Thursday, 28 August 2014

Why should you consider getting into buy to let in Erewash, Broxtowe and the Amber Valley


 

In a recent article, when we spoke about the difference between the four towns of Ilkeston, Heanor, Eastwood and Belper property markets, it produced a number emails and a couple of people making contact with me  for a chat about investing in buy to let.

Many people in our part of Derbyshire and Nottinghamshire have seen the buy to let market become all about nest egg investment, over the last few years. It is fuelled by pitiful interest rates on building society savings. It reflects the fact that building society savings accounts are paying half a per cent interest and pension returns are struggling to match expectations, turning more and more people into landlords to secure their future.  So what can you expect from your rental property investment? In the short term, rental yields are important, and in Erewash and Amber Valley, the average annual yield is in the order of 3.4% to 5.5% per year (depending on which town and type of property you buy of course).

In the long term though, the question of capital growth is as important, if not more important (because if you have great short term yields, but the value of the property doesn't keep up with the rest of the market, you will have an asset that in real terms is dropping). Taking Ilkeston as an example (but the figures are just as relevant for Heanor, Eastwood and Belper) as we mentioned in a previous article, average property values in Ilkeston currently stand at £143,400. Property values in Ilkeston have risen by 15.4% in the last 5 years. On the other hand, property investment is a long term game, so I wanted to share with you the research I did for a couple of Amber Valley and Erewash landlords. Roll the clock back 10 years to 2004, the average value of a property in Ilkeston was £97,700. 15 years to 1999 makes interesting reading, as the average Ilkeston property value was only £50,100, 30 years makes it £15,700 and just for a bit of fun, we looked at 1974 when it was £5,940!

However, if one looks at say a 30 year investment period, if you had put £15,700 into the stock market in 1984 instead of buying a house in Ilkeston, your shares today would be worth £91,008. Put the same £15,700 in a Building Society account and you reinvested the interest back into the account, and your Building Society passbook would have £86,889. Compare that with the property market in Ilkeston and the property would be worth £143,400 today. Quite a bit of difference to the building society until you realise that with the rental property you would have received in excess of £78,000 in rent over those 30 years, which wouldn’t have received with the Building Society account!

If you would like to discuss my thoughts on the rental markets in Ilkeston, Heanor, Eastwood or Belper, please feel free to pick up the phone 01332 910499 or email me on lettings@sprucetree.co.uk

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