Welcome everyone, my name is Ben and i have been given this opportunity to write the first blog for Paul at Landlord Services Management Ltd, otherwise known as my dad! So a brief introduction to me, I am a professionally qualified Civil Engineer and currently work as a Project Manager on a range of engineering projects in multiple sectors, recently including aviation and utilities. Aside from this I use my skills to help with my property investment, I look for properties which need some renovation work to add value but otherwise seek a long term rental investment which will hopefully benefit from capital growth, something i will be covering in this blog.
So i thought i would write about the current performance of the property market in Plymouth and really highlight why now is a good time to invest. Now you may or may not have heard about the 18 year property cycle but this is a powerful concept you should be aware of! If you haven’t heard of it, continue reading and then follow it up with more reading! I have added a diagram below for explanation, along with a link to the original posting by Rob Dix at the Property Geek. Essentially it means that we have a cycle of boom and bust every 18 years in the property market, give or take a year of two. From the boom we have around 4 years of recession/ recovery, 7 years of steady growth followed by a mid-cycle wobble (market uncertainty, then 7 years of explosive growth which takes us back to the start and the beginning of the recession/ recovery phase.
To express this graphically i have obtained all of the house price data from the Land Registry and converted it into a graph representing each category of property, feel free you undertake your own analysis at the Land Registry. The graph also shows the average house price which is what i will focus on here. Therefore the 18 year property cycle once overlaid onto the data looks like this:
Now, you could look at this two ways, firstly, that the recession phase stopped when we hit rock bottom around March 2009 (Just 14 Months in) meaning it didn’t last the expected 4 years. We could also look at it and determine that November 2011 was the point at which we began to see steady growth, which is pretty much bang on 4 years. From this point it’s easy to see we have had steady growth and are currently 6 years into the expected 7 years. So the real question is when will we see the mid-cycle wobble and the following 7 years of explosive growth? Well, no one really knows, we have seen signs with the removal of mortgage interest relief, the increase in Stamp Duty and the increased buy-to-let mortgage criteria that this has created a market decrease in certain geographical areas which may well be the wobble, however only time will tell. The one thing we can hopefully look forward to is 7 years of explosive growth!
Now why am I telling you all this? It’s pretty simple, property investment is in a very solid position and now that the market crash of 07/08 is a decade in the past we can start to look forward. Lets not forget that interest rates are at an all time low and have allowed the steady growth to happen, now that the Bank of England base rate is at 0.5% (up from 0.25%) this gives some signs that they are trying to keep the market cool. Once this settles down, landlords get used to the new rules and regulations and we gain confidence, we should see the house prices rise and create a fruitful future. The real question is whether you will capitalise on the current uncertainties and either start investing or increase your current investments? If you do then please bear in mind that whilst market trends are an indication they are not guaranteed. It’s also worth noting that the 2 years before a market crash is called ‘the winner’s curse’, this is because house prices are going up so fast you don’t think you can lose, you possibly start leveraging yourself further and then find that its all at risk when we have the market crash. The smart thing to do is therefore to track house prices, make your own assessment as to when you think it’s getting too hot and then slow down your investing. If you miss the last 2 years of growth it will mean you reduce the biggest portion of losses and these 2 years allow you to build up a cash reserve ready to invest when the market crashes again and people need to sell at reduced values. Whilst we look forward to a potentially explosive 7 years why not review your situation, review the market and look to increase your net worth in 2018 and beyond. If you need any assistance with managing your portfolio then by all means get in touch with Landlord Services, Paul’s property management systems are comprehensive and allow landlords to take a step back knowing that everything is in hand, simply click the link at the top of the blog and leave a message under ‘Contact Us’.
Although this has been a very brief tour of the 18 year property cycle its been great to have the privilege to write the first blog and I hope you find it worthwhile. All the best in your 2018 property adventures, Ben