As promised here is another valuable nugget of advice from the team here at Martin & Co Shrewsbury for anyone looking to invest in buy-to-let properties in Shropshire.
I recently read an interesting article that highlighted the best way to identify whether an area was worth investing in, in terms of value and possible return. The trick appears to be to identify the average annual income for the area and the average house sales price and work out a ratio:
For example - the average annual salary in Shropshire is estimated at £24,158.00 and the average house price in Shropshire is estimated to be £153,459.00. Therefore we reach a ratio of 1: 6.3 which is low and therefore indicates that property in Shropshire is affordable.
What this research suggests is that property is currently affordable, the time for investment is now, with house prices on the rise as supply shows, a recent report states house prices remained on a "firmly upward trend," housing demand continues to be supported by an economic recovery that is gathering pace, rising consumer confidence, low interest rates and wage growth finally beginning to outgrow consumer prices.
How this affects the rental market -
The buy to let market in the UK looks set to expand further during 2014, with 60% of landlords planning to increase their property portfolios over the next six months, according to new research.
Lenders are being viewed increasingly positively and 45% of landlords are looking to remortgage in the next three to six months, says the latest survey from specialist mortgage brokers.
The survey also found that 95% of landlords have borrowing on their current portfolio and five year fixed deals are the most preferable loan options.
According to the lender the research suggests landlord appetite for more purchases stems from the attractive yields available across a variety of investment property types. Landlords are looking into having portfolios with more diversity.
‘With buy to let mortgage rates at historic lows, this strategy may well prove prudent in protecting them against future interest rate rises,' (Sourced from - Property Wire).
Why does this mean it's a good time to invest in buy to let property?
Simple. House prices are on the rise again, steadily but surely! And they are going to continue to rise over the next few years, in order to highlight the current trend in rising house prices, here are some useful statistics:
I have identified two rent-able areas within Shrewsbury, Harlescott Crescent and Belle Vue Road, these are residential areas with good sized properties, Harlescott is mainly semi detached or detached houses dating back to the 70's & 80's, whereas Belle Vue is a contrast with period (Victorian and Elizabethan) terraced properties.
The average house price in Harlescott Crescent is £165,333 which is a 4.20% increase in the last 12 months (an increase of £6,665). If we look at property in the same area from five years ago, property prices in Harlescott Crescent have increased by 9.70% (£14,617).
Belle Vue is a similar story, the average house price in 2014 is £215,576, this is a 3.82% increase in house prices in Belle Vue over the past 12 months from £207,636. In five years there has been a 9.61% increase in property prices in the Belle Vue area of Shrewsbury.
Please remember these are average prices and take into account all different property types to produce an average.
What I can deduce from these statistics is that house prices are on the rise, in time it will become even more difficult for first time buyers to go through the strict mortgage application process, find large deposit amounts and afford the price of steadily increasing property. While this does not bode well for buyers, it does bode well for the rental market with a growing demand for rental property and a lack of available property, now is definitely the time to invest in buy-to-let property.
Looking closer at buy-to-let in the areas I have specified above, we can look at possible yields from a buy-to-let property in those areas. Harlescott Crescent is fast becoming a popular rental area for Eastern European families, close to places of work and the larger schools in the area, properties in this area are being snatched up fast! With an average yield on a property with a value of £165,333 being 3.9% (monthly rental of £546) compared to Belle Vue where the average yield for rental property is 3.2% (monthly rental of £592). Of course these figures are an average and not property specific, but the Yield percentage appears to be more with the Harlescott property.
The two properties are contrasting in location, size, age and price. While the Belle Vue property is in a more desirable and marketable location with attractive and spacious period properties, ideal for full time professionals looking to be close to the town center or small families. The Harlescott property would be larger in size and sought after by larger families looking to settle in a residential area, close to the industrial and business sector of Shrewsbury.
If you would like any further information please do not hesitate to contact me at Martin & Co Shrewsbury, 40 St Johns Hill, Shrewsbury, SY1 1JQ (Telephone - 01743340020).