I recently had an interesting chat with a business acquaintance who 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 by 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, we found that Yeovil (BA21 postcode only) currently has an average property value of around £162,000 with the average salary being £18,750. This is a ratio of 1 to 8.64. Looking at surrounding areas, and comparing Sherborne for example, the average value in Sherborne and surrounding villages (DT9) is £274,900 with an average salary of £23,950, giving a ratio of 1 to 11.48. We can see therefore that in Sherborne affordability of housing is lower meaning that people are more able to afford property in Yeovil. However, you must also consider that the issue isn’t always necessarily affordability, and is often the raising of the 5% (and often more) deposit required to buy which is the main thing preventing people getting on the housing ladder. Therefore, with the popularity of both towns as high as it has ever been, our conclusion was that a rental property in either town would be a sound investment.
Tenants’ inability to raise that sort of money for the deposit is still driving demand for rental property. If you would like some advice about buying to let, and would like to chat about what kind of property and in what area would be right for you, just call me on 01935 420555 at our office in Yeovil.