One of my landlords rang me last week from St Mary's Island, after he had spoken to a friend of his. Over the last few weeks they have been discussing the Medway property market and neither of them could make their mind up if it was time to either sell or buy property. If you read the newspapers and the landlord forums on the internet, there is a good slice of doom and gloom, especially with changes in the taxation towards landlords, new legislation on checking tenants and the general uncertainty in the world economic situation.
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I would admit, there are certain landlords who may have over exposed themselves in the last few years with high percentage loan to value mortgages. Those landlords, with their current interest rates, may start to suffer, as their modest monthly positive cash flow and profit fall when their tax situation changes throughout 2017 and beyond.
It appears to me these landlords seem to have treated the Medway buy-to-let market as a sure bet and have not approached this as a business. As a result, they thought "Buy a house - rent it out so it covers the mortgage and make a few quid on top". These are the people who will be thinking twice. I see opportunity everywhere and it won't be stopping. It’s going to be an exciting 2017.
Gone are the days when you could buy any old house in Medway and it would make money. Yes, in the past, anything in Medway that had four walls and a roof would make you money because since WW2, property prices doubled every seven years … it was like printing money – but not anymore.
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Taking Strood as an example, since January 1997, the average price , for example, for a flat/apartment has risen from £30,958 to today’s current average of £161,500 in the town, an impressive rise of 422% and terraced/town house have risen in the same time frame, from £44,634 to £205,243, also a great rise of 360%. However, look back to 2005, and in that year, the average flat was selling for £131,800, meaning our Strood landlord would have seen a modest rise of 23% and the terraced owner would have seen an increase of 53%, as they were selling for on average £134,031. These figures appear healthy but lets take a look at inflation;
Since 2005, then inflation, (the cost of living), has increased by 33.4%. That means to retain its value, Strood terraced property bought for £134,031 in 2005 needs to be worth £178,755 today. Therefore, our landlord has seen the ‘real’ value of his property increase by 19.6%; 53% capital growth less 33.4% inflation.
The reality is, since around the early 2000’s we haven’t seen anything like the capital growth in property we have seen in the previous years. So it is high time anyone considering investing in property stopped believing the hype and did some serious research using independent investment expertise. You can still make money by buying the right Medway roperty at the right price and finding the right tenant.
Think about it. Properties in real terms are 19.6% higher than ten years ago, so investing in Medway property is not only about capital growth, but also about the yield (the return from the rent). It’s also about having a balanced property portfolio that will match what you want from your investment – and what is a ‘balanced property portfolio’? Well, I discuss such matters right here on the Medway Property Blog. You can subscribe using the button at the top right hand side of this page.
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