Manchester has some qualities that help make it a great place to invest and live.

Regeneration and funding for improvements to the public transport system have improved the quality of life for residents, and made it easier to get to for visitors.

The City is home to a number of leading Educational Institutions, including The University Of Salford, The University Of Manchester, Manchester Business School, Manchester Metropolitan University and City College Manchester.

A high population of students helps the rental market, and graduates buying their first home in the area keeps no-chain home sales up.

And According to The Manchester Evening News, Manchester’s commercial property market is still looking good. Which, along with a direct effect on property sales, also means businesses in the area are thriving – meaning more jobs for people living in Manchester.

In 2007 Manchester accounted for the most significant level of UK investment, with £1.2bn of investment activity in the city.

An exception to this rosy picture is Alpha Street in Higher Openshaw, where houses have an average value of £29,900, and have seen little to no increase in the past 20 years. However this street is due to be flattened and regenerated in about 2 years time.

If you’re thinking of buying property in Manchester, it’s worth looking into what the Council have planned for employment, regeneration areas, transport, housing etc.

You can see the Development Plan for the Manchester District here.

Darren Shaughnessy, Director Kings Residential, Estate Agents in Manchester  and Letting Agents in Manchester writes:

I have heard many people say recently that the buy to let property (BTL) market is dead. I don’t believe that this is true. In a nervous market where lenders are less willing to offer credit the industry needs to be realistic. Realistic prices need to be demanded by the developers, realistic rents need to be expected, and the investors need to be realistic and consider a BTL investment as a long term investment. There are few quick and easy gains to be had and the adverts promising to make you a property millionaire overnight are a little exaggerated!

Property is and always will be a good long-term investment. In the long-term property prices have always increased. In difficult times you just need to hang in there and wait for prices to rise again. Those that rode out the crash in the 1980′s saw huge profits. This is a relatively minor lull by comparison.

Landlords who have done their research and are subsidising their mortgages by topping up their rental income and have budgetted for this subsidy are likely to see good gains in the long run. Those that have not budgetted and cannot cope with the shortfall may become another reposession statistic.

The buy to let market is not dead, but a few in the indutry are sleeping!

Darren Shaughnessy, Director Kings Residential, Estate Agents in Manchester  and Letting Agents in Manchester writes:

The Council of Mortgage Lenders (CML) Announced that repossessions of mortgaged properties increased to 27,100 in 2007 up from 22,400 in 2006. Whilst there were more mortgaged properties in 2007 than in 2006 the repossession rate rose from 19 per 10,000 mortgaged properties in 2006 to 23 per 10,000 mortgaged properties in 2007.

The CML predicts that the rate will increase further in 2008.

My view is that they are probably right. Quite a few buy-to-let landlords have over stretched themselves and I think that 2008 is the year that repossessions of buy to let properties will peak. Some landlords have been funding their losses by re-mortgaging their properties. With the well publicised credit crunch biting hard re-mortgages of recently purchased buy to let properties will be harder to come by.

The days of using the mortgage lenders money to pay off the interest are over! Those property investors who have carefully planned their investments and take a long-term view of the market should do really well in the long-run.

Darren Shaughnessy, Director Kings Residential, Estate Agents in Manchester  and Letting Agents in Manchester writes:

We all know that property prices are high. They are high in that they have become unaffordable to the lower income earners which in a city like Manchester is most of the population. I have heard media speculation that prices are over inflated by as much as 40%. The danger is assuming that this applies uniformly across all towns, villages and suburbs.

There are new developments in some areas that are too expensive in my view. Where developers are charging £150,000 for a 3 bed house in an area where the average income is £10,000 per annum and the local kids are smashing up cars it is clear to me that these prices are too high.

The problem in my view is that the new build property boom of late has been fuelled largely by property investors. This has artificially kept the prices high in some areas and kept the first time buyer out of the market. First time buyers are essential to the long-term sustainability of the housing market. They are the plankton of the housing market.

The answer it would seem is to get first time buyers back in the market place. This can only happen if there is an increase in affordable housing and this means having landlord free zones. If the local authorities had the will power they could insist that for every property that is sold to a buy to let investor they have to build a property in a zone that has been designated landlord free. If it were illegal to rent out properties in certain small pockets the prices would have to be set at a level that is affordable to the local population and some housing would be reserved for the first time buyer.

Darren Shaughnessy, Director Kings Residential, Estate Agents in Manchester  and Letting Agents in Manchester writes:

The housing market received a welcome but modest boost today as the Bank of England reduced interest rates against the backdrop of depressed levels of property sales.

The Estate Agency business has seen a significant reduction in the number of property sales in the last few months as the media talks down property prices but we have not seen significant reductions in prices. In the city centres, where buy-to-let investors have bought 90% of all properties and where most properties have purchased in the last couple of years, there is no room for discounting prices as there has been no equity growth over this period.  There have been repossessions of properties from buy-to-let investors who have over-extended themselves and in some areas there have been enough repossessions to affect the market values of properties.   

 In the suburbs where property owners are funding their mortgages based on affordability against stable incomes rather than optimistic rental returns there is no sign of an increase in forced sales. There may be the occasional property that is reduced because the vendors really want to sell quickly and to be assured of a fast sale drop the price. However, there are not enough of these to dramatically affect the prices of property in the suburbs. In most cases the vendors want the full market price and are not prepared to drop the prices. In a market with nervous buyers fearing uncertainty, this leads to stagnation of the market and that is what we are seeing now.

As an estate agent I would love to see a 40% drop in prices as this would stimulate the first time buyer market and kick start property sales which would mean increased property sale commissions. The reality is that without some external factor(s) to increase the number of forced property sales, their will be no widespread fall in prices.

The reduction in interest rates is likely to increase confidence slightly so may have a positive effect on the market. It will certainly help those buy to let landlords struggling to meet the gap between the rental yields and the mortgage payments but will it stimulate property sales? I think that in the suburbs it will a little. In high density buy to let zones I don’t believe it will make any difference.

The thing that will stimulate property sales will be affordable lower-end property prices and this does not appear to be close to the horizon.

Darren Shaughnessy, Director Kings Residential, Estate Agents in Manchester  and Letting Agents in Manchester writes:

I have felt for some time that discounted rate mortgages are a very bad idea. They are great for the young career couple with a clear and definite salary incease path. It helps these people onto the house ladder earlier than they might otherwise have been able to. Where a clear expectation of substantially higher income coincides with the increase in the mortgage rate they continue to be able to afford the payments albeit now probably higher than market rate but because (in this scenario) this has been a carefully considered decision, it is probably not a decision that will be regretted.

 However, for most people who’s incomes remain fairly constant increasing just modestly each year, a discounted rate mortgage can be a long-term albatross. Luckily in the UK most mortgage advisors would look at projected income levels and advise against this if it was not appropriate but in the US this has not been the case and is the root of the current sub-prime lending crisis. Mortgage brokers have targetted the poorest and most vulnerable with the promise of low payments but not really emphasised that these low payments will turn into large (unaffordable) payments in a couple of years time. To make things even worse, by allowing these products onto the mass market they have artificially fuelled the prices of houses so that when the banks do foreclose on the mortgages in huge numbers they are left with a property that is worth far less than they lent in the first place.

For some, discounted mortgages can be great, for other they are bad. But the unscupulous brokers – they are just plain evil. The lenders however have just been plain  stupid. They have not asked questions and will be carrying huge dents in the profits as a result.

Darren Shaughnessy, Director Kings Residential, Estate Agents in Manchester  and Letting Agents in Manchester writes:

 The BBC news website is running a very interesting article on the crisis in the USA.

 http://news.bbc.co.uk/1/hi/business/7070935.stm

If you take a look at this I think most people will see that something pretty extraordinary has been happening in the US. Lenders have been lending money to people who were destined to default. They simply had no hope of being able to afford these houses in the long-term once gtheir initial short-term fixed rate expired and they returned to normal rates. The extent of the problem has been so great that in some neighbourhoods 1 in 5 houses have been repossessed.

Mortgage brokers and Independant Financial Advisors in the UK have been criticised for mis-selling in the past but the market is very tightly regulated now. The US scenario just is not going to occur in the UK. However, this does not mean that it will not impact the UK. Much of the sub-prime lenders have packaged up their poor quality sub-prime debt along with some better debts and sold them on, thus reducing their exposure but increasing the exposure to the purchasers of this debt. The purchasers are all large financial institutions and are based all over the world including the UK.

We keep hearing the phrase “Credit Crunch”. This refers to the fact that many financial institutions are becoming reluctant to expose themselves to bad debt and so are becoming more careful about who they lend to. This means less credit is available and inevitably that the price of this credit will increase.

What we should not presume is that because huge numbers of repossessions are occuring in the USA that the same will happen here.

Darren Shaughnessy, Director Kings Residential, Estate Agents in Manchester  and Letting Agents in Manchester writes:

Price Waterhouse Coopers, the big five Accountancy giant said today that the housing market was only marginally over-valued when compared to average earnings. In their view ”a general cooling of the market was still more likely than an outright fall in prices”. This means that fewer buyers might be looking for property but there is unlikely to be a major downward shift in prices.

I reckon PWC they have been reading my blog entry from a couple of weeks ago when I predicted the same outcome.

 http://blog.kings-residential.co.uk/2007/10/21/uk-house-market-overpriced-says-imf/

Darren Shaughnessy, Director Kings Residential, Estate Agents in Manchester  and Letting Agents in Manchester writes:

The National Housing and Planning Advice Unit (NHPAU) announced that an additional 270,000 homes over and above the governments existing targets are required to meet demand.

Professor Stephen Nickell, one of the authors of the NHPAU report pointed out the following amazing fact:

If you’d like to put this sort of thing into perspective we built more than that number back in the 1930s in Britain when we had a considerably smaller population,”.

The advisory body has said that “the current aim of building three million new homes will not resolve problems for many first-time buyers in the face of what are predicted to be continually rising prices”. They have obviously reading my blog entries from last week.

Come on guys, keep up!

Getting a foot on the property ladder

Darren Shaughnessy, Director Kings Residential, Estate Agents in Manchester  and Letting Agents in Manchester writes:

 With house prices reaching all time highs and at multiples that are beyond the first time buyer with no equity something needs to be done to help the virgin home-owner onto the ladder.

Reductions in interest rates do not work because this just increases spending power across the board and drives up prices. Building and regeneration programs don’t seem to work because they are in the wrong locations for the new home owner and are snapped up by the long-distance property investors and filled with tenants (or wannabe first time buyers) who cannot afford to buy the same properties in the first place. Clearly we require more housing stock but with buy to let investors fuelling the house price boom the very people who underpin the housing market, the first time buyers are priced out. 

The  solution may lay in social exclusion from certain developments. What we need are a little more guts and forward thinking from the town planners and schemes like the one announced by Ikea recently. They are to offer houses at about 20% under the market value for comparable houses in the area. Only households with an income between £15,000 and £30,000 will be eligible to purchase the houses and the purchasers will have to complete an application form and pass pre-defined approval criteria. The buy to let investor is excluded from eligibility as are people who already own their own home (unless it is being sold due to a relationship breakdown).

The houses known as BoKloks are expected to sell for between £100,000 and £150,000 with flats from £70,000. The first of these developments is being located in Gateshead with Glasgow following shortly afterwards. So what we are looking for are socially responsible property developers to follow the lead and implement the same strategy across the country.

 The answer probably lies in the hands of the town planners. Instead of trying to woo any and all property developers to build on every plot of land lying bare or derelict and being grateful to them for it, perhaps they should be thinking about the wider social implications of what is happening. I am not aware of sale prices being a tool that the planners use to achieve their wider objectives but maybe it should be. If the planners looked at a development and said, “OK, we like it but the prices are going to exclude the local population so it does not meet our planning objectives – reduce the prices or planning application denied”, maybe the first-time buyer would get a chance to get a foot on the ladder and the entire market would be more robust.