UK property trends, market conditions, end of the property boom, mortgage difficulties, why now is not the time to sell

An end to the property boom was obvious long before it happened which makes the way the banks handled the problem leading up to the end of 2007 even more difficult to understand. The warning signs were everywhere yet most banks continued to work in the sub-prime mortgage markets until the mortgage crisis became public.

Start of article about the UK property market.

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We were warning home owners that the housing market was heading for trouble as early as June 2005. This was the time when buy to let landlords and property investors should have been positioning themselves to start off loading properties and taking their profits to be ready to move back into the market when the time was right.

Some people would say that we jumped the gun but selling property is not like selling stocks and shares; it isn't an electronic purchase and it isn't instantaneous. Of course this advice only applied to investors who were working off slim margins and borrowing at high value to mortgage ratios. Investors who have a good business model can sit and wait, because property values are simply paper gains or losses. You don't make or lose money until you sell.

It is the investors who are seeing their paper gains being eroded and rental incomes falling and not covering their mortgage repayments who are vulnerable to their friendly bank suddenly deciding they don't like the exposure they have on their books.

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The problems property investors face in a falling property market are many fold. On paper, they once had a portfolio that was continually growing in value and many will have used the equity in their other properties to finance buying more properties. All the time they were able to find tenants prepared to pay a rent that covered the mortgage repayments, they and the banks were happy to work off the paper profits.

This was not just short sighted, it was also a crass business model. Nothing continues to increase in value without having a financial adjustment at some point and the margins most property investors were working off were too tight to be comfortable. Rental income may appear high but when the mortgage repayments are almost as high and within a percentage point or two, it only needs a small increase in the mortgage rates, a few bad tenants and a couple of properties standing empty and the debts can accumulate very fast.

A few months of running at a loss can result in debts that are impossible to recover from when the market is running against you. Furthermore, because the overheads are fixed, there is little you can do as much of what is happening is out of your control.

So where does this leave investors, property owners and estate agents if UK property trends continue to spiral down?

An extra bedroom in the roof or an extension can add 11-15% to the value of your property saving you a fortune on moving. By improving your home, you can save on:

• No conveyancing fees
• No removal costs
• No home information pack
• No stamp duty
• No estate agents fees
• Valuation and survey costs
• Furnishing and redecoration costs
• Far higher mortgage repayments

Read on about UK property trends.