Does Chichester’s Somerstown really outperform Summersdale Road?

A couple from the Summersdale area of Chichester came to me to discuss 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, a two-bed apartment will cost around £285,000 and rent for £950 per calendar month, providing a yield of 4%.

With this in mind, it was interesting to find that two-bed apartments on Somerstown (controversially re-built in the 1960’s), currently outperform those on Summersdale Road in regards to rental return. This is because they can be bought for £230,000 and rent for £825 per calendar month, which equates to a yield of 4.3%.

However, we must remember that yield is not the sole consideration when investing in buy-to-let property. Ten years ago the same two-bed apartments on Somerstown could be bought for £175,000, which means they have risen 31.4% in value in a decade. However, a two-bed apartment on Summersdale Road in the same year sold for £185,000, meaning its value has increased by a far stronger 54% in those same 10 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 fill in your details in the signup boxes to the right to receive my weekly Chichester Property News e-mail, complete with my buy-to-let ‘deal of the week’.

(This article was featured in the Chichester Observer's property section on 14th July 2016)

Clive Janes, CRJ Lettings.  

www.crjlettings.co.uk

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

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