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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The Derby Property Market has been like a can of fizzy pop!

A number of landlords, first time buyers and investors have approached me recently, asking about the Derby property market. With all these headlines of massive increases in property values in the UK, should we be worried we are about to have a price crash?

We are at the early stages but the economy is now actually looking a lot healthier and there are signs we are seeing an actual recovery after several false starts.

I am of the opinion that over the last few years, whilst mortgages have been a little more difficult to obtain than the last decade of the 2000’s, this lack of mortgages has produced some pent up demand for property. Now we appear to be on the other side of the financial crisis, and the banks are more willing to lend, this is why sales, prices and first-time buyer numbers have improved so rapidly. It has been like opening a shaken can of fizzy pop. You get the initial fizz of activity, and then it flattens.

What we're seeing is a relatively normal market correction, not a quick transition from a recession to a boom.

Property values in Derby have risen, on average by only 7.1 % in the last 12 months. When I look at the East Midlands as a whole, prices have risen by 7.9% and nationally by around 8.7%. Compared to the boom years of 2001 to 2004, when property values increased by 20% in 2001, 33.9% in 2002 and 8.4% in 2003 in Derby, I cannot see why some are concerned about an unsustainable price boom. I believe house prices are rising off a low base and talk of a housing bubble in relation to the national market is overdone.

We are seeing continued exceptional property price growth in London combining with modest gains across other regions and creating a picture of a broadening market recovery, and I expect prices to continue to rise in the short term.

Speaking to others in Derby, the issue isn’t house price inflation, but a lack realistically priced properties coming onto the market for sale, hence, a lack of supply.

In the last two weeks of April 196 properties came on to the market for sale in Derby, two months later in  the first two weeks of June, only 165  properties came on to the market. So should you be buying a property in Derby?  Now is a good time to buy, provided you accept prices may fall again in a few years. It depends on how long you plan to own the property (whether as a home or investment), whether it personally suits you and most importantly whether you can afford it.

Derby first time buyers preparing to take the plunge should bear these factors in mind. The biggest issue must be that buyers ensure they can take the hit of future interest rate rises and therefore, I ask the first time buyers of Derby to make sure you'd be happy in your new home, because you could be stuck there in five years' time.

Landlords tend to buy for the long term, so these short term movements don’t tend to affect them as much. The lack of supply in Derby of new properties coming onto the market indicates people wanting to buy have to move quickly, and don’t have the luxury of a few weeks to decide to view the property. However, my findings show that first time buyers and landlords in Derby aren’t prepared to pay over the odds for a property to secure it. Maybe, just maybe, the memory of the 2008 price crash has given a dose of realism to the optimistic Derby property market?

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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