The average house price will grow, interest rates will drop and rents will climb in 2008, according to Stuart Law, chief executive of property investment firm Assetz.
Law says these predictions fly in the face of the negative sentiment in the UK property market at present, saying there is 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,” he says.
Law says he expects the average house price to climb 5% in 2008 as a result of a number of factors, including immigration, the fact that sellers are “retreating faster than buyers”, and that Government plans to build new homes show “little sign of being implemented”.
He says: “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.”
Law says he expects interest rates to drop to 5% by December next year. “As a result of sustained low inflation and economic pressures, the Bank of England will have to keep interest rates at a neutral rate of around 5% in 2008,” he says.
“I would anticipate the first drop of 0.25% before Christmas or very shortly afterwards, followed by two further 0.25% falls in early 2008.”
He also predicts sub-prime lending will “remain extremely difficult” in 2008 due to “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.”
Concerning buy-to-let, Law says he expects lending to recover as underwriters realise the quality of security is “significantly better than any other market sector”.
“Already buy to let mortgages are now 0.3% cheaper than homebuyer mortgages due to the perceived better quality of borrower,” he says.
“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.”
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