One topic that I am always asked about, both by existing landlords and new ones, is how one area’s property values have performed against another. When purchasing a buy to let property, there are two ways landlords make money through property letting; capital growth and rental income growth.
When a property increases in value over time, it is known as capital growth. Capital growth has been strong in recent times in both Chelmsford and Braintree, 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.
One of our landlords from Great Baddow, who has a number of properties in both Chelmsford and Braintree, asked me about the difference between both these areas housing markets. I was quite surprised with my findings and wanted to share them with you.
The average property price in Chelmsford is currently £314,212. In the last 3 months property values in Chelmsford, according to my calculations, have risen by just over 2.4%. When this is compared back to the preceding months, it is showing that house prices have started to slow down in their increasing. In the previous 3 months, prices increased by 4.3% and 6 months prior to this increased by 4.6%. However, when we look at the bigger picture and look at how prices have performed in the last 5 years, prices are 22.4% higher than 2009.
Braintree has a slightly different story. Whilst property prices have increased by 16.2% in the last 5 years, it has been a bit more in fits and starts. To show you this in numbers, in the last 3 months, Braintree has only seen an increase in prices of 0.57%, the preceding 3 months, prices rose by 5.7%, 6 months before this, they only raised by 1.6% and the year leading up to this saw an increase of 3.24%. As you can see, there is not as much consistency in the price rises. Time will only tell if this will level out over the coming months.
So which is the better bet? Over the last 2 years, property values have increased at a 19% quicker rate in Chelmsford, compared to Braintree. If this trend carries on, Chelmsford would be the better area, in relation to long term house price growth. But then there is question of yield, as the average yield in Braintree is a healthy 5.3%, compared to Chelmsford at 4.5%.Although looking at the numbers is important when thinking about buying and investment property, you also need to look at the local market, what types of tenants are renting in the area you are interested in? Is there large council tenant demand, or mainly professionals?
Each Chelmsford (and Braintree) landlord will have different needs and requirements in his or her property investment. We are able to give an objective and unbiased opinion on what (and what doesn't) make a good property investment. Knowing what has happened to values in different towns, enables us to spot any trends or opportunities for buy to let landlords.
If you would like to discuss my thoughts on the property market, please feel free to pop into our offices on Duke Street.