The FT has reported that ARLA, the Association of Residential Letting Agents has reported signs of improvement in the buy to let sector. For the first time in 2 years, landlords are now buying more properties than they are selling.

The biggest bargains have been noted to be in new build developments coming up to completion. Sales prices which were agreed maybe 2 years ago, now look too high. Consequently some investors are choosing to lose their deposit and walk away from the transaction.  Developers have therefore been agreeing significant reduction in price to shift their stock.

It’s been reported that some property agents are selling blocks of new-build flats to private investors at discounts of up to 40 or 45 per cent of the peak market price. Some developments are now providing gross rental yields of up to 10 per cent.

Mortgage approvals have risen by the biggest margin for three years in February according to the FT. In addition, lending to companies has also grown at its strongest pace in almost a year.

Other good news is also from RICS and Hometrack. The Royal Institute of Chartered Surveyors (RICS) are reporting increased enquiries from new buyers, and property expert Hometrack has reported house prices are declining at a slower pace.

“It adds to the glimmers of hope that the UK is nearing a bottom, or will reach the bottom in the first quarter of this year,” said Colin Ellis, an economist at Daiwa Securities SMBC, whose forecasts for the UK economy are among the least optimistic in the City of London.

Whilst there is still a long way to go until approvals and company lending meet anywhere near their earlier peak levels, it is heart warming to see some good news on the property front.

In the period since the Second World War UK residential property has on average doubled every 9 years. Residential property has therefore shown an unequalled track record of producing high and consistent capital growth.

Although there have been temporary dips in property values, property has subsequently recovered and values have gone on to increase.

For example, the Nationwide house price survey shows the average price of a house in Quarter 2 1989 was £116,674. Prices then started to fall and reached a low of £73,079 in Quarter 4 1995. However, prices then started to rise and by Quarter 1 2002 the average price had climbed to £118,100, a figure just in excess of the previous high. The figures available for quarter 4 2008 shows an average value of £156,828.

So even accounting for the recent falls in property value the average house is still worth more than twice the figure from 13 years ago.

As identified in the previous posting, the Consumer Price Index has risen to 3.2% for the 12 months to February 2009. In order to counter inflation it is possible interest rates will be increased. The result of increasing interest rates is that consumers then have less disposable cash and reduce their spending. Hence, inflation then stabalises.

Whether rates may start to rise again depends on whether the February figures are a one off or if they get repeated in subsequent months. If February figures are a sign of things to come then it is very likely that mortgage rates are now at their lowest and we may not see any further falls.

The FT has advised that brokers recommend fixing mortgage rates now rather than hoping for further rate cuts and to opt for longer-term rather than two-year deals. Five-year deals may be slightly more expensive but customers who fix for two years risk coming out of a deal at a time when interest rates are rising again.

Earlier this week we had 2 different sets of inflation figures announced. The Consumer Price Index (CPI) showed prices had risen by 3.2% in the 12 months to the end of February. This is an increase on the January 12 month figure of 3%.

However, the retail price index (RPI) showed that inflation had fallen to zero.

Where is there such a difference between the figures?

The RPI statistics includes housing costs and so has shown a “zero” figure due to the recent falls in interest rates. However, consumer goods are still rising, particularly food and petrol. This has therefore resulted in the increased rate to 3.2%. This is mainly due to the fall in sterling, the effect of which has been passed on to the consumers by way of higher prices.

A number of economists still expect CPI to fall in the coming months, since retailers are likely to have to reduce prices in light of reduced consumer spending.

If you analyse all the millionaires, typically those that haven’t made their money directly from property will have made their wealth by investing in it indirectly. It stands to reason that if the majority of extraordinarily wealthy people have used property profitably, then there’s money to be made in this sector.

There’s nothing wrong with seeing what successful people are doing and modelling this by applying those principles to your own life

A paper due to be published by the FSA later in the year will consider various proposals to control the amount of lending for each borrower. Regulations may be introduced to limit the maximum loan to value and also limit maximum income multiples.

Whilst it would be hard to argue that all lenders have been prudent in their lending up to now, I’m not sure limiting salary multiples is the right way to go. Most lenders now use an income calculator which takes account of the number of adults and dependent children within a household. For example a married person with a non working spouse and 2 children has a significantly different disposable income to a single person on exactly the same salary.

Limiting a mortgage advance to eg 3 times salary will have a very different monthly cost when base rates are 0.5% as opposed to when base rates are 5%.

Lending needs to be prudent but salary multiples are too narrow a criteria to use. Maximum lending needs to be based on affordability.

The Financial Times has reported that Estate agents are calling for home sellers’ packs (HIPs) to be suspended, since they are deemed by many to be an expensive waste of time.

The price tag is typically £300 and this is incurred by the vendor before they know there is a willing purchaser. In the current environment where house prices have been falling for the past year, this cost has therefore brought additional problems to sellers. Estate agents have called for HIPs to be suspended for at least a year in order  to give the housing market a period of time to recover.

The FT has reported that The National Audit Office found that 80 per cent of buyers do not see a HIP before making an offer on a house, and most said the HIP had no effect on their decision.

The Conservative party has said it is committed to abolishing Hips.

Experienced property investors do not tend to follow the sheep, and now will be an ideal time to add to their portfolio. Inexperienced property investors buy when all around them are buying. This pushes the prices up and makes it more difficult to buy at a competitive price.

For an experienced investor, now is the time to look at buying property at a bargain. There is no such thing as a “cheeky offer” in the current environment. Some sellers will have to sell and therefore what seems to be a low offer to you may be acceptable to a motivated seller.

The profit on a property is made at the time you buy, not at the time you sell. Therefore, to ensure you have a good investment buy at a competitive price. Take into account any further falls in property you think are still to come.

Be assured that those who have made money from property will be viewing the current market as a buying opportunity.

What better time than now to nab a bargain?

Residential property has an unequalled track record of producing high and consistent capital growth. In the period since the Second World War the value of UK residential property has on average doubled every 9 years.

Yes, there have been temporary dips in property values but property has subsequently recovered and values have gone on to increase.

For example, the Nationwide house price survey shows the average price of a house in Quarter 2 1989 was £116,674. Prices then started to fall and reached a low of £73,079 in Quarter 4 1995. However, prices then started to rise and by Quarter 1 2002 the average price had climbed to £118,100, a figure just in excess of the previous high. The figures available for quarter 4 2008 shows an average value of £156,828.

So even accounting for the recent falls in property value the average house is still worth more than twice the figure from 13 years ago.