One of my Camden landlords contacted me last week from Primrose Hill, after he had spoken to a landlord friend of his from Kentish Town. He told me they were deliberating the Camden property market and neither of them could make their mind up if it was time to either sell or buy property following Covid-19. His friend said he would wait to see what would happen to property prices following Covid-19, yet my landlord wanted to pick my brain in order to help him decide what to do.
I said the press are aware that bad news sells newspapers and the doom mongers are plying their trade on uncertainty in the world economic situation. Roll the clock back to the Credit Crunch of 2008/9, and there were quite a few landlords in Camden who had overexposed themselves with high percentage loan to value buy to let mortgages, backing the hope they would make their money on the capital growth, yet fell foul of a drop in rents and thus got bankrupted (but who could blame them when the property market was rising at 15% to 20% a year in the early 2000’s and banks like Northern Rock were giving mortgages out to anyone with a pulse and note from their Mum).
Thankfully the Bank of England changed the rules on all mortgages in 2014 banning self-certification mortgages, tightening the rules around interest-only mortgages and the requirement around affordability to be checked plus a tough stress test if interest rates rose. It’s obvious we are going to enter into a recession because of Covid-19, yet this time the Camden property market is better placed to weather the storm.
However, gone are the days when you could buy any old house in Camden and it would make money. Yes, in the past, anything in Camden that had four walls and a roof would make you money because since World War 2, property prices doubled every seven years … it was like having a free cash machine.
If a landlord bought an NW1 apartment in the summer of 2000, he or she would have seen a profit of £466,300 to its current value of £731,200, a rise of 176.0%
Nonetheless, if that landlord had bought the same property in 2010, the Camden landlord would have only made £181,400 profit (a 33.0% increase). Yet since 2010, the country has experienced 31.5% inflation, meaning our Camden landlord has seen the ‘real’ value of their Camden property increase by 1.5% (i.e. 33.0% less 31.5% inflation).
And this is my point. Nobody has been complaining about the property market in the last ten years, yet landlords have not made that much money even after inflation. If we do see a slight dip in property prices because of Covid-19 (looking at the market at the moment I haven’t seen any indication of its slowing down from its post lockdown takeoff), but if we do, Camden landlords need to realise property values aren’t the only indicator of whether the property market is good or not.
The reality is, since around the early 2000’s we haven’t seen anything like the capital growth in property we have seen in the past and it’s not predicted to grow at the rates it has previously done either. So, I believe it is high time for any Camden landlord pondering investing in Camden property to stop believing the hype and do some serious research using independent investment expertise. You can still make money by buying the right Camden property at the right price and finding the right tenant.
Think about it, properties in real terms are 1.5% higher than a decade ago, so investing in Camden property is not only about capital growth, but also about the yield (the return from the rent). It’s also about having a balanced property portfolio that will match what you want from your investment – and what is a ‘balanced property portfolio’? Well we discuss such matters on the Camden Property Blog ... if you haven’t seen the articles, then it might be worth a few minutes of your time?