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Buy-to-let borrowers breathed a sigh of relief last week when it was revealed that their investment should have returned to 2008 figures.

Nationwide revealed that UK house prices rose by 0.9% in September, which pulled the annual levels up to 0.0% – in other words, according to the building society, house prices are back to 2008 levels.

For a long time now, those who invested in UK property as a means to increase their wealth have unfortunately seen their investment fall in value by as much as a quarter. They have had to stand back and watch their equity dwindle and also their ability to get hold of new credit stifled – but this news may be just what they need to hear. As house prices go back up, the ability to get hold of credit improves, as does the potential to sell the property in the future.

But Keshav Thukaram, managing director of Smartlandlord.co.uk says that, for the time being, any rises are indications that the market is bottoming out – not that prices are going to shoot back up.

He says: "We should treat these numbers with caution. But a lot of professional landlords had been waiting for the downturn for a long time. They're cash rich and many of them started investment in property in the last downturn. We are still a long way off recovery though – we still haven't felt the pinch from higher unemployment for instance – so speculative buy-to-let investors and reluctant landlords that bought at the peak of the housing bubble, have little hope of recovering losses on the value of their property."

The days of investing in buy-to-let for the short-term are over. House prices will not rocket up, and some experts have reported that we may see a 'double-dip' where house prices drop again.

Brigid O'Leary, the Royal Institute of Chartered Surveyors senior economist says: "The recent trend in increasing house prices has been supported by very low levels of stock on the market. An increase in property for sale would improve transaction levels but could also put some renewed downward pressure on house prices. Looking ahead, high, and still rising, unemployment plus any future increases in mortgage interest rates will weigh on the outlook for house prices over the next 12 to 18 months."

So the message is be cautious, but be hopeful. House prices have risen further than anyone imagined in 2009 and there is hope that it may continue into 2010. For now investors should stay firm, make sure their buy-to-let finance is working and their rent is coming in – a strong base from which you can invest further when the market really picks up.

SOURCE: Nationwide, RICS, Smartlandlord.co.uk, 02/10/09

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