Somerstown outperforms Summersdale Road by 23%

This article was featured in The Chichester Observer's property section on 31st July 2014.

Last week, a couple from the Summersdale area of Chichester came to discuss potentially investing in a buy-to-let property.

One of the most important considerations you will make before investing is the balance between annual rental return (yield) and the annual increase in value (capital growth).

Summersdale was built to the North of the city just before the First World War as Chichester’s population quickly rose by a third. It is considered one of the premier areas to live outside of the city walls. On Summersdale Road itself, the average house is worth £411,000 and rents are on average £1,202 per calendar month.

With this in mind, it was interesting to find that houses on Somerstown (controversially re-built in the1960’s), currently outperform those on Summersdale Road. This is because the average house on Somerstown can be bought for around £293,500 and the average rent on that street is currently £1,050 per calendar month. The yield which could be achieved from a house on Somerstown is therefore around 4.3%.

When compared to the possible 3.5% yield available on Summersdale Road, we see the annual rental return on offer on Somerstown is a startling 23% higher.

However, we must remember that yield is not the sole consideration when investing in buy-to-let property.

The average sale price of a house on Somerstown in 2002 was £190,000. This has since risen by 54% in the last 12 years. However, an average house on Summersdale Road in 2002 sold for £182,000, meaning the value has increased by a whopping 126% in those same 12 years.

I always tell Chichester landlords that capital growth and yield are two important considerations with property and can have a big impact on the long term results of your 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 a high yielding property in a strong capital growth area. Unfortunately, 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 that 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.

If you would like more information on investing in Chichester’s property market, please call me on 01243 624 599 or keep an eye on the blog on my website where I will keep you updated with my buy-to-let ‘deals of the day’.

___________________________________

If you are looking for an agent that is well-established, professional and communicative in Chichester, then contact us to find out how we can get the best out of your investment property.

E-mail me on clive@crjlettings.co.uk or call 01243 624 599.

Don't forget to visit the links below to view my previous buy-to-let deals and Chichester Property News articles:

Follow The Buy-To-Let Property Investment Market in Chichester

Chichester Property Market LinkedIn Page for Clive Janes

CRJ Letting Agents Chichester Facebook Page

CRJ Letting Agents Chichester Twitter Page

Chichester Investment Property Management Specialist CRJ Letting Agents Website

c/o CRJ Lettings, 30B Southgate, Chichester, West Sussex, PO19 1DP

__________________________________