London Property ‘in crisis’ as Foreigners buy Property

Britain will soon become a nation of tenants as huge deposits, high house prices and strict lending criteria combine to leave millions unable to climb onto the property ladder. Meanwhile foreign investors are buying up large chucks of London real estate as they seek a haven for their wealth amid the increasing risk of a global recession.

Britain’s housing market is “in crisis” as millions are forced to rent and the government must urgently act to increase the supply of homes, an alarming new report by Oxford Economics warned last month.

The housing study, commissioned by the National Housing Federation (NHF) warned that home ownership in England will fall over the next decade to the lowest since the mid-1980s as property ownership remains out of reach for many. It predicts that the proportion of people living in owner-occupied homes will decline from its 73 percent peak in 2001 to just 64 percent in 2021.

In London, it predicts that the majority of people will rent property, with home ownership in the capital falling to just 44 percent by 2021. That means around six out of every 10 Londoners will live in rented accommodation.

Meanwhile, the average house price looks set to rise by 21.3 percent over the next five years. The group, which represents housing associations in England, says a chronic shortage of housing is to blame. Only 105 000 homes were built in England in 2010/11, the lowest level since the 1920s.

“Home ownership is increasingly becoming the preserve of the wealthy and, in parts of the country like London, the very wealthy,” says NHF chief executive David Orr.

Adding even more upward price pressure is the fact that wealthy foreign buyers have flocked to London in record numbers, buying up large chunks of property in the city’s most desirable neighbourhoods. The number of international buyers viewing prime central London properties increased by 23 percent in the three months through July, as the increasing risk of a global recession prompted investors to seek a haven for their wealth.

“We’ve had the US debt crisis, the eurozone debt crisis and financial market turmoil but none of these issues have touched London’s property market,” says Mike Smuts, managing director of Smuts & Taylor, a South African investment firm that specialises in helping rich South Africans buy property in London.

Smuts, who first predicted in February 2010 that Britain was fast becoming a nation of tenants, says that although Russian, Chinese, Indian and buyers from the Middle East account for most of the foreign purchases of London properties, wealthy South Africans have also been very active.

“Since the Reserve Bank relaxed exchange controls last October we have seen a large influx of clients who are looking for safe-haven investments amid the financial market turmoil and the alarming calls locally for nationalisation and the redistribution of land without compensation,” he says. “London property is fast becoming the ‘Swiss bank account’ of the 21st century.”

How to manage Property Cycles anywhere in the World

The dizzying heights of the most recent property boom, when house price growth peaked at an average annual rate of 32% in 2004, as well as the protracted recovery period in which the property industry has been languishing since late 2009, are prime examples of fluctuations that obscure the otherwise clear cyclical movements in the property industry.

One of the fundamental basics of economics is that markets move in cycles. Markets experience boom times, followed by a period of market correction and a downturn, before the next boom arrives. This is a natural phenomenon evident in all markets, and whether it is called "boom and bust", "bulls or bears" or simply "peaks and troughs", investors can be absolutely certain that neither a growth period nor a downturn in any market will last forever.

What was uncertain, however, was the highs or lows that may be reached during an upturn or a downturn, and the duration of either.

"In the property industry in SA, the average cycle normally spans around seven years," says Dr Koos du Toit, CEO of the P3 Investment Group.

"But given the heady heights reached in 2004, when many analysts and experts warned of a 'property bubble', as well as the subsequent economic turmoil as the world experienced the worst recession in living memory, it is not surprising that many have lost sight of the fact that we are simply moving through another cycle.

"Yes, the market correction and downturn of this property cycle were nothing short of terrifying for speculators and those investors who had overextended themselves financially. And the long, slow recovery has been painful for even the most prudent investors. But the cycle is turning, as it always does, and the market will again experience an upturn.

"What remained uncertain wass when the upturn will commence - many predict only towards the end of 2012; what level property price inflation will reach before the next market correction; and how long the upturn will last."

The question arises: How can a property investor protect a portfolio against the ravages of the property cycle?

"Many property investors do attempt to 'time' the market, but this is akin to speculation. The 2004 boom and this long, protracted recovery provide ample proof that 'timing' the market can be a dangerous game," comments Du Toit.

"Professional - and thus successful - property investors take a long-term view of their investment and the market. They don't speculate; they are building sustainable property investment businesses. This includes keeping an eye on the property cycle, but their focus is not on 'timing' the market, but rather finding the right investment properties that will yield an ongoing passive income and capital growth over the long term. Seasoned and professional property investors know that these investment properties can be found regardless of where we are in the property cycle."

Du Toit explained that professional property investors did not simply acquire properties, they acquired property assets with long-term income-generating potential.

"In layman's terms, this approach can be compared to buying a cow. You can either keep the cow for milking over the long term, or you can sell it quickly at the highest price for slaughtering. If you acquire a cow for milking, you will have an asset, which is appreciating in value, and you will benefit from the milk it produces on an ongoing basis for years to come. If you sell the cow for slaughtering, you might make a quick 'killing' - to use the terminology speculators are fond of. But you may not, particularly if several other cow owners have the same idea. Either way, both the cow, as an asset, and the milk it would have produced over the long term, are gone."

Du Toit notes that a property should be acquired as a cash cow.

"The intention is to hold the property over the long term, milking its ability to produce a passive monthly income that keeps pace with inflation year after year.

"While the property will also appreciate in value, this is regarded as an added bonus, since the objective is not to sell the cash cow, but rather to milk it. This approach is almost immune to the property cycles, since regardless of whether property prices are rising or falling, there will always be demand for good entry-level rental properties in well-established and growing areas.

"And while capital appreciation is not the main objective, investors are richly rewarded for their patience and long-term perspective by superior capital growth over the years, as the ups and downs average out, producing a steady upward trend in property price inflation."

This, clearly, was an entirely different approach when compared to speculating, in which property investors try to "time" the market by buying at high prices, and hope to "make a killing" by selling even higher in the short term.

Du Toit says that while fortunes have been made in this way, it is a high risk approach that has certainly seen many investors lose their investments, and has given many South Africans a distorted understanding of property investment.

"Property investment - acquiring property assets that can be 'milked' over the long term for their income-generating potential - may not be as thrilling and exciting as wheeling and dealing with properties, timing the market and making a killing.

"But it is a proven, tried-and-tested recipe for virtually failsafe property investment. And it is a system that allows investors to sleep peacefully at night, knowing that wherever we are in the property cycle, whatever highs or lows may be reached during an upturn or a downturn, or the duration thereof, their properties are generating an inflation-linked passive income, and in the long term, even their most optimistic capital appreciation expectations will be realised."

This article is to inform and educate, not to advise.

Home Buyers to spend HALF of take-home pay on their Mortgage

Economists said there is ‘no doubt’ that Bank of England interest rates will return to around 5 per cent - possibly even higher - from their current historic low of just 0.5 per cent.

If the current profit margins are maintained, it means mortgage rates will be pushed up to 8 per cent, according to Capital Economics.

It would see mortgage payments at the start of a new mortgage increase from 34 per cent of average take-home pay to 51 per cent for those buying a new home, it said.

It equates to more than £12,000 being spend on their annual mortgage repayments, as the figures are based on average take-pay home of £23,800 - or a gross salary of £31,500.

For existing borrowers – including those remortgaging – it will reach a record 42 per cent or £10,000.

Paul Diggle, an economist at Capital Economics, said: “The record level of outstanding mortgage debt relative to earnings suggests that existing mortgage borrowers would fare even worse relative to historical norms.

“And with the share of outstanding mortgages on variable rates of interest the highest in at least a decade, there is good reason to think that a sustained tightening in monetary policy would be passed on to borrowers quickly and in full.

“Were average mortgage interest rates for existing borrowers to reach 8 per cent, their average mortgage payments would rise to an all-time high of 42 per cent of take-home pay.

“Yet the additional interest rate risk that variable rates expose borrowers to can be overstated. The fact that most fixed rate periods in the UK are just two or three years long means that even most borrowers on fixed rates are exposed to a high degree of interest rate risk.”

However, he added the Bank Rate is likely to remain at its current level during this year and next.

“If that happens, it would no doubt add to the pressures on mortgage borrowers, but the house price correction that we expect over the coming years will be driven largely by the deteriorating labour market and the sheer unaffordability of housing,” he said.

It comes amid a rise in the number of people being evicted from their homes as lenders warn they will not be as tolerant about borrowers failing to keep up with their mortgage payments.

Earlier this month, the Council of Mortgage Lenders said 9,100 people had their homes repossessed during the first three months of 2011, up from 7,900 during the last three months of last year.

During the recession, lenders were told by the Government to use repossession only as last resort. But as the Government’s austerity measures take hold amid possible rises in interest rates, more home owners are expected to fail behind in their loan repayments.

Home owners 'run for cover' ahead of potential rate rise

Home owners are ‘running for cover’ ahead of a potential rise in interest rates by locking into fixed rate mortgages, experts said yesterday.

The Bank of England is widely predicted to increase interest rates from their current level of just 0.5 per cent to help combat rising inflation.

Brian Murphy, of mortgage brokers Mortgage Advice Bureau, said: “The stand-out trend in the mortgage market at present is the increase in the number of rate-wary borrowers remortgaging onto fixed rates.

“People know that rate rises are coming and they are locking in now before fixed rates move higher. Essentially, borrowers are running for cover.

“Consumer confidence is in tatters and until prospective buyers feel safer financially the mortgage and property market will remain stuck in a rut.”

As much as 80 per cent of mortgage borrowers opted for a fixed rate deal in February.

It comes as new figures from the Council of Mortgage Lenders show mortgage lending stalled last month at £9.5 billion, which is broadly in line with the previous month’s £9.48 billion.

Bob Pannell, chief economist at the CML, said: “There is little in the latest batch of market data that would cause us to revise our market forecasts for 2011, and nothing that alters our underlying view that this is going to be a challenging year for households and the housing market. The housing market remains stuck in a rut.”

The best Mortgages for First-Time Buyers

We asked the experts for the best deals on the market for those looking to get on the property ladder.

Melanie Bien, director of independent mortgage broker Private Finance

"If you don't mind a new-build home, a number of developers are offering incentives and mortgages at higher LTVs than you could normally achieve. Taylor Wimpey has teamed up with Melton Mowbray and Saffron building societies to offer a 95 per cent LTV deal fixed at 2 years from 5.49 to 5.99 per cent.

"But while that is not a bad rate for this level of borrowing, fixing for such a short time is risky in a volatile housing market in which interest rates look set to rise sooner rather than later.

"Bovis has linked up with Woolwich to offer 90 per cent LTV mortgages at competitive rates with an insurance policy paid for by the developer to protect the lender in case of default, while Barratt has teamed up with Hitachi Capital to offer parents a £50,000 loan to help their child with the deposit.

"More conventional schemes, which don't require you to buy a new-build home include Lloyds' Lend A Hand. The child puts down just a 5 per cent deposit while the parents commit the equivalent of 20 per cent of the purchase price in savings in a Lloyds account. The child then pays the sort of rate normally only accessible on a 75 per cent LTV deal, making it much more affordable."

David Hollingworth, London & Country

The Mortgage Works has launched some specific guarantor products – for example they have a 3 year fixed rate at 4.99% with a 1% fee to 85% LTV.

Any new innovations that lenders have tried to pull together to assist first time buyers will usually draw in some way on parental assets.

For example, the Lloyds Lend a Hand scheme offers up to 95% LTV to the child but on the condition that parents put an additional 20% in a separate savings.

The lender has a charge over the savings although this can be released at the end of the fixed rate bond period subject to the LTV improving adequately. The benefit of this is that the child can get a higher LTV and the parent retains the savings in their own name rather than having to gift them to the child. What it doesn’t get round is the need for a large amount of cash to put into the transaction.

A solution from National Counties BS looks to provide an alternative working on similar lines but avoiding the need for substantial cash sums by using spare equity in the parental home as additional security.

The Family First Guarantor mortgage offers a fixed rate at 4.99% until 30/11/13 up to 95% LTV (with additional security) with a £495 fee. Bath BS also offers a similar idea with its Parental Assisted Mortgage.

Developers keen to shift their stock have been particularly keen to look at new options. Barratt recently launched an unsecured loan offering for parents looking to provide a deposit to their children. Taylor Wimpey has today been reported to be hooking up with some local building societies to offer 95% mortgages on specific developments.

UK commercial property an investment for South Africans

The continued recovery of the UK commercial property market, coupled with the strengthening of the rand relative to pound sterling, has presented South African investors with a unique opportunity to invest in the UK while capitalising on the recovery cycle.

This is according to Eric Mounier, CEO of the Pam Golding Properties/Athanor International Property Investments joint venture which markets direct offshore commercial property investments.

"Since 2000, the joint venture has been involved in property asset transactions valued at over R5 billion and currently is involved in supporting over 40 active property investments,he said.

Despite commercial property values in the UK being devalued by over 40 percent following the global credit crisis, the asset management team has been successful in ensuring all properties under management remain operational and income producing, and favourably positioned to take advantage of the expected recovery cycle.

Illustrating the UK commercial property market's recovery is the Investment Property Databank (IPD) UK monthly index, which indicated a 0.1% growth in un-geared commercial property values for the month of October 2010.

This growth concluded the 15th consecutive month of capital appreciation, bringing the compounded upturn in values since the recovery to 15.9%, according to the IPD.
While there had been significant growth during this period there was still a long way to go to get back to the values prior to the global credit crisis.

"This trend is supportive of the market commentary which indicates that investors are starting to re-enter the market, with the UK providing a popular investment destination.

During the period of downturn following the global credit crunch, the UK experienced a significant re-pricing of commercial property values, and as a result investors were taking advantage of the favourable prices which were now possible.

In addition, during the past year we have seen a significant strengthening of the rand against the pound with a slight reversal of this trend more recently, Mounier said.

For those taking the view that the pound was likely to remain strong against the rand and the euro, the timing seemed opportune to invest in a solid pound-related asset class, he added.

The aim of the Athanor/PGP JV is to facilitate property investments which derive the vast majority of their returns from the large net yields currently available as a result of the positive gap between the rental income and the cost of finance. "

Consequently, less dependence was placed on capital growth to achieve the expected return which reduced the risk associated with these investments.

As an example of such an investment, a recently launched property in Parkhouse West Industrial Estate in Newcastle-under-Lyme in Staffordshire, England, is expected to produce cash flow of around 11 percent per annum, from which a portion will be used to pay down the bank loan and the remainder available to return to investors.

The majority of the projected return will come from the annual cash flow," he said.

Home buyers need 40pc higher deposit

The average deposit reached 43 per cent in September, up from 30 per cent in December 2006.

It is a fresh blow to first-time buyers as it equates to £70,000, based on average house prices. This is almost three times the average salary and £20,000 more than the deposit required four years ago.

However, it is not the highest average deposit since records began four years ago. Levels reached 49 per cent in December 2008 as the credit crisis began to tighten its grip.

It comes after the Bank of England warned last week that banks are becoming even stricter about who they will lend money to amid fears that higher unemployment will lead to home owners defaulting on their loans.

The latest mortgage research by surveyors e.surv also found that not all buyers are being treated equally. Those buying cheaper properties are being squeezed the most, typically needing a 35 per cent deposit compared to 25 per cent four years ago. It means they can borrow 11 per cent less than previously.

By contrast, those buying properties worth at least £500,000 can borrow just 4 per cent less.

Richard Sexton, business development director of e.surv said: “Tighter loan to value criteria have hurt everybody, but those at the bottom of the ladder have been hit disproportionately.

“One in five borrowers wants to buy a home worth less than £125,000. They are the classic first-time buyers, but they are still trailing far behind wealthier home buyers in their access to finance.

“Those financing homes in the £500,000 price bracket are only around one twentieth of buyers. For them, it’s as if the credit crunch hardly happened. This is a concern as first-time buyer participation is central to any sustained recovery in house prices.”

It comes after property experts warned declining house prices are “inevitable” after Nationwide revealed its latest house price index last week.

It reported typical values rose 0.1 per cent in September to £166,757 compared with the previous month. But this was not enough to halt the drop in annual house price growth, which slid from 3.9 per cent in August compared with the previous year to 3.1 per cent in September.

Mr Sexton added: “House prices today are almost exactly at the same level as four years ago, but the size of deposit needed has risen £20,000 to buy a typical home.

“Lenders are nervous about the state of the economy and the future direction of house prices, and their ability to fund their mortgage lending is constrained by the demands from regulators to bolster their capital reserves.

That means only the best quality borrowers are offered loans, and on much tighter criteria than before.”

Outlook for UK housing market bleak

House prices in Britain fell by 3,6% in September, the largest drop in prices since 1983 according to mortgage lender Halifax.

It says the figures show that the housing market there is rapidly losing steam after a brief recovery last year.

However, rival mortgage lender, Nationwide claimed last week that house prices actually rose by 0,1% and analysts point out that the drop in prices may just be a seasonal blip rather than a worsening trend for the property market.

Halifax says that for the three months to September house prices in Britain were down by 0,9% compared with the same period last year and points out the rate of decline is significantly slower than the quarterly changes of between 5% and 6% seen in the second half of 2008.

Mortgage approvals data supports Halifax’s views that the outlook for the property market in Britain remained bleak. The September data conflicts with the data released in August when house prices rose by 0,4% and showed an increase in the three-month annual rate of 4,6%.

Halifaxexpects the housing market to fall slowly for the rest of this year and it to continue to decline in 2011.

Home owners must reduce prices by 10pc to sell properties

A total of 32 per cent more estate agents reported a fall rather than a rise in house prices in August, compared to 8 per cent the previous month, according to the latest housing survey from the Royal Institution of Chartered Surveyors. That is the lowest reading since May 2009.

It comes amid a decline in the number of first-time buyers – a key component in maintaining values.

Stuart Allan, a RICS member from Bishop Auckland in Co. Durham, said: “There is a dearth of first-time buyers principally due to difficulties in obtaining mortgages and this has depressed the value of houses at the lower end of the market.

“These houses are typically selling for up to 10 per cent less than the estate agents advertised prices and this is reflected throughout the market.

“Vendors or property are required to be more realistic in their sale price expectations.”

Tom Goodley, a RICS member form Norfolk, said: “There appears to be a lot of over priced houses on the market, and a shortage of buyers. The basic economics of supply and demand must prevail.”

The share of the market occupied by first-time buyers dropped to 34 per cent in July, down from 38 per cent the previous month and the lowest proportion since the beginning of the credit crisis in August 2007, according to the Council of Mortgage Lenders.

First-time buyers are struggling to get on the property ladder as banks further tighten lending criteria.

These buyers have a typical deposit of 24 per cent of the value of their home, up from 21 per cent in April.

The CML also disclosed an increase in the number of loans approved to those buying a new home to 56,000 in July, up from 52,000 in June - although this remains significantly below long term averages.

Howard Archer, of economists Global Insight, said: “This mortgage data for July remains very low compared to long-term norms and does little to dilute suspicion that house prices will remain under pressure.

“It is also notable that mortgage approvals to first time buyers actually weakened in July, which suggests not only that they may be becoming more reluctant to move into the housing market in the current uncertain economic environment. It also suggests that first time buyers are finding it hard to get mortgages.”

Nicholas Leeming, of property website Zoopla.co.uk, said: “A crucial indicator of the health of the housing market is activity by first time buyers. The lack of attractive mortgage deals, combined with uncertainty around the economic impact of the government’s spending cuts affecting both lenders and borrowers, is seeing many frustrated first-time-buyers opt for renting in the short term.

“The mortgage market remains dominated by the cash-rich, with deposits on new homes increasing once again this month.”

Six Reasons NOT to buy property

...and why none of them hold much water।

We often hear about real estate investors who have been very successful in building wealth-creating portfolios। We may believe that they have some very special skill or ability, that there is something they know which nobody else does. At other times, we think it was pure luck or coincidence that an investor succeeded, that circumstances have since changed or that it just can't be done. Our cynicism encourages us to do nothing, to avoid the risk.

Yet history proves that doing nothing could be the most risky of all। Apart from the missed wealth creating opportunities, doing nothing translates into a lack of self-development, a missed chance to learn and grow. If we delve deeper, it is clear that most of the reasons people use not to invest are actually based more on emotion than business savvy. We rationalise our fear using calculated arguments as to why it can't or won't work. But the truth is that none of these arguments really hold much validity.

So let's discuss the top six reasons why people decide not to invest in property। And lay them to rest-once and for all.

Reason # 1: Investing in property is risky

Fact: There is a certain level of risk in every investment-and property is no exception। But investing all your money in the bank (or even worse under the mattress) may be the most risky of all as the returns barely keep up with inflation. Also bricks and mortar is more tangible than stocks and you can take out insurance against fires or floods. You can also protect your asset against your death or disability. And yes, there is now even insurance available to cover landlords for non-paying tenants!

Reason # 2: I don't have the time

Fact: We all manage to find the time to do things we really want to do. Time management involves prioritising things that are more important. Anyway, you don't need to do it all yourself. Build a team of competent management agents, brokers and mortgage originators (yes, there are some out there!) and let their specialist skills work for you.

Reason # 3: I don't have the money

Fact: You DON'T need money to make money। Even in a market where 100% bonds are not widely offered, a good below market value deal will attract finance from investors। Network with people who share your passion for property and these investment opportunities will present themselves।

Reason # 4: Below market-value properties don't exist

Fact: No matter what the stage of the property life-cycle, there will always be value for money deals। The key is to identify initially whether the seller is motivated and only negotiate with motivated sellers. As long as there is divorce, relocation or excessive debt, motivated sellers will always be out there.

Reason # 5: The property market will go down

Fact: The property market has never gone down over the medium or long term. Does that mean that it won't in the future? Probably not, simply because property prices rise in relation to income levels which increase over time. Even political factors, crime and other excuses people use not to invest, have not had a serious impact on our or overseas markets. At times, these factors often have the reverse effect-lifting prices as investors choose the safer haven of bricks and mortar.
And if prices DO go down over the next few years? Who cares! Buying for the rental yield and at below market value still ensures the investor comes out trumps।

Reason # 6: I don't know where to begin

Fact: You only learn through action. Educate yourself and when you feel a good opportunity presents itself, take the plunge. It may not be the best deal you may ever do but it will be the most important in terms of confidence. Luckily, over the long term, property is very forgiving of peoples` mistakes.

Global housing on the mend - December 2009

Investors across the globe are starting to return to residential property markets, following what has arguably been one of the longest and strongest real estate slumps the world has ever seen.
The Knight Frank global house price index for third quarter 2009 released earlier this week shows that house prices are now rising in almost 70% of the locations tracked by the British property group, compared to less than 50% in second quarter 2009. Knight Frank compares house price movements in 42 countries.

Liam Bailey, head of residential research at Knight Frank, says although house prices in almost 60% of the countries included in the index are still lower than they were a year ago, most markets have now turned the corner.

Singapore reported the biggest quarterly jump in prices with growth of 15,2% in third quarter. That was followed by Hong Kong (6,3%), Canada (4,9%), Australia (4,2%) and New Zealand (4,2%). South Africa ranks as the sixth fastest growing housing market in Knight Frank's index, with prices up 3,8% in the three months to September 2009 (quarter-on-quarter).
The UK and US, two of the countries hardest hit by the credit crunch and global recession, are also back in positive growth territory with quarterly price increases of 3,7% and 3,2% respectively.

On an annual basis, Israel is now the world' fastest growing housing market with prices rising 13,7% in the year to September 2009. That was followed by Austria (9,7%), Malta (9,7%) and Switzerland (7%). South Africa ranks 15th in the annual growth stakes with prices up 1,3% over the 12-month period.

Dubai is the biggest loser, with prices sliding a massive -47% in third quarter 2009 year-on-year (y/y). There are also a few European countries where prices are still falling on the back of what appears to an oversupply of stock. These include Spain, Denmark and Ireland.

Bailey says Dubai's recent debt woes have no doubt dented investor confidence in that country. The problems now seen in Dubai's housing market underscore the fact that the global housing recovery will not necessarily be smooth sailing, says Bailey.

However, he believes that any further house price falls are likely to be corrections rather than the start of another round of drastic reductions.

Link

United Kingdom - The Land of Fish and Chips

United Kingdom – The Land of Fish and Chips

Fast Facts

· 2nd Biggest Economy in Europe
· No restrictions on foreign ownership when buying property.
· Capital: London
· Population: 60 million
· Currency: British Pound (£)

Economic Overview

‘Oi !!.......you there, Wha’ fish you wan wiff them chips, then? I aint sellin’ no chips with no fish, innit’…..

And thus our adventure with the United Kingdom and all its peculiarities get off to a good start. But apart from the adventure, experience and ‘Greener Pastures Syndrome’, what makes this mud island one of the best places, to start your property empire?

The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK), is a sovereign island country located off the north western coast of continental Europe. The UK is a union of four constituent countries & is governed by a parliamentary system with its seat of government in London, & is a constitutional monarchy with Queen Elizabeth II as the head of state.

The UK is the fifth largest economy in the world & is one of the world's most globalised countries with London being the major financial centre of the world, in front of New York City, Hong Kong and Singapore.

In 2008, a flat in central London sold for £115m, which is believed to be the most expensive apartment the world. (Crazy money if you ask me!) That aside, UK house prices are slowing down & the long-lasting property boom seems over. UK house prices fell by 2.5% in March 2008 which is also the biggest monthly decline since September 1992. To show you what this means in the big scheme of things, have a look at the graph:

As you can see, the house price boom which started in early 1997 has now returned to those levels, and the current future sentiment is anyone’s guess. Mortgage lenders have greatly reduced the amount of loans they are prepared to make & it was recorded that lending to first-time buyers was at its lowest since early 1975.

100% mortgage loans are now no longer offered & borrowers looking for new mortgages are being thrown into complete chaos, as deals they have agreed with their broker, disappear from the market just hours before applications were to be signed. (This also happened to me !!)

So, with all these doom and gloom predictions, will we if ever, return to a hint of normalcy?

Property Market Review

The UK property market is currently in decline thanks largely to the phenomenon called the ‘Credit Crunch’? (Ever heard of it?)

Definition: A credit crunch is a sudden reduction in the general availability of loans, or a sudden increase in the cost of obtaining loans from commercial banks. So, why the ‘sudden reduction in giving out loans? Show us why in Graphs they cry !!

Have a look at the affordability of property prices by the above graph which is the ratio between house prices and earnings. House prices are now 7.0 times earnings in London, 5.7 times in the South West, 4.6 times in the Midlands, 4.5 times in Yorkshire and Humber, and 4.0 times in Scotland.

This means that UK house prices are currently more overvalued now than they have ever been !! (And if I was a bank, I’d also reduce funding until affordability returns to some vestige of normality)

So, what about the ‘upside’? …….(The UPSIDE??!! Are you kidding me??!!)

Apart from the doom-and-gloom scenario as discussed, there are still ‘pockets of light’. Rental incomes have increased at an average of 16.7% over the past year & London yields are showing a very healthy 5.7% .

A major contributor to this yield is immigration which is not only featured in London as many may think. Across the country, the average proportion of properties taken by immigrants is 20% as the UK continues to attract immigrants due to job opportunities (No, this isn’t only us Saffers !!) In addition, the economy remains strong with retail sales in the year to February rose by a stronger-than-expected 5.5 %.

Furthermore, UK house prices have been continually on the rise since 1995. From late 1995 to 2008, average UK house prices have risen from £50,930 to £179,363.This is an overwhelming 252% increase !!

Also, UK house-building has largely failed to respond to booming house prices for the past decade, largely because of building regulations. Increases in population, immigration, and a decrease in unemployment, have all added to the demand for housing as have changes in household sizes.

The Barker Review (HM Treasury), concluded that to reduce the trend in real price inflation to 1.8%, the rate of new home building would have to increase by around 70,000 homes per annum to around 195,000 per annum. Government figures show that homebuilding stagnated at 148,000 new units annually between 1989 and 2005.

In 2006, 180,000 new homes were built which is still low compared to 425,000 units in 1968……..

Conclusion

So forget the credit crunch, affordability & high interest rates, because as long as the UK can maintain its demand for a skilled worforce, the economy will march on unhindered through the storm.

Horizon Consultancy – South African Property Investment Event , 6th April 2008 - London, United Kingdom

Our South African Investment Event will be hosted at the Wimbledon Park Golf Course (http://www.wpgc.co.uk/) in London, UK on Sunday, the 6th April 2008 from 12:00 to 15:00.

For a map of the location, click HERE !!

We will have several Cape Town property developments available on the day, but our flagship Development will be the Stellendale Village in Kuils River, Cape Town.

Stellendale Village is in its 4th Development Phase, due to the success of the previous 3 phases. The 1st and 2nd phases have 100% tenant occupancy.

The Development is situated next to the Stellenbosch Arterial in Kuils River , and a stones throw from the currently under construction, Zevenwacht Mall. The Development's location allows for direct access to the N1 and N2, and is close to schools and sport amenities.

A Summary of the Development is as follows:

· 5% DEPOSIT secures unit! (No other costs until transfer)
· 3 Bedroom, 1 or 2 bathroom with optional garage
· Estimated occupation beginning 2009
· 100% financing available for qualifying clients
· Estimated levy: R380 p/m
· Estimated Rental Income R3 600 p/m
· Freehold Title
· Home Owner's Association
· Controlled Access & Security
· 24 hrs Internet Connectivity & DSTV enabled
· Automated Irrigation
· Includes Hob and Oven

For more information on Stellendale Village, click HERE !!

If you would like to attend this Investment Event, please register on our website under 'Investment Events' as numbers are limited: www.horizon-consultancy.com
Kind Regards,

The Horizon Consultancy Team

http://www.horizon-consultancy.com/