When should i start thinking about raising the rent?

Following on from my recent article about rental values since the recession, (where I’d found that rental values in the city are around 4.8% lower than they were in 2008) I’ve now looked into the forecasts for the next 12-24 months, to decipher when landlords should consider price increases on their rental portfolios.

As with all parts of the economy, the rental market is all about supply and demand. On the supply side, 1,550 rental properties have come up for let in the last 31 days in Nottingham. This sounds like a lot - until you consider there are around 28,500 rental properties in the area. Therefore, around 5.4% of the rental stock is coming onto the market each month (the UK average is about 5%). However, when you strip out the student properties, which account for around 15% to 20% (since the same student properties are rented out to a new batch of undergrads each year), of the remaining rentals, the percentage of stock available each month is much lower than the norm.  

So, could it be that the reason for this lack of new rental properties coming on the market is that professional tenants seem to be staying in their properties longer?

With a lack of supply, newer tenants have to pay more to secure the property they want. Poorly maintained homes, which may still retain 70’s décor and green bathroom suites have seen their rents drop. However, swish apartments with all the mod cons and refurbished Victorian terraces are still being snapped up – and tenants are willing to pay for the privilege. In fact, these types of homes have seen rents rise by 0.4% in a month, which just goes to show that good quality property will always rent the fastest.

Interestingly, looking at property values, the Land Registry has just released their latest set of data. For the most current figures, property values rose in Nottingham by 0.9% in the month, meaning they are now 6.5% higher than they were a year ago.  When one looks at the regional picture, the East Midlands average rose by 1.4% for the same period.

Looking forward, after considering all the statistics, I expect sale prices in Nottingham to rise by 3% to 5% over the coming 12 months.  Similarly, unless something drastic happens in the economy, the demand for rental property is unlikely to fall any time soon and therefore rental prices will follow suit.

Therefore, if you are a landlord, or are considering becoming one, it would be my advice to spend a little money on redecorating your buy-to-let and / or buying some new furniture to beat the competition. If you’re property is already in good nick, now might be the time to consider a rent rise – although I’d think carefully before doing so if you’ve got reliable tenants! An extra £25 per month isn’t worth the hassle if you’re replacing great tenants for poor ones.

If you would like further information on investing please email me on jaclyn.bartlett@centrickproperty.co.uk 

Are fewer people are moving house in Nottinghamshire?

As the dust has now settled and the General Election seems a distant memory, we should be getting back to a ‘normal’ property market. However, I’m not quite so sure. Many of my fellow property professionals in Nottingham (solicitors, conveyancers and one the best sources of info – the board company, who puts up all the estate agency sales and lettings boards across the county) are all saying they haven’t seen much of an upturn in business compared to the months leading up to the election.

I am largely thinking that, other than the upmarket areas of London (where the market went into spasm with the prospect of Labour/SNP introducing Mansion Tax for properties over £2,000,000), most places, including Nottingham, (where there has only been two properties sold above £2,000,000 mark in the last 7 years) didn’t really see an impact in terms of buyer’s confidence. 

As I write this article, of the 876 properties that have come on to the market in Nottingham  since the 2^nd of April, only 107 of them have a buyer and are sold subject to contract. That’s around one in eight – or just 12%!

There seems to be a real change across the country regarding how the population are buying houses.  Back in the 1970’s, 80’s and 90’s; the norm was to buy a terraced house as soon as you left home and do it up.  Over time, as property prices generally went north, you could make your way up the ladder until you found yourself in a 4-bed detached house with a large mortgage.

Looking into this a little deeper; the pressure for youngsters to buy when young has gone, since renting, and not buying, is considered the norm for ’20 somethings’. This isn’t just a Nottingham thing, but, a national thing, as I’ve noticed that people are more often going up and down the property ladder because they need to - not because “it’s what people do”.  All this means that there are a lot less properties on the market compared to the last decade.

A by-product of less people moving is that less people are selling their property. My research shows there are a lot fewer properties each month selling in Nottingham compared to the last decade.  For example, in February 2015, only 472 properties were sold. Compare this to February 2002, where 761 properties sold, and in Feb 2003, 835 properties.  I repeated the exercise on different sets of years, (comparing the same month to allow for seasonal variations) and the results were identical if not greater.  So what does this all mean?  Demand for property isn’t flying away, but with fewer properties for sale, it means property prices are proving reasonably stable too. Slow and steady growth of property values in Nottingham, year on year, without the massive peaks and troughs we saw in the late 1980’s and mid/late2000’s might just be the thing that the Nottingham property market needs in the long term.

If you’d like to know more, please give drop me an email on jaclyn.bartlett@centrickproperty.co.uk 

Sherwood property market outperforms West Bridgford by almost 50%!

I've recently been doing a bit of research for an investor client of mine, who wanted some advice on where to buy his next buy-to-let property in Nottingham (he wanted to stay within the city), so I did a comparison between two very popular, but rather different areas.

The most interesting point I found, when I compared the area of West Bridgford (where the client lived) to the Sherwood area (where he already had a buy-to-let property) was that the property market in the Sherwood area had outperformed the West Bridgford area of Nottingham by 47.8%!

Let me explain why. The average price of a property in Sherwood is £144,500, so when you consider the rents that are achieved in the Sherwood area are an average of £564 per month, this gives us a yield of 4.79% per year. So is Sherwood the best investment? Well, in the West Bridgford area, where the average value of property in the area is £270,700 and the average rent is £745 per month, this gives a much lower yield of 3.24% per year. That makes the yield/ return in Sherwood 47.8% proportionality more than property in the West Bridgford area, so surely it is the best place to invest?

However, this is a great example of annual yield/return not being the only factor when choosing an investment property, as you should also consider how much the value of the property goes up in the long term. In the last 16 years, property values have risen on average by 100.84% in Sherwood (rising from £71, 980 to the £144,500 mentioned above), which is very impressive considering there was the 2008 property crash. However, property values for property in West Bridgford have risen on average by much more impressive 143.87% in the same time frame.

So, if you are investing in Nottingham property, do you want capital value or yield or both? Other areas, such as St. Ann’s, which offer impressive yields of 6% to 8% have only gone up in value by 66.4% since 2000. Sherwood has decent yields and decent capital growth. Demand is good as well, as in the last 31 days, 54 properties have come up for rent in Sherwood, 13 of them (an impressive 24%) have already have secured a tenant. Great demand with a balance of capital growth and yield means the landlord can have their cake and eat it.

If you would like some advice about buy to let or you are a landlord with a portfolio, please come and see me at our office on Queens Road (right next to the new train station entrance). 

Nottingham Buy To Let – Should you look further afield?

I was at a recent business networking event in Nottingham, when a landlord (who it transpired had a couple of Buy to let properties) bent my ear on where the next hot spot town or city is to invest his money in and where the best rental yields are. Now it can be tempting to just look at Nottingham when growing a buy to let property portfolio, but there can be big differences in the amount of rental income you receive and how much your property will appreciate by considering other locations in the country.

Now regular readers of my articles of the Nottingham Property Blog know of my love of the ‘buy to let seesaw’. On one side of the seesaw is yield and the other capital growth. Landlords should be looking for a high rental yield so that they can comfortably cover any mortgage payments and make some profit from the income return, but you also want the property to rise in value over time so you can get some capital growth when you come to sell. However, high yielding property in say such areas as St.Ann’s in Nottingham, (so the seesaw arm with yield on it goes up on one side), will suffer from low capital growth (so the other arm with capital growth on the seesaw goes down).  The relationship works in reverse as well, so in such upmarket areas as West Bridgford, properties offer good capital growth, but at the expense of a decent yield.  

The North East and North West of the UK are landlord magnets for great yields. The average yield in Nottingham today is 4.85%, which when you compare with say Hartlepool in the North East, which achieves 7.73%, doesn’t look too healthy. Now of course, these are only averages and some of my Nottingham landlords are achieving 6% to 8% on some of their Nottingham properties, but at the expense of capital growth. Anyway, after wasting a tank full of petrol up the A1 to Teeside or the M1 to Home of the ‘The Reds’,  that Liverpool property, would have dropped in value by 2.2% in the last 12 months and the Hartlepool property would have dropped by 1.4%.

When you compare the long term house price growth, it gets even worse. Looking at the graph, Since 1995, property values in Nottingham have risen by 86.41%, compared with Hartlepool at 21.02% – it just shows you shouldn’t always chase the yield because of the poor increases in property values in those two places. As I always like to explain to landlords when they either email me, pick up the phone or pop into my offices for a coffee (both my own and even landlords who use other agents (you are all welcome at ours), together with soon to be FTL’s (first time landlords)), a decent yield is important, but when you come to sell your buy to let property it would also be nice to make a decent profit. Any profit you can make when you come to sell it, on a buy to let property is known as the ‘capital gain’ ie capital growth.

At the end of the day, as a Nottingham landlord, you want to be making gains from both your rent and house price growth, particularly when you want to sell, because when combined, the rental yield and capital growth, that gives you the real return on your investment. Finally though, do you know Hartlepool and Liverpool as well you know Nottingham? Do you know where the good and bad areas are in both those places? Are you happy that it would require you to take a day out of work if there was an issue with your property in the North?  If you can’ t answer yes to all three questions, then maybe you should be considering a closer to home?