I don’t know about
you, but if you watch Sky News every waking hour or read the newspapers, it
always seems we as a Country, Europe or the World seem to lurch from one crisis
to another. Another week, another crisis averted. It was only last summer the
soothsayers were predicting the end of the world over the supposed house price
bubble that many believed was developing in the South of England. Property
prices were rising at 20%+ per annum in London, only for things to ease as the
property market in there showed a controlled slowdown and cooling in activity
with price growth easing to a more realistic 8% to 9% per annum. Interestingly,
there was no panic when some modest price drops were seen in some of London’s
highest priced suburbs.
However, the recent
crisis is the buy to let boom and as George Osborne always likes to be topical,
in the July emergency budget, he declared that he will start to scale back,
from 2017, the tax relief that those high income tax rate landlords with a
mortgage have benefited from. The Daily Mail ran headlines stating it was the
end of the private landlord; predicting many landlords will give up on buy to
let altogether and we will be inundated with rental properties up for sale as
landlords feel squeezed from the market.
Even Mr Carney, the Governor
of the Bank of England, recently cautioned that the buy to let property market
could destabilise the whole UK property market. He was concerned landlords who
bought with high loan to value mortgages could be spooked if there is a
property crash, they would panic because of negative equity, sell cheaply,
which would worsen house price falls.
End of the world
then? .... this week, yes probably, but next week .. that’s
another story! Before we all go and live like a hermit in the
Scottish Islands, let me explain to you my perspective on the whole subject. As
I mentioned a few weeks ago, two thirds of buy to let properties bought in the
last eight years have been bought mortgage free – so they won’t be affected by
the Chancellors’ tax changes. Also, something I feel is often
overlooked but is very important, is the fact that landlords historically have
only been able to normally borrow up to 75% of the value of the rental
property. In the last property crash of 2008, property values
dropped by the not so insignificant figure of 10.00% in Penicuik, but even
then, when we had the credit crunch and the world’s banking sector was on the
brink, no landlord would have been in negative equity in Penicuik.
I believe we have a
case of ‘bad news selling newspapers’ and I believe that buy to let, and the
property market as a whole, will carry on relatively intact. It’s true reducing
tax relief will hit landlords who pay the higher rate of income tax and this
may slightly diminish buy to let as an investment vehicle, but I doubt people
will sell rather they may change the way they do business eg buying via a
limited company. Many landlords have been lazy with their investments, buying
with their heart, not their head. You would never dream of investing in the
stock market without doing your homework and talking to people in the know. If
you want to make money in the Penicuik property market as a buy to let
landlord, it’s all about having the right property and as you grow, the right
portfolio mix to offer a balanced investment that will give you both yield and
capital growth.
The Penicuik buy to
let market still offers good investment opportunities to new and old alike.
Those who have bought in the last twelve to eighteen months have reaped the
benefit from buying in Penicuik, because the city offered a combination of
reasonable house prices with subsequently increasing rents. Property
values have risen by 17.14% in the last eighteen months in Penicuik, whilst
looking at rents, in Q2 2015, average rental values for new tenancies were 5.4%
higher than Q2 2014 and 13.4% higher than Q2 2012.
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