It is clear that there are some difficult times ahead.
No decision making or leadership from the Government, little help from the lending market to help aid the economy - and even less to help the property industry.
Given that property plays such an important part in our economy (and our pensions - just remember the billions of pounds invested by pension funds) this could be seen to be very worrying.
However, blind panic is not the answer.
Revaluing your assets now, is a little like brewing up in a chocolate teapot – predictable outcome – and messy - and a lot of lenders are doing just that. We hear more and more desperate stories of lenders reducing or removing facilities, amidst the chaos of concern over reducing values.
Yes, values are lower than they were a year ago and they will also increase again! If you’re not planning to sell and can maintain the repayments, then don’t worry about the value now. The property market has always been cyclic. It seems that the lending industry has a very short term game plan (and memory) and in property, that more often than not leads to tears.
However, not everyone’s the same. prop-search.com has recently advised and subsequently been instructed by a well known lender to ‘manage’ their way through the coming months, by offering short term, cheap, ‘no strings attached’ tenancies on an empty building, rather than selling it in the current market. This strategy is being adopted by a number of clients, with no tenancy exceeding 12 months, thereby allowing us to review the market and ‘adjust’ the deal as required. The tenancy agreements are kept plain & simple – not designed to catch anyone out, nor as a long term solution.
So far this year (2009), we’ve let and generated income for clients on over 100,000 sqft of commercial property. The deals aren’t easy and the fees aren’t great! – but we are managing the problem ‘together’ and when things eventually do improve, then so will the deals.
Where buildings are empty, agreeing a short term let (as little as 6 weeks), can help address paying void rates, potentially ‘buying’ another 3 to 6 months rates holiday once the short ‘tenancy’ comes to an end. This will be especially important if the Government proceeds with its rates revaluation in 2010 and increases rates further.
Again, prop-search.com can help advise on this.
These are examples of the ‘industry’ working the problem itself. But wouldn’t it have been better if the Government had dealt with this themselves – abolishing the void rates payments, reducing stamp duty and reinstating capital allowances.
Instead we got a 2.5% reduction in VAT and the lowest interest rate for 315 years, which in many cases, isn’t even being passed on to the very people it could potentially help!
Apparently we all need to save more – but with interest rates on savings at a big fat zero, why would we?
Conversely, if you have the funds available, now looks like a good time to invest in property again! Potentially cheap to buy and with many yields close to (and in to) double figures, it makes sense to invest. Now whether the we’ve hit the ‘bottom’ or not is open to debate, but anyone who can guess to within 10% of ‘the bottom’ is either lucky or psychic – so now is a good time to start looking for the right deal. But the property market (seemingly unlike the financial market that funds it) is NOT short term. Generally one needs to take a 10 year view - not 10 months! And the same tips apply now as they have always done! – look at the nature of the building, its location, specification and flexibility of use.
There are an awful lot of investors out there, waiting to pounce on the property market again – and as they do, confidence will begin to be restored and values will increase.
prop-search.com is also ready. (Take a look at www.prop-search.com) We are able to help people and companies manage their commercial property requirements through the difficult times and in turn prepare for better times ahead.