Hi [name]

Hope you are well, and had a good bank holiday!

Predictions are never easy, but it is always good to see independent groups giving their thoughts on house prices.

I would consider the Centre for Economics and Business Research (cebr) a pretty reputable group and they have this week said a combination of low mortgage rates and a shortage of new homes being built would push up house prices by 5.3% during the year to an average of £172,500.

It then expects lower price growth of 3.4% during 2011, followed by a strong rise of 9% in 2012.

With the power of leverage you can see a very strong return on your initial investment ie if put 25% down and the rent covers your interest on the 75% bank borrowing, then a 5% increase in property value equates to 20% return on your initial investment.

I personally agree with these predictions for the next 2 years, around 4-5% growth per annum in the UK.

The group is also predicting that average mortgage rates will fall from around 4% now to 3% by the beginning of 2011.

It said the drop would be driven by the money markets pricing in the impact of cuts to the Government's budget deficit.

The research also expects the Bank of England base rate to remain at 0.5% for longer than is currently predicted.

At the moment the economic consensus is for the base rate to rise by the end of 2011, but Cebr thinks it will then still be at 0.5%.

However, the group said its analysis did suggest that the base rate could be temporarily higher if there was a hung parliament, and in the worst case it could rise to 3.5%. But it added that the impact of this was likely to be temporary and within 18 months rates would be back where they would have been if a single party had won the election.

So good news for those on tracker mortgages! Many people have been predicting base rate rises for the last 12 months, but I fully expect rates to stay low - and certainly below 3-3.5% for a very long time.

Why we source where we do!

We often get asked why we mainly source deals in the Midlands upwards in the country, as opposed to the South of the UK.

Our principles wherever we buy ourselves or recommend, is to go for areas of the country where prices fit the local salaries ie we rarely go for the south of the country where average house prices can be as much as £200,000 and salaries just £25,000 ie 8 times the affordability - whereas further north we can get prices at £80,000 with salaries of around £21,000 ie under 4 times average salaries.

This basic understanding of looking for local affordability has always stood us in good stead, and ensures we always have a good supply of tenants that can afford the rents, and the markets stay strong as they are affordable to investors, first time buyers and owner occupiers alike.

Compare this to say Cheltenham where average prices are £200,000 and salaries around £24,000 - no first time buyers can afford to buy based on their salaries and buy to let investors are not attracted as yields are low due to the fact that salaries are not much different to the rest of the UK, and yet house prices are far more....! Not an attractive investment for us....!

Now most of our investors are from outside the areas we invest in - so we therefore assist where required with all the management going forward of the properties if required ie tenant find, managing any work etc.

The properties we source are not the most glamorous - this is not a beauty contest - but they cashflow well - come with significant amounts of equity from day one - we secure them with 25% discounts - and as you are not tying up too much money in each deal can be very attractive.

Hope this helps give you a good understanding on why we invest in the North West, North East, the Midlands, Yorkshire Wales and Scotland!

We have some excellent deals coming in just now, all up to 25% discount to current RICs values - in Scotland, the Midlands, the North West and Wales - to pre-register for all new deals due in this week, sign up here Register for information on all new deals!

Any questions, let us know on 0115 9853963.

Best Regards

Alan Forsyth