Ignore those property price pundits who crave free publicity

Ignore those property price pundits who crave free publicity

16:17 PM, 13th December 2011, About 12 years ago 4

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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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0:27 AM, 14th December 2011, About 12 years ago

House prices are clearly overvalued and have a lot further to fall. To ignore this is a little stupid.

7:59 AM, 14th December 2011, About 12 years ago

Interest rates will remain low for the next 15 years the UK economy is f----d.
Tenant demand will remain stong.
If the EU regulation resticting BTL mortgages being obtained on rental criteria is enforced in 2013 then there will be distressed landlords having to ofload properties and that will reduce prices.
Tenant demand will be even more along with rents as most of those distressed properties will be bought by FTB as LL won't be able to borrow for a BTL mortgage unless they are very, very rich!!!
If you are holding your properties for the long term , which quite frankly is the only game in town then you won't have to worry about capital values.
They will slowly increase and you will be receiving ever increasing rental income over the long term you hold your properties.

Sam Addison

11:26 AM, 15th December 2011, About 12 years ago

All these figures and percentages are sweeping generalisations. There is a world of difference between the market for a multimillion pound house in London and a 2 bed terrace in Burnley. No doubt some areas will see prices drop but others will see prices hold or even rise. The loss of jobs in the public sector will have little impact in areas where there is already high unemployment.

If you are wanting to increase your portfolio you just have to be selective as always.

20:30 PM, 15th December 2011, About 12 years ago

Capital values are going to be down long term just like what happened to Japan.

There are a lot better investments than UK property at the moment, in fact uk property looks extremely vulnerable especially with the increasing repossession of by to let properties at the moment.

Also it isn't Bank of England interest rates you should be watching but LIBOR instead. That is rising pretty fast which means higher mortgage costs.

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