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The key to successful property investment as with so many other things is timing. Timing makes or breaks the investment opportunity.

With the benefit of hindsight, the only 20:20 vision, we can see that the
time leading up to the 2007 price peak was not the best time for investors
to buy.  As prices rose sharply some investors were accepting gross returns
as little as 4-5%, a strategy based on the expectation that continually
rising prices would provide the real investment return. The dramatic
reversal of the market unfortunately has provided the opposite affect with
low returns and falling prices for those who bought at the top.

This year has been a traumatic one for the UK economy.  Few could have
anticipated the share price collapse of some of our most respected companies and the stock market remains in turmoil.  We have seen our Banking system part nationalised and for those who remain comfortable with their savings in deposit accounts, rates are set to fall even further in coming months. Against this background the security of real returns and likely capital gains from residential property is appealing to many people including many who previously have not invested in bricks and mortar.  In the last few
years many people have turned to residential property to take control of
their own finances due to poorly performing pensions and other forms of
investment and the majority of buy to let properties bought before 2006
are still worth more today.

Opportunities are available to invest in good quality properties at prices
around thirty percent less than the 2007 peak with gross rental returns of
around 8% from a strong rental market.  Lack of liquidity in the market
makes the bargaining position of those with substantial cash deposits
particularly strong.  These opportunities will continue to be available
until the recent large interest rate cuts feed through into low priced
mortgages readily available to first time buyers.  This will take some time
and when it does the market will stabilise and begin to recover. Many
experts are predicting the market to recover strongly in 2010.

Looking to the future the total returns from investment property will be the net rents received plus capital appreciation.  For most people Capital Gains on sale will be taxed at 18% after personal annual allowances of £9,600. Prospects for the housing market over the longer term remain good. Demand for homes remains high but is currently artificially depressed by the lack of liquidity.  The population continues to grow with increased longevity and immigration and more people are choosing to live alone.  The demographics point to strong long term demand for housing. 

A good home is both a fundamental need and an aspirational choice and even the current difficulties will not curb the average persons desire to own their own home.

It will take time but the current difficulties in the market will pass and I
believe that those who buy in the next few months will look back at a well
timed investment.

Article Courtesy of Clive Rook BSc., FRICS - Managing Director of Rook Matthew Sayer

www.rookmatthewsayer.co.uk

Clive can be contacted on
clive.rook@rookmatthewssayer.co.uk