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.

      

Click HERE to arrange you FREE RENTAL VALUATION.
Click HERE to ASK AN EXPERT anything to do with residential lettings.
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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.
Click HERE to visit Professional Properties WEBSITE.

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.
Click HERE to ASK AN EXPERT anything to do with residential lettings.
Click HERE to visit Professional Properties WEBSITE.

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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