By Henri Sant-Cassia, CEO www.oneandonlypro.com .
You’ve picked up the fearful whispers about the mythical Brexit effect – some say it’s a risky time to buy property – but having studied all the property data in the UK, I have never seen a better opportunity to invest.
Before explaining why, I want to deal with a major misconception. People talk about the property market as if they were going to purchase the whole of the UK’s stock of properties. Yet changes in average prices and general market trends have nothing to do with specific properties. As intelligent investors our objective should always be to find the best property deal in our chosen location.
If we can find a great deal, and buy at the right price for that specific piece of real estate, all the white noise in the marketplace fades into the background.
YIELDS ARE HIGHER THAN EVER
Right now, yields are spectacular. Even in sought after areas, or as I prefer to say, ‘overbought’ areas such as St Albans and Guildford, property with yields of 9% can easily be found.
A property yielding 9% would actually give a return of around 33% when bought with the leverage of a mortgage. So, in 3 years you would have returned your initial outlay. You’d be hard pushed to find that kind of return from any type of investment, especially an investment backed by the security of bricks and mortar.
SPINNING PLATES THEORY
The market depends on the different plates which are spinning. After the credit crunch of 2008 the finance plate stopped spinning. For cash investors and those who were still creditworthy this created a fantastic buying opportunity and tidy returns.
When a property plate stops spinning, it provides savvy investors with an opportunity. Today plates are spinning in seemingly crazy patterns, and this is producing more chances to find a winning investment than ever. When my parents look at the market today, they can’t believe there is so much negative sentiment.
For example, you can purchase houses and flats in the Midlands and the north for around £40,000. The mortgage on such a property would be around £60. I have paid more for phone contracts. You could clear your mortgage within a few years if you applied all your rental income to mortgage debt. Numbers never lie, and these are fundamentals, not opinion.
Finance is freely available, unlike in 2008 when the banks were looking at reasons not to lend, and in 1997 when buy to let mortgages did not exist. Yes, lending criteria have tightened, but there are more buy to let products coming onto the market, and lenders are keen to put their funds to work.
Demand for rental property from both professional tenants and receipt of housing benefits is high. My parents talk about the days when the government had adequate social housing, and my friends are constantly on the lookout for rentals. Our figures suggest demand has never been higher, and is continuing to rise.
Buy to let interest rates are at historic lows. Buy to let finance can be found at 1.8%. Interest rates have been as high as 10%+, and properties still rose in price. Lower interest rates should increase prices even further.
There are some very motivated sellers due to Brexit and tax changes. An intelligent investor knows that times of negative sentiment give the greatest opportunities. As Warren Buffet said, “It is wise to be fearful when others are greedy and greedy when others are fearful.”
Yes, stamp duty has been increased but mark my words the same investors who don’t want to pay £3,000 stamp duty on a £100,000 property are going to be kicking themselves when the price of the property hits £200,000.
Those worried about Section 20 tax changes can use a limited company to avoid the new rates. Even without this protection, the numbers still stack up. The same properties which were renting for £400 in 2006 which had mortgage payments of £400 are now renting for £525 with mortgage payments of £80. Even with a tax hike, there is still a massive margin to be made.
Remember, it’s about finding the right property at the right price. Analysing all properties for sale in the UK our AI system at One & Only Pro classifies only around 3% as worthwhile investments with 97% overvalued and possibly due to correct downwards. The key is finding your property within that 3%.
You may think you do not have the ability or the skills of a seasoned property investor, but new technology means the playing field is now level. Excellent investments can now be found in a few clicks.