Hi everyone, I’ve made it to Friday on my week back off furlough! Hope you’ve all had a good week too.
It’s been a bit of a mad week in for us; there had been plenty of enquiries which is great and shows that investors are back to it. There have been so many of you loosing out on properties which have sold for well over what you were expecting though, which has been frustrating. I have likened it to the shops reopening – lots of investors getting excited about being able to attend an auction or visit a property just like we are seeing queues outside every shop this week!
Demand is also outstripping supply, and although new properties are coming into the market there is still a lot less than there was.
Do you want to be an early adopter in this scenario?
Paying above the odds now is not going to do you any favours long term. You’ve got to keep looking at properties at a business transaction and not get emotionally involved. If you’re relying on bridging finance then we need to ensure that the GDV works, and you need to be mindful that if you are refinancing we will need that GDV to work, even if there is a market readjustment over the next 6 months. Now is the time to take advantage of opportunities by making sensible decisions, not to get drawn into a bidding war to win the prize.
With any development loan, whether that’s a refurbishment bridge or ground up, you have to be able to work back from your GDV and have enough profit in the deal to make it work.
How is this affecting valuations?
This is an interesting question! On one hand we are seeing properties selling for in excess of the asking price or auction guide price, and on the other we are still seeing cautious valuations. Valuers are always going to be cautious, and they do have to rely on sold comparable property prices so where sales are only going through now they won’t be available to use for about 3 months. They will also have a potential future down turn in the back of their mind, so they will not want to push the boundaries of what is achievable. Time will tell whether we can bounce back from this quickly, and whether prices continue to rise but I suspect that things will start to calm down over the next month or so. I am not expecting a sustained rise in prices.
Enjoy your weekend, and as always if you have any questions then please give us a call!