Bargain hunters home in as property perks up

Published on Saturday 31 October 2009 18:47

CASH-RICH millionaires are raiding their bank accounts to pick-up bargains in sell-off Scotland.

Estate agents and banks say that the property crash in Scotland is "bottoming out" and speculators who abandoned the country as recession hit are re-entering the market before prices escalate again.

One agency, Savills, has now produced a guide on how to spend 2 million in a range of property sectors including homes, farms, forests and commercial buildings.

Among the "bargains" it highlights are penthouse flats on Edinburgh's Firth of Forth waterfront that have had a third sliced off their price since they were first put onto the market before the economic slump.

Potential buyers are also lining up to snap up hotels in Glasgow and Perth, put up for sale recently by the McKever Group, while a bidding war is expected in Edinburgh for properties, including the three-storey Hudson Hotel, in the New Town, and the Jazz Bar, on Chambers Street.

The property market began to crash last year after almost a decade of sustained growth due to the effects of the recession and the credit crunch, which put severe restrictions on bank lending.

Property speculators who were in part behind the previous boom pulled their funds out of property and put them into other forms of investment.

But agents are now finding that speculators are coming back into the market as the recessionary gloom lifts.

Savills said it was currently experiencing a "feeding frenzy" with major investors vying to snap up properties which would have struggled to attract buyers in the first half of this year.

Charles Dudgeon, the head of Savills in Scotland, said: "We are talking to a growing list of 'hot' buyers, who are either cash rich or have raised the finance they need. They are looking at a whole range of opportunities from residential to forestry and from commercial to new homes."

Joss Mitchell, director of HSBC Private Bank Scotland, said: "In Scotland, we have seen a marked increase in the number of our customers considering raising finance for commercial and residential property purposes.

"Property investors, who pulled their assets out of the property market prior to the recession, or just as it took hold, appear to be seriously considering re-entering."

The market for newly-built properties was one of the first to slump after the credit crunch hit with waterfront developments in both Glasgow and Edinburgh severely affected.

The company building the flagship Platinum Point development – a range of luxury flats in Edinburgh with views across to Fife – went into administration. Consultant Deloitte's was brought in and will now put unsold properties back on the market at a third off.

Savills' guide says: "While over 85 per cent of the apartments have been snapped up, it is still possible to buy a mixed portfolio of apartments at Platinum Point for 2m.

"These brand new, high specification apartments offer considerably more space and luxury than their traditional city centre equivalents and, are being viewed as a good buy in an uncertain but improving market."

Prices now range from 192,500 to 486,500 for two to four bedroom apartments, including penthouses, a 30 per cent reduction on the pre-administration cost.

The guide also notes prices for top-end existing homes are up to 20 per cent less than they were a year ago. "2m would now buy an excellent, detached, stone built villa in the best districts of Edinburgh.You might have had to pay 15 or 20 per cent more at the peak of the market in 2007," it says.

Simon Rettie, managing director of property agency Rettie and Co, said: "There's no doubt that with first-time buyers the tap is pretty much still switched off at the moment.

"However the market for middle-range properties has been pretty robust of late and although it's patchy at the top end, we did 10m worth of business in Edinburgh last week, and three of those involved properties of more than 1m," he added.

The commercial property market for shops, retail malls and business premises such as restaurants is also picking up, according to agents.

"A restaurant spanning three floors in Edinburgh's New Town is currently on the market privately. This would have attracted a bid of close to 3m at the height of Edinburgh's property market in spring 2008. Whilst around 1m would have been knocked off this in price by the start of this year, prices are rapidly rising as the weight of money is re-entering the market and stock remains scarce," the guide explains.

On the retail front, Silverburn shopping centre near Glasgow city centre is expected to be snapped up for 250m after being previously valued in the region of 375m. Potential buyers from around the world are said to be vying to clinch a deal.

Forests are also being suggested as a bargain because of the drive to create more woodfuel processing plants across the UK, which is likely to drive prices for timber "dramatically" upwards within the next five to ten years.

Added influences on better prices, the guide says, will be the return of house building activity, and the impetus to use eco-friendly material in construction, of which wood is the ultimate product. Mark Robertson, a partner at the agency Jones Lang Lasalle, said: "We basically saw prices fall about 40 per cent in most sectors of the investment property market.

"A lot more activity has been returning to the (commercial] market, but investors who have money to spend are looking for safe investments."