Category: ANALYSIS, COMPARISONS & TRENDS

Reduced Tax Relief – Will It Affect You?

Attacks & More Tax !

In March the Chancellor announced tax changes for property investors. In this article we consider the effect of one of these changes ….. Reduced Tax Relief.

From 2017 the amount of tax relief that some landlords can claim on their finance costs (such as mortgage interest payments) is gradually being reduced. When the changes take full effect in the 2020/21 tax year, landlords will only be able to claim tax relief at the basic rate of 20%, instead of 40% or 45% for those in higher or top rate tax brackets, respectively.

The Current Rules
Currently as a landlord you can claim all of the interest-only part of your buy-to-let mortgage against the rental income generated from your property. So, if you’re in the 40% income tax bracket, your tax bill will be 40% of the difference between these two elements.
For example, let’s say your Crawley investment property generates £12000 pa in gross rental income. If you have a buy-to-let mortgage & pay interest of £9000 pa, your net profit will be £3000pa.

If you pay income tax at the basic rate of 20%, then you would owe the Revenue £600 i.e. 20% of £3000. If you’re in the 40% higher tax band, however, you would have to pay £1200 in tax i.e. 40% of your £3000 profit. Our example is summarised in Table 1.

25-4-16 Table 1

New Tax Regime from 2017
By 2020/21, when the transition period for changes to tax relief are completed, you will only be able to deduct 20% of the mortgage interest from your tax liability. To illustrate the impact, let’s re-visit the previous example. Again, this is summarised in Table 1.

If you’re a basic rate tax payer, in 2020/21 your tax liability will still be £600 i.e. 20% of your £12000 rental income LESS 20% tax relief on your mortgage interest. So nothing changes.

Unfortunately, if you’re a higher rate tax payer you won’t be so lucky. As a taxpayer in the 40% income tax bracket, from 2020/21 onwards your rental income will be taxed at the rate of 40%, BUT your mortgage interest relief can only be deducted at the rate of 20%.

With reference to our previous example, if your rental income is £12000 pa, you’ll have to pay tax on this amount at the rate of 40% i.e. £4800. Although you will be able to deduct mortgage interest, in 2020/21 this can only be done at the basic rate of 20%. In our example this amounts to £1800. Hence your tax bill for the property in 2020/21 would be £3000. So you would be £1800 worse off compared with now.

Please note the above is not & should not be considered as tax advice. In order to obtain expert tax advice your should consult with a qualified accountant or tax advisor. They may be able to suggest ways in which you can reduce your tax liability.

The opinions expressed in this article are those of the author only and not of Northwood. If you are considering investing in property, please make sure that you seek appropriate professional advice.

 

 

12th April 2016

5%+ Rental Yield After Adding the Stamp Duty Surcharge ?

With the additional 3% Stamp Duty surcharge for second property purchases now set in stone, a number of property investors have been concerned about the effect on rental yields.

As we’ve argued previously, however, the Stamp Duty hike imposed by the Chancellor on the 1st April, has to be considered in the grand scheme of an overall property investment strategy – see https://wordpress.com/post/thecrawleypropertyblog.com/2740.  Most of the landlords that we know aim to keep their properties for the long term i.e. 10 years plus. This length of time is usually sufficient to “ride-out” the inevitable peaks and troughs associated with property prices. As one wag pointed out to me recently, however, it’s not the peaks that concern him……it’s more the troughs ! Point taken !

So, has the recent Stamp Duty surcharge torn the heart out of buy-to-let ?

From our perspective the answer to this question is currently no. Investment property is for the long haul, not just for Christmas – first mention of the C-word this year !  The 3% additional upfront purchase cost for buy-to-let investors is therefore more of an irritant than a game changer. Of course there are other tax changes that the Chancellor intends to phase in over the next few years, so advice from a qualified tax specialist is probably in order.

However, by way of an example, let’s take a look at a 2 bedroom flat in Southgate West, Crawley, that has just been advertised on Rightmove by estate agents Taylor Robinson. The asking price range is £210000 to £220000. Although the apartment block appears somewhat dated, from the internal photos the property looks to have been refurbished & maintained to a very high standard indeed. Here’s the Rightmove link for a closer look http://www.rightmove.co.uk/property-for-sale/property-53773372.html

Although the asking price for this flat is somewhat higher than similar properties that have sold recently, both the internal condition and seasonal effects of Spring on house prices have probably persuaded the vendors to try for as much as they can get – and why not !

Notwithstanding the higher price, 2 bedroom flats like the one we’re considering here rent for around £925 to £950 pcm. If, as a property investor you decided to add the additional Stamp Duty surcharge onto the purchase price to calculate your rental yield, you would get an effective asking price range from £216300 to £226600. Based on the rental values we’ve quoted, your gross rental yields would now effectively be around 4.9% to 5.3%. These yields are still slightly higher than the UK average at around 4.8%, as quoted for February 2016 by the Your Move and Reeds Rains Buy-to-Let Index – http://www.lslps.co.uk/news/house-price-index. Of course, if you can offset the Stamp Duty surcharge against any Capital Gain when you eventually sell, so much the better !

So there you go – it’s still possible to achieve 5% gross rental yields on Crawley investment properties, even if you add the Stamp Duty surcharge on to the asking price !

If you’re considering investing in property in or around the Crawley area and would like some advice on what & where to buy, please give us a call on 01293 515588. Our advice is free  and we’d love to chat “property” with you ! Alternatively, you can also e-mail us on crawley@northwooduk.com.

The opinions expressed in this article are those of the author only and not of Northwood. If you are considering investing in property, please make sure that you seek appropriate professional advice.

 

 

 

 

 

 

 

15th March 2016

Impact of the April 2016 Stamp Duty Rise:

We’re sure that everyone is now fully aware that Stamp Duty Land Tax (SDLT) is going to increase by 3% on all of the tax bands for additional properties purchased after 1st April 2016. In case you’re not sure of the Stamp Duty rates we’ve reproduced them in the table below.

Table 1: Stamp Duty Bands & Rates

Mar 16 - Stamp Duty Bands

If you are a property investor and are not well underway with your next property purchase by now, it is almost certainly too late to complete by the end of this month !

So, have you missed the Buy-to-Let boat ?

To answer this question, let’s look at the facts.

Consider, for example, a typical Crawley investment property, such as a modern 2 bed flat close to Three Bridges station. Currently these types of properties are being advertised for around the £235k mark.

What Stamp Duty would be paid by an investor if a property like this was purchased before or after 1st April 2016 ?

The Stamp Duty payable is shown in Table 2 and, as you can see, the total due from 1st April is a whopping £9250! Put another way, the Government is imposing a SDLT surcharge of  £7050 !  No wonder property investors have been trying to complete their purchases before April !

Table 2: Example Stamp Duty payable before & after April 2016

Mar 16 - Stamp Duty example

*Assuming second property purchase

 

However, let’s put some perspective on the Stamp Duty surcharge.

Although we know that property prices can go up as well as down, the average long term trend in prices has been upwards for a very long time.Last year, for example, average prices paid for properties sold in Crawley increased year on year by 10.8%, as we reported in last months’ Crawley Property Update (e-mail crawley@northwooduk.com and request your copy !)

A 3% increase on the Stamp Duty rate for 2nd property purchases would therefore have been easily “gobbled-up” in last years’ average property price rise.

The Stamp Duty surcharge appears even less significant when compared with average price increases in Crawley, over the last 15 years or so. According to the Land Registry, the average price paid for property in Crawley is now some 135% higher than it was in the year 2000.

Putting the Stamp Duty Rise into Context

The Chancellors additional 3% Stamp Duty increase from April 2016 is not particularly welcome for buy-to-let investors. However, we feel that when property price rises over the medium to long term are factored in, it is not something that should deter those determined to invest in the property market.

Of course, it should be stated that investing in the right property and in the right location, is perhaps even more important than it has ever been. If you’re in any doubt about what property to invest in, make sure you talk to a local property expert.

Last, but not least, it has been reported that the Government is currently proposing that the Stamp Duty surcharge can be offset against any capital gain when the property is sold. However, we can’t guarantee that ministers won’t change their minds at some point in the future, perhaps when we’re not looking !

The opinions expressed in this article are those of the author only and not of Northwood. If you are considering investing in property, please make sure that you seek appropriate professional advice.

20th February 2016

Seasonal Uplift in Crawley Property Prices

The daffodils are well & truly out in Crawley and, at the time of writing, we’re still only three quarters of the way through February !

20-2-16 Daffodils

As the weather warms-up & we move towards the Spring, buyers also begin to emerge from Winter hibernation. As a consequence, we start to see the annual pick-up in the housing market up and down the country.

Reflecting this increased activity in the housing market, the February 2016 Rightmove House Price Index (see http://www.rightmove.co.uk/news/February-2016-Property-Trends-Infographic) indicated an average month-on-month increase in asking prices of 2.3%. If this rise were repeated throughout the year, it would mean an annual increase of over 31% !

Well, I can hear you say, “that’s not going to happen, is it !” Our answer to that is …. you’re right, it’s not going to happen !

Nonetheless, however, the 2.3% month-on-month rise reported by Rightmove is indicative of the seasonal factors that provide a boost to asking prices everywhere, including Crawley.

As a number of our landlord investors know, seasonal factors are not the only effect behind the increase in property prices this year. One other important (and hopefully never to be repeated) factor, is the UK Governments proposal to increase stamp duty by 3% for those purchasing 2nd homes, including Buy-to-Let investors.

The Government has argued that Buy-to Let investors have been instrumental in pushing-up property prices, way beyond the reach of first time buyers. To contradict this, however, data released by the Council for Mortgage Lenders (CML), and reported in Landlord Today, (https://www.landlordtoday.co.uk/breaking-news/2016/2/first-time-buyers-outnumber-landlords-three-to-one) shows that although Buy-to-Let investors formed a large proportion of borrowers in 2015, they were in fact out numbered 3 to 1 by first time buyers.

Whatever the merits or otherwise of the Governments proposed stamp duty increase, D-day for the rate hike is set for 1st April 2016. So, if you’re currently in the process of purchasing a Buy-to–Let property, make sure it completes before April fools day, or you might be landed with more than just a silly prank for your efforts !

Some commentators have predicted that after 1st April 2016, demand from Buy-to-Let investors will start to dry up. As someone who does not own a crystal ball, I cannot guarantee this is going to happen – only that the argument seems plausible.

So what about the effect on Crawley property prices ?

It’s clearly too soon to see whether there will be a spike in actual prices paid up to April 2016. This information will probably not be available from Land Registry until sometime in the middle of May. However, a good indication of whether prices are starting to increase is to look at advertised asking prices. This is because an increase in asking prices usually translates into an increase in actual prices paid.

To get a feel for the seasonal effect on property prices, together with any rise associated with the imminent stamp duty increase, we’ve looked at asking prices for 2 bedroom flats at Crawley’s ever popular Commonwealth Drive development. Average advertised asking prices in the last 4 months of 2015 have been compared with those that have come on to the market since the start of 2016. The results are shown in the table below.

Table: Average advertised sales & rental prices for 2 bedroom flats at Commonwealth Drive, CrawleyTable 20-2-16* From Rightmove advertised prices    ** Rounded to the nearest £100

 

The table shows that the increase in average asking prices in 2015 compared with 2016 is £7900, or nearly 3.6%. So the price rise for the Commonwealth Drive flats in Crawley has been even higher than the 2.3% rise reported nationally by Rightmove.

As a property investor, one question to ask will be, if the increase in asking prices translates into actual prices paid, how will this affect rental yield ?

In order to give an answer to this question, we checked the average advertised rents over the same periods. We’ve then simply calculated the resulting yield based on advertised asking prices. The results are also shown in the table. As you can see, average rents, which have increased from £1006pcm to £1053pcm, have risen by 4.7% i.e. over 1% more than the advertised asking prices for the same period. The resulting gross rental yields (the right most column in the table) have also improved, albeit, slightly.

In conclusion, although we’re seeing the usual seasonal increase in property prices in Crawley (at least as far as the flats at Commonwealth Drive are concerned), there is also the possibility of an additional effect due to the imminent stamp duty hike for Buy-to-Let investors. Advertised rents have also increased at a higher rate, with rental yields nudging up a little as well.

Please do bear in mind that we can’t judge trends in the whole Crawley property market based on one set of data. Nonetheless it will be interesting to see just what effect the increased stamp duty hike will have on asking prices for flats at Commonwealth Drive and elsewhere in Crawley.

Post April 2016 of course, we’ll also be looking to see whether there are any signs of reduced demand for investment properties from Buy-to-Let landlords. Rest assured, we’ll be on the case just as soon as the information becomes available !

The opinions expressed in this article are those of the author only and not of Northwood. If you are considering investing in property, please make sure that you seek appropriate professional advice.

 

 

 

 

1st February 2016

Crawley v’s Redhill: Investment Property – Not Football !

One of our landlords called up the other day looking to invest in another flat. Flats are his thing rather than houses and he already has investment properties in both Redhill & Crawley. He’d seen a few flats for sale in both towns and was asking our advice as to which location we thought would be better.

This got us thinking about both capital growth & rental yields in both towns. So we decided to take a closer look by comparing roughly similar types of properties in both locations, to see which one was the “best”.

Crawley people will be familiar with the Maidenbower flats at Fenchurch Road, Lyon Close and Dakin Close, while those from Redhill will be familiar with the “St Anne’s” development. Both locations are fairly convenient for their respective town centres and mainline stations to & from London. As such, the flats were and remain very popular with both tenants & landlords alike.

In order to compare the two locations we have used price paid information from HM Land Registry. Historic rental prices, as advertised on Rightmove & Zoopla, were used to calculate rental yields. In Table 1 we show the average prices and capital growth percentages for the flats in Redhill & Crawley over the last 15 years.

Table1: Average prices & capital growth

Table1 1-2-16

* Calculated from Land Registry price paid data

Prices in 2000 were roughly the same for both locations, give or take just under £6k. However, average prices for the Redhill flats have increased by 130% over the last 15 years, giving a year on year average compound rate of increase of around 5.74%. This can be compared with Crawley where there has been a corresponding overall increase of 107%, or an average compound rate of increase of 4.97%, year on year. In monetary terms the average Redhill flats have increased by about £129300 over the last 15 years, whereas an average Crawley flat has “only” managed an increase of £99650 i.e. a difference of nearly £30k !

However, as we’ve previously mentioned before in these blog articles, there are two sides to every story and property investment is no exception. For property investment, the flip side to capital growth is rental yield i.e. how many pounds we get back in rent for each pound we invest. Areas with higher rental yields tend to come with lower capital growth and vice-versa. However, combine both and you get a much fuller picture of how well a particular investment is performing.

The investment strategy of the landlord who prompted this article is fairly well balanced between capital growth on the one hand & rental income on the other. In a perfect world he’s happy to sacrifice some capital growth for rental income, so that his investments cover running costs and provide some additional income on top. His running costs include a float for the inevitable breakdowns & repairs, as well as money for refurbishing his properties every 4 to 6 years to keep them fresh & up to date.

So on the face of it, investing in the Redhill flats is a better option in terms of Capital Growth than Crawley. However, what about Rental Yield ?

In Table 2 we show average gross rental yields over the last 10 years for the Crawley & Redhill flats in question.

Table 2: Average Gross Rental Yields

Table2 1-2-16

The figures in Table 2 show that on average the Redhill flats have a lower average gross rental yield compared with those in Crawley. Over the last 10 years, the difference in yields, shown in the middle column, vary from 9.8% to 16.0%. Another way to interpret this difference is that for every pound you invested in the Crawley flats, you get between 9.8% & 16% more back in rent.

So although the Redhill flats outperform Crawley in terms of Capital Growth, Crawley is clearly the winner when it comes to Rental Yield. Deciding on whether Crawley or Redhill are “best” for you will depend on your investment strategy….. is it driven by income or long term capital growth ?

As far as our landlord is concerned, he’s gone away to think over his investment strategy. His considerations are now whether to change the balance of his portfolio to give higher rental income (i.e. higher yield), sacrifice some of the income for longer term capital growth or stay as he is. We’ll keep you posted on what he decides to do !

If you’re thinking of investing in property in Crawley or surrounding towns, it’s well worth speaking to a property professional who can help point you in the right direction. What & where to buy will depend on your investment strategy, which may be balanced or more skewed towards either capital growth or rental income. We’re more than happy to provide you with free independent advice on any investment purchase you might be contemplating. Just pick up the phone and give us a call on 01293 515588. Alternatively, you can also drop us an e-mail to crawley@northwooduk.com. We look forward to hearing from you.

The opinions expressed in this article are those of the author only and not of 
Northwood. If you are considering investing in property you should seek 
appropriate professional advice.

 

 

Crawley Property: Market Review 2015

Here’s wishing you a Happy & Prosperous 2016.

Just before the Christmas break one of our long standing landlords popped into the office to wish us the Seasons Best and we got talking about what the Crawley property market has in store for the coming year. There are numerous changes afoot in the property market in general and in particular for the private rented sector (PRS). However, as we were just collecting information together for this article we were able to take a brief look at what the market here in Crawley had done in 2015. Here’s the bones of what we discussed.

When our landlord came into the office the Nationwide Building Society had just published their December 2015 House Price Index (see http://www.nationwide.co.uk/about/house-price-index/headlines). The index had shown a steady annual increase in average property prices of 3.7% to the year ended Nov 15. This puts the average price for a property in the UK at just over £196 000 compared with just over £189000 a year earlier – see Table 1 for details. As always there is considerable regional variation in prices, with London & the Southeast coming out on top, with areas to the North & in Scotland lagging some way behind. Indeed, the Nationwide survey shows that the so-called North – South divide is alive and kicking (at least in terms of property prices) and has actually widened further. More on this later.

So much for the national picture, what about our local property market here in Crawley ?

In order to compare national trends with those in Crawley, we’ve used Land Registry price paid data and calculated the average change in local property prices. As the latest property price information from the Land Registry is up to the end of Nov 15, we’ve used this date to compare local and national trends. The information comparing Crawley and UK wide property prices is shown in Table 1 for the years ending Nov 13, 14 & 15.

Table 1

16-1-16 Table 1

* Price data from Nationwide Building Society

** Calculated as 3 month moving averages from HM Land Registry Price Paid Data to the nearest £100

As you can see from Table 1, the average Crawley property price in Nov 15 was £264500. This is some 35% above the national average as quoted by the Nationwide at £196305. The difference between these prices is only to be expected for a town like Crawley which lies in the South East of England, one of the most expensive parts of the UK. The table also shows the year on year rate of property prices rises, which are also shown on Graph 1.

 

Slowing Rate of Property Prices Rises

As we are all no doubt aware, prices in Crawley have been increasing over the last few years. However, as shown in Graph 1, the rate of increase has slowed to 6.8% for the year ended Nov 15 from a peak in 2014. The trend of year on year property price rises seen in Crawley  over the last few years is mirrored nationally, but at a lower rate – as shown in Graph 1.

Graph 1

Graph 1 16-1-16

The reduction in property price rises shown in Graph 1 is not unexpected, as wage rises have increased at a much lower rate. In addition, the Government, via the Bank of England, has tried to clamp down on the availability of mortgages and imposed much stricter lending criteria in the so-called MMR (Mortgage Market Review). More recently, the Bank of England has also announced a tightening on Buy-to-Let lending, in an effort to limit property prices rises to a more sustainable long term level. So the slowdown in the rate of property price rises is to be expected and is largely welcome – after all, no one really wants another boom & bust ! Let’s hope the politicians and the Bank of England know what they’re doing !

 

Increasing North – South Divide

Both Graph & Table 1 also show another interesting trend in property prices – the so-called North – South divide. As clearly seen in Graph 1, the rate of property price increases in Crawley (blue line) has been consistently higher compared with the national trend (red line). Prices in Crawley have therefore been increasing at a faster rate than those nationally.

The difference in average prices between Crawley and the rest of the UK is shown in more detail in Graph 2. Again, the blue line shows Crawley prices and the red line, the UK average. You will notice that the price data for Crawley is more “lumpy” than that seen nationally from the Nationwide. This is due to the relative amounts of data used to produce the two graphs. Nonetheless, the upward trend in property prices in both cases is obvious to see. Trendlines have also been added to the graphs (the dark grey dashed lines) for clarity.

Graph 2Graph 2 16-1-16 Firstly notice that the trendlines are good fits to both sets of data. Secondly, it can be seen quite clearly that the trendline for Crawley has a steeper slope than that for the UK as a whole. This indicates the more rapid rise of property prices here in Crawley. By way of example, in Nov 13 the difference in average prices between Crawley and the rest of the UK was just under £52000. Fast forward to the end of Nov 15, however, and the difference had increased by nearly 32% to just over £68000. So, the North – South divide in property prices continues to widen.

Well, so much for what has happened to the Crawley property market in 2015, what about 2016 ? Over the next few blogs we’ll take a more detailed look at what could lay in store for us in the coming year. We’ll also take a more detailed look at some interesting properties as they come on to the market.

If you’re interested in property investment in Crawley or the surrounding towns, why not give us call on 01293 515588. Our advice is free and we’d love to have a chat with you about our favourite subject – property ! Alternatively, you can also e-mail us on crawley@northwooduk.com. Either way, we’d love to hear from you.

17th December 2015

Price Reduction: 2 bedroom flat, Furnace Green, Crawley

You may recall back in November we published a blog featuring a 2 bedroom flat in Furnace Green, Crawley. Here’s the link https://thecrawleypropertyblog.com/2015/11/23/23rd-november-2015/

According to the selling agents (Astons) the property, which was being marketed to investors, was let for £875pcm. Back in November the asking price was £169950.

Well, the same property (with the same summery photo !) has just been relaunched with a £4k price reduction at £165950. Here’s the Rightmove link in case you want a closer look http://www.rightmove.co.uk/property-for-sale/property-52224724.html

Furnace Green 23-11-15

Based on the new asking price & quoted monthly rent, the potential rental yield has notched up a couple of tenths from just over a 6.1% in November to 6.3% as of now. Readers of this blog will know that a yield of this size  is  pretty healthy for the Crawley buy-to-let market. However, as we’ve said before, where the rental yield is high, capital growth is often lower.

One question that you might be asking yourself is whether, after a £4k price reduction, the flat is now reasonably priced. The second question, of course, is whether the vendor would be prepared to accept an even lower offer.  To answer the second question first, just ask. The worst that the vendor can say is no !

There are a couple of pieces of information that might help us decide whether the flat is now reasonably priced.

Consider, for example, the sold price history for this particular flat which is shown on the Rightmove details. At the peak of the market in 2007 the flat sold for £150000. Our previous analysis of sold prices for flats in Crawley over the last 15 years (see our blog post of 6th November) indicates that prices have only increased by a relatively small amount (approx 6% ) from the 2007 peak. If we were to assume that the flat under consideration here had increased in value by 6% since it was last sold in 2007, it should now be worth about £159000.

Another point to consider is that the property is currently being marketed to “investors only” and probably means that the  vendor would ideally like to sell the flat with the tenant in-situ. This type of sale can be advantageous for both purchaser and seller alike. From the purchasers point of view he gets a tenant from day one. As far as the seller is concerned, however, he should in theory be paid rent up to the day the sale completes. This is of course infinitely better than having to pay a mortgage on an empty flat while the sale (hopefully) goes through! In addition, with the imminent 3% increase in stamp duty for buy-to-let property purchases due to come into effect in April 2016, a vendor in this position would presumably rather sell sooner than later.

Thus armed with your analysis and understanding of the property market in Crawley you can make a more informed decision about whether to buy the property and what price you should be paying.

Whether you’re an experienced property investor or a buy-to-let novice, you can always give us a call for free advice on what the property market in Crawley has to offer. Call us on 01293 515588 or e-mail us on crawley@northwooduk.com.

14th December 2015

Property Investments – Seeing the wood for the trees

As we approach Christmas so we are seeing quite a few properties coming on to the market which are already tenanted. This may be because some landlords have had enough of renting – after all it’s perhaps not as easy as it seems at first glance. It may also have something to do with that Mr Osbourne, the Chancellor, and his rather unhelpful tax announcements for buy-to-let landlords. We’ll be saying at little more about these in the next few weeks or so….so keep a look out.

Whatever the reasons for these landlords deciding to sell with their tenants in-situ, the same criteria about buying investment property still applies. Just because the property is currently tenanted, it doesn’t mean that it is necessarily a good long term investment. We still need to apply our critical faculties and look at each opportunity as objectively as possible.

Location, of course, is one of the keys to unlocking investment potential, as are the additional facilities that a property has to offer. In this context “facilities” refers to the general situation of the property concerned, particularly in relation to what propsective tenants are looking for. In other words, it is crucial that you have researched & know your market really well. If you try to put yourself in the shoes of prospective tenants you’re more likely to make a better & more informed investment decision. You can also talk to your local letting agents as well. They should have a mine of information on what type of property lets well and, perhaps more importantly, what doesn’t !

To illustrate the point, let’s take a look at a couple of flats that have recently come on to the market. They’re both on the popular Pembroke Park development in Three Bridges, Crawley. For those of you who know Crawley quite well, this developement, which was completed in 2010, is on the site of the old leisure centre. This location is ideal for access to Three Bridges train station with its fast line to London. In addition, you are also in a great position for access to Gatwick Airport, Crawley Town Centre and Manor Royal industrial estate. In our opinion, the location of this development is pretty much spot on.

So let’s look at the other “facilities” the flats have to offer ?

One of the flats we’re considering was featured in our blog post of 1st November. It is marketed by Connells with an asking price of £230000. Since then the advertised status of the property has changed to “sold subject to contract” – here’s the link to our blog post https://thecrawleypropertyblog.com/2015/11/01/1st-november-2015/ and to the Rightmove details http://www.rightmove.co.uk/property-for-sale/property-37376022.html?premiumA=true

The second flat we’re looking at has only come on to the market in the last couple of days. It’s being marketed by House Network.co.uk with a Guide Price of £225000. According to the agents, this flat is currently being let on an Assured Shorthold Tenancies (AST’s). Here’s the Rightmove link for further details http://www.rightmove.co.uk/property-for-sale/property-34542621.html

Page Ct 15-12-15

Take a moment to look at the details for both of the flats. What do you consider to be the main difference between them in terms of medium to long term investment potential ? Remember, try to look at them objectively from the point of view of prospective tenants !

In our opinion, the main difference between these two flats is the availability and quantity of parking.  The Connell’s flat has a secure underground allocated parking space, plus a permit to park and a visitors parking permit. However, in the case of House Network.co.uk’s flat, there is only apparently permit parking available. This usually means you do not have a guaranteed parking space and it’s more on a “first come first serve” basis. In essence, therefore, the Connells’ flat has the best part of twice as much parking as the other.

Clearly, statistically speaking, the flat with more available parking is, in the long run, more likely to rent quicker and have fewer & shorter void periods. I know which one I would consider buying.

Assessing whether a property is a good long term investment can often be quite difficult to do. As we’ve tried to illustrate above, even similar properties on the same development could lead to very different investment outcomes.

If you find yourself in an quandary, where you can’t see the “wood for the trees” with regard to a potential investment purchase, why not give us a call ? We’ll be able to cast a fresh & experienced eye on the situation and give you our objective, unbiased opinion. Don’t hesitate to call us on 01293 515588 or e-mail us at crawley@northwooduk.com.

30th November 2015

Bargain or not ?

Take a look at this 1 bedroom flat at Connaught Gardens, West Green, Crawley, on the market with Astons at £167950. The property is marked for “Investors Only”, which probably means that there’s a tenant in-situ. However, no rent is quoted and there are no internal photographs.

Connaught 30-11-15

For further details, here’s the Rightmove link http://www.rightmove.co.uk/property-for-sale/property-52224760.html

One thing to notice straight away is that the picture looks quite “summery”, rather than indicative of the end of November!  A little further digging and we found an identical photograph, advertising (presumably) the same property, from July 2015 at a lower price of £164950. Here’s the Rightmove link https://www.rightmove.co.uk/rmplus/property/showPropertyMcr.action?propertyId=35578086 You’ll also notice that there is a “Sold STC” flash on this picture. So presumably, an offer was accepted by the vendor, but for one reason or another the sale did not go through to completion.

If the property didn’t sell at £164950, why market it now for £3000 more?

Well, perhaps the agent could argue that the market has now “moved-on” a bit since July and the vendor, fed up with waiting for another sale, has also decided to let the property out. Hence it is now being marketed for “Investors Only”.

Of course, the above is just speculation on our part you understand, but these things do happen.

One bedroom flats like the one we’re considering rent for between £775pcm & £795pcm. So based on a marketing price of £167950, the rental yield would be in the region of 5.5% to 5.7%. Regular readers of our blog will know that a rental yield at this level is pretty good.

However, let’s take a closer look at the asking price.

Land Registry price paid information for properties can easily be found from sites such as Rightmove or Zoopla. Looking at the price paid information for Connaught Gardens, Crawley, on Rightmove, you’ll see that a similar one bedroom flat sold for £155000 (June 2015) and a 2 bedroom flat completed in April 2015 for £167500.

So the question remains, is the 1 bedroom flat we’re considering a bargain at £167950 or not?

Well, from the marketing price history of the flat, together with recent sold price information for other properties in the same development, £167950 does seem to be a bit on the high side. This is inspite of the fact that the   rental yield appears to stack up. So armed with the results of our investigation, you could sensibly approach the agent with a below asking price offer and argue quite a convincing case for it to be accepted.

Of course, it remains to be seen whether the vendor would be persuaded! However, your most powerful weapon in any negotiation is that you can make a “sensible” offer and then walk away. This will leave any decisions to be taken, firmly in the vendors hands. And remember, don’t get “hooked” up on any one particular property, there are others around to consider.

If you currently have your eye on a buy-to-let property in and around the Crawley area, but are not sure whether you’re paying too much for it, why not give us a call on 01283 515588. We would be more than happy to offer you our advice. Alternatively, you can also e-mail us on crawley@northwooduk.com.

 

20th November 2015

Horsham v’s Crawley !

Well, the Christmas Season is really starting to gather pace now. As it does you’ll usually find that the sales & lettings markets start to quieten down a bit. However, do keep your eyes peeled. There will be some bargains to be had, particularly as most people will be turning their attention towards the festive season.

One of our landlords called up the other day after reading the blog we posted on 6th November. If you re-call, in this blog we showed why the price of flats in Crawley had underperformed houses over the last 10 years. Well, the landlord concerned lives just outside of Horsham and has investment properties there, as well Crawley. He asked us if the price of his flat in Horsham had similarly underperformed the market.

When we compared average sold prices of flats in Crawley & Horsham over the last decade, Horsham clearly came out on top. As shown in the Table below, the difference in the average sold price between flats in Crawley & Horsham was barely discernible in 2005. By 2010, however, it had increased to 3.7% and over the last 5 years had widened even further to 21%. So in direct answer to our landlord’s question, his Horsham flat had probably performed much better over the last decade, outpacing Crawley by a good 20% or so.

Table: Sold Prices in Horsham & Crawley (From Land Registry)

Crawley Blog 19-11-15 Table 2

Just to round off the Horsham v’s Crawley story, we also decided to check the current average For Sale prices advertised on Rightmove for flats in both towns. These were calculated by taking a snap-shot of flats advertised on 13th November. By doing this we found the average For Sale price of Horsham flats was about £220000 and was 11% higher than Crawley, with a figure of £198000.

In contrast to the average For Sale price, however,  when we looked at  average rents being advertised on Rightmove on the same day,  we found that Crawley was ahead at £930pcm, with Horsham lagging behind at £880pcm. Using these average rents and the current average For Sale prices, we calculated rental yields for both towns. In this case, Crawley again came out on top with an average yield of 5.6%, while Horsham was 4.8%.

So it would appear that where Horsham outperforms Crawley in terms of Capital Growth, the reverse is true for Rental Yield.

As we’ve seen before, Capital Growth & Rental Yield tend to move in opposite directions. It’s therefore well worth taking the time to consider your investment strategy thoroughly. You need to decide if you’re looking to maximise you income now, or go for maximum long term capital growth and sell later on. Of course, you could also take a compromise position between the two.

Whatever your answer is to the Capital Growth v’s Rental Yield question, we’d be more than happy to have a chat with you to explore the different options available. Why not give us a call on 01293 515588 or e-mail us at crawley@northwooduk.com.