I had an interesting chat with a landlord who uses another letting agent in the City after he popped into our offices for a coffee whilst his wife was doing some last minute Christmas shopping. We got talking about the Croydon property market and thought other landlords might be interested.
You see, property values didn’t start leaping forward in Croydon until early 2013. Throughout the remainder of 2013, prices steadily increased. In 2014, property prices really rocketed. Several factors were in play here which caused this ‘property price bubble’. The public had more faith in the property market, having seen the activity from the previous year and also news headlines were encouraging, mortgage products became more available to first time buyers and also people who hadn’t been able to sell in previous years due to negative equity or just the property slump, suddenly were coming to market.
In 2015, whilst we have still seen a reasonable increase in property values. The start of the years was a bit slower, with the general election looming and people ‘waiting and seeing’ what was going to happen, however it did pick up almost straight away afterwards. We have also had the change with pensions this year, allowing people to have access to their money, which has brought out some new buy to let Landlords to the market.
As I’ve mentioned plenty of times in my previous blogs, the Croydon market is on the up, with the increase in property values being more sustainable. This is due to the balance between supply and demand being closer together, (although still more demand than supply). This should mean that the Croydon property market will continue to steadily rise for the foreseeable future.
However, we have got the possibility of a possible Interest rate rise on the horizon. This could stem the flow of buyers if the interest rates go crazy whilst they wait to see what happens with them. This could potentially flip the balance between supply and demand the other way. This would of course be worse case scenario, if the interest rise is done slowly and in small increments as it has been reported it will happen, then it should make that much of an impact on the Croydon property market.
The advice I would give to landlords is, as always, don’t just buy any old property in Croydon. First time landlords need to be cautious. The doubling of house prices every seven to ten years which has taken place since WW2 doesn’t seem to have been seen since the mid 2000’s. Although saying that, Croydon is one of the rare towns where there is a HUGE injection of money coming in (Read: Croydon Westfields). The property market is shifting with more properties being built and restrictions put on mortgage lending, the likelihood of the property market increasing at the same levels as the past are questionable. But investing in property is also about receiving the rent.
On the one hand going for high yielding Croydon property to rent out seems an obvious choice, but high yielding property often doesn’t go up in value that well and in some circumstances doesn’t keep up with inflation, meaning in real terms you have a depreciating asset. So surely you should pick a property that has great capital growth then, because of the obvious potential to generate long term capital profit, especially with inflation eating away at our savings. However, rental yields on high capital growth properties (in areas such as East Croydon, Central Croydon) tend to be low, meaning if you are taking a high percentage mortgage, the rent doesn’t pay the mortgage payments.
As always, my door is always open for both current and new landlords alike. If you want to pop in for a chat about investing in Croydon, I’m always happy to give my honest opinion.