House prices ‘will drop 10% in a year’

12 July, 2008 10:39:00 Ritun

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The Property Tycoons Newsletter
Showing you how to get started in the property business, how to find cheap bargain properties, how to fund
property deals 100% no money down, how to get mentoring from property experts and MUCH MORE!

Volume 1, Issue 6

November/December 2007

House prices ‘will drop 10% in a year’.

This will be the final Property Tycoons newsletter issue this year so I thought I’d share my thoughts on the current property climate, what typical newspaper headlines (above) mean for us as property entrepreneurs and where I think the juiciest opportunities will lie next year (believe me there will be plenty of opportunities no matter which way the market goes).

As you will have noticed there is a lot of speculation out there at the moment on the future of the housing market. Not just here in the UK but worldwide. Will prices go up? Will they go down? Will they stabilise for a while?

Journalists (many of whom are not landlords or even property owners), politicians, analysts, economists, mortgage lenders, estate agents, chartered surveyors and everybody else in-between are all very busy giving their

views on the market. Hell even I’m throwing my hat into the ring!

So who should you believe?

Fairly loose lending standards led to a lot of people buying homes they could not previously afford to buy. This purchasing power created further demand. House prices continued to rise. And rise. Then interest rates then went up.

This made some investment properties difficult to stack up with the rent just about covering the mortgage payments in some areas. I’ll cover what happened to borrowers (especially sub prime) who should not have been given the ability to borrow large sums in just a second.

Lenders then sharply restricted lending to the sub prime market and that’s pretty much where we’ve ended up.

Continued ..

Nobody!

Let me explain…

The recent house price boom started at about the time the dot com bubble burst. Many investors shifted capital out of the rapidly deteriorating stock market and into the blossoming property market. Interest rates were low at the time which created a healthy profit margin between interest payments and rental income.

This increased demand pushed property prices up. Investors released equity and purchased more properties. Ordinary homeowners also released equity from their homes since there was a lot of it and interest rates were low which kept their costs of borrowing relatively low

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