But are we really on the verge of the property market crashing down around us?



This article will explore what's currently happening in the financial market and whether now is the wrong time to be buying property in the UK. The goal is that by the end of it you will have a better understanding of what is really going on and how you can still make money in this or any other economic climate.

What's happening in the financial markets around the World?

The speed and the depth of reach of the fall out from the sub prime financial crisis in the States has taken many investors and financial organisations by surprise. Many people knew that the stability of the US economy had far reaching implications for the rest of the World, but just how far, is only just becoming apparent.

There has been a panic amongst lenders in the UK and a reluctance to really admit how hard they have been hit. Banks are no longer lending money to each other as freely as they used to and they are all suspicious of the state of each others finances.

All the big banks and lending organisations appear to have been hit heavily. Some of them are now admitting it openly and asking for help from shareholders while others are determined to try and put a brave face on and try to brave it alone.

The Bank of England is desperate to keep the mortgage market stable and the economy going forward. There is confusion within the Bank of England as to what is the best way to achieve this, but as a result of them knowing something has to be done, they have decided to make 50 billion pounds available to try and help curb the problem.

One thing that that has become abundantly clear is that many banks and financial organisations appear to be run by people with very little business and financial savvy themselves. Criteria that have been set in the past for lending purposes seem to have gone out the window and one has to ask oneself, on what basis where they set in the first place?

On the whole, 100% plus mortgages seem to have been abandoned. Big players in the buy to let mortgage market, such as Mortgage Express, have pulled key products, such as their same day remortgage product and are now insisting investors have had their property for at least 6 months before being allowed to remortgage.

Many property investors are now finding it difficult to get mortgages at rates that make purchasing property financially viable.

Surveyors seem to be running around like headless chickens, not really having a clue how to value properties in the current climate. While they where confident of their valuations in a more stable market, bring in a little instability and their valuations seem to be on shaky ground, with each surveyor looking over his shoulder and being scared to overvalue properties, hence many times undervaluing them.

Off plan property investors are being especially hard hit since surveyors are being particularly caution with anything that it is difficult to get comparables for. Properties that where bought off plan 18 months ago are now coming to completion and are not worth what they where projected to be worth.

The lending World has shown how fragile it actually is and the truth has been laid bare for all to see.

Should we stop buying property in the UK altogether?

Good question. And with the speculation of a UK property market crash, it is a question that many investors are asking. However, astute property investors don't get caught up in speculation. They know that they just need to focus on buying BMV properties based on local affordability that have good rental yield and they will be fine.

They are confident that if they can buy these properties for around 4 times, or less, of what the local average salary is and they can manage to get a reasonable rental yield, then long term they are onto a winner.

However, if you are looking at buying in areas where the property prices are 7-10 times the local affordability then you are potentially on shaky ground.

These are great learning times for the positive thinking UK property investor. For the next few years you probably won't be able to complacently buy a property anywhere in the country and just expect it to rise in value. Now, is the time when you have to learn your craft properly. It's time to go back to school.

For the investors that understand the property and financial markets, and learn how to work with them in any and all conditions, then the next few years promise to be times of learning and expansion, not contraction. Yes, there are difficult times a head, but out of huge challenges can come tremendous growth.