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Property News 9th June
2008
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More Bad News for Landlords and Homeowners...
According to
Chesterton estate agents house prices fell in all but one UK region in
April, highlighting the growing crisis in the property market and the
spectre of negative equity for buy to let investors as well as residential
home owners. The average price of a residential property today is down to
£193,183. There are still some regional increases particularly in the
areas of London, but these anomalies are localised to specific needs of
the local market. The impact of the credit crunch on
buy to let landlords has been
overwhelming. Landlords coming off fixed rate
buy to let mortgages are finding
remortgaging a more expensive investment opportunity. The inter banking
interest rate (LIBOR) has increased over recent months as banks and
lenders have removed products, increased lending criteria and withdrawn
from some property investment markets altogether.
Despite recent
price falls, first time buyers (who for years have been squeezed out of
market) are now finding themselves not being able to meet the new mortgage
lending. The number of new private landlords has also evaporated as the
criteria set down by the buy to let mortgage providers has excluded or
scared away novice first time landlords. In addition, investment
home loan providers have tightened up lending criteria such as the loan to
value (LTV), on existing landlords with little equity in the property
portfolio. Mortgage lending generally is at a record low with the number
of first time mortgages reducing to 58,000 in April. The impact of the
lending squeeze, the lack of confidence in the economy and in particular
the UK buy to let market has led respected groups such as the Council of
Mortgage Lenders (CML) and Royal Institute of Chartered Surveyors (RICS)
to predict a 35% to 40% fall in property prices this year.
As confidence
ebbs away other sectors of the housing market have been effected... For
instance, despite a massive shortage new builds to keep up with long term
rental demand, the National House Building Council recently reported a 27%
annual fall in planning applications. The number of
empty flats is also on the rise as well
as the recent over supply of modern flats in city centres (converted or
built for the buy to let bubble) has ground to a halt. However, it is not
all bad news... the anticipated big house price crash has still not been
as severe, sudden or headline grabbing enough for statisticians and
business analysts to compared falls to those of the the 1980's. Indeed,
there does appear to be some light at the end of the tunnel for worried
landlords.... the number of tenants requiring accommodation is forecasted
to increase. In addition, analysts Hometrack recentley stated a 10% fall
in prices will enable a fifth of those currently priced out of the market
to buy a home.
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