Property prices 'may boom by 2010'

Property prices may be booming again by 2010 as the sharp fall in housebuilding threatens to see demand outstrip supply, according to a report.

The Centre for Economic and Business Research (CEBR) said a halt in housebuilding amid the credit crunch could fuel a 30% rise in prices between late 2009 and 2012.

Its quarterly consumer and housing prospects report estimates that house completions will fall by a fifth this year and by 10% in 2009 as builders hit by the property market slowdown put the brakes on construction.

New figures revealed that activity in the construction industry fell to its lowest level for at least 11 years last month. The Chartered Institute of Purchasing and Supply's (CIPS) Construction Purchasing Managers' Index, which measures the industry's performance, showed the lowest reading since the survey began in April 1997.

House builders are suffering from falls in property prices, lower demand from buyers struggling to raise finance in the credit crisis and more expensive raw materials.

The CEBR expects house prices to fall by 8% this year and 4% next, but recover sharply amid a shortfall in supply.

Richard Snook, an economist at CEBR and one of the report's authors, said: "When prices have fallen in the past, we have seen house building slow quite rapidly but take a lot longer to come back, which leads to demand outstripping supply. With the fundamentals of the housing market still relatively tight, the credit crunch might already have sown the seeds of the next house price boom."

The CEBR also forecasts that prices will start to recover next year if the Bank of England cuts interest rates, as expected in 2009.

Inflation pressures are seen easing as the economy slows, which may allow the Bank's policymakers more room to loosen monetary policy, in turn set to lead to reignite property market.

The number of house building completions totalled 175,000 in England last year, but the CEBR forecasts a fall to 134,000 next year - far below the Government's target for 185,000 a year. And the CEBR predicts that the average UK house price will fall from £196,000 in 2007 to £174,000 in 2009, before recovering to £226,000 in 2012.

Estate Agents are Open to Offers Summer 2008

Estate Agents offices and showrooms up and down the UK are close to empty as the majority of the nation feels the effect of the credit crunch. Indeed, whilst at this time last year (at the peak of the boom) agents were reluctant to meet and greet property investors (probably because they always knew we offer low!) - the tide has changed leaving investors in a better bargaining position and being able pick up good property deals - particularly over the last few months.

Some tips on approaching Estate Agents:

(a) Take your time and nurture a relationship with the Agent. They want to know that you are serious. You should have a good understanding of your chosen area, what prices/rents are doing (head to Rightmove / Zoopla / Net House Prices) and show estate agents you have done your research. Explain the fact that you can move fast and can help fix ‘chains’ where a buyer has dropped out of a sale by completing quick.

(b) At the moment Estate Agents are not busy so it is highly likely that they would be more than willing to show you around some properties on their books. Ask them to email you the details prior to your visit and undertake as much due diligence as possible such as verifying the open market value (have their been any recent sales in the last three months?) as well as referring to our rates table via our website which is updated daily with new products on the market (what would this property need to value up to in order to get it to stack?);

(c) Dress professionally and take a tick sheet which could point out any potential issues with the property which could help you negotiate your offer price further;

(d) Act friendly and courteously whilst doing your very best to find out what is the situation that the vendor is facing. Property acquisition is a numbers game and you should be prepared to deal with the fact that most owners, even in the current climate, are not willing to accept Below Market Value (BMV) offers. However, do not let this dishearten you - once you have found a potential deal, it’ll all be worth it!

(e) At the end, thank them for their time; leave your card and explain that you will take your notes and head back to your office to do some further research;

(f) If the Agent is close to you, pop in the next day arming yourself with as much information as possible - perhaps a recent Hometrack report; some evidence of visible house price drops in your area and examples of what you will be able to achieve in rent for the property you have viewed. The key here is not to not act too bullish and confrontational and have a frank and open discussion with the Agent about why you have come to your given purchase price;

* Make lots of offers. The worst that can happen is that the vendor will say no!
* If you are polite and come across as professional the Agent will have no reason to feel ‘offended’ by your low offer;
* You must learn to develop a thick skin; and lastly
* Keep Asking!

Swap Rates

As property investors, you should keep aware with what is happening in the wider economy - particularly with regards to what is happening with interest and swap rates (the borrowing rates between institutions)

http://www.swap-rates.com/UKSwap_extended.html


as these can clearly effect what you will be able to borrow against an investment property that you are looking at buying and/or re-mortgaging.

Banks are showing large drops in House Prices whereas Land Registry price figures are showing only a small reduction

This practise by the banks has been attacked by Stuart Law, Chief Executive of Property Investment firm Assetz. He condemns the banks figures as being distorted and creating alarm in the market while they continue to profiteer from inflated mortgage products and fees. Law says, "the marginal 0.2% monthly fall in house prices, reported by the Land Registry provides a true reflection of the current housing market and is far removed from the spurious 2.5% fall suggested by Nationwide last week. The Nationwide figures are skewed based only upon it's own data while Land Registry data provides a more reliable overview of the entire market."

Law expects to see individual banks and lenders continuing to report high house price falls while the truth is much lower. While there is a reduction in house prices this needs to be accurately reported and not over-hyped by banks who have their own agenda and interests to protect.

Law also accuses the banks of profiteering. "It is the the banks profiteering which has led to purchasers trying to chip away at vendor's asking prices, in order to compensate for the additional borrowing costs they now have to endure."