Comment on the Walsall property market
I met up with a friend this week who is also a landlord. He is from the south west part of the country and also uses the services of a professional managing agent to manage his portfolio. As we were talking, over some light lunch, the subject had to come up and so we obliged. My friend told me how he was going to rely on his property portfolio to save himself from pension oblivion. This of course got me thinking so I thought I’d share those thoughts with you below.
The nations favourite topic at lunchtime tends to be about ‘the boss’ and in the evening….we can’t stop talking about property! The hot topic of discussion at the dinner parties, BBQ’s and local pub meetings of the movers and shakers of Walsall is the subject of the local property market, but in particular, buy to let in Walsall. These people are buying up buy to let properties quicker than a seasoned Monopoly player.. or so it would seem if you read the Sunday papers. So, is the buy to let market a sure fire way to make money? Is it something everyone should be jumping into? Is it a dead cert that you will get a return? The answer isn’t as simple as that, to all those questions as it all depends on the plan and strategy you apply to your investment similar to any other!
Firstly, the government gives tax breaks to landlords, as it allows the mortgage interest payments on a buy to let property to be tax deductible (some changes are afoot). A landlord only has to flick through Rightmove or Zoopla, pick any property at random and agree a price. Find a modest deposit of 25%, often by re-mortgaging their own home, which for an average Walsall terraced house, would mean finding £22,455 for the deposit because the average Walsall terraced house is currently worth £89,818. Then borrow the rest with a low interest rate buy to let mortgage. Finally, the landlord would rent out the property in a matter of hours for top dollar and live happily ever after, with the rent then covering the mortgage payments, with loads of money to spare and come retirement have a portfolio of property that would have quadrupled in value in fifteen years. Sounds wonderful – doesn’t it? Or does it?
Let us not forgot that the half of one per cent Bank of England base rate is artificially low. The international money markets can be fickle and if interest rates do rise quicker and higher than expected because of some unforeseen global economic situation, that monthly profit will soon turn into a loss as the mortgage will be more than the rent. Even though tenants are staying longer in their rental property, they still come and go and my guidance to landlords is they should allow for void periods, plus the maintenance costs of a rental property, agent’s fees, building insurance and home emergency cover… all things that eat into that profit.
Interestingly, by my calculations, there are approximately 3,790 Walsall landlords owing in excess of £891million in mortgages on those buy to let properties. An impressive amount when you consider Walsall only has 0.491% of the all the rental properties in the Country. It really does come down to a number of important factors going forward to ensure you are water tight for the future. A lot of my existing landlords are fixing their mortgage rates. One told me that the Metro Bank are currently offering a 5 year fixed BTL remortgage rate at 3.79% for 5 years based on a 75% loan to value. I don’t give financial advice, so you must speak with a qualified mortgage advisor.. but that sounds very fair!
However, one thing I do know is this. Buy to let is a long term investment. It’s a ten, fifteen, twenty year plan and property prices will go down as well as up. You wouldn’t dream of investing in the stock market without advice, so why invest in the Walsall Property Market without advice? We give bespoke, detailed advice to our landlords to enable them to spot trends in the Walsall Property Market before others, enabling them to buy in better properties at better prices. For example, did you know that flats are selling for around 10% lower than 12 months ago in Walsall yet semi’s are selling for 14% more? This means we can advise on which properties will go up in value better (or lose less if property prices drop), we can also advise which have lower voids and which properties have higher maintenance issues.
If you would like to discuss anything property related please feel free to contact me and I would love to hear from you.
Phone: 01922 637672
Email: salekm@ashmorelettings.co.uk
One of my professional landlords called me towards the end of last week informing me how he thinks he should be purchasing more detached properties in Walsall. He told me how he thinks they will bring about better returns when he sells them although he hasn’t sold anything yet. I thought this didn’t ring quiet true in my mind so, me being me, I began to look at the stats to see what the actual numbers was telling us.
Rightmove announced that average ‘asking prices’ fell slightly last month by 0.6% in the West Midlands, leaving them 2.9% higher than a year ago.
I had an interesting telephone conversation with a local property developer and landlord. Amongst other matters we began to talk about the future of the Walsall property market. He wanted to know my thoughts on the future of the Private Rental Sector (PRS) nationally and especially locally. As usual I had an opinion and it sounded like he wanted to hear it. Below are my thoughts on how I think the next 10 years will play out and why I think the PRS is set to grow even further in Walsall.
Thatcher’s government introduced the right to buy of council homes but that’s not where the British obsession for owning your own home began. Prior to WW2 the aspiration of the people wasn’t to buy but to rent. Looking at the country as a whole, in 1951, 30% of residential properties were owner occupied, then every ten years that rose incrementally to 39% by 1961, 51% by 1971, 58% by 1981, 68% by 2001 but after that, it dropped to 63.4% by 2011 and continues to drop today.
A Walsall landlord who manages a portfolio of properties called me after reading my Blog. He was concerned about the Walsall Property Market where he has 4 properties and after the recent changes he is considering whether to exit the market by selling the portfolio. We discussed many things but mainly he wanted to pick my brains and thoughts around what he called the crisis in the market. I’m a glass full sort of guy so where others see ‘doom and gloom’, I only see opportunity.
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 West Midlands, including the Bath Property Market.
I recently went to a property auction and bumped into one of my landlords! We got talking about the state of the Walsall property market and whether we, as a country, are turning more and more to the European style of property ownership, where it is the norm to rent as opposed to automatically buying once you have a good job etc. So I got to work when I returned to my desk….
Even though a recent report by the Halifax stated home-ownership remains a goal for 85% of twenty to forty five year-olds, there is information emerging that attitudes in the UK towards renting your own home as opposed to owning it have softened, showing more and more, that renting is being seen as a life style choice. In fact it is recognised in learned circles that the cycle of renting is also repeated by the fact that people who grow up primarily in rented accommodation are themselves more likely to rent than buy.
So I had an interesting conversation with a landlord recently from the south who was looking to invest in Birmingham. Even though he has a property we manage for him in Shenstone he still calls it Birmingham so when I informed him about some mouth watering deals you could have in Walsall, he asked me where that was! Anyway, we started to talk about the local property market in Walsall and I shared with him my thoughts and why, to me at least, it makes sense.
The Land Registry have just released their latest set of figures for the Walsall Property Market, and it makes interesting reading – as average property values in Walsall rose by 0.2% in May.
Investing in property is essentially different from investing in stocks and shares or putting money in the Building Society. Whilst these other investments (Building Society Passbooks, Stocks and Shares etc) are passive i.e. once the money has been invested it you leave it alone, with BTL, things are more hands on, in fact it’s almost a business!
One thing the landlords I speak to say is the fact that they like BTL because it is both an investment as well as a business. It is this factor that attracts many of my Walsall landlords – they are making their own decisions rather than entrusting them to others – such as City Whizz Kids in London playing roulette with their pension pots.
Here’s a post that you may have to read a couple of times to get the gist!
Some landlords have been speaking to me recently about stories in the press and their concerns about booming house prices and the next housing bubble. Whether you are an established landlord or one considering entering the market for the first time, it is of utmost importance that you do your homework. Buying a property in Walsall and the surrounding area is an investment, and as such, one needs to do one’s homework.
Well, the last few weeks have been rather hectic as Walsall landlords. Some who use us to manage their properties and other landlords who just read our Walsall Property Blog, have been sending me emails or picking the phone up to me about the new rules on buy to let taxation announced in the recent budget and the side effects of such policies.
George Osborne confirmed in the recent summer budget that the tax relief given to landlords on mortgage interest payments, on their buy to let Buy-to- Let (BTL) properties, would be reduced over the coming years for higher rate income tax payers. The Chancellor said the tax relief that private BTL landlords (who pay the higher rate of income tax) would change in 2017 from the current 45%/40% and would steadily reduce over the following four years to the existing 20% by 2020.
Walsall Property Blog 
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