One
of my landlords rang me last week from Barrowby Edge, after he had spoken to a friend
of his. Over Christmas, they were discussing the Grantham 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.
I
would admit, there are certain landlords in Grantham 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 Grantham 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 Grantham and it would make money. Yes, in the past, anything in Grantham 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 Grantham
flat/apartment has risen from £22,763 to today’s current average of £137,725 in
the town, an impressive rise of 505% and terraced/town house have risen in the
same time frame, from £28,028 to £116,000, a still impressive rise of 314%. However,
look back to 2005, and in that year, the average flat was selling for £50,000,
meaning our Grantham landlord would have still seen a rise of 175%, but, the
terraced owner would have seen an increase of only 27%, as they were selling
for on average £91,375 ... 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, Grantham terraced property
bought for £91,375 in 2005 needs to be worth £121,865 today. Therefore, our
landlord has seen the ‘real’ value of his property drop slightly by 6.4% (i.e. 27%
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 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 Grantham property at the right price and finding
the right tenant. Think about it, properties in real terms are 6.4% lower than
ten years ago, so investing in Grantham 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 Grantham Property Blog ... if you haven’t been, then it might be
worth a few minutes of your time?
