14:58 PM, 27th October 2010, About 12 years ago
Switch on the TV or radio news, open the paper and log in to the internet and just about everyone is lamenting the price of a home.
First time buyers can’t afford to step on to the property ladder, families can’t afford to move and banks aren’t lending.
Does all this really matter to a property investor?
The likelihood is that if you are renting out buy to let property, you are in property investment for the long term and a blip in house prices now means you are not quite so rich on paper as you were – but other than that, there’s not much change.
In the long term, property has doubled in price since the year 2000, according to the Bank of Scotland despite the recession and credit crunch.
Low house prices are opportunities for cash-rich investors who can expand their portfolios at bargain basement prices.
Rock bottom interest rates are fuelling a boom in buy to let profits as finance costs drop to leave a good margin between rent coming in and expenses going out.
Plenty of tenants are out there because they can’t buy due to the squeeze on mortgage lending.
Even difficult to let properties will attract tenants as the need for housing soaks up homes that otherwise would have sat on the shelf.
The laws of economics dictate that when demand rises for a commodity in limited supply, the price consumers should expect to pay will rise.
Rents are no exceptions to the rule and that’s why they are hitting their pre-recession peak.
The real elephants in the room for property investors are interest rates.
When interest rates rise, as they surely will, buy to let profit margins will shrink exposing landlords who have not made a provision with money in the bank to soak up cash flow problems.
Sitting out the rental boom and staying away from the house price hullabaloo while building up a war chest to fund possible bad times ahead seems the best strategy for buy to let investors.
Eventually, the housing market will level out, banks will feel more confident about lending and prices will start their inexorable rise again.
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