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Women In Business
Women in Business
Where there’s muck - there’s brass.
That old Yorkshire saying was never more true than today. It came to my mind when I was dribbling in front of my screen wondering with what words to start a treatise on a subject close to my heart - how to profit from a downturn.
 I refer, of course, to the housing slump; as slump it now certainly is. I have always been somewhat more optimistic about the housing price trend than many a national media journalist but then they don’t get paid for writing good news.
The downward pressures, which I shall be discussing as and when they become relevant in later paragraphs, are countered, I still maintain, by the overall and inescapable fact that the UK does not have enough dwellings to go round.
Let me qualify that - UK does not have enough good dwellings of the type buyers require. That is an important qualification if one is to make money from the current misery.
 In short, I think there is again money to be made from buying up cheap homes and renting them out until their price has recovered sufficiently to turn you a tidy profit.
But not quite yet.
My wife and I did this in 1991 and the eventual sale of the property in 2005 brought in some five times the return the invested sum would have made had it followed the FTSE.
1991, you may be old enough to recall, was a couple of years or so into the last housing slump. I see the same price collapses happening now as happened then. The only ingredient missing then that has contributed to this slump was lenders offering cheap mortgages to people whose credentials they had not thoroughly checked, or which they had ignored.
Now we see news like the recent British Bankers’ Association’s finding that the number of mortgages approved in May was 20% down on April and less than half the approvals of the same time last year.
Note this refers to approvals, not applications. There is still a demand out there, though that, too, has dropped, but would-be buyers are frustrated by tighter mortgage conditions and so the result is the same. Fewer sales and yet lower prices.
According to Dee Ellison of Braintree, Essex based agents New Vision Property Sales, “Mortgages are tougher to obtain. Banks are being more careful not to lend over and above people’s ability to repay. In fact, banks should never have loosened this requirement. But people who cannot get the over-high mortgage they could have wangled this time last year are only a small part of the market - regardless of the news headlines. Nevertheless, sellers, particularly of first-time buyer properties, must trim their expectations to what their market can now afford.
“Supply is being further reduced by sellers’ costs. It takes an average of £15,000 to sell one home and buy another. More people now look at their existing home, work out what improvements £15,000 would make and decide to stay put. Some look at the same conundrum another way - that if they can’t sell for at least purchase price, plus annual inflation, plus £15,000 then it’s not worth selling.”
Painful contractions
So now that the banking system has turned sour and banks have stopped lending on these silly deals, the overblown housing market has contracted. It has contracted back to normal, in my opinion, an opinion borne out by my other estate agency acquaintances.
 Many of them accused urban centre builders for most of the ‘homes don’t sell’ headlines. Builders, they say, are now unable to sell new-build properties at their usual premium prices. They’ve had it too good for too long. Sue Moore of agents East Anglian Property Management is typical:
“Developers created demand by offering guaranteed rents for a short time or telling buyers to expect unrealistic rents. I have many instances on my books of small house and apartment owners trying to sell because they just couldn’t get the rents they were led to expect. In the resale market their properties are worth less than they paid for them only a couple of years or even a few months ago. Now developers themselves are finding that potential buyers have woken up to their tricks and their new-builds are sticking on the market.”
Those remarks are an excellent preface to my next opinion. Soon there will be money to be made in buy-to-let but not with the cheapest property you can find. Flats are the main cause of oversupply-led price drops. If or when I went back into buy-to-let, I wouldn’t touch them. I’d buy a house.
More on page 2..
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