Buoyant confidence among UK property investors

Tuesday, 29 July 2008 12:00 AM

The majority of UK property investors remain in good spirits, despite ongoing fears of recession, according to new research.

Despite 65 per cent of potential investors believing the UK is heading for a recession, 37 per cent are still planning to buy investment property in the UK, 25 per cent will be purchasing abroad and eight per cent in both the UK and overseas.

That is according to a poll carried out at the Property Investors Show, which finds confidence is due to the higher rents that are now obtainable.

In present market conditions two thirds of investors believe rental yields are currently a greater consideration than capital growth - compared to only 40 per cent in 2007.

The news comes as rental yields hit a two year high of 6.4 per cent in May, according to figures from buy-to-let investment specialist Paragon.

"Although investors hold a less bullish view of house prices and capital growth than this time last year, it is clear that professional investors are still confident in the longer term returns of bricks and mortar and are intending to expand their portfolios this year," said Nick Clark, managing director of the Property Investor Show.

"They have recognised that the demand for rented accommodation is currently the greatest consideration and is boosting rental yields considerably, particularly in London.

"Landlords can take advantage of the lower prices coupled with rising rents and they are certain to achieve good returns over the long term."

The majority of investors (70 per cent) believe house prices are going to fall this year, with 25 per cent predicting that the drop is going to be at least nine per cent.

However, of those predicting a fall in prices, a third believes that the market will recover by this time next year.

This supports research from the National Housing Federation, which argues prices will increase by 25 per cent over the next five years, in response to a shortage in supply.

Investors are also backing the capital city to offer the best investment opportunities in the UK this year, with 38 per cent looking to London due to its booming rental market and the increasing yields that can be achieved.

Of those buying overseas, 72 per cent have chosen emerging markets, believing that, with lower starting prices, they offer the best potential for capital growth in 2008.

Chris O'Toole

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