One of my Huddersfield landlords contacted me
last week from Brighouse, after he had spoken to a landlord friend of his from Ferndale.
He told me they were deliberating the Huddersfield 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 landlord wanted to pick my brain in
order to help him decide what to do.
I said the press are 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 Huddersfield 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 2000’s 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 are going to enter into a recession because of
Covid-19, yet this time the Huddersfield property market is better placed to
weather the storm.
However,
gone are the days when you could buy any old house in Huddersfield and it would
make money. Yes, in the past, anything in Huddersfield 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 Huddersfield terraced / town house in the
summer of 2000, he or she would have seen a profit of £67,600 to its current
value of £110,100, a rise of 158.9%
Nonetheless, if that landlord
had bought the same property in 2010, the Huddersfield landlord would have only
made £10,400 profit (a 10.4% increase). Yet since 2010, the country has
experienced 31.5% inflation, meaning our Huddersfield landlord has seen the
‘real’ value of their Huddersfield property decrease by 21.1% (i.e. 10.4% less
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 worse 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 I haven’t seen any
indication of its slowing down from its post lockdown takeoff), but if we
do, Huddersfield 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 Huddersfield
landlord, pondering investing in Huddersfield property to stop believing the
hype and do some serious research using independent investment expertise. You
can still make money by buying the right Huddersfield property at the right
price and finding the right tenant.
Think about it, properties in
real terms are 21.1% lower than a decade ago, so investing in Huddersfield
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 Huddersfield Property Blog ... if
you haven’t seen the articles, then it might be worth a few minutes of your
time?
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