Baldock homeowners and potential Bank of England base rate rise…..

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An interesting article…….  Are Baldock homeowners ready for an interest rate rise?

For more information about the Baldock property market and where it is going – please read my other blog posts on http://www.baldockpropertyblog.co.uk  or drop me note via email lettings@satchells.co.uk, like many Baldock landlords are doing.

Alternatively pop in to our office for a cuppa or give me a call on 01462 894565.

 

 

 

Baldock Buy-to-Let Return / Yields – 1.7% to 6.3% a year

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The mind-set and tactics you employ to buy your first Baldock buy to let property needs to be different to the tactics and methodology of buying a home for yourself to live in. The main difference is when purchasing your own property, you may well pay a little more to get the home you (and your family) want, and are less likely to compromise. When buying for your own use, it is only human nature you will want the best, so that quite often it is at the top end of your budget (because as my parents always used to tell me – you get what you pay for in this world!).

Yet with a buy to let property, if your goal is a higher rental return – a higher price doesn’t always equate to higher monthly returns – in fact quite the opposite. Inexpensive Baldock properties can bring in bigger monthly returns. Most landlords use the phrase ‘yield’ instead of monthly return. To calculate the yield on a buy to let property one basically takes the monthly rent, multiplies it by 12 to get the annual rent and then divides it by the value of the property.

This means, if one increases the value of the property using this calculation, the subsequent yield drops. Or to put it another way, if a Baldock buy to let landlord has the decision of two properties that create the same amount of monthly rent, the landlord can increase their rental yield by selecting the lower priced property.

To give you an idea of the sort of returns in Baldock…

186 Baldock table

 

186 Baldock graph

Now of course these are averages and there will always be properties outside the lower and upper ranges in yields: they are a fair representation of the gross yields you can expect in the Baldock area.

As we move forward, with the total amount of buy to let mortgages amounting to £199,310,614,000 in the country, landlords need to be aware of the investment performance of their property, especially in the era of tax increases and tax relief reductions. Landlords are looking to maximise their yield – and are doing so by buying cheaper properties.

However, before everyone in Baldock starts selling their upmarket properties and buying cheap ones, yield isn’t the only factor when deciding on what Baldock buy to let property to buy.  Void periods (i.e. the time when there isn’t a tenant in the property between tenancies) are an important factor and those properties at the cheaper end of the rental spectrum can suffer higher void periods too. Apartments can also have service charges and ground rents that aren’t accounted for in these gross yields. Landlords can also make money if the value of the property goes up and for those Baldock landlords who are looking for capital growth, an altered investment strategy may be required.

In Baldock, for example, over the last 20 years, this is how the average price paid for the four different types of Baldock property have changed…

  • Baldock Detached Properties have increased in value by 274.1%
  • Baldock Semi-Detached Properties have increased in value by 267.3%
  • Baldock Terraced Properties have increased in value by 293.8%
  • Baldock Apartments have increased in value by 280.8%

It is very much a balancing act of yield, capital growth and void periods when buying in Baldock. Every landlord’s investment strategy is unique to them. If you would like a fresh pair of eyes to look at your portfolio, be you a private landlord that doesn’t use a letting agent or a landlord that uses one of my competitors – then feel free to drop in and let’s have a chat. What have you got to lose? 30 minutes and my tea making skills are legendary!

Baldock House Prices Outstrip Wage Growth by 21.13% since 2007

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I recently read a report by the Yorkshire Building Society that 54% of the country has seen wages (salaries) rise faster than property prices in the last 10 years. The report said that in the Midlands and North, salaries had outperformed property prices since 2007, whilst in other parts of the UK, especially in the South, the opposite has happened and property prices have outperformed salaries quite noticeably.

As regular readers of my blog know, I always like to find out what has actually happened locally in Baldock. To talk of North and South is not specific enough for me. Therefore, to start, I looked at what has happened to salaries locally since 2007. Looking at the Office of National Statistics (ONS) data for North Hertfordshire District Council, some interesting figures came out:

 

188 North Hertfordshire table

 

 

188 North Hertfordshire Graph

Salaries in North Hertfordshire have risen by 25.96% since 2007 (although it’s been a bit of a roller coaster ride to get there!) – interesting when you compare that with what has happened to salaries regionally (an increase of 18.65%) and nationally, an increase of 17.61%.

Next, I needed to find what had happened to property prices locally over the same time frame of 2007 and today. Net property values in North Hertfordshire are 47.09% higher than they were in late 2007 (not forgetting they did dip in 2008 and 2009). Therefore…

Property values in the Baldock area have increased at a higher rate than wages to the tune of 21.13% … meaning, Baldock is in line with the regional trend

 

188 Baldock Grpah 2

 

All this is important, as the relationship between salaries and property values is the basis on how affordable property is to first (and second, third etc.) time buyers. It is also vitally relevant for Baldock landlords as they need to be aware of this when making their buy-to-let plans for the future. If more Baldock people are buying, then demand for Baldock rental properties will drop (and vice versa).

As I have discussed in a few articles in my blog recently, this issue of ‘property-affordability’ is a great bellwether to the future direction of the Baldock property market. Now of course, it isn’t as simple as comparing salaries and property prices, as that measurement disregards issues such as low mortgage rates and the diminishing proportion of disposable income that is spent on mortgage repayments.

On the face of it, the change between 2007 and 2017 in terms of the ‘property-affordability’ hasn’t been that great. However, look back another 10 years to 1997, and that tells a completely different story. Nationally, the affordability of property more than halved between 1997 and today. In 1997, house prices were on average 3.5 times workers’ annual wages, whereas in 2016 workers could typically expect to spend around 7.7 times annual wages on purchasing a home.

The issue of a lack of home ownership has its roots in the 1980’s and 1990’s. It’s quite hard as a tenant to pay your rent and save money for a deposit simultaneously, meaning for many Baldock people, home ownership isn’t a realistic goal. Earlier in the year, the Tories released proposals to combat the country’s ‘broken’ housing market, setting out plans to make renting more affordable, while increasing the security of rental deals and threatening to bring tougher legal action to cases involving bad landlords.

This is all great news for Baldock tenants and decent law-abiding Baldock landlords (and indirectly owner occupier homeowners). Whatever has happened to salaries or property prices in Baldock in the last 10 (or 20) years … the demand for decent high-quality rental property keeps growing. If you want a chat about where the Baldock property market is going – please read my other blog posts on http://www.baldockpropertyblog.co.uk  or drop me note via email, like many Baldock landlords are doing.

 

Great one bedroom investment opportunity in Baldock

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Available for sale through Country Propeties in Baldock at £165,000, this property seems like an ideal investment opportunity!   Less than half a mile from the mainline station to London and in a quiet development with allocated off road parking.  Anticipated annual yield of 4.7%.

Take a look at the advert here and call Country Properties to view ASAP!