Friday, 5 February 2016

Doom and gloom for Aylesbury property investors?

One of my landlords rang me last week from Stone, after he had spoken to a friend of his. Over the last few weeks, they have been discussing the Aylesbury property market and neither of them could make their mind up if it was time to 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. 

There are landlords in Aylesbury who have borrowed heavily in the last few years with high percentage loan to value mortgages. Those landlords with a modest profit will start to suffer, as their modest monthly positive cash flow/profit, i.e. income (rent) less costs (mortgage, fees, tax), will become negative as the tax and mortgage rates rise throughout 2017 and beyond. It is these landlords that are most likely to sell some of their portfolio before the new tax regime begins.
 
There are landlords who have treated the Aylesbury Buy to Let market as a sure bet and have not approached it as a business. They will struggle in the new environment of higher taxes and interest rates. These are the people who will be thinking twice. I see lots of opportunity for the informed investor; it is going to be an exciting year ahead. 

Gone are the days when you could buy any old house in Aylesbury and it would make money.  Yes, in the past, anything in Aylesbury that had four walls and a roof would make you money because since WW2, property prices doubled every seven years. 
 
Since January 1997, the average price paid for an Aylesbury apartment has risen from £36,059 to today’s current average of £151,070 in the town, an impressive rise of 319% .Terraced houses have risen in the same period, from £55,268 to £238,011, an even better rise of 331%. However, look back to 2005, and in that year, the average flat was selling for £131,854, meaning our Aylesbury landlord would have seen a modest rise of 19% and the terraced owner would have seen an increase of 72%, as they were selling for on average £137,077 ... not bad until you consider inflation. 

Since 2005, inflation, i.e. the cost of living, has increased by 33.4%. That means to retain its value, Aylesbury terraced property bought for £137,077 in 2005 needs to be worth £182,818 today. Therefore, our landlord has seen the ‘real’ value of his property only increase by 38.6% (i.e. 72% less 33.4% inflation). 

 Therefore, it is sensible that anyone considering investing in property carries out some serious research using independent investment expertise. An agent you are buying from is going to tell you what you want to hear not what you need to know! You can still make money by buying the right Aylesbury property at the right price and finding the right tenant. However, remember, investing in Aylesbury 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 Aylesbury Property Blog ...  it might be worth a few minutes of your time looking at the historic articles?  http://theaylesburypropertyblog.blogspot.co.uk/
 
What are we waiting for? C'mon lets go!
What has my landlord in Stone decided to do? He is looking to buy property before the Stamp Duty thresholds change in April.