Saturday, 7 June 2014

Ramslye Estate outperforms the Culverden housing market by 55%

Following a discussion with a local landlord who lives on Royal Chase backing onto the old hospital site, we got chatting about his two properties in Royal Tunbridge Wells and how property in the Ramslye Estate, where one of properties is, (just off Eridge Road) are so different to the housing market in the Culverden Park, where he owned the one he lives in. We got talking about the two properties in both areas and he wanted some advice on where to buy the next one. I did a comparison between the two and was surprised to find that the property market in the Ramslye Estate area had outperformed the Culverden development market by 45%!

The average price of property on the Ramslye Estate is £251,500. When you consider the average rents that are achieved in the Ramslye Estate are around £935 per month for a decent property, this gives us a yield of 4.5% per year. Yields in the Culverden area, where the average value of a property is £854,000 and the average rent is £2,050 per month, offer a 55% lower yield of 2.9% per year, so surely Ramslye is the best investment, isn’t it?

This, however, is a great example of annual yield/return not being the only factor when choosing an investment property, as you should also consider how much the value of the property goes up in the long term. In the last 13 years, property values have only risen on average by 102% in the Ramslye Estate, which is very impressive. However, average property values on the Culverden development have risen on average by 158% in the same time frame. Now whilst yield is very important, capital growth is just as, if not more, important in property investing.

 So, if you are investing in property in Royal Tunbridge Wells, do you want capital value or yield? I think all would agree that in an ideal world, as a property investor, we would like to invest in properties that offer both the best capital growth prospects and highest yields. However, this may of course be easier said than done as good capital growth prospects and high yields are not necessarily mutually exclusive but could prove difficult to achieve both
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Different landlords need different things (high yields or high capital growth or somewhere in the middle). As I look at each person as an individual, I recommended to him that his primary focus needed to be towards upon capital growth potential (rather than yield) when buying his next property, as I saw this as potentially the best way to meet his needs on the investment. In his case, the ideal property that offered a decent yield and decent capital growth was a nice semi in the Hawkenbury area of the town.

However, I reminded him to ensure that the yield has plenty of margin so any investment remains cash flow positive when such time arrives that interest rates rise to a more typical level. 
If you would like some more advice about buying to let, be you a landlord with a portfolio or someone thinking of investing in rental market. So, feel free to pop into our office near the Railway Station for a chat about the property market in our area.

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