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 Confidence in Property Investment
A survey conducted by the insurance company Standard Life indicates that people are beginning to think twice about investing in property.
The results suggest that interest rate rises have caused a reduction in confidence amongst potential investors. In the survey around 1500 people were asked for their views on a number of investment categories. This included asking whether it is a good or bad time to invest in their own home or buy to let property. The increase in those replying that it is a bad or very bad time was significant. In fact interest in this type of investment has returned to the level shown in January 2006. In contrast the confidence in savings accounts has improved.
Some experts warn that new buy to let investors may struggle to cover increases in mortgage costs with the income from their property. However, the most recent figures from the Council of Mortgage Lenders show that in 2006 a further 330,000 buy to let mortgages were taken out. This was in fact the highest annual figure since this type of mortgage became popular around 10 years ago. The total number of buy to let mortgages is now around 850,000, which is 9% of all mortgages.
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Where are people investing?
The trend for people to invest in properties abroad is still strong but the returns to be made and the regions where people are investing are changing.
Gone are the days when cast iron returns were guaranteed and the places nearer to home like France and Spain look less attractive now.
Turkey has become a hot spot over the last couple of years and the scale of some development projects over there is huge. But prices are creaping up and the days of a holiday villa for less than £50k have gone sadly. The recent trend is places like Bulgaria, Slovenia and even Poland and Albania, but people need to look beyond cheap headline property prices before they invest. They should consider carefully whether they will really want to live or holiday in these places themselves or be able to generate any significant rental income to help offset any mortgage costs.
We worry that the market is being driven along by finance companies and developers wishing to cash-in on the "home abroad" craze and the real losers will be the people who stake their life savings in some far away white elephant!
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