House prices increasing
House prices will increase by an average of five per cent across the UK during 2008, according to the latest predictions from property specialists Assetz.
According to Assetz price growth will be driven by a range of factors.
Immigration levels will continue unabated, increasing demand, whereas sellers will retreat faster from the market than buyers – ensuring a shortage of supply supports price levels.
There is also little chance of supply being increased by government plans to build three million new homes by 2020 in the short term.
"While we are currently experiencing a lot of negative sentiment in the property market, this is actually no reason to set the alarm bells ringing. If people look at the fundamentals it is actually very hard to find out what all the fuss is about," said Stuart Law, chief executive of Assetz.
"Despite a recent slowing in the rate of house price growth across the market, the average figures reported by the major indices show that house prices have continued to grow at a healthy rate over the last two or three months."
According to Assetz, low inflation during 2008, along with a growing economic slowdown, will force the Bank of England to lower interest rates to a level of five per cent.
A fall of 0.25 percentage points is expected before Christmas, with two further cuts in 2008 to bring the base rate down. However, some sectors of the market will suffer.
"Subprime lending will remain extremely difficult in 2008, with poor credit mortgage applicants struggling to achieve any mortgage offers, and those who do secure an offer receiving interest rate quotes that are substantially above those of early 2007," continued Mr Law.
This is in stark contrast to the buy-to-let sector, which many analysts believe will boom, on the back of falling prices and high rental yields.
"Buy-to-let lending will recover very strongly as underwriters realise the quality of security is significantly better than almost any other market sector.
"Already buy-to-let mortgages are 0.3 per cent cheaper than homebuyer mortgages due to the perceived better quality of borrower. With interest rates predicted to fall imminently, and rents rising, both new and established investors will soon reap the rewards of higher rental yields with positive cash flow," concluded Mr Law.
(Source: www.aboutproperty.co.uk)
