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Saturday 22nd of November 2008
December 19, 2007

Quick Property Buying sector adds new dimension to UK housing market

by Gill Montia

Molae Properties, the property purchase company, has published a report that has been commissioned from David Stubbs, Senior Economist with the Royal Institution of Chartered Surveyors (RICS).

The work is an independent analysis of the impact of the fast-growing “Quick Property Buying” sector on the UK housing market.

It highlights recent changes in the buy-to-let property investment sector and describes Quick Property Buying firms as an evolving response to higher financing costs and their effects on rental yields.

The report estimates that 300 Quick Property Buying firms already exist. They make money by offering homeowners who need to sell a property a rapid service, in return for a discount on the market price of their homes.

Once the transaction is complete, the property will be sold at the market price, or let.

The reasons why property owners need a quick sale vary but predominantly sellers are in arrears with their mortgages and in danger of repossession.

The RICS expects repossessions to increase to 43,000 in 2008 and because Quick Property Buying companies provide a way out to distressed sellers, they could have a significant impact in a housing market downturn, by providing an additional source of demand.

The author of the report believes that operators in the sector hold a positive view of the UK housing market and for this reason they “provide a previously unseen source of demand within the UK market during slowdowns, with activity further ramping up at the first sign of recovery in housing prices and activity”.

Most of the firms are “using over-the-counter buy-to-let mortgage products” and “the reduction in transaction times versus the mainstream market is not as significant as might be imagined by prospective sellers”.

However, the most established and professional firms have financing agreements that “often allow exchange of properties in a matter of days”.

Also, financers tend to greatly reduce deposits once they are convinced that the company is purchasing a property at a discount so that “firms will be able to make multiple purchases even if they are relatively poorly capitalised”.

At the same time, the on-going credit squeeze could limit the abilities of some Quick Property Buying operators and it is possible that the current strong growth in the sector will be followed by a period of consolidation.

The report concludes that while “‘Quick Property Buying Companies’ are a new phenomenon and the evolution of their industry and its impact on the market is full of uncertainties … their presence adds a new dimension to the market which is sure to change its character over the coming years”.

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