David Boyd, Managing Director, PAD4U Estate and Letting Agents Manchester writes:

Last year I predicted that average house prices were likely to be flat over 2011, and for all the news mania in-between, this is pretty much what happened.  Halifax noted a 1% drop (up to November), Nationwide a 1.6% gain (up to November) and Land Registry (up to October) a 3.2% drop.  This is in stark contrast to some economists’ predictions of a 20% slump in house prices.  Compare to a 6% drop in the FTSE 100 over 2011.

The average figures of course belie a whole host of outcomes as I am always careful to point out.  London, was the only region to see gains in England and Wales for instance.  However, this is on a regional basis which is a very coarse average.  Within every town and village and even street,  each will have a different story to tell, which is why I always advocate focusing on local property prices when making an investment decision, whilst maintaining an overall view of house prices.

But what next for 2012?  Again as in 2011, there are many factors at play which could see property prices falling further, and opposing factors which could see prices recovering.  The main factors likely to drag on property prices are increased unemployment (especially as the Government continues its cuts in the civil service), constrained wage increases,  the eurozone crisis (as this could affect available mortgage funds), banking regulation (ditto).  Factors which will assist property prices include low interest rates, more quantitative easing and banks (perhaps given that property prices have been reasonably stable) offering more reasonable and flexible mortgage products.

The eurozone crisis is perhaps “the big one” and it’s impact is difficult to predict.  However, unlike the property crash, the problem is well known and understood by the majority of people and therefore is less likely to be a  “shock to the system”.   In comparison few economists actually predicted the crash in house prices due to lax credit via derivatives and securitisation of mortgage loans.  The Government and the Bank of England’s position has become reasonably transparent (even whilst they still do not admit such), they wish to have a soft landing for the housing market and have been following an inflationary policy to secure such.  The bank (due to our independence from the euro) still has its hands on some fairly significant levers for the economy and the Government are also carrying out policies of easing credit to medium sized companies.

It is for the these reasons that I predict the Government and Bank of England will be mostly successful in ensuring a soft landing and although house prices are likely to weaken next year, economists predictions of 10-15% drops are likely to be proven wrong again.

Transactions levels are likely to remain low as these opposing forces play out the probable stalemate that will ensue, and speculators stay clear (there will also, thankfully, be less property programmes on TV I predict).  However people will still have families and thus require a bigger home,  seniors will still downsize to release equity, people will continue to move around the country to find work, and pretty much life will go on.  Ultimately whilst people can pause in their dealings with property, it can’t be stopped and even the oft cited rental market has proved no great escape as tenants remain subject to rental fluctuations and potential upheaval, therefore, the ladder of life and property are intertwined and it is why it will remain, over the long term, one of the most stable asset classes.

Paul Robertson who has worked for PAD4U for over 20 years has finally had enough (of the weather that is!), and is relocating to Perth, Australia.  Paul has served in many roles during his time at PAD4U, his most recent as Business Development Manager.  Paul’s vast experience and knowledge of the property market will be definitely missed, but we wish him all the success in his future career down under.

Paul will remain a major landlord at PAD4U, having built up a significant portfolio during his time with the company.  The company has always encouraged its team to get involved in the property market as we feel being an experienced landlord is the best way to serve other landlords and understand their needs.  It also ensures that we ourselves demand the best service from PAD4U, as landlords.  Paul will certainly continue to expect the best service within the industry as a portfolio landlord from PAD4U and will continue to advise the company as it grows.

On a personal note Paul will be missed. He has helped me build and modernise PAD4U  since I took over the reins of the company and his dedication and his work ethic I have greatly admired and looked to emulate. Without such PAD4U would certainly not have grown and moved so far forward as it has.  Paul, in all but name is family, and I hope this move brings much happiness.  I’m pleased that property has given Paul the security to be able to make such a bold move and underlines our continued belief that property can bring wealth and security over time.

Luke Elston will have the daunting task of filling Paul’s shoes, as he becomes PAD4U’s Business Development Manager.  Luke, who joined PAD4U 3 years ago, from the Halifax Estate Agency, has shown great drive and determination in helping PAD4U deliver the best service to it’s customers.  Luke has successfully completed both his ARLA Technical Award for Lettings and Property Management, and NAEA award for Sales and is keen to become a landlord when the opportunity presents itself.   Luke has earned respect from landlords, tenants and colleagues alike for his tenacity, reliability, and commitment to his work and is looking forward to introducing himself to existing landlords over the next month and listening to their needs and continuing to improve our service.

Ben Goldacre, in his book ‘Bad Science’, has been exploring the various stories we read and watch in newspapers and on TV regarding scientific subjects and shining a light on how much of it is founded on ‘Bad Science’.  This can occur through lack of research, lazy journalism or just general ‘Bad Science’. We end up with an inaccurate picture of what is scientifically correct and what meaning this has in the context of our day-to-day lives.

Perhaps Ben Goldacre may turn his scrutiny to ‘Bad Economics’,  as there are countless examples of such.  One of my pet peeves is the comparison of investing in the Stock Market vs Investing in Property, as there are usually gaping holes in the analysis.

For example, leverage: the headline usually reads “Return of £100,000 invested in the Stock Market, equals £100,000 invested in Property”, (over some arbitrary time frame).  However, the error is in the question; £100,000 invested in property would equal  £400,000 invested as most investors would use mortgage funds to leverage their money (here I calculate for 75% Loan To Value as an example).  Of course it is not usally possible for a private investor to do the same with the stock market (although options, futures, etc offer leverage they do so over set time frames that require constant rollover, which may involve a margin call depending on how the investment has performed), as no bank will give long term funds for this type of investment.  So the actual comparison should be £100,000 invested in the Stock Market, against £400,000 invested in property (taking into account the interest costs of the bank funds).  The outcome of which, of course, would be very different.

The question above, however, is still incorrect because it assumes average house prices.  However, most property investors don’t buy into a property index, but rather an individual property or properties.  Thus, the comparison should be £100,000 invested in an individual Stock (or Stocks or Index) vs £400,000 invested in one or more properties.  Now this is where things get tricky.  There are significant studies which demonstrate that both private investors and professionals alike are pretty poor at choosing companies that beat the market over time, i.e. stockpicking, so it’s best the investor sticks with an index, but his/her returns will thus be limited.  There are many explanations for this, but one factor is likely to be a lack of understanding of what they are buying.  Whilst I have found no evidence to suggest that investors would be better informed on individual properties, I would hypothesise that they are more likely to buy in the area they live, and therefore have more information regarding schools, transport, the type of potential tenants, and that to a reasonable trained eye most of the information about a property would be more readily available to anyone.

Whilst this article does not provide the answer, perhaps if financial journalists could start by asking the right questions, the information gained can be used by private investors to make sensible financial decisions on real world scenarios.

I don’t need to inform anyone that the market is tough especially in local areas such as Levenshulme/Longsight/Gorton as first time buyers are finding it virtually impossible obtain the finance they need to get on the housing ladder.  But don’t despair house sales are still being made, here are some tips to help you sell your home:

1. Price: Get it right, first time!

Firstly, you need to get an honest valuation on your property by an experienced local Estate Agency (choose three of the top agents in your area – only choose strong local agents and find out how they will market your property).  Secondly, if you find yourself using the phrase “Let’s try it at ‘x’ first and then we will go down to ‘y’”, stop!  Throw some cold water over yourself (no actually do it! It helps), then make the sensible decision to set the price correctly first time.  The best opportunity of selling a property is the first month it’s on the market, don’t waste this, or you will end up reducing the property more than ‘y’ to sell the property after the first month has elapsed.

2.  De-clutter to the extreme!

There is nothing worse than viewing a property that looks like an explosion of a Storage Depot has occurred nearby and left the shrapnel in the property you are viewing.  Pack everything away neatly in the Garage or Cellar or alternatively store some of your belongings with family whilst your property is on the market.  The property should be extremely clean and tidy for all viewings and when the agent is taking photographs.  You need to show your property in the best light.  I know this is hard work, but it pays.  Oh, and put the toilet seat down!

3. Click ‘Like’ on Rightmove or PAD4U website to get your property on Facebook!

OK so this isn’t the most likely route to finding a buyer, but with millions of Facebook users, its worth letting all your friends know your house is on the market as they may just know someone who is interested in buying a house in that area.

I read with some sense of irony the research recently instigated by the Halifax on the social trends and views of First Time Buyers.  The research ‘discovers’, that due to the banks requiring huge deposits, first time buyers can no longer afford to buy a home, but now must join ‘Generation Rent’.  I would have thought that this would be self-evident, and ought to embarrass the banks, but seemingly not.

Interestingly the research demonstrates that the greater majority of people desire to own their own home (77%).  Therefore we haven’t seen a step change in the British psyche as the title ‘Generation Rent’ suggests, only that due in part to the bank’s currently lending criteria, first time buyers, can no longer afford to buy a home and must now rent.  The study suggests several outcomes of this avoidable phenomenon, but the most concerning is the reduction in social mobility i.e. the wealth gap between the have and have nots is likely to widen considerably.

Of course it isn’t just the banks fault, a culture of saving needs to be rekindled in Britain, but due to the banks setting an unrealistic high bar for deposits, more young people are likely to dismiss the opportunity and not bother saving at all for a home.  Landlords are likely to benefit from the the banks grip on mortgages, forcing more people into rented accommodation and for far longer.

The Government have policies such that emergency services cannot strike, so that the country does not grind to halt.  Financially we need more than words to ensure banks lend responsibly (which doesn’t mean they don’t lend at all), otherwise the banks may cause the housing market to grind to halt, and the UK economy as a whole.