Property investors not turned off by market crash fears

Wednesday, 02 April 2008 12:00

Property investors remain keen to expand their portfolios despite a slowing market and falling house prices.

A poll by investment specialists Property for Life revealed 71.3 per cent of investors are willing to make further residential purchases under present market conditions.

This represents a ten per cent increase since the end of last year - before the Bank of England's interest rate started to fall from its peak of 5.75 per cent.

The monetary policy committee (MPC) has now made two cuts to the base rate, in December and February, bringing it down to 5.25 per cent.

Indeed more cuts are expected by investors, with 70 per cent expecting further cuts over the course of the next 12 months, according to the research.

Among those expecting a cut, a reduction of 50 basis points was the most widely predicted.

"The vast majority of professional investors are looking to expand their property portfolios this year, with confidence remaining high," said David Austin, managing director of Property for Life.

"Demand for rental accommodation is still driving the market, pushing rents up and a record 65 per cent of investors say they are no longer feeling the pinch of higher interest rates.

"And as the cuts to the base rate set in fully, with more expected, the desire for buy-to-let property is unlikely to decline."

However, the majority of investors expected prices to fall for UK property in the short term.

Some 46.3 per cent of property investors expect a further deterioration in prices, but are willing to purchase on the assumption the market will return to a negative footing in the future.

"Investors' house price expectations have been fluctuating since December, with those polled uncertain as to whether prices will see an overall decrease or stay the same," continued Mr Austin.

"Now, investors seem to have come to a consensus that we will see falls overall, however slight. Serious investors are as ever taking the longer term view, certain that they will see significant returns over many years of owning property.

However, in a separate poll carried out by online portal HotProperty.co.uk, estate agents revealed a much shakier view of the market.

During March just 51 per cent of agents questioned by the property website said they were more confident in the future direction of the market than the previous month.

This represents a drop of 22 per cent on confidence levels recorded in February.

"The March agent confidence index shows a considerable drop in agents' confidence," explained HotProperty managing director Shawn Luetchens.

"This is possibly due to a seasonal slowdown in the market following the surge we saw in January. However, the consistently negative reporting in the media is also a contributing factor, with many agents claiming it is damaging consumer confidence and having an impact on the market."

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