Myth-busting – Electrical Safety installations Act 202011:19 AM, 3rd August 2020
About A week ago 79
Christmas is not only the time to be merry, but it’s also the time when the dreaded pundits come out with their property price predictions for the next year in a bid to garner column inches and web space for free publicity.
Piles of press releases predicting this, that and the other for next year are already flooding out.
Already, the Nationwide has come out claiming homes are 25% over valued, the Halifax expects little change in prices, while first time buyer web site Firstrung’s chief executive officer Paul Holmes has said they will “spectacularly fall”.
He predicts an estimated 33% drop during the next three years – and suggests landlords “pencil in an on average 1% fall per month” for 36 months.
The main question for landlords is do the predictions really matter?
Just because some City analyst with a vested interest in selling mortgages says property prices will rise/slump (delete as appropriate) in 2012, property investors have no reason to jump.
As a landlord, you are holding assets that have a market value that rises and falls according to demand and supply.
If you do not need to buy or sell, then the price is irrelevant and merely information of passing interest. The value of a property does not affect the letting business.
If you do need to sell, the fact that the price may have been better three years ago is irrelevant. The price is what someone can pay now.
If you are buying, no doubt you will argue with the seller that the market is falling and try to negotiate a lower price.
The real problem over property prices is equity for sellers. For highly leveraged properties with maxed out mortgages at 85% loan to value in 2007, when prices were at a peak, the current value is not enough to repay the debt and capital gains tax.
Landlords have to make a business decision about a sale – take the offer and make up any shortfall from their own pockets or carry on letting in the hope equity will outstrip debt in the future.
If you want to have a bit of fun you might enjoy reading this article which is very controversial and has several comments already.
Alternatively, if you fancy pitching your intuition against the highly publicised authors you can do so by clicking here.
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