I was in a discussion with a local landlord who lives in Ramsgate, we got chatting about where he was going to buy next. Interestingly, he had several properties throughout Thanet, Herne Bay, Canterbury and Sandwich. I did some research to find out how our local markets had been doing over the last year.
The average price of terraced property in Ramsgate sold last year was £152,399. When you consider the rents that are achieved for these type of properties are on average £662 per month, this gives us a Gross Yield of 5.2% per year. In Margate last year, the average sold price for the same style property was £137,343 and would rent on average for £618 and give a gross yield of 5.4%.
This, however, 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 12 months, property values have only risen on average by 3% in Ramsgate. However, average property values in Margate have risen on average by 9% in the same time frame. Interestingly the Market in Margate is only 5% away from reaching the peaks of 2007 yet in Ramsgate it is 9% away from the peaks reached in 2007. The question that every landlord must ask from their investment is, do you want capital value or yield?
I always tell investors, capital growth and yield are two phrases that are one and the same with property investment and can have a big impact on the long term results of your property investment.
Many investors believe that by chasing high yielding properties they will make a faster profit than waiting for capital growth. The problem with this is that to achieve high yield you usually have to compromise on capital growth. Therefore, it would seem the most logical solution is to find high a yielding property in a strong capital growth area. Such properties don’t exist (or if they do, I don’t know of them!)
This is because, as I tell my landlords, there is generally an inverse relationship between yield and capital growth so the higher the yield, the lower the capital growth and the higher the capital growth, the lower the yield. This means property investment becomes all about balancing the scales. Whether you are a new landlord or an existing landlord our advice is completely free and impartial. So, feel free to pop into our office in Northdown Road, Cliftonville for a chat about the property market in our town.
