Landlords Looking Forward

In many ways this last year of property investing has been a case of ‘back to the future.’

What do I mean? Well we have seen stability return to house prices and less of the economic shockwaves that rocked our entire financial system in 2008/2009. Whilst things continue to look bleak in terms of the near term, I genuinely think going into 2011 and beyond there is a more stable and predictable economic outlook. I can see a slow unwinding of an overvalued residential property market caused by a huge credit bubble at the end of the ‘noughties.’

Property investment after a frenetic feeding frenzy has returned to old fashioned fundamentals. Landlords that have survived, are buying property for the long-term and focusing on rental yields and particularly net yields to ensure a landlord is cash positive even when interest rates inevitably rise.

Buy property rapidly and repent at your leisure

The recent demise of yet another ‘property guru’ highlights the dangers of buying ‘packaged’ property investments from so called experts. These people peddle the mantra of property investment as a way to a better life with almost religious zeal. Yet their experience is nothing more than a property self help book and them seeing an opportunity to flog inexperienced investors a product.

DIY property investment

I would urge all new landlords to ignore packaged investments. They should DIY. If this is too much effort then you should probably not be a residential landlord, if you are not prepared to put the effort in. The sourcing of the property and the finance required is all part of the process of residential investment. Not to do this and rely on somebody else will very likely mean that you will end up with a more expensive and less desirable property investment than if you spent a little time researching things yourself.

The future

I’m not predicting that where we stand at the moment with huge structural imbalances in the public finances that the immediate future for residential property investment is bright. That would be madness. However, with a sense of perspective gained from over 20 years in the property business I would say that things are bad, but at least containably bad. We have been in the property doldrums before. Anybody old enough will remember the slumps in the early 80s and 90s. Things recovered before and they will again. Critical to recovery is mortgage finance and there is the rub. Without finance prices won’t recover. Without confidence in a rising market mortgage companies will continue to restrict lending. It’s the classic paradox at the bottom of the market.

I do however think we are at or approaching the low. I still maintain my prediction which I made back in 2008 which is based on instinct rather than any hugely intricate economic model, is that the Olympic year in 2012 will herald the start of a new bull market in house prices.

At this stage after a very tough 2011, the countries mood and the prospects will start to look a lot brighter. At that point; providing landlords stick to basic investment principles, 2011 may start to look in retrospect, a good time to pick up a property bargain.

All that it remains for me to say is have a Merry Christmas and I wish you all a safe and prosperous new year.

Chris Horne

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