One of my landlords from The Drum rang me last week, after he had spoken to a friend of his. They were discussing the Bo’ness property market and both could not 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 increasing legislation affecting the sector and the general uncertainty in the world economic situation particularly given the Brexit vote.
I would admit, there are certain landlords in Bo’ness 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 (ie 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 Bo’ness 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 am here to stay. It’s going to be an exciting year.
Gone are the days when you could buy any old house in Bo’ness and it would make money. Yes, in the past, anything in Bo’ness that had four walls and a roof would make you money because since WW2, property prices doubled every seven years years… it was like printing money – but not anymore.
True, since September 1996, the average price paid for a Bo’ness terraced house has risen from £29,352 to today’s current average of £107,984 in the town, an impressive rise of 267.9% and semi-detached houses have risen in the same time frame, from £33,619 to £134,690, an even better rise of 300.6%.
However, look back to 2006, and in that year, the average terraced house was selling for £89,348 meaning our Bo’ness landlord would have seen a 20.9% rise and the semi-detached house owner would have seen an increase of 24.0% as they were selling for on average £108,644 .... not bad until you consider inflation.
Since 2006, inflation, ie the cost of living, has increased by 30.5%. That means to retain its value, a Bo’ness semi-detached house bought for £108,644 in 2006 would needs to be worth £141,889 today when in fact it is only worth £134,690. Therefore, our average landlord has seen the ‘real’ value of his property fall by 6.5% (ie 24.0% less 30.5% inflation) over these 10 years ie 0.6% per annum.
The reality is that in the period since around 2005/2006 we haven’t seen anything like the average capital growth in property we have seen in the past largely as a result of the economic crash in 2008 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 Bo’ness property at the right price and finding the right tenant. However, remember, investing in Bo’ness 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’?
If you would like to talk to us about your balanced property portfolio, please call me on 01506 828096, email me at email@example.com or pop into the office (19 Main Street, Bo’ness) for a chat – the coffee is always on.