A survey recently conducted by the Homebuyer and Property Investor show revealed that over 70 per cent of investors are still planning to buy a property for investment purposes this year, despite the numerous reports about the current state of the property market
Clearly, many serious buyers still remain upbeat about the market. It is without doubt that this level of confidence has been boosted by the December drop in interest rates, which is set to become more established as further falls are widely anticipated.
Although the financial pressure should really begin to lift if a further drop is announced, borrowing in this current climate is no easy feat.
However, investors who are less heavily geared, with the protection of a strong portfolio behind them and excellent credit ratings, will be attractive to lenders.
Bucking the trend
For the investors that can meet the borrowing costs, the rental market remains a solid investment as it continues to buck the trend of the rest of the residential market.
As many potential buyers are sitting out and waiting to see what the market does, there has been a booming demand for rental property, with many agents reporting more than a 25 per cent increase in enquiries since this time last year.
This trend is particularly significant in the capital. The Association of Residential Letting Agents Q4 Review found that nearly two-thirds of those managing properties in central London said that there were more tenants available than properties in all cases of rented accommodation.
As a result, despite higher borrowing costs, rental yields have started to increase for the first time in many years.
With the rental market remaining healthy, seasoned investors are looking to enter the market and capitalise on the plethora of competitive deals from developers, as well as the growing number of low-cost properties available at auctions.
As the market continues to tighten, experts at the Homebuyer and Property Investor show estimate that approximately 50 per cent more properties will be offered at auction this year compared with five years ago.
While some buyers may be put off by the fast completion of sale by auction, experienced investors with equity, cash or strong credit history are in a great position to secure a good deal.
However, those investors who are less experienced need to approach auctions with caution and do their research to ensure they are paying a fair price.
Where will the money be spent?
With rental demand growing, borrowing costs improving, interest rates set to drop and more bargains up for grabs from developers, many investors believe 2008 will prove to be a very profitable year.
But, where will this money be spent? Respondents to the survey expect London and the South East to be the best performing property markets in 2008, with nearly 70 per cent of investors identifying the regions as this year’s property hotspots.
Many will be looking to purchase in the South East and London, and the growth in buy-to-let interest in these regions will help to buoy the UK property market.
While supply and demand is given as the main reason for predicting that housing markets of the South East and the capital will do well in 2008, the belief is also fuelled by improved transport links, wealth, foreign buyers and regeneration across the area.
The Thames Gateway is expected to perform well due to extensive regeneration. The recent go-ahead for the East London line and Crossrail will also bolster property prices.
Kent is also one of the top choices, due to the international rail terminus at Ebbsfleet, making the county more accessible.
In addition, established areas in central locations in the city of London will continue to be strong.
Areas such as Chelsea and Mayfair, where most home owners and buyers are cash rich, have been less affected by higher borrowing costs, and will continue to perform well.
Property investment is for the long term
While 2008 may be a shakier year than last, investors can succeed in making good investments, as hotpots in the UK can still be found and bargains are more widely available.
Property is for the long term, and though it is undeniable that lenders’ appetite and ability to lend has tightened, seasoned investors, with their knowledge of the market and acquired equity, can really look to strengthen and diversify their portfolios in the current climate.
