One of my landlords from Rough Common rang me today, after he had
spoken to a friend of his. Over the weekend, they were discussing the Canterbury
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, the new legislation on checking
tenants and the general uncertainty in the world economic situation.
I would admit, there are certain landlords in Canterbury who have over
exposed themselves in the last few years with high percentage loan to value
mortgages. Those mortgages, with their current (yet artificially low) interest
rates, will start to suffer, as their modest monthly positive cash flow/profit,
i.e. income (rent) less costs (mortgage, fees, tax); will become negative when
the tax and mortgage rates rise throughout 2017 and beyond.
It appears to me these landlords seem to have treated the Canterbury
Buy to Let market as a sure bet and have not approached this as a business and,
as a result, they will suffer as 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 won't be stopping, I’m here to stay. It’s
going to be an exciting new year.
Gone are the days when you could buy any old house in Canterbury and
it would make money. Yes, in the past,
anything in Canterbury 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.
True, since January 1997, the average price paid for a Canterbury
flat/apartment has risen from £50,990 to today’s current average of £201,867 in
the city, an impressive rise of 296% and terraced/town house have risen in the
same time frame, from £65,679 to £252,147, an similar rise of 284%. However,
look back to 2005, and in that year, the average flat was selling for £152,071,
meaning our Canterbury landlord would have seen a modest rise of 33% and the
terraced owner would have seen an increase of 43%, as they were selling for on
average £176,885 ... not bad until you consider inflation.
Since 2005, then inflation, i.e. the cost of living, has increased
by 33.4%. That means to retain its value, Canterbury terraced property bought
for £176,885 in 2005 needs to be worth £235,909 today. Therefore, our landlord
has seen the ‘real’ value of his property only increase by 9.6% (i.e. 43% less
33.4% inflation).
The reality is, since around 2004/2005 we haven’t seen anything like
the capital growth in property we have seen in the past and it’s not predicted
to grow at the rates it has previously done either. 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 Canterbury property at the right price and finding
the right tenant. However, remember, investing in Canterbury 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
we discuss such matters on the Canterbury Property Blog ... if you haven’t been,
then it might be worth a few minutes of your time? www.canterburypropertyblog.com
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