I’ve heard plenty of reports in recent months about how the housing market is continuing to crash and investors are losing their grip on their properties.
There are claims that the housing bubble has burst completely, with buy-to-let investors staring bleakly down the barrel of negative equity. Others argue that repossession rates are at a high as property investors can no longer afford to hold onto their assets.
It’s a bleak outlook that has been fuelled by the effects of the credit crunch and, understandably, it has made people think twice about entering what they believe to be a crumbling property market.
But despite these sensationalist tales, I do not believe that we are witnessing the end of property investing as we know it. After all, many commentators said things would never be the same again after the last financial crisis in 1991, but the market did recover – and that was when we had mortgage rates of 14%.
The Council of Mortgage Lenders has recently revealed that buy-to-let mortgages have a greater financial security than most others being offered at the moment. According to their statistics, which you can see for yourself if you go to InvestorsChoiceLending.com, just 1.1% of BTL loans were three months or more in arrears in the second quarter of the year and just 0.08% were seized by lenders during that time – hardly the doom and gloom that some industry experts have claimed. Investors Choice Lending website offers information on how to hold properties as long as possible, with the best terms and rates.
I have no doubt that there are some investors who decided to move into buy-to-let when the market was at its peak and are now suffering. But, then again, property is a long-term game and you have to be willing to accept the bad times as well as the good. We’re in the middle of a recession at the moment but it won’t last forever, and those who are committed to investing in property rather than just out to make a quick buck will know that the market will inevitably recover in time.
I still firmly believe that investing in property, particularly in these uncertain economic times, is a far more reliable way of maintaining your capital gains than playing the stock market – which is down 32% on the year, measured against the FTSE at around 4200. You only have to look at the plummeting share values of major banks such as Northern Rock and RBS to see that stakeholders would have been better advised to buy a flat or house instead, as they would still recoup their investment even if they sold up in the current climate.
Over the last 10 years, the FTSE has fallen 20% below its 1998 levels, while the average UK house price has risen by 244% over the same period. Therefore, if you’ve invested in bricks and mortar over that time, you’ve made a substantial profit on your investment.
Of course, some commentators will tell you that the property market is still in decline and prices are going to drop even further across the UK. Their advice is for buyers to wait until the market reaches its natural bottom before making a purchase.
But the trouble with this piece of advice is that it’s impossible to gauge when the market will actually level out. After all, there’s nobody going to ring a bell at this mythical point to alert every investor that the time is right to buy.
Some industry experts have even predicted that the housing market will fully recover by 2011 and prices will continue to rise. So it stands to reason then that, if you buy a property now, it’s highly likely that it will rise in value over the long term.
Investors will also be interested to know that we’ve recently witnessed a rise in demand for rented accommodation in recent months – especially in Edinburgh – due to a lack of confidence among buyers in the property market. Many people are choosing to rent rather than buy a home and, although there are a number of “reluctant landlords” who have put properties up for rent because they cannot sell them, this has not flooded the rental market to saturation point. If you have a good property and are willing to accept a moderate rental yield, you can find tenants to move in.
Of course, investing in property isn’t for everyone and there will be many who prefer to keep their money in shares or savings. For some, the hassle of finding tenants and using rents to cover mortgage repayments on a property will be less appealing than putting their savings in an ISA or investment account.
But for those who are brave enough to invest in bricks and mortar, there are clear rewards to be gained. The value of your property can only increase in the long term while, with the base interest rate currently at the lowest it has been since 1951, there is very little to be gained from storing your money in a building society account.
If you have the funds available to invest in property, it makes sense to take the plunge now rather than waiting. The downturn should be seen as a massive buying opportunity and I believe those with the courage and patience to invest in property will be rewarded.
Well, to end this article with a good note, I highly recommend reading this beginners guide to USDA home loan. This is one of the best I have seen. You can also read this post on stock trading-What You Need to Know About Penny Stock Loans – Easy Stock Loans.