Recent press cuttings
11th October 2007House prices keep on rising?
Gordon Brown has made several announcements, since becoming Prime Minister, that 3,000,000 new homes are required by 2020 in UK. This has been widely reported in the national news (BBC, Daily Telegraph, Daily Mail etc.). Nick Hopkinson, Director of Fruitful Property a specialist research and investment firm, discusses the likely impact of these government plans.
These announcements have raised many questions about the future of UK house prices. Everyone wants to know if now is a good time to invest in UK property and whether the residential housing market “bubble” is going to burst? The debate inevitably focuses on whether house prices will crash or can they keep on rising? “Rather than resorting to sensationalist headlines or PR type claims I prefer to look at the independent experts opinions” says Hopkinson from Fruitful Property.
According to the Royal Institute of Chartered Surveyors (RICS): with sustained strong demand, and real shortages of this type, it would appear unlikely that prices will drop back or slow down in real terms in anything other than the immediate short term regardless of recent interest rate rises and affordability. The other difficulty, of course, is that its just 13 years till 2020. Currently 150,000 new homes are built per year in the UK... giving a shortfall of 1,000,000 from the required figure of 3,000,000! That of course, ignores population growth from such factors as immigration and the regional nature of the shortage (i.e. the real shortage is concentrated in geographic pockets and is not everywhere).
Fruitful Property clients would appear to be in 'the right place at the right time' and have an apparently rosy future ahead - it’s hard to imagine anything other than strong, sustained price growth over the next decade if you are careful about where you invest and do proper due diligence. Especially when you appreciate that the property shortage is largely concentrated in the South East and London areas of the country where Fruitful Property focus. The real capital growth in property long term is made by combining the following four principles:
- Maximum gearing – using unique negotiated discounts to achieve 80% loans with only 5-10% of your own funds invested.
- Future “hot spot” sourcing – researching the best locations based on long term factors. Fruitful Property focus on key areas within London and the South East where demand exceeds supply long term.
- Compound capital growth – getting growth on the whole value of the property over 10+ years, not just your investment funds.
- Risk mitigation – understanding and budgeting for all the legal, financial and future risks.
Now! is always a great time to invest in UK houses if you take this approach. This is what Fruitful’s landlords are doing and getting return on investments (ROI) of 1,000 percent + over 10 years. Not many other investments can match that without a very high risk of losing your whole fund…something that’s very unlikely in property. Another research source, latest quarterly Assetz report on the UK property market, also indicates continued house price growth. Their key property market forecasts for the end of 2007 are:
- CPI inflation will be around 2% and possibly having dipped lower.
- Bank base rates remaining at 5.75% or 6% maximum and general consensus that the peak of this tightening session has been reached.
- First time buyers will be priced out of the market and rents will continue to rise - actually rising faster than property prices leading to an increase in yield%.
- House price inflation average performance for 2007 will register 8% or greater as predicted at the beginning of the year.
“If you invest carefully and stick to the four key principles - YES, house prices will keep on rising!” Say’s Hopkinson.
For further information about this article call 020 7031 8282 or go to www.fruitfulproperty.com