The National Association of Estate Agents (NAEA) has published its predictions for the UK property market over the next 12 months, and they make interesting reading.
NAEA believes that the market next year will be largely dependent on the availability of lending.
They think that house prices could remain flat, or even drop in some areas, for the first six months of 2010, before picking up again and remaining stable in the second half of the year.
Housing supply is likely to remain stable in the run up to the General Election, after which there are likely to be more houses available for sale, particularly if Home Information Packs are scrapped.
As has happened this year, they predict that a number of buyers will take advantage of lower interest rates and lower priced property. Some buyers are in a very strong position currently if they have access to cash or credit and the ability to purchase without first having to offload their own property.
When we construct comprehensive Financial Planning reports for our clients, the value of property is one aspect we include within our calculations and forecasts. It has been interesting to note recently that many clients have overvalued their main residence when compared to the valuation system we use. Recent increases in average property prices have come largely as a result of limited supply, so in a ‘normal’ supply situation it is unlikely these prices would be anywhere near maintained.
Of course your property should be a place to live first and an investment second (if at all).
Hopefully the temptation of becoming an amateur landlord with the prospect of covering mortgage costs with rental income and then benefiting from a rapid increase in capital values has been proven to be a complete fallacy in recent years. It is always a shame to see investors lured by unscrupulous and unregulated property investment salespeople into taking too much risk with their investment portfolio as a result of gearing (borrowing money to invest) and failing to diversify between the investment asset classes.
Where the NAEA predictions for 2010 are important is in predicting the likelihood of a ‘feel good factor’ which usually stems from property price increases. Whilst residential property is not necessarily a good thing to consider from an investment perspective, it can and does drive the UK economy to some extent.
