The main UK event this year will be the General Election (which must be called before June). After the election the main effort of incoming Government will be balancing reductions in public expenditure with the recovery in the economy by keeping interest rates low, wage demands low and slowing the rate of unemployment.

Dominic Farrell, Director of Distressed Assets says, “The UK property market will not collapse in 2010. The same pundits who predicted a collapse in 2009 are predicting a collapse of 20% this year. 

"They got it wrong last year and they will be wrong again this year. 

"Given low interest rates, a shortage of supply, economic recovery (albeit weak) and growing confidence amongst business owners, industrialists and bankers, I personally predict a rise in property prices in the UK of up to 5%.

“The two key factors supporting property markets are the availability and cost of finance as well as general consumer confidence. In both cases there have been substantial improvements since this time last year.” 

Farrell's views are supported by a recent report by property website Zoopla: “Around 81% of people expect house prices to rise during the coming six months, predicting average increases of 5.4%. The figure is a significant turnaround from a year ago, when only one in five people expected property values to increase during the first half of 2009.”

What We Say ~ we share the view that UK property (even global property), will continue to recover during 2010 and beyond though we hopefully we will see a more steady, sustainable property growth rate than the years before 2007. 

This is good news to property investors who will see their asset steadily increase in value.  The flipside of course, is that each additional property is going to be more expensive to buy.  Using Farrell's prediction for next year for example, a £100,000 property today will cost £105,000 at the end of the year i.e. 5% more. 

Our recent Blog & News "BMV Changes 2010" offered current consideration for BMV purchases in the light of changes in the marketplace and we recommend another read to you.  

 

Our message remains constant.  If you intend adding to your property portfolio and want the best prices, remain active for suitable deals on a weekly if not daily basis.  Call us to discuss your particular needs and remember, we will give you advanced warning via SMS TXT in addition to our normal Property Alert emails if you ask us to. 

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According to FindaProperty, tenants will need to act quickly if they want to enjoy a bargain rent for a time before they return to 2008 levels.

Tenants who negotiated discounts over the last eighteen months should expect a return of market rent and according to FindaProperty's November Rental Index, the average UK rent rose to £831pm (+0.1%) making it the 7th consecutive month of level or rising rents.

Though overall rents remain down 2.5% on last year, the gap is now closing quickly as indicated by the current disparity being the narrowest year-on-year.

 

The reason for increasing rents is that, although past surplus of rentable property meant tenants could haggle, the number of properties available to rent continues to decline (down 3.5% in November) making competition between applicants for tenancy tougher.

The average number of days it now takes to let a property is 55, down by 16 from 71 days at the start of 2009.

Michael O'Flynn, Director, FindaProperty said, "... there is a clear trend of recovery in the rental market with stock levels declining and prices recovering ... this is good news for landlords but for tenants it means that the days of discounted rents, juicy incentives and plenty of high quality stock to choose from are probably drawing to a close. As such, tenants need to act fast if they still want to nab a bargain before rents return to 2008 levels."

Source Mortgage Solutions

What We Say ~ we have noticed recent RICS rental assessments within the Sale & Rent Back sector being higher than the vendor is currently paying to a lender.  It is important therefore, that Landlords satisfy themselves that the tenant is aware of and has agreed to a fair market rent (or very close too it) thus, avoiding any unpleasant experiences as rents increase to fair market.  This could be of particular concern to a tenant who is on or expects to be on a fixed or limited income, such as a pension, that might not allow the upkeep of future fair rental increments.

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For the first time since 2007, gross lending in the BTL mortgage sector grew in Q3 (£2.1B) by 10% over Q2, according to the Council of Mortgage Lenders.

Lending for purchase and remortgage grew in Q3 with purchases being the stronger. This is probably due, for the most part, because remortgaging above 80% Loan-to-Value is not currently available and landlords with higher LTV's can only sit tight on existing reversion rates until more favourable conditions prevail. 

Michael Coogan, DG/CML, said, "... although the recovery is modest, the figures show that buy-to-let is here to stay ... buy-to-let lenders are among those facing some of the biggest challenges in raising mortgage funding, so the improved figures are all the more welcome. Future demand for housing in all tenures supported by lenders will remain strong, despite mortgage funding constraints and low construction rates."

Coogan added, "... with funding for social housing under pressure, the private rented sector has a strong future ... Mortgage lenders will have an important role to play in it, and will continue to help improve choice and standards for private tenants".

source Mortgage Solutions

What We Say ~ The above is good news for BTL investors as more key commentators feel bullish about new mortgages in general and the BTL sector in particular. Reducing lending rates must help more landlords weather the current economic storm provided they were not overgeared i.e. total borrowing against total portfolio value, in the first place.  Buying at 25% below market value builds in a significant hedge against any further drop in current market values though given our increase in demand for BMV's at this time, we share the view of pundits who believe we are rounding the bottom of the market about now.  

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Property values in the UK have been steadily rising during the past few months, albeit in smaller increments when compared with pre-07 figures, but nevertheless rising.  Our BMV portal also shows a sharp increase in private registrations recently, with increasing demand from institutional investors seeking property en-masse; so, we have to say the time for waiting, if ever there was one, is now definitely over.  If you are serious about starting or adding to your portfolio, do it now as increasing demand may see availability of suitable property fall and purchase prices rise.

You must satisfy yourself as to who you are dealing with.  During the process of your own due diligence, be sure you are offered terms of business (and, study them) before you part with any money.  Possibly with the exception of the surveyors fee, shy away from any firm who wants large sums up front without written guarantees you will get it back if the deal is withdrawn for example, following a significant down-valuation of the property. Remembering you always get what we pay for, choose a firm you feel confident will continue to deliver a professional level of service before, during and after sales.  This might mean a slightly higher fee, but it is worth it providing their overall terms of business stacks up to scrutiny. 

A prudent investor will always have a balanced investment of cash and medium/long term assets.  Cash funds need to be easily available for rainy-day emergencies.  Property however, fits within medium/long term investment planning (5 years+) attracting capital growth AND income for the landlord. It is no coincidence that wealthy people hold property and even taking into account the four UK recessions we have experienced during the past 30-years, property has proved a most robust investment. Companies exist that allow you to make money with their money (Lenders). For every £1 you invest in a BTL property, an appropriate lender will typically add £3 (that’s 75% of the total purchase price). Yet a lot of people still don’t understand that this ‘enhanced’ investment is exactly what the Buy-to-Let investor enjoys again and again.

Taking into account just one of the favourable tax treatments on BTL property: all the interest you pay to the lender is from pre-taxed income.  This means that if for example, you borrow money at 4%pa, the taxman pays almost 1% of it (at 23%).

When you consider our Below Market Value property is currently acquired for a typical cash investment of round *£5,000, you can see why most of our deals are snapped up on the day of listing.

  

Spain ~ we have temporarily withdrawn our current interest in Spain (until the banks get their heads on straight)!

France ~ since 1995 average values have increased by 140%. Even with a small decrease in 2008, the first half of 2009 saw a slight increase. Prices for 2003-08 averaged +7.6%pa (source FNAIM). We Brit's seem to particularly like Brittany and Normandy as they are close to the UK with frequent and affordable travel options.

 

Portugal ~ is a place that appeals to many due to cheap transport links and we are seeking more BMV deals as we write. Prices between '03-08 averaged +21%pa (source National Price Statistics Office).

Cyprus ~ since 1990 has been averaging 16%pa across the island. Prices flattened during the last 12mths but still show a 41% rise since '04 (sources MAP Platis, GP Index).

 

NOTE: If you are thinking about buying outside the EU, make sure there legal system is compatible with the UK and that there is a lawful land register.

*we expect this figure to increase with the advent of FSA regulation anticipated within the next year or so.

 

What we say ~ the message is clear: do not delay your BMV property purchases! 

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