The Crawley Property Market is a very
interesting animal and has been particularly fascinating over the last 12 years
when we consider what has happened to Crawley rents and house prices.
There’s currently much talk of what will happen to the rental
property market following Brexit. To judge that, I believe we must look what
happened in the 2008/9 credit crunch (and what has happened since) to judge
rationale and methodically, the possible ramifications for long-term investors
in the Crawley property market. You see, an important, yet overlooked measure
is the performance of rental income vs house prices (i.e. the resultant
yields over time). In Crawley (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, they are 22.6% higher than they were at the beginning
of 2005. In fact, over the last five years, the average growth has been 2.4%
per annum. From a landlord’s point of view, 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 – our friend 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. Let me explain, in 2005, £900
may have bought a two-week 4* holiday in Italy. Yet, holidays have increased in
line with inflation (which has been 38.5% since 2005), so our holiday would
cost today £1,246 (£900 + 38.5% inflation
= £1,246). Therefore, the landlord could no longer afford the same holiday,
even though having the same amount in pound notes from their rental property.
This means when we compare rents in Crawley to inflation since
2005, Crawley landlords are worse off today, when they receive their monthly
rental income, than they were in 2005 by 15.9% in real terms (rents increased
by 22.6% since 2005, less the 38.5% inflation since 2005 – net affect 15.9%
drop)
However, rental income is not the only way to generate money
from property as property values can increase. Although in the short term, cash
flows are diminishing, many Crawley landlords may be content to accept that for
a colossal increase in capital value.
Property values in Crawley have risen by 63.2%
since 2005
This equates to a reasonably salubrious 5.27% per annum increase
over the last 12 years. Even more interesting that this includes the 2008/9
property crash, this will make those Crawley 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 Crawley have diminished, when compared to
2005. Last decade, making money from buy to let was as easy as falling off a
log – but not anymore.
It would be true to say, my rental income verses property prices
study does lead to noteworthy thoughts. I am often asked to look at my
landlord’s rental portfolios, to ascertain the spread of their investment
across their multiple properties. It’s all about judging whether what you have
will meet your 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 Crawley 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, even ask your agent for a portfolio
analysis like I offer my landlords. The clear majority of agents in Crawley
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!
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