The housing Market - September 1999
We appear to be having a real Indian Summer! After a wet August, September
is starting hot - both literally and in the Housing market. The latest figures
from Halifax show that average property prices have risen by over 10% in the last
12 months. All the gloom that I (and others) were spreading at the start of the
year looks completely misplaced - what a curmudgeon I was!
I must admit that the omens do look good. Inflation is low, unemployment is low
(at least compared to the last 15 years) and output is growing slowly and steadily.
12 months ago there appeared to be a real danger that the financial crises in the
Far East would bring the global banking system to its knees. They have surprised
almost everybody by extricating themselves from is such a hole with such efficiency.
Is there any Bad News? Well, stock markets still appear to be over-valued (I've
been wittering on about this for a year now - but it's true). With the economy as
it, its unlikely to come crashing down - but the upside must be limited to specific
sectors and companies. The other factor is the sleeping beast of inflation. Currently
low, it would only take a couple of months of low interest rates combined with a bit
of a boom and we could see a repeat of the Lawson boom at the end of the 80's. He
called it a blip at the time, but the by the time he spotted the danger, it was too
late. His blip gave us 3 years of high inflation, low growth and thousands of people
with negative equity - thanks Nigel! Let's hope that the now-independent Bank of
England will handle things a bit better.
For years and years it has been said that the rental market in the UK is poorly
served. Finally, the message seems to have got through, and the number of people
buying to rent has grown enormously over the past year or so - driven by the
attractive income and capital growth. However, as the number if people renting
is growing, market forces push down the yield obtainable. There are still some
very attractive investment properties around - but the market will not provide the
easy money that it once did.
If you're buying property to rent, don't look for your dream home. People who
rent want 'something that will do'. Points that are you might think of:
- Decide at which group you are aiming. Some of the categories
- Students. needs to be cheap, accessible for the nearby college.
Do not expect trouble-free tennants! Also - you only get the rent
during the academic year
- Twentysomething college leavers. Like students, these people are
looking for property in the right location that is affordable. They
may be better behaved than students - but not much.
- Monday-Friday workers. Perhaps the best people to aim for. These
are people moved by their company who work away from home. The
company will pay. They are unlikely to wreck the place. They
tend not to need space but being convenient for work is vital as
is being fully furnished and equipped.
- Ex-pat/Company moves. Where the whole family follow the breadwinner
to a new location - either international or within the UK. They will
be looking for speed into work and schools.
- Between houses. This is a wide category of anybody who is looking to
buy in an area, and rents in the interim. Main downside is that you
have no real idea of how long they will be there.
- Who is going to manage the property? Finding tennants is one thing - but managing
them on an on-going basis is another. Agents will handle the collection of rent,
inventory and all the other hassle associated with renting - but at a price.
- Are you going to need to sell at short notice? If you give someone a 2 year rental
period, it tricky if you suddenly need to sell after 1 year.