Tuesday 17 February 2015

Investor Update

I had an interesting chat with a landlord who uses another letting agent in the town after he popped into our offices for a coffee whilst his wife was in the Ashley Centre. We were taking about the Epsom market and thought other landlords might be interested.

You see, whilst I said last week property values stopped dropping in June 2009, since then, it hasn't all been in an upward direction as around the Winter of 2010/11, property values in Epsom dropped six months in a row, albeit only by only 1.5%, but still a drop all the same. However, for the last 23 months, we have had growth although increases are beginning to ease for the first time since the start of 2013. Now it could be said this easing of the housing market in Epsom can be attributed partly to the time of year (in 2013, property values in Epsom only increased by 0.2% per month in the Autumn months), but it is obvious that estate/sales agents in Epsom are wary about the direction of the market as a result of the not as strong demand and fewer house sales.

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 Epsom. 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 is questionable. But investing in property is also about receiving the rent – a gross rental yield.

On the one hand going for high yielding Epsom 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.

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.

If you are unsure what to do, be you a first time landlord or a seasoned pro, feel free to pop your head round our door or email me on ian@directresidential.co.uk, or to be kept up to date with what is happening to the Epsom Property market, keep checking this blog.

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