Wednesday, 18 February 2015
Godwin Road property market outperforms the Ethelbert Road property market by 144%
I spoke about a conversation I had with a landlord, who lives in the Ethelbert Road just off Old Dover Road, he took me up on the offer of an informal chat about the Canterbury property market the other week after he read the ‘Canterbury Property Blog’. We got talking about investing in Canterbury property and how different areas of the city performed again other areas. Investing in Canterbury property is a balancing act between capital growth and yield. On the one hand going for strong capital growth seems an obvious choice because of the potential to generate long term capital profit, especially with inflation eating away at our savings. However, rental yields on high capital growth properties tend to be low meaning if you are taking a high percentage mortgage, the rent doesn’t pay the mortgage payments.
It became really interesting when we compared his area of Ethelbert Road against the Godwin Road area, where he was brought up in the 1950’s. Those ‘Arts and Crafts’ five / six bedroom detached houses on Ethelbert Road have a current average value of £876,300 and rent for approximately £2,300 per month. This would give our landlord a yield of 3.14% per year .. very reasonable indeed. Until you consider those ex-local authority one bed apartments in the Godwin Road area, which sell for around £98,400 and let, depending upon condition for around £630 per month, a yield of 7.68% per year, which is a 144% proportionally higher yield.
However, as I said a few weeks ago, yields are not everything in property investment. Another is how the value of the property goes up over time. Better properties in better locations don’t have the best yields, but their property values tend to go up quicker over the long term. The average values of one bed apartments in the Godwin Road area in 2000 was £33,200, therefore they have risen by 196%. So, one would expect Ethelbert Road property values to have risen more.
Quite the opposite, average values have only risen by 125.1% since 2000. However, percentages don’t tell the whole story. Firstly, the Godwin Road was probably a Right to Buy council property, which are sold at discounts. Also, whilst an average homeowner, if they sold their property today in the Godwin Road area would make around £65,000 tax free gain, a home owner in Ethelbert Road would, on average, have made and impressive £490,000 gain.
Now I know there aren’t many landlords that would buy a large 5/6 bed detached house on Ethelbert Road to rent out. It’s just that looking at the Canterbury property market in more depth enables me to give you the best advice and opinion to help you find the best investment property. It is in our interest that you buy a property which will rent well, and for long periods of time. If you would like any advice on choosing properties, please come and see me at our office in Watling Street in Canterbury.