To buy or sell in the Penicuik property market? That is the question

One of my landlords rang me last week from Mauricewood, after he had spoken to a friend of his. They were discussing the Penicuik 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. 

I would admit, there are certain landlords in Penicuik 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 Penicuik 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, here to stay. It’s going to be an exciting new year.

Gone are the days when you could buy any old house in Penicuik and it would make money.  Yes, in the past, anything in Penicuik 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 February 1996, the average price paid for a Penicuik flat has risen from £34,537 to today’s current average of £121,688 in the town, an impressive rise of 252.3%  and a terraced house have risen in the same time frame, from £35,622 to £141,096, an even better rise of 296.1%.  However, look back to 2006, and in that year, the average flat was selling for £97,068 meaning our Penicuik landlord would have seen a 25.4% rise and the terraced house owner would have seen an increase of 39.1%, as they were selling for on average £101,416 .... not bad until you consider inflation.

Since 2006, then inflation, ie the cost of living, has increased by 33.4%. That means to retain its value, Penicuik semi detached property bought for £101,416 in 2006 needs to be worth £135,288 today. Therefore, our landlord has seen the ‘real’ value of his property only increase by 5.7% (ie 39.1% less 33.4% inflation).

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 Penicuik property at the right price and finding the right tenant. However, remember, investing in Penicuik 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 us on 01968 674601, come into our office at 6 Bank Street, Penicuik or email us (robert@thekeyplace.co.uk, linda@thekeyplace.co.uk).