West Hallam property market - Good Capital Growth?

 

Well my last article about West Hallam 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 Amber Valley, Broxtowe and Erewash property market is something that shouldn’t been done lightly.  For those new to the buy to let investment game, the yield 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.

Previously we said West Hallam property values were 5.5% above the 2007 peak of property prices (considering that average property prices in Derbyshire as a whole are currently 7% below the 2007 peak). 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 West Hallam property that sold in 1999 (and there were quite a few!) and the very same property selling again 2014, average property values had risen on average by 172.5% in West Hallam, whilst in Amber Valley and Erewash they had only risen by, on average, by 127.3%

That's not to say everything in West Hallam turns to gold. A two bedroom modern town house on Farnham Walk in West Hallam sold in March 2005 for £104,000 and quite recently someone purchased the property again for £110,000.  This was only a rise of 5.7% over 10 years.  Interestingly, the property was purchased as a buy to let investment and is currently on the market for rent for £525 per month, giving the landlord a potential yield of 5.72%.   As we don't sell property, I can always give my landlords (or landlords who aren't with me but want a second opinion and even people who are thinking of becoming landlords for the first time) 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 want to chat about property investment in the Ilkeston, Eastwood, Heanor and Belper areas, then if you buy right, you will build yourself some capital growth for the future. Our office is in Heanor and I look forward to seeing you soon or you can email me on lettings@sprucetree.co.uk

 

What happened to the Belper property market in 2014?

 

In previous articles, we have talked about Belper’s history of rents, property values, tenant demand and yields; all important matters for a landlord, but we haven’t discussed the future.

Property values rose by 8.4% (Oct 13 to Oct 14) in Belper over the same time frame. Good news all round, but when you consider property values have previously dropped by 17% between September 2007 and June 2009, this is not as good as the media would have you believe.  It should be no great surprise to hear that Belper property values are starting slow up as we head in to the New Year.  Whilst property values in Belper were growing by nearly 1% a month in the Summer months, on the run up to Christmas,  they have slowed and now increased last month by 0.5%.  

The reality is we have had a year and a half of decent market conditions in Belper, but now all that pent up demand is starting to fade. The big question moving forward is whether the Belper market will now be held back by affordability and restricted mortgage lending, and what long term impact this will have on the Belper property market.

Looking at the UK as a whole, because we can’t look at Belper just on its own, the recent strong rise in house values in some parts of the UK in the early part of the year (especially in London), along with earnings growth that remain below inflation and the possibility of an interest rate rise over the coming months, appear to have tempered housing demand. This weakening in demand has led to a modest easing in both property price growth and sales. A moderation in growth looks likely into next year as supply and demand become increasingly better balanced.

Now with the General Election just a few months away, whichever Government takes power, they, along with the Bank of England, have a thorny job to do in balancing the expected rise in interest rates with the continued resurgence of the housing market, to ensure the property market doesn’t drop and drag down the economic recovery forcing people into selling their property at a loss.

However, back to Belper, long term property values which track peaks and troughs are more helpful to landlord investors. The questions I seem to be asked on an almost daily basis by landlords are:-

“Should I sell my property in Belper, or even buy another?”

“Is the time right to buy another buy to let property in Belper and if not Belper, where?”

“Are there any property bargains out there in Belper?”

Many other Belper landlords, both who are with us and many who are with other  Belper letting agents, like to pop in for a coffee to  discuss the Belper property market, how Belper compares with its closest rivals; Eastwood, Ilkeston and Heanor, and hopefully answer the three questions above. Give me a call and I will just give you my honest opinion.

Kirk Hallam yield 7.4% +

This 3 bedroom home in Kirk Hallam needs a little cosmetic TLC and a bit of a garden facelift but is a great property to put into your Portfolio.  Kirk Hallam is popular with both families and professionals alike.  If you ask for a minimum of £525 pcm you’ll yield a nice return of 7.4%, even more if you’re canny.  Lets talk after you’ve done your viewing!

Does a little hard work and a potential yield of 8.5% interest you?

We’ve found another opportunity waiting for someone to take it.  This 3 bedroom terraced house in Heanor needs a little thought and modernisation before you take it to market but we believe it represents a real opportunity. 

With some shrewd negotiation you should be able to snap this property up.  We believe a realistic rent of £495 per calendar month could be sought.  That would be a yield of between 7 and 8.5%.  Why not book a viewing and then we can discuss who to let your property to!

Heanor Refurb Bargain - potential high yields!

 

 

If you’re not afraid to get your hands dirty, this property might be for you.  A smart new kitchen and bathroom would dramatically improve this property, not to mention spending some time on the carpets and decoration in order not to scare tenants away.  After this work has been done you could expect to achieve a realistic yield of between 7 and 9% depending upon how hard you’re able to bargain!  If this is one for you.  Get a viewing booked then call me for a chat 01332 910499.

Buy to let in the villages – Awful rental returns in West Hallam?

 

I have recently been speaking with a number of landlords about the importance of a balanced portfolio, when buying and renting out property. The balance between buying properties that offer good monthly returns (high yields) but quite often offer poor capital growth (ie they don't increase in value that much over the years compared with the average) verses properties that do go up in value quicker but often offer a lower yield. Another consideration has to be the mix of town properties verses the villages.

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 West Hallam and is particularly popular because of the successful primary school, Scargill C of E.

West Hallam consists of some 1,858 dwellings of different housing types and a population of 4,828 people.With an average property value of £188,860 and average rents in the order of £628 per month, the average yield achieved in West Hallam are miserable 3.99% a year .. you might as well put it in the bank! So, does that mean you should stay clear of buying a property in West Hallam as a buy to let investment ? Before I can answer that, you must really consider the capital growth vs yield question. Some Derbyshire 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 parts of Derbyshire, 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 Derbyshire is about balancing the two.

A few weeks ago, I said property values in Derbyshire were 7% below the 2007 property boom, but here is the interesting news, in West Hallam they are 5.5% above the 2007 boom prices.  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 West Hallam very happy after reading this!

Ilkeston Property Market Comes Off The Boil

 

The Amber Valley and Erewash property markets over the last 12 months have all certainly performed in different ways. If one considers the four towns of Ilkeston, Eastwood, Heanor and Belper property values over the last 12 months, property values have risen by 4.5% in Ilkeston, 4.3% in Heanor, 6.4% in Eastwood and 8.4% in Belper.  It gets even more interesting when you consider that in the last month of 2014 property values actually dropped in Heanor and Ilkeston whilst they increased by 0.3% in Eastwood and 0.5% in Belper.  Therefore, one must ask why are the four towns performing so differently when they are so close together? 

In this article, I want to look specifically at Ilkeston. In Ilkeston, the not so hot price rises  could be down to an increase in supply of properties on the market. Looking at the town centre, during the first 3 months of 2014, on average 73 properties were coming on to the market each month and for any potential buyer had, on average, 423 properties to choose from. In October, there were a lot more properties for a buyer to choose from (473 to be exact) and the number of new properties coming onto the market was in triple figures. Greater supply with tempered demand has eased the market. This is good news as we would not want a repeat of the overheating in the mid 2000’s where property values in Ilkeston 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. However, the up market areas of Ilkeston and DE7  (Morley, Kirk Hallam and Smalley) have benefitted from a delayed ripple effect from the South and saw their strongest quarterly price growth for four and half years. Interestingly, though, average values remain closer to 7% below their pre credit crunch level, property prices in the upmarket areas of town (Morley, Kirk Hallam and Smalley)  are on average 3% above the pre – credit crunch level (of late 2007).

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 Ilkeston 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.

As always, as I don’t sell property,  if you want a chat about what (or not to buy in the Ilkeston property market, email me the Rightmove link to jeremy.bullock@sprucetree.co.uk and I will give you my honest opinion.

Amber Valley and Erewash Property Market – What is going to happen in 2015?

 

I had an interesting chat with a landlord who uses another letting agent in the Heanor after he popped into our offices for a coffee whilst his wife was doing some last minute Christmas shopping. We got taking about both the Amber Valley and Erewash property markets, as he lives in Heanor but his buy to let properties are in Heanor, Ilkeston, Eastwood and Belper and I thought other homeowners and landlords might be interested in what was discussed. Whilst the housing markets are so different, with average property prices in Belper being as high as £210,400, in the middle, Ilkeston £139,700 and Heanor £133,700 with Eastwood at a very respect £115,600 there are a alot of similarities between the four town’s property markets .

You see, property values didn’t stop dropping in Amber Valley and Erewash until December 2009 (and even then, after a small recovery in the proceeding years, there was a minor dip in property values of 4.1% in early 2012), so after a strong run over the last 15 months, the ever upward drive of house price rises has started to turn with increases now at a standstill (and in some locations a minor drop) for the first time since the middle of 2013. Now it could be said this easing of the housing market in Amber Valley and Erewash can be attributed partly to the time of year (in 2013 property values in Amber Valley and Erewash dropped by 0.1% in December), it is obvious that estate agents in Amber Valley and Erewash are wary about the direction of the market as a result of the not as strong demand and fewer house sales.

With the uncertainty of a possible interest rate rise, new mortgage rules, a general election on the horizon and recent warnings of a house price bubble. Although the main indicators suggest that buyers will start to gain the upper hand, especially with the new stamp duty rules announced recently by George Osbourne. However, there are many homeowners who don’t need to sell and won’t bother unless it’s economically beneficial to do so, but most homeowners are homebuyers, so what they loose with one they gain with another.

 

On the one hand going for high yielding Amber Valley and Erewash property to rent out seems an obvious choice but high yielding property often doesn’t go up in value that well and in some circumstances doesn’t keep up with inflation, meaning in real terms you have a depreciating asset (I spoke about this a few months ago in ‘The Spruce Lettings Property Blog’). So surely you should pick a property that has great capital growth then, because of the obvious potential to generate long term capital profit, especially with inflation eating away at our savings. However, rental yields on high capital growth properties tend to be low meaning if you are taking a high percentage mortgage, the rent doesn’t pay the mortgage payments.

This is all good news for landlords looking to buy rental property with the changes in stamp duty and later in 2015, the new rules regarding pensions, where you will be able to take money out of your pension pot to invest in property. However, at the same time, I would say don’t just buy any old property in Amber Valley and Erewash. First time landlords need to be cautious. The doubling of house prices every seven to ten years which has taken place since WW2 doesn’t seem to have been seen since the mid 2000’s. The property market is shifting with more properties being built and restrictions put on mortgage lending, the likelihood of the property market increasing at the same levels as the past are questionable. But investing in property is also about receiving the rent.

If you want to chat about property investment in the either Belper, Ilkeston, Heanor or Eastwood, either pop into our offices Heanor or email direct on lettings@sprucetree.co.uk