The buy to let market is thriving, but too risky for most newcomers
Ten years ago, twins Matthew and Peter Jones were both plain-clothes policemen who dabbled in buy-to-let. Today, they are professional investors with a portfolio of 25 homes worth £10m and enough confidence in the property market to launch their own firm of estate agents and buying agents last year. You will find their offices in Richmond, west London, where house prices have more than tripled over the past decade.
“We ended up making more money through property than by doing the day job so we became full-time professionals, setting up M&P Properties in 2003,” says Peter Jones, 35. The twins bought their first buy-to-let property, a two-bedroom flat in Twickenham, for £82,000 in September 1997. It is still part of their portfolio and is now worth £295,000.
Peter and his brother agree that the property market has been slowing down. They have seen the downbeat economic forecasts including the predictions by Capital Economics, the analyst group, that the housing market is poised for two years of falling prices. But they see the softening market as an opportunity rather than a threat. “This year looks like it will be a time to snap up a good deal,” says Peter. “There will be sellers out there who are prepared to sell at reasonable rates. Next year we will be looking back on 2008 as a good buying opportunity. We hope to have added at least £2m to our portfolio by 2009.”
The Joneses put three offers in just before Christmas, when the market was at its most quiet, and are in the process of buying a three-bedroom house for £800,000 in Richmond, a one-bedroom flat for £300,000 on Richmond Hill and a small one-bedroom house in Twickenham for £250,000.
Read the rest of this entry »
UK housing market outperforms Europe
The UK housing market performed well in 2007, compared to most of the rest of Europe.
That is according to the latest European Housing Report from the Royal Institution of Chartered Surveyors (Rics), which showed that the UK housing market was the sixth strongest last year.
House prices increased by eight per cent in the UK, making the market the strongest among the largest European economies.
Commenting on the findings, professor Michael Ball, author of the report, said that the UK housing market is in a good position.
“The often repeated dilemma currently facing monetary authorities is that slowing economies – and housing markets – need lower interest rates, but higher inflation is against them,” he commented.
“How Europe’s housing markets fare in 2008 depends on how that tug-of-war develops.
“The UK housing market looks much better placed than many others in Europe because of the greater interest rate flexibility,” continued professor Ball.
The Financial Times House Price Index recently revealed that property price growth reached 0.5 per cent in England and Wales in February.
Rental yields warm up as property values cool down
Average rents in the private rented sector have risen by an average of 4 percent for houses and 2 percent for flats in the three months to the end of February.
These averages have been boosted by a 9 percent rise in Prime Central London and a 5 percent rise away from the South East. In the South East itself, rents fell slightly, by 2 percent for houses and 5 percent for flats.
These figures are seen as emphasising the start of a new housing cycle says ARLA (Association of Residential Lettings Agents).
The improvement in rents received includes an increase of well over £3,000 a year for renting a house and £1,500 for renting a flat in Prime Central London.
Rents have risen in the rest of the country too, from an average of £931 to £981 for houses and £619 to £664 for flats.
In the South East the average rent dropped from £1,390 to £1,361 a month for houses and from GBP 930 to GBP882 for flats.
In all the regions the cost of renting a house against renting a flat is around half as much again, between 48 percent and 61 percent higher.
These figures are the results of the latest quarterly ARLA Survey of its member letting agents published this week (10 March).
Read the rest of this entry »
Mortgages disappearing from the market
Potential homebuyers have been advised to try to secure deals on mortgages as soon as possible.
It comes as the global credit crunch continues to affect the mortgage market, leading to many lenders pulling some products from the market.
Michael Coogan, director general of the Council of Mortgage Lenders (CML), told BBC Radio Four’s ‘Today’ programme that the mortgage market is changing rapidly.
“[Lenders are] changing their approach to their products, putting their price up; they’re also removing products,” he revealed.
“I think what you’ve got to do is to try and ensure that you act fast to try and complete the deal as soon as you can.
“The lenders aren’t looking to withdraw products without reason. They are limited in funds, they are also having to address the issue of putting the right price on the product,” continued Mr Coogan.
A number of mortgages were pulled from the market last month, with 125 per cent deals disappearing altogether and 100 per cent mortgages also becoming much less readily available.
Gross lending declines in February
Gross lending declined to an estimated £24 billion in February, down 7% from £25.9 billion in January and 6% from £25.6 billion February 2007, according to the Council of Mortgage Lenders.
The Bank of England approvals data for January showed subdued levels of house purchase activity and a sharp rise in remortgage approvals, which is likely to be supporting current lending volumes.
CML director general Michael Coogan said:
“We have entered a substantially slower phase in the housing market and there will be ongoing problems in the mortgage funding markets unless the Bank of England makes new, broader based attempts to improve levels of liquidity in the UK.
“Demand for mortgages remains strong but cannot be fully met from existing funding. This has led many lenders to reduce their product ranges, increase their mortgage prices and, in some cases, to reduce their lending capacity.
“As credit conditions change markedly from day to day, lenders will continue to rapidly adapt their products and pricing to match. This is a vital response to the uncertain conditions.”
Source: Council of Mortgage Lenders
