Doom and Gloom for the Bexley Borough Property Market?

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After speaking to a friend, one of my landlords from Latham Road rang me last week. They had been discussing the local property market and neither could decide if it was time to sell or to buy.

If you read the newspapers and landlord forums on the Internet, you’ll find plenty of doom and gloom, especially with changes to landlords’ taxation, new legislation on checking tenants, and general uncertainty about the global economic situation.

Admittedly, some landlords in our Borough have over-exposed themselves in the last few years with high percentage loan to value mortgages. With current (artificially low) interest rates these mortgages will start to suffer as their modest monthly positive cash flow/profit, (income (rent) less costs (mortgage, fees, tax)), will become negative as tax and mortgage rates rise throughout 2017 and beyond.

It appears that these landlords have treated the local buy-to-let market as a sure bet rather than as a business. They thought, “I’ll buy a house and rent it out so it covers the mortgage and make a few quid on top." They will be thinking twice. In the past, anything in our area with four walls and a roof would make money because property prices doubled every seven years after World War Two. But the days when you could buy any old house in Bexleyheath and use it to make money are gone.

Since February 1997, the average price paid for a Bexleyheath flat/apartment has risen from £56,500 to the current average of £198,500; an impressive rise of 251%. Terraced and townhouses have risen in the same time frame, from £77,500 to £327,500; an even better rise of 323%. However, in 2005, the average flat was selling for £147,250, so our Bexleyheath landlord would have seen a modest rise of 35%, while the owner of a terraced house would have seen an increase of 72%, as they were selling for, on average, £190,000. That’s not bad until you consider inflation.

Since 2005, inflation, also known as the cost of living, has increased by 33.4%. To retain its value, a Bexleyheath terraced property bought for £190,000 in 2005 needs to be worth £253,400 today. Therefore, our landlord has seen the “real” value of his property increase by 38.6%. Being a landlord was once like printing money, but it isn’t now.

Since around 2004/2005, we haven’t seen anything like previous levels of the capital growth in property. Nor are those earlier rates predicted to return. Anyone considering investing in property needs to stop believing the hype and do some serious research along with independent investment expertise. Wise landlords can still make money by buying the right property at the right price and finding the right tenant.

Investing in Bexley Borough property is not only about capital growth, but also about the yield (the return from the rent), and about having a balanced property portfolio that will match what you want from your investment.

What’s a “balanced property portfolio”? We discuss all such matters on the Bexley Borough Property Blog ... if you haven’t visited, it might be worth a few minutes of your time. Check out  www.bexleyproperty.co.uk or you are more than welcome to pop into our office in Bexley Village (next to the Kings Head Public House), or to give us a call on 01322 559955.

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