The UK’s newest property hotspots in 2008
12 deprived towns and cities in the UK could soon become prime property hotspots and investment locations…
Some of the most deprived areas of the country are set to become property hotspots thanks to the government’s Pathfinder Funding Programme, which will see £1billion of government cash set to revitalise the property markets of 12 redundant and troubled neighbourhoods. According to Property Secrets, these areas will become more attractive to both owner-occupiers and potential tenants, and property values could escalate and accelerate above the UK average.
Five areas, including East Lancashire, Manchester and Salford, Merseyside, North Staffordshire and South Yorkshire, are guaranteed to receive more than £100 million. Other areas to receive up to £95 million, over the next three years, are Newcastle (£95m), Oldham (£90m), Hull and East Riding (£87m), Birmingham Sandwell (£53m), Tees Valley (£35m) and West Cumbria (£6m). Manchester and Salford are to receive a massive £140 million, with £52 million guaranteed over the next 12 months.
A National Audit Office study found the Pathfinder Funding Programme has succeeded in raising property values beyond the comparative levels of other regions with similar problems, which are not part of the scheme.
Huge investment
Neil Lewis, CEO of Property Secrets, said: “This is just one of the persuasive arguments why property investors should consider targeting these locations now before they start improving and their values go up.This huge investment of £1billion will breathe new life into these local property markets and contradicts reports that the UK property market, particularly for the buy to let investor, is dead.”
“The UK buy to let market is pretty stagnant right now and you really need to know what you are doing if you are considering investing – make sure any property is significantly below market value. However, these pathfinder areas represent a great investment opportunity, but it is essential to buy at the right price and we would recommend a target of at least 15% below market value.”
“These ‘pathfinder’ regions are certain to become more popular over time and we will see a new breed of owner-occupiers and tenants migrate into these areas. But speed if essential for any property investor interested in these areas if they are to secure units that are best placed for price enhancement now rather than later.“
Renting property is a good option
The housing market is changing. The days of easy money are over, with lenders no longer offering 100 per cent or more of the value of a home.
Prices are likely to stagnate in 2008 and with mortgages more difficult to come by, renting could be a good option.
The rungs on the property ladder are snapping because lenders themselves are also suffering from the credit crunch. They can’t get the funds to lend to would-be borrowers.
As money gets scarce, only borrowers with the biggest deposits and best credit history will get cash.
People coming off a special deal now face an uncertain future. If they can’t move on to another special deal they could see their repayment soaring by hundreds of pounds a month.
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New CGT rate could help generate extra interest in buy to let
A new single rate of 18 percent Capital Gains Tax for buy to let investors and second home owners will be introduced on 6 April 6 2008, benefiting individuals, trustees and personal representatives.
The current rate is 40 percent for higher rate tax payers who have owned their property for less than three years. Even after a 10-year ownership of a property, the most a higher rate tax payer could hope for is a fall to a minimum of 24 percent.
The new rate has been welcomed by property investors and will make owning property personally advantageous for many discerning owners.
Alongside the change in rates, there is also a change in the indexation rule. Indexation was an inflation adjustment to the original purchase price and enhancement costs incurred up until 5th April 2008 which may result in the cost increasing thereby reducing the taxable gain.
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Buy to let investors have seen increases in their returns
Buy to let investors have seen increases in their returns during the first quarter of 2008 thanks to the demand for rented accommodation from immigrants, according to the quarterly ARLA Review and Index published today, March 31.
The average return on a geared (mortgaged) investment is 21.7%, up 0.27%, and returns on cash purchases average 10.91%. Flats show a marginally higher return than houses, except in the North. All returns on rental investments include capital appreciation and rents.
This quarter, the number of buy to let investors reporting a significant impact on the rental market due to immigration has increased by nearly 10% since the question was last asked at the end of 2006.
Unsurprisingly, given this increase in immigrant demand and the domestic demographic trends, nine out of ten investment landlords continue to state that they have no intention of selling their investment properties should house prices fall. This majority proportion is virtually unchanged on the last quarter.
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Mortgage approvals at 13 year low
The continuing decline in the property market has been underlined by the latest Bank of England figures.
The number of new mortgages approved for house purchase fell slightly in February to just 73,000, said the Bank.
That was a 39% drop on the same month a year ago, and leaves prospective mortgage lending still at its lowest level for 13 years.
However there was a record rise in other loans to individuals, excluding mortgages and credit card borrowing.
These loans, typically bank loans, overdrafts and hire-purchase agreements, rose by £2bn in the month.
But the Bank of England said it thought the surprising rise was largely due to students having to borrow more from the Student Loans Company because of an increase in tuition fees in the current academic year.
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