UK Property Predictions and Where the Market is Heading

By: Carlton Johnson

Do you want to know what is going to happen in the UK property market in 2008?

This UK property predictions article endeavors to give you an insight into what is potentially in store for property investors and homeowners in 2008.

Firstly let's take a look at what happened in 2007 and the early part of 2008.

The debacle of what happen in the subprime mortgage crisis sent a shock wave through the financial World. There were many causalities, probably the most notable to date in the UK is Northern Rock.

Any business that relies heavily on debt and borrowed money has been hit hard. Banks and financial institutions are tightening the purse strings and property investors are feeling the squeeze and many are nervously looking at other ways to reduce the risks in their portfolio. Investors are particularly nervous if they are coming to the end of any fixed term mortgage agreements.

There is a good chance new mortgage rates will not be as favourable, hence potentially taking thousands of pounds out of the investors pocket.

Are we on the road to another recession?

Many people are looking at the property market crash of the 1990's and are wondering if we are heading down the same route now.

The bottom line is that there is always a chance we could be going down that same path; however, the likelihood of this happening today is currently very slim. The reason being that when we look at the property market of the 1990's compared to now, there are two big contributing factors that aided the crash that aren't present today, these are:

1. Unemployment was sharply on the rise.

2. At their peak, interest rates were almost 15%

How is capital growth going to be affected this year?

All indication are that property prices this year will be much flatter than they have been for a long time. Indeed we are beginning to see sequential months of the average property prices in the UK actually going down.

However, locations such as Scotland and London are still bucking this trend. For short-term capital growth there are no real safe bets at the moment, but the safest of what is on offer tends to be in Scotland and down south in places like London.

Nonetheless, there are still location in the UK that are potentially undervalued and should still see a slow but steady price increase this year.

What are the facts?

While the media is predicting negative equity and zero percent price rises this year, the truth is nobody really knows what the future holds.

However, when it comes to UK property predictions, history does prove one thing. It proves time and time again that the media hasn't got a clue and is often wrong. Their job is to sell newspapers and get people to watch their TV program and often the most profitable way to do this is by selling doom and gloom.

At the heart of the UK property market is the basic law of supply and demand. So, while demand far out strips supply then we can confidently predict that long term prices will increase. There are other economic factors that have to be taken into consideration, but as a general rule, this law normally holds true. However, that is not to say that in the short term they won't remain stagnant or even go backwards.

The Good News.

The bank of England has recently announced it is pumping 50 billion pounds into the financial sector to try and revitalise the mortgage market. This is an extremely proactive and unprecedented measure to try and keep the UK economy as stable as possible.

Now, it may take several months for property buyers to feel the benefits of the money, but long term it should help to ensure the economy does not end up in the same mess as it did in the 1990's.

The Conclusion.

Even though 2008 is likely to be a volatile year for property owners, for the astute investor who has a big cash reserve and knows where to locate the undervalued properties, because of less competition from other investors who are trying to sit out the current uncertainty in the market, this year could prove to be one of their most profitable ever.

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