More warning signs about UK property

Visit the Fairmont Dubai's 33rd floor at the moment and the chances are you will find a presentation from a UK property concern in progress in one of the rooms.

For expatriates and nationals are still interested in buying bricks-and-mortar in the UK. Now this column has been warning for sometime that investors should beware of UK property and nothing in recent months has changed that opinion.

Let's start with a classic warning sign. One of the brightest participants in the market sells out entirely.

Step forward Wilson Connolly. This UK housing giant, the first to warn of an impending market collapse in 1989, was bought last week by Taylor Woodrow for more than $750 million. Now if Wilcon, as it was always known, is pulling out of the British housing market, do you know better?

Moreover, London house prices have definitely started to fall and are fetching around 10% less than a year ago. Would anyone in their right mind buy into a market where prices are falling?

Strangely some people still do. Property is a long-term investment, agents will remind us. But as my father used to remark on his less good days, in the long-term we are all dead.

The numbers just do not stack up anymore in the UK. Rental yields have tumbled to a situation where 4-5% is considered good. This will not repay a mortgage even at today's historically low interest rates.

So why buy now? Do you think interest rates are more likely to rise or fall? If the buying for rent equation does not make sense now, then what will it look like if interest rates go up?

Indeed, when interest rates rise from 5.5% to 6.5% or 7% don't forget that this is a much larger percentage rise on your payments. $1,000 today becomes $1,181 or $1,272 tomorrow.

Far more painful to bare will be the capital losses. If you insist on buying that smart one-bed apartment in London Docklands for $550,000, then how will you feel if $200,000 is lopped off the value and you have to wait another 10 years to get it back.

Don't think it can't happen. It happened in 1990-93, the last time the UK property market went bananas.

And what of those ladies and gentlemen of the property fraternity who are waiting for you at the top of the Dubai Fairmont? They are commission agents to a man and woman, and they will be there to assist you sell at whatever price you decide to take, and whatever the loss, for a small fee of course.