#SQFT 1: Ignorant vendors stand out as the market bottoms out

images-2It could be suggested that the market has bottomed out.

While many dinner party opinions could flood the comments here – this is more a personal feeling from the coal face. Newspapers report the past, conversations are never positive (because we love to complain) and economic factors (Brexit, Trump, Euro, interest rates etc.) are ALWAYS present. No, this is a feeling of personal sentiment on price corrections from the hundreds of properties I see that are now looking like reasonable value again in comparison to the gambling madness of the bull market we have experience over the last few years.

“Why aren’t they selling then?”, is the common retort.

Because, now buyers are not blinded by competitive bids and gazumping – we have the opportunity to actually recognise if the property has errors, weaknesses and undesirable factors (on a busy road, no outside space, in poor condition). When this becomes evident, the actual value of the property is the value a buyer is willing to offer – whether or not the vendor accepts this as reality is another matter. Tabling an offer though is so vitally important as so many other factors come into play with a transaction.

the actual value of the property is the value a buyer is willing to offer

On a beautiful house I saw yesterday – the family struggling to sell (even at a reasonable price) may be blighted by the fact that they overlook a less than salubrious council estate. Yes, buyers don’t want this – lets call a spade a digging implement. However, a little more digging revealed that the family are French (relocating) and have owned the house for about ten years. Given this, the churning brain tells me that firstly, they will have realised a very decent profit on their asset (though may not have doubled their money as many believe is their right in property ownership in central London). Yes, currency fluctuations may mean that the are getting less Euros back into BNP Paribas – but this was their home – and it has proved a good investment. They may take an offer – remember, term start dates are not flexible.

Now – it is at this stage where those disconnected and the tail end of bad advice are beginning to throb like a vestigial thumb. Another beautiful house I looked at yesterday has huge planning potential gain (though complex, don’t get too excited). The buyer would get slaughtered by CIL, SDLT and any vague remaining profits – but welcome to property development 101. Fag packet sums on exit values, disposal, debt costs, development costs and fees gave me a purchase figure roughly 15% higher than the vendors paid 9 years again – which checked against (loose guideline) indices, is where the market is over that period.

Put the gun down. Just a messenger.

Yes, central London has seen explosive growth of in excess of 25% in some recent years. But it has also dropped a little. 15% is about the growth rate expected given gains and losses.

In 9 years, the market has not risen 67% that the vendors are “asking”.

Even on a busy road.

#sqftblog

This story is listed in: London Property market, Property development, Property Investment, Property Market

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£20,308,750

GDV to date

£970,308

Average acquisition

£1,562,212

Average GDV

£351,115

Average Equity raise per deal

£343,558

Average profit per deal

97.75%

Average ROI on equity

11

Deals completed

8

Currently units in progress