This Week in Property: The Latest News (13th May 2022)

Take a look at what our CEO Gill Fielding has to say about this week’s property news…

Premium Bond Madness

I’ve just read that the amount put into Premium Bonds this year so far is a staggering £2 BILLION – has the world gone mad? Premium Bonds are like savings but who gets ‘interest’ is random – meaning that the vast majority of people don’t get anything. What happens is the amount that would have been paid out in interest is combined and paid out to a few each month as winnings like the lottery. The winnings are normally small – about £25 and only 1 in 2.5 million pay outs are £5k or above. The estimates are that on average and overall people end up winning enough to get about 1% on their money each year – so less than you’d get in a standard savings account, which in itself is pathetically low but at least you’re certain to get the interest money.  Of course what is attractive about Premium Bonds is the possibility of a big win so it’s got the allure of the lottery or gambling but your capital or stake is still there. I guess it’s Ok for a bit of fun but I wouldn’t put a lot of money in there but sadly figures show that unless you put a lot in there (there’s a £50k max) you’re unlikely to win and in the period 2007 – 2021 16 million people didn’t win anything at all – and 98% of those had less than £1k in savings there.  It’s a real contradiction – you need to put a lot in there to win anything but if you had £50k (which would mean you had a higher chance of winning) you could get a far higher interest rate than 1%. I think Premium Bonds just prove that the average person doesn’t really know very much about money and how it works and that’s sad. With £50k you could easily make yourself financially free by investing in assets.

Fundamental Economics

Most of us are aware that the UK base rate rose to 1% last week and that inflation is about 7% and many people are up in arms about that but as I’m older I remember times which were much worse! In 1975 inflation was 24% – yep that’s 24% and the average mortgage rate was just over 9% and I started my property investing journey just about then. Now we have a base rate of 1%, inflation of 7% and an average mortgage rate of between 1.7% (fixed rate) and 1.8% (variable rate) and as far as I’m concerned that’s magical and amazing – and incredibly cheap!!! Its not a case of the good old days – rather the bad old days – and I think it’s good to have that long term perspective – it makes our current circumstances look rather positive.

Good riddance to POA

Have you ever looked at a property and notice that you can’t see any price only to find those irritating words POA (Price On Application). I think this is snobbery of the worse kind. It’s as if there is a club you’re not invited to and the suggestion is that if you have to ask you can’t afford it. It’s an irritating method that estate agents use and I think its smacks of elitism. But no more!! The National Trading Standards office has now said that all property listings have to have a price on and quite right too. You wouldn’t go into a supermarket wanting to buy a melon to find you have to go the checkout to get a price. The price is fairly and transparently listed on or by the melon. Gone are the days where property purchase was an activity reserved for the privileged and gone are the days when estate agents can play silly beggars with the prices and the customers. Hooray!

New trends emerging?

As a property investor I’ve always stayed well clear of central London because prices there can be distorted by international investors and just that kind of ownership means that the area is not like any other in the UK. But maybe there’s a new trend emerging which might float my boat a bit more because the number of properties being bought in central London postcodes by international purchasers is now dropping. In the last 4 years the number of international buyers buying properties in prime central London has fallen from its height of about 55% of all purchases to 27% and that’s even lower if we include greater London where it has fallen to 23%. This is good news for the UK property purchaser. If you are a property investor then prices might be more affordable and if you are a residential purchaser and want someone to live then these properties and these areas are becoming more normal and there are people and activities around at weekends and there are some social benefits to that. All in all I think this is a positive trend emerging and in one way I hope the International purchasers don’t come back!

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