The DA13 property market - good capital growth?

Today, we’ll give a look at the DA13 property market and compare its rental yield and capital growth for all you buy to let investors out there. For those new to the buy to let game, the yield is the yearly rent from a property reflected as a percentage of the value of the property, 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 (but we all knew that, right...?).

DA13’s average property value in December 2006, just before the crash of 2007, was around £284,000. The year after, in the 2008 slump, average prices surprisingly spiked in the postcode to over £395,000. Considering values today in the village are around £328,000, if you bought in DA13 in 2006 just before the crash, the value would have increased by just over 13%. This is a really good increase, though not as much as if we were still at 2008 levels.

Between June and November 2013, prices for detached properties in DA13 rose up from an average of £350,313 to £435,063 – a fantastic 19% increase for such a short space of time. On the other side of the coin, semi detached properties have not increased much at all, only a slight 0.1% (better than nothing I guess).

However, property investment cannot be judged over short time frames and most certainly not by averages. 5 to 15 years is normally a more suitable time frame for capital growth, though it can be affected by slumps and booms. In October 2006, a detached freehold property in Beechwood Drive, Meopham, was sold for £285,000, and resold four years later for £410,000, a capital growth of 44%.

That's not to say everything in DA13 rapidly turns to gold. There are good properties that have nearly stagnated in value. A home in Blenheim Close, Meopham sold in February 2011 for £291,500. A buyer got it at a steal for £295,000 in June 2013 – a 1.2% increase in price in just over more than two years.

We always give our landlords, landlords who aren't with us but want a second opinion, and people who are thinking of becoming landlords, our unbiased opinion on what to buy and what not to buy. As is the risk with asking for advice, it might not be what you want to hear, but it is what you need to hear. If you want to chat about property investment in the area, be it Meopham, Gravesend, Dartford, or any of the surrounding area, pop in for a cuppa (remember - Southfleet or Sutton-At-Hone!) or call us up for a chat (01474 833050 or 01322 860500) - we look forward to hearing from you!

P.S. You can also catch us on the web here - we're about to relaunch our website, so keep an eye on it!

What a housing 'bubble-pop' will mean for you

Following on from last week’s discovery that house prices have jumped on average in Swanscombe by 18% in the last year, we’ve briefly condensed information for you on the reported housing market ‘bubble-pop’ that the media seem so keen on this week.

House prices shooting up? Will the Bank of England increase interest rates next year? Tough new lending rules? All of these have lent weight to the idea the housing market is going to deflate at some point throughout the year. But what will this mean for you as home owners and investors?

Issue: House prices are soaring in the South East
Answer: Oh, the age old issue of supply & demand, don’t you just love it? London & the South East have the fastest growing populations in country – and, unsurprisingly, there is not enough housing in these areas, thus pushing the largest price hikes, and pushing down rental yields. Great if you’re selling, not so much if you’re buying.

Issue: No decent rental yields
Answer: There isn’t enough decent stock out there… that’s about the gist of it. Prices are currently so high that they have forced rental yields down. Fine for a cheap property you purchased in 2008, as it’s unlikely to have affected you (rising rental figures help here), but not so great for if you want to add to your portfolio now.

Issue: Are the media scaremongering?
Answer: KPMG & Shelter have released some dire figures: if England continues to build less than half of the 250,000 new properties needed yearly, the average house price will rise to £900,000 in 20 years’ time. Bear in mind, the average house price in England in 2009 was £151,000, it’s currently £183,000, and when was the last time this country built 250,000 homes? Where are they getting these figures from?!

Issue: How will affect investor purchasers?

Answer: Positively! Aside from the obvious potential cheaper prices & higher yields, swathes of people to rent will come to the market as they can’t secure a mortgage, or are struggling to get a deposit. You’ll have a better choice of tenant as a lot of potential buyers will be looking to the rental market (although, in the recovery, they will likely move on to purchase). And you’ll (hopefully) get a better choice of property to buy (people need to move, slump or no slump). You’ll have opportunity. What more could you ask for?

For all your rental advice and property needs, call us on 01474 833050, email us here, visit our website, or pop in to Southfleet or Sutton-At-Hone to speak to us (and don’t forget, you’ll even get a nice cup of tea to go with your advice).

Have a great Bank Holiday weekend!

Your next buy to let should be in...

Drumroll please!

Recently we've covered Gravesend, Dartford, Rochester, Meopham. What about the smaller areas with dreamy futures? Who’s looked at property in Northfleet, for instance? Would you purchase something there, because it’s cheap and has a higher yield? And risk tenants preferring something a bit snazzier? Or would you purchase something in Swanscombe, an area with a relatively battered reputation, but close to some heavy investment works (Paramount Park, Ebbsfleet’s Garden City, anyone?), and wait it out until the area becomes what so many hope it will?

So what about Northfleet? Well, over the last year, 244 properties have sold, mostly terraced houses, which went for an average of £163,000. The semis went for an average of £189,000, while the flats were on average £107,000. BUT Northfleet’s prices have only risen 5% in the last year.

Swanscombe, on the other hand, has had 82 properties sold in the last year. Again, mostly terraced, averaging at £170,000, the semis at an average of £208,000, and the flats at £101,000. Overall, the Swanscombe property prices have SHOT UP by 18% since last year! Perhaps a bit of a coincidence after the announcement of Paramount Park… Perhaps all you savvy investors are getting in there quick, snapping up the cheaper properties and waiting it out!

In Swanscombe, there are currently 11 properties available to rent, with an average rental of £707.00pcm. So, you purchase a terraced house at an average of £170,000, rent it for £707.00pcm, you have yourself a yield of 4.1% - just above the average yield for Gravesend (4%). In Northfleet, there are currently 43 properties available, with an average rental of £799.00pcm. So again, you buy your terraced investment for £170,000, rent it out (with River & Country) to a lovely tenant for £799.00pcm, and you have a slightly more respectable yield of 4.7%.

Would you go for Swanscombe’s slightly lower yield, seeing that prices have risen 18% in the last year, or do you go with a comfort purchase like Northfleet, with a steady yield of 4.7%, but a slow riser?

We're all about giving free property advice to all of you! You can call us on 01474 833050, 01322 860500, email us here, visit our website, or pop into our offices in either Southfleet or Sutton At Hone.

Buy to let - is Meopham a good place to buy?

It’s important to have a balanced portfolio when buying and renting out property. Getting 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 is tricky. Another consideration has to be the mix of town properties verses the villages.

Choosing the right village, though, is very important. Living in a village often has a higher cost, especially transport and petrol. 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 costs.

However, one town that has a high demand with tenants is Meopham, particularly popular with workers from London and the surrounding areas who know of the village’s popularity. With five churches, three pubs, three schools, possibly the most idyllic cricket green and a windmill, Meopham offers a peaceful environment matched to a varied social scene. The village consists of some 4,000 dwellings of different housing types and a population of just over 6,400 people.

Rental prices range at the lower end from around £600.00 per month for a one bedroom ground floor flat, which at that price should fly out the door. £750.00 should get you a purpose built two bedroom apartment, while a three bedroom semi-detached can be rented for between £1100-1250.00 per month, depending on condition. If you really want to splurge, there is a very nice five bedroom detached property in the vicinity going for £1900.00. There is always a huge demand for properties in Meopham – currently there are only seven available, compared to 50 in nearby Northfleet.

So, does that mean you should buy a property in Meopham as a buy to let investment? Before I can answer that, you must really consider the capital growth vs yield question. Some local 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 more deprived parts of Gravesend, 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 vice versa. Property investment in Meopham, and Gravesend as a whole, is about balancing the two.

Not many landlords, especially those of you who use buy to let mortgages, can afford to service high levels of debt without a reasonable yield, forcing you 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 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.

For advice (it’s free!) on how your property is performing, call us on 01474 833050 or 01322 860500, email us here, visit our website here or pop in to see us in either Southfleet or Sutton At Hone.

P.S. Our next blog post will be 16th May.