A recent article, when we spoke about the difference between
Canterbury and Tonbridge property markets, produced a number emails and a
couple of people popped by my offices for a chat about investing in buy to let.
Many people in our part of Kent, over the last few years, have seen the buy to let market become all about nest egg investment. It is fuelled by pitiful interest rates on building society savings. It reflects the fact that building society savings accounts are paying half a percent interest and pension returns are struggling to match expectations, turning more and more people into landlords to secure their future. So what can you expect from your rental property investment?
In the short term, rental yields are important, and in Canterbury, the average annual yield is in the order of 3.5% to 4% per year. However, that is based on averages, and as most landlords in Canterbury tend to buy starter home homes, apartments and terraced houses, the majority of which are achieving 4.5% to 6.5% per year depending on location and price in the town.
Many people in our part of Kent, over the last few years, have seen the buy to let market become all about nest egg investment. It is fuelled by pitiful interest rates on building society savings. It reflects the fact that building society savings accounts are paying half a percent interest and pension returns are struggling to match expectations, turning more and more people into landlords to secure their future. So what can you expect from your rental property investment?
In the short term, rental yields are important, and in Canterbury, the average annual yield is in the order of 3.5% to 4% per year. However, that is based on averages, and as most landlords in Canterbury tend to buy starter home homes, apartments and terraced houses, the majority of which are achieving 4.5% to 6.5% per year depending on location and price in the town.
In the long term though, the question of capital growth is
as important, if not more important (because if you have great short term
yields, but the value of the property doesn't keep up with the rest of the market,
you will have an asset that in real terms is dropping). As we mentioned in a
previous article, average property values in Canterbury currently stand at £296,300
and property values in Canterbury have risen by 18.8% in the last 5 years. On
the other hand, property investment is a long term game, so I wanted to share
with you the research I did for a couple of Canterbury landlords. Roll the
clock back 10 years to 2004, the average value of a property in Canterbury was
£177,300. 15 years to 1999 makes interesting reading, as the average Canterbury
property value was only £91,020, 30 years (1984) makes it £28,570 and just for
a bit of fun, we looked at 1964 at it was £3,300!
So, looking at it from another point of view, if one bought a
Canterbury property in 1984 for £28,570, it would be worth £296,300 today; but
if you had put that same £28,570 into the stock market in 1984 instead of
buying a house in Canterbury, your shares today would be worth £168,900. Put
the same £28,570 money in a Building Society account and you reinvested the
interest back into the account, and your Building Society passbook would have £159,300.
The difference gets larger when you realise that with the rental property you
would have received in excess of £216,000 in rent over those 30 years, which you
wouldn’t have received with the Building Society account!
If you would like to discuss my thoughts on the rental
markets in Canterbury, feel free to pop into our offices on Watling Street, or
pick up the phone or email me on david.anthony@martinco.com
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