Friday, 26 February 2016

Doom and Gloom for Royal Tunbridge Wells Property Market?

One of my landlords rang me last week from Claremont Road, after he had spoken to a friend of his. They were discussing the Royal Tunbridge Wells 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 Royal Tunbridge Wells 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 Royal Tunbridge Wells 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 Royal Tunbridge Wells and it would make money.  Yes, in the past, anything in Royal Tunbridge Wells 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 Royal Tunbridge Wells flat/apartment has risen from £49,419 to today’s current average of £279,275 in the town, an impressive rise of 465% and terraced/town house have risen in the same time frame, from £74,694 to £369,101, also a great rise of 394%. However, look back to 2005, and in that year, the average flat was selling for £177,519, meaning our Royal Tunbridge Wells landlord would have seen a modest rise of 57% and the terraced owner would have seen an increase of 97%, as they were selling for on average £187,313 ... not bad ... until you consider inflation.

Since 2005, then inflation, i.e. the cost of living, has increased by 33.4%. That means to retain its value, a Royal Tunbridge Wells terraced property bought for £187,313 in 2005 needs to be worth £249,817 today. Therefore, our landlord has seen the ‘real’ value of his property increase by 63.6% (i.e. 97% 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 Royal Tunbridge Wells property at the right price and finding the right tenant. Think about it, properties in real terms are 63.6% higher than ten years ago, so investing in Royal Tunbridge Wells 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 Royal Tunbridge Wells Property Blog ... if you haven’t been, then it might be worth a few minutes of your time?  

Thursday, 4 February 2016

Royal Tunbridge Wells Landlords count the cost of a Tory Election win

Can you remember 10.05pm on Thursday, 7th May 2015 ... with the shock news that BBC Exit Polls suggested the Conservatives would be returned with majority? The middle classes in Langton Green and Bidborough exhaled a huge sigh of relief, as Royal Tunbridge Wells landlords, faced with rent controls from Red Ed and the Labour Party, now had something to cheer about as the Tory’s were always considered to be a political party that accepted the importance of the rental market, supported its development while properly targeting the lawbreaker landlords renting out below standard rental accommodation.

Since May though, George Osborne announced future rises in stamp duty for buy to let landlords and a change in the interest relief on buy to let mortgages, some people have started to question that loyalty. However, things could have been a lot worse for Royal Tunbridge Wells landlords as previous ideas of making landlord’s pay more tax was the idea (which was seriously considered) of increasing Capital Gains Tax rates to the landlord’s own income tax levels. If Landlords would have had to pay capital gains tax of 40% to 45% on any uplift in value, I can tell you here and now, that would have made investing in property a non starter for almost everyone.

However, I will admit the loss of mortgage higher rate tax relief will make a number of properties not stack up financially. The new rules are likely to slow demand in the Royal Tunbridge Wells housing market, which is in fact good news for the other landlords, as there is less competition from 'amateur' landlords offering too much.

Just a thought, but making Royal Tunbridge Wells landlords think twice and
run their numbers more cautiously is not such a bad thing.

So looking at the numbers, the November figures have just been released and they show a growth of property values in Royal Tunbridge Wells of 0.5% over the month of November. That figure doesn’t surprise me due to the time of year. It’s quite dangerous to look at one month in isolation, so looking at a more medium term view, over the last 12 months, property values in Royal Tunbridge Wells have risen by 7.7%, not bad when you consider inflation is running at -0.1%.

However, regular readers of the Royal Tunbridge Wells Property Blog know my passion for looking deeper into the stats. The really interesting information is the value growth, but what types of property are actually selling in Royal Tunbridge Wells?  Looking at all the properties sold, as recorded by the Land Registry, within 3 miles of the centre of Royal Tunbridge Wells in September 2015 (this data always runs a couple of months behind the house price data) compared to September 2007 (a couple of months before the credit crunch started to bite and the subsequent property crash).

Sept 2007
Sept 2015
Detached in Royal Tunbridge Wells
Semis in Royal Tunbridge Wells
Terraced Houses in Royal Tunbridge Wells
Apartments / Flats in Royal Tunbridge Wells

Now I have mentioned in previous articles that the numbers of properties selling in the town has certainly dropped post 2008, but what amazed me were the greater drop in the number of detached and semis selling in Royal Tunbridge Wells compared to the drop in sales of terraced properties and apartments, which hardly changed.

Less properties are selling than last decade in Royal Tunbridge Wells
and the types of properties selling have changed ...
interesting times ahead for the Royal Tunbridge Wells Property market!

Therefore, all I can say to the landlords of Royal Tunbridge Wells is do your homework, make sure the numbers do stack up, take advice and opinion from professionals and above all, for those of you planning to add to your portfolio, buy the right property at the right price. One place for such advice and opinion on the Royal Tunbridge Wells Property market is the Royal Tunbridge Wells Property Blog