dothesums blog

What are we to make of the so called ‘credit crunch’ and investing in buy-to-let properties?

Loans and mortgages are more difficult to obtain with fewer than one third of those available at the same time last year. When you do find the right loan, it is likely to be more expensive, with both higher interest rates and larger arrangement fees.

And yet paradoxically, because the property market is operating at a lower level, deals can be made, sometimes at attractive prices.

In our view, the mistake that the public makes is to see the property market as one entity. They are encouraged in this perception by the oversimplification of the media, usually in terms of a property ‘bubble’. Well, they have to sell newspapers, it is in their interest to dramatise every situation and spread gloom and despondency.
In our view, the market is more like bubble-wrap, rather than one large bubble. That is, numerous small bubbles each surrounded by relative sanity.

The skill then becomes how to choose those few areas/postal districts, which will provide the significant price increases over the next few years.

We can rule out two main categories.

Firstly, avoid new build flats, because they will carry the developers profit-premium. We have been advising our clients for two and a half years now, to avoid these properties, because they are likely to be substantially more expensive than older nearby properties with similar accommodation. This is especially true, if they are in a city centre as developers are always tempted to over-supply that local market.

Secondly, avoid locations where there has been a recent, exaggerated increase in prices and where the market values have reached a probable ceiling.

Here are a few locations to look at and a few to avoid at the moment.

Examine:
* Lyme Regis (det)
* Virginia Water (det)
* Birkenhead (semi)
* Steyning (semi)
* Camden (terr)
* Windermere (terr)
* Hove (flat)
* Jarrow (flat)

Avoid:
* Flint (det)
* Stocksfield (det)
* Staleybridge (terr)
* Brough (terr)
* Chorley (flat)
* Lingfield (flat)