Is this a good time to get into the Burton Buy to let market?

The buy to let sector in Burton, in fact the whole of the East Midlands buy to let sector is doing very well at the moment, but it can be a minefield.

I could regale you with many stories where investors have got it tremendously wrong in Burton, like, for example, some modern apartments on the corner of Horninglow Road North and Wyggeston Street, that were sold for an eye watering £133,000 in 2008, only to be selling today for £75,500, a drop of over 43%.

It is interesting to note that at that time in 2008 for £133,000, you could have bought a lovely 3 bed semi in Stretton or a three bed detached house in Tutbury. A two bed apartment for the same price as a decent semi or nice modern detached house, doesn’t, in hindsight, quite stack up.  The thing is, I still see mistakes being made on a daily basis in Burton. With property, if you make even a small mistake, it could still prove to be very costly.

So what should you buy in Burton?

One option is Houses of Multiple Occupation (HMO’s). While they can be profitable, chiefly in the student market with Burton and South Derbyshire College's students, they can make things much more complex and costly, with the need for HMO licences etc. Mortgage rates on buy to let are really low at the moment and for the right property and person you can get rates below 3.9% if you put down a decent deposit of 25%, but the best rates are for deposits of 40% deposit and,  as I type this, you can get a 5 year fixed rate buy to let mortgage from the Post Office for 3.65%. Also, the deposit will ensure you have plenty of equity in the property, if the property market stagnates in the future.

The important thing to remember is the amount you can borrow is driven by the rental income, so it is vital you can identify a property with a decent yield that lets easily. This is where I can help!

Finally though, if are investing so much time and money in building wealth for you and your family, it is equally important for you to identify ways to protect it. Do not forget, if you spend years building a successful property empire in Burton, when you pop your clogs, your family could face an inheritance tax bill of 40%, which they would have to pay within six months of the death. In a buoyant market, selling in six months is not an issue, but what if the market was like it was in Burton between 2008 and 2012, when things took seasons to sell, not weeks. Quite apart from losing nearly half of the assets you built for your family to the tax man, if they had to sell some of your portfolio, possibly at a discount because the taxman wanted his money so quick, it might be wise to consider some life insurance that will offer protection against inheritance tax.

There are plenty of good advisors in Burton that can help you with the mortgages and life insurance. We aren’t one, because we are a letting agent and we stick to what we are great at, but what we can help with is choosing the right Burton property to buy. It’s in our interest to do so, because if we offer the best advice and opinion, without any conflict of trying to sell you anything, you might consider trusting us to manage the property.

Which property price band is actually selling in Burton?

House Prices up, house prices down, house prices stable.. the newspapers are full of good news, bad news and indifferent news about the Brit’s favourite subject after the weather.. the property market.

The thing is, the UK does not have one housing market. Instead, it is a patchwork of mini property markets all performing in different ways in different areas.  At one end of scale is London, which has seen average prices grow in the last twelve months by a shade under 19% - and again that is an average because some Borough’s in London have risen by 26% - whilst in the land of Daffodils, by contrast, Wales only saw a 2% increase in property values, although in the Merthyr Valleys, they dropped by over 11%.

Well we can’t ignore the rest of the UK, and we can’t forget that the Chancellor’s Stamp Duty reforms have polarised the London property markets above £1,000,000 because at the top end of the market, punitive Stamp Duty charges will dampen demand further. While the Bank of England warned of the growing London property price bubble in the Spring of 2014, even talk of a recovery in some areas was premature. In 2015, irrespective of where you are in the UK, one story will unite the patchwork quilt of markets - really slow property value growth.

But what about Burton?

Well, we haven’t had the December figures from the Land Registry yet but the last few months’ activity and prices achieved would suggest neither house price growth nor drops.  In fact, most sellers are buyers anyway, so if you need to take less for yours, you won’t have to pay as much for the one you want to buy... and that is good news for everyone as most move up market when they move. This is even better for landlord investors, as they can bag a bargain as well.

The question you should be asking though is not only is what happening to property prices, but which price band exactly is selling? I like to keep an eye on the property market in Burton on a daily basis because it enables me to give the best advice and opinion on what, or not, to buy in Burton.

 

Over the last two months (62 days to be precise), 62 properties with asking prices under £100k have come onto the market in Burton and 32.2% of them (20 properties) have a buyer and are sold stc.

Between £100k and £150k, of the 88 properties that come on to the market, 25% of them (22 properties) have a buyer. The £150k to £200k price range has seen 71 properties come on to the market, and an unimpressive 11.2% have a buyer (8 properties). The more expensive £200k to £300k range has seen 6 of the 47 properties that came on to the market find buyers (12.7%) but the £300k+ range has been even slower, with only 7.1% (1 property) of the 14 that have come on to the market, find buyers.

The next three months’ activity will be crucial in understanding which way the market will go this year and I honestly believe we will not see any house price growth or drops this side of the election. Election or no election, people will always need a roof over their head and that is why the property market has rode the storms of Oil crisis in the 1970’s, the 1980’s depression, Black Monday in the 1990’s, and latterly the Credit Crunch together with the various house price crashes of 1973, 1987 and 2008.

Why? Because of Britain’s chronic lack of housing will prop up house prices and prevent a post spike crash... there is always a silver lining when it comes to the property market!

Is there a reluctance to sell property in Burton?

Apathy has hit the Burton housing market as sellers await the outcome of the general election and stricter mortgage regulation suppresses buyer demand. This is mirrored around the UK as Rightmove reported the number of homes registered for sale per estate agent fell to its lowest level for five years in December, with available stock 10 per cent lower than in the same month a year earlier.

Looking at Burton, in the summer of 2014, each estate agent in Burton had on average 45.7 properties on its books (as there were a total of 777 properties up for sale in Burton at the peak in the Summer just gone). Our research shows that number has plummeted to 38.5 per agent in December and looking at first three weeks of January, this number will lower by the month’s end.  While the lack of new properties coming onto the market in the later months of 2014 in Burton pushed asking prices up slightly from November to December, traditionally a quiet season for the housing market, property sellers will need to work hard in 2015 to complete a sale.

The length of time a property takes to sell has increased over the last few months. Two bedroom properties in Burton are now taking 94 days to sell, three bedroom 72 days, four bedrooms 97 days, but here an interesting figure, one beds are taking on average 137 days to find a buyer

2015 will be the year of the selective mover. With only 315 brand new properties a year being built in Burton since the turn of the Millennium (we should be building 610 per year if we took our equal share from around the UK), this woefully low and insufficient number of new buildings in the City over the past few decades and a systemic change in the type of properties homeowners want (with families splitting etc so we have too many larger houses and not enough smaller ones), buyers are becoming dissatisfied with, and therefore dismissive of what is up for sale.

I would confirm the heat has gone out of the Burton property market and I anticipate a moderate reduction from the high transaction volumes seen in 2014. That might mean Burton landlords could bag a bargain during this period of uncertainty, especially if the financial markets do not like the election outcome. Markets and buyers do not like uncertainty, but savvy Buy to let landlords know buy to let is a long term game, and irrespective of short term apathy, reduction in the quality and quantity of stock for homeowners to buy  or the election, if people don’t buy property they rent. Burton City Council are building anymore properties, the council house waiting list is decades, not years for the better type of property.. the only other place to get a roof over your head.. rent a property! Good old Bricks and Mortar!

Therefore, if you are considering buying a property for investment in the near future, as I don't sell property, I am always happy to give you my considered opinion on which property to buy (or not as the case may be) to give you what you want from your investment.

Is Stretton the place to buy a property?

Information is so important when making decisions on what (or not) to buy when investing in Burton property. The demand for rental properties is much greater that the supply and some circumstances, we have four to five prospective tenants for each decent property. As always the demand is much greater for properties that are good areas. Also, we are noticing that tenants are staying longer in their chosen property with some tenants signing for the third and fourth years. This is obviously causing problems from the supply side so we are relying on new investment Landlords to bring in some new properties.

Today, I want to look at the Stretton to the Northern edge of Burton. By knowing the different areas of Burton, I can weigh up potential hotspots in the rental market and show potential landlords where there could be an opportunity. The majority of properties sold in Stretton during the last 12 months were detached properties which on average sold for £222,000. Semi-detached properties had an average sold price of £137,900 and terraced properties averaged at £114,700.

The overall average property in Stretton is worth £168,500, which as one would expect is higher than Burton overall average at £144,500 and Stapenhill £144,600, but was cheaper than next door Rolleston-On-Dove at £220,300.

In Stretton, there are 7,849 people living in 3,285 properties. It is the home ownership percentages that really got me interested, as it is this information, tied in with our intimate knowledge of the market, where we can match tenant demand to an under supply of rental properties. In Stretton, of those 3,285 households, 87.6% own their property, compared to the Burton average of 69.6%.

There are only 245 rented properties in Stretton are in the private rented sector (7.5% of Stretton properties are privately rented compared with the Burton average of 13.8%). The reason the private rental sector is much lower is that Stretton has a high proportion of homeowners and hardly any local authority housing. The properties do sell well, in fact 782 properties have changed hands since 2007. However, with such excellent demand from homeowners and tenants, this could be the right area to purchase your next buy to let investment. Stretton might not have the stellar yields of the terraced houses between the A38 bypass and Derby Street/ Derby Road but they are in the very respectable 4% to 5% range.

However, where Stretton comes into its own is in its growth in property values. Stretton property values are 112.6% higher than the year 2002 - not too shabby when you consider that the overall Burton average is 77.8% higher over the same time frame!

Therefore, if you are considering buying a property for investment in the near future, as I don't sell property, I am always happy to give you my considered opinion on which property to buy (or not as the case may be) to give you what you want from your investment. If you are a landlord, new or old, I am certainly more than happy for you to pick up the phone, pop into our High Street branch (with new window displays I might add!)