Monthly Archives: March 2010

Looking For A Holiday Home And Strong Property Investment?

It is a well known fact that not only the UK economy, but the general world economy is still struggling to recover from the onslaught of a crippling recession. As a consequence of increased financial stress, many people have inevitably had to cut back on non-essential items over the last few years. Now that the shoots of regeneration are beginning to bare their buds however the travel industry in particular is starting to show signs of recovery. As the purse-strings gradually loosen, holidays are once again within the grasp of many.

Allied to the improvement in the tourism sector, those with a little more capital at their disposal are once again beginning to consider investment opportunities. In fact, now is a particularly lucrative time to be entering into investments given the expected growth across the board. Property in the UK for rental or resale purposes is a long-standing wealth accumulator and still holds potential. But the recent crash in house prices and prevalence of negative equity has damaged the pockets of many. The same can be said of those who invested in property in rapidly developing ‘new’ areas such as the United Arab Emirates and locations which notoriously had over-inflated base values such as Florida.

In spite of the horror stories associated with some acquisitions of overseas property, there are also success stories and these are set to proliferate with the shift from recession to growth. For UK investors however one location stands head and shoulders above the rest in terms of potential: Turkey. Due to the sustained weakness of the Pound against the Euro, Turkey has grown hugely in popularity as a tourist destination. This financial advantage over European alternative destinations has been bolstered by concerted efforts by the country to maximise their tourist appeal. This high level of tourism activity equates to great opportunities for renting out property in the country.

Alongside the tourist appeal, Turkey is also an economical stable and increasingly powerful force. With the world’s 15th highest gross domestic product and ever growing levels of foreign direct investment ($21.9billion in 2007) it is by no means the ‘Sick Man of Europe’.

Given the solid economic foundation, high popularity with both tourists and foreign investment and the very attractive exchange rate between the Pound and Turkish Lira: Turkish holiday properties are an incredibly attractive proposition. In addition to the attractive portfolio potential, Turkey is a truly exceptional holiday destination, with enviable weather, geography and cuisine. Overall the area formerly known as the Ottoman Empire offers that which all property investors long for: solid rental occupation, high rental yield, great capital appreciation and a wonderful place to stay when you feel an urge to unwind and spend some of the capital you’ve accumulated through your ownership.

Understanding Forex Indicators: Spotlight Macd

Trading in the forex market tends to be a little confusing when you’re first starting, which is why it’s vital to your success as a trader to understand technical indicators and use them within the framework of your forex trading strategy. Forex indicators assist traders in predicting the direction in which the currency market will travel. Following the indicators will give any forex trader the information they need to work their forex trading strategy. Because of its popularity with forex traders, we will begin with the moving average convergence/divergence (MACD) indicator.

The WHAT? – The MACD indicator sounds complicated so it must be, right? Wrong! The MACD indicator is one of the easiest trading indicators to analyze because it allows you to quickly identify and exploit a short-term trend. Composed of two colored lines, generally red and blue, the MACD forex indicator tells you if a currency is experiencing an up trend or a down trend. The first line, the MACD line is the total difference between two exponential moving averages, commonly referred to as EMAs, whereas the second line is the signal line. The signal line (blue) is plotted on top of the MACD line (red) to show you when to buy or sell.

Interpreting MACD – Now that you have a basic understanding of the MACD forex trading indicator, we will discuss two of the most common techniques used to make a forex technical analysis. First, are crossovers, which are indicators based on when the signal line and the MACD line “crossover” one another. When the MACD line crosses below the signal line that’s a technical indicator that you should sell or go short. If however, the MACD cross above the signal line, that’s a sign that it’s a good time to buy.

Next is the divergence technique, which generally signals to traders that a current trend will end soon. You will notice that the price is moving in the opposite direction of the MACD when a trend is coming to an end. With this technique you must also be on the lookout for positive or negative divergence. Positive divergence happens when the foreign exchange rate makes a new low, but the MACD begins to clime. Negative divergence occurs when the currency exchange rate makes a new high, yet the MACD falls and often closes lower than the previous day’s high.

The MACD is the most popular forex technical indicator because its clear signals are a simple indicator to buy or sell. Additionally this indicator eliminates the need to guess which way the trends are going, because the crossover and divergence techniques lets traders know they are trading in the direction of the trends. If you’ve chosen to use a short term forex trading strategy, you will find the MACD indicator especially useful due to its reliability when tracking short term trends in the market.

When using the MACD indicator, traders should be aware of whipsaw patterns that occur in the forex market. Whipsaw patterns involve a foreign exchange rate heading in one direction, and then quickly moving in the opposite direction. These patterns can cause the foreign exchange rate to fall or surge quickly relative to its position prior to the whipsaw.

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Should Buy To Let Mortgages Be Regulated?

When I was first asked this question, my initial response was ‘of course they should be regulated’. This was partly driven by the fact that I find far too many people investing in buy to let property without doing the level of due diligence on a property that they would if they were buying a home.

I also think that people often believe property is more likely to deliver an investment return than a pension or other financial investment. Personally, I love property and feel very comfortable in being sure it will give me a return, but I also take advantage of financial investment products, specifically investing in a pension due to the tax breaks I receive.

Unfortunately some people are happy to buy a property to let out by handing over a cheque and full control of their investment monies to someone else to source and buy on their behalf. As a result, investors seem happy to have properties bought for them they haven’t seen, haven’t done any independent analysis on and just think they can trust people because ‘they liked them’.

Anyone that invested with Passive Investments recently and were badly burnt when they went bust, are probably wishing someone – for example a mortgage advisor or lender – would have made them carry out independent third party due diligence. And the ‘property investment’ system SHOULD have facilities to protect an investor, currently it doesn’t and this needs to change. If you want to invest in property and not do any of the work, including your own extensive due diligence, you do so at the risk of losing every penny you pay to a company and neither the FSA or the OFT seem able or willing to help you, so you are very much on your own!

Think I’m exaggerating? Then just pick up the phone to Paul Shamplina and his team at Landlord Action. They work on a daily basis with landlords that have handed money over to buy to let property sourcing or ‘armchair investment’ companies, and they spend their time trying to get money back that landlords have lost.

So the question is, would regulating buy to let mortgages help this situation? And to answer this I researched a number of repossessed properties to identify if there are lots of buy to let landlords being repossessed because they were lent money when they perhaps shouldn’t have been?

Buy to Let Mortgage Repossessions
Currently statistics from the Council of Mortgage Lenders (CML) show that repossessions aren’t actually that high and are typically less than the homeowner market, which is expected to have around 48,000 repossessions in 2009 versus 1,600 new buy to let repossessions and 2,200 properties in possession in Quarter 3 of 2009.

In 2008 there were 1,157,000 buy to let mortgages of which 26,700 (2.31%) were over three months in arrears and of these, 7,900 had a ‘receiver of rent’ acting on behalf of the lender. Only 2,300 properties were actually repossessed. This represents less than half a percent of all buy to let mortgages ending up in repossession.

In 2009 things did get worse, and in Quarter 1, of 1,164,300 mortgages, 35,600 (3%) were in arrears for three months or more and of these 9,200 had a ‘receiver of rent’, while repossessions jumped up to their all time high of 2,500 in Quarter 2 of 2009. However, Quarter 3 revealed that over 12,500 properties were having their rent transferred to the lender rather than to the buy to let landlord, and this figure has risen from a low of 400 in Quarter 3 of 2006 which is a rise suggesting that there is a growing problem, albeit still only accounting for 1% of all mortgages.

According to Michael Coogan, Chief Exec of CML, the majority of these repossessions were made because the owners lost their job – not because of any bad advice or lack of due diligence on behalf of the lender or mortgage advisor.

So, therefore based on repossessions, the cost versus the benefit of introducing buy to let regulation is unlikely to prevent future repossessions.

There is one thing though that these numbers ignore and that is how many buy to let landlords will be able to cope with the mortgage payments when the interest rates return to ‘normal’ and investors have to manage mortgage rates of 5%-7%, particularly when the average rental return for property according to the Findaproperty Rental Index is only 4-5%.
However, it’s not just the number of repossessions that should decide whether buy to let mortgages should be regulated, so our next articles look at the pros and cons of regulating mortgages from my view, the lender’s, legal and wealth management perspective.