Today, the Bank of England finally announced that interest rates will be cut to 0.25%. Rates have been pitiful for years, even those locking in savings for five years get an average of 1.97% interest. Average interest rates on an easy access savings account is 0.65% and if mirrored by the Bank of England rate could drop to 0.4%. Those with £10,000 in savings will only see £40 a year!! Those relying on pensions will continue to get a very low return and income.
However, those with mortgages will benefit from an average of a £22 monthly cut to their mortgage bill. This is the perfect time for investors to get savvy with their money, take advantage of unprecedented low mortgage rates to find high-yielding properties with good prospects for capital growth to attain an investment with yields ranging from 5-20% (or more!). Furthermore, due to the mortgage interest changes more landlords will be selling up, and the increased Stamp Duty is scaring off some newbie investors. Increased supply and lowered demand; the perfect recipe to make a killing in property!
If you live in Medway, then you can see it is changing in certain areas with a massive drive to regenerate the city. With the current climate Medway could offer an excellent opportunity for property investment. Medway council’s programme aims to transform an area of 11 kilometres around the River Medway with Chatham Centre and Waterfront at its heart. This includes major transport infrastructure and an expected 12,000 to 16,000 new homes; with an aim to generate more than 20,000 new jobs. So is this good news for an investor?
What are the stats?
Looking at the stats in the last census of 2011, it shows that the population of Medway has increased 5.9% from 249,288 in 2001 to 263,925 in 2011. The largest increases have been in the River and Gillingham North wards, with both these wards seeing significant housing development since 2001 and an increase in the number of students attending the Universities of Medway.
The census also shows that the number of ‘household spaces’ in Medway stood at 110,263 with just over two-thirds of the homes owned either with a mortgage or outright, which is in keeping with the rest of Kent and the South East. The increasing population, both working professionals and students, alongside economic development suggests there will be an increased rental demand in Medway.
It also shows that there have been significant changes in the tenure of properties. The number owned with a mortgage fell by nearly 6,400, although some of this will be down to the increase in outright ownership up by just over 3,900. At the same time private rented households has increased by almost 8,800 and was highest in River ward (36.1% of households) and Gillingham South (33.9%), and lowest in Hempstead and Wigmore (7%). It also shows that over two thirds of households in Gillingham South were terraced properties. River ward has the highest proportion of households which are flats, apartments.
So lots of stats here, but what does this mean to an investor?
Taking the census into account and the massive regeneration taking place, it could be assumed that it isn’t a great place to invest in. I would disagree.
For many who wish to jump on the housing market it is still tough to get a mortgage. The stats show us that more people are living in rental accommodation and with the number of students set to increase, demand is expected to grow in Medway. In addition, social housing supply has remained steady meaning that there are still not enough homes and demand is only going to increase as more people move into the city.
Any regeneration, if done right, should also improve the local area. With this, you get improved infrastructure, environment and new people moving to the new homes. This should lead to an increase in house prices and conversely, demand to live in the neighbourhood.
As Medway’s plan does talk about more homes, you might think that this will mean a lowering of prices because of an increase in supply. Once again, when areas improve house prices usually increase. The high speed train link to London also means Medway is in closer reach to the Capital whilst offering more affordable housing adding to its pull factors.
So in my opinion the evidence is clear. As an investor it is a great time to increase your portfolio or, if you are new to this, start with your first property. Being ahead of the curve means you can also get a head-start. If your investments include HMOs, then the long term yield remains good (take a look at the many examples in my other blogs), but alongside this you should see the value of your property increase as the area improves. It is then, a win-win situation.
If you want to know more and are interested in investing in property or expanding your portfolio then please feel free to contact me. You can email me at email@example.com or phone me on 07944 726676.