Property prices will Rocket, Then We All Die. Cheerful Stuff from LettingFocus.com

Ever heard of James Lovelock and Gaia theory?
James Lovelock is a chap you really should know about because his theories, if they come true, will impact all of us.
Lovelock is an independent scientist whose Gaia theory - that the Earth is a self-regulating super-organism - came out many years ago.
Stay with me this really has something to do with property, I promise.
His new book, “The Revenge of Gaia”, predicts that by 2020 extreme weather will be the norm and by 2040 much of Europe will be Saharan and parts of London will be underwater.
Increasingly and rather scarily, other scientists like those on the Intergovernmental Panel on Climate Change, tend to agree.
Sadly, according to Lovelock, global warming has now passed the point where it can be stopped and catastrophe is now inevitable. (Well, if the whole world went fully nuclear tomorrow we may just have a chance but that’s pretty unlikely with oil men being so close to the White House and Kremlin.)
Before that happens, he says, the UK will increasingly become a place for refugees from mainland Europe as life in the south of Europe, Africa and Central & South Asia beomes impossible.

GOVERNMENT STATS AGREE
On population predictions the UK’s own government statistics make similar predictions to Lovelock. At http://www.statistics.gov.uk/cci/nugget.asp?id=1352 you can read the predictions that government minister for immigration Phil Woolas was so cross had been published at all.
These say that the UK population is projected to increase by 4.4 million by 2016 an increase equivalent to an average annual rate of growth of 0.7 per cent.
If past trends continue, the population will continue to grow, reaching 71 million by 2031. This is due in part to natural increase (more births than deaths) and because it is assumed there will be more immigrants than emigrants.
So just before we all die – and I hope I’m joking here- we will certainly see a shortage of property and record prices for houses and possibly high rents, i.e. any form of shelter from the burning heat.
But once catastrophe beckons, (Lovelock predicts 80% of us will be dead by 2100), I guess you should substitute your assets out of property and switch into buying cans of tinned food, a secure bunker and some guns. Cheerful stuff!
For the sake of my darling 7 year old son, I dearly hope that Mr. Lovelock will one day turn out to be a very very deluded octogenarian with a book to promote who has finally got it wrong.
I’m an optimist so I’m sticking with that hope.
In the medium term given the increasing population and a dearth of house building I just can’t see house prices falling much more.

ESTATE AGENTS REALLY ARE GETTING BUSY
I know they are eternal optimists but the number of estate agents in the London area who seem genuinely rushed off their feet (at least outside the prime property markets) may really suggest we are getting near the bottom for house prices.
This is backed up by my own experience too. Every week I go to Rightmove and select 2 bed flats and houses in an certain area of central London (well 3 miles out if you must know) where there are loads of identical property.
These are my bellwether properties.
None have dropped their asking prices for 2 months now – further signs that we could be near the bottom.
Around the rest of England and Wales I’m hearing the same story.
I’ll be looking in mote depth at the state of the property market and the opportunity for investors, at my seminar on Wednesday. I’ll also have special guests along who are experts in mortgages, tax and buying below market value.
Come to Our Next Evening Property Event in London Evening of 18th March
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ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the property letting experts. Read Property Articles by David Lawrenson.
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I’m an expert property writer and property speaker - and I run the well known landlords blog that you are reading now.
Come to Our Next Evening Property Event in London Evening of 18th March
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 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 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 these sources.
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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.
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Copyright: David Lawrenson 2009. This blog is updated roughly once a week.
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Immigration flow may reverse says David Lawrenson of Letting Focus

One of the big threats to buy to let is the risk that the big flow of immigration may one day start to reverse.
New migrants generally rent and the huge numbers coming to the UK – we are talking millions but the fact is no one really knows least of the all the government – have pushed up demand for rented property.
However, the tide could be turning as the economies of the new EU member states strengthen. The numbers of east European immigrants approved to work in Britain dropped from 227,875 in 2006 to 206,905 last year, a fall of nearly 10 per cent, and the trend is expected to accelerate over the next decade. According to the Independent, “Poles, who make up two-thirds of the newcomers, are understood to be returning home in greater numbers, drawn by higher salaries, job shortages and the fall in the value of the pound against the Zloty”

Mortgage Rates
Also, in yesterdays papers was the threat that mortgages could get more pricey. The Head of the City Regulator the FSA said banks may be forced to keep loans on their own books in future rather than packaging them up and selling them off. This could have the affect of raising the cost of money. My view is that this fear is a bit overblown as there are still plenty of other sources of finance available like the building societies.
Meanwhile, in a separate move, Nationwide has raised the amount of deposit required for access to its best loans to 25%. I feel that this news is more significant for the housing market because this tightening of credit, if followed by other lenders, could lead to a bit of a donwturn in housing prices as borrowers find it harder to get funds. Possibly as much as 5 to 7% over the next year if others lenders follow suit.

Buy to Let Mortgage Rates
What about buy to let mortgages? As far as we can see lenders have now stuck another 20 basis points onto the cost of these loans relative to bank base rate than was the case pre-credit crunch days. However, buy to let loans are still available at 80% loan to value. So, if your credit rating is good, and you have access to money, the effect of all this will be that more property should be available to buy (to let) at lower prices than was available before.
Finally, I was quoted extensively in yesterdays Independent. Here is the link to copy into your broswer: http://www.independent.co.uk/life-style/house-and-home/property/investment-get-the-best-deals-ndash-now-787640.html
If you need more advice on property investment or buy to let investment in general please ask me.
I’m David Lawrenson from property investment advisors http://www.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.I’m an expert on property investing for profit and a well known property freelance writer 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 http://www.lettingfocus.com/
My next London landlords networking meeting is on March 12th. 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, 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.

Property prices and buy to let after the credit crunch by Lettting Focus

What will happen to property prices and what will happen to buy to let and property investment after the credit crunch?
Well, now we know that the Bank of England was now thrown a lifeline to the Northern Rock and has in effect underwritten its deposits.
And much money has been made and lost in the city on trading in the shares of NR as well as Alliance & Leicester, Bradford and Bingley and Paragon - which have all seen huge gyrations in their share prices. (Expect a wee enquiry into these gyrations at some future point! I can’t help but smell a rat here!)
But back to property!

Money Markets and Buy to Let
As you may know, not all lenders raise as much cash from the money markets as Northern Rock did.
Nationwide and Halifax Bank of Scotland only get about a third of cash in this way, though that’s still been enough for lenders like these to raise their standard variable rate by up to 0.2%.
Other banks who have used the credit markets more to raise money are Bradford & Bingley and Alliance & Leicester – and their stock market prices have sea-sawed along with Northern Rock, though not quite as much.

Mortgage Trackers
If you took out a Bank of England base rate mortgage tracker for a long term, then you can sit back and relax. Your rate will not go up unless base rates do.
But if you are on a mortgage linked to the standard variable rate one or one where the fixed term expires soon, then be prepared for a hike in your rate right now.
Back in 1988 I took out a loan with a lender that raised funds on the money markets – and not linked to central bank base rates. There then followed a credit crunch and my rate went up.
I learnt my lesson way back then.
However, lots of landlords have borrowed from lenders who raise their funds in the money markets. I have not seen figures on this, but my guess is that it is a much higher proportion than on standard residential mortgages.

Mortgage Rate Hikes
Therefore, mortgage rate hikes for landlords could be particularly high and may force some to sell property, opening up an opportunity to others to buy property cheaply. (And if the private rented sector declines, rents will surely rise)
But what does this all stuff mean for house prices?
Well, lenders have already tightened up their lending criteria. They will look much more closely at (and may refuse) to lend on “risky” deals like ex council, new build flats with gifted discounts in oversupplied areas or at loan to values much over 75%.
It could also mean the “no money down deals” may only be available to experienced investors with good track records who are known to a lender.

Oversupply of Property
Now, for a long time I have said there is still an oversupply in some areas.
I forecast falls in house prices in areas that are heavily oversupplied with too much of one kind of property.
Sorry folks, but many cities in the North have too many flats for the current state of their local economies and I predict prices will come down by at least 10% in these towns over the next 12 months.
I’m not alone here. Anne Ashworth, writing in the Times today, cites Liverpool as a good case in point.
However, other areas which are not oversupplied will do well and see prices and rents hold up and indeed go up.
But while all this interest rates stuff is important it is actually a bit of a side show because the real factor that is driving up the UK’s house prices is the expanding population and the lack of housing supply.

Northern Ireland
Take Northern Ireland as an example. Why did prices surge 50% in 12 months in Ulster recently? True there was a bit of property speculation, and the peace dividend also played a part. But another story that you won’t hear about in the press (well you may in the Daily Mail) was a large migration to Ulster from mainland UK by workers mainly from the new EU.
Now, if the UK economy becomes less attractive to workers from the new EU relative to other places in Europe, then much of the inward migration could fast turn the other way as workers return home or move to other better economies.
I don’t think this could happen anytime soon, but if it did, that really could put the skids on house prices and rental levels.

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Copyright: David Lawrenson 2007. This blog is updated every week.

Landlord Bashing in The Press. Comment by David Lawrenson

Landlord bashing seems to be all around us right now.
The Guardian newspaper over the last two Saturdays has let its readers loose with a string of mostly anti buy to let letters - and the Metro free paper was at it too yesterday.
But landlords should take note because some of the Guardian letter writers’ comments were fair and needed making. In particular, their attack on absentee landlords who fail to maintain their properties and let tenants dump rubbish outside, thus destroying the look of a community was very valid.
However, the fact is that this type of landlord will not survive in the long term because tenants will rightly shun properties that are substandard and which frankly, look a mess.
Still, these kinds of concerns are the legitimate concerns of communities and the landlord community should take note.

Jealousy of Successful Property Investors
That said a lot of the anti- landlord culture is of course fuelled by some jealousy of the big capital gains some forward thinking landlords made in the last 10 years – or more specifically of those smart landlord / investors who bought in the right places and the right kind of property.
Not all did and some will have made losses! And of course, the press love to highlight the landlords who made a mess of it.
Of course, the big rises in house prices has been driven by the huge drop in borrowing costs between 1997 and 2004 and by large scale immigration (which has also massively fuelled the available tenant market).
And its worth noting, as the Abbey and the A&L showed in previous surveys last year, that despite high house prices, there are in fact millions of people who could afford to buy but actually choose to rent. Their choice to rent simply reflects the hire and fire work culture that exists today – they may need to move fast to find work. Renting gives them that option.

Immigration and Low Interest Rates - a One Off Event?
Both the immigration and low interest rates factors are potentially “one off” events and landlords are having it harder now - with net yields of 4% (about 2% below the best mortgage rate) being the norm – and yields are much less in many parts of the north where there is a huge oversupply of flats.
In conclusion, it is a shame that much of the stuff in the press on the buy to let issue has been misleading and landlords and their representative organisations need to respond positively and put the other side of the argument and explain the good that many landlords do.
I hope this is done forcefully – and fast.

Landlord Associations
Also, it would be good if more landlords became members of landlords associations – the percentage of landlords who are members is woeful and continually surprises me.
And we also need the various landlords associations to speak with one voice as soon as possible.

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LettingFocus.com is the home of landlord information. Hello, I’m David Lawrenson.
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