UK House Prices Situation at 5/10/07: Slight falls in average price in the majority of areas

UK House Prices Forecast: Continued "soft landing" for most areas of the country

Risk that Panicking Landlords Could Depress Market

The last few years has seen a huge increase in the number of small-scale buy-to-let landlords - those with 1-3 properties which they rent out, usually as a secondary source of income.

Many of these landlords bought their rental properties when prices were already near the top of the market and are currently finding that rental rates are not keeping up with increasing mortgage payments.

The Royal Institution of Chartered Surveyors (RICS) has recently published data suggesting that many of these landlords are selling their properties - with landlord sales up a surprising 44% since the beginning of 2007. This puts them at the highest level for two years.

The problem is that many landlords took out buy-to-let mortgages with high LTV (loan-to-value) ratios - often 85% or 90% of the property's price. This leaves them likely to be running at a loss at present, according to Kelvin Davidson of Capital Economics.

Davidson has calculated that landlords with LTVs of more than 50% are likely to be losing money at present, given average rental yields and mortgage interest rates.

UK Properties Still More Affordable Than Some European Countries

Despite the high salary multiples most people require to buy a property in the UK, the situation is far worse in many European countries - especially former eastern bloc countries recently admitted to the EU.

Countries such as Poland and Bulgaria have average house prices of 29 years' salary and 15.6 years' salary respectively - compared to a mere 9 years' salary in the UK.

Still, there are some countries better off than us - Scandinavian countries require less than 6 years' average salary to match their average house prices.

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