Bank of England expert predicts future UK property boom

An ageing population and an increasing number of immigrants are set to fuel a property price boom in the UK, it is claimed.

According to Professor David Miles, who sits on the Bank of England’s monetary policy committee which sets interest rates, people will also be older when they buy their first property because of changes in the mortgage industry due to the credit crunch.

In a research paper he says that the trend of rising real incomes and the likelihood of rising population density means the UK should anticipate a rising trajectory for real house prices over the longer term. But he does not indicate exactly when this would happen.

‘This is particularly likely in a country like the UK where population density looks set to rise relatively fast,’ he explained, pointing out that one in six people currently alive in the UK expected to celebrate their 100th birthday and the population is set to rise.

At present, 62.2million people live in Britain, but the Office for National Statistics expects this number to increase to 67.2 million by 2020 and to 71.4million by 2030.

Over the past 25 years, house prices have reached levels which leave many people unable to afford to buy their own home. In 1986, the average home in a British city cost £35,209. Today the same property would cost around £170,000.

In his report on population growth, house prices and mortgages, Miles says that the changes to the mortgage market over recent years will be permanent. ‘The first effect is likely to be prospective buyers postpone their purchase, while they save more to accumulate a larger deposit. As a result, the average age at which people would buy their first home will rise, and the  share of owner occupied houses will fall,’ he explained.

He believes that the changes in the mortgage market is not a bad thing and the fact that banks and building societies insist on large deposits to get the best loan deals is not a sign of a damaged market, or one which is not functioning properly.

He singled out the 100% mortgage deals, prevalent during the last housing boom which allowed people to buy without saving a penny for a deposit. ‘It probably never made sense for there to be 100% mortgages. There may be no price at which it makes commercial sense for such a loan to be available,’ he said.

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House Prices and Rents to Rise as Homebuilding Figures Stall

The Daily Telegraph, By Ian Cowie February 24th, 2012

A shortage of new homes is expected to push house prices up.

House prices and rental yields will be squeezed upward by a shortage of new homes, experts claim, following the latest production figures from the National House Building Council (NHBC).

Despite various Government initiatives to encourage new building and help first time buyers beat the mortgage famine, the NHBC reports a sharp contraction in public sector residential construction, which fell by 20pc over the year to last month. Meanwhile, private sector production of new homes increased by less than half as much – by 9pc – to bring the total to 7,831 new residences completed in January; little changed on the year before.

Mark Posniak, a director of the mortgage provider Dragonfly Property Finance said: “These latest figures drive home the paralysis at the heart of the property market.

Tracy Kellett, managing director of BDI Home Finders added: “The lack of new homes being built says all you need to know about whether the Government’s initiatives are working. Clearly not is the answer.

“It’s a well-documented fact that there are simply not enough homes for our growing population. The lack of new homes being built is keeping house prices artificially high and causing rents to rise across all sectors.

“For landlords and homeowners, this is a good thing, for aspiring homeowners and tenants, quite the opposite.

Grant Property Investment have helped clients from 30 countries invest in over 1,700 properties across 12 UK cities. We’re the UK’s leading provider of residential property Investment and Management. Our clients range from individuals to institutional investors, with one property to £100mil property funds.

For any further information about Grant Property Investment, Property Investment or Buy-to-Let mortgages please Contact us.

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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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Welcome to 2012!

Hi All,

I thought I'd drop you a quick personal note to thank you for all your support in 2011, and to wish you a very Happy New Year. I hope that 2012 proves to be a prosperous and fun year for you.


If one of your New Year's resolutions is to invest in 2012, then let me know. I'm pleased to say the team were busy over the second part of December, which is traditionally a great time of year to pick up some brilliant bargains, if only because everyone else has switched off for Christmas! This year is no exception, and I'd be delighted to put you in the loop as to what is currently available.

I look forward to working with you in 2012.

Kind Regards,

Peter Grant
CEO
Grant Property Investment

For the latest update on our property portfolio, please visit our website.

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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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