Long term readers of this magazine will be very familiar with the boom and bust story which took place in some parts of the UK's residential property market from 2000 to 2008. Some fourteen years ago, around 2000/2001, it was not at all difficult to buy two and three bedroom older-style terraced houses in many parts of the north of England for less than £20,000 and back then many investor-landlords were getting gross yields of 20% or more on these low value properties.
Fast forward six years to 2006 and typical values on these types of properties in many locations had rocketed upwards to around £60-80,000 with gross yields plummeting down to 5-6%. And then in mid 2007, we had the collapse of Northern Rock and the bubble was well and truly burst with many such properties losing around 40-50% of their market value by 2011.
Many experienced residential landlords who had regularly bought up to around 2005 stopped buying well before the downturn occurred but a fair few were somewhat less judicious and kept purchasing at what were deemed irrationally low yields of 4-5%.
Long term investors will always look to buy at or near the bottom of a market cycle and if it's appropriate, to then look to sell at around the peak, however in the north of England now it would appear that for residential property values at least …'the only way is up'.
Nicholas Clift along with his business partner Michael Massey run a property sourcing and managing service for investors based in Sunderland on the North East coast.