Another year seems to be running away and with it all the excitement of political volatility, be it Trump or North Korea, and all the erratic weather; earthquakes, hurricanes and typhoons. In amongst all the chaos and tragedy there is a certain contented calm about the residential property market.
We have seen the London market weaken over the past year; it was too expensive anyway, and the impact of job losses, and global status due to Brexit, causes uncertainty.
However, it has given the long-waited opportunity for the “regional markets” to shine and take the spotlight. Property prices in cities such as Nottingham, Peterborough, Leeds, Northampton have all been rising over the past 12 months; in a steady, calm and mature manner. Whilst this might not be “shoot the lights out” exciting, perhaps that is not what we want as investors. After all we invest in bricks and mortar for a solid, stable return.
The other important point that we are keen our investors grasp is that total returns from property investment are what we call a “blended return”. By this we mean over say a 5 year period, property prices may go up 20%, but the rental yield over that period may be another 6% per year, then there is also rental growth to take into consideration.
So the “blended return” of Investment A: Hull: 7% yield, 15% capital growth over 5 years is a total of 50%. Whilst for Investment B: Stamford: 5% yield, 20% capital growth over 5 years is a total of 45%. Whilst Stamford may outperform in prices terms, potentially the better blended return is in Hull.
So going into Autumn, the market could not be in a better position. Other asset classes do not look attractive, increasing chaos drives investors to seek simple to understand, tangible investments like bricks and mortar, rents are strong, demand is strong, mortgage rates are at record lows.
The big factor to watch will be interest rates. They could move up 0.25% or so in next 6 months. This may cause some short term panic and a frenzied media, but in the longer term this is prudent macro economic management; a good thing for the property market.
A few notable points;
HULL: city of culture, strong inward investment, good employment prospects, high rental yield, low absolute prices. Importantly we have a great investment team on the ground.
KETTERING: one can still buy a terraced house at £125,000 within 1hour train commute of London, with a rental yield of 6%; surely the only way for prices is up.
STAMFORD and OAKHAM: good quality, solid rental market and long term price appreciation. Attractive rural locations. Easy access to London, commuters and lifestyle purchasers.
All three of the markets above are in a really good place, and offer investors strong prospects to outperform other areas of the UK over the next 12+ months.