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News: Bad news for quick buck chasers

Tue, 13 Nov 07

Barely a week has gone by in recent months without apparently contradictory predictions appearing about the future of the UK buy-to-let market...

 Ever since the credit crunch appeared and the housing market began to slow in the wake of the July interest rate hike, predictions of doom and gloom for investors have appeared as warnings have emerged about shrinking yields.

In contrast, others have said the market is sound in the long-term and have pointed to rising rents as more and more potential first-time buyers opt to stay off the housing ladder until affordability starts to improve. This view suggests that the market has a good future, since that affordability improvement may be some time in coming about.

Speculative froth

Both views are right, according to Chris Horne, editor of new landlord website Property Hawk. His perspective is that the market has changed in a way that has spelt bad news for the quick buck chasers, but at the same time it has done so to the advantage of those in it for the long-term.

The removal of the "speculative froth" in the market is thus, he believed, "not a bad thing", the reason being that: "Serious long-term investors will be more likely to get property for a reasonable price because the speculative element that has crept in over the last few years will have gone."

Stating that the property investment is "all about the long-term", Mr Horne argued that this situation was therefore one to be taken advantage of provided the new investor now was committed to the long-term and also avoided the wrong sort of investments - such as the "overpriced new builds" which have appeared in central areas of cities. What these investors must do, he stated, was "think harder and more carefully" about where to buy.

That the opportunities are still there for investors who have put their money into the right kind of property to thrive is not a view confined to Mr Horne. Dennis Reed of financial brokers Moneygate told Firstrung that the trends told a different story.

Bucking the trend

He stated that while interest rates had outpaced rents in the last 18 months, the latter had risen sharply in the last nine months and this was "set to continue" as potential housebuyers waited to see how the housing market would shape up in the months ahead.

"Despite predictions of doom and gloom in the property market, the buy-to-let market looks set to continue bucking the trend with predictions of up to 15 per cent growth over the next year," Mr Reed added.

Thus, to say the buy-to-let market is in trouble, or to say that it has been unaffected by recent economic events, would in either case be an oversimplification. But the situation may now become much simpler in one respect - it is the canny and the well-advised, in it for the long-term, to whom the future belongs.

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