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 news@thekeyplace.co.uk or
pop into the office (19 Main Street, Bo’ness) for a chat – the coffee is always
on.
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