What will next year's property trends be in Derby?

I had an interesting chat with a landlord who uses another letting agent in the City after he popped into our offices for a coffee whilst his wife was doing some last minute Christmas shopping (that reminds me, I must start thinking about mine!). We got talking about the Derby market and thought other landlords might be interested.

You see, property values didn’t stop dropping in Derby until January 2013, so after a strong run over the last 20 months, the ever upward drive of house price rises has started to turn with increases now at an almost standstill for the first time since the start of 2013. Now it could be said this easing of the housing market in Derby can be attributed partly to the time of year (last year property values in Derby dropped by 0.8% in November but recovered by 0.9% in December), it is obvious that estate agents in Derby 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 Osborne. 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 lose with one they gain with another.

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 Derby. 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.

On the one hand going for high yielding Derby 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 Derby Property Blog’ when comparing Pear Tree to Littleover). 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 (in areas such as Allestree, Breadsall and Little Eaton) tend to be low meaning if you are taking a high percentage mortgage, the rent doesn’t pay the mortgage payments.

That is why in the New Year, due to the demand, we will be running a number of informal Landlord Workshops for new and existing Derby landlords, irrespective of whether you are a self managing landlord (ie you do it all yourself), landlords with other agents, people who are thinking of becoming a new buy to let landlord in Derby for the first time in 2015 and finally our landlords that already let us manage their properties.

May I take this opportunity to wish you all a very Merry Christmas and a prosperous 2015.

What will the property investment market be like in Derby in 2015?

A number of landlords, who own property in Derby, have made contact with me recently asking for my thoughts on the future of the buy to let market in Derby. In previous articles, we have talked about Derby’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 5% (Oct 13 to Oct 14) in Derby. Good news all round, but when you consider property values in the city have previously dropped by 19.7% between November 2007 and January 2013, this is not as good as the media would have you believe.  It should be no great surprise to hear that Derby property values are starting slow up as we head in to the New Year. Property values in the city were growing at 1% a month in May and July this year, but in October they slowed to a mere 0.3% monthly increase.

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

Looking at the UK as a whole, because we can’t look at Derby in just its little own bubble, the recent rapid 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 on the horizon, 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 Derby; 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 Derby, or even buy another?”

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

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

Many other Derby landlords, both who are with us and many who are with other  Derby letting agents, like to pop in for a coffee to  discuss the Derby property market, how Derby compares with its closest rivals (Nottingham, Burton, Loughborough etc.), and hopefully answer the three questions above.

I don’t bite, I don’t do hard sell, I will just give you my honest and straight talking opinion. Please email me at simonj@professionalproperties.co.uk or call me on 07977 235545!

In the meantime may I take this opportunity to wish you all a very Merry Christmas and a  prosperous 2015.

The numbers say buying is cheaper than renting in Derby...

A few weeks ago, my article about why Derby twenty somethings aren’t buying anymore, caused a number of landlords to contact me. So much so, I want to revisit the story for a second time as some landlords are concerned demand will dry up as people start to buy instead of rent.

So .. Renting verses Buying in Derby – Which is best? An intriguing question, yes? Or one which would appear patently obvious to answer? Surely we are all in this to own our own property one day rather than paying out large sums of what is essentially ‘dead’ money, as some like to call it, in rent. Or is there a little more to it than that?

Let’s firstly look at a typical property sale. In Alvaston, there are a number of three bedroom semis for sale at £110,000. Say a first time buyer bought it for £103,500 working off a typical mortgage rate of 3.89%, with a 30 year repayment plan and based on an initial deposit of £5,175, the monthly repayments would be £464 per month. This property would typically fetch approximately £550 per calendar month.

So, it’s cheaper to buy then rent, so it would appear as though the answer is obvious. Buying must be the way to go. The sales market must be booming, but yet in a lot of cases it is not, and the number of people choosing to rent continues to grow. Besides the numbers, it’s clear that a certain percentage of people still favour renting than buying. The National Centre for Social Research Report backs this up pointing to a shift in attitudes from previous generations when buying at the first opportunity was the ‘done thing’.

Although in pure monetary terms, buying seems like the best option, first time buyers are clearly also considering the risk associated with owning their own property. The reasons for that reluctance to buy are many and varied, but here are some of my thoughts.

Firstly, it’s a big financial commitment –first timers need to be sure they can afford what they’re taking on. Also, when interest rates rise, repayments will also go up. New homeowners also need to be sure they can afford maintenance costs such as replacing a boiler if it packs up or fixing a leaky roof. If you stretch yourself too much when you buy you may resent not having money for meals out, holidays and entertainment.

You have less flexibility than when renting. For example, if you want to move for work or personal reasons selling up and moving on is far more expensive if you own as you’ll have all of the associated estate agency and legal fees. Also bear in mind that it may not always be easy to sell your home – (it was really tough to sell a property in Derby in 2008 and 2009) so it’ll be dependent on what’s happening in the market. Finally, If you’re living with someone else and split up, the process of sorting out the property will be far more complicated and expensive

Buying and owning your own home is certainly what the majority of us continue to strive towards, and but now more than ever ‘Generation Rent’ continues to gather considerable momentum and shows no sign of slowing down in the future.

No doubt this will be welcomed news amongst Derby’s landlords and investors.

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!

      

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The Derby property boom is over! Finished. Kaput! Or is it?

Put the streamers and silly hats away, the party that was ‘The Derby Property Boom’ is over. During the last 3 months, property values have only risen by 0.3%. So surely this is doom and gloom time isn’t it?

Well, no actually! The Derby housing marketing is entering a new phase. It has been through the 2001 to 2007 boom, a bust in 2008 and 2009 and a recovery cycle since 2012, and as we head into 2015, a year that will see the formation of a new Government, we are now entering a more stable, yet still challenging era.

As I said to a landlord from Little Eaton, who recently changed agents to us, in the East Midlands, (especially the big cities like Nottingham, Leicester and our own Derby) we are all facing a housing crisis, because in the East Midlands – with its high employment rates, excellent quality of life, and rapidly growing strengths in a range of sectors - it is becoming a victim of its own success. People want to live here but nobody wants to build on greenbelt. With planners not willing to give planning permissions for thousands of new properties that are required for our ever growing Derby population, accommodation in the City is in ever greater demand whilst supply remains worryingly slow to come through.

Just because property prices have levelled off in Derby, doesn’t mean the housing market is ready to jump off a cliff. I actually see this as a good thing, in fact, for the savvy landlord, a blessing in disguise. If you think the housing market is done and dusted for 2014, think again. This is the perfect time to snap up a bargain. Despite recent mild weather, chill winds are hitting parts of the market now. This means every seller has three strong reasons to get their business done this side of Christmas. You see, as a landlord with cash in your pocket, ready to buy the next buy to let investment, you can get a bit of a bargain at the moment. We have seen it in Derby as a seller’s market for 12 months, but as the pressure mounts for property sellers to sell, the market has tipped.

Another reason sellers want to do a deal as soon as possible is the uncertainty surrounding the general election in the coming Spring. In the past, the prospect of an election means buyers hold back until they know how their income and tax might be affected. But for the brave landlord, it’s a chance to look at properties with fewer rival landlord purchasers waiting in the wings. Just as many Derby landlords do now, whether they use us to manage the property or not, feel free to email any Rightmove link on any Derby property you are looking at, and I will always give you my unbiased opinion.

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!

      

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So Duffield rental returns are poor.. What about Capital Growth?

Hello again readers!

Well, the recent article about Duffield certainly 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 Derby 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.

In my rather thought provoking article we said Duffield property values were 9.35% 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 particular property or a number of properties for a landlord, I like to take a longer look at the market, as I consider a period of around 10 to 15 years a more suitable time frame for capital growth. After doing my research, looking at every Duffield 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 220.3% in Duffield, whilst in Derby they had only risen by 153.6% That's not to say everything in Duffield turns to gold. One property on Vicarage Lane had impressively risen by 111% since 2001, but not so impressive when you consider average property values in Duffield rose by 175% between 2001 and today. Also, one of those lovely apartments in The Park (on Tamworth Road in Duffield) sold a few months ago for nearly 10% below the price paid in 2008; the year of the slump. So, even in a village environment, it’s important to look at what type and to look at where the properties are that will effect good capital growth.

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!

As always, as I don’t sell property, if you want a chat about what (or not) to buy in the Derby property market, email me the property link from Rightmove to my email address and I will give you my honest opinion.

      

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Buying to let in the villages? Rental returns in Duffield 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. The balance between buying properties that offer good monthly returns (high yields) but quite often offer poor capital growth (i.e 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 Duffield and is particularly popular because of the successful secondary school, Ecclesbourne. The village consists of some 2,028 dwellings of different housing types and a population of 4,986 people.

With an average property value of £347,900 and average rents in the order of £831 per month, the average yield achieved in Duffield are miserable 2.86% a year.. you might as well put it in the bank!

So, does that mean you should stay clear of buying a property in Duffield as a buy to let investment ? Before I can answer that, you must really consider the capital growth vs yield question. Some Derby 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 Derby, 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 Derby is about balancing the two.

A few weeks ago, I said property values in Derby were 8% below the 2007 property boom, but here is the interesting news, in Duffield they are 9.35% above the 2007 boom prices.. this means if you had bought an average property in Duffield as opposed to Derby back in 2007, whilst your yields would have been low, in terms of the value of the property, you would be £51,500 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 Duffield very happy after reading this!

If you would like to discuss my thoughts on the rental market, feel free to pop through the door of our offices on St. James Street, call me on 07977 235545 or send me an email to:    

As always, as I don’t sell property, if you want a chat about what (or not)

to buy in the Derby property market, email me the property link from Rightmove to my email address and I will give you my honest opinion.

      

Click HERE to arrange you FREE RENTAL VALUATION.
Click HERE to ASK AN EXPERT anything to do with residential lettings.
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What's causing the Derby city centre slowdown?

Over the last month or so, the Derby City Centre property market has lost some of the momentum that was seen in the first half of the year, as prices rose by just 0.7% to leave annual price growth at 5.5% on average in the City Centre (compared to nearer 9% for the city as whole).

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. This could be down to an increase in supply.

Looking at the City centre, during the first 3 months of 2014, on average, 32 properties were coming on to the market each month and for any potential buyer had, on average, 137 properties to choose from. In September, there were 32% more properties for a buyer to choose from (182 to be exact) and the number of new properties coming onto the market also increased. 

Greater supply with tempered demand has eased the market and good news as we would not want a repeat of the overheating in the mid 2000’s where property values in Derby were increasing by over 20% a year between 2001 and 2004.

Other factors that are driving the city 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 suburb areas of Derby; Allestree, Littleover, Mickleover etc, 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 6% below their pre credit crunch level, property prices in the these areas of city 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 Derby as a whole, but considering we have a couple of years of decent growth, great demand for rental properties with
minimal void periods 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 Derby property market, email me the property link from Rightmove to my email address and i will give you my honest opinion.

      

Click HERE to arrange you FREE RENTAL VALUATION.
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As mindsets change, where does that leave the Derby rental market?

Following my article last month on property values up to July, I am pleased to say that Derby house prices edged up by a further 0.7% in August. As a result, the annual pace of house price growth is Derby up to 5.5% from 4.4% in July. We need to go back to March 2010 to see such a high growth, 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 Derby to one of its lowest rates of 2.6% (or 4197 people)

Nevertheless, Derby 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 Derby 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 Derby landlords is renting is here to stay for the medium to long term, whilst the outlook in the short term for the Derby 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 too if you want .. its no trouble at all, but I will warn you, I will always tell you what you need to hear, not want you want to hear!!  simonj@professionalproperties.co.uk

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Are there any poor estate agents in Derby?

My friends often call me an estate agent, but then I remind them that whilst a lot of estate agents do both property sales and lettings, we are a letting agent only and always plan to be.

By specialising in lettings, it enables me and team to get the job done right. In a recent article, when we spoke about the difference between Derby and Nottingham property markets and their prices, one landlord who popped his head round our door in St. James Street to chat about the Derby property market got talking about how he thought there were less for sale boards in Derby than there were ten, even fifteen years ago.

All the newspapers talk about is a crisis of a lack of properties. Building new property is not like the Mars bar factory that can keep the machines going an extra couple of hours to make more Mars bars. The Government says 200,000 properties need to be built each year for the next ten years. For Derby to take its share of that would mean we would have to build 1,904 properties each year for the next ten years.. yet in the last ten years, in Derby, we have only built on average 986 properties per year.
People in popular areas say they want more properties for their children and are usually in favour of more homes being built, as long as they are not in their local area!
Increasing supply of houses leads to more congestion, crowded amenities and loss of greenbelt. Then, and here is the big reason, those homeowners have a vested interest to keep the building low because an increased supply reduces the value of their existing home.

Finally, a lack of council houses since Mrs T. encouraged the sale of council housing after she was elected in 1979, the number of new social housing to replace them, has been very low.

However, getting back to the point, it’s a simple fact that since the 2007 crash, the number of properties that are selling in Derby has dramatically reduced. Look at the graph and you will see in the late 1990’s (what most say was a normal market), around 350 properties a month were selling each month in Derby. In the first half of the 2000’s decade, when we had a rising market, around 450 properties were changing hands each month in Derby. In 2008, the year of the property crash that dropped to 240 per month and hasn’t grown that much since, although we started to see a rise in 2014.

Hence those poor old estate agents aren’t selling as many properties! It must be tough for the little dears!

If you would like to discuss my thoughts on the rental market, feel free to pop through the door of our offices on St. James Street or send me an email to: simonj@professionalproperties.co.uk!

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In Derby, semi’s account for 38% of property sales. Is that good?

Derby attracts all sorts of property hunters seeking a home in our city and strikes a wonderful balance between old and new. Fortunately, just about every accommodation preference can be catered for, from highly desirable detached houses on the South West and North West areas of Mickleover, Allestree and Littleover, which are perfect for families, as well as popular 1930’s bay front semi detached houses, imposing late Victorian terraced houses and modern luxury apartments dotted around the City.

However, with newspapers and the media giving mixed messages on what is exactly happening in the City, let us have a look at what has happened over the last 12 months, in particular, what type of property is actually selling.

Between August 2013 and August 2014, 3421 of the 102,271 properties in Derby actually sold. The best performing type of property was, surprisingly, the detached house. With an average sale price of £225,824; over 1,010 of them sold, representing 29.5% of the property sold in Derby (which when you consider only 23.4% of Derby property is detached, this means detached houses have done well).

In very close second are terraced houses. They represented 27.7% of the sales but terraces only make up 23.6% of the property .. again good news for all terraced house owners.

Of the 40,097 semi detached houses in Derby, 1298 changed hands in the year, showing that whilst 39.2% of property in Derby are semis, they only, but very respectably, represented 37.9% of the sales.

However, it is the flats/apartments that seem to have performed the worst. Whilst there are 14,212 apartments in Derby (representing 13.8% of the housing stock), only 165 changed hands in the year, representing only 4.82% of the sales.

What does this mean for the property owners of Derby? It means that there is a two tone property market place in Derby. Most homeowners start with a terraced, aspire to move to semi detached houses, then as finances  allow, they move to a detached property. The majority of apartments, especially in the city centre, were purchased by landlords to rent out to tenants, so they have no need/want to trade up on the property ladder.

There are a small number of homeowners who are still in negative equity, and in some cases, property values of some Derby apartments sold at the height of the boom, are still 15% to 20% lower than what was paid for them in that 2007 boom.

However, on average, general Derby property values are only 8% off those 2007 property boom. We are seeing some good sales and if you look hard enough, you may chance upon a "hidden property gem" in the most unlikely of places..

If you would like to discuss anything further then please pop in and see me, send me an email or call me directly on 07977 235545.

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Onward and upward for the house price trend in Derby.

Last weekend I was asked to comment on Derby house prices at a property talk in Mickleover to a group of local landlords and investors. I did the research so I thought I would use it in this article!

In Derby, property prices are still 7% below the level that was achieved in the 2007 property boom (before it went pop in early 2008 with the credit crunch).  If Derby people sold their properties today, bearing in mind that the cost of living has increased by 19% over the last seven years too, the money they would get from the property would actually be 26%  lower (19% cost of living  + 7% below the 2007 boom), than if they’d sold in 2007.

Average Derby house prices are in a constant state of microflux. Over the last seventeen months, the trend has been in an upward  direction. The price of a typical Derby home increased by just 0.9% in July (yet dropped 0.6% in June and even stranger, still increased in May by 1% ).

Looking at monthly figures can be dangerous, so, I always look at the Land Registry  figures too which shows that the annual rate of Derby house price growth moderated in July to 4.1% from 4.4% in June.

The slowdown was not entirely unexpected, given mounting evidence of a moderation in activity in recent months.  Mortgage approvals declined by almost a fifth between January and May, and there has also been some softening in forward looking indicators, such as new buyer enquiries. But on the other side, with the labour market strengthening, landlords are looking for a home for their savings, mortgage rates are expected to remain low and with consumer confidence rising activity is likely to recover in the months ahead.

Rightmove have recently released some data on Derby and the immediate area, and they make fascinating reading. The peak of the property market last decade in Derby is recognised as November/December 2007. Whilst property values are still 7% lower than that boom, homeowner’s asking prices are 0.3% higher than the 2007 boom.  Therefore, there is an argument to say, some (not all) Derby asking prices are a little high but the price the properties are actually selling for, is a decent and reasonable figure. Remember, price is the amount someone is prepared to pay and not necessarily what someone thinks it is worth!

It all comes down to doing your homework, asking questions of the agent and the owners. Find out their motivation for selling and see if you can ‘bag that bargain’. Trust me, they are still out there. As we are not an estate agent, I can look at the whole of the market and give you an honest opinion on the investment potential of any property up with any agent. In fact, very soon, I will be starting to put on what I consider the best buy to let deals there are on to the ‘Derby Property Blog’;

If you would like to discuss anything further then please pop in and see me, send me an email or call me directly on 07977 235545.

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What if Brian Clough had bought a house in Derby and Nottingham in 1995?

A couple of weeks ago saw the latest East Midlands derby between Derby and Nottingham Forest. As both sets of fans clapped when Brian Clough was remembered and it was an emotional moment – such a giant for both clubs.

Whilst driving down the A52, aptly named Brian Clough Way, I decided in this weeks article to look at how both cities property values had faired over the long term.

When a property increases in value over time, it is known as capital growth. Capital growth has been strong in recent times in both Nottingham and Derby, but the value of   property does go up as well as down, and of course the local conditions surrounding your property have a big effect.   Rental income is what the tenant pays you and, hopefully, this will grow over time too. If you divide the  annual rent into the value (or purchase price) of the property, this is your annual return.

A few weeks ago, I said that both cities were around 8% off the 2007 boom prices. Well, the Land Registry have just released the figures going back to 1995, and that my ‘Derby Property Blog’ reading friends, makes for a completely different story altogether.

Between 1995 and 2000, Nottingham property performed nearly a quarter better, rising by 4.3%, compared to 3.37% in our Derby. The next five years saw the property boom, with property values rising by an impressive 115% in Nottingham, but not as impressive as Derby, whose property values rose by 134.6%.
Derby continued to do better between 2005 and 2010, which if you recall was when we had the property crash. Whilst average values dropped by 11% between 2005 and 2010 in Nottingham, in Derby they only dropped by 3.7%. Finally, since 2010 and to the present day Nottingham property values have continued to drop, being 3.8% lower, whilst our property values in Derby have held firm and in fact have risen ever so slightly by 0.1%.

Nottingham might get all the headlines, but since 1995, if Brian had bought a house in Nottingham, it would have been 92.2% higher in value now, but in Derby, it would have been worth 135.2% higher.

Each landlord will have different needs and requirements in his or her property investment. Knowing what has happened to values in different cities, enables us to spot any trends or opportunities for buy to let landlords. You ought to see what has happened to the different suburbs in Derby .. that makes even more interesting reading! .. something I will share in future articles.

You know what I always say readers - 'Knowledge is Power'. When it comes to lettings and property investment, it couldn't be more true!

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Private rented sector reforms - Why fix what isn’t broken?

In the last few months, politicians in Westminster have decided to step into an area which affects pretty much everyone involved in residential lettings - property and the private rental sector.

Anyone who rented property in the 1970s and 1980s knows the difficulties of tenancy agreements from that era which allowed the tenant the right to stay in the property for life. In some cases, tenancies could be transferred to their children, rents could not be increased and tenants could not be removed.

One of the suggestions by the Labour Party is rent controls. With more than 4.4 million people renting 3.4 million properties in England alone, it was clear that this could be a policy that was purely playing with the sentiments of these tenant voters.

In a damning report, the Institute of Economic Affairs says that Ed Miliband is going for completely the wrong solutions and accuses him of flawed thinking. Instead, the IEA says he should instead look at a radical liberalisation of the planning system to allow the private rented sector to grow.

Under the current legislation, tenants are already in a position to challenge rent increases that are unreasonable and they have the advantage of giving a months’ notice to the landlord (when the tenancy is a rolling agreement ie periodic tenancy) . But do rents need capping?

Well, let's look at our area. In Derby, there are 37,828 people renting 15,943 rental properties. The average rent of a Derby property in 2008 was £524 per month. If Derby landlords had raised the rents in line with inflation, (which sounds very fair to anyone), as inflation has been a total of 19% since 2008, the average rent in Derby should be today £524 + 19% = £623. At this moment in time, the average in Derby is £503.

However, restricting rent rises in the future could put more properties back on the market for sale as it would destroy the confidence in the housing market. In turn, this would reduce property prices. With less property available to rent, and a lack of interest from potential investors (due to the poor yields) this policy would end up creating a shortage of affordable housing.

Even with the vast increase in renting in Derby over the last ten years, 7.29% of property being rented in 2001 to 15.6%  in 2011, the number of homeowners in Derby only dropped by 1.9% (there were 63,979 homeowners in 2001 in Derby, but it only dropped to 62,765 homeowner households by 2011 in Derby. It is clear that the changes to the law of tenancy agreement made in Housing Act 1988 resulted in benefits to both landlords and tenants. The law has made it easier to rent a property and at the same time, the Assured Shorthold Tenancy gives the tenants a right to quiet enjoyment of the  property for a period of time. Yes, the total rent paid by Derby tenants is an awful lot of money, £96,231,948 a year in fact, but as rents are free to move up, but just as important down.

The IEA’s report also says that rent controls in Britain between 1915 and 1989 were associated with the collapse of the private rental sector, from close to nine-tenths of the housing stock at the start of the 20th century to close to one-tenth by the late 1980s.

Swedish economist Assar Lindbeck – a socialist – once said: “Rent control appears to be the most efficient technique presently known to destroy a city – except for bombing.”

Why fix what isn’t necessarily broken?

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Derby Apartments - 1 bedroom or 2 bedrooms?

Last week, I spoke to one of my landlords and she asked me if the number of bedrooms in a property had any influence on the return she could get. I did some research and followed up her query – I was actually quite surprised with the results...

Currently in Derby, the average rent for a one bed property is around £398 per month with an average value of £68,700. This means an approximate return/yield of 6.95% per year. This is of course the average.

There are one bed apartments on the market for rent at a higher price than some two bed apartments. In fact, some one bed apartments in Derby can attract rents in the late £600's whilst some converted terraced houses with flats in them can be rented for as little as £230 per month. This means yields on one beds can range between 4% and 9%.

Two bed apartments in Derby can be priced anywhere between £230,000 in one of those modern upmarket developments in Littleover and as low as £40,000 in Alvaston. Again, rents can be quite varied, ranging from over £700 per month for some bespoke unique apartments in the gated  development’s in Derby to £350 per month in Alvaston or around Pride Park. However, looking at the average rent for a two bed apartment in Derby, I calculate it to be £539 per month with the average value being £109.300 which gives a return/yield of 5.9% per year.

Whilst there is a little difference in the yields when it comes to the number of bedrooms, it is only one of many factors you should consider before buying a property. Whilst two bedrooms are more expensive to buy, they will always let better. Do they sell   better? Well, 23% of the two bed apartments on the market in Derby at this moment in time are sold subject to contract compared to 25% of 1 bed apartments – so not much difference there.
It really comes down to the property and type of tenant. Two beds attract sharers, which brings both advantages and disadvantages to the landlord but one beds have better yields.

It depends what you want from your investment. I know the lettings market in Derby so I can advise you what you can expect to achieve in rent and how it go up in value together. I don't sell property, so I don't make a penny out of you buying something, I make my money ensuring I can find the best tenants for the best properties. If you would like any advice on choosing properties, come and see us at our office on St. James Street.

If you would like to discuss anything further then please pop in and see me, send me an email or call me directly on 07977 235545.

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Are yields of 9.2% p.a. in Mackworth the best Derby has to offer?

I regularly talk to landlords about investing in Derby. Following a discussion with one of them last week, he asked me to look into the Mackworth Estate area, and whether it was a good place for him to invest in.

There was a 3 bed semi up for auction in mid September with Guide Price of just £65,000. Average rents in these types of properties have risen by 18.8% since 2008, which is amazing considering average rents in Derby are in fact 4% lower (on average) than those being achieved in 2008.

Let’s say you buy it for £70,000, the achievable rent can be in the order of £525 to £550, depending how much effort you have put into presenting it; but being sensible, we are still looking at a yield in the region of 9.1% to 9.2% per year.. yields that are only normally achieved in risky HMO’s (Houses of Multiple Occupation ie Student housing .. with the fun and games that brings!).

Property values since 2002 have risen, according the Land Registry, in Derby, by 55% but looking at the properties that sold in 2002 and again more recently, average increases in property values in Mackworth have been in the region of 98% over the same time frame.

So is this an investors paradise – great rental growth, great yield and great capital growth?

Well, all is not as it seems. This is a great example of the headline numbers (yield and capital growth) being not the only factor to consider when choosing an investment property, as you should also consider how long it takes to find a tenant. The average time it takes to find a tenant in the Mackworth Estate area can be up to six to eight weeks, whereas in other other parts of Derby a tenant is usually found in one or two weeks. If you take into account the extra five or six weeks of void period for your property, every six to nine months, because tenants in this area tend to have a high propensity to move more
regularly and the extra fees a landlord has to pay each time a tenant moves in and out, the annual overall return from the property is lower than it seems.

Finally, the property is constructed with non-traditional means i.e. not a cavity wall of two skins of brick and breeze block, but of a concrete frame. These are notoriously difficult to obtain mortgages on, so it’s only normally cash buyers who can go for these. I am not suggesting that you don’t buy it, but go in with your eyes wide open and having done your homework.

If you would like to discuss anything further then please pop in and see me, send me an email or call me directly on 07977 235545.

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Who owns what in Derby and the rise of the Renter!

Last week, a couple from the Little Eaton, north of Derby, came in to discuss with me about potentially investing in the Derby property market for the first time.

As my regular readers will know, the most important consideration you will make before investing in property is the balance between annual return and capital growth. However, what affects those two things in Derby are very varied and complex. The quantity of property and whether property is owner occupied, social housing, or private renting has a big difference on yield and capital growth.

The growth in home ownership in Derby, started in the 1950’s, continued through the 1960s and, by 1971, the proportion of owner occupiers was equal to those renting. By 1981, 58% of Derby households were owner occupied and, for the first time, the proportion of rentals was less than home owners but by 1991, it reached 68%.

Roll into the 21st Century and in 2001, there was hardly any change in the tenure structure in Derby, as owner occupation stayed relatively unchanged at 68.4%. The significant change over the decade (1991 to 2001) was within the rental sector, where the proportion of households privately renting increased for the first time since 1918. 7.2% of households were privately renting in 2001, while those socially renting had decreased to 14.2%. Between 2001 and 2011, the number of households in Derby rose from 92,405 to 102,271, an increase of 10.6%. but the percentage of households that were owner occupiers in Derby dropped significantly to 61.4%.

However, that doesn’t tell the full story, because whilst there was a significant drop in the percentages (68.4% to 61.4%), the actual numbers tell a completely different tale. Of the 63,287 households in Derby that were owner occupied in 2001, that figure had only dropped to 62,765 households being owner occupied .. so why the huge drop in percentages?

In 2001, 6,739 houses were privately rented (7.2%) in Derby but roll on another ten years and there are 15,943 households in Derby that are privately rented (15.6%). The rapid increase in the number of households privately renting in Derby could be linked to the decline in the number of households getting on the housing ladder, usually by way of a mortgage. This is mainly because of the increasing difficulty for first time buyers being able to raise deposits for a mortgage, which haven’t been helped by high property prices. The average Derby house price for those who were first time buyers increased by 91.3% between 2001 and 2011. This meant larger deposits which are linked to the house price, were required. Also tighter lending requirements, especially in the wake of the recent credit crunch meant a larger percentage of the house value was required as a deposit, as 100% mortgages became a thing of the past.

Finally, declining wage growth and rising inflation over the period exerted pressure on household spending and eroded the value of savings. While in 2001 the average house price in Derby was four and half times the average gross wage, by 2011 the average Derby house price was seven times larger than the average wage. This meant households needed to save for a longer period in order to provide a deposit.

If you would like to discuss anything further then please pop in and see me, send me an email or call me directly on 07977 235545.

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Chaddesden property market outperforms Allestree’s by 55%!

A couple from Breadsall came to our offices to discuss investing in property in Derby after reading this ‘Derby Property Blog’.
I reminded them that one of the most important considerations you will have to make before investing is considering the balance between annual return and the capital growth of the property that you buy.
One of the most sought after places to live in is Allestree on the North Eastern side of Derby. There are 5,956 households here and an   impressive 89% of the properties in Allestree are owner occupied, yet only 416 of those households (or 7%) are privately rented. Allestree has many different types of housing, but the very popular average 1950’s three bedroom semi-detached houses sell at around £225,100 (although there are some rather more expensive ones in certain parts of the area) and rents are on average £761 per   calendar month.

Chaddesden on the other hand is a different story altogether. Only 3,854 of the 11,300 Chaddesden households are home owners (34.1%) and surprisingly, only 1,073 are   rental properties (9.4%), the rest being made up of local authority owned housing. With this in mind, I carried out some further research and found that three bedroom semi-detached houses in Chaddesden have outperformed those on Allestree.
This is because a three bedroom semi in  Chaddesden can be bought for around £95,100 and the achievable rents can be around £500 per calendar month. The yield which could be achieved from property in Chaddesden is therefore around 6.2% per year. When we compare this to the possible 4.0% yield on Allestree, that return is 55% proportionally higher in Chaddesden than Allestree.

We must  remember however that yield is not the sole consideration when investing in Buy to Let properties. Areas which offer good yields, for example, Chaddesden, often suffer from poor capital growth as the properties in the area don’t increase in value as quick as the perceived more sought after areas.
However, looking at average property values in Allestree back to 2002, the average price  has risen by 45.2% up to today, but here was the even bigger surprise; the evidence suggests average values in Chaddesden have risen by an impressive 89.6% in the same time frame!

Nevertheless, even though the percentage rise hasn’t been as great in Allestree compared to Chaddesden, those of you live in Allestree are still  financially better off. Whilst the headline rate is higher, someone who bought a semi detached property in 2002 in Chaddesden would be nearly £45,000 better off due to the 89.6% rise, the 45.2% value increase for homeowners of semis in Allestree mean they are still £70,000 better off.

It just goes to show you need to look beyond the statistics and see what it means for your wallet!

If you would like to discuss anything further then please pop in and see me, send me an email or call me directly on 07977 235545.

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Could buy-to-let property in Derby be your nest egg investment?

My recent articles giving an insight into the Derby property market are producing more and more emails and an increasing number of people popping into my offices for a chat about investing in buy to let.

Many people in our part of Derbyshire, over the last few years, have seen the buy to let market become all about nest egg investment. 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.

To get anywhere near a savings rate of 4%, you have to tie your money up for 10 years. Now, personally, if I was tying my money up for that length of time, I would want a better return and more control.
So what can you expect from your rental   property investment?

In the short term, rental yields are important, and in Derby, the average annual yield is in the order of 3.44% per year. However, that is based on averages, and as most landlords in Derby tend to buy starter home homes, apartments and terraced houses, the majority of which are achieving 4.5% to 6.2% per year depending on location and price in the City.

If you have read some of my previous articles on property bargain hunting in Derby, you can achieve rental returns of nearer 7%!

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).

As we mentioned in a previous article, average property values in Derby currently stand at £170,300. Property values in Derby have risen by 9.65% 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 Derby landlords. Roll the clock back 10 years to 2004, the  average value of a property in Derby was £146,100. 15 years to 1999 makes interesting reading, as the average Derby property value was only £65,600, 30 years makes it £28,200 and just for a bit of fun, we looked at 1974 at it was £10,050!

However, if one looks at say a 30 year investment period, if you had put £28,200 into the stock market in 1984 instead of buying a house in Derby, your shares today would be worth £134,690. Put the same £28,200 money in a Building Society account and you reinvested the interest back into the account, and your Building Society passbook would have £158,070.

Compare that with the property market in Derby and the property would be worth £170,300 today. Not much difference to the building society until you realise that with the rental property you would have received in excess of £108,000 in rent over those 30 years, which you wouldn't have received with the Building Society account!

When it comes to investing in and letting out property, it is so important to do your sums and your research before taking the plunge. As the saying goes; if it was easy, everyone would be doing it!
Please give me a call or call in and see me to discuss any aspect of letting or buying       investment property.

If you would like to discuss anything further then please pop in and see me, send me an email or call me directly on 07977 235545.

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What has the ‘Help to Buy’ scheme done for Derby?

The Conservative’s and Liberal Democrats launched 'Help to Buy' last year to give a boost to the housing market.

The Help to Buy scheme involves the Government guaranteeing up to 15 per cent of a mortgage, acting as an indemnity for the banks and building societies who sign up (so far only three banks have done so). This means lenders can provide mortgages more confidently to borrowers with a 5 per cent deposit. It will apply to all types of properties, first-time buyers, home movers and re-mortgagers.

In the first 14 months (to end May 2014) there were 22,831 properties bought  with the support of the Help to Buy: equity loan scheme, up 2,283 (11%) from the total as at 30 April the majority of sales were to first-time buyers, representing 86% of total sales the average (mean) purchase price was £206,084.

Mr Cameron, during a recent visit to Ilkeston, said the Help to Buy scheme, introduced in April last year, has helped people in the East Midlands purchase 2,860 homes, 85% of whom were first-time buyers, and 27,861   nationally. Of the 2,860, some 168 were in Derby, though the Cabinet Office could not provide figures for how many of these were first-time buyers.

Quite interestingly, first timer buyers have had access to 95% mortgages since 2010 so I am not sure what it will do to the market, except highlight that property can be bought with a 5% deposit.

Scheme or no scheme, Derby continues to have a buoyant property market. Prices are rising, but not at the double digit level that was experienced in the early to mid 2000’s. If the scheme enables those who want to buy, to buy, then that can only be good for everyone in the town.
Over the last 2 or 3 years, it has mostly been landlords that have been buying property in Derby to let out. Carrying out a quick search on one of the price comparison websites, I was able to find in seconds that landlords can get fixed rate buy to let mortgages from as low as 2.99% until the end of 2016.

With rental yields in Derby of around 4% to 7% per year and the values increasing by 7.1% in Derby, and the overall yearly return is the region of 8% to 11% per year.

However, buying a buy to let property is full of pitfalls. If you have a good tenant, in a good property and a good relationship between tenant and agent, then not much can go wrong, as long as the relationship between the landlord and agent is exceptional. I pride myself on exceptional relationships with my  
landlords and their continued business speaks for itself.

If you are considering  becoming a new buy to let landlord, feel free to pop your head through the door of our agency on the St. James Street in Derby for some advice and opinion on what (or not) to buy.
It is true the property market is showing signs of good improvement, but, if you know where to look and what to look for, there are still bargains in Derby to be had.

If you would like to discuss anything further then please pop in and see me, send me an email or call me directly on 07977 235545.

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