Monday 10 June 2024

BUY-TO-LET DEAL OF THE WEEK: 2 bed flat in Chichester, £155,000, 7.4% yield

2 bed flat in Chichester
Listed for sale on 03/06/24 @ £155,000
Rent = £950pcm
Yield = 7.4%
Last sold for £140,000 in 2005 (+11% in 19 years)

The property is on the market with Bell & Blake and full details can be found on Rightmove via the following link:

Thursday 6 June 2024

How have General Elections affected house prices over the years?

So, a General Election has been called for 4th July. In the run up to this we’ll witness fiercely contested TV debates and political posturing in an attempt to try and secure your vote. As well as this, each party will be launching housing manifestos, indicating how they plan to tackle the housing market. The thing is though, whatever the politicians throw at it, the UK’s property market is something of a runaway train, whereby their meddling has little effect on the overall course.

It’s often mentioned in the press that the uncertainty caused by an election causes a downturn in property sales in the lead up to the opening of the voting booths. My analysis shows this to be untrue though, as the normal seasonal pattern occurs whether it’s an election year or not; the number of properties sold rises in Spring and Summer and drops again towards the end of the year (almost stalling as we approach Christmas). There’s also little effect upon house prices in the run up to an election or straight afterwards either.

It is interesting to note though that house prices nationally have risen at a greater pace under Labour’s stewardship than under the Conservatives. Whilst house prices have increased by an average of 6.0% in each of the 32 years the Conservatives were in power, Labour have managed to oversee an average rate of 9.4% in each of the 18 years they ruled the roost.
It won’t surprise many of you that Tony Blair’s premiership between 1997 and 2007 was the main contributor to this rapid growth under Labour. He resided over the biggest ‘boom’ in property prices of any British Prime Minister since data began, with the average UK home trebling in price in just ten years (increasing from £61,946 in May 1997 to £186,348 in June 2007).

His successor (Gordon Brown) remains the only Prime Minister to have seen house prices fall during their time in the hot seat though, with an 8.3% drop during his premiership between June 2007 and May 2010. It is debateable, however, whether Liz Truss should now share this honour. Whilst the data suggests a decrease in house prices during her ‘term’, it is rather difficult to confirm this based on only 50 days in office! 

If Rishi Sunak’s time as PM comes to an end next month though, it is likely he too will have overseen a drop in house prices during his premiership. House prices sit lower now than they did when he took over a little under two years ago in October 2022, despite general inflation otherwise roaring during that time.

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Monday 27 May 2024

BUY-TO-LET DEAL OF THE WEEK: 3 bed house in Chichester, £300,000, 5.6% yield

3 bed house in Chichester
Listed for sale on 20/10/23 @ £369,000
Now = £300,000
Rent = £1,400pcm
Yield = 5.6%
Last sold for £185,000 in 2005 (+57% in 19 years)

The property is on the market with Charles Peck and full details can be found on Rightmove via the following link:

Thursday 23 May 2024

Should you buy a developer’s show home?

With all the new housing developments springing up around Chichester recently, and with many more planned in the future, an interesting investment opportunity was raised by one of my landlords a while ago - should he buy the developer’s show home and rent it back to them whilst the housing development is being built?

This is not a new practice and has been a popular investment with some for many years - particularly when house prices were booming and it was a reasonably safe bet that come the end of the development the show home would be worth far in excess of what the investor had originally paid.

It can be difficult to get a mortgage on a property that you buy and intend to rent back to the builder (particularly when it is a corporate lease that might run for several years). This therefore means you cannot leverage your funds and thus it tends to appeal to more risk averse ‘cash-rich’ investors who aren’t seeking mortgages to turbo-charge their returns.

The concept of being able to lease back the property from day one on a long-term contract at a reasonably generous fixed return, is quite appealing. Particularly when you factor in that you won’t need to market for, or manage, live-in tenants and the builder will maintain the property.

It’s not without its downsides though.

Besides checking the developer’s credit worthiness to pay the rent, you need to be confident of what the property is actually worth. This can be difficult when it is the first home to be built on what will be a building site for often many years. New-build properties are normally sold at a premium, so it can be hard to find comparables that justify the price, as existing homes nearby are likely to be cheaper in comparison.

There seems to be a flurry of developers right now who are overpricing such offerings and simply paying the rental return from the overinflated price. This is predominantly happening in the North and North-East of England, where developers are largely marketing the properties to ‘Southerners’ who aren’t perhaps familiar with the local housing market and their accompanying lower house prices.

Unfortunately, at the end of the term the investor is likely to find the achievable market rent is far below what they had been used to and the property hasn’t necessarily increased (or retained) the value they originally paid.

As ever it is buyer beware in regards to how good the ‘deal’ actually is. It is also ‘horses for courses’ in regards to what you are trying to achieve as to whether buying a developer’s show home is right for you.

As it happens, for this particular landlord it seemed to make sense. It was a national housebuilder and the property price and rental return seemed reasonable. The landlord was a cash investor and for the next few years he needn’t worry about tenants or property maintenance and he won’t have to pay a letting agent their management fees! ……oh.

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Monday 13 May 2024

BUY-TO-LET DEAL OF THE WEEK: 3 bed house in Chichester, £400,000, 4.5% yield

3 bed house in Chichester
Listed for sale on 12/04/24 @ £415,000
Now = £400,000
Rent = £1,500pcm
Yield = 4.5%
Last sold for £340,000 in 2015 (+18% in 9 years)

The property is on the market with White & Brooks and full details can be found on Rightmove via the following link:

Thursday 9 May 2024

£585m spent on property in Chichester in 2023

…£585,653,350 to be precise.

That was the huge amount of money spent on property in Chichester in 2023, according to recently released Land Registry data. That figure is, however, a whopping 29% lower than the total spent in 2022 (£820m).

Interestingly, that decrease was primarily down to the 23% decline in the number of transactions, although the average property also sold for 4% less in 2023 (£447,465) than in 2022 (£466,171). The number of transactions has now been declining each year since 2014 (with the sole exception of 2021).                                                                                                                           Last year I predicted that a decline in prices towards the end of 2022 would continue into 2023 (correct), although the data suggested there would be little change in the number of transactions (incorrect), which would lead to an overall decrease in the total spend in 2023 (correct).                                                                                                                                                              When you consider that an average of 2,525 properties were sold in Chichester each year between 2000-2007 (the last ‘boom’ phase for property), it did not seem unrealistic to expect the number of property purchases to remain steady at 2022’s relatively low 1,758. Instead, 2023 marked the lowest number of property sales in Chichester this millennium, with just 1,309 changing ownership!

This market slowdown has directly correlated with the sudden increase in interest rates. It seems the health of the market, both in terms of price and volume, rests largely on the action taken in this regard. The economists’ consensus had been for interest rate drops to have started by now, then pushing this prediction back to June and now being unsure whether it will happen even then. They also believe the drops will be more gradual than previously thought, which is why mortgage rates have again risen a little in recent weeks.

There is also the political uncertainty of a pending General Election adding to peoples’ reservations of buying right now. You may also have noticed there are quite a few new homes being built around Chichester too, for which we are already seeing developers having to reduce prices to sell and/or slowing down their build rates.

That is why I believe Chichester’s property market in 2024 already looks set to come in lower in terms of both price and volume than last year, resulting in another (albeit probably less steep) decline in the total amount spent on property overall.

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Monday 29 April 2024

BUY-TO-LET DEAL OF THE WEEK: 2 bed flat in Chichester, £220,000, 6.0% yield

2 bed flat in Chichester
Listed for sale on 23/04/24 @ £220,000
Rent = £1,100pcm
Yield = 6.0%
Last sold for £223,000 in 2021 (-1% in 3 years)

The property is on the market with Sims Williams and full details can be found on Rightmove via the following link: