Crawley Studio Apartment – Worthwhile investment with 6% yield

Studio apartments tend to be the first rung on the property ladder for tenants or a temporary place to stay for visiting workers and experience a higher turnover of tenants than the larger properties.  But with a constant stream of workers coming to Crawley to work at Gatwick Airport the studios are always in demand.  I have seen this studio come on to the market with local agent Inspire, you can view the listing by clicking the link.

http://www.rightmove.co.uk/property-for-sale/property-57800689.html

The Southgate area of Crawley has always been popular with tenants, it is walking distance  to the town centre and railway station and is well placed for access to Gatwick via the FastWay bus routes.  This block offers a large car park and the flat itself is a really good size compared to some studio apartments we have seen.  The rental value would be a minimum of £650 per month easily achieving a gross rental yield of 6% based on the asking price of £130,000.  Landlords would need to be aware that the second home stamp duty would levy a bill of £4000.  For any advice on Crawley rental properties you are welcome to contact me at the Martin & Co office in Crawley town centre. 

Crawley OAP’s sitting on £2.59 bn of Property

Crawley people aged over 65 currently hold more housing wealth in their homes than the annual GDP of the whole of Blackpool … and this is a problem for everyone in Crawley!

Many retiree’s want to move but cannot, as there is a shortage of such homes for mature people to downsize into.  Due to the shortage, bungalows command a 10% to 20% premium per square foot over houses of the same size with stairs. To add to the woes, in 2014, just 1% of new builds in the UK were bungalows, according to the National House Building Council - down from 7% in 1996.

My research has found that there are 7,776 households in Crawley owned outright (i.e. no mortgage) by over 65 year olds.  Taking into account the average value of a property in Crawley, this means £2.59 billion of equity is locked up in these Crawley homes, compared to the GDP of the whole of Blackpool being £2 billion of GDP.

A recent survey by YouGov, found that 36% of people aged over 65 in the UK are looking to downsize into a smaller home.  However, the Government seems to focus all its attention on first-time buyers with strategies such as Starter Homes to ensure the youngsters of the UK don’t become permanent members of ‘Generation Rent’.   This overlooks the chronic under-supply of appropriate retirement housing essential to the needs of the Crawley’s rapidly ageing population.   Crawley’s housing stock is woefully unprepared for this demographic shift to the 'stretched middle age’, and this has created a new 'Generation Trapped’ dilemma where older people cannot move.

Therefore, older retirees can't leave bungalows, younger retirees can't buy bungalows and younger people can't buy family houses.

The problem will only get worse, as in the 50 year old to 64 year old homeownership age range there are an additional 5,305 Crawley households that are mortgage free and a further 7,552 Crawley households who will be completing their mortgage responsibility.  With Government projections showing the proportion of over 65’s will rise by over a third from the current 17.7% to 24.3% of the population in the next 20 years ... this can only add greater pressure to the Crawley Property market.

House prices have rocketed over the last 40 years because the supply of property has not kept up with demand. With migration, people living longer and high divorce rates (meaning one family becomes two) we need, as a Country, 240,000 properties to be built a year to just stand still.  In the 1990’s and early 2000’s, the Country was building on average 180,000 to 190,000 households a year, but since the Credit Crunch (2009), that has only been between 130,000 and 145,000 households a year.

The solution …. release more land for starter homes, bungalows and sheltered accommodation because land prices are killing the housing market as the large firms dominating the construction industry are more likely to focus on traditional houses and apartments.   

An opportunity for landlords - until the Government change the planning rules and allow more land to be built on – Bungalows could be a decent bet for future investment as they continue to attract ever growing premiums? 

What will 2017 hold for the Crawley property market

Well, wasn’t 2016 eventful. The ups and downs of Brexit, the Queen’s 90^th, Andy Murray winning Wimbledon, Trump, Bake Off to Channel 4 and something close to the hearts of every buy to let landlord and homeowner in Crawley ... the Crawley property market.

So, let’s look at the headlines for the Crawley property market...

In December 2016, Crawley property values rose by 0.26%, leaving them, year on year 11.7% higher, whilst interestingly, Crawley asking prices are down 0.3% month on month. All three statistics go to show the Crawley property market has recovered well after the summer lull, which was worsened by the uncertainty surrounding the EU vote back in June. Irrespective of all the issues, the average value of a Crawley home stood at £333,200 as we entered 2017.

Generally, Crawley asking prices continue to hold up well, as asking prices were 3.9% higher year on year.  Asking prices tend to drop on the run up to Christmas and locally, they actualy dropped by 0.3% in November 2016 although this compares well with last year’s drop in Crawley asking prices, as we saw asking prices drop by 1.6% in November 2015.

Now it’s true to say, after chatting with fellow property professionals in Crawley, all of us have seen the number of property sales fall slightly, suggesting a slowing market, but it is very early days and it could be the time of year.  Also, the numbers are limited, so it’s interesting to take note from a recent survey by the Royal Institution of Chartered Surveyors, stating new buyer enquiries and new instructions are falling at the same rate, suggesting that there will not be a downward pressure on property values.

Looking at the figures for the UK (as we can’t just look at Crawley in isolation), property values are generally rising slower than a few years ago, but on a positive note, there's still growth across the UK. You see, slowing property value growth isn't solely Brexit related, but after a number years of double digit rises in property values, affordability has weakened and cooling price growth is widely seen to be a natural correction of the market.

On the other hand, interest rates being at a record low of 0.25% are helping the property market. The cut in interest rates in the late summer was the medicine for the post-Brexit worry and will, as a consequence, ensure that the UK economy continues to be underpinned by buoyant property prices.

 So, what will happen in 2017 in the Crawley property market?

Some say until we know what type of exit the UK will make from the EU it is hard to evaluate the outcome. Although, I believe, the whole Brexit issue is a sideshow to the main issue in the UK (and Crawley) housing market as a whole. As I have mentioned time and time again over the last few months, the biggest issue is demand outstripping supply when it comes to the number of households required to house us all. Crawley has an ever-growing population: with immigration (we still have at least two years of free movement from EU members into the UK), people living longer and the fact we need thousands of additional households as the country has nearly 115,000 divorces a year (where one household becomes two households).  These are interesting times ahead!