Property : A Mayfair flat is an emerging market asset

Wednesday, Sep 14 2011 by Isaac

"Mayfair real estate is an emerging market asset class," said Renaissance Capital deputy chief executive Andrew Cornthwaite, who got the idea from an investor deciding what to do with $1 billion (633 million pounds) made selling emerging market assets.

"I asked him what he was buying now," Cornthwaite told the Reuters Russia Investment Summit. "He said: 'I am buying coal in Mozambique, I am buying oil in Kurdistan, and I am buying buildings in Mayfair'."

http://uk.news.yahoo.com/mayfair-flat-emerging-market-asset-184248601.html

I have to admit I have been reading TMF property board with interest for a while, with the likes of Bertee and King Of Nowhere talking up the property market etc

Recently Cliff D'Arcy said in a recent TMF article that it was a bad idea to buy a property in London or the South East.

I personally don't think such a general remark is valid as it deepnds on a number of factors such as location, cost of finance, if it is an investment then the ability to rent it out & potential yield etc

As readers will know I am a big fan of investing in companies that pay decent dividends & think it is a good strategy to make money in the stock market.

But I think it is a better strategy to buy a property in Central London, put about 50% deposit on the flat/house and take out cheap finance and then rent it out so the mortgage payments are easily covered.

For sure property is expensive compared to the 1990s, but when you look at it from a cashflow perspective especially in Central London where property can be let within days or 1-2 weeks at good rents that comfortably pay the mortgage then it does'nt seem like such a bad proposition.

House prices have been expensive for yonks.

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But the truth is there are still a lot of people out there who just can't buy their own house/flat, with the high rents of the past year that is even more evident as I am sure most of these people would rather buy then rent.

We have had a recession/credit crunch since 2007, infact the worst financial crisis since the 1930s yet prices in London drops 10-20% only be bounce back strongly a year or two later. We have been in an environment where the banks won't lend with good rates unless you have a good credit record and a good deposit.

By no means am I bullish on house prices, but I am not bearish either.

I do think though if you can put 50% deposit on a Central London flat in a nice location that can easily be rented out then it's not a bad investment in the current inflationary environment especially when cheap financing is likely to last for a while.

The expenses you can deduct from letting income (unless it's under the Rent a Room scheme) include:

letting agent's fees
legal fees for lets of a year or less, or for renewing a lease for less than 50 years
accountant's fees
buildings and contents insurance
interest on property loans
maintenance and repairs to the property (but not improvements)
utility bills (like gas, water, electricity)
rent, ground rent, service charges
Council Tax
services you pay for, like cleaning or gardening
other direct costs of letting the property, like phone calls, stationery, advertising

Filed Under: Property,

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3 Posts on this Thread show/hide all

	Isaac	16th Sep '11	1 of 3
http://citywire.co.uk/money/uk-rents-soar-to-all-time-high/a524623 The cost of renting in the UK rose at a record rate of 1.2% in August, hiking the average rent to an all-time high of £713 a month, new research today revealed. This is the seventh consecutive monthly rise and the biggest increase since August 2010, according to LSL Property Services, which offers a range of services to both consumers and mortgage lenders such as estate agency and valuations
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	harryr	17th Sep '11	2 of 3	3
Only one pure London prime property company listed on the LSE. NTA. Company market cap £23M. Profits from just one of its projects should be in the £50M - £100M mark. 75% sold so risk is not far off zero. Site due to finish this month .
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	Isaac	18th Sep '11	3 of 3
There appears to be no let-up in the rental market for potential first-time buyers who face tough deposit demands at a time when wages are rising more slowly than living costs. Jonathan Moore, director of rental property website easyroommate.co.uk, said: ‘In the last 12 months alone, nearly 200,000 more first-timers have had to rely on rental accommodation rather than being able to buy with a mortgage. ‘Lenders’ unrealistic deposit requirements, combined with hefty house prices have left the private rented sector groaning under the strain of demand from frustrated first-time buyers. ‘Such strong competition for limited accommodation is taking its toll on rents, and they will continue to climb for as long as the mortgage markets remains at a standstill.’ John Boyle, managing director of HomeLet, said: ‘Tenants in the Greater London area are stretching their budgets more than ever, not only due to an increase in rental costs, but also rising energy costs.' Over half of London’s renters are actively saving to purchase a house, according to research by furniture rental specialist, Roomservice by CORT. But eight out of ten will be unable to actually buy a property once their current tenancy agreement comes to an end because of high deposit requirements for mortgages. The research also found that 40 per cent of the capital’s renters had been stuck in a rental property for over five years, as buying a property in London is becoming an increasingly difficult task, with soaring rents, house prices, deposit costs and difficulty of obtaining a mortgage, particularly for first-time buyers. Roger Hollis, managing director of Roomservice, said: ‘As the tenants themselves come to terms with the changing face of London’s rental market and find themselves – often unwillingly – renting for far longer than previous generations, it is essential that housing supply adapts to meet their needs. ‘With people having to wait for far longer before buying their first home a genuine paradigm shift is taking place, the full repercussions of which are still to be realised.’ Read more: http://www.thisismoney.co.uk/money/mortgageshome/article-2037746/Rental-prices-accelerate-fastest-pace-year-risen-mammoth-12-London.html#ixzz1YLXVvQ2r I find the London situation quite interesting because there are thousands of FTB's who simply can't get on the ladder and have been forced into renting. So ineffect for them to get on the ladder either House prices have to drop significantly due to higher interest rates (something that could potentially have less of an impact as people build more equity in their homes and therefore become less exposed to interest rate hikes), other reasons could be significant building of new homes or a more relaxed lending criteria. The fact that London house prices remain stubbornly high despite strict lending criteria it makes one think what will happen when the banks loosen up a bit more? Even if prices drop there are alot of FTB's who can then get on the ladder & thus providing support to prices, which is one of the reasons why I am not bearish London House prices but am neutral.
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18th Sep '11

3 of 3

There appears to be no let-up in the rental market for potential first-time buyers who face tough deposit demands at a time when wages are rising more slowly than living costs.

Jonathan Moore, director of rental property website easyroommate.co.uk, said: ‘In the last 12 months alone, nearly 200,000 more first-timers have had to rely on rental accommodation rather than being able to buy with a mortgage.

‘Lenders’ unrealistic deposit requirements, combined with hefty house prices have left the private rented sector groaning under the strain of demand from frustrated first-time buyers.

‘Such strong competition for limited accommodation is taking its toll on rents, and they will continue to climb for as long as the mortgage markets remains at a standstill.’

John Boyle, managing director of HomeLet, said: ‘Tenants in the Greater London area are stretching their budgets more than ever, not only due to an increase in rental costs, but also rising energy costs.'

Over half of London’s renters are actively saving to purchase a house, according to research by furniture rental specialist, Roomservice by CORT.

But eight out of ten will be unable to actually buy a property once their current tenancy agreement comes to an end because of high deposit requirements for mortgages.

The research also found that 40 per cent of the capital’s renters had been stuck in a rental property for over five years, as buying a property in London is becoming an increasingly difficult task, with soaring rents, house prices, deposit costs and difficulty of obtaining a mortgage, particularly for first-time buyers.

Roger Hollis, managing director of Roomservice, said: ‘As the tenants themselves come to terms with the changing face of London’s rental market and find themselves – often unwillingly – renting for far longer than previous generations, it is essential that housing supply adapts to meet their needs.

‘With people having to wait for far longer before buying their first home a genuine paradigm shift is taking place, the full repercussions of which are still to be realised.’

Read more: http://www.thisismoney.co.uk/money/mortgageshome/article-2037746/Rental-prices-accelerate-fastest-pace-year-risen-mammoth-12-London.html#ixzz1YLXVvQ2r

I find the London situation quite interesting because there are thousands of FTB's who simply can't get on the ladder and have been forced into renting. So ineffect for them to get on the ladder either House prices have to drop significantly due to higher interest rates (something that could potentially have less of an impact as people build more equity in their homes and therefore become less exposed to interest rate hikes), other reasons could be significant building of new homes or a more relaxed lending criteria.

The fact that London house prices remain stubbornly high despite strict lending criteria it makes one think what will happen when the banks loosen up a bit more?

Even if prices drop there are alot of FTB's who can then get on the ladder & thus providing support to prices, which is one of the reasons why I am not bearish London House prices but am neutral.

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Property : A Mayfair flat is an emerging market asset

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