Reasons to be cheerful for UK property investors?

The UK property market is in much upheaval and with so many doom and gloom articles, what are the facts? Truth is house prices have dropped for the fourth consecutive month this January, interest rates have been cut and mortgage providers are stricter than ever. For the average boffin, the property market is not looking great, but for shrewd investors - and even first time buyers - it might not be so bad after all.

Increased demand pushes rent prices up 10%

First things first, what are the experts saying about buy-to-let? Well nothing is for certain, however there are a few facts we can rely on. 86% of current investors intend to either expand or keep their portfolios the same. The majority are in no rush to sell and although money may be tight, long term prospects remain strong.

Halifax figures show that there are fewer potential first time buyers in the marketplace, and those who are seeking mortgages are finding it increasingly difficult (providers have tightened their criteria and most have now stopped 100% mortgage deals). This has led to an increasing demand for rental properties and, most interesting to investors, average rents in the UK increased by 10% in October 2007 compared with the previous year. As the Independent reports - the buy-to-let market may just ‘defy gloom’ yet.

Repossession woes mean opportunities for first time buyers

Secondly, although buying property is increasingly difficult, there is hope that falling prices will attract people who have until now being priced out of the market. It won’t be easy though, as mortgage providers are now asking struggling first time buyers for a 10% deposit on all properties.

Still, despite rising rates the Guardian has reported that there has already been some interest from first time buyers at auctions. ‘One man’s loss is another man’s gain’ seems to be an apt description for the UK property market at present - as more people with 100% mortgage deals will struggle to find replacements for their current term when it runs out. Increasing repossessions mean more auction properties and it’s great news for first time buyers as this number is set to increase still further.

Property market clouds with a silver lining

Admittedly it is a difficult time for the UK property market: The Royal Institution of Chartered Surveyors (RICS) has reported the fastest falling house prices since 1992, and Instant Access Group suggests that prices won’t pick up until 2009 (as reported on Bloomberg).

With the housing market in tatters, buying property now is not for the faint-hearted. However, where there’s a will, there’s a way - this so-called crash could just work out for serious investors with money to burn, or for the braver of first time buyers with the cash for that dreaded 10% deposit.