Buy To Let Post Brexit in Dundee - Dont panic.
I don’t know about you but the tide of “woe, woe and thrice woe” post the vote (yes that one) is wearing thin with me. At this point most of its guesswork, angst or just plain old rant, all of course wrapped up with a healthy dose of fear.
It doesn’t matter who voted which way, events are going to unfold in due course and we all need to just deal with it as best we can.
Naturally property features heavily in these concerns and is probably the most common question I get asked, even my bank phoned me the other day for a chat about it.
There are (in my opinion), two ways to look at this if you’re a property investor:
A couple of weeks after Brexit, I guess there are a couple of ways to look at this……
If you decide not to buy as a result of the referendum and property prices drop then in the short term you will have certainly won. Your money will still be in the bank earning you virtually no interest but at least you won’t have lost anything.
If you are brave and decide to buy that investment property anyway and the market drops 5-10% you would no doubt be more than a little displeased and think it was probably a bad decision. Let’s say that property cost you £100,000 (just because it’s a nice round figure), then you could be looking at a loss of £5,000-£10,000.
To taking this premise, what would, or indeed am I advising when I am asked this very question, “Leap of faith or Money Under the Mattress”?
The first reality is that we don’t know what the effect of Brexit will be on the local market yet and we aren’t likely to for some time. We don’t know how long it will take to trigger Article 50 and, once it is triggered, we don’t know how long it might take to sort all of the issues out, but we do know there will always be a strong demand for rental property in Dundee unless the Law becomes an active volcano again.
If you are worried about property prices in Dundee then it might be worth thinking about some figures …..
2006 to today ....
In 2006, the average (and I do stress that) value of a Dundee property was just £141,255 back then and broken down by type it was: Detached £222,679; Semi-detached £140,321; Terraced £124,352; Flat £101,305.
The average value of a Dundee property today is £159,679 and broken down by type it is: Detached £260,191; Semi-detached £160,580; Terraced £137,594; Flat £114,708.
This means in the last 10 years the average value of a Dundee property has increased by 25.71% which breaks down by type of property as follows: Detached 29.87%; Semi-detached 19.81%; Terraced 26.66%; Flat 24.99%.
Going back further ....
Go back 20 years and you find that the average value of a Dundee property was £116,060 which broke down by type as follows: Detached £198,735; Semi-detached £121,852; Terraced £107,567; Flat £82,648.
So over the past 20 years a Dundee property’s average value has increased by 287.36% - the spread by type of property is greater: Detached 244.48%; Semi-detached 289.29%; Terraced 269.16%; Flat 274.00%.
And of course none of the above figures include the hopefully healthy rental yield you should be getting.
Property is for the long term ....
We often talk about property investment being a long term thing and if you’re in it for the long term and can weather the storms then you will probably do alright.
I have been involved in property in various ways over the last 20 years, as owner, landlord and letting agent, I have been through many property booms and traumas and guess what……
I’ve done all right out of it! If prices drop 10%, I will still have done all right out of it.
Now don’t get me wrong. I’ll be a little upset if they do drop 10% but my personal opinion is they won’t and if they do, then they will recover.
If over the next 10-20 years (which is what I would call holding a property long term) we experience anywhere near the same kind of growth a small blip will not make a huge difference.
At the moment people are being cautious and this could present itself as an opportunity for anyone looking to buy a property in Dundee as fewer people will be jumping in with both feet.
I’m not suggesting you rush out to buy a property but fortune favours the brave and either way in 10-20 years’ time you will probably have done all right!