The UK Property Market 2011/2012

Hi All,

We’ve been getting a lot of questions about the market, and I thought it worth sharing both questions and answers - so here goes.

I’ve kept it very brief, so if you want further details, let us know click here or visit our website www.grantpropertyinvestment.com

Kind Regards

Peter Grant

CEO

1. What's happening with prices.

Prices fell in 2008 but have been very stable since then. We predicted that prices would be flat in 2011 and in fact they have risen slightly, according to Nationwide Building Society.

2. Has the financial crisis changed the market?

Yes. Since 2008 the market has moved from being a sellers market to becoming a buyers market - favouring investors. There is lower mortgage availability for first time buyers. Buy-to-Let mortgages on the other hand have risen sharply in 2011, allowing investors take advantage of very favourable buying conditions.

3. What's happening in the rental market. 

Rents have been rising as have yields. We have 100% occupancy in prime areas. The Scottish rental market has performed better than England.

4. What impact has the euro crisis had this past 6 months.

None. Prices have in fact risen slightly.  It's been similar to other past 'crisis'. In good times property prices rise and in less good times property prices remain flat.

5. Why is property less volatile than shares and bonds.

Shares and bonds make headlines and react to headlines because they are completely liquid so there can be dramatic price movements. Property prices don't react to headlines and have always been very stable by comparison.  

6. What is likely to happen in 2012? 

2012 is predicted to be similar to 2011, with prices stable and perhaps rising slightly. Nationwide are predicting 2% growth. Rents are likely to carry on strengthening as are yields. We expect occupancy in prime areas to remain very high.

7. How does property compare as an investment?

Over any period (3 years or 30 years) residential property has outperformed shares and commercial property. Over the last 40 years, the average growth is 7% pa. Through gearing that‘s a 28% return pa.

8. When investing, what should I focus on?

There are several rules to follow in order of priority

  1. Location, location, location. Choose a prime city centre area
  2. Traditional property outperforms new build, so focus on that

  3. Rentability. Look for strong rent and high occupancy

  4. Experience. Use GM as a partner and use our strong experience

  5. Price. Buy well but without compromising on the above points

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Housing rebound coming in 2012

Firstly from all at Grant Property Investment, we would like to wish all our clients and suppliers a Merry Christmas and Happy New Year!

Attached and below is a fantastic article from Barclays outlining their forecasts for the 2012 housing market. As we expected they have forecast a bumper year for 2012. We have further press articles relating to a positive outlook for 2012 within our website, please Click Here to see more.

Barclays Capital (BCS: 10.17 0.00%) analyst Stephen Kim predicts a housing recovery buoyed by improving jobs numbers and the fact prices for nondistressed homes will have stabilized without government support.

"In the absence of a government homebuyer incentives, prices for non-distressed home sales have stabilized for almost a year," Kim said. "This is the most important trend in the housing industry right now, and we are amazed at how little attention it has been getting from the media and the street. This stability on the part of nondistressed prices has occurred despite a very high share of distressed activity and continued declines in overall prices."

Barclays said recent economic data — including higher job creation in November, housing starts and improved homebuyer traffic — point to some improvement potential in the sector.

In mid-2010, the federal homebuyer tax credit expired, leaving the housing market without training wheels for the first time since the 2008 economic meltdown. Yet, prices in some housing markets remained stable on the back end.

With its new outlook in the market, Barclays upgraded D.R. Horton's (DHI: 11.76 0.00%) stock to buy and raised price targets for D.R. Horton, Lennar (LEN: 18.51 0.00%), Toll Brothers (TOL: 19.26 0.00%) and Meritage Homes(MTH: 20.28 0.00%).

At the same time, the investment bank raised its 2012 earnings-per-share estimates for D.R. Horton, Lennar, Meritage Homes, Pulte (PHM: 5.59 0.00%) and Toll Brothers, while lowering its estimates for KB Home (KBH: 7.03 0.00%).

"Thus, the key to timing housing’s recovery depends primarily on when these first-time buyers decide it is safe to buy a house," Kim concluded.

Please visit our WEBSITE for more information on this article and about Grant Property Investment's unique range of in-house property investment solutions!

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UK Property Investing - Buy to let

We’ve had a big response to our update on bank lending, and we’ve been asked a lot of questions around the Investment Market. I’m pleased to share some general advice around buying and investing.


1. Timings. In general it’s a good time to invest. It’s still a buyers market, and there’s great value to be had.

2. Areas. The best areas to head for are city centre. They are experiencing the best yields and the highest occupancy. The more prime the better.

3. Type of property. Traditional property has always been the best performing compared to new build (measured across both yield and capital appreciation).

4. Rental Market. There have been lots of headlines around a strengthening rental market. Scotland is generally performing better than England. The Student Market is particularly buoyant. Prime city centre areas are best.

5. Yields. Average yields in the industry are 5%. Larger traditional property in city centres gives a yield of 7% and above (that’s an improvement of around 20% due to lower prices and higher rents).

6. Capital appreciation. The long term average is 7% pa. On a geared return that’s a 28% return.
Banks are more active again. The number of buy to let products rose by 26% in the last quarter. B2L lending has increased by 40% on the previous year.

Everything seems to point to investing – but investing wisely. Buying in good areas and at a good price is key.

If we can help, let us know. www.grantpropertyinvestment.com

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