Monday 25 July 2016
I was interviewed by Brendan Quinn recently for his podcast and my sentiment is clear. The market is still strong and there is no holding back the buyers at recent auctions (auctions are always a good indicator of investor sentiment). So much so that some sellers have been upping their reserves to a level that could not be met. I think the days of achieving 50% over the guide are gone, so auctioneers are wise to set the reserves competitively and let the buyers decide the price. I note that some London auctions have had a fair few unsold where the expectations were too high; I believe this is due to a shift in demand for certain types of properties.
I had carried out due diligence for several clients on recent lots and they decided not to buy at the prices that they were going for as it didn't fit in with their particular strategy (buy to sell). Judging by the fact that the properties still sold they certainly were fit for those opting for a longer term strategy. Those buyers are clearly seeing these properties as hold and rent opportunities. They are buying more with yield in their sights than instant capital appreciation by adding value. Is this a better strategy?
It's certainly one to consider. Buy to Let is not a new phenomenon of course, and has done very well over the years, I can say this from personal experience and that of many of my clients. A caveat however is that more money is invested per property, perhaps limiting the number of properties an investor can buy - normally an investor will look to leverage to buy as many as they can, but if they are unable to "finance out," that is, lend on the increase in value they have created it will ultimately slow the market down; they can't buy as frequently/as many properties, so they will be just collecting rents until the time is right. On the plus side they will be better cushioned to rate rises, small market dips and voids should they be unable to find tenants for some reason. Not unwise.
As per my previous blog posts and many talks I have had recently I predict that London will see very high rent rises over the next few years due to the increased taxation on residential landlords - so perhaps a long term view is the right one?
I am not alone in thinking that rents will rise substantially over the next few years. The Tax Payers Alliance (formed to campaign against the recent changes in taxation for residential landlords) seems to agree. For the full article from the Tax Payers Alliance click here.
So if you are looking to invest in property with a view to buy, add value and resell, perhaps it's time to rethink? There are certainly still opportunities out there however so if you are aiming for the first time buyer market I feel you are nearly guaranteed to do well (and others agree judging by a recent article in the Property Reporter), providing you can find the properties at the right price. If you are considering a longer term strategy and a longer cycle per property - the market is looking good for landlords at the moment, and with further rent rises to come it would be worth considering more letting stock in your portfolio. If you are looking to make the most of your property investment why not drop me a line and start a dialogue? I'm on email@example.com.
PS I will be hosting an investor evening in Clapham in September - an ideal time to meet in person - so do keep your eyes peeled for more details with date, venue and guest speaker lineup.
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