What if Brian Clough had bought a house in Derby and Nottingham in 1995?

A couple of weeks ago saw the latest East Midlands derby between Derby and Nottingham Forest. As both sets of fans clapped when Brian Clough was remembered and it was an emotional moment – such a giant for both clubs.

Whilst driving down the A52, aptly named Brian Clough Way, I decided in this weeks article to look at how both cities property values had faired over the long term.

When a property increases in value over time, it is known as capital growth. Capital growth has been strong in recent times in both Nottingham and Derby, but the value of   property does go up as well as down, and of course the local conditions surrounding your property have a big effect.   Rental income is what the tenant pays you and, hopefully, this will grow over time too. If you divide the  annual rent into the value (or purchase price) of the property, this is your annual return.

A few weeks ago, I said that both cities were around 8% off the 2007 boom prices. Well, the Land Registry have just released the figures going back to 1995, and that my ‘Derby Property Blog’ reading friends, makes for a completely different story altogether.

Between 1995 and 2000, Nottingham property performed nearly a quarter better, rising by 4.3%, compared to 3.37% in our Derby. The next five years saw the property boom, with property values rising by an impressive 115% in Nottingham, but not as impressive as Derby, whose property values rose by 134.6%.
Derby continued to do better between 2005 and 2010, which if you recall was when we had the property crash. Whilst average values dropped by 11% between 2005 and 2010 in Nottingham, in Derby they only dropped by 3.7%. Finally, since 2010 and to the present day Nottingham property values have continued to drop, being 3.8% lower, whilst our property values in Derby have held firm and in fact have risen ever so slightly by 0.1%.

Nottingham might get all the headlines, but since 1995, if Brian had bought a house in Nottingham, it would have been 92.2% higher in value now, but in Derby, it would have been worth 135.2% higher.

Each landlord will have different needs and requirements in his or her property investment. Knowing what has happened to values in different cities, enables us to spot any trends or opportunities for buy to let landlords. You ought to see what has happened to the different suburbs in Derby .. that makes even more interesting reading! .. something I will share in future articles.

You know what I always say readers - 'Knowledge is Power'. When it comes to lettings and property investment, it couldn't be more true!

If you would like to discuss anything further then please pop in and see me, send me an email or call me directly on 07977 235545.

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Private rented sector reforms - Why fix what isn’t broken?

In the last few months, politicians in Westminster have decided to step into an area which affects pretty much everyone involved in residential lettings - property and the private rental sector.

Anyone who rented property in the 1970s and 1980s knows the difficulties of tenancy agreements from that era which allowed the tenant the right to stay in the property for life. In some cases, tenancies could be transferred to their children, rents could not be increased and tenants could not be removed.

One of the suggestions by the Labour Party is rent controls. With more than 4.4 million people renting 3.4 million properties in England alone, it was clear that this could be a policy that was purely playing with the sentiments of these tenant voters.

In a damning report, the Institute of Economic Affairs says that Ed Miliband is going for completely the wrong solutions and accuses him of flawed thinking. Instead, the IEA says he should instead look at a radical liberalisation of the planning system to allow the private rented sector to grow.

Under the current legislation, tenants are already in a position to challenge rent increases that are unreasonable and they have the advantage of giving a months’ notice to the landlord (when the tenancy is a rolling agreement ie periodic tenancy) . But do rents need capping?

Well, let's look at our area. In Derby, there are 37,828 people renting 15,943 rental properties. The average rent of a Derby property in 2008 was £524 per month. If Derby landlords had raised the rents in line with inflation, (which sounds very fair to anyone), as inflation has been a total of 19% since 2008, the average rent in Derby should be today £524 + 19% = £623. At this moment in time, the average in Derby is £503.

However, restricting rent rises in the future could put more properties back on the market for sale as it would destroy the confidence in the housing market. In turn, this would reduce property prices. With less property available to rent, and a lack of interest from potential investors (due to the poor yields) this policy would end up creating a shortage of affordable housing.

Even with the vast increase in renting in Derby over the last ten years, 7.29% of property being rented in 2001 to 15.6%  in 2011, the number of homeowners in Derby only dropped by 1.9% (there were 63,979 homeowners in 2001 in Derby, but it only dropped to 62,765 homeowner households by 2011 in Derby. It is clear that the changes to the law of tenancy agreement made in Housing Act 1988 resulted in benefits to both landlords and tenants. The law has made it easier to rent a property and at the same time, the Assured Shorthold Tenancy gives the tenants a right to quiet enjoyment of the  property for a period of time. Yes, the total rent paid by Derby tenants is an awful lot of money, £96,231,948 a year in fact, but as rents are free to move up, but just as important down.

The IEA’s report also says that rent controls in Britain between 1915 and 1989 were associated with the collapse of the private rental sector, from close to nine-tenths of the housing stock at the start of the 20th century to close to one-tenth by the late 1980s.

Swedish economist Assar Lindbeck – a socialist – once said: “Rent control appears to be the most efficient technique presently known to destroy a city – except for bombing.”

Why fix what isn’t necessarily broken?

If you would like to discuss anything further then please pop in and see me, send me an email or call me directly on 07977 235545.

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Derby Apartments - 1 bedroom or 2 bedrooms?

Last week, I spoke to one of my landlords and she asked me if the number of bedrooms in a property had any influence on the return she could get. I did some research and followed up her query – I was actually quite surprised with the results...

Currently in Derby, the average rent for a one bed property is around £398 per month with an average value of £68,700. This means an approximate return/yield of 6.95% per year. This is of course the average.

There are one bed apartments on the market for rent at a higher price than some two bed apartments. In fact, some one bed apartments in Derby can attract rents in the late £600's whilst some converted terraced houses with flats in them can be rented for as little as £230 per month. This means yields on one beds can range between 4% and 9%.

Two bed apartments in Derby can be priced anywhere between £230,000 in one of those modern upmarket developments in Littleover and as low as £40,000 in Alvaston. Again, rents can be quite varied, ranging from over £700 per month for some bespoke unique apartments in the gated  development’s in Derby to £350 per month in Alvaston or around Pride Park. However, looking at the average rent for a two bed apartment in Derby, I calculate it to be £539 per month with the average value being £109.300 which gives a return/yield of 5.9% per year.

Whilst there is a little difference in the yields when it comes to the number of bedrooms, it is only one of many factors you should consider before buying a property. Whilst two bedrooms are more expensive to buy, they will always let better. Do they sell   better? Well, 23% of the two bed apartments on the market in Derby at this moment in time are sold subject to contract compared to 25% of 1 bed apartments – so not much difference there.
It really comes down to the property and type of tenant. Two beds attract sharers, which brings both advantages and disadvantages to the landlord but one beds have better yields.

It depends what you want from your investment. I know the lettings market in Derby so I can advise you what you can expect to achieve in rent and how it go up in value together. I don't sell property, so I don't make a penny out of you buying something, I make my money ensuring I can find the best tenants for the best properties. If you would like any advice on choosing properties, come and see us at our office on St. James Street.

If you would like to discuss anything further then please pop in and see me, send me an email or call me directly on 07977 235545.

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Are yields of 9.2% p.a. in Mackworth the best Derby has to offer?

I regularly talk to landlords about investing in Derby. Following a discussion with one of them last week, he asked me to look into the Mackworth Estate area, and whether it was a good place for him to invest in.

There was a 3 bed semi up for auction in mid September with Guide Price of just £65,000. Average rents in these types of properties have risen by 18.8% since 2008, which is amazing considering average rents in Derby are in fact 4% lower (on average) than those being achieved in 2008.

Let’s say you buy it for £70,000, the achievable rent can be in the order of £525 to £550, depending how much effort you have put into presenting it; but being sensible, we are still looking at a yield in the region of 9.1% to 9.2% per year.. yields that are only normally achieved in risky HMO’s (Houses of Multiple Occupation ie Student housing .. with the fun and games that brings!).

Property values since 2002 have risen, according the Land Registry, in Derby, by 55% but looking at the properties that sold in 2002 and again more recently, average increases in property values in Mackworth have been in the region of 98% over the same time frame.

So is this an investors paradise – great rental growth, great yield and great capital growth?

Well, all is not as it seems. This is a great example of the headline numbers (yield and capital growth) being not the only factor to consider when choosing an investment property, as you should also consider how long it takes to find a tenant. The average time it takes to find a tenant in the Mackworth Estate area can be up to six to eight weeks, whereas in other other parts of Derby a tenant is usually found in one or two weeks. If you take into account the extra five or six weeks of void period for your property, every six to nine months, because tenants in this area tend to have a high propensity to move more
regularly and the extra fees a landlord has to pay each time a tenant moves in and out, the annual overall return from the property is lower than it seems.

Finally, the property is constructed with non-traditional means i.e. not a cavity wall of two skins of brick and breeze block, but of a concrete frame. These are notoriously difficult to obtain mortgages on, so it’s only normally cash buyers who can go for these. I am not suggesting that you don’t buy it, but go in with your eyes wide open and having done your homework.

If you would like to discuss anything further then please pop in and see me, send me an email or call me directly on 07977 235545.

CLICK HERE TO REQUEST A NO OBLIGATION, 

FREE RENTAL VALUATION ON YOUR PROPERTY.