Two Speed Colchester Property Market?

Even with the General Election on the horizon, property values in Colchester are still 1.11% higher than they were 3 months ago, the diversion and ambiguity of an election typically makes house sellers who need to sell, price their property more realistically (although this only lasts a couple of months). Looking specifically at it from a Colchester landlord’s point of view, the Colchester properties favoured by investors are in short supply in many parts of the town because of a number of factors. One of the factors has been that we seen the number of first time buyers coming to buy their first home increase over the last 12 months in Colchester.  Another factor has been the fact that the banks have been pushing ‘let to buy’ (yes ‘let to buy’ is different to ’buy to let’) to homeowners (more of ‘let to buy’ in an up and coming article). Next, because of the banks, who are chasing low risk landlords with high deposits with very low mortgage rates- and the low risk landlords with high deposits tend to be attracted to the safer modern two and three bed town houses and semis in Colchester.

As I mentioned a few weeks back, the pension rules are changing which means buy to let landlords can use some, or all, of their pension pot to buy a property.  It shouldn’t be forgotten there are tax implications taking more than a quarter of your pension pot out (see the article from a couple of weeks ago), so whilst many pension pots may not be able fund a suitably big enough tax free lump sum to buy the property outright, for most it will provide enough for the 25% deposit (required by most BTL mortgage providers). It shouldn’t be forgotten landlords that the interest paid on the mortgage is tax deductible against the rent, thus lowering your income tax paid.

In the last 12 months, I have noticed a particular uplift in interest from ‘50 something’ Colchester people wanting to become landlords for the first time. In Colchester, the highest returns for the lowest investment are at the lower end of the market e.g. the classic apartment. Unfortunately apartments, with two bedrooms are coming to the market in smaller numbers than the larger four beds in top end sectors of the Colchester property market. When looking at the actual numbers, in the later part of the summer of 2014 in Colchester, in one month alone 403 two bed properties were on the market in Colchester. However, in January this year, a notoriously excellent bumper month for properties coming on to the market, there were only 341 two bed properties on the market in Colchester to choose from. Today, that figure stands at only 316. Whilst the number of four and five beds has increased significantly ...  interesting don’t you think?

At that lower end of the property market in Colchester, (i.e. where first time buyers and landlord investors compete with each other to buy those smaller properties), I believe throughout 2015, there will be a slow and steady tipping of the scales between supply and demand. In fact, from what i am seeing and hearing, early anecdotal evidence has suggested over the last few months (although we will need to look at figures later in the Spring once we have the data from The Land Registry), we are beginning to see a polarised Colchester property market, where we have high demand but low supply at the bottom end of the property market, yet high supply but lower demand at the top of market.. and that can only mean one thing ... prices will go up quicker on the smaller properties than the larger ones in Colchester, thus narrowing the gap for people looking to move up market!

Great Investment - 5.81% Return

Temme English Estate Agents have put this two bedroom house North of Colchester's Town Centre  and close to local amenities on the market at £155,000. It could potentially achieve a rental income of £750 pcm.

If you bought it for £155,000 it would offer a fantastic yield of 5.81% per year!

This is a great return and a good long term investment.

I think this house will generate a lot of interest with investors!

http://www.rightmove.co.uk/property-for-sale/property-46821790.html

Rents Paid by Tenants in Colchester on the Rise

With Easter just gone and considering we are a quarter of the way through 2015, I was talking to landlord from West Bergholt the other day about what is happening to the level of rents that are being achieved in the Colchester property market.

In terms of rents in Colchester, it appears that rents being achieved for new rentals (i.e. when the tenant moves out and new tenant moves in) have risen in the order of 3.8% in the last 12 months on top of the range modern properties, yet remained static for older Victorian terraced houses and converted apartments. However, landlords with existing sitting tenants, irrespective of age are not increasing their rents, as most landlords prefer to keep their existing tenant paying the same rent and have the peace of mind that their tenant remains, paying the rent (thus reducing the risk of a void period).

It must be remembered rents dropped by 2% over 2008/9, due to oversupply in the rental market in 2009.) A lot of the people who couldn’t sell their property in Colchester in 2008/9 when the Credit Crunch hit in 2008, decided to let their house out instead of selling at a loss. In fact, the number of houses on the market in Colchester dropped by 62.3% between April 2008 and March 2010, a lot of which came on to the rental market in Colchester. However, looking at the longer term though, tenants have had it good  because since the turn of the Millennium, average wages have grown by 46%, but rents outside London have only grown by 36% rental growth over this period.

I told the landlord that there is a lack of new rental properties in Colchester coming on the market, in fact according to the Office of National Statistics, there are only 66 new rental properties are coming to the market each month in Colchester but the population of Colchester is rising by 143 people a month – something will have to give soon! This is compounded by the fact a number of landlords are looking to sell their rental properties in the coming months, as the property market in Colchester has improved. This further compounded as tenants in existing rental properties appear to be staying in properties for longer periods of time.

Looking at the rents charged in Colchester, historic evidence in the UK suggests private market rents have moved in line with general inflation. Government figures only go back as far as the year 2000, but looking at other countries with similar housing markets (America, Australia, Ireland and Holland) the fact is rents paid by tenants tend to rise in line or just ahead of inflation.

As short term wage growth in Colchester has eased off recently, rising by only 1.3% in the last 12 months, taking average salaries in Colchester to £25,832pa, with the tax breaks announced by The Chancellor in the Budget, I believe, even though rents have kept pace with inflation in the past, renting as an option has become more affordable, and is increasingly seen as a lifestyle choice. With returning economic growth and expected increases in the rate of growth of wages, above inflation rental growth could rise.

If you want a chat about the local Colchester property market, pop in for a coffee or email me on simonewaller@moreestateagents.co.uk 

Great Investment - 5.52% Yield

Haart Estate Agents have put this two bedroom apartment South of Colchester's Town Centre  and close to local amenities on the market at £125,000. It could potentially achieve a rental income of £575 pcm.

If you bought it for £125,000 it would offer a fantastic yield of 5.52% per year!

This is a great return and a good long term investment.

I think this apartment will generate a lot of interest with investors!

http://www.rightmove.co.uk/property-for-sale/property-34322712.html

Colchester Property Market - What is really happening?

I had an interesting conversation with a local Colchester accountant the other day. He is quite an observant chap (I know this because I have known him for a few years.. but I suppose you have to be to be an accountant!). Anyway, he mentioned a few things he had noticed recently in Colchester, one that Colchester property prices had gone up in the last few years but nowhere near the growth levels that were being achieved in central London, and secondly, that he thought the number of for sale boards in Colchester (and more importantly ones with sold slips on them) had increased over the last couple of years.

The rate of house price inflation in Colchester continues to slow with growth of 9.6% in the 12 months to February compared to 9.8% just under six months ago, according to the latest Land Registry data. However, there is considerable local variation with house price growth ranging from 7.8% in Suffolk to 14% in Hertfordshire over the last 12 months.

Whilst Colchester hasn’t seen the 20%+ per year in house price growth of London over the last couple of years,  Colchester has seen  a sharp uplift in the number of properties sold throughout  2014 as base line demand for housing grows, which suggests there is substance to the recent pick-up in house price growth in the town. Since the Second World War in the UK, when the number of properties sold has grown, property values grew soon after. The 18.43% uplift in property transactions in Colchester in 2014, compared to 2013, indicates the most significant recovery in house market activity in Colchester (outside London) since 2007.

When you compare Colchester with London, you could be looking at two different countries. In London, its mid/late teens house price to earnings ratios are impacting demand (i.e. the average property value is often 15 or 17 times the average wage in London .. in fact in Knightsbridge the ratio can be 30 to 1).  However, the number of people wanting to sell has dropped considerably, meaning that falling sales volumes combined with a general slowdown in activity in the run up to the General Election are resulting in lower mortgage approvals for home purchase.

Transactions are a great indicator for house prices. The acceleration in house price growth in London in the last two years was preceded by three years of rising transactions. A similar pattern is being registered in the Colchester area, as pent up demand returns to the market supported by low mortgage rates and an improving economic outlook.

But before you get the Champagne out, while the uplift in activity is welcome news, the number of Colchester property sales in 2014 are still 20.7% lower than the level seen in 2007 and property values are 3.1% above the 2007 levels. The ongoing housing recovery is far from broad based and remains focused on middle to higher value areas within Colchester where households have equity and find it easier to access mortgage finance. 

Great Buy to Let - 6% Yield

Boydens Estate Agents have put this one bedroom apartment North of Colchester's Town Centre  and close to the Mainline Train Station on the market at £100,000. It could potentially achieve a rental income of £500 pcm.

If you bought it for £100,000 it would offer a fantastic yield of 6% per year!

This is a great return and a good long term investment.

Ideal for someone who doesn't mind a bit of refurbishment work, have a look at the internal photos on the Rightmove link.

I think this apartment will generate a lot of interest with investors!

http://www.rightmove.co.uk/property-for-sale/property-34263297.html

Great Investment - 6.28% Yield!

Palmer & Partners Estate Agents have put this two bedroom apartment East of Colchester's Town Centre on the market at Offers in Excess of £100,000. It could potentially achieve a rental income of £550 pcm.

If you bought it for £105,000 it would offer a fantastic yield of 6.28% per year!

This is a great return and a good long term investment.

Ideal for someone who doesn't mind a bit of refurbishment work, have a look at the internal photos on the Rightmove link.

I think this house will generate a lot of interest with investors!

http://www.rightmove.co.uk/property-for-sale/property-34036515.html?premiumA=true

Palmer & Partners Estate Agents have put this three bedroom house close to Colchester's Town Centre and Town Train Station on the market at £175,000. It could potentially achieve a rental income of £825 pcm.

If you bought it for £175,000 it would offer a great yield of 5.68% per year!

This is a great return and a good long term investment.

Looks to be in great condition inside, have a look at the internal photos on the Rightmove link.

I think this house will generate a lot of interest with investors!

http://www.rightmove.co.uk/property-for-sale/property-49318855.html?premiumA=true

Massive drop in Homeownership in Colchester

An Englishman’s home is his castle but when it comes to the UK  the ‘Brit’s are still a nation of homeowners (although wasn’t it Napoleon who thought we were all shop keepers!). It  is interesting to note that up until the mid to late 1960’s, more people rented their home (albeit mostly from the local council) than owned their own. In fact, I was surprised to read that in 1921, over 75% of homes in England and Wales were privately rented with the remaining 25% being owner occupied. 

It was only after the Second World War, when the Beatles were rocking, that people started to buy instead of rent .. but instead of owning our property outright, we borrowed money from banks and building society’s to buy them and the roots of the growth of the private rental sector can be drawn back to the late 1970’s early 1980’s, when the council houses began to be sold off under the right to buy scheme.

In 2001, 71.78% of households were owner occupied in Colchester, but ten years later, that percentage dropped massively to 66.31%. But here is the interesting part, when you look at the actual numbers of households, 45,734 households in Colchester were owner occupied in 2001. Ten years later, in 2011,that number (who owned their own home) had actually increased to 47,507 households.

So why big drop in percentages but not in actual properties? An additional 7,928 properties were built in Colchester between 2001 and 2011, but a lot of them were bought as buy to let investments, thus more than doubling the number of private rental properties in Colchester. In fact, the number of properties in Colchester, which were privately rented, jumped from 5,136 in 2001 to 11,689 in 2011! With the Colchester Council housing waiting lists being in the 5 to 10 year range for a decent property in a decent location. Therefore, with no more council houses being built, and an increasing number of people looking for a roof over their head, private renting is the only option.

With every report stating the rental market will continue to grow throughout the rest of this decade and beyond, linked with high demand and limited supply in the Colchester, then if you are considering buying a property for buy to let investment in Colchester, as I don’t sell property (I’m just a letting agent), I am always happy to give you my considered opinion on which property to buy (or not as the case may be).. If you are a landlord, new or old, I am certainly more than happy for you to pick up the phone or visit the Colchester Property Blog where you will find the best buy to let deals on a day by day basis from all the agents in Colchester

Northwood Estate Agents have put this two bedroom apartment close to Colchester's Town Centre on the market at £110,000. It could potentially achieve a rental income of £575 pcm.

If you bought it for £110,00 it would offer a great yield of 6.27% per year!

This is a fantastic return and potential for capital growth.

Looks to be in great condition inside, have a look at the internal photos on the Rightmove link.

I don't think this one will be on the market for long before being snapped up!

http://www.rightmove.co.uk/property-for-sale/property-50877113.html

What properties are actually selling in Colchester?

Prices up, prices down, prices stable .. the newspapers are full of good news, bad news and indifferent news about the Brit’s favourite subject after the weather .. the property market. 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 London, which has seen average prices grow in the last twelve months by a shade under 19% (and again that is an average because some Borough’s  in London have risen by 26%) whilst in the land of Daffodils , by contrast, Wales only saw a 2% increase in property values (although in the Merthyr Valleys they dropped by over 11%).

Well we can’t ignore the rest of the UK, and we can’t forget that the Chancellor’s Stamp Duty reforms have polarised the London property markets above £1,000,000 because at the top end of the market, punitive Stamp Duty charges will dampen demand further. While the Bank of England warned of the growing London property price bubble in the Spring of 2014, even talk of a recovery in some areas was premature. In 2015, irrespective of where you are in the UK, one story will unite the patchwork quilt of markets –  really slow property value growth.

But what about Colchester? Well, we haven’t had the December figures from the Land Registry yet but the last few months’ activity and prices achieved would suggest neither house price growth nor drops.  In fact, most sellers are buyers anyway, so if you need to take less for yours, you won’t have to pay as much for the one you want to buy ... and that is good news for everyone as most move up market when they move. This is even better for landlord investors, as they can bag a bargain as well.

The question you should be asking though is not only is what happening to property prices, but which price band exactly is selling? I like to keep an eye on the property market in Colchester on a daily basis because it enables me to give the best advice and opinion on what (or not ) to buy in Colchester. 

If you look at Colchester and split the property market into four equalled sized (into terms of households) price bands. Each price band would have around 25% of the property in Colchester, from the lowest in value (the bottom 25% ) all the way through to the highest 25% (in terms of value).  Over the last two months (63 days to be precise), in the lowest quartile, (those with asking prices under £135k) 194 properties have come onto the market in Colchester  and 34% of them (66 properties have a buyer and sold stc. The next quartile, between £135k-£175k of the 177 properties that came on to the market, 36.1% of them (64 properties) have a buyer. The £175k-£255k price range has seen 258 properties come on to the market, and 34.4% of the properties have a buyer (89 properties). The most expensive 25%, the £255k plus range, has seen 52 of the 232 properties that came on to the market find buyers (22.4%).  Fascinating don’t you think?

The next three months’ activity will be crucial in understanding which way the market will go this year and I honestly believe we will not see any house price growth or drops this side of the election. Election or no election, people will always need a roof over their head and that is why the property market has rode 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!

Beresfords Estate Agents have put this two bedroom apartment close to Colchester's Mainline Train Station on the market at £147,500. It could potentially achieve a rental income of £675 pcm.

If you bought it for £147,500 it would offer a great yield of 5.49% per year!

This is a great return and potential for capital growth.

Looks to be in good condition inside, have a look at the internal photos on the Rightmove link.

I don't think this one will be on the market for long before being snapped up!

http://www.rightmove.co.uk/property-for-sale/property-34130049.html