50
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INTERNATIONAL PROPERTY DEVELOPER BMV DEALS www.opp.org.uk
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JULY 2009
Y
INDUSTR
How do buyers tend to fund BMV
purchases?
The euro exchange rate is a factor
in the decision making process
for UK investors [in the eurozone].
Those with funds in GBP tend to
PEOPLE
take more f_i nance, hoping the
exchange rate will improve. Banks
will normally of_f er up to 80% of the
valuation or 70% of the purchase
price, whichever is the lower. They
will normally list repossessed prop-
erties at debt, but will look at of_f ers Discount Spain | Taylor Woodrow de Espana is selling 35 units at Valle de Alenda in Alicante from €173,000 - a mark down of 35%
of anything from 20-50% below
that, depending on the location
TION
to sell through their own marketing but with less certainty due to the properties will have an obvious impact
and particulars.
activities and estate agencies. “I have uncertainty over valuations.” on values within the area,” admits
Steve Long, Casacalida Properties heard a lot about independent f_i nancial In Cyprus, agent Ben Randall is Milla. “However, in the case of bulk/
advisers selling homes, but up to now of_f ering a one bedroom unfurnished multiple purchases, it may be that a
DESTINA they have not represented a major apartment at Pyla Palms, Larnaca for greater discount has been applied
sales channel for us,” he says. £67,916 inclusive of legal fees plus and so would not be representative of
As well as selling direct, Long 2% commission (this unit has a bank the wider market. Given that current
observes that banks are using agents valuation of £108,333). In the UK, valuations tend to have a short shelf
and IFAs recruited through previous Gordon Marchant of Simple2rent sold life, developers are not inclined to
relationships or associations. “The a two bedroom f_l at in east Croydon invest in renewing valuations on a
banks are being careful to steer clear valued at £150,000 for £100,000, again regular basis.”
of the well known ‘hard selling’ agents with a 2% commission. Parfait believes the ability of
How is Below Market Value defi ned?
who have historically commanded high In addition to any commission from investors to buy below market value
The word discount itself is the
commissions,” he explains. This is the the developer, investment clubs and - especially second hand stock from
BUSINESS
problem as it is not clear usually
case at CAM, which uses a combination specialist BMV agencies will often distressed home owners - has probably
what the discount refers to - origi-
of its website and “a selective network charge the buyer a f_i nder’s fee. “Some limited the falls in values over the last
nal peak pricing, land registry pric- of agents and investment groups” to investment syndicates may also do a 18 months and he claims such activity
ing originally or for current deals, market its properties.
current valuation, bank valuation
Dutch, Danish and Norwegians are incredibly active. They
or even just developer asking
BMV commissions have the euro and their economies are in better shape than
price. Because of the uncer-
The level of commission of_f ered has Germany or France.
tainty of what a discount refers to
become a key factor. Long claims the Victor Sague, Taylor Woodrow de Espana
OPER
people are erring on the side of
days of high commissions are over
caution and wanting very large
“probably for good” and that agents f_l ip, buying the property very cheaply will help lead the market into recovery.
VEL
discounts in terms of percentage.
typically earn between 1% and 3%. in their own names and then selling it As debate rages about whether
DE
In a very good quality and trans-
parent market here in the UK it is
“Typically around 2% margin is for a slightly higher f_i gure to the end the end of the recession is in sight,
possible to def_i ne BMV in terms
achievable,” says Stuart Law of Assetz, user,” says Parfait. or it’s just the beginning of the end,
of gross yield on UK residential. which has been actively selling BMV So what impact do BMV deals have many agents specialising in BMV claim
Gross yields for buy to let were for some time. “In the UK market it is on the market value of properties the market has almost run its course.
5 to 5.5% outside London until
next to impossible to trade property, already sold? “It is no secret that the “When sales are slower for sellers,
recently and now 8 to 10% can be
buy it in and then sell it on afterwards banks are preferring to lend on their they will compete harder for buyers to
achieved. Gross yield is def_i ned
in the short time frame due to changes own stock rather than f_i nancing new get the deals, be it individual owners,
as the anticipated monthly rent
TING
in the Council of Mortgage Lenders applications, so individual sellers are developers, or banks with excess
times 12 as a percentage of the
guidelines. The maximum total margin now realising they need to compete repossession stock,” Carter concludes.
purchase price. A valuer is then
ARKE
available for property sources such with the banks’ stock as well as the “When buyers are plentiful there will
used just to check what discount
M
this negotiated price represents to
as Assetz and our subagents would developers’ distressed stock,” says Long. not be BMV sales. Simple economics.”
a current RICS valuation.
be between 4% and 5%. The client “This has meant prices in the main The same advice applies to agents
meanwhile would be achieving as appear to have bottomed out.” and investors alike; act now while
Stuart Law, Assetz
much as 10 times this in discount “Transactions on individual CAM stocks last.
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