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 doing some last minute
Christmas shopping in . 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 early
2013. Throughout the remainder of 2013, prices steadily increased. In 2014,
property prices really rocketed. Several factors were in play here which caused
this ‘property price bubble’. The public had more faith in the property market,
having seen the activity from the previous year and also news headlines were
encouraging, mortgage products became more available to first time buyers and
also people who hadn’t been able to sell in previous years due to negative
equity or just the property slump, suddenly were coming to market.
In 2015, whilst we have
still seen a reasonable increase in property values. The start of the years was
a bit slower, with the general election looming and people ‘waiting and seeing’
what was going to happen, however it did pick up almost straight away
afterwards. We have also had the change with pensions this year, allowing
people to have access to their money, which has brought out some new buy to let
Landlords to the market.
As I mentioned in last
weeks article, the Chelmsford market has become a lot more stable, with the
increase in property values being more sustainable. This is due to the balance
between supply and demand being closer together, (although still more demand
than supply). This should mean that the Chelmsford property market will
continue to steadily rise for the foreseeable future.
However, we have got the
possibility of a possible Interest rate rise on the horizon. This could stem
the flow of buyers if the interest rates go crazy whilst they wait to see what
happens with them. This could
potentially flip the balance between supply and demand the other way. This
would of course be worse case scenario, if the interest rise is done slowly and
in small increments as it has been reported it will happen, then it should make
that much of an impact on the Chelmsford property market.
The
advice I would give to landlords is, as always, 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. 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.
As always, my door is always open for both current and new landlords alike. If
you want to pop in for a chat about investing in Chelmsford, I’m always happy
to give my honest opinion.
May I
take this opportunity to wish you all a Merry Christmas & a Happy New Year.
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