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THE CREDIT CRUNCH AND THE PROPERTY MARKET - OUR VIEW
What is it?
Mortgage and lending institutions have stopped lending money to each other, why? Banks have either lost or expect to lose a lot of money in America where a property market based upon lax lending and artificially inflated property values has crashed in value. This effects the British consumer because our own banks joined in the foolish rush on American Property.
Most consumers in the UK could work it out themselves, 304 million people live in America, 60 million in the UK. America is roughly 39 times the size of the UK but only 5 times the size of population. Why, therefore, would anyone expect the property market in the USA to be the same as in the UK? Quite simply in the USA if property prices increase dramatically, build a new one, it is cheaper. The pressure on land prices in the UK due to limited supply and positive immigration means that property prices in the UK are not inflated beyond disproportionately beyond land prices.
So why the drop in house prices in the UK?
Offers on properties in the UK are still coming in, but no one can get finance to fit. The banks have, over night, restricted lending criteria to effectively mean that first time buyers can not get a mortgage without a 25% deposit, buy to let the same. No finance = no move!
The banks are doing this so that there is no opportunity to refinance thus meaning that consumers are forced on to their higher variable rates, so recouping losses. The banks are taking this further removing deals from brokers, the guys who get consumers the cheapest deals!
So effectively the banks are recouping the losses incurred in the USA following a period of lax lending and you the consumer are paying for it through the removal of competion in the mortgage market.
However, property prices in the UK are still expected to rise in the long term and if you have built a portfolio for a long term hold you should be fine!
If you are lucky enough to be cash rich, now could be the best opportunity to buy property since 1990 (the last crash!). Remember how 1990 was the 'peak' of the property market in the UK? If you could turn the clock back to then and buy property at that peak, would you?
Property Investment planned wisely can provide fantastic returns. Only Property provide Property Investment Planning and Management Facilities to help you build a successful and profitable portfolio.
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