How Long Will The Credit Crunch Last?
This is a question many people are asking themselves from home owners to the seasoned property professional.
It is a difficult question to answer, but I will try and shed some light on the subject.
The downturn in the property market has been mostly caused by the credit crunch and the lack of available credit in the credit markets.
Banks are wary of lending to each other and hence the costs for banks to borrow money from other lenders have dramatically increased and hence these increased costs have been passed down to consumers.
Banks have lost billions of pounds through the credit crunch and with these losses come great uncertainty and unease, not just through the financial and banking sector, but also amongst buyers.
The root cause of falling property prices is that lenders no longer lend to anyone now, the number of products has decreased and the costs of borrowing have dramatically increased.
This means that fewer buyers can get mortgages which has the knock on effect that there are less buyers in the market, which mean property sales and demand is down and hence property prices fall.
The property market will only start to recover when the credit crunch eases and confidence returns to the financial and property markets.
How long will this take? One month, six months? The truth is no one really knows, some analysts are predicting the worst is over whilst some say it will get a lot worse.
My feeling is that it will take some time for the financial markets to recover and I feel that the credit crunch will probably ease by sometime in 2009.
However, I feel that as we move through 2008, the financial markets will slowly improve and with it confidence will gradually return.
I feel that on average, property prices will fall by about 5% to 10% on average in 2008, with the biggest falls occurring in the less affluent areas of the north.
Now is a very good time to buy because you can pick up some great property bargains at well below market value if you focus on the right deals.
So if you follow the strategy that you will only buy a property if you can buy it at a minimum of 20% below market value, which produces at least £100 positive cash flow per month with a plan to keep that property for at least 5 years, you are only going to be a winner in the current situation.
Even if the market values of your properties fall by 10% on average in the next 18 months, you know that you still have 10% equity within your property portfolio with positive cashflow being produced month on month with the above strategy.
And you know that at some point in the future, property prices will rise once again and market conditions will return to normal of 5% to 10% growth per year.
I hope that you can see that no matter how bad the property market is, if you look carefully enough and have the right plan, you can still make significant profits.
Until next time.
Invest Wisely Grant James
It is a difficult question to answer, but I will try and shed some light on the subject.
The downturn in the property market has been mostly caused by the credit crunch and the lack of available credit in the credit markets.
Banks are wary of lending to each other and hence the costs for banks to borrow money from other lenders have dramatically increased and hence these increased costs have been passed down to consumers.
Banks have lost billions of pounds through the credit crunch and with these losses come great uncertainty and unease, not just through the financial and banking sector, but also amongst buyers.
The root cause of falling property prices is that lenders no longer lend to anyone now, the number of products has decreased and the costs of borrowing have dramatically increased.
This means that fewer buyers can get mortgages which has the knock on effect that there are less buyers in the market, which mean property sales and demand is down and hence property prices fall.
The property market will only start to recover when the credit crunch eases and confidence returns to the financial and property markets.
How long will this take? One month, six months? The truth is no one really knows, some analysts are predicting the worst is over whilst some say it will get a lot worse.
My feeling is that it will take some time for the financial markets to recover and I feel that the credit crunch will probably ease by sometime in 2009.
However, I feel that as we move through 2008, the financial markets will slowly improve and with it confidence will gradually return.
I feel that on average, property prices will fall by about 5% to 10% on average in 2008, with the biggest falls occurring in the less affluent areas of the north.
Now is a very good time to buy because you can pick up some great property bargains at well below market value if you focus on the right deals.
So if you follow the strategy that you will only buy a property if you can buy it at a minimum of 20% below market value, which produces at least £100 positive cash flow per month with a plan to keep that property for at least 5 years, you are only going to be a winner in the current situation.
Even if the market values of your properties fall by 10% on average in the next 18 months, you know that you still have 10% equity within your property portfolio with positive cashflow being produced month on month with the above strategy.
And you know that at some point in the future, property prices will rise once again and market conditions will return to normal of 5% to 10% growth per year.
I hope that you can see that no matter how bad the property market is, if you look carefully enough and have the right plan, you can still make significant profits.
Until next time.
Invest Wisely Grant James