Walsall landlords heading for financial disaster?

Walsall landlords heading for financial disaster?
Walsall landlords heading for financial disaster?

One of my Walsall Wood landlords rang me last week after he had been speaking to a friend of his over a Costa (as you do!!).  They were discussing the Walsall 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 helping 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 (see last week’s article at https://walsallpropertyblog.com/2016/03/01/walsall-landlords-could-be-fined-1188000/) .

I will admit that there are a proportion of landlords in Walsall 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 that these landlords seem to have treated the Walsall 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 time for Walsall property!

Gone are the days when you could buy any old house in Walsall and it would make money.  Yes, in the past, anything in Walsall 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 any more!

True, since January 1997, the average price paid for a Walsall flat/apartment has risen from £38,390 to today’s current average of £77,500 in the town, an impressive rise of over 100%.  The terraced and town houses have risen in the same time frame, from £32,735 to £103,787 an even better rise of 217%.  However, look back to 2005, and in that year, the average flat was selling for £101,691 meaning our Walsall landlord would have seen a modest drop of 24% and the terraced owner would have seen an increase of 6.8%, as they were selling for on average £96,732… which isn’t good for people who bought in 2005, and it gets worse when you take into account inflation.

Since 2005, the rate of inflation, i.e. the cost of living, has increased by 33.4%.  That means to retain its value, Walsall terraced property bought for £96,732 in 2005 needs to be worth £128,900 today. Therefore, our landlord has seen the ‘real’ value of his property decrease by 26.6% – 6.8% less the 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 Walsall property at the right price and finding the right tenant.  Think about it, properties in real terms are 22.4% lower than ten years ago, so investing in Walsall property is not only about capital growth, but also about the rental returns.  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’?  you may ask… well I discuss such matters on the Walsall Property Blog… so if you haven’t read my previous offerings, then it might be worth a few minutes of your time?

Email: info@ashmorelettings.co.uk

Phone: 01922 311016

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