The Land Registry have just released their latest set of
figures for the Clacton Property market. It makes interesting reading, as
average property values in Clacton rose by 0.6% in May. This leaves average
property values 9.2% higher than 12 months ago, meaning the annual rate of
growth in the town fell to its lowest level since August 2014. When we compare Clacton
against the regional picture, East of England property values rose by 1.6%,
leaving them 8.8% higher than a year ago.
Obviously this is a far cry from the price rises we were
experiencing in Clacton throughout 2014. At one point (December 2014 to be
exact) property values were rising by 9.8% a year. All the same, even with the
tempering of the Clacton property values in 2015, property values are still
higher. This is good news for local homeowners who had been affected by the
downturn after 2007 and still find themselves in negative equity.
However, the thing that concerns me is that the average number
of properties changing hands (ie selling) has dropped substantially over the
last 12 months in the town. In April 2014, 100 properties sold in Clacton but
in April 2015, that figure dropped to 66.
I have been in the Clacton property market for quite a while now and the
one thing I have noticed over the last few years has been the subtle change in
the traditional seasonality of the Clacton property market. It has been
particularly noticeable this year in that the normal post Easter flood of properties
coming onto the market was not seen. This has made an imbalance between supply
and demand, with less houses coming onto the market there is simply not as much
choice of properties to buy in Clacton and with the population of Clacton ever
increasing, this will generally strengthen house price growth for the
foreseeable future.
So what does all this mean for Clacton landlords or those
considering dipping their toe into the buy to let market for the first time? For many people, buy to let looks a good investment,
providing landlords with a decent income at a time of low interest rates and
stock market unpredictability.
However, if you are thinking
of investing in bricks and mortar in Clacton, it is important to do things correctly.
As an investment to provide you with income, for those with enough savings to
raise a big deposit, buy to let looks particularly good, especially compared to
low savings rates and stock market yo-yo’s. I must also remind readers,
landlords have two opportunities to make money from property, not only is there
the rent (income), but with the property market bouncing back over the last few
years, property value increases has spurred on more investors to buy property
in the hope of its value continuing to rise.
Savvy landlords with decent deposits can fix their mortgages
at just over 3% for five years, making many deals stack up. Nevertheless, low
rates cannot stay low forever, because one day they must rise and you need to
know your property can stand that test. I saw some Clacton landlords struggling
in the mid noughties, when interest rates rose from 3.5% in July 2003 to 5.75%
in July 2007. That might not sound a lot, but that was the difference of making
a £100 a month profit in 2003 to having to make up a shortfall in the mortgage
payments of £100 per month in 2007.
Its true many landlords were thrown a life raft when the
base rate dropped to 0.5% in March 2009. Whilst interest rates have remained
there since, mark my words, they will rise again in the future. However, even
with the potential for costs to rise, demand for decent rental properties
remains high as there are ever more tenants in the market, driving up demand
and thus rents. The British love of bricks and mortar plus improving mortgage
deals also add up to fuel the buoyant Clacton property market.
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