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Ten predictions for 2007

2007 will be a year of continuing trends, rather than dramatic changes in the buy-to-let world. A stable UK and global economy should mean pretty much more of the same for most of us. However, within the general environment of steady house price rises and general strong tenant demand there will be a number of developments within the investment markets that will affect landlords.

Here is the Property Hawk’s team projection of the list of the ten biggest developments to hit the world of landlording in 2007.

1. Landlords will be hit by more legislation.
Watch out for the introduction of the Tenant Deposit Scheme. From the 6th April 2007 this mean landlords are required to ensure that new tenancies have their deposit money paid over to a custodial body or take out insurance. See the article on TDS for details. Even for landlords looking to sell their property there will be no escape. From the 1st June the much pilloried Housing Information Packs (HIPs) will be introduced. These require anyone wishing to market their property to ensure that they provide at the very least an Energy Performance Certificate along with legal documents like searches. In both cases; prepare for confusion and poorly thought out detail by Government and regulators as they concentrate on Tony Blair’s ‘abdication date’ rather than implementing what are after all dubious bits of legislation; correctly.

2. Interest rates will rise early in the year, probably February or March, but don’t worry.
A single 0.25% will probably be it meaning that we can look forward to a period of stability and a base rate of 5.25% for the remainder of the year.

3. Student landlords will continue to suffer.
Landlords who have prospered over the last 10 years as the student population has swelled will continue to feel the pinch. The reasons for this are two fold.

Firstly competition from the various specialist accommodation providers will intensify as they expand aggressively into the market. Student accommodation has become one of the ‘hot’ property investments of recent years and continues to attract large amounts of investment capital. This will be deployed throughout the UK to develop each company’s property portfolio resulting in an increasing supply of student bed spaces.

Secondly, the fall out from the introduction of Houses in Multiple Occupation (HMO) licensing means that many landlords that used to make money out of student lets will now face either having to reduce the number of rooms they let out below 5 or face having to obtain a license. The license and the necessary steps required to comply with it can amount to thousands of pounds of capital expenditure and also make the property unsaleable into the owner occupation market. The alternative is to loose valuable rent which ‘hammers’ the resulting investment yield.

4. HMO landlords to carry on leaving the industry.
Frustrated by the increasing levels of regulation and bureaucracy many longstanding landlords will choice to sell. This in turn should throw up some bargains for those prepared to do the work and that understand the new legislation and the multiple occupation market.

5. Rents will continue to rise
Rents will continue to rise as strong immigration, legal and illegal together with the continuation in the high relative value of houses keeps rental property demand strong.

6. Look out for auction bargains.
The explosion of new developments targeted at novice buy to let investors together with rising interest rates has meant that there are increasing numbers of repossessed properties appearing in the auction market. These properties are often sold at 15-25% of their original sales price. Make sure you do a full investment appraisal to establish how much you can afford to pay to obtain your desired investment returns before you start bidding.

7. First time buyers will be back.
After several years of first time buyers being conspicuously absent from the housing market. In 2006 numbers were close to a record low. Increasing confidence amongst buyers that the market isn’t about to crash and more generous lending criteria by the banks means that first time buyers have the money and motivation to once again ‘gate crash’ the housing market in numbers. Look for a mini boom in prices in the first time buyer bracket after several years of poor performance.

8. Posh takes a pause.
After a year when certain markets in the best areas of London and other parts of the country have performed particularly strongly, we expect these high levels of growth to take a breather whilst the more proletariat areas catch up

9. Income investing is back!
I have been taking a long look at my own portfolio. After a decade of expansion and the high gearing which has enabled this; I am sitting on large tax losses. In the coming year I intend to rationalise my portfolio with a series of selective disposals. The aim being to generate a profit over the coming years and thereby benefit from my accumulated tax losses and the subsequent tax free income. 2007 could be the year when landlords once again start to focus on the income aspects of property investment following years of relying on capital appreciation for their returns.

10. We expect the number of registered users of Property Hawk to reach 10,000
As landlords increasingly appreciate the benefits of our Property Manager software and a site that is purely dedicated to UK residential investment. Why wait –join the growing number of landlords that can see the benefit of on-line management by registering for FREE today.

The Editor

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