Poor rental returns normally means good capital growth. What about Repton?

Hello again readers!

Well, there are only 28 sleeps until Christmas (sorry to remind you!). Over the festive period, many landlords make their investment plans for the new year so it may well be a good opportunity to look back over my past articles as they might give you some ideas and some invaluable information.

Well, last week’s article about rental returns in Repton made the phone ring!

The subject of investing in villages for buy to let is an interesting one. In fact it can be as risky as investing in student lettings or HMO’s (Houses of Multiple Occupation where everyone has a bedroom with a  shared kitchen and bathroom).

As I keep saying in these articles, investing in the Burton property market is something that shouldn’t been done lightly. For those new to the buy to let investment game, the rental return is the yearly rent from a property reflected as a percentage of the value of the property (one might consider it in the same light as the interest rate from your savings account) whilst the 'capital growth' is the amount the property goes up in value each year reflected as a percentage of the value of the property.

Last week we said Repton property values were 7.3% above the 2007 peak of property prices (before average UK property prices slumped 15% in 2008). However, property investment cannot be judged over short time frames and most certainly not by averages.

Often, when looking at a market for a landlord, I like to take a longer look at the market, and consider 10 to 15 years a more suitable time frame for capital growth. After doing my research, looking at every Repton property that sold in 1999 (and there were quite a few!) and the very same property selling again recently, average property values had risen on average by 227.5% in Repton, whilst in Burton they had only risen by 185.3%.

That's not to say everything in Repton turns to gold! One property in Brook House on the High Street of Repton, sold recently for a matter of a few thousand pounds above the price paid in 2008, the year of the slump.

I pride myself by knowing the market with all its ups and downs, so I can give some great advice and opinion. It might not be what you want to hear but, I can assure you, it is what you need to hear!

We are currently undertaking a mini office refurbishment at the moment so, if you would like to discuss my thoughts on the rental market, feel free to pop through the door of our offices on the High Street and see what we are doing.

You can also call me on 07973 666229 or send me an email to: davidm@professionalproperties.co.uk

      

Click HERE to arrange you FREE RENTAL VALUATION.
Click HERE to ASK AN EXPERT anything to do with residential lettings.
Click HERE to visit Professional Properties WEBSITE.

Should you invest in the villages? Rental returns in Repton are awful!

I have recently been speaking with a number of landlords about the importance of a balanced portfolio when buying and renting out property. We discussed the balance between buying properties that offer good monthly returns but quite often offer poor capital growth and properties that do go up in value quicker but often offer a lower yield.

Another consideration has to be the mix of town properties and village properties. Choosing the right village though is very important. Living in villages often has higher costs, especially transport and petrol costs. Some tenants don't buy because they can't afford the mortgage, so if you buy in the wrong village, you could limit yourself to the type of tenant who can afford those extra transport
costs.

However, one village that has a high demand with tenants is Repton. The village consists of some 1,036 dwellings of different housing types and a population of 2,867 people. With an average property value of £301,200 and average rents in the order of £789 per month, the average yield achieved in Repton are a miserable 3.14% a year .. you might as well put it in the bank!

So, does that mean you should stay clear of buying a property in Repton as a buy to let investment?
Before we can answer that, you must really consider the capital growth vs rental return question. Some Burton buy to let investors often make the mistake of chasing yield over capital growth and believe that by chasing high yielding properties, in say the ‘poorer’areas of Burton, they will make a faster profit than waiting for capital growth.

The problem with this is that to achieve high yield you usually have to compromise on capital growth. Therefore it would seem the most logical solution is to find a high yielding property in a strong capital growth area but, these simply don't exist and in actual fact, most of the time, lower yielding properties have a better capital growth. This is because there is generally a contrary relationship between yield and capital growth so the higher the yield, the lower the capital growth and the higher the capital growth, the lower the yield. Property investment in Burton is about balancing the two.

A few weeks ago, I said property values in Burton were 6.5% below the 2007 property boom, but here is the interesting news, in Repton they are 7.3% above the 2007 boom prices.. this means if you had bought an ‘average’ property in Repton as opposed to Burton back in 2007, whilst your yields would have been low, in terms of the value of the property, you would be £36,600 better off.

It just shows you need to look at the bigger picture when deciding what and where to buy your next buy to let property and I hope I have made all the property owners in Repton very happy after reading this!

I will always give all landlords my unbiased opinion on what to buy and not buy. I pride myself by knowing the market with all its ups and downs, so I can give some great advice and opinion. It might not be what you want to hear but, I can assure you, it is what you need to hear!

If you would like to discuss my thoughts on the rental market, feel free to pop through the door of our offices on the High Street, call me on 07973 666229 or send me an email to: davidm@professionalproperties.co.uk

      

Click HERE to arrange you FREE RENTAL VALUATION.
Click HERE to ASK AN EXPERT anything to do with residential lettings.
Click HERE to visit Professional Properties WEBSITE.

People more relaxed about moving as Burton town centre stops bubbling!

As we recover from the bubbling cauldrons of Halloween and the raging inferno’s of Bonfire Night, the temperatures have started to drop and, over the last month or so, the Burton Town centre property market has lost some of the momentum that was seen in the first half of the year. Prices rose by just 0.5% to leave annual price growth at 4.5%, on average, in the town centre (compared to nearer 5.5% for the neighbouring villages).

It was interesting to see The Nationwide Building Society House Price Index showed its first monthly price fall for 18 months in September 2014 and three-month on three month price growth fell by more than half the levels seen in March 2014.

So, what factors have caused this change? It could be down to an increase in supply. Looking at the Burton and immediate surrounding villages, during the first 3 months of 2014, on average 131 properties were coming on to the market each month and for anyone potentially looking for a new
property had, on average, 673 properties to choose from.

In September, there were sixth more properties for a buyer to choose from (781 to be exact) and the number of new properties coming onto the market also increased to 183 per month. Greater supply with tempered demand has eased the market and this can be seen as good news as we would not want a repeat of the overheating in the mid 2000’s where property values in Burton were increasing by over 20% a year between 2001 and 2004. Other factors that are driving the town centre market slowdown – namely the emerging impact of mortgage regulation and threat of interest rate rises are having an influence on buyer (mainly landlord) sentiment. When it comes to mortgages and
finance, people are certainly a lot more cautious than they used to be!

However, the some of the surrounding market villages of Burton have benefitted from a delayed ripple effect from the South and saw their strongest quarterly price growth for four and half years.
It now seems certain that the spectre of interest rate rises and the uncertainty around the General Election will suppress the short term potential for further price growth in Burton as a whole, but, considering we have a couple of years of decent growth, great demand for rental properties with little or no voids on most properties, this easing could be a blessing is disguise, as I don’t know about you, I wouldn’t want to see a repeat of the boom and bust property market of the last decade.

I will always give all landlords my unbiased opinion on what to buy and not buy. I pride myself by knowing the market with all its ups and downs, so I can give some great advice and opinion. It might not be what you want to hear but, I can assure you, it is what you need to hear!

If you would like to discuss my thoughts on the rental market, feel free to pop through the door of our offices on the High Street, call me on 07973 666229 or send me an email to: davidm@professionalproperties.co.uk

      

Click HERE to arrange you FREE RENTAL VALUATION.
Click HERE to ASK AN EXPERT anything to do with residential lettings.
Click HERE to visit Professional Properties WEBSITE.

A European mindset in Burton. Piggy bank or iPhone?

Following my article last month on property values up to July, I am pleased to say that Burton house prices edged up by a further 0.5% in August. As a result, the annual pace of house price growth is Burton down to  4.1% from 4.3% in July. When you consider house prices were stagnant a few years ago in Burton, as house price growth continues to outpace earnings by a wide margin, with average wage growth running at less than 1% in recent months.

I am not an estate agent, but know most of the estate agents in town well and they say new buyer enquiries have moderated somewhat in recent months, and the prospect of interest rate increases together with subdued wage growth may temper demand in the year to come. The demand should be there as the brightening economic outlook and consumer sentiment remains buoyant thanks to        declining inflation and sustained decreases in unemployment down in Burton to one of its lowest rates of 1.5%. (or 1705 people)

Nevertheless, Burton housing affordability does not appear stretched by historic standards, in part due to the low level of mortgage rates. The cost of servicing a typical mortgage remains close to the long run average of 30% of take home pay and it has been proved time and time again to be cheaper than renting.
A lovely three bed semi can be yours in Burton in one of the top areas for £130,000, meaning if you could save the £6,500 deposit, it would be cheaper to rent than buy. So why are first time buyers buying their first house instead of renting?

It comes down choice and lifestyle of the tenants. In many cases renting provides the flexibility some people, especially young people, want and need. For others home  ownership is top priority but when there is no social pressure to buy and you can ring the landlord and sort out any issue , why would someone want to buy. Youngsters find it harder to save for the deposit when Apple launch their latest iPhone each six months or the next 50 inch LCD TV needs buying. Renting is a choice and we are developing a more  European mindset it would seem.

Therefore, my message to Burton landlords is renting is here to stay for the long term, but the short term outlook for the Burton and East Midlands housing market remains uncertain. The number of mortgage approvals fell by  almost 20% between January and May, suggesting that activity was cooling.

However, there was a modest rebound in June and it is unclear how much of the slowdown was due to the introduction of Mortgage
Market Review  rather than an underlying loss of momentum.

It’s all about buying a property that will attract the right sort of tenants, a good balance of yield and capital growth and when you do come to sell it in ten or twenty years, it will sell whatever the market is doing at the time. As I don’t sell property, I can give you my honest opinion on any property.

Many landlords send me Rightmove links to property, asking my advice. You can to if you want .. its no trouble at, but i will warn you, I will always tell you what you need to hear, not what you want to hear.

If you would like to discuss my thoughts on the rental market, feel free to pop through the door of our offices on the High Street, call me on 07973 666229 or send me an email to: davidm@professionalproperties.co.uk

      

Click HERE to arrange you FREE RENTAL VALUATION.
Click HERE to ASK AN EXPERT anything to do with residential lettings.
Click HERE to visit Professional Properties WEBSITE.