Following last week’s article, I had an interesting chat with a chap who lives in Rogerstone, who popped into our office on Station Street, whilst his better half was at the hair salon (next door to our office). He is thinking of buying his first buy to let property and he wanted my opinion on the state of the market and if it was a good time to invest.
He was particularly worried that with all the newspaper headlines of a booming housing market, there wouldn’t be any demand from tenants. One of the best pieces of advice I can give to those looking to invest in property is a simple trick of the trade. You can judge the affordability of an area’s property market (and thus how much demand there could be) by simply finding the ratio of the average property price to the average salary. The lower the ratio, the more affordable property is.
When we put this to the test, as we talked about a few weeks ago, we found that Newport currently has an average property value of around £155,200 . The average salary of someone living in Newport is £24,411. This is a ratio of 6.35 to 1. Most lenders will only lend up to 4.5 times income, so to buy an average house in Newport, a first time buyer would need to be on a salary in the mid £30,000’s and even then, would need to raise the 5% deposit, which when you take into account buying fees, will be in the order of £9,700.
Tenants’ inability to raise that sort of money for the deposit is driving demand for rental property. If you would like some advice about buying to let, be you a landlord with a portfolio or someone thinking of investing in the rental market for the first time, please pop in and see me at our office in Station Street, opposite the Cambrian Retail Centre in Newport.