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.

CLICK HERE TO REQUEST A NO OBLIGATION, 

FREE RENTAL VALUATION ON YOUR PROPERTY.

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.

CLICK HERE TO REQUEST A NO OBLIGATION, 

FREE RENTAL VALUATION ON YOUR PROPERTY.

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.

CLICK HERE TO REQUEST A NO OBLIGATION, 

FREE RENTAL VALUATION ON YOUR PROPERTY.