Property Investment News

According to the Times house prices rose for the third month in a row in July. Prices are said to now be higher than the beginning of the year. The average UK house price rose by 1.3% this month to £158,871. It is said they could be higher still by the end of this year. Average prices however are 6.2% lower than this time last year but it is a considerable improvement from last month where a 9.3% decline was registered from the same month in 2008. According to figures provided by Nationwide, February represented the lowest point with a 17.6% annual decline. Nationwide also commented that house prices had been very resilient considering the recession and unemployment; it could have been much worse. The building society did warn that the current good news for the property market might not be sustained. The reason for this is the shortage of house supply means that it has pushed prices up. This especially is the case for property investment at the moment as less people are selling their property because they want to wait and see which way the market is heading.

There has long been a divide in housing trends between the North and South. This divide shows the difference in the housing market in Britain.

The South takes generally 6 weeks to sell due to high demand and property shortage. The North generally takes around 3 months to sell, according to research.

Research showed that properties in London and the South West take on average 5.8 and 8.9 weeks to sell. In the North East and the North West it takes an average of 10.3 to 11 weeks.
Although demand in the South is high, the best property investment deals can be found in the North due to people wanting so sell quicker for a lower price.

Last week’s news was that the fall in Britain’s gross domestic product in the second quarter this year was more than expected. There has been significant concern that Britain’s expectation of seeing a recovery soon is fading. This could lead to further government debt, more unemployment and a delay in the growth of the property market.

Responding to these concerns, Alistair Darling called in representatives of the larger banks demanding to be told why they are not lending more and why the cost of lending is so high when the base rate is still at a record low of 0.5%.

The focus in this case is on lending to businesses as they have a major role in bringing the country out of recession. But it is well known at the moment that lack of finance has affected many sectors, especially property. The amount of available mortgages has fallen to a small percentage of what it used to be for residential buyers and property investment. If Mr Darling does not succeed in getting banks to lend again soon, it might be the case that many investors will look to borrowing from overseas banks such as The Bank of China who may soon be offering UK mortgages.

The latest research today has shown rents rose in June for the first time in 3 months. It was said that nationally the average rents increased to £649 per calendar month, up a fraction of a per cent from May. Leaving average monthly rentals 3.4% lower than in August 2008 when average rentals were at their peak.

In 2008 rents were rising way above the rate of inflation by over 7%. Rental payments in London increased to an average of £900 per month, up 1.7%. However, the North West slid 1.4% to an average £526 per month, and tenants in the South East benefitted from 6.6% falls. In Wales, landlords increased rents by 4.9%. These figures help to prove a mixed picture of the UK property investment and residential landlords market at the moment.

If there is one part of the current financial crisis sure to be long lasting, it would be the effect on the property prices. Not only will the prices take some time to recover lost ground after more than a year of falls, but the sort of growth many have been expecting has not been as rapid as initially hoped.

For those who are in property investment for the long term, this is easily dealt with by waiting for the value of their portfolio to rise knowing it will eventually gain again. In the mean time however, some investors might struggle due to the type of finance they used when buying during the peak period.

When values have fallen, investors can have problems. Sainsbury’s Bank surveyed recently that UK landlords have seen a total of £118.4 billion off the value of their portfolios from the first quarter of 2008 to early 2009.

Landlords in property investment for the long term will still find that if they keep reliable tenants or have property in areas of strong rental demand, they will have the best chance of riding out the storm and seeing better days ahead of them. The other security measure for investors is to look for appropriate mortgage insurance for these uncertain times.

The recent home improvement survey from Halifax could provide the tools you need to help increase the value of your investment property portfolio.

The survey offers landlords and home owners advice on how property improvements can boost the value of properties and how it’s very often the smaller cheaper improvements that make the most difference.

Some of the advised improvements include: improved fuel efficiency, home security measures, redecoration, renovation of the garden, loft conversions.

The good news for property investors is that as well as boosting the value of your property investment, these small changes can make your property easier to let also.

Mortgage lending in June had seen an increase in comparison to the month before. Lenders say that the trend is seasonal, but the figure is said to be approximately 48% lower than last year. CML members (Council of Mortgage Lenders) lent 12.3 billion pounds in June 2009, which had increased from 10.5 billion pounds in May.

It has been said that the lending figures reflect the season, but this may help lending increase throughout the year.

The Bank of England stated that although June showed a rise, fixed rate mortgages were becoming more expensive. The report also stated that UK business loans were being paid back instead of borrowing being increased. This did have a negative impact on the economic recovery.

The general sentiment is that the better way to help encourage people to borrow again is by companies offering more affordable loans and lower deposits. This would help the property investment market improve also as more investors would be prepared to borrow again and achieve better rental yields on cheaper mortgage rates without putting so much money into a property.

Investors whose property investment portfolios have fallen in value in the current financial situation could see an improvement as recent prices have risen according to the RICS housing market survey which was published this month.

6% more surveyors expect the house prices to increase during the next 3 months, compared to a negative reading in May. The increased optimism has been motivated by the increased number of buyer enquiries and drop in new supply.

The number of surveyors to report an increase in fresh enquiries rose in June with 67% reporting a rise rather than a fall.

It was also reported that the rebound in enquiries is now increasing in the number of transactions. Sales increased, be it from very low levels.

The average number of properties sold in the last 3 months increased from 11.7 to 12.7.

A great concern for property investors when searching for their next investment property is yield. This is a real safeguard for investors in difficult times of late. This would allow investors to both get good returns on their money and to keep hold of it in the long term. When the market is struggling, this is the main concern for investors.

The other concern though has been that investors seek an excellent location for their property investment. It is very true that London is in demand for properties, although there is also higher demand for properties in Manchester and the North West, including apartments, which previously would have been unheard of to invest in due to what appeared to be over-supply. However, now these areas are becoming more popular if the developments are in a good area close to amenities and can therefore be filled quickly and bring in a good rental income.

Estate agents in the UK say that house prices are beginning to increase because of the property shortages at present. An increase in sales and property investment demand is a strong cause of this trend.

Although some estate agents maintain that prices will still fall over the next few months, many other opinions are that prices will increase as also suggested by the Royal Institute of Chartered Surveyors (RICS). This should be a good time for those looking for property investment.

The average number of house sales is said to be rising. RICS also indicated that average sales rose from 11.7 in May ’09 to 12.7 in June. This is a good sign that the economy is showing some improvement, and prompting increasing interest from property buyers.

Although experts have warned we should not be too optimistic too soon as there is a long way to go before the economy recovers. Many estate agents are worried about the lack of financial support for first-time buyers, and the amount of buyers struggling to get a mortgage, which contributes to a slower recovery of the property market.

While RICS is cautious about being too optimistic about a recovery in the market, the latest figures are clear there has been some improvement. If property sales continue upwards, lenders could follow suit, with a hopeful recovery of the market not too far away.