The Evesham Property Market is a very interesting animal and has been particularly fascinating over the last 12 years when we consider what has happened to Evesham rents and house prices.
There’s currently much talk of what will happen to the rental property market following Brexit. To judge that, I believe we should review what happened in the 2008/9 credit crunch (and what has happened since) to judge the possible ramifications of long-term investment in the Evesham property market. You see, an important, yet overlooked measure is the performance of rental income vs house prices (i.e. the resultant yields over time). In Evesham (as for the rest of Great Britain), notwithstanding a slight drop in 2008 and 2009, property rentals have been gradually increasing.
The income from rentals has been progressively increasing over the last 12 years. Today, they are 14.8% higher than they were at the beginning of 2005. In fact, over the last five years, the average growth has been 1.4% per annum. From a landlord’s point of view, increase in average rental income is not to be sneered at. However, the observant readers will be noting that we are ignoring an important factor – our friend inflation.
Let’s imagine that a landlord who let their property back in 2005 for £900 a month was lucky enough to retain good long term tenants. They decided not to increase their rent over the years and today, in the Spring of 2017, they still receive £900 per month. Whilst the landlord is not getting any less income, they are considerably worse off.
Even if the same landlord had increased their rent in line with the average market rate, they would still be 23.7% worse off (in real terms) than they were in 2005.
However, rental income is not the only way to generate money from property. Increasing values play a major part in the decisions of a property investor. Although in the short term, cash flows have been diminishing, many Evesham landlords were content to accept this for the strong increases in capital values seen since 2005.
Moving forward, the prospects of making easy money on buy to let in Evesham have diminished, when compared to 2005. Last decade, making money from buy-to-let was as easy as falling off a log – but not anymore.
I am often asked to look at my landlord’s rental portfolios, to ascertain the spread of their investment across their multiple properties. It’s all about judging whether what you have will meet your needs from the investment in the future. It’s about the balance of capital growth and yield, whilst also managing and diversifying the risks.
If you are investing in the Evesham property market, do your homework and do it well. While some yields may look attractive, there are properties in many areas that do not have the solid fundamentals in place to sustain them. If you are looking for capital growth, you might be surprised where the hidden gems really are. Take advice and ask your agent for a portfolio analysis like the ones I offer to my landlord clients. I’m sure your agent will also be able to give a detailed analysis of past and anticipated investment performance (taking account of the effects of inflation) of your portfolio. However, if they can’t help – you know where I am. The kettle is on!