I spoke about a conversation I had with a landlord, who lives in Old Moulsham near the Tennis Courts, who took me up on the offer of an informal chat about the Chelmsford property market the other week after he read the ‘Chelmsford Property Blog’.
We got talking about investing in Chelmsford property and how different areas of the town performed again other areas. Investing in Chelmsford property is a balancing between capital growth and yield. On the one hand going for strong capital growth seems an obvious choice because of the potential to generate long term capital profit, especially with inflation eating away at our savings. However, rental yields on high capital growth properties tend to be low meaning if you are taking a high percentage mortgage, the rent doesn’t pay the mortgage payments.
It became really interesting when we compared his area of Old Moulsham against The Westland Estate, where he was brought up in the 1950’s. The extended four bed bay fronted semis sell for £470,000 and rent for £1500 per month. This would give our landlord a yield of 3.8% per year .. very reasonable indeed. Until you consider those ex-local authority three bed semis in the Westland estate, which sell for around £190,000 and let, depending upon condition for around £875 per month, a yield of 5.5% per year, which is a 44% proportionally higher yield.
However, like I said a few weeks ago, yields are not everything in property investment. Another is how the value of the property goes up over time. Better properties in better locations don’t have the best yields, but their property values tend to go up quicker over the long term. The average values of three bed semis on Westland estate in 1999 was £69,875 in 1999, a rise of 172%. So, one would expect Old Moulsham property values to risen more.
Quite the opposite, average values have only risen by 130.6% since 1999. However, percentages don’t tell the whole story. Whilst an average homeowner, if they sold their property today in the Westfield estate would make around £120,000 tax free gain, a home owner in Old Moulsham would, on average, have made and impressive £264,000 gain.
Now I know there aren’t many landlords that would buy a large four bed semi in Old Moulsham to rent out. It’s just that looking at the Chelmsford property market in more depth enables me to give you the best advice and opinion to help you find the best investment property. It is in our interest that you buy a property which will rent well, and for long periods of time.
If you would like any advice on choosing properties, please come and see me at our office in Duke Street, opposite County Hall in Chelmsford.