The Credit Crunch 5 Years On, What Can Property Investors Learn From It?

Credit Crunch Impact On Property I recently met up with a few former colleagues and we got talking about the credit crunch and property.

Working as a property investment analyst back in 2007, both they and I personally felt the full force of the tidal wave that was about to hit investors and the companies who helped them source properties.

The net affect was that the eco system that had worked so well in the years leading up to the credit crunch was completely shattered for a while as confidence drained from a whole industry.

As property markets grow on confidence the credit crunch looked like the death of the industry.

I happened to be involved in sourcing East European property investments at the time and it quickly became apparent that investors were losing confidence. They began to ask themselves, how can I continue to believe that property prices will go on rising when the banks are failing?

They were of course right.

This was an extinction level event for the property industry as many companies went under and investors suffered losses by speculating in property markets, which were really built on the availability of cheap credit.

Looking back, were Romania and Bulgaria the kinds of places where investors should have been sourcing property investments for the long term?

So when the banks eventually pulled the plug, people stopped investing in property.

Fortunately for those investors who still believed in property investment, the good thing about the past 5 years and this has been the growth of the rental market.

The demand that fuelled the boom up until 5 years ago didn’t go away – instead many of those people who wanted to buy their homes back then are looking to rent instead.

The real losers were those people who were relying on short term property price growth rather than taking a long term view and looking for areas to invest where rental demand would be high and property prices low.

They ignored the simple rules of property investment and it ended up costing them dearly.

However those UK landlords who have bought and held UK property for this past 5 years have never had it so good. Yes property prices have barely moved in a positive direction outside London and the South East, but they have been able to increase the rents their tenants pay.

This has increased their yields and therefore their profits.

Also their buy-to-let mortgages have come down considerably as the banks have kept interest rates low. Meanwhile those with cash to invest in property have no doubt profited from making cheeky offers to cash strapped owners and developers.

The Credit Crunch then has not turned out so bad in the end for those who are benefiting from a reliable income stream driven by high tenant demand.

How has the credit crunch affected you this past 5 years? Please leave your comments below:

 

Kind Regards
Brett Tudor

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