I had an interesting chat with a landlord who uses another
letting agent in the Heanor
after he popped into our offices for a coffee whilst his wife was doing some
last minute Christmas shopping. We got taking about both the Amber Valley and Erewash
property markets, as he lives in Heanor but his buy to let properties are in
Heanor, Ilkeston, Eastwood and Belper and I thought other homeowners and landlords
might be interested in what was discussed. Whilst the housing markets are so
different, with average property prices in Belper being as high as £210,400, in
the middle, Ilkeston £139,700 and Heanor £133,700 with Eastwood at a very
respect £115,600 there are a alot of similarities between the four town’s
property markets .
You see, property values didn’t stop dropping in Amber
Valley and Erewash until December 2009 (and even then, after a small recovery
in the proceeding years, there was a minor dip in property values of 4.1% in
early 2012), so after a strong run over the last 15 months, the ever upward
drive of house price rises has started to turn with increases now at a standstill
(and in some locations a minor drop) for the first time since the middle of
2013. Now it could be said this easing of the housing market in Amber Valley
and Erewash can be attributed partly to the time of year (in 2013 property
values in Amber Valley and Erewash dropped by 0.1% in December), it is obvious
that estate agents in Amber Valley and Erewash are wary about the direction of
the market as a result of the not as strong demand and fewer house sales.
With the uncertainty of a possible interest rate rise, new
mortgage rules, a general election on the horizon and recent warnings of a
house price bubble. Although the main indicators suggest that buyers will start
to gain the upper hand, especially with the new stamp duty rules announced
recently by George Osbourne. However, there are many homeowners who don’t need
to sell and won’t bother unless it’s economically beneficial to do so, but most
homeowners are homebuyers, so what they loose with one they gain with another.
On the one hand going for high yielding Amber Valley and Erewash
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 (I spoke about
this a few months ago in ‘The Spruce Lettings Property Blog’). 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 tend to be low meaning if you are taking a high percentage
mortgage, the rent doesn’t pay the mortgage payments.
This is all good news for landlords looking to buy rental
property with the changes in stamp duty and later in 2015, the new rules
regarding pensions, where you will be able to take money out of your pension
pot to invest in property. However, at the same time, I would say don’t just
buy any old property in Amber Valley and Erewash. 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.
If you want to chat about property investment in the either Belper,
Ilkeston, Heanor or Eastwood, either pop into our offices Heanor or email
direct on lettings@sprucetree.co.uk
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