I was recently asked to value a 1 bed apartment in Thorplands, NN3 as the owner was re-mortgaging. He reminded me that he'd bought the property a few years back after I'd plugged it on this blog, which prompted me to delve into the archives - it was actually the first property I ever promoted in this way. See http://lettingsblog.blogspot.com.es/2011/04/potential-investment-with-9-yield.html
He paid £41k for it, and it's now worth conservatively £85k - other properties are advertised well into the £90s. The rental price I suggested then was £375. Now it's £525.
How has the value changed?
What's interesting is that it's in an area that, according to some, isn't the best. Thorplands is an ex Local Authority area on the east side of town, and we manage about 20 properties there. Maybe it wouldn't be my first choice of places to live, but it attracts good tenants and the properties don't cause us any more issues than anywhere else. It's also an area that many investors have turned their nose up at over the years - "ooh I wouldn't want to buy there" etc, and when pushed they claim it's because property prices won't appreciate over time like they do in a nice area.
The apartment in that first blog rather disproves that theory. In just over 6 years it's more than doubled in value so the guy that bought it has done phenomenally well. I look at other properties we took on at the same time and see one in Grange Park which is generally considered to be one of the best areas of Northampton - modern, affluent, easy on the eye. When I do the figures that's worth about 30% more than it was in 2011 - again a fine return but nothing compared to the ex Local Authority area.
Why the difference in appreciation?
As we look back, the housing market was generally suffering in the late noughties. The market crashed in 07, it took everyone a couple of years to accept this and revise their valuations of their own properties, and prices didn't start to rise again until about 2011 - even then the rise was slow. When the market went south, the supposedly poorer areas of town suffered more and prices fell harshly whereas the more affluent areas whilst hit badly, didn't suffer in terms of value to the same extent. There's a logic here - people in the more affluent areas were in a better position to 'ride it out' and so they did.
The lesson to be learnt is that prices fluctuate less in the more affluent areas - so when the housing market is in poor shape these areas will suffer, but will suffer least badly. On the flip side, when the housing market is buoyant as it has been recently there's more upside in the cheaper areas as there's never a shortage of people wanting to get onto the housing market if the economy allows. In the time I've been a lettings agent, the investors who have seen the greatest capital return are those who have snapped up the cheapest properties in a stuttering market then sat on them waiting for things to improve.
He paid £41k for it, and it's now worth conservatively £85k - other properties are advertised well into the £90s. The rental price I suggested then was £375. Now it's £525.
How has the value changed?
What's interesting is that it's in an area that, according to some, isn't the best. Thorplands is an ex Local Authority area on the east side of town, and we manage about 20 properties there. Maybe it wouldn't be my first choice of places to live, but it attracts good tenants and the properties don't cause us any more issues than anywhere else. It's also an area that many investors have turned their nose up at over the years - "ooh I wouldn't want to buy there" etc, and when pushed they claim it's because property prices won't appreciate over time like they do in a nice area.
Why the difference in appreciation?
As we look back, the housing market was generally suffering in the late noughties. The market crashed in 07, it took everyone a couple of years to accept this and revise their valuations of their own properties, and prices didn't start to rise again until about 2011 - even then the rise was slow. When the market went south, the supposedly poorer areas of town suffered more and prices fell harshly whereas the more affluent areas whilst hit badly, didn't suffer in terms of value to the same extent. There's a logic here - people in the more affluent areas were in a better position to 'ride it out' and so they did.
The lesson to be learnt is that prices fluctuate less in the more affluent areas - so when the housing market is in poor shape these areas will suffer, but will suffer least badly. On the flip side, when the housing market is buoyant as it has been recently there's more upside in the cheaper areas as there's never a shortage of people wanting to get onto the housing market if the economy allows. In the time I've been a lettings agent, the investors who have seen the greatest capital return are those who have snapped up the cheapest properties in a stuttering market then sat on them waiting for things to improve.
