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Posted in Markets by Carl on January 20th, 2009
There are two major pieces of news that will be interesting to people considering buying a holiday home or investing in the Larnaca region of Cyprus.
The first is that from 31st March 2009 Easyjet will be flying from to Larnaca from Luton. Single flights look like they start from £41.
The second is that A Russian conglomerate called the Boema Group is applying for planning permission to build a €800million Disneyland holiday resort according to OPP magazine.
Scheduled to be the largest ever single investment made on the island, creating around 3,000 jobs,the project is likely to be built on leased state land near the UN buffer zone between Turkish and Cypriot lines around the Larnaca – Famagusta boder. The investors were reportedly looking at Serbia to locate the project, but changed their mind after a Cypriot delegation highlighted Cyrpus’ political stability, EU membership and year round sunny weather.
Christodoulos Papadopoulos, director of Boema in Cyprus, believes that his company has struck a deal with Russian tour operators, which plan to deliver an extra 500,000 holidaymakers from Eastern Europe alone. Alongside this, analysts believe the government is likely to speed up the approval process to complete the ‘Disneyland of the Mediterranean’ project ahead of Cyprus’ six-month European presidency in 2012.
Good news for those who have bought or are about to buy in Larnaca!
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Posted in General information by Ash on January 8th, 2009
No. 4 Cyprus – An Island On The Up
For the third year running ‘A Place in the Sun’ has carried out a survey to find out where it is that people are looking to buy an overseas property, via their website and visitors to their exhibition in 2008. Of over 1,000 responses Cyprus falls into the top 20 again and has risen 2 places since last year to being the 4th most popular destination. Unsurprisingly the top of the list was dominated by Mediterrean countries – those classic second-home and retirement destinations that are close to friends and family in the UK.
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Posted in Financing by Ash on January 8th, 2009
The Bank of England has cut rates again, this time by 0.5% to 1.5%. These are truly historic times with this being the first time that rates have fallen below 2% since the Bank of England was founded in 1694. Is it enough? My guess is probably not, and I would expect the market to react as such.
However, I think that it is a sensible step for now and that there will now be pause for the economy to catch its breath after the substantial cuts we have seen since the cuts started in October and wait to see what effect these cuts are having. Any more moves and the Bank of England will have effectively have used all of its interest rate bullets. The only option then left would be quantitative easing (printing more money!) which really would be akin to reloading the gun for one last shot.
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Posted in Markets by Ash on January 8th, 2009
Abu Dhabi has announced that it will form regulatory authority that will oversee the growing Real Estate sector in the emirate following on from the success of the equivalent authority in Dubai.
As you know Abu Dhabi is a market that we follow closely and indeed feel offers much opportunity in the medium to long term. We feel that the establishment of an appropriate regulatory authority is an important step in the evolution of the property market by improving transparency and trust in the property market. We believe it will provide an integrated framework for rentals and sales that will provide comfort to investors and developers alike.
We await further developments with interest.
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Posted in Markets by Carl on December 15th, 2008
What a couple of weeks I’ve had! With all the talk about UK residential property prices crashing I thought we should do some investigating on behalf of our clients, firstly to see if it is true and secondly to see if there is value to be had.
Before we trampled the streets, Ash and I spent two weeks conducting some desk research where we thought the value might be. Initially we thought the secondary market with distressed sales at auction might be a good place to start. We quickly found it is a very time consuming task and potentially expensive with no gain (you have to do all your research and employ a solicitor to conduct all the searches in advance of the auction – i.e. you have to be ready to exchange if you win in the bid and you might not!). Also if we are looking on behalf of our clients apart from the time involved, we are not doing anything they couldn’t do themselves. It’s also a very slow process so we’d only be able to satisfy one or two clients a week! Additionally there is new government protection in place to postpone the repossession process for another 6 months. I think this part of the market has not hit the bottom yet!
After a chance meeting with a friend in the industry my attention was quickly drawn to the New Build market within the M25 principally. The reason? Well as you’ll be aware there was an explosion of new build over the last two years which, as much of it nears completion, has coincided with the credit crunch and the global recession. With a lack of liquidity to support the purchase of the massively overly inflated prices that were being asked by developers there is a lot of unallocated stock available. Developers have seen their land bank values reduce dramatically, they have breached many of their banking covenants and their share prices have subsequently tumbled. In short they need cash more than profit at the moment! If a development is near completion they need to recoup costs; if it is a long way from completion it will be mothballed and won’t be started again until the market picks up in 2010! So we have a moment in time when completed new build will be sold very cheaply; but as we have found out it is only available to those people that can buy in bulk and move very quickly. The individual investor does not really have much of a chance.
With this in mind we have been on the streets of London visiting tube stations I didn’t even know existed! We have seen in excess of 40 developments from some of the biggest names and some small independent developers. One thing is for sure that unless you visit the development in person you have no idea whether it is a good investment opportunity or not. Only one Developer has a brand that means something – i.e. a consistent quality that is carried from one development to another. Others have both excellent and very poor developments in their portfolio.
Having completed the task (for the moment!) of visiting sites, we have whittled down our choice to a small number of developments that we are currently negotiating on for our clients. If we can’t get the deal we want we will keep searching until we do. What we now know is that whilst price and location are very important drivers of rental yield and future capital growth, (as sure as eggs are eggs prices will rise it’s just we don’t know when because there is a fundamental issue that demand exceeds supply!), quality is also a very important factor. My goodness there has been some terrible developments built over the last couple of years!
I’ll keep you posted on how we get on……
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Posted in Financing by Ash on December 12th, 2008
Over the last couple of months we have seen the Bank of England cut UK base rates from 5% to 2%. So this is a cut of some 60% in borrowing costs. There is talk that we will see further cuts in the next couple of months as the central bank tries to stimulate a clearly suffering economy.
Obviously those on existing tracker rates (whether residential or BTL) are benefiting but what is the position for new borrowers? A couple of months ago a major UK lender was offering prospective customers with a 25% deposit a mortgage rate of 4.79% as a two year base rate tracker and 5.04% for a two year fixed rate. Now the same lender has withdrawn all of its tracker products and its two year fixed rate is now at 4.54%. So the tracker which would provide the most benefit both now and in the future (if rates are cut further) has disappeared altogether and the fixed rate has come down by 10% or so against the backdrop of a 60% fall in base rates!
The banks are clearly using the current interest rate climate to rebuild capital reserves which have been decimated by recent events. As I have stated previously investors looking to refinance property portfolios or selectively acquire property should look at current financing as “bridge finance†until markets return to normal.
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Posted in Developments by Carl on November 25th, 2008
Angelos Angelopoulos has re-done the animation for the Q Business Park in Larnaca, Cyprus. This follows the successful launch of the project in October. I think you will agree it really is going to be a spectacular building which I am sure will attract visitors, art lovers and photographers from around the world. It will also be the tallest building in Cyprus!……
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Posted in Financing by Ash on November 21st, 2008
There is a common view that the Buy to Let market in the UK has died and that the principle reason for this is a lack of appetite amongst banks to provide mortgage finance. Whilst it is correct that a number of banks have withdrawn from the market, Mortgage Express, who were one of the largest providers have withdrawn from this market completely, there are still several lenders that are active in the market.
Rates may be slightly higher and Loan to Values (LTV) may be slightly lower but for deals that are well priced financing is still available. If you assume finance of 65-70% and an interest rate of 6.5%-7% you will not be disappointed.
Whilst the figures above may not at first seem appealing, as Dipen has noted in his blog yesterday this my be a once in a generation opportunity to acquire capital assets at sensible prices thereby allowing any acquisition to be cash positive even at current interest rates. The finance available at present should be seen as “bridging finance†until finance markets return to more normal levels and when looked at in this way the investment decisions that you make now will start to look very astute.
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Posted in Markets by Dipen on November 20th, 2008
Opportunity in the UK?
The cyclical nature of investing has never been better highlighted than the conditions that are prevalent in the world today. At our launch in February, we highlighted the overheating in the UK market in our document ‘Property Investment – The Facts and The QIS Approach’ and stressed that caution was the keyword for the UK. We predicted that a major fall resulting in negative growth was likely, although the speed and size of the fall has surprised us all. However, the key point from our document was that professional and long term investors should focus on:
1)Â Pursue an Investment Strategy and do not be deterred by sentiment. Rely on Fact.
2)Â Investing is for the long term.
3)Â All markets are Cyclical so focus on the bigger picture and not just the short term snapshot.
4)Â Never ignore Change.
So what are the facts for the UK? Well as we all know, liquidity in mortgage markets and particularly the Buy to Let market has dried up, deterring buyers and forcing sellers to delay their moves or substantially reduce their asking prices. The immediate effect of this has seen a dramatic fall in the average house price in the UK with falls of around 16 to 20% being the norm. However, this sense of gloom and panic has created potential opportunities in the new build and secondary market as the double whammy of the virtual shutdown of the mortgage market and housebuilders being perilously close to breaching their banking covenants has forced prices close to a ‘generational’ low in my opinion.
So how do I arrive at this conclusion? Well the macro outlook for property, particularly in the South East, has not materially changed. In fact if anything, it has worsened. There will be a huge undersupply of homes in the future as housebuilders cancel projects in the current climate, resulting in the delay of homes coming online once demand returns from buyers. In fact with the number of new homes coming online in the South East expected to drop by two thirds over the next two years, any perceived overcapacity will quickly disappear and will be followed by a sharp rise in prices as property once again becomes more valuable. The current demand constraints seem to create an oversupply of property and this has lead to us being offered substantial discounts on both new build and secondary market properties within Greater London. These discounts are driven by hosebuilders and owners needing cash rather than profit and are truly creating generational opportunities.
So what next? Well as I said in our newsletter we are focussing on discounts of around 40% on market value and we are seeking projects that create instant equity BUT also are cash positive. By this I mean that we intend for the yields to comfortably cover any financing costs, even at today’s inflated levels. By the way, we have access to BTL financing options and even though the rates are higher than before, these should almost be viewed as medium term bridging facilities, as rates will normalise in the future – remember even this is cyclical! Ash will be talking about this in more detail soon.
As in so many cases, the best time to buy is when all around you are fearful of doing so. It is impossible to call the bottom of the market, but I feel that in terms of the value from bulk deals, we are very near the bottom. There are many people hoovering up property at these current levels and we intend to do the same.
If you would like a copy of our Property Investment report that I refer to above then please email us at information@qis.uk.com.
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Posted in Accessible overseas property by Carl on November 3rd, 2008
The fully accessible complex we are building in Larnaca continues at a pace. It’s good to know that our partners in Cyprus, the Quality Group, really are committed to developing not only a superb product but also to making sure that they really do understand the needs of the disabled community. I think it’s great that they have decided to put a large proportion of their staff through a Disability Equality training programme which will be run by Agnes Fletcher (part of our Q Well-being team and a leading proponent of disabled rights around Europe) in early December. For my part is great to see that our partners really believe in what we are trying to achieve. I think it is important that they really understand that a requirement a disabled person has from a building needs to be combined with the correct terminology as well. Well done Quality Group!
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