Property a sound investment in 2009

Investors urged to look at quality of property and long-term potential

Property investors and landlords have been urged to take a long-term view of their assets to weather the economic downturn.

While property values may not fully recover over the next 12 months, Edinburgh property management specialists Cullen Property are advising clients to stay calm and stick to their assets for long-term gain.

The company expects the market for both buying and letting property to calm down in 2009, with a number of opportunities arising for serious investors. Managing Director Malcolm Warrack and Operations Director Steve Coyle share their expectations for the property market in Edinburgh in the New Year:

• House prices are likely to continue to fall slightly, although parts of the city may withstand this trend. Lower prices may tempt investors back into the market
• Property investors will most likely see their mortgage rates falling as fixed term deals come to an end and customers are moved onto standard variable rates which have fallen considerably following interest rate cuts. Investors are therefore well advised to hold on to their property and wait for the market to improve before selling
• Rental properties: supply and demand will level out as some ‘reluctant landlords’ realise the legal requirements involved in letting a property and decide to sell at a slightly lower price instead
• Rents are expected to remain stable in Edinburgh, although there may be slight increases in the most popular areas near the universities and the city centre
• Quality of rental accommodation is likely to increase as landlords upgrade properties to attract prospective tenants and give themselves an advantage over competitors whilst minimising voids between rental periods

Cullen Property’s Managing Director Malcolm Warrack comments: “We have always advised our investor clients to look at property as a mid or long-term investment and to make sound financial arrangements.

“This strategy has worked really well and, so far, none of our clients have had to sell a property due to the credit crunch.

“Instead, we have been able to achieve occupancy rates of over 98%, which we have maintained for over five years.”

Cullen Property currently manages approximately 300 properties across Edinburgh, over 65% of which are occupied by students. The company offers a full management service, including property sourcing, lettings and refurbishment.

Changes to housing benefit leaves poorest priced out of town

Charity warns that low earners will not be able to pay their rent under new allowance scheme

Sara Gaines, guardian.co.uk, 30 December 2008

Reforms to housing benefit could push claimants into ghettos as tenants are forced to move to the outskirts of towns where housing is cheap but jobs scarce, a charity warned today.

Shelter found that the Local Housing Allowance (LHA), which is replacing housing benefit paid to benefit claimants and low earners, is not enough to cover private sector rent for many tenants.

Those who lose out will be left to meet the shortfall themselves, and may see the only solution as moving to poorer areas.

Shelter said this would create a poverty trap as such areas, often on the outskirts of towns, have far fewer employment and training opportunities.

LHA is a flat-rate, means-tested benefit paid according to household size and location. It is calculated using the average rent in a given area, known as a Broad Rental Market Area (BRMA).

Shelter says BRMAs are too large and that there are often huge differences in the rents people are asked to pay across the areas. Full Article

UK house price experts differ on depth of fall

House prices in Britain are set to fall by an average of 10 per cent next year, according to forecasters, with some experts expecting the decline to bottom out after summer.

Daniel Thomas, Property Correspondent, FT.com - 29 Dec 2008

There is a wide disparity between the most optimistic forecasts – that the market will remain flat – and the most bearish predictions of a further 20 per cent fall in house prices.

The only consensus among the forecasts is that there will be no growth in the market next year. Such is the level of uncertainty, given the precarious state of the economy, that Halifax and Nationwide, two of the largest mortgage lenders, have decided not to release house price forecasts for next year.

Nationwide said it could be irresponsible to make a forecast, given the market’s dependence on confidence. Halifax said its decision related to its merger with Lloyds TSB. Both forecast at the start of this year that the market would be flat – it fell by 14-15 per cent in the year to the end of November, according to the lenders’ own indices.

Other forecasts reveal a range of 20-35 per cent in peak-to-trough falls in the housing market. Full Article

Falling UK commercial property prices

UK commercial property prices have already fallen by 25 per cent since last summer, but there is now clear evidence is that the UK property market has entered its so-called “double dip” phase as falling rents from struggling office and retail occupiers began to accentuate already dropping prices in the cyclical market downturn over the past year.

Cynthia O’Murchu and Dan Thomas, FT.com - 22 Dec 2008

The IPD property index shows that the fall in property total returns accelerated in the third quarter of 2008 over the previous quarter, to -3.8 per cent, the worst month so far this downturn, with capital values down 4.3 per cent. While income returns rose 0.5 per cent, rental value growth fell -0.3 per cent, the sixth month of decline. Full Article

Live-in landlords: Good lodgers can become great friends

Alex Knight took in a lodger just a few days after giving birth to her youngest child. “I knew I would need someone who would be quiet and not wake the baby,” she says. “We took in a 19-year-old girl, who’s very sensitive about our family life but who also loves playing with the children. Coralee’s more like a friend now.”

Sonia Purnell, The Telegraph - 11 Dec 2008

Unusual perhaps, but it is not unknown for good lodgers to become great friends, or even house, child or pet sitters. Sadly, however, not every case turns out as happily - it is all too easy to end up with a lodger from hell.

One west London family were faced with an angry husband threatening to burn their house down because they had unknowingly taken in his bride under an arranged marriage, who was running away from him. The same family gave up taking in lodgers altogether when their next paying guests were an American couple whose outsize figures, it turned out, were the result of constant 12-hour cooking marathons in their kitchen. Full Article

One door opens, another slams in their faces: rent arrears haunt landlords

We’re constantly being reminded that investments go down as well as up, but how many buy-to-let investors could have predicted the market would be this volatile?

Laura Howard, The Independent on Sunday - 14 Dec 2008

After seeing at least 15 per cent wiped off the value of their property investments in the past year, it seemed that landlords on variable-rate mortgages could at last breathe a sigh of relief thanks to the recent dramatic cuts in the base rate. But already they are faced with a still graver problem: the growing prospect of rent arrears.

According to research published last week by the National Landlords Association (NLA), 71 per cent of landlords expect tenants to fall behind on their rent during the course of next year as unemployment shoots up and the credit crunch bites harder.

Richard Price, the director of operations at the NLA, says: “Regardless of how reliable your tenants are, things will always go wrong. The usual triggers are a change in relationship or, most likely in the coming months, loss of income through unemployment.” Full Article

Sterling prospects attract foreign property buyers

Sharp falls in sterling and the prospect that interest rates could hit zero per cent next year are luring foreign buyers into the UK property market.

Sharlene Goff - FT.com - 19 Dec 2008

Property prices will end the year about 15-25 per cent down on last year which, together with the recent plunge in sterling, means properties may be at least a third cheaper for some overseas buyers.

The pound almost reached parity with the euro this week as speculation grew that the Bank of England would slash interest rates to close to zero per cent next year. It has also suffered severe losses against the Swiss franc, dollar and yen.

Knight Frank, the estate agent, calculated that a house priced at £8m at the end of 2007 – which at the time would have been worth €11m – would now go for the equivalent of about €7.8m. This represents a fall of almost 30 per cent in euros, more than double the drop for those buying in pounds. Buyers with dollars would have seen a decline closer to 40 per cent.

Knight Frank has seen more interest from Americans and Europeans in recent weeks, although most were not yet buying. Full Article

UK housing market ’set for bleak 2009′

The housing market endured a torrid time during 2008 and few economists expect 2009 to be much better, with some predicting prices could fall by up to 20% next year.

Jon Land for 24dash.com in Housing - Friday 19th December 2008

Homes have lost around 15% of their value during the past 12 months as the problems caused by the credit crunch exacerbated already stretched affordability.

But despite house prices dropping at a record rate for much of this year, it seems likely that the UK is only half way through the housing market correction.

Predictions for property prices during 2009 range from falls of 5% to ones of 20%, although some commentators say the market could begin to recover during the second half of the year.

The problem faced by forecasters is that there are now many different factors at play which could potentially impact the market in different ways.

Predicting house price changes has become so difficult that the Council of Mortgage Lenders has abandoned its annual forecast in this area altogether.

One thing that economists do agree on is that the credit crunch is largely to blame for the steep fall in house prices seen during the past year. Full Article

Housing associations under threat of ruin

Fears were growing last night over the financial health of some of Britain’s largest housing associations.

Vince Cable, Liberal Democrat Treasury spokesman, asked the Government in the House of Commons what it proposed to do about those facing “grave financial difficulty” and in “danger of collapse” .

Francesca Steele, Times OnLine.co.uk - 17 December 2008

Commons leader Harriet Harman replied that capital investment in the social housing sector had been brought forward for this reason.

Mr Cable’s demands followed an admission on Tuesday by the Tenant Services Authority (TSA), chief regulator of housing associations, that six were on its watch-list .
Related Links

* Savills issues fresh profit warning

* Jobs under threat at estate agents

* Mortgages plunge 70% as home sales hit new low

Documents posted on the Housing Corporation web site show that the Peabody Trust and the Shepherds Bush Group carried a regulatory health warning earlier this year. These were still being displayed last night. In these latest assessments in March and January respectively, they were each described as having financial exposures “which make it vulnerable to deterioration.” The Peabody Trust, was also given just one star out of three. Full Story

LandlordZONE Newsletter - Dec 2008 - Motivational Coaching & Property Investment

December 2008 edition of the LandlordZONE Newsletter.

Motivational Coaching & Property Investment

Download the Full Newsletter

The Credit Crunch has brought home to us important lessons about asset values, how they can be over-inflated and how rapidly these can be destroyed.

With commercial property values likely to decline by 50% peak to trough, and likewise at least 30% for residential - we have not seen the full decline yet.

When you make an investment in an income producing property your risk is not if the value will fall—we should know that values go through market cycles—it’s about how soon you will need to sell.

Buy now and be forced to sell in 6 months and your risks are very high, but sell in 10 years and your risks are reduced to virtually zero, with the prospect of very good growth.

Continue reading LandlordZONE Newsletter - Dec 2008 - Motivational Coaching & Property Investment…