Now that we are settled into 2019, the Southgate property market was subdued throughout 2018 and the trend is set to continue for this year. As I’ve mentioned in previous articles, property ownership is a medium to long term investment so, looking at the long-term, the average Southgate homeowner who bought their home at the turn of the Millennium would have seen an increase in the value by 295.4% or £464,351 in monetary terms.
The significance of this is that house prices are a national obsession, with the UK Economy centred on the housing market, fuelled by jobs and salaries.
The large increases have come about through house price inflation and homeowners adding value in terms of refurbishing and extending. I was curious and decided to take a closer look at the different types of property in Southgate and the profit made by each type.
(Source~ Land Registry)
Source- Land Registry
Importantly, there is inflation to be factored in to the equation with an increase of 60% since 2000 which will mean that the true spending power is much less. The table below gives us the Net Profit.
So the ‘real’ value of the profit, after inflation, in Southgate is a respectable £9,836 per year.The global economic recession of the last decade saw average values in the Southgate area fall by 15-20% in a 12-18 month period depending on the type of home you owned.The question that I’m often asked is what will happen to the future of the Southgate property market?
Irrespective of the political and economic headwinds, what is happening in Europe or globally, for the medium and long term there needs to be an increase of supply UK wide and locally for house price growth to be sustained.
Whilst we haven’t had the 2018 stats yet, Government sources suggest this will be nearer 180,000 to 190,000 new homes built , a decrease from the 2017 figure of 217,350 new households being created.
Governments, current and previous, have all fallen short of yearly house building targets for the past 35-40 years. One of the main arguments is to allow local councils to borrow against their housing stocks, rather than relying on the Private Sector. The increased need has come about for various reasons, longer life expectancy, more single parent households and divorce, to name but a few.Whilst Southgate landlords have been hit harder with higher taxes, to enable them to stay in business, surveys show that the majority intend to increase their portfolios over the coming years.
The younger generation of Southgate see renting as a choice, giving them flexibility with their commitments and is very fitting with the modern, mobile workforce.Demand for rented homes will continue to grow and landlords will be able to enjoy increased rents and capital growth, although those very same Southgate buy to let landlords will have to work smarter in the future to continue to make decent returns (profits) from their buy to let investments.
Even with the correction in prices throughout 2018, most Southgate buy to let landlords (and homeowners) have still benefited from substantial growth in terms of Capital Gain and rental yield since 2000. The challenge for Buy to Let investors for the long term is sustainability and growth.
Since the inception of Buy to Let in the 1990’s making money from property was straight forward. In today’s market place there is strong local competition from other Investors raising the bar, offering high quality homes, the new tax regime and ever increasing regulations, all eating away at the profit margin.
The role of the Letting Agent has gone from Rent Collector to Trusted Advisor. Thankfully, along with myself, there are a handful of agents in the Southgate area whom I would consider exemplary who can give you valuable impartial advice on your medium and long-term goals, in relation to your required return on investment, yield and capital growth requirements.
If you would like such advice, whether you are a landlord of ours or not – without any cost or commitment, feel free to drop me a line [email protected]
or call the office 020 8366 9777.