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The Money Centre offers its predictions for 2006

Amanda Jarvis

January 19, 2006

Property was a hot topic for discussion in the world of personal finance last year. Mark Alexander reviews what was an exciting year for property and predicts what to expect from the market in 2006. Mark is the managing director of the Norwich based buy-to-let specialist The Money Centre, which experienced its most successful year ever in 2005.

Mark comments: “The property market gave plenty of material for discussion in 2005. It was an eventful year and one with a few surprises too. In the summer, the market was spurred on with a quarter point cut in interest rates to 4.5 per cent, which helped to restore confidence in the market. Some had predicted the Bank of England would actually increase interest rates, which was received as welcome news for buy-to-let investors looking to expand their portfolio or remortgage their existing properties. A further base rate cut is predicted for February 2006, which could see another surge of investors returning to the market. While the market has been fair in 2005, it has been a tough year for first time buyers in the residential property market. Even if there is another cut in February as predicted, it won’t be enough to help their needs and prices will still be way above their affordability. Whilst first-time buyers have been priced out of the market, it has meant that landlords have let their properties successfully, when providing young people with good quality rental accommodation.”

“While 2005 mainly treated buy-to-let investors well, no one could have predicted the scrapping of the A-day pension reforms Gordon Brown took a surprising U-turn in his pre-budget report, preventing investors from including residential property and luxury investments such as vintage cars within their pension. It was a surprise to both the landlords who had been planning their future finances and the financial services industry who had made plans to provide residential investment pensions, in what was predicted to become a huge new opportunity for buy-to-let investment. So what would we suggest now? The evidence still shows that the housing market is outperforming other investment options over the longer term, therefore it makes sense to invest in buy-to-let property even outside of your pension.”

“2005 was a period of realignment for the housing market. Pricing was becoming unrealistic and people were anxious that the market would crash, so became reluctant to buy. However, the market remained steady and as the year went by confidence returned which lead to prices rising for the first time in 18 months in December 2005. As a result, we predict that the first half of 2006 will be busy, especially when last year’s pent up activity is released. 2006 should see house prices stabilise and prices continue to rise. We predict growth should be around 5 per cent within the first half of this year, then stabilise for the latter half giving an overall growth of 2-3 per cent for 2006. It is also possible that the Bank of England Monetary Committee will lower the base interest rate by as much as 0.75 per cent which should help mortgage approvals to rise from a five year low of 1.13m in 2005 to 1.34m in 2006. Investors, in particular, we believe should be concentrating efforts on releasing equity and investing in property to build a buy-to-let portfolio – a portfolio, which if managed properly, is likely to generate very good long term profit.

“Most inner-city properties are priced out of reach for first time buyers yet highly-desirable to live in, so we suggest buy-to-let investors continue to invest in the city and make the most of a good rental market, where demand for homes is still outstripping supply.”

“The employment boom experienced last year, expected to continue into 2006, indicates that these positive predictions can be met. So here’s to a successful and prosperous 2006 for one and all!”

If you would like to make the most of the buy-to-let market in 2006, contact The Money Centre for a no obligation one-to-one consultation, or attend one of their free buy-to-let property seminars, which are currently taking place at various locations nationwide. Call 01603 428500 for further information or log onto www.themoneycentre.co.uk


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