Research and Facts
The real estate industry in the UK has been stable for a long time now. The market experienced its peak in the year 2008 and an anticipated growth was predicted in the coming years (UK insights, 2010). However, it faced a down-fall in 2009 and 2010. Consequently, the interest rates also dropped making the return on order on asset investments to be less appealing. The fall in the sterling also made foreign investors to have the notion that the assets in the UK are relatively cheaper. The shares of real estate companies have also dropped in value due to the down-fall of the market. They trade at a fraction of what they used to when the market was vibrant selling at a discount to be more appealing to the buyers. Respected investors, analysts, investment banks and real estate agents have publicly announced that the market is reaching the lowest level that has ever been recorded in history (UK insights, 2010). They however predict that the market would improve and stabilize in 2011 due to the several factors, them being the increasing value of the sterling that has been experienced for the last few months.
It is therefore wise to invest in the real estate industry at this time when the assets are relatively cheaper and the interest rates on investments are low to exploit the market to the fullest. At the present moment one is able to get the best property at the best price or even cheaper than the market value. This is what foreign investors are enjoying currently in the UK market. When the market will stabilize and prices go up these investors might sell their assets and enjoy abnormal profits.
The property of interest is in Marylebone, London, one of the best places to own a home in East London. It is a new house therefore it does not have any accruing rates, taxes or other related fees. It is therefore a prime property that should be considered for purchase. The mortgage of the house will be insured so that in case of any irregularities in payments or default the property will still be secure. The maintenance and repair costs will be minimal as the property is new. However, in case of any imminent repair and maintenance work, the agent has suggested a good repair and maintenance company with competent staff who have been credited to have high quality work in the area at a good price.
The house is a freehold property arranged as three 2 bed roomed apartments. It has 5 bed rooms, a balcony, terrace, mews, a swimming pool and private parking that can accommodate up to six cars. The house is fully furnished and has specious rooms. The property is on a 1 acre land. Each bedroom has its own bathroom with two more each on each floor of the house. The house has a state of the art design that is appealing to the eye. There is constant availability of water. The houses have reservoir tanks which hold 50,000 liters of water capable of being used for three months without refilling. There is also piped gas into the house and electricity. The sewer system of the house and the area is very efficient.
As stated earlier, the property is at a prime area in East London next to Portland place. It is favorable for commuting and shopping at the Marylebone High Street and surrounding malls. The area is also very secure with regular police patrol within the area. Only a few incidences of crime have been recorded in the history of the area. From the research conducted, the rent in the area ranges between £ 8,000 and £ 15, 000 per month depending on the size of the house.
Analysis of Value
The real estate market in the UK has been declining for the last two years. This has resulted to the decline in the value of houses and the number of sales made in the country. Valuation of properties has thus become difficult due to lack of enough data that is required for the exercise. There have been a few sales in the area where the property of interest is located. This has resulted to a lot of difficulty in estimating the value of the said property.
The real estate industry in the UK uses a number of methods to value property. The method that is preferred id the Market approach, although other methods such as the income approach are also used (UK insights, 2010). To be consistent with the traditions of the real estate industry in the country, the market approach was used to value the property.
The market approach values a property with respect to the sales that have been made on properties of the same kind in an active market. This is by far the best method to value an asset especially when there is availability of the relevant data required for the project. While using this approach, several factors were considered to get the true value of the property. First, the status of the industry was considered. Since the real estate industry was not doing well at the moment, the value of the house was expected to be lower than what it used to be in the previous years. Other factors such as market share and profitability and prospects of growth were also considered. All these factors together with the information concerning the sale of houses in the area gave an estimate of the house. The house was valued at £ 5,500,000. In comparison, the house was being sold at £4,650,000. The house was therefore being sold at the best price despite the market constrains that were being experienced in the industry.
In the process of purchasing a house, several documents have to be prepared. These documents are used to show the legality and validity of the transactions which have been conducted to acquire a house. It is very important to have these documents on a legal stand point. Closing forms, contract for deed, mortgage forms, owners finance agreements, purchase contracts and sellers disclosure and just examples of the legal forms that are required in the process of purchase and acquiring a house. All these forms should be drafted using a standard format that is accepted by the state. In this case therefore, the forms should be drafted according to the requirements of the British government. One should stick to these formats because any deviations or irregularities may result to the forms being termed as null and void. The forms should be prepared in good time in the course of purchase.
UK Insights (2010) Economic insights. UK Real Estate Insights, 1(11), 1-33.