Property Prices Approaching the Bottom says Lawrenson of Letting Focus

Readers of this column will know that I’ve often banged on that property is not as wildly unaffordable as some people think.
If you have seen me speak you will know that I often quote figures from the Council of Mortgage Lenders to show that to be the case.
My view is still that houses prices do not have that much further to fall because affordability is now approaching a long term equilibrium position. Maybe another 8-10% from here at most.
This argument was backed up by some research published on Monday 20th October.
The Daily Telegraph/Lombard Street Research Housing Affordability Index showed that houses have become significantly less overvalued in recent months and that as a result - according to the researchers - they could “bottom out” in middle or late 2009.
The Affordability Index takes into account the cost of mortgages as well as households' disposable incomes, so I think this makes it quite a useful measure.
Whilst unemployment is rising fast – to now stand at 1.8m, or a shade under 6% of the working age population, the Lombard Street researchers say that “Unemployment is unlikely to reach the rates it hit in the early 1990s. So there is less potential for forced (house) sales than there was in the early 1990s."
I tend to think unemployment could hit harder - to as much as 3.25 million by the end of 2009 - and that's why I expect another 8-10% to come off house prices.
Of course, how much more is to come off prices will vary by location. I expect the biggest drops may well be in London as a result of the shakeout from financial services.

RENTAL INCOMES LIKELY TO TREND DOWN A BIT IN LONDON & THE SOUTH EAST
Just had an email from a pal who works at Barclays in London’s Canary Wharf telling me that his intranet site is suddenly full of folks trying to let their properties in the local area. This is a clear sign of the fall out from the credit crunch as jobs in this mainly financial servcies dominated area have been cut back.
If you let property anywhere in the south east you can expect to feel some downdraft from this ripple to reach you soon (though with the large numbers of first time buyers frozen out of buying by the credit crunch I don't expect rents to fall TOO much.)
My advice is to keep rents competitive over the next year and if you have good existing tenants think twice before raising rents.
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