A question posed by a local portfolio landlord of mine last week. Who would be the gainers and losers...?

Those Walsall people wanting property valuestodropwould be those 30 or 40 something's, sitting on a sizeable amount of equity and hoping to trade up (because the percentage drop of your current 'cheaper' property will be much less than the same percentage drop of the more expensive property- and trading up is all about the difference). If you have children planning to buy their first home or you are a 20 something wanting to buy your first home - you want them to drop. Also,Walsall landlordslooking to add to their portfolio will want to bag a bargain (or two) and they would love a drop!

Yet, if you have recently bought a Walsall property with a gigantic mortgage, you'll want property valuesto rise. If you are retired and are preparing to downsize, you will also want Walsall property values to rise (because you will have more cash left over after the move). Also, if you, a landlord looking to sell your portfolio or a Walsall home owner, who has remortgaged to raise money for other projects (meaning you have very little equity), you will want property values to rise to enable you to put a bigger deposit down on the next purchase.

So, before I discuss my thoughts on the future, it's important to look at the past...

The last property crash, caused by the Global Financial Crisis, was between Q3 2007 and Q3 2009 ... when property values in Walsall dropped 11.11%

...taking an average property value from £134,950 in September 2007 to £119,950 by September 2009 ... and since then - property values have over the medium-term risen (as can be seen on the graph).

KEY:

GREEN - DETACHED

YELLOW - SEMI

ORANGE - TERRACED

BLUE - FLATS

PURPLE - ALL

Many fellow professionals are pointing the finger at Brexit but I don't think that is the issue or at least not on its own. There is a direct link between how people feel about the property market (sentiment) and the actual performance of the property market. However, the question of whether people's sentiment moves as a result of changes in the property market, or whether changes in the property market drive sentiment is a question that baffles most economists - you see if someone feels assured about their financial situation (job, money etc.) and the future of property, they are more likely to feel assured to spend their hard-earned earnings on property and buy and if you think about it ... vice versa. So, I believe Brexit isn't the issue - it's just the "go to" excuse people are using. Humans don't like uncertainty, and Brexit itself is causing uncertainty - it is, after all, the great unknown. As a Letting Agent in Walsall we are monitoring this closely.

So, coming back to reality, one of the biggest driving factors in the current state of play in the Walsall housing market has been the part Walsall Buy to Let landlords have played in the last 15 years. Making money as buy to let landlord in these golden years was as easy as falling off a log - but not anymore! Landlords had been getting off quite lightly when it came to their tax position, but with Osborne changing the taxation rules on buy to let ... things have become a little more difficult for Walsall landlords and indeed the same goes for the rest of UK landlords as a whole.

And what of Walsall first time buyers? Well, a few weeks ago in my blog on the Walsall Property Market, if you recall, I mentioned that last year was the best year for over a decade for first time buyers. For the last 30 years, buy to let investors have constantly had more purchasing power than first time buyers, as they were older and more established, together with their tax breaks. Yet, now as many amateur landlords are having second thoughts in staying in buy to let, this has given first time buyers a chance to get on to the property ladder.

What will happen to Walsall property values? The simple fact is we don't have the conditions that caused the crash in 2007 (i.e. sub-prime lending in the US, causing banks not to lend to each other, thus stalling the global economy as a whole). Assuming everyone is sensible on the Brexit negotiations, the biggest issue is interest rates. As long as interest rates remain comparatively low (and don't get me wrong - I think we could stand Bank of England base interest rates at 1.5% to 2.5% and still be OK, then the thought of a massive property market crash still looks improbable.

Yet correspondingly, I cannot see Walsall property values rising quickly either.

The double-digit growth years in property values between 1999 and 2004 are well gone. A lot of that growth was caused by an explosion of buy to let landlords buying property to accommodate the influx of EU migrants in those years. Mark Carney at the Bank of England can't make interest rates any lower, so it's difficult to envisage how credit conditions can get any easier!

Balance of probabilities ... Walsall property values will hover either side of inflation over the next five years, but if we did have another crash, what exactly would that mean to Walsall homeowners - if they dropped by the same percentage amount, as they did in the last crash?

If Walsall prices dropped today by the same percentage as they did locally in the Global Financial Crisis back in 2007/9 ... we would only be returning to the property values being achieved in January 2016 ... and nobody was complaining about those!

Therefore, looking at the number of people who have bought homes in the area since January 2016, that would affect approximately only 13% of local home owners and landlords ... and only a small percentage would actually lose - because you only lose money if you decide to move (and come to think of it, some of those sellers would fall into the category mentioned above that would relish a price drop!). So, really not many people would lose out.

Interesting don't you think?

If you wish to discuss the Walsall Property Market or need a second opinion on your investment thoughts then pick up the phone or email me the Zoopla or Rightmove link. I don't charge for opinions and don't do the hard sell.

Email: salekm@ashmorelettings.co.uk

Phone: 01922 311016

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