HOUSE PRICES IN LONDON AND THE SOUTH EAST HAVE FURTHER TO FALL SAYS DAVID LAWRENSON OF LETTINGFOCUS

November 2009.
Sometimes what you see with your own eyes can be more useful than all the economic news you read. Here is an example.
So busy was the city centre of the Welsh capital 3 weeks ago that I commented on a recent blog post about how no one seemed to have bothered to tell the people of Cardiff that a big recession was all around them.
Meanwhile, back at home my weekly car trip across London seems to get faster all the time and getting a seat at a restaurant in Canary Wharf is now simplicity itself.
Confusing eh? But this difference is really not surprising at all because the recession (and any associated fall in house prices) is hitting much harder in London and surrounding areas than anywhere else in the country.

REPORT CONFIRMS ITS GRIM DOWN SOUTH EAST
Now we have hard evidence.
A recent report from the Local Government Association (LGA) said that workers in London and the South East are likely to be worst hit by the recession, with one in 12 jobs being cut in the next 18 months.
London suffers because of its dependence on the financial sector, where banks like Citi are shedding thousands of jobs. Many construction firms are also based in and around the London area.
According to the report, parts of the South West and East Anglia, with big farming communities, will only see one in 30 jobs disappear by 2010 with Plymouth and Cambridge the places least likely to see job losses. Stoke-on-Trent and the areas round Newcastle are also predicted to not do too bad either.
To some extent this is a repeat of the last big slowdown as London’s performance in previous recessions was worse than other parts of the country. As a result, London saw the biggest house price falls in the period from 1989-1994.

LONDON HOUSE PRICES HAVE FURTHER TO FALL
I have been amazed at how asking prices for property in London have been so resilient so far– and it is only now that I am seeing realistic pricing coming through from vendors, as reality, in the shape of redundance notices begins to strike.
This trend to more realistic pricing was also picked up by the website, Rightmove’s recent analysis too. (As you may know from other blogs I have not bought in the capital for 5 years as I think most house prices are way too high.)
For these reasons, I think London residential property prices will possibly drop another 8-10% from here whereas other areas may be close to the bottom already.
Areas that will also hold up well are places where there is a large proportion of people working for the government.
Whereas private sector workers (most of whose pensions are linked directly to the stock market) should make sure they are seated down before they open their next pension statement, government workers whose pensions are paid by future taxpayers won’t need to worry.
And neither will they be as worried about losing their jobs as the government will not want to make the dole figures any worse.

USE YOUR LOCAL LIBRARY
I stumbled across two magazine at my local library which should make good occasional reading for anyone looking to buy into areas that will do well in the future. One is “Regeneration & Renewal” at http://www.regen.net/. The other is “Modern Railways” which is packed with news on the latest new railway building. Use both to tell you where to buy to take advantage of coming improvements to infrastrucuure – a big factor in house price appreciation once the credit crunch eases.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the landlord and property letting advice experts.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property title - Buy Successful Property Letting - How to Make Money in Buy to Let.
The new edition 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 sale and rent back.
I’m an expert freelance property writer, property speaker and I run this well known property blog
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general property letting advice for anyone looking to buy property for themselves or to let out.
In my work as a consultant I help private individuals with any aspect of buying property or buy to let. What’s unique about lettingfocus.com is that we are independent property investment advisors because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.
We simply give one to one unbiased advice and are often asked to evaluate other property investments.
In my corporate consulting role, I also advise banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my blog & find details of my networking, advice and property training programme at my website.Copyright: David Lawrenson 2008. This blog is updated once a week.
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Time to buy property to let - from Lettingfocus.com.

If I had a pound for every time in the last two weeks some journalist or other contact said to me “Ooh dear, buy to let looks in for a bit of a fall now,” I’d have, er…. about £21Well, sorry folks but actually this year is the best time for the last 6 years to buy property to let.Every experienced residential property investor knows that you make a lot of the money in property when you buy. So when you buy, you have to buy cheaply.
When property prices are booming like they were in 2004 to 2006, vendors will not listen to offers and it will be a struggle to get value.However, in the current market, with vendors struggling financially, you CAN buy cheaply because vendors will listen to offers.And this scenario is made all the more attractive to property buyers because the credit crunch means there is a real dearth of buyers, especially first time buyers. This is because of two things. Either buyers believe all the guff in the press about a huge imminent house price fall and choose to stay on the sidelines or they simply don’t have access to mortgages.

CASH PILES
The smart investors have built up cash piles which mean they can access at least 20% of a property’s value – and they can get good mortgages deals too. They also know that the tenant pool has just got bigger and will continue to do so because all those buyers who are too scared to enter the market and all those who can’t get a mortgage will have to live somewhere. So, they are going to have to rent! This will further push up rents which have been increasing by almost 19% over the last year.It’s tough and I feel sorry for the first time buyers, but that’s the economy folks. And it’s brutal.Now, I have to say, here that I don’t think the property crash will be that severe (though in the Me-too-Identikit Buy-to-Let-Ghetto-Flats which were flogged years ago to hapless novice investors it will be hard – very hard indeed)
In most other places, I don’t think prices will fall far or for too long because interest on mortgages expressed as a % of average incomes (the affordability argument) is not that stretched.Yes really!Right now mortgage interest payments are gobbling up about 18.5% of peoples’ incomes.
This is above - but not much above - the long run average according to the council of mortgage lender’s stats.And even though they are a shade above the long run mean, with earnings still going up at over 4%, this figure will soon come down to about 15% and buying a property will start to look very cheap again.And finally, as we get wealthier, surely it should not be a surprise that people choose to spend a higher % of their income on property.
Why not? After all, clothes, CDs, computers, cars are all cheaper today than they have ever been -leaving more to spend on property.So, whatever the stats say, I think it is perfectly possible for a wealthier economy to live with spending more of its income on property. If by 2010, we look back and the year of 2008 did not turn out to be a belter of a time to buy property to let, then I’ll buy a big round of drinks and cook a great meal at my house for all the journalists who say otherwise.
I’m David Lawrenson from property investment mentors lettingfocus.com.
I’m the author of the buy to let book “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title.
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 below market value. I’m an expert on the UK property market and a well known property investment blogger and I contribute to newspapers and a host of property websites, write a property investment blog, a number of columns in the press and run a landlords advice service.
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.You can read more of my property investment blog and details of my networking, advice, buy to let networking programme at my website.My next London meeting is coming soon. Click here for details: Property Investment Advice
What’s unique about lettingfocus.com is that we offer independent property mentoring 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. Permission must be sought before using the material in the blog.

Don’t believe this talk of a housing crash says LettingFocus

The media is still doing their best to talk up a recession and a fall in house prices.
However, out in the real world, the real market (outside the awful oversupplied and in places fraud ridden new build sector) is stubbornly staying relatively strong.
Indeed, the UK property market is gaining momentum according a preview of figures from the National Association of Estate Agents (NAEA) monthly housing market survey. Buyers on books, housing stock and sales all increased in January in an upward trend.
They say that after a seasonally slow December, the market is beginning to pick up again, with the number of house buyers up 11% in January and first time buyers accounting for 14.5% of all sales, a rise of just over 3% for the same period last year. Well, of course the NAEA’s job is to talk up the market, naturally.
But even if you look behind the figures you still don’t see a big fall off in activity.
OK repossessions are up and filling the auction rooms, that is true – and yes the papers love to scream this from the rooftops. It sells papers after all.
But the fact is that repossessions are low by historic measures.
OK, they are almost three times up on 2004, buy hey interest rates were unusually low at that time, so that’s kind of what you would expect.

Repossesion Rates
But according to the FT “the increase merely takes repossessions from an extremely low level to a pretty low level”
They highlight that as a proportion of outstanding mortgages, only 0.11 per cent (one in a thousdand) were repossessed in the second half of 2007 – exactly the same proportion as in the first half and actually four times lower than the peak of repossessions which occurred in the second half of 1991.
The FT goes on to say that analysis of the figures show that “at no point in the 1990s was the rate of repossession any lower than it is today.”
So, those are the real facts behind the tabloid headlines.
What’s my take on all this.
Well, I was hoping for a stalling hosuing market so that I could get some good property deals.
At the moment there is only a slight slowdown and vendors will listen to offers but so far the market is still staying relatively strong. That may change during the year.
Meanwhile to find out what’s really happening in the property market, do what I do, stick to the FT and avoid all the nonsense and hype in the other papers. And definitely avoid the Get Rich Quick in Property courses and companies.

About David Lawrenson
If you need more advice on where to buy investment property ask me. I’m David Lawrenson from independent property investment experts www.lettingfocus.com
I’m the author of the landlords bible “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title.
I’m an expert on property letting and a well known writer on buy to let and I contribute to newspapers and a host of property websites, write a property investment blog and run a landlord and tenant advice service - check out my columns for FinancialExpress.net and Archant’s “The Guide” magazine
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.
You can read more of my landlord blog and details of my networking, advice, property investors seminar programme at my website www.lettingfocus.com.
What’s unique about lettingfocus.com is that we offer independent property investment mentoring because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, 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 at least twice a week. Permission must be sought before using the material in the blog.