An investor that I have been advising over the last few years who herself lives in London has remained interested in the derby property market, because of the success she has had over the last few years. She is a huge fan of the Graham Penny Auctions in derby, so when she asked me for advice over a few properties she has seen at the current auction this month I gave her my honest opinion, I advised her not to expect too many bargains, I asked her to wait until the next auction to get a better idea of how the property market will react to the new regulations, I predicted that with the new regulations on stamp duty coming in April, people may panic buy which will push the prices up, I explained how that combined with stricter lending rules the price in property can’t change for the better in the coming months.
So it was no surprise to me this morning I received an email from the investor saying ‘thank you, you were right’. The auction was a great success for sellers and the team at graham penny, no doubt they have invested heavily in the auctions and have worked hard to build their incredible brand, the auction had an unbelievable turnout and for sellers it was probably the auction they should have had their property listed.
The table below shows us how this auction compares with the previous two and the same month last year (only comparing properties in derby):
|Feb 2016||Dec 2015||Oct 2015||Feb 2015|
|Average selling guide price||£77905||£66385||£60300||£73450|
|Actual Average selling price||£99048||£78615||£72150||£90175|
Now considering stamp duty tax is set at 3% from April, the price increase when comparing actual selling price to guide price was 9% more than the previous auction, 7% more than the auction before, and when comparing to last year’s figures it was 5% more. So as you can see the inevitable happened, the prices did fluctuate and the houses did sell an average 27% over the guide price, we know how smart marketing and very low guide prices by the team at graham penny auctions in derby is the key to what has attracted such large crowds. But the prices of actual houses sold and guide prices should not be as high when comparing to previous auctions and future events. So in theory have buyers actually paid the stamp duty tax without knowing.
I know some of you are shaking your head and probably thinking these are only averages of all the properties in Derby and for investors these figures don’t mean anything, well just to put it into perspective I have created another table which will give you a better indication. Now terraced houses are the largest percentage of houses let on most landlords’ portfolios specifically two bed terraces, and in derby the most popular areas are DE22 and DE23 for these types of properties let. So I will compare two bedroom terraces in these areas this auction to previous auctions.
The table below compares the price change of the average two bed terraces in derby, comparing the current auction with previous auctions.
|Feb 2016||Dec 2015||Oct 2015||Feb 2015|
|Average Guide Price||£54000||£55600||£51800||£54000|
|Average Sold Price||£72300||£63800||£65400||£66000|
Again you can see from the table above, when comparing average guide price to actual selling prices this auction shows the largest percentage difference, but this is not the most significant figure. When comparing the average sold price between December and October 2015 the difference was 2% which is expected, but when you compare that of December 2015 to February 2016 the average sold price increased to 12%. This figure to me is an anomaly when comparing with previous auctions a result of people panicking as surely house prices have not increased by 12% over the last 3 months, but if they have only time will tell.
Overall I believe when investing in a buy to let property the right price is one that is following current and past trends, I believe the 12% increase was a reflection of people buying with the 3% stamp duty tax coming this April in mind, but without knowing they have actually paid more then what the stamp duty tax will amount to. The future looks bright for investors with capital as I think the market will stall for a while. The house prices won’t fall, but I do think they will increase at a slower rate over the next 6 months when comparing them to last couple of years giving you extra time to save up for a deposit. As always Derby still is one of the most lucrative property markets and there are always properties giving you a healthy return on your investment even at the current sold prices the returns on some of the properties are still around 7%. If you would like to discuss any opportunities further I will happily give my opinion.
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