Last week I had an interesting conversation with a local landlord who lives on the Nonsuch Estate in Ewell. He called in to discuss a property he was looking to purchase in Epsom. We discussed the different areas in Epsom and Ewell and how they have performed. Interestingly, when we compared one of his Epsom buy to let properties (an ex local authority property in the Longmead Estate) with the Nonsuch Estate where he lived, he was quite surprised to find that the property market in the Longmead Estate area had outperformed the Nonsuch Estate development by 92%!
The average price of a 2 bed apartment on the Longmead Estate is £186,700. When you consider the rents that are achieved in the Longmead Estate are an average of £1,100 pm, this gives us a yield of 7.07% per year. So is the Longmead Estate the best investment? Well, in the Nonsuch Estate development, where the the average value of a bay fronted detached property is £803,500 and the average rent for such a property is £2,467 pm, this only gives a yield of 3.68% per year. This makes the yield/ annual return on the Longmead Estate development 92% proportionally more than the yield that can be achieved on property in Nonsuch Estate, so surely it is the best investment, isn’t it?
However, this is a great example of annual yield/return not being the only factor when choosing an investment property, as you should also consider how much the value of the property goes up in the long term. In the last 15 years, property values have risen on average by 121.9% in the Longmead Estate (rising from £84,100 to the £186,700 mentioned above), which is very impressive considering there was a property crash in 2008. However, average property values on the Nonsuch Estate development have risen on average by an impressive 242% in the same time frame.
Now of course, I have shown the extremes of the Epsom and Ewell property market here. High annual yielding property, such as those on the Longmead Estate, do attract a certain type of tenant which can be positive and long term, but also negative to the investment return for capital growth. Every landlord is different and requires different returns. Therefore, if you are investing in Ewell and Epsom property, do you want capital asset growth or annual rental yield or a bit of both? If you would like some advice about buying to let, be you a landlord with a portfolio or someone thinking of investing in the rental market for the time throughout 2015, please come and see me at our office on Upper High Street, Epsom or keep checking back here.