One of my investors contacted me last week from London, after he had spoken to a landlord friend about investing in a post-covid world. He told me they were deliberating the Tameside property market and neither of them could make their mind up if it was time to either sell or buy property following Covid-19. His friend said he would wait to see what would happen to property prices following Covid-19, yet my investor wanted to pick our brains in order to help him decide what to do.
We said the press is aware bad news sells newspapers and the doom-mongers are plying their trade on uncertainty in the world economic situation. Roll the clock back to the Credit Crunch of 2008/9, and there were quite a few landlords in Tameside who had overexposed themselves with high percentage loan to value buy to let mortgages, backing the hope they would make their money on the capital growth, yet fell foul of a drop in rents and thus got bankrupted (but who could blame them when the property market was rising at 15% to 20% a year in the early 2000s and banks like Northern Rock were giving mortgages out to anyone with a pulse and note from their Mum).
Thankfully the Bank of England changed the rules on all mortgages in 2014 banning self-certification mortgages, tightening the rules around interest-only mortgages and the requirement around affordability to be checked; plus a tough stress test if interest rates rose. It’s obvious we could be set for a recession because of Covid-19, yet this time the Tameside property market is better placed to weather the storm.
However, gone are the days when you could buy any old house in Tameside and it would make money. Yes, in the past, anything in Tameside that had four walls and a roof would make you money because, since World War 2, property prices doubled every seven years. It was like having a free cash machine.
If a landlord bought a Tameside terraced / townhouse in the summer of 2000, he or she would have seen a profit of £87,416 to its current value of £125,616, a rise of 228.8%
Nonetheless, if that landlord had bought the same property in 2010, the Tameside landlord would have only made £33,442 profit (a 36.2% increase). Yet since 2010, the country has experienced 31.5% inflation, meaning our Tameside landlord has seen the ‘real’ value of their Tameside property increase only by 4.7% (i.e. 36.2% over 31.5% inflation).
And this is my point. Nobody has been complaining about the property market in the last ten years, yet landlords are still not that better off in real terms. If we do see a slight dip in property prices because of Covid-19 (looking at the market at the moment we haven’t seen any indication of its slowing down from its post lockdown takeoff), Tameside landlords need to realise property values aren’t the only indicator of whether the property market is good or not.
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, I believe it is high time for any Tameside landlord, pondering investing in Tameside property to stop believing the hype and do some serious research using independent investment expertise. You can still make money by buying the right Tameside property at the right price and finding the right tenant.
And as ever, I’m only a phone call away to help you with that process. 07709 505 442.