"House prices to fall" - "House prices to stay flat for years" - "Housing will avoid crash"
All headlines from The Sunday Times - which is right? To some extent all of them. Bad news always sells more newspapers than good - The first two headlines were front page the third tucked inside the first page albeit written by the economics editor.
International banks greed and incompetence has led to what is being called "the credit crunch" - Their stupidity in involving themselves in the specialist and risky world of subprime lending in the USA defies belief. The erstwhile cautious Northern Rock if not history will never recover from its Bank of England rescue and several other lenders will be forced into merger if indeed surviving.
Going beyond sub prime mortgage problems the American property market has generally been having a torrid time with prices falling in most States and builders shunning new developments. Hopefully recent and predicted significant interest rate cuts will do something to bring about a revival.
So how likely is it that the UK is going to share in the US's problems? At the time of the UK's last home value "fall out" interest rates were 13-15%, Unemployment high and there had been a period of ill advised property development.
Whilst UK interest rates have seen significant increases in the last eighteen months we still have a sub six bank rate with every indication of a reduction in the next three months or so. Mortgage lenders are less rigid and in terms of their margins more competitive than in the early nineties - is a mortgage interest payment of £500/600 per £100,000 of borrowing an impossible burden for homebuyers - fifteen years ago they were needing to find double that and most incomes have increased dramatically in that time. The UK labour market is strong and the economy has been growing at a healthy rate. IMP are still able to achieve sub 6% interest rates from their specialist expatriate terms.
Property investors have just been given the prospect of the bonus of capital gains tax being reduced from 40% to 18%. Add the ability to offset all mortgage interest against rent and "Buy to Letters" and other property investors are even better placed and they will continue to underpin values. 60% of investors now choose property over pensions to fund their retirement and "buy to let" is denoted an industry by the National Statistics office as such experiencing higher growth than any other in recent years.
The banking crisis will produce problems for some and there are areas where values are very likely to fall particularly those enjoying the "catch up" growth of recent times. We have consistently warned of the dangers of investing in the oversupply of new build investment flats particularly in the Midlands/Northern cities where fingers are likely to be seriously burned. We don't see 2008 as likely to deliver the same sort of growth in values as 2006/7 but some areas will see modest growth - Fundamentally there is still an acute shortage of building land and homes for family occupation - demand remains strong
Prime London property will remain a law unto itself dependent on foreign money, city bonuses which will be taking a knock and owners cashing in on their equity and downsizing. Its time Central London postcodes and perhaps a few others were taken out of the house price indices which do nothing but mislead.
So forget the IMF and the other prophets of the UK's imminent housing collapse - it won't be happening!
Expats wishing to compare their own loan package with what is currently available should click on IMP's website at www.international-mortgage-plans.com which gives an overview of the current marketplace, lenders comparable terms and incorporate a cost and commitment free 48 hour acceptance in principle.
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