The Art of War: 62% Capital Growth Since 2008
Dear Investor,
Nationwide today reported a 0.1% rise in UK property prices during September. As a number, it is statistically insignificant and doesn’t alter the short-term static trend or the uncertainty currently in the market. As we have previously said the cooling market is a good thing for investors as it lessens competition and allows for negotiation (something which is much harder in a rising market). This further strengthens the position of buyers of distressed assets, something Bold Spirit has used to the advantage of our investors over the past 3 months.
The banking crisis remains a significant problem in the Irish Republic which is becoming ever clearer as the Irish economy continues to struggle despite severe austerity measures introduced by the government. The Irish finance minister, Brian Lenihan, said this morning that Anglo-Irish Bank was too big to fail – where have we heard that before?
“The bank had grown to half the size of our annual national wealth, so clearly the failure of a bank on that scale would do huge damage to the local economy here in Ireland,” he said.
When put into perspective, the numbers are alarming: Ireland’s debt to GDP ratio will now rise to nearly 99% this year, which is well above Euro zone limit of 60%. It also has a huge deficit – more than 30% of GDP this year, including the cost of the bailing out the banks. Compared with the Irish we are in a reasonable position.
The UK, Ireland and the rest of Europe are not out of trouble yet however and there is bound to be more pain to come. With low transaction volumes in the property market, lower mortgage approvals and a rise in the supply of property for sale negative sentiment is likely to prevail – which is great news if you are investing now.
As Warren Buffet points out; “Be fearful when others are greedy and greedy when others are fearful.”
Further, Sun Tzu, in the Art of War states, “when the enemy attacks; retreat and when the enemy retreat; attack.
In relation to markets, whether property or stocks and shares, it is generally the amateur investor, spurred on by the media and the fear of missing out, who buys close to the top of the market. Clients of companies selling UK new build city centre apartments during the boom are counting the cost today and professional investors are being “greedy” and attacking. For instance a client of Bold Spirit purchased a new build apartment for £74,000 when the original purchaser paid over £170,000. He has now achieved a 62% capital gain over two years with a return on cash invested of 249%.
Opportunities to attack and be greedy remain today and as the financial crisis continues to unwind, professional investors will become increasingly active in the market. At Bold Spirit, we have seen a significant increase in UK and overseas investors wishing to buy whole developments or blocks of units. The time to buy is now, not when the media and taxi driver tell you it’s a good idea.
If you are interested in learning how to buy good quality investment property at discounts and with yields only obtainable by investing in distressed assets, then you are most welcome to come to our free seminar at the Victory Services Club on Seymour Street, London at 6.30pm on Thursday 14th October. Please click here for further details.
Best wishes,
Dominic Farrell
