offered lots of fantastic stock from administrators, the issue with this is (as with most repossessed stock) the fact that RICS are down valuing it hugely, so this means that it's already dropped massively in price and the administrators are not going anywhere over the 15% - 20% mark. I have to agree with them, for instance, Land registry last year shows £110,000 sold prices, they have been down valued to £60,000 and we have 17.5% off that absolute maximum (I have had 4 offers refused already). Best of all is that 2007 prices were £125,000. That's more about 60% discount off the 2007 prices but only 17.5% off the down valuation.
I believe a lot of the above is fuelled by The Mortgage Works (TMW) bringing out an 80% mortgage product as this has directly seen the 2nd hand market discounts drop from 20% - 25% to 15% - 20% in a matter of days!
Regards,
James De Souza
Director of Property
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Ok So first of all this is great news. I know, I know that many property experts will tell you the bigger the discount the better the deal but it's just plain rubbish.
The discount is simply a reflection of the market, the bigger the discount the more uncertain the market, or it put it another way the less demand in the market or the oversupply in the market. If the we have perfect demand and supply then I would be out of business because their would be enough sellers and enough buyers to buy and sell everything at the asking price. Of course we know that this is never the case because we don't live in a perfect market.
So here's your dilemma?? To Wait or Go!
So discounts decreasing mean simply that the market is getting better and slowly but surely picking up. Lowering discounts mean two things: Firstly either mortgages are getting better, as in Loan to Values are getting better and therefore less deposit is required. Now mortgage products are only getting better because of the next point. The market in the UK is getting better, all the figures that continue to come out are better and the general feel is that the worst is over and we will be on a long slow recovery.
So now is the time for you to take action, but you'll need to accept less negotiated discount.
You'll still need your deposits, gone are the days of legal no money down deals, don't believe that you can still do it. Unless that is you want to pay bridging fees at about 1.5% per month for 6 months and take the risk that you cannot remortgage. No sane professional would allow you to take this risk unless you last name was Trump yet many people are gambling with these type of structures.
So if you are still holding out for the days of big discounts, then congratulations you will be one of the many people in 5 years that will be saying 'I wish I had of...'
I suggest that you give the team a call now on 0207 812 1255 and we'll help you plan the next 5 years and then work on implementing the plan so that in 5 years time you are saying 'Thank Goodness, I bought when I did...
Live with passion,
Brett Alegre-Wood
PS. James has mentioned lower discount administration stock. Weâ??ll be sourcing a number of developments over the next year that fit this category, most of itâ??s new or near new but I feel that there is a tremendous opportunity because we can secure it at the right price.
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