One of my landlords rang me last week from Walmley, after he had spoken to a friend of his. Over Christmas, they were discussing the Erdington 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 Erdington 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 Erdington 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 Erdington and it would make money. Yes, in the past, anything in Erdington 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 Erdington flat/apartment has risen from £33,313 to today’s current average of £78,143 in the town, an impressive rise of 135% and terraced/town house have risen in the same time frame, from £53,935 to £131,645, an even better rise of 144%. However, look back to 2005, and in that year, the average flat was selling for £68,250, meaning our Erdington landlord would have seen a modest rise of 14% and the terraced owner wouldn’t have seen a change as they were still selling for on average £131,645 … which isn’t good for people who bought in 2005, but it gets even worse when you take into account inflation.
Since 2005, then inflation, i.e. the cost of living, has increased by 33.4%. That means to retain its value, Erdington terraced property bought for £131,645 in 2005 needs to be worth £175,573 today. Therefore, our landlord has seen the ‘real’ value of his property decrease by 33.4%.
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 Erdington property at the right price and finding the right tenant. Think about it, properties in real terms are 33.4% lower than ten years ago, so investing in Erdington property is not only about potential 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.
Henley Charles Estate Agents is rated 1.00 stars by Reviews.co.uk based on 5 merchant reviews