If, as the saying goes, ‘A week is a long time in politics’, then a year must be an eternity in the property investment market!
Look back to this time last year: every growth indicator was flat lining, the political parties were squabbling over the right way to kick start the economy; it was all bad news. Now take a look at UK PLC today: unemployment falling, inflation falling, house prices rising and even German companies are looking to invest here!
So, why is the housing market on the up again and will history repeat itself with another “boom, bust” scenario?
Kerry Santucci, of Enhanced Wealth Ltd, specialist Mortgage Brokers, believes it will not. Kerry said that the conditions that led to the near collapse of the financial world and the failure of many economies simply can’t exist in the UK today.
“ In the dying days of the housing market, just prior to the recession, the housing market was fuelled by what we now call ‘toxic’ money, the origin of which was akin to a pyramid selling scheme”, said Kerry.
She went on to say that, as a result of the financial crisis, lenders are now cautious in terms of to whom money is lent and the safety margin on security. “Mortgage lenders are now subject to far more stringent solvency margins and controls,” said Kerry.
Lenders still active in the mortgage market have learned a lot in the past few years. That they are now feeling confident enough to lend, not only in the residential market, but also the Buy to Let Market is a sure sign that the housing market is on the up. One thing is certain – these lenders know when it’s time to lend ….they have learned to whom and on what they should lend through bitter experience!
David Smith, of DW Smith Letting and Estate Agents, Hanham, Bristol said “We have noticed that loan to value ratios have been rising steadily, even on apartment developments for buy to let investment.” He went on to say that interest rates seem to be falling across the LTV bands and that some of the criteria designed to allow lenders to avoid lending seem to have been removed.
He concluded that, with 1 bed flats going for £105K, in St George, producing £500 -£550PCM rental income (gross), your asset value return would be over 6% and much, much more if you were looking at a geared return based on only 20% Cash investment into the deal.
“Where else can you get that kind of return, and strong potential asset growth, with minimal risk,” said David.