Europe is an opportunity, not a threat

The last Bank of England Monetary Policy Committee decision of the year to keep rates at 4.5% didn\'t take many by surprise. There had already been enough shockwaves sent through the mortgage lending and advising community with chancellor Gordon Brown\'s last minute U-turn on self-invested personal pensions.

Some good could come out of this. First-time buyers may be able to snap up reasonably priced properties put on the market by buy-to-let landlords, who had planned to put these investments into their Sipps to gain tax benefits.

But it was the government’s 11th hour timing that left a lot to be desired, putting advisers in the awkward position of having to go back on advice given to clients who had decided buy-to-let was the ideal way to save for a pension.

But the buy-to-let market is still on the up, with the Royal Institution of Chartered Surveyors reporting that in the three months to October, tenant demand was the strongest since the start of 2004. As a result, it says, rents are rising. While this might be the national picture, it is unclear whether it is the case in London.

My own experience is that the capital is experiencing a buy-to-let slowdown. I’ve been trying to let a one-bedroom flat in north London for more than two months without joy. One of London’s biggest estate agency chains, Foxtons, tells me there’s a lack of demand. And Loot, which advertises property-to-let in the capital, has cut its advertising rates because of the lack of tenant responses. I also heard of someone having to let a one-bed flat with a roof garden in Clapham for just 500 a month to get tenants.

Turning back to the MPC, most of the industry is hoping for a rate cut early in 2006 to sustain the optimism that has emerged around the housing market in the last few months.

The Council of Mortgage Lenders says the number of loans approved for house purchase in the three months to October was 12% higher than in the previous three months. It predicts that strong market trends will remain in place for the foreseeable future.

Next year, the industry will be forced to look beyond British shores as Europe will have an increasingly important role to play. The European Commission is looking at measures to make it easier to do business across member states and to harmonise consumer protection. There are many differences the EC must tackle to enable lenders to deal across borders. These include huge variations in access to borrowers’ credit data; land registration systems; and mechanisms to take possession of property.

Rather than taking an ostrich approach and seeing the opening up of European frontiers as a threat, UK lenders and advisers should be trying to get in there early to make the most of what could be a lucrative business opportunity.