Steve Hemingway

Pensions seem a great thing. The government encourages pension savings by allowing us to save out of our gross income and by exempting pension savings from income and capital gains taxes.

So far so good. However, pension saving bears a huge burden of regulatory compliance. There are high costs associated with employing armies of actuaries to administer and oversee pension savings, and there are heavy opportunity costs of restricting savings to those areas the government deems suitable for pension investment.

I don't think that anybody really knows every rule that governs pensions. There are, as Google puts it 'about 11,200 pages' on the HMRC website that mention the word 'pension' or 'pensions'. I understand that early drafts of the overview of the so-called pensions simplification that came into force in April last year ran to over 3000 small-type pages.

It is not permitted for pensions to invest in residential property, and it is not permitted for pension equity to benefit from significant gearing, and it is not permitted for pension savings in close companies (fewer than ten shareholders). As far as I am concerned, these are not minor restrictions.

It is, it seems possible to invest in overseas companies, and these companies can invest in anything they like, including residential property. They are also permitted to borrow. It has been suggested to me that if I can 'round up' ten investors who would be interested in investing alongside me in a company, for example in the IoM, we can gear up this company and invest our capital in some suitable investment. These investors could invest some of their pension savings, as I plan to, or invest any other savings.

My preference would be for one of the offshore development vehicles set up by Chinese companies to benefit from a reduced Chinese tax charge. These are typically registered in the BVI or similar tax-haven countries, but investing in any Chinese property exposure seems good to me.

If you are interested in joining such a syndicate, please get in touch. I am not offering total democracy, but I will certainly be happy to discuss exactly what the moneys are invested in. As you have probably guessed, I have been in discussion with a pensions specialist about this kind of structure.

I have also discovered that, in principle, the requirement to liquidate the pension investment and purchase an annuity can be deferred at least until age 85. This removes one of the other major reservations I have about increased pension savings.

Property Snake is a cool site. It scrapes data from other property portals and tracks reductions in advertised prices. Rightmove and the rest will flag a property as having had a price reduction, but will never reveal by how much. Of course most large reductions just reflect unrealistic initial pricing, but there is a distinct difference between the number and size of price reductions in Cardiff and that in Hertfordshire.

As you might guess, my interest is in selling a flat in Cardiff. The sad news is that I am unlikely to get any more for it in pound terms, than I paid for it five years ago. So much for demand outstripping supply, and so much for the reports by Kate Barker and others that we need to build more homes in the UK.

Property Snake seems to source its data from Oodle. I have not come across this site before, but it seems to be really rather good - it aggregates advertisements from some very disparate sources - certainly local papers (Herts24) and from eBay. I am not sure it collects them from Gumtree and Craigslist - if it did it would really be the first choice for finding something locally.

This article by Jim Pickard suggests that all is not well in the BTL market place.  BTL lending doubled in 2006 compared to 2005 at a time when property prices were hardly moving, certainly in sectors dominated by BTL activity. Repossessions are now rising too.

My own view is that this is bound to continue. A lot BTL investment is driven by the following cocktail:

(i) large cash payments made by developers to BTL investors 24 hours after completion. These have been developed to get around the problems of the previous gifted deposits where mortgagees agreed to lend on a 'market value'  that was higher than the actual sale price of the property,

(ii) specially-discounted deals provided by lenders for the short term. These provide very low-cost finance at the expense of high arrangement fees and expensive reversion to expensive 'SVR' mortgages,

(iii) tenants with bad credit risk being persuaded to pay above market rents for poor quality properties,

Good quality advisors can put together deals for property investors which avoid these problems, but the typical investor probably doesn't have the ability to discriminate between the good, the bad and the ugly. Because no investment product is being offered, the whole sector has nothing to do with the FSA.

The credit crunch has hit the high street The UK love affair with shopping has proved to be a key factor in the economic prosperity and urban regeneration of the last decade. But the global economic downturn, along with a shift towards shopping online, has seen a High Street slowdown that is having a knock-on effect for the flagship shopping centres that in the past have often been centrepieces of urban regeneration. "There's far more capacity out there than ever before and demand is relatively flat," says retail sector analyst Richard Hyman of Deloitte, a consultancy, warning that retail-led urban regeneration may be over for good.

This post on skyscraper city describes the content of the programme. There is a link to the downloadable audio file in the post. It is well worth listening to.

Local authorities are desperate for the revenue they receive in business rents and the notorious Section 106 planning gain payments so they have huge incentives to grant planning permission for retail schemes, and in some cases will give away car parks and similar land owned by the council as an incentive for the developer to agree to the scheme, greatly to the advantage of the developer, and of the elected officers, but not to the advantage of the long-suffering council tax payers.

I spoke to Fred of Resident Broker. The website is down, but he is very much up and about. Resident Broker is a specialist BTL mortgage broker. They seem to know what they are doing and gave me a picture of the market. Essentially the banks are punishing new borrowers for the sins of their forebears. The *best* deals available now for BTL are from Birmingham Midshires, with 5.89% fixed for 3 years with an astonishing 2.5% initial fee. The best tracker rates are Bank of England base rate + 3.75%. Nobody will lend at more than 75% LTV, and *the only* no-fee deal is from Northern Rock is offered at 8.04% - practically a credit card rate.

Banks will not lend on HMOs any more, they are reluctant to lend to student lets. It seems practically impossible to get any finance for property investment. This sort of situation is going to result in some real bargains coming onto the market.

The situation is improved by the existence of people like PJT Finance who can structure deals to achieve much higher levels of gearing than banks officially are happy with as long as 'BMV' (below market value) prices are available. Having been deeply sceptical about the whole BMV concept in the past, I now can recognise that with new finance being impossibly expensive compared to existing finance there will be sellers who may be prepared to sell at any price to "de-leverage" (un-gear?). There are a number of sites offering 'BMV leads' - i.e. the contact numbers of desperate home owners facing repossession. This is maybe not the sort of bottom-fishing that everyone is comfortable with, but with the prospect of a house being sold at a no-reserve auction by a bailiff instructed by the mortgage lender (which, as we saw above, has no compunction about taking it's pound of flesh at the point of lending) I can see why some owners might choose this option. A couple of sites offer this service - Network Property Buyers and 24-7 Property dot Com. You can see a consolidation of leads at this forum at Singing Pig.

I have been investing in UK property for about thirty years. I have made some money, and lost some, but net I'm ahead. I don't claim to be a genius, or a 'guru', but I am looking a lot smarter now than many buy-to-let investors who took on excessive leverage with short-term and expensive financing. I have also stayed out of the market for the last six or seven years, which has helped a lot.

The market has changed. You probably noticed, but you probably didn't crunch 'the numbers'. I have been looking at the prices at which houses sold at auctions in the SE over the last few months. In order to do this I accessed the Essential Information Group's website, using a trial short-term login. Some basic information about past and future auctions can be obtained from a login, but full property details require a subscription.

I plan to buy some UK property in the new year. I could leverage up my expertise if I could join forces with some other investors to form a syndicate. You could be passive or active members of the syndicate, but you cannot become a member unless you are prepared to restrict investments to older houses with good yields and prosperous locations; you can also not become a member if you think that gearing is some kind of magic.

I could either set up the investment through a limited company (my preference) or through some other structure, like an LLP.

If you are remotely interested in joining forces then drop me a line to steve.hemingway@gmail.com. At the very least we could share access to research resources such as the Essential Information Group.

I am thinking of buying leads which will give contact details of people facing repossession and looking for landlords who are prepared to buy their house and agree to a tenancy so they can continue to live there and pay rent (sale and rentback, sale and leaseback - a classic business trick for obtaining liquidity that is now more and more popular with individuals who borrowed to much). These leads cost money (the sellers of the leads spend a fortune on Google Adwords - just do a search for 'quick sale' or 'quick house sale' and see the sorts of sponsored links that appear).

If you want to hear more, call 07712 176618.