Property Investment - safe as houses?

Published ¤ 15/06/2011 16:42:38

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With "property boom" turning to "property bust", is buying a property still a worthwhile investment?

A few years ago purchasing a property portfolio was tipped to provide a healthy return, with many would be investors using property investments as a pension alternative. Then in 2008 the credit crunch arrived and many landlords and developers suddenly found procuring finance very difficult. After a few turbulent years the scene may be finally changing with more lenders willing to loan to seasoned investors and at quite competitive rates. Couple this with an increase in rental incomes and the proposition of property related investment looks appealing once again.
What's the deal with house prices?

Every month we are left confused by conflicting reports published by major lenders detailing house-price movements for the previous month. Identifying which lender is more accurate is by no means an easy task. Halifax only recently claimed that house prices rose by 0.1% on the previous month where as Nationwide recently cited a 0.3% increase for the same period.
Surely someone is right?

Due to the nature of the data and the reporting parameters used by each of the lenders, variations are to be expected; yet actual sales figures from the land registry can provide some indication. Although not as regular, the Land Registry has reported a 1.3 percent annual decrease in April 2011 but an increase of 0.8% between March and April of this year. So at least there is a consensus on the direction of change. Of course, the next question is whether this is a trend or a boon.
Many experts believe that this recent increase is due to a case of simple economics. Lack of supply has meant that prices have witnessed a slight rise but still nowhere near the levels of 2007. There is also a belief by house-sellers and estate agents that the longer they wait to sell, the higher the chance of attaining the price they want. Long term this is unsustainable as there is a consensus that house prices are still massively overpriced. With the restrictions still placed on lending, unemployment levels still very high, and the expectation of interest rate rises, surely supply will continue to outstrip demand.
So in conclusion, property investment is just the same as any other. Not for the faint hearted or risk averse, long-term attitudes may be the only way of approaching this type of venture. Doing ones homework and researching the proposition fully in terms of return on investment (whether this be rental yield or capital gain) and likely risk factors (such as future saleability and location) are all vital considerations. And finally, remember the value of your investment (house prices) can go down as well as up.
If you want "truly" independent and professional advice on how to invest in property, then call PKS on the number at the top of the page, or click here to send a message.

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