By Martin Grainger, Head of Portfolio Development

I've been reading assorted claims from estate agents about the UK market bottoming out for a some time now, and I've been sceptical. Their job is to talk the market up, after all.

But I have to say that, even if we put the more optimistic comments aside, I am seeing a great deal of new excitement among the property investors I deal with. More are buying and buying faster and with a greater confidence in the UK than we've seen for a very long time indeed. They also generally know pretty much what they want and where.

Talk about a market bottom in the UK definitely has something to do with this new-found confidence and readiness to commit. But, in fact, it's the quality of the property buys we are now finding we can source that is the real reason. Some are simply no-brainer buys. Well, I would say that, wouldn't I? But seriously, though, the numbers do the talking.

Investment focus

I think this is an important point, because I would strongly advise against anyone trying to call the bottom of the UK market. Focus instead on the numbers right now and see if they make good investment sense. We at PS have stressed this repeatedly and it still applies - probably more so than ever. We, too, think 2009 will probably see the market bottom out and then jog along flat for a fair while - but we are definitely not sourcing with that in mind. In the long term, whether the bottom of the market is this year or early next won't matter a great deal, if at all.

Prices have fallen and, in some locations, by a considerable amount. That isn't the point, though - what matters is the yield. Yield is quite simply key in an uncertain market because it enables the investor to hold long-term. And for a chance of strong capital growth, long-term is the order of the day in the UK.

And I think investors do get this. There is no urgency about their interest, the kind you'd get in a really hot market, but people are taking units much more quickly. These are educated and sensible investors.

Most, I'm happy to say, are not tempted by the deals that are springing up and have been for some time - the 40% to 50% 'below market value' ones. Again, we have repeatedly stressed that market value is a meaningless phrase in a market that is still highly dysfunctional. Discounts, I would say, in general, are best ignored.

7% yields

So, when I talk about strong yields, what do I have in mind? Well, we're looking for yields of 7%-plus, which most investors find highly appealing.

Again, though, we are not just considering high yield. Some high-yielding properties look very impressive but are in an area our intrinsic value analysis indicates we should steer clear of. What I mean by this is that key indicators for long-term, even modest, growth are poor; these are generally areas that will continue to struggle economically even when the recession eases.

Towns and cities - or areas within cities - are our focus, but only those with the long-term potential for growth, regardless of the price of the deal.

Lots of people ask about finance and I know that this is a big talking point in the current climate. A few things to note here.

First, many people are buying for cash right now - those that have it, of course. But we haven't had anyone that did need a mortgage who was unable to go-ahead with a deal because they couldn't raise finance, including the self-employed.

Now, it has to be said that, while we are pretty busy, the volume of investors PS deals with - and the fact that our deals are very carefully selected, often bespoke - may mean that our experience doesn't accurately reflect the market as a whole. So, the fact that our investors don't appear to have much of a problem obtaining finance can't really be used to measure the state of the BTL market generally. I'd be the first to admit that. Having said that, for our deals, generally we're seeing finance at 70% or 75% LTV available.

One word of warning here- we have seen the return - in a limited way - of the no-money down option. We strongly urge people to be cautious here.

If you haven't come across it, it works like this: you buy a property at a discounted value of, say, 25%. The mortgage company values the property up by 25% and gives you a mortgage of 75% LTV - effectively covering 100% of the purchase price.

Now, this can definitely work to an investor's advantage, but I'd advise anyone to get involved only with sound finance packages and genuinely discounted deals.

Property types

OK, so finally, what type of property are investors going for?

By far and away the most popular properties are those in excellent locations, of course, but also those that are already tenanted. These have provable yields and are the cleanest and simplest to finance and buy. Hugely discounted properties, especially new builds, are far more difficult to deal with.

Anyway, I hope that was all of some interest to property investors. Personally, I find the UK market fascinating just now and especially as we are starting to come up with deals that unquestionably are very, very good ones.

I'll be back shortly with more results and findings from our investment property sourcing activities.

Meanwhile, if there's anything you'd like to discuss about what I've said here - or in general regarding the UK market - I'm happy to hear from you.

For more information on PS Property Sourcing and to discuss your specific requirements contact Martin Grainger now: +44 (0)1270 539576 or Email Martin