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The answer to the question on the previous page depends on where, what and why you want to invest in property and if you are in a strong financial position to buy. In other words, you are not exposing yourself too greatly to increasing interest rates, not buying for a quick resale profit and the rental market is still strong where you wish to invest. The best property investments are usually made in a buyers market and that is beginning to kick in now. However, if we are about to get a buyers market, you should not be looking for a quick resale return.

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Let's analyse the situation and factor in what is likely to happen over the next 24 months or so. You have to bear in mind that anything and everything can change when investing in property and there are a lot of amateur property investors out there who may have left it too late and are about to take a hit.

UK sub prime lenders, like the US have been falling over themselves to lend money to property investors for the UK buy to let market. Many of these investors have continued to buy up properties blindly believing that property prices were going to increase year on year. Many of them have bought what they believed to be discounted properties on developments in city centres like Manchester and Leeds. Some have over exposed themselves financially, believing that they would find it easy to let these properties to cover the mortgage repayments. There is a trickle that is likely to become a strong flow of these properties being dumped back onto the market because the rental demand was never there.

We have seen what happened to Northern Rock; Barclays Bank have just written off over a billion dollars in bad debts in the American sub prime lending market and this is reported to be just the tip of the iceberg. HSBC, Nat West and all the other major banks are caught up in this fiasco. In order to recover their losses, the banks will undoubtedly raise their interest rates - they do not have to wait for the Bank of England to raise its base rate; they can do more or less what they like.

This doesn't just affect property investors who have already borrowed money. Higher interest rates and tighter mortgage qualification is going to make it far harder for anyone to borrow money to buy a property. Existing buy to let investors are going to find it harder to find tenants who can afford their rents; so they are either going to have to reduce their rents or sell up and this is going to create a mountain of properties that need to be sold off quickly.


Many property investors who bought through investment clubs are now finding that their supposedly discounted properties are worth 25%-40% less than they originally paid for them and having failed to find a tenant are now selling up. To compound the problem, many fixed term interest mortgages are coming to an end and the property owners are discovering that they have to meet far higher repayments and are unable to find a lender prepared to take them on. As a result, repossessions are on the increase and more properties will be dumped back onto the market over the next two years.

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I have no doubts, despite estate agents trying to talk the markets up, that UK property prices are likely to fall and fall quickly. The temptation would be to wait; however, having reached the bottom, they are just as likely to bounce back at speed and as it is virtually impossible to predict when the lowest point will be, timing will be down to luck more than wisdom. Having said this, I would offer the following advice because these types of decisions have to be made on an individual basis when buying investment property.

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