Where to invest
The simple truth is that unless you get your location right, you won’t maximise your profit from property investment. Further, if you can predict market trends you will make even more profit.
If you want property that will rent or sell easily, then look at city locations, up-and-coming areas with planned or current regeneration projects, and close to amenities and public transport. It also pays to invest in properties that have parking, private entry, an en-suite and some outdoor space – either a small garden, terrace or balcony.
If you buy outside of the city, make sure there are good road and rail links, and property with a view of the sea will always fetch a good price – similarly with property close to a golf course.
It is still too early to tell what effect the November base rate rise will have on the property market, even though the market took the August rise in its stride and saw little or no effect on house prices. Although interest rates have only risen by 0.5% in 2006, this represents over a 10% increase in the interest homeowners and investors will have to pay to their lenders on existing mortgages. With many mortgages now on fixed rather than variable rates though, the effect of a change in interest rate for many people will be delayed. In addition, there also remains a risk that the market may be dampened by above-inflation rises in associated housing costs such as Council Tax and utility bills, which are currently fuelling higher than target inflation in the UK.
For London and the South East, it’s anticipated that house price growth will continue to be positive over the next six months, albeit at reducing levels. In other UK regions, it is believed that there will be growth only for those properties which are able to attract genuine owner occupier interest. Affordability will remain an issue for the foreseeable future in several areas such as Scotland, Northern England and Wales and, as a result, growth rates in these areas are expected to remain nominal only in the first half of 2007.
Overall, sentiment for UK residential property remains positive and factors underpinning the housing market (such as historically low interest rates) remain predictable. For 2007 the continued forecast is flat to modest house price growth in line with or just above RPI inflation. Any pent-up demand in the market should support prices rather than drive them. Issues such as the level of the base rate, inflation, employment prospects, taxation, general economic performance in and outside the UK, consumer spending and market sentiment remain important factors in this scenario. Property investment remains a good medium and long-term hold.