A famous song once began “Looking back we could have done it differently” and I think that sums up how we all feel in 2009.

At the start of 2008 everyone was happy, investors were cheering at the continuing rise in house prices, availability of mortgages and so many options to invest their money it was unreal. Fast forward four months to April and the wheels began to fall off in a dramatic and rapid downturn that would leave everyone feeling the bitter cold of recession by the end of the year.

Investment companies began to close their doors and declare administration, mortgage companies decided not to lend to the 90% of people they would have done four months earlier and even the credit card companies started to be a bit more wary about who they would issue their plastic money machine to.

By the end of 2008 high street shops were closing, more and more companies were closing their doors for the final time and the threat of redundancy was hanging over many of the country. The banks had to be bailed out by the Government, with one major player only being saved with a few days to spare. The news that we all expected to hear was confirmed that the country was now in recession and how the media told us, every headline, news program and radio debate show was dominated by how the next two or three years would challenge us all.

It is fair to say that how quickly things changed in the space of 12 months came as quite a shock, but, the leading question is, why did things change so quickly?

The bubble had been ready to burst for many years. The banks were over lending, credit was easier to pick up than the flu and you could invest in property in every corner of the globe, it really was that simple. Property prices were rising at a rate that was just unsustainable and the introduction of the 125% mortgage was surely a sign that things were getting out hand, meaning that you owned an extra 25% of nothing!

As we all look around and wonder who is to blame, it is a very leading question. Do we blame the banks for over lending? Is it the mortgage companies who have allowed people to borrow beyond their means? Is it the investor who has caused the price rise of property by over buying? Are we as individuals to blame for overspending and over borrowing? Or should we firmly look at the Government and ask the question – How did this happen and why was it not spotted and brought under control?

2008 was a year in which we started with so much optimism and ended with more doom and gloom than even the most pessimistic person in the world could have predicted.

So, to finish in the words of another famous song, in 2009 “things can only get better”.

Today I’m going to take a look at what type of property will be a good play in 2009, with 2 main contenders: existing,completed properties or the recent investor’s darling, the off-plan..

Firstly, as a pre-text, it does depend on strategy.  If you are looking for a holiday home to use in the next few months, you will probably not be considering off-plan…so for the purposes of this piece we will assume it is for investment in 2009.

A comparison – existing, income generating properties are in many ways a lower risk play than off-plan and generally perform better in a downturn.  What is important with existing properties is that you have real-time evidence to base your decisions on: current comparable property prices, rents levels, availability of tenants, mortgage rates and terms, currency (if buying abroad), political situation, etc.  As your property is active as of now, compared to off-plan which is active in the future, you have the benefit of what judging information on what is happening now to manage your risk more appropriately..

With off-plan, it is a more speculative, higher risk type of purchase.  Off-plan is a solid enough investment in a booming market, where increases in equity are sought over rental yield.  You are however taking a leap of faith with off-plan and need to ask that many more questions.  Depending on location, such as an emerging market, there may be nothing built with no idea of valuation other than the developer’s price as a guide.  In the time between “purchasing” and “completing”, a whole set of factors will change, either in your favour or against you.   These factors include, property values, rental yields, mortgage rates and terms, final construction quality, infrastructure changes and exchange rates.  So off-plan is a higher risk play; some projects will be of great success but many others won’t.

With regard to the off-plan boom in the current climate, there is a caveat, and this applies to off-plan units that are soon to complete, or have just completed.  A number of locations round the world have suffered from over-supply of units from developers.  In several countries I have been to, many developers are renting recently completed, previously unsold, off-plan units out to generate some income.  These units are available for a snip of the advertised price when they were off-plan so, depending on your strategy and where you would like to buy, there are no doubt some excellent recently completed, or soon to be completed, “off-plan” deals.

Therefore in today’s market, for investment it is generally a better bet to go for completed existing properties, or soon to complete, “previously off-plan” properties, where the evidence to make your investment decision is real-time rather than 2 years away.

So firstly Happy New Year to everyone!  I know many people will be pleased to see the back of 2008, but what lies ahead for us in 2009?  More of the same or some interesting opportunities?

To many it is likely to another year of pure survival, that’s for sure.  Projections for further retail closures, particularly in January (the favoured month for administrators with little stock left), are not looking good.  Property prices are predicted to continue falling, and in my opinion as much as 20% next year.  All sounds very doom and gloom I know…

…however, there are opportunities, and the types of opportunities that exist are for the very reasons most of us need them..quick income.  It would difficult to find someone this year who isn’t looking for quick and stable income generation from another source other than work, whether it be to cover mortgage costs, a certain standard of living, or merely to make ends meet.

There are a number of options we will be bringing to the table in 2009, continuing with our successful ambulance trading project, where the first investors have received their returns.  Any sector backed with government contracts is largely recession proof, and in the next week we will be providing evidence of how the deal has worked from a numbers point of view, with testimonials to boot.  Other sectors we will be active in are renewable energy , which will be discussed in the next month or two, and, strangely enough property, which we will discuss now.

It is many a savvy investor’s belief that property is starting to show value again.  With yields up around the 8-9% mark and interest rates at 6.75% approx. for mortgages, there is a positive cashflow to be had if the right deal can be found.  On top of this, large discounts can be secured to ensure you are covered should the market fall further.  As mentioned earlier I believe a further 20% could be eroded, which means you should look for a 25-30% discount on property valuations.  Add in some tenant insurance and you have a property investment protected against loss of income, loss of equity and generating income on a monthly basis straight away.  The only major downside is a much higher level of deposit, but it ultimately reflects a more secure payment against the purchase and a lower amount to pay back on mortgage.  Remember this is the very factor that has caught so many out on 100% mortgages..!

So discounted, income generating properties are a strong bet for 2009…stay tuned as over the next few weeks we will be bringing to market such deals that match the criteria set.