Doom and Gloom for Colchester Property Market?

One of my landlords rang me last week from Beacon End, after he had spoken to a friend of his. Over Christmas, they were discussing the Colchester property market and neither of them could make their mind up if it was time to either sell or buy property. If you read the newspapers and the landlord forums on the internet, there is a good slice of doom and gloom, especially with changes in the taxation towards landlords, new legislation on checking tenants and the general uncertainty in the world economic situation.

I would admit, there are certain landlords in Colchester who have over exposed themselves in the last few years with high percentage loan to value mortgages. Those mortgages, with their current (yet artificially low) interest rates, will start to suffer, as their modest monthly positive cash flow/profit, i.e. income (rent) less costs (mortgage, fees, tax), will become negative when the tax and mortgage rates rise throughout 2017 and beyond.

It appears to me these landlords seem to have treated the Colchester Buy to Let market as a sure bet and have not approached this as a business and, as a result, they will suffer as they thought "Buy a house - rent it out so it covers the mortgage and make a few quid on top".  These are the people who will be thinking twice. I see opportunity everywhere and won't be stopping, I’m here to stay. It’s going to be an exciting new year.

Gone are the days when you could buy any old house in Colchester and it would make money.  Yes, in the past, anything in Colchester that had four walls and a roof would make you money because since WW2, property prices doubled every seven years … it was like printing money – but not anymore.

True, since January 1997, the average price paid for a Colchester flat/apartment has risen from £35,309 to today’s current average of £128,832 in the town, an impressive rise of 265% and terraced/town house have risen in the same time frame, from £45,454 to £199,361, an even better rise of 339%. However, look back to 2005, and in that year, the average flat was selling for £115,844, meaning our Colchester landlord would have seen a modest rise of 11% and the terraced owner would have seen an increase of 32%, as they were selling for on average £150,911 ... not bad until you consider inflation.

Since 2005, then inflation, i.e. the cost of living, has increased by 33.4%. That means to retain its value, Colchester terraced property bought for £150,911 in 2005 needs to be worth £201,267 today. Therefore, our landlord has seen the ‘real’ value of his property drop slightly by 1.4% (i.e. 32% less 33.4% inflation).

The reality is, since around 2004/2005 we haven’t seen anything like the capital growth in property we have seen in the past and it’s not predicted to grow at the rates it has previously done either. So it is high time anyone considering investing in property stopped believing the hype and did some serious research using independent investment expertise. You can still make money by buying the right Colchester property at the right price and finding the right tenant. However, remember, investing in Colchester property is not only about capital growth, but also about the yield (the return from the rent). It’s also about having a balanced property portfolio that will match what you want from your investment – and what is a ‘balanced property portfolio’? Well we discuss such matters on the Colchester Property Blog ... if you haven’t been, then it might be worth a few minutes of your time? 

33.1% of Colchester tenants in the private rented sector are on Housing Benefit

“What does the ideal Colchester tenant look like?”, asked one of my landlords from Lexden the other day, to which he carried on before I could reply, “Let me guess, a professional couple, both in their 30’s, flawlessly tidy, pays their rent early, doesn’t complain or fuss, who has no plans to move and cheerfully accepts annual rent rises”.

Before I can answer that question properly, I have always believed all a landlord wants (and expects) of their tenants is to pay their rent on time and look after the property as if it were their own. In return, the landlord should provide a property that is warm, clean, modern and damp free and sort any issues (such as repairs) quickly and without fuss. 

Back to the tenants – tenants tend to fall into several groups ... 20 something professionals; young and middle aged families; corporate tenants (ie their employer finds their employee a house to live in); students; older singles/couples and housing benefit claimants – and they come with different needs and wants. So choosing who best suits your Colchester property – and steering clear of bad tenants – is a big factor in making property investment a success.

One topic that I am often asked is should they, as a landlord, accept tenants on housing benefit?

It might interest the landlords of Colchester that of the 11,689 private rented properties in the local council area, 33.1% of the tenants of those properties are on some form of housing benefit.

(3,875 properties to be exact). I know many landlords have suffered late rent payments with tenants on benefit, especially since 2008, when local authorities started paying housing benefit to tenants rather than directly to the landlords, but you can’t ignore the fact that housing benefit tenants make up a significant proportion of the Colchester rental population. My opinion is that the final choice of accepting such tenants has to be the landlords but you can’t tar every tenant with the same brush (I will always give you a balanced opinion if ever asked).

Interestingly, it might surprise some readers of the Colchester Property Blog, when we compare Colchester to the national picture, Colchester’s Housing benefit claimants are lower, as nationally a higher proportion of private tenants claim the benefit. Nationally, 39.2% of the tenants of the 3,891,467 rental properties in Great Britain claim some form of housing benefit (ie 1,526,915 properties).

Now, let us look at the occupations of Colchester tenants, which makes even more fascinating reading. Of the 11,689 privately rented properties in the Colchester area, 8,921 head tenants (the head tenant being classified as the head of the household) are in employment (the other 2,768 rental property head tenants either being retired, long term sick, students or job seekers).

Splitting those 8,921 head tenants down into their relevant professions, 3,690 of them are Managers, Directors, Senior Officials, Professional or Technical Professions, 780 in Administrative and secretarial occupations, 993 in Skilled Trades, 995 in the Caring, Leisure and other service occupations, 773 Sales and Customer Service Occupations, 682 Process, Plant and Machine Operatives and finally, 1,008 in Elementary Occupations.


The one thing I have always known anecdotally, but until I did my research, never had anything to back it up with, was the high proportion of professionals and skilled trades renting property in Colchester – intriguing! Maybe in future articles, I will look deeper into the corporate tenant market, young and middle aged families, students and older persons rental markets.