Assetz® News - Buy-to-let booster predicted for 2009

Buy-to-let booster predicted for 2009

19th December 2008 |

When it comes to predictions, it is easy to point out when somebody has got one wrong. This year has seen a lot of assumptions and ideas blown away by the tornado of unexpectedly bad financial and economic news as the full severity of the credit crunch became apparent.

Of course, there are some exceptions, such as David Blanchflower on the Bank of England's monetary policy committee, who spent much of the year arguing that inflation was a temporary problem and that the real concern was a forthcoming economic slump, a view that saw him consistently isolated on the monetary policy committee (MPC). In retrospect, it is easy to see him now as the only one who got it right.

However, it may be argued that 2008 has been a year of extraordinary transition. Previous years could have seen regular predictions of economic growth, rising property prices and more investment in the buy-to-let market without the facts doing anything to contradict this. Similarly, anyone predicting the kind of negative consequences associated with a recession - such as rising repossessions and falling prices – may do so confidently.

Giving its own predictions of the year ahead, property portal propertyfinder.com has indeed suggested that there will be further price falls, predicting a 12 per cent drop overall. It did suggest that the market could bottom out and be recovering in some places by the end of the year – though less so in London and the south-east where the financial crisis has hit hardest.

For investors, however, the prognosis may be a good one. The portal suggested that as prices dip it will be buy-to-let investors, alongside first-time buyers, who snap up plenty of bargains, with this activity helping to raise the overall number of transactions.

All this relates to another key factor in any market recovery – the increasing supply of mortgage lending. Director of the site Nicholas Leeming said: "Fiscal measures will boost confidence and help to make mortgage finance accessible again and this will cause transaction numbers to slowly rise." The particular factors the site has pointed to are the reduction in fees payable to the government by banks for guaranteed lending and the interest rate cut, with a prediction of a one per cent rate by the spring.

There may be very good reasons for regarding these predictions as sound. The tip for the base rate to reach one per cent echoes the forecast for next month's MPC meeting from the Ernst & Young Item Club this week, while Bank of England deputy governor Charles Bean told the Financial Times that it is "possible" the rate will fall to zero.

A boost in first-time buyer numbers may also be on the cards, as the National Association of Estate Agents has reported that its November survey showed the third successive increase in the share of the buyer market held by such purchasers.

Of course, nobody can know for sure how the year ahead will pan out, but if prices do indeed hit the bottom in 2009, there may be much less doubt that those who invest in buy-to-let then are in a position to profit when better times come in the years ahead.