Have you ever wondered what goes on at the property “seminars” you see
advertised in all types of publications? I went along to one recently hosted
by the George Wimpey Property Investor Club at the Britannia International
Hotel, in the London Docklands, to find out.
The venue was impressive - a 440-room hotel, all gilt and glass. The sales
“pitch” - let's call it that and put the silly “seminar” idea to one side -
took place in a first-floor conference room and was due to start at 6.30pm.
There was no meet-and-greet formality. Instead my fellow punters, many
looking distinctly uncomfortable, found themselves on a landing walled by
advertising boards, each showing posters of the apartment blocks you find in
all our towns and cities.
Why, I asked, had these particular individuals been targeted? “It's simply a
way for us to set up a dialogue with smaller-scale investors,” said Kevin
Belsham, the sales and marketing director at Taylor Wimpey, which ran the
session. “We have 2,500 members in our club and we like to give them the
sort of discounts that would normally be reserved for seasoned investors.”
It all sounded sweetly innocent and unthreatening, but I was struck by one
thing. The punters, who were by now on the receiving end of a charm
offensive from the smiley-faced sales staff, were being referred to as
members of the “club”. Yet no enrolment appeared to have been carried out.
It transpired that anyone who had ever bought a home from Wimpey could be a
member of its “club”. So, too, could the people who had responded to the
advertisement on the company website. In fact, this “club” was open to more
or less anyone.
The members were a wide social mix. Many were dressed in baseball caps and
leather jackets; some had toddlers in tow. None had the look of a property
tycoon. What followed was surprisingly sober in tone - standard-issue,
estate-agent dogma about the folly of trusting pension schemes or the stock
market, buy-to-let being a far safer option. Demand for rentals, said the
speakers, would remain strong because of the high divorce rate and the
tranche of 20 and 30-year-olds who could not get on the property ladder.
It was all faintly disappointing. I had imagined I would witness the “hard
sell” of legend. Later, I asked Ben Williams, an Edinburgh-based chartered
corporate psychologist, to identify the sales strategies that were being
employed. “The company has got across a sense of exclusivity,” Williams
said. “The hotel is a high-status setting. They call it a ‘club' as if the
investors have been specially chosen and use the term ‘seminar' to give it
the cachet of high academic stature.”
It was only in the later stages that the speakers warmed up, becoming quite
evangelical about the benefits of the scheme. Members would be able to buy
off-plan, receive free newsletters and get advice on the best locations to
buy. It was, throughout, a question of “what” they would buy “where”, not
“if” they would buy at all. As for finance, typically the members would need
to provide 15per cent of the purchase price, but if they did not have that,
not to worry, equity from their own homes could be brought into play. It
only remained for the sales director to caution that we would have to “move
fast” to get the best properties. Then we were sent out to the sales teams
in the corridor outside. It worked a treat - every sales desk seemed to be
doing roaring business. Why the enthusiasm? “Because of group pressure,”
Williams said. “People see that other people are interested in what's on
offer and this enhances the attractiveness of the product.”
Nobody addressed one vital topic - the oversupply of apartments. No mention
was made of the Knight Frank research that had just appeared showing
investors' yields on new flats had fallen to their lowest levels in many
cities. Nor did they mention that Knight Frank and Savills forecast only 3
per cent growth in 2008. Instead, our attention was drawn to the bargain
prices. There were flats in Corby and Derby with 15 per cent price
reductions; some in Greater Manchester and Bolton had 20 per cent off; and
flats in Newport, Gwent and Cardiff Bay offered guaranteed rental incomes
until 2010.
During the following few days I contacted experts and asked if they thought it
wise to invest in mid-priced, buy-to-let apartments at that time. If not,
these sales seminars were surely just a way of off-loading on novice
investors the glut of apartments that were “sticking”.
“The days when a buy-to-let investor would remortgage a house to make a
significant short-term profit are over,” said Marcus Dixon, at Savills.
“It's increasingly difficult to get sufficient yield to cover investment.”
Ed Stansfield, at Capital Economics, agreed: “I'd be reluctant to advise
anyone to enter the buy-to-let market in these uncertain times,” he said.
“Those that do will need to have very long investment horizons.”
Four months later, what hope for investors who took a punt on Taylor Wimpey
homes that night? Last week Knight Frank stood by its prediction of 3 per
cent growth in the market in 2008. Hometrack reported on February 25 that
average property prices were down by 0.2 per cent with the annual rate of
growth slipping to 1.4 per cent. It also stated that the greatest pressure
on prices is being felt in the East, North West, Yorkshire, Humberside and
Wales - the very areas where Taylor Wimpey, last October, was offering their
most enticing deals.
In my opinion the idea of a percentage reduction is a scam. It merely confirms that the price was too high in the first place and the 'reduced' figure represents the real current market value.
James, Jakarta, Indonesia