Commercial property blog

By Claer Barrett

It has taken a financial crisis to make buy-to-let a profitable investment.

Friends who are landlords have enjoyed a good Christmas, thanks to plunging interest rates on their lenders’ standard variable rate (SVR).

As buy-to-let mortgages are nearly always interest only, for those not committed to a fixed rate deal, monthly repayments have reduced by half or more.
A year ago, a friend struggling to let her perfectly rentable 2-bed property in East London took a reduced rent just to get a tenant in situ.

Far from being a hair shirt decision, interest rate falls have shrunk her mortgage repayments to such an extent, she is now making a gross rental yield of 15 per cent.

Sadly, I fear her elation will be short lived. Here’s why. Continue reading »

By James Whitmore

For Sale Signs

Take two stories that were published today in the Financial Times and the Telegraph. ‘House prices are expected to fall by almost 30% during the next three years,’ says the FT. ‘Falling output from housebuilders could lead to a 30% increase in house prices between 2009 and 2012,’ says the Telegraph.

The 60% differential is plainly ridiculous. The FT’s source is the prices of residential property derivatives, while the Telegraph’s is the Centre for Economic and Business Research.

If I had to choose between the two extremes, I would plump for the 30% increase. While mortgages are difficult to come by, prices will continue to slide. But, once the mortgage market returns to normal, then prices will once again rise quickly. After all, mortgage interest rates are still historically low – my own is 5.14% (0.14% above base rates) secured only last December with my existing lender, and there is still a nationwide shortage of family houses.

Before the credit crunch began a year ago, the newspapers, if you remember, were full of stories saying there was a huge shortage of houses in the UK and Gordon Brown was making an increase in the development of houses his priority. That situation is now even worse, because far fewer houses are being built this year.

The medium and long-term trend for house prices is up. We are enduring one of those nasty short-term blips. When it will finish, I have no idea, but surely by 2012 prices will once again be soaring.