Wednesday 31 December 2014

What will this year's property trends be in Chelmsford?

I had an interesting chat with a landlord who uses another letting agent in the City after he popped into our offices for a coffee whilst his wife was taking advantage of the early sales. We got talking about the Chelmsford property market and thought other landlords might be interested.

You see, property values didn’t start leaping forward in Chelmsford until January 2013, so after a strong run over the last 20 or so months, the ever upward drive of house price rises has started to turn with increases now at an almost standstill for the first time since the start of 2013. Now it could be said this easing of the housing market in Chelmsford can be attributed partly to the time of year (last year property values in Chelmsford CM1 dropped by 0.8% in December, but Jumped to a 12% increase in Jan / Feb 2014), it is obvious that estate agents in Chelmsford are wary about the direction of the market as a result of the not as strong demand and fewer house sales.

With the uncertainty of a possible interest rate rise, new mortgage rules, a general election on the horizon and recent warnings of a house price bubble. Although the main indicators suggest that buyers will start to gain the upper hand, especially with the new stamp duty rules announced recently by George Osborne. However, there are many homeowners who don’t need to sell and won’t bother unless it’s economically beneficial to do so, but most homeowners are homebuyers, so what they lose with one they gain with another.
This is all good news for landlords looking to buy rental property with the changes in stamp duty and later in 2015, the new rules regarding pensions, where you will be able to take money out of your pension pot to invest in property. However, at the same time, I would say don’t just buy any old property in Chelmsford. First time landlords need to be cautious. The doubling of house prices every seven to ten years which has taken place since WW2 doesn’t seem to have been seen since the mid 2000’s. The property market is shifting with more properties being built and restrictions put on mortgage lending, the likelihood of the property market increasing at the same levels as the past are questionable. But investing in property is also about receiving the rent.

On the one hand going for high yielding Chelmsford property to rent out seems an obvious choice, but high yielding property often doesn’t go up in value that well and in some circumstances doesn’t keep up with inflation, meaning in real terms you have a depreciating asset (I spoke about this a few months ago in ‘The Chelmsford Property Blog’ when comparing Westlands to Old Moulsham). So surely you should pick a property that has great capital growth then, because of the obvious potential to generate long term capital profit, especially with inflation eating away at our savings. However, rental yields on high capital growth properties (in areas such as Old Moulsham, Beaulieu Park & Chancellor Park) tend to be low, meaning if you are taking a high percentage mortgage, the rent doesn’t pay the mortgage payments.

That is why in the New Year, due to the demand, we will be running a number of informal Landlord Workshops for new and existing Chelmsford landlords, irrespective of whether you are a self managing landlord (ie you do it all yourself), landlords with other agents, people who are thinking of becoming a new buy to let landlord in Chelmsford for the first time in 2015 and finally our landlords that already let us manage their properties.

May I take this opportunity to wish you all a very Happy New Year.

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