The property market here in Rotherham is a very interesting animal and has been particularly fascinating over the last 12 years in the case of Rotherham rents and house prices.
There’s currently much talk of what will happen to the rental property market post-Brexit. To judge that, we must remain rational and methodical by looking what happened in the 2008/9 credit crunch (and what has happened since). From there we can see the possible ramifications for long-term investors in the local property market.
An important yet overlooked measure is the performance of rental income vs house prices (i.e. the resultant yields over time). In Rotherham (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 rents are 16.7% higher than they were at the beginning of 2005.
In fact, over the last five years, the average growth has been 0.9% per annum. From a landlord’s point of view, this 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 – inflation.
Turn the clock back to 2005, and we have a property being rented for say £900 a month and that is still being rented at £900 a month today, in spring of 2017. While the landlord is not getting any less income, this £900 is no longer worth as much due to a bigger rise in inflation during the same period. Total inflation since 2005 has been 38.5%. This means when we compare rents in Rotherham to inflation since 2005, Rotherham landlords are worse off today from their monthly rental income than they were in 2005 by 21.8% in real terms.
Don’t forget property values!
However, rental income is not the only way to generate money from property – property values can also increase.
Although in the short term, cash flows are diminishing, many Rotherham landlords may be content to accept that for a colossal increase in capital value. For example, in Rotherham:
Property values have risen by 23.1% since 2005
This equates to a reasonably salubrious 1.92% per annum increase over the last 12 years. Even more interesting is that this includes the 2008/9 property crash – a fact that will make landlords and investors feel a little better about the information regarding rents after inflation.
Moving forward, the prospects of making easy money on buy-to-let in Rotherham have diminished compared to the previous decade. In 2005, making money from buy-to-let was as easy as falling off a log… this is just not the case anymore.
I am often asked to look at my landlord’s rental portfolios so studying and comparing rental prices and house prices is valuable. To ascertain the spread of your investment across multiple properties it’s important to judge whether what you currently have will meet the needs of the investment in the future. It’s the balance of capital growth and yield, whilst diversifying this risk.
If you are investing in the Rotherham 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 rudiments 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 even ask your agent for a portfolio analysis. The majority of agents in Rotherham will be able to give a detailed analysis of past and anticipated investment opportunity (especially the awful effect of inflation) on your portfolio. However, if they can’t help – well, you know where I am! The kettle is on so please get in touch.