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Is The UK Set For Another Property Crash?


Tuesday, February 3, 2015

What Factors Contribute To A Property Crash?What Factors Contribute To A Property Crash?

  • Rent Rises?
  • Falling oil prices?
  • Quantative Easing (QE) by the Bank of England?
  • Quantative Easing by the European Central Bank (ECB)?

According to an article in Money Week just two of the factors listed above have got economists worried about the prospect of another property crash.

There is some sense in the article’s main argument, but then again, anyone can predict a property crash, because it is what follows a property boom, and the UK is experiencing somewhat of a property boom right now!.

So predicting where the UK is on the property cycle can be calculated by the timing of events and what factors are in play to cause another property crash in the market. However, not all the evidence points towards the likelihood of another property crash.

In order for another property crash to happen, two main trigger factors need to occur at the same time:

  • Severe lack of confidence in the market or customer affordability
  • An oversupply of desperate property vendors /sellers who really need to sell

Without these 2 main factors affecting the UK property market, there will be no property crash, just another stagnant property market, like the one that the UK experienced between 2009 and 2012.

In the meantime life carries on and economic pundits continue to predict possible trends.

The best thing for property investors to do is to take advantage of the up swings in the UK’s property market as they happen and predicting them should be left to those who know why the market moves up and down.

Buy to let mortgage rates are still attractive, as are rental yields, encouraging portfolio landlords and property investors to increase their rental stocks by purchasing suitable properties that will provide decent yields.The advice from the financial experts is simple – Listen to what the financial experts have to say and continue to have faith in bricks and mortar, oh and don’t forget to shop around for the very best buy to let mortgage deals.

So what factors could drive the UK’s property market up in the near future?

Money

The money markets are currently very liquid, causing banks and mainstream mortgage lenders to compete for business, lowering the cost of loans making borrowing cheaper. This could also have a knock on effect to the buy to let mortgage market too.

Rents

If private rented sector (PRS) rents continue to push beyond the previous recorded highs of 2014, then higher rental prices may force many tenants out of the private rented sector and on to the housing ladder as rental prices will force many to buy property because property ownership is cheaper than renting.

Supply

There is still a lack of good quality housing stock available on the open market, causing an increase in demand for rented properties, good news for landlords at the moment but if the situation changes following a massive house building push by Government, then it could be the end of many landlords businesses.

Confidence

There is still a great deal of landlord confidence in the UK property market at the moment and this continues to grow with more property investors and landlords planning to expand property portfolio’s in 2015.

Tenant security of tenure is still a little shaky with standard tenancy agreements (AST’s) varying between 6 months and 1 year and the Government will continue to encourage more people to buy property themselves and not choose to  rent long-term. Financial incentives such as the Help To Buy Scheme will continue to garner the interest of struggling first time buyers, as long as the scheme is open.

Due to the lack of supply of suitable housing stock, The UK private rental sector (PRS) will continue to grow, and property investors using buy to let mortgages will take even more property stock away from the open sales market. This in turn will have a positive effect on the buy to let mortgage market, increasing competition and driving the cost of borrowing down further, at least until Bank of England interest rates start to rise.

The issue of property stock levels is likely to be exacerbated in the short-term as it will take time for more suitable new build properties to reach the market, however the Government have pledged to build 200,000 new properties.

In the short to medium-term things should remain positive for most of the UK as property prices catch up with the pro-rata gains made in London over the last few years.

The likelihood of another property crash remains in the shadows but all in all it is a great time for property investors to buy property using buy to let mortgages– so what are you waiting for?


This was written by Mike Clarke. Posted on at 11:30 am. Filed under Buy To Let. Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink. Follow comments here with the RSS feed. Both comments and trackbacks are currently closed.