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News: Pinched buyers still in control

Fri, 02 Nov 07

Over half of buy-to-let investors are convinced that interest rates will decrease over the next 12 months, with 64% believing the base rate has already peaked, according to Property for Life’s second investor confidence tracker...

Chart 1. What investors believe will happen to interest rates over the next 12 months, comparing September 07 and October 07:

 

Consequently, the proportion of investors believing that now is a good time to buy property has increased to 76% in October, up from 72% in September.

Chart 2. Percentage of investors believing now is the right time to buy, compared to those who thought that September was a good time to buy.

 

The base rate has been maintained at 5.75% for three successive months and is generally expected to remain at this after the MPC’s decision on 8th November, with a very slight possibility of a drop before Christmas. Investors now appear clearer on the direction that interest rates will take over the next year, with 54% expecting a decrease. Only 18% are expecting an overall increase in the base rate compared to 34% in September, almost a 90% decrease.

David Austin, managing director of Property for Life, comments: “No matter what the critics say, the buy-to-let market remains buoyant. The belief among investors that the base rate has peaked appears to have led to an increased feeling of security, prompting a greater percentage to be confident that now is still a good time to buy investment property.

“As always, some areas of the market are fairing better than others, but seasoned landlords will know where best to invest and will be in it for the long term to take advantage of high tenant demand and strong returns.”

Investors still optimistic

However, although 36% of those questioned believe that the base rate has yet to peak over the next 12 months, the majority of these have not had their desire to buy reduced. A quarter of the investors think that rate rises in the current climate are still necessary.

The tracker also reveals that the investor outlook on the housing market has been readjusted in October, taking the latest market activity into consideration. Only 38% of buy-to-let investors are predicting price increases over the next 12 months compared to 48% in September.

David Austin comments: “Despite some believing that house prices may decrease over the next 12 months, investors are not being dissauded from expanding their portfolios, optimistic that prices will resume their upward path in the near future.”

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