It's better than they would have us believe,
Well, house prices have been dropping for five months now which is kind of in line with our expectations. Or have they? I have said for the last two years that people shouldn't believe the statistical averages the papers churn out each month. They display a picture that can and will look very different from the property, street and area you own. ‘Get local' is always my chant.
Do your due diligence on your local area and see what is happening. Only this way will you get a real indication of what your house prices are doing.
The real 40-60% house price drop hasn't changed…
The truth is and the reality of the house price situation is that we've been buying property at or around the same price since January 2009 and since that time the house prices are approximately 40%-60% below the 2007 peak values.
One of the things we've started doing about 6 months ago on our 2 Year cash flows is showing the price variances from 1) Peak 2007 house price, 2) Current valuation through to 3) Actual negotiated and the contract price. The three prices generally display a 40-60% drop in prices of the type of properties we are buying.
I had a question the other day when I said the above at a seminar asking if we sold property at the higher price. The answer is ‘No' we didn't because the properties where these sort of drops were experienced were the city centre and places that were overdeveloped. House prices had been pushed up artificially and we had moved out into the suburbs where overdevelopment and overvaluations were rare.
Drying up supply will settle prices…
Prices are slowly moving towards what I would consider reality and I expect that by Q2 next year they will be settled. The indicators are certainly pointing towards this (as well as no double dip). So if you think that house price decreases will continue you are wrong, they are simply returning to reality and then they will sit for a while until the lack of supply kicks in and the lending returns.
So as an investor you simply need to hold tight, enjoy the superior cash flows and rising rentals. 2011 will be a slow relatively uneventful year before the lack of supply will really take hold.
Call the team on +44 (0)207 923 6100 if you want more details about the current market and how you can still monopolise on it. You still have plenty of time to grab a bargain.
Live with passion,
Brett Alegre-Wood
