Property market optimism on shaky ground

Forecasts of a slump in the UK property market do not seem to have deterred the majority of the population, with 62% still believing the value of houses will continue to rise.

However, only 44% of property investors hold the same opinion and the Association of Investment Companies (AIC) is warning that large numbers of people could be in for a shock.

An AIC survey has found that 21% of the general public are expecting the housing market to stagnate, fall in value, or even crash and this group is supported by the opinions of 48% of active investors in the sector.

When questioned about the impact of five interest rate rises since August 2006, 30% of buy-to-let property investors and/or those with a second property believed that the rate rises have affected the value or profitability of their investments. Forty-three percent of active investors agree with them.

Amid this group 7% of the general public and 6% of active investors admit they are already losing money, either because capital values have decreased, or because higher mortgage payments are reducing rental incomes.

Both the general public and active investors remain optimistic about commercial property as an investment.

According to the survey, 55% of the general public and 37% of active investors believe that commercial property will continue to rise in value.

Discuss this in the Finance Markets forums

Story link: Property market optimism on shaky ground