Recently I was discussing the situation of the Durham student market places with an investor who has owned (and still continues to do so), student property in the Viaduct area of Durham City and in particular I would like to highlight one of the favourite streets in this area, East Atherton Street.
Naturally very few investors in the North East of England have had an easy ride with the dramatic drop in property prices since 2009. However you may be surprised to find that the market is anything but depressed in Durham. It is true that the property prices have reduced but Durham is a popular student destination and rents have increased substantially over the last seven years, redressing the balance for property owners.
You may be interested to note that in 2009 East Atherton (on average) was achieving £70pppw when the average house price before the recession hit was £263000 giving a yield (GROI) on a typical 5 bed house of 7%.
There have only been two properties sold since 2010 with an average price of £232,000, however rents have increased from an average of £70 Per Person Per Week in 2009 to £98PPPW in 2015 so if you take the same example of a typical five bed property the gross return on investment has risen quite dramatically to 11%. To be fair a lot of landlords are offering all-inclusive packages but the tenants I spoke to were paying very close to the £98PPPW excluding bills and that had increased substantially from the previous year, which would indicate that this information is correct.
However a word of caution and a firm reality check is needed at this point. I am sure you will agree, these figures are outstanding and indeed they are the exception to the rule. If you compare the interest rates in 2009 to now there is a significant difference and Gross Return on investment is really the same as a balance sheet in finance, it is simply a snapshot in time and does not truly reflect the full picture. The current Bank rate is .05% and has been so since 2009. If you can achieve a true 5% yield then that represents ten times the bank rate and should be considered attractive.
Property Investment is a complicated game and you need to understand the market so you make the right decisions. Please make sure you have a good financial advisor and a knowledgeable broker / lender who can work for you! Not them. If you invest you need to make good informed decisions so the more information you have, the better the decision you should be able to make.
If you would like to discuss investing in the Durham property market or require any advice, help or assistance with the lettings, or management of your existing rental property or portfolio, please feel free to call me at my Durham Office on 0191 212 6970 or e-mail me on firstname.lastname@example.org