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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