LANDLORD RETURNS ON FAIRFORD LEYS

In my previous Blog posting, I was discussing the difference between apartments and semi-detached houses in the Fairford Leys development on the South Western edge of Aylesbury. I talked about the effect that the lack of two bedroom houses coming on to the market was driving up the demand for apartments in the same area. Due to a lack of supply of two bedroom houses coming on to the market for sale, they have experienced some excessive short term price gains and landlords are considering buying apartments in Fairford Leys as an alternative investment. The question I set at the time was “What does this news have on rental returns?”

When a property increases in value over time, it is known as 'capital growth'. Capital growth, also known as capital appreciation, has been strong in recent times in Aylesbury, but the value of property does go up as well as down, and of course the local conditions surrounding your property have a big effect. Rental income is what the tenant pays you - hopefully this will grow over time too. If you divide the annual rent into the value (or purchase price) of the property, this is your yield, or annual return.

Looking at the capital growth of a property needs to be both a short and long-term decision, in my previous article, I discussed the short term gains however, looking back to 2002 the average two bedroom house in Fairford Leys has risen by 57.3% compared to the apartments that have only risen by 18.5% considering that inflation has been 41.9% over the same time frame, obviously twi bedroom houses have beaten the cost of living whilst the apartments have come nowhere near that figure. So in real terms they have dropped in value.

However, we also need to consider the annual yield. The average yield for a two bedroom apartment in Fairford Leys is presently 5.88% whilst for a two bedroom house it is 4.92%, making the apartment have a 19.5% proportionally higher yield.

One final consideration is that with apartments there are additional costs for ground rent, buildings insurance and the cleaning and maintenance of communal areas. This does reduce the yield, however, it does remove certain obligations and responsibilities away from the landlord, something that some landlords prefer.

It really comes down to what you really want from your property investment. Investing in property is a balance between capital growth and yield and each landlord sits differently on that see-saw. There are plenty of other areas in Aylesbury which also need serious consideration and therefore whether you are one of our own existing landlords , or a landlord with any other letting agent in Aylesbury please, feel free to pick up the phone and have a chat about what’s happening in the property market today.