Don’t believe the doomsayers on house prices – but we are in for a rocky ride says Lawrenson of LettingFocus
A few of the clients I have consulted with are right now buying property to let. Some of them have asked me if they should now re-negotiate on the price they offered.
My response is “it all depends on what is happening in your local market” – however in general my answer would be to say “No”, just as long as you got a good price in the first place.
No wonder they are spooked.
It seems that doom and gloom really is all around us in the media at the moment and the press seem to be doing their best to talk up a house price crash.
The editors of Money Week, The Sunday Mail property section and the Daily Telegraph are all especially gloomy on house price prospects. Only David Smith at the Sunday Times (who writes a new small but fascinating section in their Home supplement) seems ready to offer a counter view.
If you have read my other blogs, you will know that I think that providing the government does not end up being forced to put up interest rates too far (by more than 1% above current levels), then I don’t think there will be an across the board big fall in house prices.
Part of the reason that I don’t think there will be a crash is that don’t share the view that houses are currently as unaffordable as some commentators think.
For example, I note that the Council of Mortgage lenders stats on affordability of mortgages (see the site at www.CML.org.uk) shows that the % of average mortgage borrowers’ incomes that is accounted for by mortgage interest is currently about 18% - and falling.
Looking at this data on an historical basis, we can see that from 1980 to 1985 this figure was occasionally above 18% (and often above 15%) without there being a major fall in house prices. (The big fall, of course, came later in 1990, when due to rapidly rising interest rates, this measure hit a massive 27.1%)
Clearly, we now have a different picture today from that which prevailed in the early 90s. Back then, interest rates went up very high very fast as the government of the day struggled to keep the UK in the ERM.
Today, we have a serious credit strike by the banks which accounts for the weak housing market.
It’s my view that a combination of rising earnings and a lack of new house building (the lowest new house building starts since 1945 has just been recorded) will together act to keep house prices from falling off a cliff –though I expect falls of about 3% - 7% from here until the end of 2009.
At some point within the next 2 -3 years the mortgage markets will unfreeze. At that time the slow rate of new house building starts will have translated into a shortage of property on the ground.
And the combination of increased earnings and lack of property to buy will push house prices upwards.
This scenario all assumes we don’t see the government lose control of the economy leading to rises in unemployment and interest rates. Such a scenario would lead all bets on the future direction of house prices to be off (including my own).
But hey, investing in property is not a risk free game. If it was then everybody would be doing it – and many would be making a mess of it – as we have witnessed in the scandal where novice investors bought off plan over supplied new build flats fin inner cities from property clubs.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of landlord consultants lettingfocus.com.
I’m the author of “Successful Property Letting - How to Make Money in Buy to Let” which for the last 2 years has been the UK’s top selling property title - buy the UK's top selling property investment book.
It is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying property below market value.
I’m an expert freelance property journalist , property speaker and a well known buy to let blogger
I contribute to newspapers and a host of property websites, write a number of columns in the press and I can provide landlords advice
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services and am a regular speaker at property shows.
You can read more of my blog & find details of my networking, advice, property investors networking programme at my website.What’s unique about lettingfocus.com is that we offer property coaching because unlike most people in the buy to let and property “advice” business we are not linked to a property company, a developer, an agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2008. This blog is updated once a week.
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Once clicked, this link is added to your Bookmarks (or Favourites) drop down menu in the top toolbar. Thereafter, every blog published automatically appears in this drop down menu.
This means you won't have to visit the site to pick up latest blog, the headline of which will appear in your toolbar menu.
You can then click the headline and copy and paste the full article or a synopsis into your Latest News section - some software may be able to automate this process.
Please note we require the full links shown in each blog to also be shown at your site. Please contact us via our main site www.lettingfocus.com if you have any queries about this.
My response is “it all depends on what is happening in your local market” – however in general my answer would be to say “No”, just as long as you got a good price in the first place.
No wonder they are spooked.
It seems that doom and gloom really is all around us in the media at the moment and the press seem to be doing their best to talk up a house price crash.
The editors of Money Week, The Sunday Mail property section and the Daily Telegraph are all especially gloomy on house price prospects. Only David Smith at the Sunday Times (who writes a new small but fascinating section in their Home supplement) seems ready to offer a counter view.
If you have read my other blogs, you will know that I think that providing the government does not end up being forced to put up interest rates too far (by more than 1% above current levels), then I don’t think there will be an across the board big fall in house prices.
Part of the reason that I don’t think there will be a crash is that don’t share the view that houses are currently as unaffordable as some commentators think.
For example, I note that the Council of Mortgage lenders stats on affordability of mortgages (see the site at www.CML.org.uk) shows that the % of average mortgage borrowers’ incomes that is accounted for by mortgage interest is currently about 18% - and falling.
Looking at this data on an historical basis, we can see that from 1980 to 1985 this figure was occasionally above 18% (and often above 15%) without there being a major fall in house prices. (The big fall, of course, came later in 1990, when due to rapidly rising interest rates, this measure hit a massive 27.1%)
Clearly, we now have a different picture today from that which prevailed in the early 90s. Back then, interest rates went up very high very fast as the government of the day struggled to keep the UK in the ERM.
Today, we have a serious credit strike by the banks which accounts for the weak housing market.
It’s my view that a combination of rising earnings and a lack of new house building (the lowest new house building starts since 1945 has just been recorded) will together act to keep house prices from falling off a cliff –though I expect falls of about 3% - 7% from here until the end of 2009.
At some point within the next 2 -3 years the mortgage markets will unfreeze. At that time the slow rate of new house building starts will have translated into a shortage of property on the ground.
And the combination of increased earnings and lack of property to buy will push house prices upwards.
This scenario all assumes we don’t see the government lose control of the economy leading to rises in unemployment and interest rates. Such a scenario would lead all bets on the future direction of house prices to be off (including my own).
But hey, investing in property is not a risk free game. If it was then everybody would be doing it – and many would be making a mess of it – as we have witnessed in the scandal where novice investors bought off plan over supplied new build flats fin inner cities from property clubs.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of landlord consultants lettingfocus.com.
I’m the author of “Successful Property Letting - How to Make Money in Buy to Let” which for the last 2 years has been the UK’s top selling property title - buy the UK's top selling property investment book.
It is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying property below market value.
I’m an expert freelance property journalist , property speaker and a well known buy to let blogger
I contribute to newspapers and a host of property websites, write a number of columns in the press and I can provide landlords advice
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services and am a regular speaker at property shows.
You can read more of my blog & find details of my networking, advice, property investors networking programme at my website.What’s unique about lettingfocus.com is that we offer property coaching because unlike most people in the buy to let and property “advice” business we are not linked to a property company, a developer, an agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2008. This blog is updated once a week.
Want to be kept updated on our blogs?
It’s easy. The link to the RSS feed is at the bottom right of every blog we publish. Simply click where it says, “Link to this post.” Once you have done this, this will take you to the latest blog which will have a 'Subscribe' button at top of the page.
Once clicked, this link is added to your Bookmarks (or Favourites) drop down menu in the top toolbar. Thereafter, every blog published automatically appears in this drop down menu.
This means you won't have to visit the site to pick up latest blog, the headline of which will appear in your toolbar menu.
You can then click the headline and copy and paste the full article or a synopsis into your Latest News section - some software may be able to automate this process.
Please note we require the full links shown in each blog to also be shown at your site. Please contact us via our main site www.lettingfocus.com if you have any queries about this.
This entry was posted by lettingfocus, on
Friday, June 27, 2008.
