Sounds like there’re some bargains out there

A cash rich investor with balls of steel could have a go:

A family who have seen the value of their London flat slashed from £600,000 to just £90,000 because of Grenfell-style cladding will sue a government agency that helped them buy their home.

They are the second homeowners in the New Capital Quay development in Greenwich to have their flat valued at rock-bottom prices.

It’s then uncertainty over who will replace, when, and at what cost, that cladding.

The company said some flats had been valued at £0. They were unsellable, unrentable and unmortgageable.

I doubt unrentable is true.

But even so, there’s an option value to those flats. Which, if you were cash rich, might be a good little bet.

16 comments on “Sounds like there’re some bargains out there

  1. The article isn’t too clear, but it seems the argument about who should foot this bill is between the developer and their insurer.

    If so, as an investor, buying the flat cheap in the hope it’s fixed in the future seems a good bet. As an occupier of the building, the risk is your choice. I’d say, 10 floors in a building without anyone stealing the fire doors and decent fire alarms, pah! I’m on the 68th floor (about 46 real floors once you delete all the Cantonese superstitions) and you can bet I’ve run down the fire escape with the kids to the refuge floor and on to the ground to be prepared.

    Oh, my mistake, they actually want a mortgage write off.

  2. How long before we all start getting the text messages:

    You may be entitled to compensation for the period you spent living in a dangerous flat, please call our trained advisers to discuss how to claim your tax free award. No win, no fee.

  3. The flat was fine when they purchased it.
    There’s been how many major fires with this cladding? And how many buildings with the cladding?
    Can they just rip the cladding off cheaper?

  4. Presumably it would be guaranteed value if you bought the building outright. But if you did, people would know what you are up to, and wouldn’t sell up cheaply. The actual hit is surely the cost of stripping off the old cladding and replacing it with non-deathtrap version (assuming you can’t successfully sue someone else for the costs). Which is nowhere near £500,000 per flat.

    Which leads to an economics question for our host – is there a name for this phenomenon? The value effect being so drastically removed from the cost of action? For a more mundane version, repaper a house and you get a much better price for it than with old paper, even though the new occupant will simply strip it off and put their own tastelessness on the walls.

  5. Any evidence that any are up for sale? A valuation is not relevant, it’s what it changes hands for. Who among the owners is willing to crystallize such a loss on the most expensive thing they ever bought? What landlord will turn a regular rent into a capital loss? There is probably NO opportunity here.

  6. Andrew M said:
    ““Unrentable” is definitely a lie. There are currently five listings on Rightmove, asking £2,000 a month for a two-bedroom flat in the New Capital Quay development”

    The fact that they’re listed for that doesn’t mean that anyone will pay it (rather like those newspaper articles based on ebay asking prices). However I should think you’re right, someone will rent them.

  7. Tim

    Not sure if you have seen the latest from TRUK but here he is on the NHS:

    ‘I patiently explained that there are three ways in which government spending impacts the economy. First, I said that the government could simply create the money in question. I pointed out that over the last decade the government has created £435 billion to, in effect, bail out our banks. That is more than £40 billion of new money a year and there has been no inflation as a result: any inflation we have had is because of changes in oil prices or because we have left the EU. I did, therefore, argue that we could as a consequence create new money for the benefit of the NHS as well’

    Additionally apparently the state taxing things is merely bringing back what it created in the first place in an interesting etymological discussion of the word ‘revenue’

  8. VP the media need to be called to account over this “no inflation” meme. Cpih has been over 2% since Feb 2017. Carney hasn’t written a single letter and nobody has said a dicky bird about it.

  9. Diogenes – I agree, and it enables utter rubbish like what has just been written above by Murphy to be published. Inflation is significant in many types of assets but because they tend to be held by people Murphy considers to be ‘wealthy’ it doesn’t get reported…..

  10. @ VP
    Inflation matters to *the small guy* with cash savings, not the wealthy home-owners who imagine that they get a net benefit from property inflation exceeding RPI or even the cost inflation for most luxury goods and it is particularly beneficial to journalists buying houses with vast mortgages and females with large credit card debts from spending more than they earn. [Not you, Julia, but the significant majority of those insolvent due to credit card debts are female, whereas the majority od self-employed becoming indolvent due to business failure are male.]
    It is piece of bollocks marketed by the media that the rich are the only people losing from inflation – it is the prudent working class who are the worst sufferers. I visited Russia in the 1990s and many pensioners werenear-destitute as their savings were justy about worthless (reduced in value by more than 99%).
    I support your sentiments, just disagree on detail – people that Murphy doesn’t like because they are natural conservatives with a small “c”, not likely to get divorced, let alone twice.

  11. RichardT,
    Looking at nearby properties, £1,900pcm seems to be roughly the going rate for a two-bedroom flat with river views in Greenwich. Even without the river views, tenants are still paying £1,450 a month.

    Take away agents fees etc, but if you could snap up one of those flats for £90k and let it out, it would be a bargain indeed.

    As others have pointed out though, nobody is actually selling at that price. This is a non-story.

  12. John 77

    Wholly agree Sir – and was not trying to minimse the impact of inflation across all income grades, especially for savers. I think we can all agree Murphy hates with a visceral passion anyone who dares to exist outside the remit of the state, which is the majority of people who are Conservative with a Small ‘c’

  13. Taking of meltdowns…read Krugman in the NY Times
    https://www.nytimes.com/2018/06/17/opinion/what-did-the-romans-ever-do-for-us.html

    Possibly the most loaughable assertions:

    “Still, our sort-of empire, like Rome’s, has been held together mainly by soft power rather than violence. Even when America was an overwhelmingly dominant economic and military power, it generally exercised restraint, getting its allies to buy in to our system rather than resorting to raw compulsion”

    So let’s forget about the terms of Lend-Lease, the Vietnam War, the destabilisations of Nicaragua, Iraq, Guatemala, Chile…it was just “soft” power. He might be even more insane than Capt Potato. Maybe Spike could fisk it for Contins. And just in case Ecks is reading…please don’t bother with your usual Father Jack routine

  14. I can not believe it would cost circa £510,000 per flat to remove the cladding reverting them to as was.

  15. Hmmm… I lodged at New Capital Quays for about 6 months when I had a contract in central London. Pretty cool place.

    IIRC it was £800 pcm for a room, with a just-about-if-you-crane-your-neck river view, £130 for a parking space, and £120 for a season ticket into central London on the Thames Clipper river bus.

    Buy a flat for silly money, put contractors in as tenants, KER-CHING!

    IF you can really get a deal like that. And “IF” is doing a lot of work there.

    The biggest risk, more likely than a fire, is perhaps the possibility of freeholders negotiating with cladders with a “money-no-object” mindset; or gold-plating the necessary safety works.

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