My concerns about the Colchester Property market

I am genuinely concerned about the Colchester property market, but in a way that might surprise you. Rightmove announced that average ‘asking prices’ rose last month by 1.2% in the East, leaving them 7.4% higher than a year ago.  Whilst it could be said that monthly change is very modest, in the same period a year ago, we saw a monthly rise of 0.7% in the East, which is more the norm given the onset of schools breaking up and everyone going on holiday.

Looking at all the data on the Colchester property market; putting aside the need for more houses to be built in the next decade to balance out the increase in population (helped in part by inward European migration) but not matched by a similar increase in housing being built; my research shows there is a widening gap between what property buyers want and what is available to buy. In a nutshell, many more buyers are looking for the smaller one and two bed properties (the typical terraced and smaller semi detached houses/apartments), whilst there are a larger proportion of the four and five properties, which are the typical detached properties available.

Demand for smaller properties comes from both first time buyers and the growing number of buy to let landlords, where it is more cost effective and efficient to buy smaller properties to let out compared to larger properties which tend to offer poorer returns.  Also, landlords with larger loans (on those larger more expensive properties) will also be hit harder with the changes in the way tax is paid on buy to let investments, which start in 2017.

If you recall, a few weeks ago I did some research on how different types of properties had performed in Colchester since the year 2000.  I revisited those calculations and it hit me how different types of properties had performed over the last 15 years.  In a nutshell, this mismatch of demand and supply isn’t a new phenomenon, it’s been happening under our noses for years!

In the last 15 years, the average terraced house in Colchester has risen in value from £63,025 to £193,398 whilst the detached house has risen in value from £133,087 to £342,627.  Nothing seems amiss until you look at the percentage growth.  The terraced has grown in value by 207% whilst the detached by only 157% meaning the gap between the inexpensive terrace’s and expensive detached properties has in percentage terms narrowed enormously (this isn’t just a Colchester thing, it has happened all across the Country).

I am concerned because more houses need to be built, not only in Colchester, but in the East and the UK as a whole.  In particular, there is specific need for more affordable starter homes for the growing demand from both tenants (and the landlords that will buy them) and first time buyers.  The Tories need to face up to the fact that unless they can get the builders, the planners (to release more building land), the banks (to finance it) and themselves together, to ensure long term plans can be made, and implemented, this issue will continue to worsen.

The country needs 200,000 houses a year to be built to keep up with demand, let alone reverse the imbalance between demand and supply.  Last year, only 141,040 properties were built, the year before 135,510 and 146,850 in the year before that.  This means only one thing for Colchester landlords.  Unless David Cameron starts to rip up huge swathes of the British countryside and build on acres and acres of green belt, demand will always exceed supply when it comes to property for the foreseeable future.

Therefore, investment in the local Colchester property market as a buy to let investment could be the best move to make as the stock market investments are possibly on the wane.  Everyone is different and trust me, there are many pitfalls in buy to let.  You must take lots of advice and seek out the best opinion.