Get Out of Property Now?

by Mary Latham

8:54 AM, 15th September 2011
About 7 years ago

Get Out of Property Now?

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Get Out of Property Now?

Landlords Money Week Magazine are telling us to Get out of Property Now.

“Dump property”. “……If you are a property speculator”

In 2007 they told us to “Get out of property now”

“Get the right dividend payer into your portfolio now”

“Hold Gold”

Professional landlords are not “speculators”. To professional landlords property is the means not the end in itself. Yes, we all hope for an increase in the intrinsic value of our properties but it is the cash flow that makes letting property the right investment for us. We are in it for the long haul and in my experience that means at least 10 years, during which time property will increase in value.

This video boasts that in 2007 they told us to “Get out of property now”.  How would that have panned out for landlords?

In the four years since Money Week gave us this “warning”, landlords have seen demand for renting reach new heights, void times decrease and many rents rise while interest rates have remained at historical lows. We have experienced positive cash flows and opportunities to be more selective in the tenants that we choose. In this time most local authorities have developed schemes to “entice” landlords into taking tenants from their homeless lists, many offering to rent properties from landlords on long term contracts with guaranteed rental income. The student community has grown year on year. Only a few weeks ago I was invited to comment on behalf of National Landlords Association (NLA) on BBC radio about the concerns of one university that their students could not find accommodation for this autumn. In my experience, more young people are actually “choosing” to rent rather than buy, enabling them to be mobile and go where the work is and to travel before they settle down.

In an another BBC radio programme I was asked to comment, again on behalf of NLA, on a report by the National Housing Federation. These are the highlights of that report, mainly related to the West Midlands where I let my properties.

From Property Housing Federation Tuesday 30th August 2011

West Midlands housing market is in crisis as owner occupation rates tumble while house prices and private rents soar, home ownership in the West Midlands will slump from 68.7% to 65.8% over the next decade as an entire generation is effectively locked out of the housing market. In England, the proportion of people living in owner occupied homes will fall from a peak of 72.5% in 2001 to 63.8% in 2021.

Huge deposits, combined with high house prices and strict lending criteria, have sent home ownership into decline throughout England in recent years and the downward trend will continue for the foreseeable future, the National Housing Federation’s independently-commissioned forecasts predict.

The Federation, which represents England’s housing associations, warned the region’s housing market will be plunged into an unprecedented crisis as it forecasts steep rises in the private rental sector, huge social housing waiting lists, and a house price boom – all fuelled by a chronic under-supply of homes.

According to Oxford Economics, who were commissioned to produce the forecasts, the average house price in England will rise by 21.3% over the next five years from £214,647 in 2011, to £260,304 in 2016.

At 15.1%, the predicted increase in the West Midlands, prices would rise from £161,100 in 2011 to £185,500 in 2016.

For thousands of people locked out of the housing market in the West Midlands, the options open to them will be limited and increasingly expensive. Average rents in the private sector are forecast to increase sharply by 20.9% in the region over the next five years, fuelled by high demand and a shortage of properties. Oxford Economics predicted that would mean rents would increase on average in the West Midlands from £396 a month in 2011 to £479 a month in 2016, meaning tenants would be paying £996 more a year in total.

Over 392,000 people are currently stuck on social housing waiting lists in the West Midlands – but only those in the most desperate of circumstances have a realistic chance of being allocated a home.

At the heart of the problem remains a chronic under-supply of new homes. In 2010/11, just 105,000 homes were built in England – the lowest level since the 1920s.

As landlords we are already ahead of the game and we are, in fact, already doing what Money Week recommends.

“Get the right dividend payer into your portfolio now”

“Hold Gold”

Bricks and mortar are liquid gold because, unlike gold

Property (cash) flows while it grows.

And finally remember this

They cannot clone land.



Comments

18:58 PM, 16th September 2011
About 7 years ago

A very interesting article I and my wife have 1 buy to let and are trying to finance some more, with the comments you make about the predicated demand we found it a hole lot more positive than most of the doom and gloom.


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