Gary predicts the future of the housing market

We’ve reached this economic situation by huge financial mismanagement, human greed, irresponsibility and just making decisions without thinking. What we have now is a domino effect after the Lehman Brothers went under, and everyone’s really panicked from there. A lot of the hedge funds have just been geared up with very complex formulas that nobody really understood and didn’t actually work. It was almost at a point where money didn’t have any value. You could go to a bank and they’d give you a 99 per cent mortgage, I saw big property dealers putting in a million and they were getting £99 million back. It’s just absolutely ridiculous, but those days are gone, they’re history. Everything has changed, and with that the guys who do change will survive, the people who don’t will go under.
Luckily because I realised there were clouds on the horizon I focused on selling what I had. I’ve downsized my workforce; I’ve closed one of my offices and really mothballed two or three big sites I have. You have to do what you can in the credit crunch, you have to create partnerships, conserve money, get the costs down as far as you can and cut right back.

Money talks
The main problem is the availability of finance, for example buy-to-let mortgages. The number of properties available is down by 65 percent and the number of ordinary mortgages are down by 40 percent, now those 40 percent and 65 percent are all the best mortgages. They’re the ones where you used to get 95 percent funding on a good day but that’s all gone now. It’s a case of, if you haven’t got a huge amount of equity and a fantastic track record it’s going to be very, very difficult to get on the market. And it’s those people, the life-blood of the market, buying the apartments and buying the houses. But until that happens in mass, the market is going to be very subdued.
However, if you’ve got access to finance and cash, now is a good time to think about getting into property. The bargains out there are absolutely phenomenal, but one caveat is – how far is this going to drop? We thought we were over the worst of it in 2008, but we’re in another banking crisis right now, it just seems to be going from one nightmare to another and every time it is getting increasingly worst.

Helping hands
There are things the government can do to help; one of which is to get rid of Home Information Packs. They don’t really make sense to me, they’re bureaucratic, and they’re another layer to stop people from putting their property on the market. The vast majority of people don’t have a disposable income, especially in these times, so where do you find another £300–350 before you put your property on the market? It’s doing the absolute opposite of what it’s meant to do; it’s a disaster. If you go to a bad property, a solicitor will tell you not to rely on the HIPs so you’ve still got to do it all yourself. There’s no major recourse in the HIPS, they’re a waste of time, and a waste of money.

Also instead of dropping VAT by an amount that is irrelevant to everyone – which was just a joke, what difference does 2.5 percent or two-and-a-half pence in the pound make – they should have raised the stamp duty threshold from £175,000 to £250,000, so that everyone under £250,000 doesn’t have to pay a stamp duty. They need to do things like that to get some impetus back into the market. Another thing they can do is to start guaranteeing mortgages. Banks and mortgage companies won’t give your average person with a 5–10 percent deposit a mortgage, so the government really needs to step in and subsidise that in some way.
I think shared ownership schemes are the future of the housing market, a lot of housing associations are setting up now. The programmes used to be for key workers, nurses and doctors, but they’re more or less opening the doors to anyone now. If you’re a couple and your salary is under £60,000 a year then you can go into a part ownerships scheme, and I think the government has got encourage these. I’m a huge fan of the housing associations because I think they’re a great way forward and give affordable, good quality accommodation, much more than councils could ever provide, because you’re working with the private sector. I prophesise the future will be developers doing more and more schemes with the housing associations and then key worker and social housing being created.

The future
I’ve just done Tonight with Trevor McDonald and they’re looking at it being a buyer’s market now. Foreign investors are coming back into the UK market, so we’re seeing people who really understand that some properties are at their best price and they are starting to invest again. But it’s all going to take time.
I would predict that 2009 is going to be another tough year, 2010 will probably see green shoots growing, then 2011, 2012, the market will hopefully start to recover. We are a growing human race, so there’s an ever increasing demand on land, but also now a great pressure to keep our green spaces, which makes supply limited. Therefore, with a supply that’s limited and demand growing, prices will always go up, it’s fundamental basic economics. However the future is totally unknown right now, it’s absolutely impossible to predict, which is why it’s panic stations out there. The property market is in almost freefall, unemployment figures are soaring and construction has hit a brick wall. The thing about property is it’s like a supertanker; you’ve got to make the decisions a hundred miles out before you want to turn and get in the dock.
The most important thing is to stay realistic and to understand that these are very, very difficult and challenging times. Some people keep saying you’ve got to be positive, and you’ve got to look on the bright side, but I think you’ve got to look on the real side. I have spent the last year really managing what I have with a focus that I want to survive this downturn, rather than wanting to make millions. My bright side is that if I can survive this and be in the right position when the market turns again, which it will do, then I can really start making hay in the sunshine again.

If you want to read more from Gary, pick up the Home issue of Celebrity Angels magazine, on the shelves this Thursday 5 March.