Property Industry News

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China Overseas (0688.HK) +2.9% at HK$1.42 on plan to sell construction business, which will then seek separate listing. BOCI positive on move, says spinoff “will streamline China Overseas’ operations and allow it to focus on the more profitable property business”; keeps outperform call on stock as it trading at 51% discount to NAV of HK$2.79/share. Still, stock’s further upside in short term likely limited due to caution toward China property shares; immediate resistance at 10-day moving average at HK$1.46.(RLI)

Source: newratings

THE travel giant Thomson will tomorrow move into the estate agency market, making foreign properties available for people walking into high street shops for the first time.

Properties in Cyprus, Portugal and Spain will go on sale, with customers able to take a virtual tour of individual homes using computers in the travel agent’s 750 stores. A survey of 1,600 people by Thomson, the high street’s biggest tour operator, revealed that 55 per cent of Britons want to buy abroad, either as their main residence or as a second home.

The company estimates that Britons have already bought about half a million foreign properties, half of them in Spain.

Thomson research showed that Portugal was the most popular place for people aged between 40 and 50.

Miles Morgan, the company’s marketing director, said: “Thanks to the growth of low cost travel, television programmes about living abroad and people looking to invest in property rather than pensions, owning a home abroad is now a realistic option for lots of people. The travel industry has changed massively over the last few years. To survive in a very competitive market, travel agents need to broaden the range of what they sell. This is a natural step.”

Mr Morgan added: “This is a ground-breaking partnership that for the first time makes overseas home ownership available from High Street travel agents.”

Sean Tipton, from the Association of British Travel Agents, said: “Many more travel agents are looking into new areas and it makes sense for them to start selling property abroad.

“If you look at places like Spain, where property prices are traditionally lower, the trend for holidaymakers to buy property is growing. Thomson are well placed to get involved because they are the experts at selling holidays in these places.” Thomson aim to cash in on the growing market for purchasing foreign homes by making the process easy for would-be buyers. As many as 66 per cent of people it surveyed did not know how to get information about properties abroad.

Diversifying its business may help Thomson in its battle with online travel retailers, who now offer flights, accommodation and car hire at low prices over the internet.

Travel agents say that their personal approach makes them more attractive to customers but industry experts believe spreading out into other areas will help to save the traditional high street shops.

Thomson’s survey showed 38 per cent of people wanted to buy abroad just so they could have their own place and avoid traditional hotels and resorts. This figure rose to 50 per cent among 16-24 year olds.

A spokeswoman for Thomson said: “We find that the most popular place for Scottish people to holiday in is Spain and so we’re pleased to be offering Spain as one of the areas where people can buy properties.”

The company expects to sell about 1,000 properties during its first year in business, which is being run in conjunction with overseas property firm Parador Properties.

TOP TEN HOT SPOTS

THE top ten destinations for British people buying property abroad are …

Costa del Sol (Spain)
Côte d’Azur (France)
Costa Blanca (Spain)
Costa Brava (Spain)
Balearic and Canary Islands (Spain)
Algarve (Portugal)
Madeira, Azores (Portugal)
Italy
Cyprus
Greece

Source: What Mortgage magazine, Scotsman

BUY-TO-LET is back in the news, but for all the wrong reasons. This month, the Department of Trade and Industry shut down several schemes that promised “and failed” to make millionaires out of investors.

Rivals quickly moved to condemn the cowboys in their industry. Inside Track, one of the biggest companies in the business, went so far as to put forward its own four-point plan for regulating the property investment sector.

But against the background of a stagnating UK housing market, some property professionals are questioning the way that many of the remaining schemes operate.

Marketing material tends to be long on the potential to make money and short on the pitfalls. An Inside Track marketing leaflet tells you “how to make a million in property investment – even in a falling market”. The website of PropertySecrets.net, an agent for overseas property aimed at UK investors, proclaims: “Buy-to-let and property investment. Maximum profit “minimum risk”

At the moment, such claims do not have to be substantiated, as they would if made by firms which came under the aegis of the Financial Services Authority. In fact, the Inside Track promotion’s boast that “last year we created over 200 property millionaires’ relates to the gross value of its investors’ property.” The company admits that the net value, after deducting the debt taken on to acquire the assets, would make their clients’ wealth look far more modest.

Ray Boulger, of John Charcol, the mortgage adviser, says that such claims are misleading. He says: “To be a property millionaire properly, you need to have net assets of £1 million. In the boom markets of three to four years ago, that was possible. In today’s quieter market, that is much harder.”

But the criticisms go much deeper than the promotional material. These buy-to-let companies typically aim to negotiate special deals with developers of flats or houses. In return for tying up the sale of a large chunk of a new development in advance, the agent will obtain a “discount” on the purchase price. This sum, often from 10 per cent to 20 per cent, should then be passed on to the buy-to-let investor.

Someone who has lined up a mortgage to cover 85 per cent of the value will then own a property with minimal outlay of their own. In a rising market, with a tenant covering the costs of a loan, this so-called off-plan buying is a licence to print money.

Lee Grandin, of Landlord Mortgages, a specialist buy-to-let broker, describes it as “a high-risk, high-reward, high-loss strategy”.

He points out that new properties tend to be sold at a premium anyway, while a valuer’s figure can be out by as much as 10 per cent. Taking account of either of those factors could wipe out your discount. Not only that, but when the property is eventually built, an investor’s flat will be coming on to the letting market along with all the others in the development. This “investor flooding” could make it harder to find tenants.

John Heron, managing director of Paragon Mortgages, the third largest lender to the market, is much more blunt. He says that such schemes are “fundamentally about property speculation and not about long-term investment in private rented property”.

Less than 5 per cent of the property his firm lends against is new because professional landlords find it difficult to let. “Much of the new property is higher value, whereas much of the demand is affordable,” he says.

Not surprisingly, such criticisms are rebutted by operators of buy-to-let schemes. Tony McKay, chief operating officer of Inside Track, says: “Our activity is completely transparent. We negotiate a discount with a developer and pass the whole of that discount to the investor.”

Such discounts are genuine, he says, because the developer saves on certain marketing costs by selling to an investment club, while a pre-sale reduces his risks. A valuation 12 months ago of 2,600 properties bought by Inside Track investors showed an uplift of £80 million on an original cost of £395 million, according to Mr McKay.

He admits that the subsequent flattening of the market may have left some property below the pre-discounted price, but he says that the discount provides insurance against falls in values.

Source: Times Online

Instant Access Properties – the UK’s largest provider of discounted property to individual investors – has announced today that the market value of all UK and overseas properties purchased by its 4,500 members has now exceeded GBP1 billion.

The announcement comes following an internal evaluation which found that overseas property purchased by members has reached a market value of over GBP299 million, whilst UK property values exceeded GBP629 million. Combined sales added to the capital appreciation of all properties has produced a total value well over GBP1 billion.

Jim Moore, Chairman of Instant Access Properties said: “We are delighted to have reached this very prestigious milestone. For any company to have produced sales figures in excess of GBP1 billion is a real achievement but it is even more impressive when you consider that we have only been in operations since 2002. Instant Access Properties has challenged the conventional way of investing in property and our members have made over GBP150 million of paper profit as a result.”

Instant Access Properties currently facilitates sales of nearly eight per cent of all new build apartments in England alone and is the largest facilitator of investment opportunities in the UK and internationally for private investors.

Commenting on the landmark achievement, Anthony McKay, Chief Operating Officer and former Managing Director of Chestertons said: “This great achievement confirms our position at the very forefront of the property investment market and reaffirms that there really is no better time to be investing in off-plan residential property.

“The changes in pension laws in April 2006 – which will allow people to invest in residential property through their pension fund – will also have a significant impact on the market next year and allow our members to benefit further from the unique access to discounted deals that we source for them.”

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