As 2014 draws to a close it's perhaps appropriate to give thought to what 2015 may bring the Sunderland Property Markets
You'll note that in both the title and above I've written 'Markets' (plural), rather than 'Market' (singular) as there's no such thing as the Sunderland Property Market. Sunderland, like any other Town or City is made up of lots of small micro-markets, defined both geographically and by property type
We can’t look at Sunderland in just its little own bubble, so a good place to start would be to look at the National picture and to look at recent trends to see if they are likely to continue into 2015
The recent rapid rise in house values in some parts of the UK in the early part of the year (especially in London), along with earnings growth that remain below inflation and the possibility of an interest rate rise over the coming months, appear to have tempered housing demand
This weakening in demand has led to a modest easing in both property price growth and sales. A moderation in growth looks likely into next year as supply and demand become increasingly better balanced
Now with the General Election on the horizon, whichever Government takes power, they, along with the Bank of England, have a thorny job to do in balancing the expected rise in interest rates with the continued resurgence of the housing market, to ensure the property market doesn't drop and drag down the economic recovery forcing people into selling their property at a loss
The main indicators suggest that buyers will start to gain the upper hand, especially with the new stamp duty rules & yesterdays announcement of a 20% discount offered to 100,000 First Time Buyers aged under 40
There is also good news for landlords looking to buy rental property with the changes in stamp duty and later in 2015, the new rules regarding pensions, where you will be able to take money out of your pension to invest in property
That said, don’t just cash in your pension to buy any old property in Sunderland!!!
First time landlords need to be extremely cautious and it is entirely plausible that if poor choices are made, a Buy to Let property will deliver a much lower net return than a wisely chosen annuity!
Clearly with good advice on what & where to buy and equally good advice on how to finance such a purchase, Buy to Let could outperform annuities and form a great way to fund retirement, so it's vital to always get the best advice you can prior to making any decisions
This is clearly going to be a major talking point next year and I'll be devoting much more thought to this in advance of the pension rules changing in April 2015 & beyond - watch this space...
Anyway, back to Sunderland - there are a number of indicators that we can look at as to the state & health of a property market(s), a key one being sold prices and another being the number of transactions taking place in any period
Looking first at sold prices, taking Sunderland as a whole the average sold price of a property in September 2014 was £123,858 which represented a 3.2% increase on the same period in 2013. Tellingly the volatile nature of the sales market in recent years is highlighted when you consider that the above was actually 0.4% down on the average sold value in 2012 (£124,315) and 0.1% up against 5 years ago
If there's anything to learn from this, it's that house price growth in Sunderland is likely to be modest and landlords should not budget for double digit capital growth next year!
There are always ways to increase capital growth, the most common being to build it in at the start by buying well and in particular buying a property in need of renovation
It's always more interesting to look a little deeper and the Sunderland figures do hide few little gems of information about the particular areas & property types that make up the market as a whole
Most postcode areas in the City experienced average house price increases in the year Sept 2013 to 2014, ranging from a modest 0.3% growth in SR6 to 17.4% growth in SR2 but tellingly average prices in both SR4 and SR6 showed slight reductions (-5% and -10.9% respectively)
Digging a little deeper still, this seems to be of less concern to the investors as first thought - the fall in average prices in both areas was driven largely by steep falls in the value of detached properties (with the 'core BTL market' of terraces and semi-detached properties both showing modest increases) and given there are fewer transactions for this type of property than any other the data is likely to be skewed by a couple of 'distressed sales' which would have affected the average
Looking at property types in the City as a whole, our strongly held view that terraced and semi detached properties make a better long term investment than leasehold flats seems to be by the data, with the average price of a terraced property being 14% higher in 2014 than in 2013, with semis showing even slightly better year-on-year increase of 17.8%
Tellingly the average price of both property types are now higher than the post-crash slump of 2009 (terraced property prices are 7.1% higher than 2009 and semi's 7.5% higher) and the average semi is now above 2007 prices (£141,705 compared to £124,676) with terraces having a little way to go to reach this benchmark
Of all the figures, the ones in the above paragraph are of most interest to me and perhaps should be to investors...let me explain...
We all know that 2007/08 led to the creation of a new breed of 'Reluctant Landlord' who could not sell so chose to rent out their property instead
Most of these 'Reluctant Landlords' are still letting their property although we've noticed a steady trickle of landlords looking to sell (usually when a tenant gave notice) over the last 18 months or so but interestingly many who've tried have failed to get the price they wanted and have returned back to letting
I've held the view for some time that this trickle may become stronger as soon as prices reach 2007/08 levels and the 'Reluctant Landlords' realise they are no longer in negative equity - the above data suggests this point may be just around the corner...
If this trickle becomes a flood it will have a dampening affect on prices which will be great news for those investors looking to add to their portfolio!
Don't get too excited though! We've seen that the 'Reluctant Landlord' properties are not necessarily in the areas that would normally give the best returns or stack up as investments (putting it bluntly they are often better properties in better areas than most investors would go for)
That said, there are always going to be exceptions and it may be that a bargain 'Reluctant Landlord' property could balance a portfolio biased towards Good Yields by adding a property more likely to achieve strong capital growth
Finally, looking at the number of transactions, there were 426 completions in the key summer period of June - Aug 2013 and 538 in the same period this year, an increase of over 25%. This suggests again that the outlook for 2015 is likely to be positive, as this required both buyers and sellers to be entering the market in significantly greater numbers than before
Clearly there's always going to be a seasonal dip in both in the sales and lettings markets around now but both of the above indicators suggest that when things do pick up again in the New Year the signs are good that 2015 in Sunderland will be very much a continuation of where 2014 left off - a reasonably healthy market where well-informed investors can buy good value for money properties that will return significantly better Yields than in many areas, both regionally and nationally
If you'd like to have a chat about the Sunderland Property Markets in 2015 call into our Frederick Street office, call 0191 567 8577 or email neil.whitfield@belvoirlettings.com
The advert says 'Priced to Sell' and given this was bought new for £113,750 in 2008 the OIRO £59,950 asking price certainly demands further investigation!
The photos are clearly from when it was built in 2008 so it would be interesting to see what condition the property is in (I know some of these houses have been rented from new and have had a particularly hard life) but even if it is looking shabby, given it is small and modern, £5k should take care of most things, even if the kitchen and bathroom need TLC
Given current market conditions I'd suggest basing your calculations on £400pcm, although it has been possible to get £425 or even £450 in the past
Based on the above lower rental amount it will return 8% Gross Yield
Click here for details http://www.zoopla.co.uk/for-sale/details/35447586?tmad=c&tmcampid=35&utm_campaign=buy-alert&utm_content=contact-type-listing&utm_medium=email&utm_source=alert#jgfMtajDsxfVAwah.97
Call us on 0191 567 8577 or email neil.whitfield@belvoirlettings.com for more information
We know this 3 bedroom terrace in Jackson St will be popular as we've managed a similar property in this street for some time, along with several others in the nearby streets
This one needs a full refurb, but it does mean investors able to look beyond the very dated decor and fixtures & fittings will be able to get a property that will never have a shortage of decent tenants and also will offer immediate potential for capital growth
Realistically you'd need to budget £20k for improvements on top of the £87,000 asking price
That will return 6.6% Gross Yield based on a very realistic £595pcm rent
There's been 4 sales of 3 bedroom properties in Jackson Street within the last 12 months and 3 of the 4 sales have been between £122,500 and £143,000
The other property was sold for £66,000 (which would skew the figures, hence I've not used and average) and I'd suspect that was another 'Needs Work' bargain like this one
Looking at the above, based on a total initial investment (cost of purchase plus the cost of improvements) of £107,000 I'd suggest that a canny investor could make at least £15,000 - possibly up to £36,000 from this purchase
Click here for details http://www.zoopla.co.uk/for-sale/details/35438573?tmad=c&tmcampid=35&utm_campaign=buy-alert&utm_content=contact-type-listing&utm_medium=email&utm_source=alert#VOfZIVxS7ZB5fjwD.97
Call us on 0191 567 8577 or email neil.whitfield@belvoirlettings.com for more information
This 2 bedroom flat in Downhill (SR5) looks to be a bit of a steal at 'Offers Over £50,000' but it will need a good few thousand spending on it to bring it up to a lettable standard that will attract a Good Tenant
Based on a total investment of £65,000 it will return 7.4% Gross Yield, assuming an achievable rent of £400pcm
It needs freshening up throughout, with new flooring and a new kitchen and bathroom, the upside being it's not a large flat so this will help control costs
Click here for details http://www.zoopla.co.uk/for-sale/details/35440586#MDuWfo1SFyQEoEtP.97
Call us on 0191 567 8577 or email neil.whitfield@belvoirlettings.com for more information
This 2 bedroom semi in the popular Town End Farm area needs a little work but it's not going to need too much to get it back to a standard that will attract Good Tenants
As such it could offer the attractive combination of a decent monthly yield with the potential for building in capital growth at the outset by making the necessary cosmetic improvements
It's being offered at £70,000 and a further £5k is all that should be required to sort out the internal decoration, flooring and tidy up of the bathroom and rear gardens
Based on a total spend of £75k and a very achievable £475pcm rent it will return 7.6% Gross Yield
Click here for details http://www.zoopla.co.uk/for-sale/details/35393312?tmad=c&tmcampid=35&utm_campaign=buy-alert&utm_content=contact-type-listing&utm_medium=email&utm_source=alert#jAmu5mWaRVkBw1Yo.97
Call us on 0191 567 8577 or email neil.whitfield@belvoirlettings.com for more information
This 3 bedroom terrace is included in the Agents Property Auction on January 26th and may be worth a look for those investors happy to undertake refurbishment prior to letting
The guide price is £64,950 but given the average selling price of 3 bedroom properties on this street last year was £115,000 you should budget for significantly more than the guide price
What's more, it needs a full refurb throughout (new kitchen, bathroom, decoration & flooring) and you'd be advised to check out the electrics before commencing
Working backwards from achieving 6.5% Gross Yield with an achievable rent of £595pcm, you'd need to pay no more than £90,000 and and spend no more than a further £20,000 on rennovations - if you can get it for less or reduce the rennovation budget then you'd get an even better Yield
Click here for details http://www.zoopla.co.uk/for-sale/details/35368845?tmad=c&tmcampid=35&utm_campaign=buy-alert&utm_content=contact-type-listing&utm_medium=email&utm_source=alert#d6M6AcIGO83DFw91.97
Call us on 0191 567 8577 or email neil.whitfield@belvoirlettings.com for more information
I regularly find myself advising landlords & investors that Sunderland has a number of very different property markets within the City with some areas having massive over-supply of rented properties and others with decent rented accommodation in short supply
Until now this has been based more on experience gleaned over many years rather than any hard data, so I thought it would be interesting to see if the statistics back up what we all suspected from our anecdotal evidence
I've taken a look at the market using ONS and Rightmove data (so it excludes private lets), comparing the number of available properties last month with the total number of rental properties in the area
It's generally accepted within the industry that around 5% of the total property stock will be on the market To Let at any given time, so using this it's easy to see which areas have a shortfall of properties and which are over-supplied at any given time
Clearly statistics can be interpreted to say pretty much anything, but looking at the above, they do appear to back up what I've been consistently saying for some time...that there's over-supply of properties in and around the City Centre and Ashbrooke/Thornhill (predominantly flats & apartments) with a shortage of properties in other areas
This has had a long term effect on achievable rents, with rents in SR1 and SR2 falling steadily and not only that, it's a double-edged sword as tenants realise with a lot of landlords competing for their tenure they don't need to settle for second best, so landlords are having to ensure their properties are in the very best condition for any chance of securing a let
In the other areas, the largest overall shortfall is in SR4 but given this has the largest number of rental properties, as a percentage of the market this is a less significant shortfall than in other areas
It's also telling that the areas I often consistently advise landlords to look at to provide the best long term prospects, SR3 and SR5, show the largest percentage shortfalls in the number of properties to reach the average 5% stock level
Once again this backs up our findings that when a decent property is made available in these areas there will be no shortage of tenants due to the relative scarcity of decent private rental properties for them to choose from
Discounting SR1 and SR2, the above shows 175 extra properties were needed across the whole of Sunderland in November alone
There can only be one message to investors and landlords at this time – don’t delay any further, do your research, come and speak to us, verify what we're saying makes sense by talking to other agents, speak to other landlords – but make no mistake, this is a good time to be investing in Sunderland
It also shows that if you're thinking of getting into the Sunderland rental market and don't know where to start, you really must seek impartial advice and guidance to get the best return on your investment and to ensure you don't buy the wrong property or buy in the wrong area
For more information about potential investment properties that we could introduce you to, or to ask about our thoughts on your own investment choices, call us now on 0191 567 8577 or pop along and speak to us in person at our offices in Frederick Street
We've spotted this 2 bedroom flat in Baxter Road, Town End Farm that's included in the Agents Property Auction on 8th December
The guide price is £32,000 and if you could get it for that (even allowing a further £10k for decoration, flooring & a new kitchen and bathroom) it would return a fantastic 11.3% Gross Yield based on £395pcm rent
Given the most recent sale of a similar nearby flat was at £52,000, even if interest in the property means the hammer falls at around £50k it will still deliver a respectable 7.9% return based on the above and the £10k improvement budget
Click here for details http://www.zoopla.co.uk/for-sale/details/35287676?tmad=c&tmcampid=35&utm_campaign=buy-alert&utm_content=contact-type-listing&utm_medium=email&utm_source=alert#GM4IWA7oqJAc5af6.97
Call us on 0191 567 8577 or email neil.whitfield@belvoirlettings.com for more information
