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Resource Box: Peter Stanley at www.bookshaker.com
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"Watch For The Price Points" Tips From A Property Investor
- by Peter Stanley
(c) Property Made Simple. All Rights Reserved.
http://www.bookshaker.com
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Have you ever noticed how many prices aren't round figures?
Many shops use the tactic of £9995, rather than £10,000, as
it sounds a lot less, even thought it's only a fiver less.
The daft thing is that people are taken in by this and once
they've heard the first figure, they don't always take
account of the rest of the number.
Marks & Spencer went the other way a couple of years ago
when they realised that the cost of processing all the
change caused by the 99p ending of the prices, actually cost
them about 50p per transaction - so they rounded up all
their figures to round numbers, to reduce the coin they took
in. (Similarly, offering cash-back to consumers reduces the
volume of notes they process, which reduces their bank
charges)
The same thing happens with houses.
I was talking with an estate agent this week, on the way
back from looking at a house, and I asked him how he saw the
local housing market. He told me that anything under £100k
was selling within a week, but anything over that was taking
longer and anything over £150k wasn't selling at all. It
seems crazy that people would miss out on a house because it
was just into six figures, but people have psychological
barriers when it comes to money.
As an investor there's 2 angles to exploit here.
The properties that cost over 150k are likely to be picked
up for less than that, if you can find someone who wants to
move quickly, but also given time, the estate agents will
test the £100k ceiling, until everything is priced over that
amount. Once this happens, it won't be long before you see
prices of £110 and £120k.
This isn't a property phenomenon, as it happens in the
currency markets and equity markets, where these points are
called resistance levels.
So, I've been buying at 10% discount to market value, rather
than my usual 15% because I can see a £10k capital increase
as soon as the area breaks the £100k barrier.
So what next? I'll refinance to get as much of my deposit
out and look for the next area - which I've already found
and is only 6 months behind. In that area, the agents are
advertising at above £100k for the larger terraced houses,
with the intention of taking just below the magical figure
for a quick sale.
As soon as they start to sell at this level, the local
estate agents will use their scientific formula for
assessing houses of seeing what's sold recently and then
adding on 10%, which will push the market norm to above the
£100k.
Once the prices break this ceiling, there's another price
point at £120k, due to the stamp duty threshold.
People will create price points beyond which they don't want
to spend, for example the figure of £100,000 could be one of
these magical figures.
So look out for areas that are averaging just below or about
thresholds as should see a large jump in values once
properties start to break through the price point.
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KEYWORDS: houses,price points,property investing,investing
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made simple,peter stanley,estate agents
tactics,properties,resistence levels,refinance