Podcast Summary
Considering Economic Factors and Seeking Expert Advice in Real Estate Investments: While being cautious with economic factors is crucial, overly pessimistic forecasts may not serve your best interests. Consult financial and real estate experts for informed decisions and consider alternative financing options.
While it's important to consider various economic factors when making real estate investment decisions, being overly pessimistic in forecasting may not serve your best interests. Sarah, a listener, shared her concerns about remortgaging a UK property and taking out additional funds based on her assumptions of a 5% annual growth rate and a subsequent 25% drop during a market crash. Rob, in response, acknowledged that Sarah's assumptions might be overly pessimistic and encouraged her to consider more optimistic scenarios. He emphasized the importance of consulting with financial and real estate experts to make informed decisions. Additionally, Sarah's expat status might complicate the remortgaging process, and she should consider alternative financing options. Overall, the discussion underscores the importance of considering various economic factors and seeking expert advice when making real estate investment decisions.
Property price growth: Uncertainty and historical trends: Historical trends suggest potential property price drops, but short-term investors may still benefit from current growth
While current property price growth of around 10% is higher than forecasted, it's uncertain if it will continue. Historically, property crashes have averaged around 15%, with some experiencing more significant drops. However, if we believe in the 18-year property cycle, the growth made in the last two years is typically wiped out during the crash. Therefore, if you're investing for five years, you're likely to come out ahead despite any potential crash. It's important to remember that these are predictions based on historical trends and not guarantees. The speaker acknowledges the risks involved but emphasizes the importance of investing with confidence and knowledge of market cycles.
Impact of Section 21 ban on rent prices: The Section 21 ban may lead to rent increases as landlords seek to offset potential losses, but a rent cap could be a potential solution to prevent excessive rent hikes.
The discussion revolves around the potential impact of the ending of Section 21 no-fault evictions in the UK on rent prices. Michael, a landlord, expresses concern that landlords may increase rents to force tenants out if evictions become more difficult. He references Ireland, where a rent cap is in place, as an example. Rob clarifies that the Section 21 ban means landlords can only evict tenants with a valid reason, such as selling the property or moving in themselves. The question then arises as to whether a rent cap would be necessary to prevent landlords from raising rents significantly. While there is no definitive answer, the possibility of a rent cap based on inflation or a fixed percentage is suggested as a potential solution. Overall, the conversation highlights the potential implications of the Section 21 ban on the private rental market and the need for consideration of potential policy responses.
Impact of rent control on property investors: Rent control may not significantly impact investors due to short tenancy lengths and landlords' reluctance to increase rents for existing tenants
While there may be some concerns about the potential impact of rent control on property investors, particularly during long tenancies or periods of high inflation, the average tenancy length in the UK is relatively short, making it less likely for rents to significantly deviate from market rates. Moreover, many landlords choose not to increase rents for existing tenants due to the costs of finding new tenants, which could result in tenants receiving a "discount" if inflation or rents rise. If rent control becomes a reality, it is not necessarily something to be feared, as long as it is implemented in a balanced and fair manner.
