What to / not to buy November 06

Welcome to the second edition of What to / Not to Buy in which we look at what has been hot in the UK investment market over the last few weeks and months and look at emerging trends, as well as giving tips on what to buy and what to avoid.

This October was the second warmest on record and all the warm and sunny weather translated into buoyant activity within the housing market as sales and prices continued to move ahead.

National
House prices are up 1% on August giving an annual increase of 8% and an average house price of £181,186. Annual house price inflation has eased for the 3rd successive month and is at the lowest level since April.

WHAT TO BUY….?

Luck of the Irish
Northern Irish prices continue to lead the way with prices up 6.5% in the third quarter giving an annual rise of 30%. Seven slots out of the top ten biggest risers are occupied by Northern Irish towns with Newry and Antrim leading the way with increases of 46%. The ‘peace dividend’, high affordability, employment and immigration have all contributed to this strong market. Added to this is the influx of Irish buyers looking for second homes and buy-to-let investments.

Regions Converge
Despite the strong performance of Northern Ireland and Scotland, up 14.5% in the 12 months from the end of Q3 2005, the English regions have shown remarkable consistency with their performance. House prices here have risen between 5.5% and 8.5% indicating that the wave of price increases that started in London in the mid 90’s has now run its’ course. However, despite this apparent convergence region wide, Property Hawk has detected a huge local disparity in performance at a very local level within the same geographic region.

Local Diamonds!
Using Halifax’s latest quarterly regional survey Property Hawk has picked out some startling performance from individual towns – the regional annual growth rate is shown in brackets for comparison. For instance up north in the North-West we have Nelson with a massive 39% (6.4%) rise and in the North, Ashington lead the way with 19% (5.5%). Brighouse in Yorkshire & the Humber was up by more than a quarter at 27% (7.9%). To the East of the country Sleaford in Lincolnshire blazed into to the top spot with a 21% jump; this spot being occupied by Sudbury in East Anglia with a 22% (8.4%) rise. Over in the South East both Ashford in Kent and Burgess Hill easily outstripped the average growth rate for the region of 7.7% with a 16% uplift. In London where prices have been strong Hackney led the way with 19% hike (8.5%). Down in the South West the spa town of Bath showed a ‘clean pair of heels’ to the rest with an 18% jump (7.8%). In Wales there was a startling contrast where prices nationally barely moved with a 2.9% rise whilst those in Aberdare ‘clocked’ a startling 27% rise. Finally in the heart of the country, the West Midlands saw both Burton-on-Trent and Rugby doubling the 7.1% growth in the region with a hike of 14%.

Small is beautiful!
This is if you are a London landlord looking to maximise your returns according to research carried out by London estate agent Ludlow Thompson. Their figures indicate that whilst a two bed apartment rents has increased by only 2.11% over 1 year and 7.39% over 2; the same figures for 1 beds are approximately double at 6.32% and 13.27%. For a 4 bed detached these figures are 4.18% and 3.23%.

“People are now marrying and having children later, so there are increasingly more individuals living on their own.”
“Younger people are putting off their first purchase for longer, but want to live independently or with a partner, and so try to avoid flat sharing; increasing the rental value of smaller properties.”

Comments Stephen Ludlow, director at ludlowthompson.com

WHAT NOT TO BUY…!

Parking prices could rocket!
In the latest escalation of how ‘green’ each of the political parties can be. Richmond Borough Council is proposing to up the cost of its’ residential parking permits to owners of high carbon emitting vehicles, otherwise known as ‘Chelsea tractors’. Costs could rise from £100 a year to £750 for a typical family. Property Hawk’s advice is avoid properties with parking permits and buy either properties with their own parking or for the green option, no parking but with good public transport links.

Local Dogs!
The flip side to any property diamond is a property ‘dog’ where it’s price has underperformed those around it. In the quarterly regional survey carried out by the Halifax it is possible to pick out some of the towns that have underperformed the region in which they are located. The West Midlands suffered its’ fair share of dogs over the year with Leamington Spa, Stourbridge and Stratford up Avon all suffering a 5% reduction in prices compared to an average rise of 7.1% across the region. Brigg in Yorkshire & the Humber also disappointed with a 5% fall compared to a 7.9% rise in the rest of the region. Brent bucked the trend of London actually recording a 1% fall (8.5%). In the West Country Stroud was disappointing exhibiting a 4% decline to £211,433 compared to the regional average of a 7.8% increase and price of £195,930. Over in the east both Thetford, Grantham and Market Harborough could be given ‘dog tags’ as they recorded 5% falls.

Old ones are the best!

Increase in value of houses

After	Old	New
1 year	4.89%	0.56%
2 years	10.36%	4.8%
3 years	30.46%	12.79%

Research conducted by a London estate agent has shown that the value of old stock has consistently outperformed new build properties over the last three years. Stephen Ludlow director of Ludlow Thompson commented: “Period properties are more in demand than new developments, so potential investors ought to consider this if they are looking to obtain capital gains from their investments as well as rental returns.”
“New build flats are often in blocks with other identical flats. This can lead to landlords having to compete with each other by lowering rents in order to fill the property. The scarcity value of owning a single unit can add to potential returns.”
This scarcity argument for older properties is certainly backed up by research carried out by the Nationwide Building Society on ‘identical’ properties but of different ages. It found that owners of a Jacobean residence would have to pay a wapping 34% more, whilst Victorian properties commanded a more modest 8% premium. The good news for lovers of retro styling is that 70’s houses are available at a 3% discount.


The most important advice is to research any purchase thoroughly and understand the potential financial risks involved. Seek quality advice and avoid sales people with offers too good to be true.