Wednesday, 12 January 2011

Eleven ways to make money in 2011. #7: speculate on property | Money | The Guardian

Eleven ways to make money in 2011. #7: speculate on property

It'll be hard to go wrong buying within the M25, and there will be money to be made outside it too, if you are predatory

House keys The housing market will be driven this year by the three Ds: death, debt and divorce. Photograph: Corey Hochachka/Design Pics Inc/Rex Features

Someone is going to make a killing in property in 2011 and, as the National Lottery slogan goes, "it could be you." Despite most forecasters predicting falling house prices, look at what the property investors of yore did. They didn't make money in property because they sold it for a lot but because they bought well, and I predict 2011 to be a year you can buy property well.

Let's be clear, 2011 will also be a year you can lose your shirt – and many will. A government report in December suggested that as many as 4 million mortgage holders would be in negative equity if prices fell 10%. The main house price indices confirm that they are already on the slide. It is the people who have got it wrong who will provide many of the deals for those who will lay the foundations to a property fortune.

Investing in any asset is not for the faint-hearted: if you are squeamish, go and find a friendly deposit account. Making money in property requires you to take advantage of others' misfortune. The three Ds will drive the market this year: death, debt and divorce will be the motivators that throw up the bulk of the opportunities.

Geographically, the UK residential market will be divided between the gated community within the M25 and everywhere else. The London market will prosper and almost anything you buy in the right location and at a sensible price will increase in value in 2011. Outside, you will need to follow my carnivorous instincts when I am advising clients and be predatory. Unless a property is seriously cheap and the seller is offering his first born to take it from him, the chances are you will find you are paying too much for something that will be cheaper tomorrow.

This year we will return to the Sarah Beeny school of property investment. Look for something you can add value to. The days of sitting back and watching values rise like barometric pressure are history. Look to convert old pubs. Watch out for commercial properties that were originally houses – they will readily convert back. Identify what people are looking for, check that they can actually buy and then go source the raw material.

On the subject of buyers, forget the literally "poor" first-time buyers. Let the government worry about building for them (which they won't). No one wants to lend to them and they struggle to save the £35k deposit out of taxed income now that they have to repay their student loans. People downsizing have cash and they don't need to borrow.

Abroad, follow Ryanair. Where can you fly for a fiver? Look to buy or rent a second home there. As with the UK, follow the smell of rotting meat and make derisory offers.

Don't forget buy-to-let. It may not be fashionable to say it but income is good and, if you're clever, you should also get capital growth.

Housing expert Henry Pryor was an estate agent for 25 years and now advises high net worth and media clients. More at housingexpert.net

And here are the rest of our 11 money-making tips for 2011:

1 – make things, 2 – get a better paid job, 3 – buy and sell shares, 4 – open your own coal mine, 5 – invest in a high risk fund, 6 – rent a room, 8 – trade in your clutter, 9 – antique furniture, 10 – clinical trials and 11 – sperm and opinions.

Here are Patrick Collinson's best and worst investments of 2010, and Rupert Jones provides tips on how not to make money.

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Comments in chronological order (Total 18 comments)

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  • GerryP

    1 January 2011 12:23AM

    The whole tone of your article is that it is good idea for house prices to keep rising at a rate faster than inflation. Actually all this means is that those who own or have borrowed to purchase property make money for no effort and young people who are not home owners find it increasingly difficult to buy somewhere to live. I do however get some comfort from your analysis:

    Someone is going to make a killing in property in 2011 and, as the National Lottery slogan goes, "it could be you.


    Actually the chance of winning Lotto is 1 in 13,983,816.

    With the changes to the student lettings market from the fee increases, a likely increase in interest rates and changes to Housing Benefit you might just be right.

  • Fafnir43

    1 January 2011 12:54PM

    As someone completely locked out of the housing market, I despise you and everything you stand for.

  • willb42

    1 January 2011 1:17PM

    What an abhorrent article. Its up there on the same despicable level as keeping grain in silos to keep the price up whilst theres famine in another country.
    Also click on Henry Pryors profile photo (is that your real hair Henry), see his article from 28th August saying house price recovery is a distance away, this 'expert' hasnt got a clue.
    2011 is going to be very very interesting for property.

  • Angerofthenorth

    1 January 2011 4:30PM

    The article is about making money, not making the world a better place. I agree that it is all pretty predatory, but sadly this is the way you make money from property. The system isn't nice or fair - in fact it's horrific - but unless the government decides put making this country a better place to live for us proles ahead of a minority's ability to make a profit (fat chance), then that won't change.

    Besides, you may feel that it is wrong to offer someone who is desperate to sell a property a low sum, but they're only in that position because no one else will offer them more.

  • chrysanth

    1 January 2011 7:10PM

    I must confess I haven't read the article, but I feel visceral upset at the title, sufficient to complain. A vision for the collective future of our markets and society isn't something to be outsourced to politicians: it is a collective responsibility. You (author and editor), just shirked it. So much for CP Scott's legacy. And don't bother replying to this post with some claptrap about the adversarial marketplace as I won't read it.

  • chrysanth

    1 January 2011 7:11PM

    What about campaigning for reform of the housing market? Can we have articles on that please?

  • xThadd

    1 January 2011 7:17PM

    @chrysanth

    Why not read the article before commenting? And there are plenty of articles on reforming the housing market in the Guardian.

  • oommph

    1 January 2011 8:03PM

    I agree that there is something really nauseating about the tone here (and I too wondered if he is actually a real person, and I'm one who, despite having strong opinions, is not often drawn to making that sort of personalised comment).

    Anyway, there's a massive inconsistency here. For the UK - go super expensive! For everywhere else - go dirt cheap! From my knowledge of mainland European markets (I live in them), the gains are being made in the sought-after / pricy areas, that's where the population is stampeding too right now (like in the UK). Not the cheap places where nobody wants to live.

    This is a mistake that a lot of Britons have made in recent years (anything cheap in Europe is automatically a bargain rather than just.......cheap, because there is no market) . I am not surprised to see the latest bankruptcy from someone who has tried to earn a living writing about their French barn conversion (Lauren Booth). But I am surprised to see an "expert" doing it. It also means that many Brits thinking "ooh, I'll go abroad, it's cheaper" will quickly find themselves disillusioned because in most places people want to live now, usually because of work or trendiness, it is not.

  • dwcc

    1 January 2011 10:33PM

    Thadd,

    And there are plently of well written articles on making money in the FT. The once great telegraph is where you can read half-baked articles on how to ruthlessly lose money.

  • Inacoma

    2 January 2011 10:51AM

    This comment has been removed by a moderator. Replies may also be deleted.

  • LANDLORDX

    2 January 2011 11:55AM

    @ Inacoma

    And your point is???

    Yes, far better for Brent and Newham Councils to spend nearly £200 million on deluxe new offices for themselves than doing anything about social housing in London

  • NpNp

    2 January 2011 9:14PM

    Speculate on property?
    There's a million flat owners out there that bought off plan and have lost a fortune.
    Go on then, waste your money, especially this year.

  • BoredAardvark

    3 January 2011 9:10AM

    Mmmmm property is always a way to make money. . . were any journalists actually out of short pants in 1990 because they have bloody short memories if they were?

    You remember 15% interest rates and auctions full of repossessed homes?

  • LANDLORDX

    3 January 2011 12:19PM

    Sigh

    I remember the recession of the early 1990s fondly - I bought a lot of cheap property at the time and made good money out of it.

    Recessions are sooooo good for business....

  • RealUKCitizen

    3 January 2011 7:17PM

    @ LANDLORDX

    I started out in 2001 and made a bit before 2008 - that was a good decade. I still can't grasp how the individuals on this board think that buying a property that is for sale by it's owner is heartless and evil. Even knocking the price down as the author suggests is actually helping to keep prices reasonable. We can't win.

    Property is a good investment, and government policy and the open market together make it so - the 'greedy landlords' label often pinned to us is very amusing to me. The commentators on these boards seem to think a landlord is only socially acceptable when they are not a landlord.

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