Commentators don't understand the new paradigm on house prices says LettingFocus.com

I do think that some property market commentators are over fixated on first time buyers’ chances of getting mortgages as the lead driver of the future direction of house prices.
It matters, yes, and so does the ratio of earnings to house prices but it does not matter as much as it did before
For quite a long time now I have said that in the future, the new driver of activity will be either professional investors or wealthy parents with spare cash to pass on to their kids.
Don’t forget that over 40% of people have no mortgage so don’t give a stuff about mortgage rates and if they are not buying for themselves they will be giving their lucky offspring at least some of the money for a deposit and for the hefty mortgage fees which are now the norm.
Hard nosed property investors and rich parents of first time buyers are two key groups with the money to buy property and many commentators should wake up and realise the paradigm has shifted.
They should stop looking only at the standard measure of the ratio between a young person’s earnings and house prices or the affordability of mortgage interest payments but look instead at the stock of wealth that first time buyer’s parents and experienced property investors have.
I think it was the think tank, "The Future Foundation" who said that property was becoming more "dynastic" in nature.
I agree and about four years ago I wrote a press release suggesting that because of these and other factors, the proportion of property in the UK that is privately rented (then about 9%) could hit a third within 20 years.
Well, today I expect the budget may well give a boost to more private rented accommodation so I think my predictions could yet prove correct as more people either choose or are forced to stay in private rented accommodation.
It is sad to say - and a real shame for would be first time buyers- but if your parents are not rich your chance of getting on the housing ladder these days and in the future will be a whole bunch harder than it was in the past.
Maggie Thatcher gave us hope that we could all be home owners if we saved a little bit and worked hard. This hope is slowly being dashed.

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the property letting experts. Read Property Articles.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book - buy Property Investing Book.
The new edition is for accidental and experienced landlords and is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing and capital gains taxes.
I’m an expert property writer and property speaker - and I run the well known property letting blog that you are reading now.
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general advice on property letting and consulting to anyone looking to buy property for themselves or to let out. I can help private individuals with any aspect of buying property or buy to let.
What’s unique about lettingfocus.com is that we offer independent unbiased property investment advice 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 these sources.
On the contrary, we are often asked to evaluate other property investments.
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Copyright: David Lawrenson 2009. This blog is updated roughly once a week.
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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.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - landlord 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 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 provide general property education, training & 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 mentors 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. WANT TO BE KEPT UPDATED WITH OUR LATEST BLOGS?
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Don’t believe the doomsayers on house prices – but it could be a rocky ride says Lawrenson of Letting Focus

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 http://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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Too Many Flats asks David Lawrenson

I hate to say I told you so, but I did!
Too many flats have been built and not enough houses, so landlords who have bought houses have in most areas done better than those who went for flats.
In some cases, a lot better.
I have been preaching this for years, and now at last the Telegraph has got onto it - here is the link from the front page of today's paper. http://www.telegraph.co.uk/news/main.jhtml;jsessionid=YALNR1UJATB4DQFIQMFSFFWAVCBQ0IV0?xml=/news/2007/05/29/nhouses29.xml
Funny, but I must have imagined that interview I did with the Telegraph journalist last week!
Buy hey, I'm not bitter you didn't mention me in the piece.
Anyway, to hear this (and more) direct from my own mouth, please come down to the property investor show at GMEX Manchester this weekend where I will be doing some seminars on Saturday and Sunday on this very topic.

ABOUT US

At LettingFocus.com we are experts on landlord issues.
Hello, I’m David Lawrenson.
I have been a landlord and property investor myself for over 25 years and am author of “Successful Property Letting” – which has been the UK’s top selling property and buy to let book for the last 3 years.

We help landlords and property investors make money in property by coaching them in ways that work, which are ethical and which involve minimal risk to the investor.

At LettingFocus we pride ourselves on giving independent unbiased buy to let advice for property buyers and landlords both on a one to one mentoring and coaching basis as well as through occasional group seminars.

Property syndicates and property advice in the UK is still largely unregulated and what counts as “advice” is too often more about making the promoter money than giving useful information to the investor.

With no link to property firms, developers or bridging loan providers, at LettingFocus, we can advise you on where and what type of property to buy for investment, when to buy and how to buy property at a low price. We also show you how to manage tenants properly and in ways that take up as little of your time as possible.

We also do consultancy and write for companies such as banks, local authorities, property websites and social housing providers – helping them with their landlord facing or buy to let product strategies.

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Copyright of Blog: David Lawrenson 2009. This blog is updated roughly once a week usually on a Monday or Tuesday.

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