Property Investment News

Not many things would be worse for investors seeking a recovery in the property investment market than a relapse into negative territory. The possibility of this might worry some, thinking that the UK economy’s improvement is still a long way off and there is still more financial worry to come.

So far, though, this doesn’t seem to be happening. There is more optimism in the news today saying that despite a fourth consecutive dip in retail sales in the year in August, the sector is becoming more hopeful of a recovery. Only 2% of retailers expect business to get worse in the next 3 months, the remainder expect business to pick up again.

In the property investment market it is clear that matters are more positive. Mortgage lending has been gradually increasing and there is evidence that house prices are increasing also. Nationwide has seen a 1.6% rise in August, according to reports.

This figure has further added to a positive trend, not just over the last month, but over an increasingly longer period. The three months leading up to August has shown a 3.3% jump in prices, up from 2.7% in July. The year on year change did still remain negative, but down from -6.2% to -2.7%.

A good cause of this is the interest rates remaining low. The optimism for the fortunes of the property market may have real justification at this stage. It is believed by the majority that the housing market has bottomed out and there are indications that we are hopefully at a point where a gradual price recovery will be sustained.

The Nationwide has reported that the average priced home is now £160,224, up from £158,871 in July. For the fourth consecutive month there has been an increase, this time by 1.6%.

While prices are still lower than in 2008, the annual rate of decline in property values has slowed sharply to 2.7%; July showed a 6.2% fall.

Nationwide also said that a key factor in this was an exceptionally low level of interest rates. Rates have been maintained by the Bank of England at 0.5% since March.

This is good news for the property investment market as interest rates still remain low but prices are gradually rising once again.

In recent months there have been conflicting reports about the UK economy. On one side, experts are pointing to an array of economic indicators i.e. rising house prices and retail sales, suggesting the recession is coming to an end and a recovery is imminent. On the other side, different authorities are suggesting there is still more of a downturn to come, claiming the increase in unemployment will eventually take its toll on the UK, and the property investment market will face a double-dip recession.

The latter suggestion isn’t really as likely to happen, although not impossible. According to Mouseprice.com’s director, it is not possible to say for certain what will happen. He says that if the past is anything to go on, the last indicator is the one that keeps heading downwards when the other indicators start to turnaround.

Some pessimists point to unemployment as something that is still to kick in. This is what some are still worried about, but it still remains to be seen whether this comes about.

The Office for National Statistics stated that 72.7% of people of working age were employed during the three months up to June, which is down 0.9% from the previous quarter. Around 2.43 million people were unemployed, up by 220,000 compared to the beginning of 2009.

Earlier this week, Bovis Homes mentioned the rising unemployment, saying it was a concerning factor, given the potential impact it may have on property prices. It said that prices are still considerably low, below the levels they were at during the peak of the housing ‘boom’ in 2007, while the number of transactions are still at record lows. Bovis still remains vigilant regarding short term prices, especially due to the lack of available mortgages at present.

The above mentioned factors, as well as a potential increase in the supply of homes to go on sale in the second-hand market, suggest an encouraging situation for property investors with cash to spend. They could keep prices low for some months to come, meaning there may be opportunities for buyers to snap up some bargain investment property before the virtually inevitable rise in property prices begins.

The buy to let and property investment market has shown initial signs of stabilising during the second quarter as arrears have improved considerably and the decline in new lending has begun to slow. This is according to figures from the Council of Mortgage Lenders (CML).

There were 21,600 new buy to let loans in the second quarter, just 4% less than the 22,400 in the three months prior. Reliant on wholesale buy to let funding, the property investment market has suffered an abrupt contraction during the credit crunch.

There are now less active lenders in the private rental market and they now have less money to lend. Therefore the seven consecutive quarters of decline have left the gross lending of buy to let at very low levels.

The drop during the second quarter was mainly looking at remortgages, which was down 15% from the previous quarter, whereas the number of house purchase loans increased 5%.

The gross total of buy to lets was £1.9 billion in the second quarter, 5.6% of the gross total lending, compared to £8.9 billion quarter two of 2008, which was 11.9% of the total gross mortgage lending. Buy to let now represents 11.5% of the total value of UK mortgages outstanding.

Buy to let arrears showed significant improvements in all aspects. There were 29,400 mortgages in arrears of more than three months, down from 35,600 in the quarter before. The number of mortgages in arrears of more than 1.5% of the balance outstanding fell from 28,800 in late April to 22,900.

During the property ‘boom’ of 2007, there wasn’t much of a difference in property values between modernised and un-modernised houses. But during the current financial situation it is much different according to Savills, the property experts.

In a report recently, Savills said that neglected properties are selling at 10%-35% less than fully modernised homes. This difference is great for those looking for a good property investment.

With these savings available, the extra cash flow can easily be used to do the properties up and bring them up to the equal standard of the modernised properties.

Therefore if you are clever with your property investment choices, you could increase your cash backs and still save on renovations.

These types of properties, however, are limited to cash-rich investors who have the initial funds to put into doing the work. But with some expectations of a further fall in property prices, investing in neglected properties could be the new way to expand your property portfolio.

Properties in the UK with poor energy performance ratings could be banned from being sold or let according to a report released on Monday.

The Energy Saving Trust wants a new law to be introduced that would ban properties with low ratings, such as F and G, from being sold or let from 2015.

The Trust is calling for grants and financing packages to be made available along with advice for property owners, but for owners who refuse to act there should be strict laws in place.

The Trust state that 27% of the UK’s CO2 emissions come from UK residential property, contributing to the increase in risk of climate change. If the government is going to meet its targets to cut domestic carbon emissions by 29% by 2020, they will need to take tougher measures.

It is estimated that around 5.5 million UK properties come under the lower two bands and it would cost £5,000-£10,000 to bring them up to standard. It is estimated that if all these homes are brought up to at least band E, it would save 9.4 million tonnes of carbon emissions per year.

This is vitally important news for those involved in property investment or considering buying investment property as they will need to ensure their properties meet the required ratings or face extra costs in making the property more energy efficient.

The increase in mortgage arrears has slowed recently, with CML reports showing a ‘modest deterioration’ in mortgage arrears during the second quarter of 2009. The second quarter showed 205,600 mortgages in arrears by a minimum of 2.5% of the outstanding balance. This was higher than 203,900 seen at the end of the first quarter.

There was also a small increase in the number of mortgages in arrears by three or more months to 270,400. This is just under 6,000 more than at the end of the previous quarter. But this was 100,000 more than the 152,700 that was at the same time in 2008.

The data does show that lenders are trying to help borrowers manage their way through their payment problems and get their payments back on track avoiding repossession.

Anyone involved in property investment should also consider the difficulties some are in when keeping up with their repayments, and the first signs of struggling should seek professional advice to avoid repossession of their own investment property.

Buy to let was expected to be the worst victim of the credit crunch with supply fading out completely. But it appears that this hasn’t happened.

It may be that some less experienced investors have faded out, but the latest figures from the Council of Mortgage Lenders (CML) show that the sector has not only survived but is recovering.

The second quarter of the year shows figures from the CML that buy to let mortgages in arrears of over three months or more was 29,400 (2.49%), down from 35,600 (3.06%) from the first quarter.

The CML stated that these figures represent the first signs of stabilisation as the decline in lending had slowed. So it appears the property investment market may well have ‘bottomed out’.  The most important regard for investors is that their investment property is viewed in the long term where they will see the growth again.

Rent is treated as income and therefore taxed in line with your basic or higher rate tax bands.

You will be able to offset mortgage interest payments, letting’s agent costs and maintenance costs against the taxable rental income.

It makes it more tax efficient to have a mortgage on the investment property instead of your main home where you are unable to get tax relief on your mortgage.

Rental income should be declared on a yearly self assessment tax return, but it would be worth speaking with an accountant to make sure all tax breaks are taken advantage of.

Property prices are on the up again, which is making people ask, is it the time to jump back into the market? Mortgage lending figures may suggest so. Nationwide reported a 1.3% rise in prices following similar rises in May and June, while Halifax reported a rise also for the second time in three months. It may appear to be a small increase, but it has halted the steady drop in prices since 2007. With property prices creeping upwards, potential buyers are in sudden fear of missing out on the rock bottom prices.

Some experts however, are predicting further drops this year and are saying that the bottom of the market is still to come, therefore there will be better bargains before the end of the year. This would be good news for people who are still thinking about buying investment property to gain on the property growth still to come.