Property developers are out of stock

Brett Alegre-Wood
February 8, 2009

Investment News

Well, it appears that we've reached the tipping point in the property market.

Developers out of stock

A number of our developers are now completely out of stock. This is not an isolated case; many of our developers are at critically low levels or have simply run out. The means that everything they sell will need to be built and in most cases they will only build once they have an exchange in place. It further reinforces my theory that we've “turned the corner” in terms of property prices at the middle and lower end of the market.

Developers out of options

Adding to the out of stock challenge, many are now at the point where they must gain permission from their funders (the banks) before they can sell property at the type of discounts that we are asking for. In a lot of cases these funders are not allowing them to sell these properties – rather – they're making them look for higher offers. Valuers are still extremely cautious, though, because properties are still being down-valued more than any realistic market drops. This has worked in our investors' favour so far, but it's now gotten to the point where we're at the absolute minimum. Developers are preferring to sell direct than to do a deal that would see them losing huge amounts of money.

The off-plan property solution

The solution to the lack of available and a suitable stock is to turn to off-plan. That's where you buy a property before it's built. In most cases they need exchanges in place before the banks will lend them the money to actually build the property, so to get sales they are talking with companies like ours to get the first 10% or 20% of each development sold.

As an incentive to these initial investors, they will be offering some great discounts off the current values. This is your next opportunity – one that will become more and more available over the next 2, 3 even 5 years.

Looking at all of these factors and the monthly increase last month in HBOS figures by 1.9% it all leads to good news for those investors that bought over the past 6 months and even better news into the future.

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