Derby Buy to Let sees returns of 12.64%

The other day I got chatting with one of my out of town landlords who was back in Derby visiting his family. To enhance his retirement, he has a small portfolio of four properties in the derby city centre and wanted my advice on where to buy the next property in Derby (as he lives in a college owned flat and anyway, would never dream of buying where he lives in Kensington (where the average value of a flat is £1.62m and a City house £4.1m.  Eye-watering to say the least!!).

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Before I could advise him, I reminded him that the most important thing when considering investing in property is finding a Derby property with decent rental yields for income returns, yet at the same time, it must have the potential for capital growth from rising house prices over time.  Going forward, Derby landlords will be under more pressure to find the best permutation of yields and capital growth, as extra stamp duty charges for buying properties and a squeeze on mortgage interest relief will raise their costs.

However, (you knew there would be a however) before we look at yield and capital growth, one important consideration that often many landlords tend to overlook, is the propensity of how likely the rent will increase.  Interestingly, the average rent of a Derby property currently stands at £659 per month, which is a rise of 2.9% compared to twelve months ago (although it must be noted this rise in rents is for new tenancies and not existing tenants). Anyway, back to yield and capital growth, the average value of a Derby property currently stands at £179,000, meaning the average yield stands at 4.41% per annum, which on the face of it, many landlords would find disappointing.  That is the problem with averages, so if I were to look at say 2 bed houses in Derby which are the sort of properties a lot of landlords buy, in Derby, the average value of a 2 bed house is £80,000, whilst the average rent for a 2 bed house is £475 per month, giving a yield of 7.12%.

Ultimately investors want to be making gains from both rent and house price growth.   When combined, the rental yield and capital growth gives you the return on investment, and that is what I told our friend.   Return on investment is everything.   So, looking at property values in Derby have risen in the last year by 5.52% …. which means the current annual return on investment in Derby for a typical 2 bed house is 12.64% a year …. not bad.

If you would like advice on any potential buy to lets in Derby , please get in touch.

 

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Derby Property Market after Brexit

Now that we have come to terms with Brexit and turn our attention to other subjects like Christmas shopping and debate about who will win premiership this season  the media are returning to their mixed messages of good news, bad news and indifferent news about the Brit’s favourite subject after the weather … the property market.

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The thing is the UK does not have one housing market. Instead, it is a patchwork of mini property markets all performing in a different way. At one end of scale is Kensington and Chelsea, which has seen average prices drop in the last twelve months by 6.2%. But what about Derby?

Property prices in Derby are 5.52% higher than a year ago

and 3.2% higher than 3 months ago.

So what does this mean for Derby landlords and homeowners? Not that much unless you are buying or selling in reality. Most sellers are buyers anyway, so if the one you are buying has gone up, yours has gone up.  Everything is relative and what I would say is, if you look hard enough, there are even in this market, there are still some bargains to be had in Derby.

However, the most important question you should be asking though is not only is what happening to property prices, but exactly which property is worth buying? I like to keep an eye on the property market in Derby on a daily basis because it enables me to give the best advice and opinion on what (or not) to buy in Derby. With interest rates cut to 0.25%, cheaper mortgages on the cards and the undersupply of housing in the Derby area we can expect a steady growth

The next six months’ activity will be crucial in understanding which way the market will go this year after Brexit … but, Brexit or no Brexit, people will always need a roof over their head and that is why the property market has ridden the storms of oil crisis’ in the 1970’s, the 1980’s depression, Black Monday in the 1990’s, and latterly the credit crunch together with the various house price crashes of 1973, 1987 and 2008.

And why? Because of Britain’s chronic lack of housing will prop up house prices and prevent a post spike crash. … there is always a silver lining when it comes to the property market as demand always outweighs supply so property will always out perform any other type of investment.

DERBY VS NOTTINGHAM PROPERTY MARKET

When purchasing a buy to let property, there are two ways landlords make money through property letting
– capital growth and rental income growth.

A landlord from London, who has a number of properties in both Derby and Nottingham, asked me a few weeks ago about the difference between Derby and Leicester housing markets. He was focused on capital growth but als
o wanted to ensure his yield was relatively fair. I was quite surprised with my findings and wanted to share them
with you.

The average property price in Derby is currently £189,000. In the laderby-eevening-telegraphst 3 months property values in Derby, according to my calculations, have dropped by just over 0.8%. Whilst in Nottingham, average property prices in Nottingham are £184,000, having dropped by 0.4% in the last 3 months. Therefore, is Nottingham the better bet?

Well, not necessarily.

Over the last 5 years, property values in Nottingham have risen by 20.5% and in Derby by 25.1%, meaning over the last 5 years, property values have increased at a 23% quicker rate in Derby compared Nottingham’s. But then there is question of yield, as Derby also normally has slightly higher yields than Nottingham, but Derby’s rental market can be quite fraught.

Each Derby (and Nottingham) landlord will have different needs and requirements in his or her property investment. If you want an unbiased opinion on what (and what doesn’t) make a good property investment. Knowing what has happened to values in different cities, enables us to spot any trends or opportunities for buy to let landlords.

If you would like to discuss my thoughts on the rental markets, feel free to  send me an email to info@arboretumlettings.co.uk