Friday, 26 February 2016

Doom and Gloom for Ramsgate Property Market?

One of my landlords rang me last week from London Road, after he had spoken to a friend of his. Over Christmas, they were discussing the Ramsgate 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 Ramsgate 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 Ramsgate 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 Ramsgate and it would make money.  Yes, in the past, anything in Ramsgate 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 Ramsgate flat/apartment has risen from £26,863 to today’s current average of £121,842 in the town, an impressive rise of 354% and terraced/town house have risen in the same time frame, from £34,683 to £173,673, an even better rise of 401%. However, look back to 2005, and in that year, the average flat was selling for £109,112, meaning our Ramsgate landlord would have seen a modest rise of 12% and the terraced owner would have seen an increase of 21%, as they were selling for on average £143,138 ... which isn’t good for people who bought in 2005, but it gets 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, Ramsgate terraced property bought for £143,138 in 2005 needs to be worth £190,901 today. Therefore, our landlord has seen the ‘real’ value of his property decrease by 12.4% (i.e. 21% 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 Ramsgate property at the right price and finding the right tenant. Think about it, properties in real terms are 12.4% lower than ten years ago, so investing in Ramsgate 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 Ramsgate Property Blog ... if you haven’t been, then it might be worth a few minutes of your time?

Friday, 19 February 2016

Thanet Buy to Let sees returns of 12.51% in 2015

Well, as a New Year begins I remembered that a few days before Christmas, I got chatting with one of my out of town landlords who was back in Thanet visiting his family.  Brought up in Thanet, he went to Dane Court Grammar School back in the 1970’s and is now a University Lecturer in central London.  To enhance his retirement, he has a small portfolio of four properties in the town and wanted my advice on where to buy the next property in Thanet (as he lives in a college owned flat and anyway, would never dream of buying where he lives in Kensington (where the average value of a flat is £1.62m and a town house £4.1m.  Eye-watering to say the least!!).
Before I could advise him, I reminded him that the most important thing when considering investing in property is finding a Thanet property with decent rental yields for income returns, yet at the same time, it must have the potential for capital growth from rising house prices over time. Going into 2016, Thanet landlords will be under more pressure to find the best permutation of yields and capital growth, as extra stamp duty charges for buying properties and a squeeze on mortgage interest relief will raise their costs.
However, (you knew there would be a however) before we look at yield and capital growth, one important consideration that often many landlords tend to overlook, is the propensity of how likely the rent will increase.  Interestingly, the average rent of a Thanet property currently stands at £510 per month, which is a rise of 6.0% compared to twelve months ago (although it must be noted this rise in rents is for new tenancies and not existing tenants).
Anyway, back to yield and capital growth, the average value of a Thanet property currently stands at £153,800, meaning the average yield stands at 3.98% per annum, which on the face of it, many landlords would find disappointing.  That is the problem with averages, so if I were to look at say 2 bed houses in Thanet which are the sort of properties a lot of landlords buy, in Thanet, the average value of a 2 bed house is £107,300, whilst the average rent for a 2 bed house is £484 per month, giving a yield of 5.11%.   However, if that wasn’t high enough, there are landlords in Thanet who own some specialist properties with specialist tenancies, that are achieving nearly double that yield – again it comes down to your attitude to risk and reward (give me a tinkle if you wanted a chat about those sorts of properties – although they can be fun and games!).
Ultimately investors want to be making gains from both rent and house price growth.   When combined, the rental yield and capital growth gives you the return on investment, and that is what I told our University friend from Kensington.   Return on investment is everything.   So, looking at property values in Thanet have risen in the last year by 7.1% …. which means the current annual return on investment in Thanet for a typical 2 bed house is 12.51% a year .... not bad.
Whether you are a soon to be new landlord or existing seasoned landlord in Thanet, you might be interested in a blog about the Thanet Property market, where you will find similar articles to this one about what is happening in the Thanet Property market .... the web address is .... and to answer the question on what he should buy, well on the same blog, once or twice a week, I post what I consider to be the best buy to let deals in Thanet, irrespective of which agent it is being marketed with.   Maybe you should visit the blog as well?

Monday, 15 February 2016

Where will Thanet Property Prices be by 2021?

I was having lunch the other day at Woody’s on The Parade, Margate in Thanet, with a local Thanet solicitor friend of mine, when the subject of property came up. He asked me my thoughts on the Thanet property market for the next five years.  Property prices are both a British national obsession and a key driver of the British consumer economy.  So what will happen next in the property market? So here is what I told him, and now wish, my blog reading friends, to share with you.
Before I can predict what will happen over the next five years to Thanet house prices, firstly I need to look at what has happen over the last five years.  One of the key drivers of the housing market and property values is unemployment (or lack of it), as that drives confidence and wage growth – key factors to whether people buy their first house, existing homeowners move up the property ladder and even buy to let landlords have an appetite to continue purchasing buy to let property.
When the Tory’s came to power in May 2010, the total number of people who were unemployed in town stood at 2,506 (or 5.95% of the working age population in Thanet parliamentary constituency). Last month, this had dropped to 1,317 people (or 3.1% of the working age population).
As the Thanet job market has improved with better job prospects, salaries are rising too, growing at their highest level since 2009, at 3.4% per year in the private sector (as recently reported by the ONS).  That is why, even with the turbulence of the last few years, property values in the Thanet area are 18.03% higher today than they were five years ago.
Many home occupiers have held back moving house over the past seven to eight years following the Credit Crunch but with the outlook more optimistic, I expect at least some to seize the opportunity to move home, releasing pent up demand as well as putting more stock onto the market. With a more stable economy in the town, this will, I believe, drive a slow but clearly defined five year wave of activity in home sales and continued house price growth in Thanet.
I forecast that the value of the average home
in Thanet will increase by 23.5% by 2021

23.5% might sound optimistic to some, but according to Land Registry, values are currently rising in Thanet at 6.9% year on year, I believe my forecast to be fair, reasonable and a reflection of both positive (and negative) aspects of the local property market and wider UK economy as whole.
However, it wouldn’t be correct not to mention those potential negative issues as I do have some slight concerns about the future of Thanet housing market.  The number of properties for sale in Thanet is lower than it was five years ago, restricting choice for buyers (yet the other side of the coin is that that keeps prices higher). Interest rates were being predicted to rise around Easter 2016, but now I think it will be nearer Christmas 2016 and finally the new buy to let taxation rules which are being introduced between 2017 and 2021 (although choosing the right sort of property / portfolio mix in Thanet will, I believe, mitigate those issues with the next taxation rules).
I am telling the landlords I speak to, that with interest rates at their current level 0.5%, the cash in your Building Society Passbook is going to grow so slowly that it might as well be kept under their bed. Property prices, by contrast, have rocketed over the years, even after the property crashes, far outstripping bank accounts and inflation.
So my final thought ...  property is a long term investment, it has its’ up and downs, but it has always outperformed, in the long term, most investments. Those in their 40’s and 50’s in Thanet would be mad not to include property in their long term financial calculations. Just make sure you buy the right property, at the price in the right location. One source of information on such matters would be the Thanet Property Blog