The London Ripple and its effect on the Thanet property market.

This week, due to all the hype surrounding the ‘London Ripple’, I thought I would look at how this is affecting us down here in Thanet.

The London property market has gone a bit mad recently to say the least (yes, even more than usual). I have been keeping my eye on this as my sister and her boyfriend are currently trying to get a mortgage to purchase in London. They are currently renting in Hackney and would, within reason and financial constraints, like to stay in the area. So I did some research for them and found that property in Hackney, in ONE year, has increased by over £100,000, around 17.5% annual increase!

This got me wondering to what degree this has affected us here in Thanet. So after doing some more research I found that in the month from March to April of this year, property has increased by nearly 3% on average in the Isle of Thanet. From April 2013 to April 2014 the average price has increased by just over 5% - not bad for those buy to let investors that are also getting average yields of 4.9% giving an annual return of around 10%! If anyone knows of a bank savings account that can offer this, let me know!

If you would like some more information about how the markets are changing due to the ‘London Ripple’ or would just like some advice on what areas and what properties make for a good investment then come and see us. Our office is in Northdown Road in Cliftonville. I look forward to seeing you. 

OR give me a ring on 07432 716 257

Ramsgate Property market - Good Yields?

Following last week's discussion about how property values (aka Capital growth) had gone up in Ramsgate, this week I want to discuss the other side of property investment, the yield.  If you recall, the yield is the yearly rent from a property reflected as a percentage of the value of the property.

So what sort of yields can be achieved in Ramsgate? Starting at the lower end of the market, Two Bedroom Apartments, depending on accommodation, have an average price of £145,539, whilst the average rent achieved is £616 per month, giving an average yield of 5.1%. Considering properties like this in Ramsgate have risen in value by around 2.2% this year, that's an overall return of 7.3% in the last 12 months.

A modern 3 bed town house can be bought for around £185,000 in Meridian Close and they achieve rents around £850 to £900 per month. This gives a yield of 5.5% - 5.85% and with property values increasing by nearly 2.2%, that gives us 7.7% - 8% return. Other factors must also be taken into account when buying a property to rent out. The more modern property will require less maintenance, and could sell quicker (because there will be a time when you do need to sell it) also the larger modern property will have slightly less void periods than a smaller property. Balancing capital growth and yield is vital, but they are not the only factors to consider when buying a property to invest in.

The reality is, buying a buy to let property, wherever it may be, is a vastly different affair to buying a property for yourself to live in. When you buy a home for yourself, you look for a property with the accommodation you need, in an area that you want to live in, within your budget. When buying a home, the only opinion that matters about its features, location or accommodation is your own. For a buy to let property, the equation is exactly the opposite. Buy to let investment is about finding a property in high demand and short supply that will go up in value substantially over time.

The only views that matter when assessing an investment property’s potential, features, location and accommodation are that of the market place, both now and in the future. It’s this balance of market opinion and underlying demand which ultimately determines its investment performance, both in terms of income and capital growth. I tell landlords never to allow their own personal likes and dislikes to cloud their rational investment judgement. Remember, rule No.1 of property investment. YOU aren't going to live there.

If you want to chat about property investment in the area, be it Ramsgate, Margate or anywhere in the Isle of Thanet, please pop in to my offices on Northdown Road in Cliftonville or give us a ring on 01843 293 293

Ramsgate property market - Good Capital Growth?

For those that read my last article, I promised that I would look at the Thanet property market and compare its Rental yield and capital growth for the buy to let investor. For those new to the buy to let investment game, the yield is the yearly rent from a property, reflected as a percentage of the value of the property (one might consider it in the same light as the interest rate from your savings account) whilst the 'Capital growth' is the amount the property goes up in value each year, reflected as a percentage of the value of the property. For today’s purpose I will concentrate on Ramsgate.

The average value of a property before the crash of 2007 in Ramsgate was around £285,000. The year after, in the 2008 slump, prices dropped to £250,000. Considering values today are around £270,000, if you bought in Ramsgate in 2008, values would have increased by 8%. When you consider values in Herne Bay since the 2008 slump are only 4.0% higher and in Deal are 6.0% higher, this is an excellent increase.

However, property investment cannot be judged over short time frames and most certainly not by averages. I often, when looking at a market for a landlord, like to take a longer look at the market, and consider 10 to 15 years a more suitable time frame for capital growth. After doing my research, a lovely characterful terrace house set over three floors along Boundary road, sold for £47,000 in January 1999. It sold again in November last year for £115,000. Now the average property value increase for Ramsgate and the immediate villages, in that time frame was 48.6% whilst this property along boundary road saw capital growth of nearer 60%. Put the same £47,000 in the stock market in 1999, and in 2013, it would have risen to £55,880, a not so impressive rise of only 2.3%.

That's not to say everything in Ramsgate turns to gold. There are good properties, which have dropped in value. A very pretty 4 bed detached house sold in 2006 for £295,000. It sold again last year and if it had followed the Ramsgate averages, it should have sold for nearer £320,000. However, some lucky person purchased it for £250,000.

As we don't sell property, I can always give my landlords and landlords who aren't with me but want a second opinion and even people who are thinking of becoming landlords, my unbiased opinion on what to buy and what not to buy. I pride myself on knowing the market intimately, so I can give some great advice and opinion. It might not be what you want to hear but, I can assure you, it is what you need to hear. If you buy right, you will build yourself some capital growth for the future. If you want to chat about property investment in the area, be it Ramsgate, Margate, Broadstairs or anywhere around Thanet and the surrounding villages. My office is 200 Northdown road in Cliftonville, Margate. I look forward to seeing you soon.

Is Thanet an ideal investment location?

I have recently been speaking with a number of landlords about the importance of a balanced portfolio, when buying and renting out property. The balance between buying properties that offer good monthly returns (high yields) but quite often offer poor capital growth (i.e. they don't increase in value that much over the years compared with the average) verses properties that do go up in value quicker but often offer a lower yield. Another consideration has to be the mix of town properties verses the villages.

Choosing the right village though is very important. Living in villages often has higher costs, especially transport and petrol costs. Some tenants don't buy because they can't afford the mortgage, so if you buy in the wrong village, you could limit yourself to the type of tenant who can afford those extra transport costs.

However, one town that has a high demand with tenants is Ramsgate. Particularly popular with people that commute to London, with a high speed rail link, easy access to the A2 matched to an active and varied social scene, Ramsgate is pulling in good quality tenants. 

Rental prices range at the lower end from around £450 per month for a small apartment to around £1100 for a large 4 bed detached house. For the mid £700's, a larger 3 bed semi can be rented. As an up and coming town with further improvements sited to the train links to London, properties are in high demand.

So, does that mean you should buy a property in Ramsgate as a buy to let investment? Before I can answer that, you must really consider the capital growth vs yield question. Some Thanet buy to let investors often make the mistake of chasing yield over capital growth. Some investors believe that by chasing high yielding properties, in say the poorer parts of Thanet, they will make a faster profit than waiting for capital growth. The problem with this is that to achieve high yield you usually have to compromise on capital growth.

Therefore it would seem the most logical solution is to find a high yielding property in a strong capital growth area but, these simply don't exist and in actual fact, most of the time, lower yielding properties have a better capital growth. This is because there is generally a contrary relationship between yield and capital growth so the higher the yield, the lower the capital growth and the higher the capital growth, the lower the yield. Property investment in Thanet is about balancing the two.

Not many landlords, especially those who use buy to let mortgages, can afford to service high levels of debt without a reasonable yield, which forces them to look at ways of making an investment affordable by finding the right balance between capital gain and yield.

Yield is critical to the survival of a buy to let investment but it’s not the key to building wealth. Don’t chase yield for yield’s sake, but rather chase capital growth with enough yield to make it serviceable because in the long term it is the capital growth, not the yield that will generate you the wealth and the financial independence you are seeking.

Next time, I will show that Thanet could just offer that right balance of yield and capital growth.