Stanley Property London

Patrick's Property Politics

To Landlord or Not to Landlord? That is the question.

Tuesday 10th May 2022

By Patrick Bullick

Most weekends I read my Moneyweek magazine, take the (Sunday) Times, catch up on my FT feeds and constantly listen to the radio - to the point where divorce is deservedly imminent.

This weekend however, I was up a lane in deepest darkest Yorkshire and did none of the above.

So, I have no idea what the commentariat is thinking about the effects of rising interest rates on the economy and, Prime Central London property. Plus, I realise I don’t really care what they think because most commentators fail to recognise that Prime London is a different entity and nobody actually knows anyway.

Even without reading any comment, I imagine that some will be concerned base rates rising will mean mortgage rate hikes and in turn, this will reduce property values.

I have had to scrape (inside) my skull to recall how things pan out when rates rise. From memory, mortgage rates do rise but the actual borrowing rates tend to hover one or two percentage points above base rate. Many people have mortgages which float at a fixed percentage above base rate.

Longer term bond rates are not much higher than near term rates, so those guys think rate rises are for the short term only. 

More importantly, for Prime Central London, there is a serious lack of supply of rental properties.

People are gradually coming back to London and we still have net immigration of about ¼ million per annum into the UK. ‘Good’ say I - a topic for another PPP.

Rents are rising and outpacing the interest payments on mortgages by some way. Particularly, in Central London it is very hard to come up with sufficient deposit to buy a property, so people must rent - or commute great distances on smelly crowded trains. 

My instinct is that this is a good time to be a landlord in London. Prices in PCL have not risen since 2015 but seem to be starting to now. I encourage investors to look at returning to this market. 

Tell me if I am wrong. Always happy to debate……

PB

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