Independent voices say we are not headed for property armageddon says Letting Focus

Sometimes, it really pays to listen to someone who has not got a vested interest in the success or failure of the property market.
Why?
Estate agents (and mortgage brokers for that matter) are always loathe to talk down house prices too much while stockbrokers and fund managers are usually keen to do the opposite - in the hope that would be property buyers are so scared that they put their money in the stock market instead.
So, let’s listen to some independent voices shall we?
Just last week, the National Housing and Planning Advice Unit (NHAPU) recommended an additional 500,000 homes be built over the next decade in order to meet demand.
Their Chariman, Steve Nickell said, “Over the short term, house prices are going down but, long term, if there are insufficient numbers of houses around, then property will become more valuable.”
Of course, any recovery in house prices depends on mortgage lenders doing what they are supposed to do – lend money to buy houses.
But as of yet, that has not happened and one side consequence of that is that housebuilders have pretty much stopped new projects.
Realising the trouble that house builders are in, investors are once more to the fore and it is they who rumoured to be back buying in bulk - rather than owner occupiers who cannot get mortgages easily.
To give you an idea of this shift, the FT reported last week that in London, the proportion of housing sold to private occupiers fell from about two thirds in the first half of 2007, to just a quarter in the first half of 2008.
So, when the credit freeze unfreezes there is going to be a lot of pent up demand for property out there - and a lack of stock to meet it.
Of course, the doomsayers love to worry us about a coming negative equity situation – like the one we had in the early 90s.
However, a typical homeowner who bought in 2004 has an average “equity cushion" of 48 per cent of the value of their property, according to research from GE Money Home Lending. And based on today's prices, the average home bought in 2000 with an average deposit of £27,000 still has a 58 per cent buffer.
So, it seems house prices would have to fall a lot lower before we see the spectre of negative equity coming over the hill once again.
Finally, the last OECD report said that Britain's labour market will hold up better than that of other OECD member states, such as the US.
Whilst total employment will continue to rise by 0.8 per cent in 2008 and 0.1 per cent in 2009, joblessness will go up because the total pool of labour will grow more quickly over the same period. But it will be less than the OECD average.
So, it’s not all bad news, folks.
My advice is, if you must listen to the “experts”; please listen harder to the independent voices than those people with vested interests.
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 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 mentor programme at my website.What’s unique about lettingfocus.com is that we offer you help as an independent property coach 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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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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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.
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Buying Below Market Value from Distressed Sellers and Sale and Rent Back by Lawrenson of LettingFocus.com

RISK OF BIG PROPERTY CRASH IS LOW
Last week I was speaking at the Birmingham leg of the Property Investors show at the NEC.
It was pretty quiet there and much less active than last year reflecting, I guess, all the negative news about the property market.
As you’ll know if you have read previous blogs, I don’t believe all the doom and gloom and whilst I think that property prices could fall up this year by up to 10%, I think that falls will be limited for properties and areas that are not oversupplied already or where serious local social and / or unemployment problems exist.
And since rents are rising strongly and unemployment has so far stubbornly refused to go up, there are indeed still many green shoots for the investor or brave property buyer.
In other words, this is a year when you can buy property cheaply, just as long as you have access to credit and can put in at least 20% of a property’s value as equity.

DANGERS IN BUYING BELOW MARKET VALUE
Whilst at the show I heard a few scare stories about Below Market Value (BMV). It seems some investors have got themselves in a bit of a mess with below market value purchases from distressed sellers - and here is how they did it.
I’ll just explain for those who don’t know that buying BMV can sometimes involve buying from indebted (and hence motivated) sellers who are about to be repossessed by the mortgage company.
BMV buyers will seek out and then buy from these kinds of “motivated distressed sellers” at a discount, sometimes using bridging loans to buy with “No money down” and then they rent back the property to the seller who becomes their tenant.
So far so good!
But one of the big dangers is that the kind of property seller who is prepared to do this type of deal - and sell their home at below its true price- will by definition have what we could call “a bad credit history”
In other words, they have defaulted on their mortgage already, so the chances are arguably higher that they will default on their new tenancy too than a normal tenant would.
Most BMV investors would say that if they do, well it is bad for them but by doing so, it will allow the investor to evict if the arrears are bad enough.
And that is true, though some will have ethical issues with all this – but let’s leave that aside for now

TROUBLE IS.....EVICTION IS NOT FAST
The only trouble with eviction because of arrears is that it typically takes about 5 months to go through if you have to ultimately enforce the eviction notice with a bailiff.
First, you need there to be 2 months before you can even start a possession action and it takes another 3 months for the court processes to slowly grind through.
Oh and don’t expect an evicted tenant to leave the property spotless – chances are very high that they wont. And we won’t even mention the stress that comes with having to evict someone
Property Investor News in one of their articles in their current edition, anecdotally report the cases of some BMV operators who are in difficulties because the investor is struggling with a many of these types of properties where he is receiving nil rent.
Some of the less reputable operators in the market sell BMV deals on the basis of “becoming a property millionaire overnight” with “nil (of your own money) down” using bridging loans and as by definition many of the investors who do this have a very high loan to value, the affect of tenant default can be crippling.
And that’s why we hear stories of BMV investors being repossessed themselves - leaving their tenants homeless.
This, of course, does nothing for the reputation of the Below Market Value business which is already being looked at by the regulatory bodies who would like to see codes of practice drawn up.
So, my message is, if you buy Below Market Value be aware of the risks, especially in sale and rent back type deals and don’t borrow too much.
Sure, you can do it using a closed bridge loan and hence with No Money Down but only do this only you have a stack of cash elsewhere to pay the mortgage - just in case your tenants default.
Pretty much all the more realistic advisors on BMV at the property shows do, to their credit, advise their investors of the risks and they caution having a pot of money aside for a rainy day.
However, there are some who don’t. You have been warned.

BEING A GOOD LANDLORD
I was quoted in the Mail on Friday and the Telegraph on Saturday. Here is the link to the Telegraph story which is all about how to be a good landlord: http://propertyclub.telegraph.co.uk/Page/View/222

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson from property consultants lettingfocus.com.
I’m the author of “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title buy the 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 below market value. I’m an expert on buying property below market value 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 I run a landlords help 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 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 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.

Why Are London Rents Going Up by Letting Focus

All this talk of a credit crunch and housing market slowdown has meant many first time buyers are staying on the sidelines and continuing to rent.
This is normal behaviour and one that I explain in the first chapter of “Successful Property Letting – How to Make Money in Buy to Let”
I have already observed on this blog that these first time buyers may be mistaken in some areas, particularly in London, where I don’t expect house prices to fall much at all, though there will be a slight increase in opportunities to buy below market value from desperate sellers.
I now see that Savills has reported annual growth of 8 per cent in rent levels in the more up market areas of London while Cluttons, puts the figures at 15 per cent .

More Demand from Tenants
Anecdotal evidence from my estate agent friends at the more down market end of the London rental market, indicates the same thing is happening. Indeed, most London agents are now seeing an increasing business from prospective tenants - and landlords & are putting up rents in line with this increased demand.
This is good news for landlords whose rental yields are now low (though that is of course, itself a function of rising house prices and rents that have failed to grow as fast)
It is bad news for tenants!
In London, expect more rental growth and steadyish house prices for the next year.

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson, the author of “Successful Property Letting” - the UK’s top selling property and buy to let book for the last 3 years.
I have been a landlord and property investor myself for over 25 years.
At LettingFocus we offer independent unbiased seminars for buy to let investors and landlords as well as one to one advice covering all aspects of buy to let, finding and managing tenants and investing in property.
The difference with me is that as I am not linked to a property company, developer, estate agency or bridging loan provider I am able to give unbiased independent advice on where to buy (which areas), what type of property to buy, when to buy and how to buy property at a low price. I can also explain how to reduce the risk of getting a bad tenant.

CHECK OUT THESE PAGES AT OUR SITE LETTINGFOCUS.COM:
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Have You Seen this Article which looks at Letting to Students? http://www.lettingfocus.com/pages/myarticles_student_lettings.html
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Copyright: David Lawrenson 2007. This blog is updated at least twice a week

House Prices Crash in the UK is Unlikely But Some Areas Will See a Correction says LettingFocus

I’m just back from a short holiday to see there is more gloom in financial markets.
I also see that the news today is that the S&P/Case-Shiller US National Home Price Index fell 3.2 per cent last quarter from the same period in 2006, its sharpest decline since the index was created in 1987.
This was an acceleration from the 1.6 per cent in the first quarter. As this data was collected before the end of July - before the sub-prime lending crisis really hit in August – the falls can only be expected to become more rapid over the near term.
Of course the key to property investment is to buy well and pick locations with care.

Ulster Property Market
I don’t think that house prices will collapse in the UK, though some areas, notably parts of Ulster where I spent the weekend, are in my opinion already too high and due a correction.
In north Antrim I saw two bed terraces on at over £200K.
With rental yields already very low according to my friends over there, I can only see house prices falling back a bit in Ulster. There has been some regeneration it’s true in Ulster, but I think the leap of 50 per cent in house prices in Ulster over the last 18 months or so, is more than enough.

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
We are LettingFocus.com - the buy to let experts and I’m David Lawrenson, the author of “Successful Property Letting” - the UK’s top selling property and buy to let book for the last 3 years.
We help you make money in property by showing you and coaching you in the ways that work and which are of minimal risk to you.
I have been a landlord and property investor myself for over 25 years.
At LettingFocus we offer independent unbiased advice for landlords and property investors on a one to one mentoring and coaching basis as well as through occasional group seminars.
Property clubs are property advice in the UK is still mainly unregulated and advice is often poor.
As I am not linked to a property company, developer, estate agency or bridging loan provider I am able to give unbiased independent advice on where and what type of property to buy for investment, when to buy and how to buy property at a low price.
I can also explain how to reduce the risk of getting a bad tenant.

CHECK OUT THESE PAGES AT OUR SITE LETTINGFOCUS.COM:

THE HOME PAGE OF THIS BLOG click here: Blog
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Next Property Investing Seminar and Networking Event
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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.

AT OUR WEBSITE LETTINGFOCUS.COM:

THE HOME PAGE OF OUR MAIN SITE click here: LettingFocus Home Page
THE HOME PAGE OF THIS BLOG click here: Blog
ONE TO ONE PRIVATE CONSULTANCY click here: Property Mentoring
NEXT SEMINAR AND NETWORKING EVENT for Landlords and Property Investors:
Next Property Investment Seminar and Networking Event
We have OFFERS on a range of services and products for landlords too; click here including landlords insurance, tenant referencing, tenancy agreements and more: Services and Products for Landlords
For general info on our SEMINARS AND CONSULTING click here: Property Seminars, Networking Evenings and Consulting

TO READ CLIENT TESTIMONIALS – both commercial and private click here: Testimonials
BUY “SUCCESSFUL PROPERTY LETTING” click here: Buy the Book at Amazon plus anything else you fancy at Amazon.co.uk

To JOIN our Free QUARTERLY NEWSLETTER simply send an email to david@LettingFocus.com - Please note we WILL NOT send spam or sell our mailing list to advertisers!
IF YOU HAVE A SITE WHY NOT LINK TO THIS BLOG OR OUR WEBSITE?
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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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The Pain in Spain by Lettingfocus.com

Investors in the UK might be very spooked by problems in Spain and the USA where the housing markets look rocky.
However, I think Spain’s problems are fundamentally different to the UK.
In Spain, the problems in the property market have been caused by a huge oversupply of new build in some areas.
In most of the UK, this is not an issue as the house building rate is much lower (though some areas in the north are clearly very oversupplied with apartments)
Spain has also been hit by a new more rigorous regime in which investors have been stopped from hiding capital gains.
In the USA, there is also an oversupply of new build in some areas, plus a recent history of irresponsible lending to sub-prime borrowers on heavily discounted loans has been a problem. By contrast, the mortgage lending industry in the UK has been more responsible, at least until now.

MORE ABOUT LETTINGFOCUS AND WHAT WE DO

LettingFocus.com is the home of landlord information.

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 commercially published property book for the last 3 years.
Our main business is at a corporate level for organisations - both public and private companies.
We provide consultancy for banks, local authorities, social housing providers and other organisations – helping them with their landlord facing or buy to let product strategies and services.

OTHER WORK
We also write for property websites and are regularly quoted by the media. In addition, we have written articles for numerous publications including The Independent, The Telegraph and quality landlord websites.

MENTORING
For private landlords, we also find some occasional spare time to 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.
We pride ourselves on giving independent unbiased buy to let advice on either a one to one mentoring / coaching basis or through our occasional group seminars.
Unfortunately, in the UK today, property advice in the UK is still largely unregulated and what counts as “good advice” is too often more about making the promoter money than giving useful information to the investor.
With no links to property firms, developers or bridging loan providers we can advise on where and what type of property to buy for investment and when to buy it. We also show you how to manage tenants properly.

AT OUR WEBSITE LETTINGFOCUS.COM:

THE HOME PAGE OF THIS BLOG click here: Blog
THE HOME PAGE OF OUR MAIN SITE click here: LettingFocus Home Page
For general info on our CONSULTING click here: Consultancy and Seminars
ONE TO ONE PRIVATE CONSULTANCY click here: Property Mentoring
NEXT SEMINAR AND NETWORKING EVENT for Landlords and Property Investors:
Next Property Investment Seminar and Networking Event
We have OFFERS on a range of services and products for landlords too; click here including landlords insurance, tenant referencing, tenancy agreements and more: Services and Products for Landlords
TO READ CLIENT TESTIMONIALS – both commercial and private click here: Testimonials
BUY “SUCCESSFUL PROPERTY LETTING” click here: Buy the Book at Amazon plus anything else you fancy at Amazon.co.uk

To JOIN our Free QUARTERLY NEWSLETTER simply send an email to david@LettingFocus.com - Please note we WILL NOT send spam or sell our mailing list to advertisers!

IF YOU HAVE A SITE WHY NOT LINK TO THIS BLOG OR TO OUR WEBSITE?
IF YOU SELL SERVICES TO LANDLORDS, YOU COULD BE A PARTNER ON OUR AFFILIATE PROGRAMME. PLEASE GET IN TOUCH!

See our Twitter page: http://twitter.com/LettingFocus

TO VIEW RELATED POSTS select a “Category” at the bottom of this page.

Copyright: David Lawresnon 2007

Why Tinkering with Pensions is Driving More People to Buy to Let

I see property expert Beeney was in the London Evening Standard yesterday saying that London house prices are due to fall heavily.
I agree they will fall, but I don’t think the fall will be too heavy – however after a recent strong rise, a pause for breath is well overdue in the capital.
But remember house price growth is very patchy and prices in many areas of the North and Midlands have fallen over the last 6 months.
The fact is that national house price stats have been skewed by massive rises in posh parts of London (driven by an unholy mixture of city money and the ill gotten gains from non UK domiciled overseas nationals attracted by our very lax tax regime)
Northern Ireland has also done well for reasons of “catch up” and a delayed impact of the peace dividend.
However, whether house prices rise or fall, in the long run this country is becoming more divided between rich and poor – and between house owners and tenants.
I predicted last year at the Property Investor Show that by 2026 half of all properties will be rented or second homes -and I still believe it.
That prediction got me a lot of press - and some stick, but let’s see shall we.I see one big lender has recently made a similar prediction.
If it happens, this will take us back to a mix of home tenure not seen in the UK since the late 1940s because without any change in the tax regime, buy to let will definitely continue to grow as a proportion of the housing stock.

Pensions and Property
Of course, Gordon Brown and the big cheeses at companies who make the decisions on company pension funds are doing their best to make traditional pension fund investment more unpopular than ever (and hence driving more people to buy to let).
And half the time, the poor pension saver doesn’t even notice what’s happening.
After all, there has only recently been a big storm about GB’s decision 10 years ago on the pension tax credit.
But there is more too - if you have a traditional pension I would strongly urge you to read Rob Budden’s excellent piece in last Saturday’s FT. It’s an eye opener that few people who are toiling away and putting money in their pension will be aware of!
http://www.ft.com/cms/s/13d3413c-ef56-11db-a64e-000b5df10621.html
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