Tuesday, 31 May 2011

State of the market - Add this to the pot - Crystal ball required


It was quoted in the press that house prices are expected to rise 16% over the next 4 years

It takes a brave man to make a quote like that! There are a few things that need to be considered;

Government cuts - changes to social housing and housing benefits will mean more private landlords are needed. But cuts in benefits will mean a requirement for low cost rental properties.

As people fall off the mortgage ladder, or can't get on it in the first place, supply and demand for good rental stock will push up rental prices. This will possibly make it too expensive to rent! Especially for low income or housing benefit tenants.

With the implementation of high University fees this will impact the Student housing market. Less people will go to university, less student homes required. High priced student houses remain empty or will Landlords drop their prices?

Its hard enough to sell a property now and interest rates are at an all time low! What will the impact of higher intrerest rates make? The news is that interest rates are expected to climb.

And the lenders aren't lending! Only squeaky clean need apply. Then they pay high fees and get low LTV!
First timers are finding it almost impossible to get a mortgage and are expected to find large deposits. The news is that there is a whole generation who will be renters for life.

So, what about Buy to let (BTL)? It seems that many investors are taking the opportunity to build their property portfolios right now. Auction houses are bursting at the seams again after a 2 year lull! There are plenty of distressed  and repossession sales. So now is the time for a good deal. Yields are good at the moment. But what happens when/if interest rates rise, more jobs are lost, gov cuts kick in? You'd expect yields to fall. Empty properties, non paying tenants, and landlords going bust!

So its no wonder we are all seeing different and conflicting news from all sources across the property industry! The ecomony is in a unique situation. Bottom line is we are in a recession and we have very low interest rates.

Whats your view?

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