Should you buy a nice new apartment to let in Aylesbury town centre?

It is a simple question with a simple answer...no!

But why not?
Regular readers will know that I have always been a fan of buying two bedroom freehold houses over apartments. But now more than at any time previously the reasons stand out.

There is a strong supply of apartments which suppresses values.
Take a walk around Aylesbury town centre. Everywhere you go office buildings are being converted, some well some not so much! Few of them have adequate parking. Most of them are available via a glitzy marketing campaign trying to support the inflated prices. You see little activity on these developments a clear sign that sales are not flowing as the agent/developer would like. Some have been available for some time, some have been reduced or had incentives added to enhance the marketing but all appear to be struggling for buyers.
At the time of writing Rightmove shows 126 apartments available (96 sstc)and 101 two bedroom houses available (116 sstc).

Prices
The prices for apartments range up to a staggering £310,000 with many around £250,000. For properties that have limited capital growth potential these prices are speculative at best.
The pricing of these apartments has been led by the strong market but the strong market has been driven by houses not apartments. There has been a lack of supply of two and three bedroom houses, the prices of apartments have risen to fill this gap. But there is a strong supply of apartments and as the market hardens the value of apartments will fall back harder due to this strong supply.
Good solid two bedroom houses can be purchased at these levels and they benefit from a much greater potential for capital growth.

Yield
The average yield for property in Aylesbury is 4% to 6%.
An apartment at £310,000 would need to achieve a rent just over £1,000 to give a 4% yield. But this does not take in to account the management fees. Typically when a development is first occupied fees are high to enable funds to accrue in a 'sinking fund' so expect to pay at least £100 monthly. This would bring the yield for the above example to 3.6% or you would need to achieve a rent of at least £1100 monthly to maintain the yield. (The same rent as a three bedroom house).

Capital growth prospects
While these apartments are new and shiny they can look appealing. But in say 5 years time they will not be new and if you want to sell you will face stiffer competition than you would if you were selling a house. Renters are more prone to accept a lack of parking, buyers less so. Renters like a town centre location, it can keep their living costs down. For a buyer this is less important, they want a 'nice' location to live in and sadly Aylesbury town centre does not offer that.

Control and hassle
An apartment obviously has more neighbours than a house, more potential for disputes, water leaks from above, noise complaints, parking disputes.
There will likely be a management company in place...they may be great they may not...more hassle. You will have little control over the fees applied each year or the work that is carried out or the standard to which those works are done.

So in summary new Aylesbury town centre apartments are not great investments!

If you want to talk through your investment goals and discuss where and what to buy please get in touch.
Do you want to make sure your purchase is as tax efficient as possible? Not sure if you should be aiming for growth or yield? What's the difference? Please get in touch ian@mortimersaylesbury.co.uk