Five Reasons Why Now Is The Time To Buy In The North East
1) CAPITAL GROWTH FOR 2005
Most respected property market commentators are predicting 2 – 5% capital growth for England as a whole and 4 – 8% in the NORTH EAST in 2005. We are predicting a 7.5% rise in the value of MRA recommended properties during 2005.
However we believe that it is sensible to advise that investment in property for capital growth is a long term prospect and not a “get rich quick scheme”.
Therefore when we quote a capital growth rate it is the figure that we expect that property to rise in value by on average each year over the next 10 years.
Of course we do not live in an ideal world and we are not saying that prices will rise uniformly by 7.5% each year, instead the market is cyclical and we will experience dramatic rises, static periods and possibly falls during that period.
The chart below shows an EXAMPLE of what COULD happen to values over the next 10 years, including both a static and falling market, yet the end result is still an average 7.5% rise per annum.
Year % Growth Property Value
1 7.5% £64,500
2 8% £69,660
3 9% £75,929
4 2.5% £77,828
5 0% £77,828
6 -2.5% £75,882
7 10% £83,470
8 12.5% £93,904
9 12.5% £105,642
10 15% £121,488
Average 7.5% £121,488
In this example if the property was geared with an 85% buy-to-let mortgage that would mean that only £9,000 of you cash was invested, ie £51,000 mortgage and a £9,000 deposit. Over the 10 years your capital growth return alone would be £61,488, ie the rise in value from £60,000 to £121,488. That is 683% in 10 years!!
Remember, over the last 16 years values in the North East of England have risen on average by approximately 10% per annum across the board despite the fact that during that period we have experienced the largest crash on record in the early nineties when values fell by as much as 25% per annum. Investing for capital growth is a long term prospect. Buy, hold and never sell, you will not regret it.
NEW YEAR PROMISES HOUSE PRICE RISES THE COUNCIL OF MORTGAGE LENDERS REPORT
2) AFFORDABILITY
The North East of England remains one of the most affordable areas of the country to buy property. Affordability is THE factor when predicting potential for future growth of capital. According to a recent report, Chelsea is the least affordable place in the UK. You have to earn 31.2 times the average London salary to buy the average property. However according to the report the most affordable place in the UK where you only have to find 1.9 times your salary, is Easington in the North East, in the heart of the area where MRA sources and recommends property investments. In South Tyneside the average property today costs circa £85,000 with the average salary being circa £25,000 PA, in the South East those figures stretch to £31,000 PA for the average salary but you have to find a massive £225,000 to buy the average property. We all have access to the same mortgage products, where is the greatest potential for capital growth?
1 IN 4 AREAS STILL HAVE “UNDERVALUED” PROPERTY
3) SUPPLY OF QUALITY PROPERTIES
As the market has slowed there is now far less competition for good quality investment properties and we are picking up more and more fantastic deals. We are now no longer in competition with as many “amateur” investors willing to pay unrealistic prices and causing us to withdraw.
4) INTEREST RATE FALLS
As you have no doubt read most respected economic analysts are now predicting interest rate falls during 2005. We are expecting the base rate to be circa 4% by the end of the year. On an average MRA property with 85% gearing the yield increases by approximately 1.5% per annum for every 0.25% drop in the mortgage interest rate.
5) HIGH TENANT DEMAND
In our area of operation we are now experiencing more demand than ever from Tenants. Rents are rising and this trend is set to continue. This is primarily because rent increases always lag behind capital value rises and as people perceive gloom in the market described by the media they are more likely to want to rent than buy. Other reasons for the increase in demand include:-
First-time buyers not being able to enter the market and leaving it later.
A large increase in unsecured debt making it difficult for people to find the money to purchase a home, ie stamp duty, legal costs, furniture, carpets etc.
A shift in the UK housing market in coming years to a more European approach where far more people rent than own.
A continued increase in the number of single occupancy households.
Huge inward investment in the North East bringing workers.
Massive immigration into the UK from new EU countries an Asylum seekers.
Not enough new homes being built to meet demand.
These and other factors have prompted the Centre for Economic Business Research to predict that “rental demand will nearly double inside 10 years”
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