Thursday 15 October 2015

Chelmsford Landlords love their Bricks and Mortar


The Land Registry have just released their latest set of figures for the Chelmsford Property market. It makes interesting reading, as average property values in Chelmsford rose by 0.8% in May. This leaves average property values 9.7% higher than 12 months ago, meaning the annual rate of growth in the City is still steadily rising. When we compare Chelmsford against the regional picture, the East of England property values rose by 1.7%, leaving them 8.8% higher than a year ago. 

However, the thing that concerns me is that the average number of properties changing hands (ie selling) has dropped substantially just in the last 6 months in the town. In December 201, 105 properties sold in Chelmsford but in May 2015, that figure dropped to 72.  I have been in the Chelmsford property market for quite a while now and the one thing I have noticed over the last few years has been the subtle change in the traditional seasonality of the Chelmsford property market. It has been particularly noticeable this year in that the normal post Easter flood of properties coming onto the market was not seen. This has made an imbalance between supply and demand, with less houses coming onto the market there is simply not as much choice of properties to buy in Chelmsford and with the population of Chelmsford ever increasing; this will generally strengthen house price growth for the foreseeable future.

So what does all this mean for Grantham landlords or those considering dipping their toe into the buy to let market for the first time? For many people, buy to let looks a good investment, providing landlords with a decent income at a time of low interest rates and stock market unpredictability. 

However, if you are thinking of investing in bricks and mortar in Chelmsford, it is important to do things correctly. As an investment to provide you with income, for those with enough savings to raise a big deposit, buy to let looks particularly good, especially compared to low savings rates and stock market yo-yo’s. I must also remind readers, landlords have two opportunities to make money from property, not only is there the rent (income), but with the property market bouncing back over the last few years, property value increases has spurred on more investors to buy property in the hope of its value continuing to rise.

Savvy landlords with decent deposits can fix their mortgages at just over 3% for five years, making many deals stack up. Nevertheless, low rates cannot stay low forever, because one day they must rise and you need to know your property can stand that test. I saw some Chelmsford landlords struggling in the mid noughties, when interest rates rose from 3.5% in July 2003 to 5.75% in July 2007. That might not sound a lot, but that was the difference of making a £100 a month profit in 2003 to having to make up a shortfall in the mortgage payments of £100 per month in 2007.

Its true many landlords were thrown a life raft when the base rate dropped to 0.5% in March 2009. Whilst interest rates have remained there since, mark my words, they will rise again in the future. However, even with the potential for costs to rise, demand for decent rental properties remains high as there are ever more tenants in the market, driving up demand and thus rents. The British love of bricks and mortar plus improving mortgage deals also add up to fuel the buoyant Chelmsford property market.

If you are planning on investing in the Chelmsford property market, or just want to know more, things to consider for a successful buy to let investment, one source of information is the Chelmsford.

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