Kent & Medway Residents Need to Be Earning At Least £54,343 To Purchase A Property!

Hello readers,

When making an investment in property it is extremely important to select the right area in order to achieve the best return, not only on a monthly basis in terms of rental income, but also in terms of appreciation over the long term.

I recently read an article about how the average cost of a house in the UK requires an annual salary of £45,664 to get a mortgage (substantially more than the national average of £29,000 per year) and thought that I would spend some time looking into the statistics for Kent & Medway to see how prices compare to a UK average and the results are very interesting!

Here is a summary of the headlines from my research:

  • To purchase a property in Kent & Medway with a 10% deposit, you need to be earning an average between £54,343 and £67,929 per year
  • At an average of £301,907, Kent & Medway house prices are 28% above the UK national average of £235,673
  • Kent & Medway house prices have increased by 56% over the past decade, outstripping the UK average of 38% by a massive 18%
  • Kent & Medway Annual house price growth for May 2020 sits at 2.2%, 0.7% below the UK average of 2.9%

    I decided to drill down into the detail a little further as I wanted to see the breakdown by Local Authority and have put together the summaries below. I would be interested to hear any thoughts that you may have on this!

House Price Growth Over The Past Decade

It is probably unsurprising that Dartford and Gravesham have seen the largest percentage growth. This is due to their proximity to London; however, this growth has slowed and, since 2017, sat at just 4% – 5% compared to somewhere such as Folkstone which has seen growth of 12.7% for the same period.

It is noteworthy, however, that every area in Kent & Medway has seen growth significantly above the UK average of 18%!

Annual Percentage Change

When looking at the UK average annual growth of 2.9%, we can see how the different areas in Kent & Medway compare.

Folkstone & Hythe stands out as a strong area, however it is worth noting that February 2019 saw prices drop from £260k to £245k and by May 2020, prices were £262k meaning that this annual growth of 6.4% is artificially inflated.

Thanet also saw a similar drop during 2019 and has since recovered, meaning that growth of 5.9% is also artificially inflated. These two recoveries certainly demonstrate how resilient and quick to recover property markets are!

Average House Prices

Investors should always consider past, current, and potential future growth along with yield and rental demand. However, this should be balanced with affordability. According to the Land Registry, the UK average property price is £235,673 and it is significant that every area within Kent & Medway sits slightly above this.

Average Salaries & Mortgages

Based on average earnings from ONS 2019 figures, on a best-case scenario an individual needs to be earning an average of £21,240 higher than the average salary for Kent & Medway to be able to purchase a property – I have made a borrowing assumption of five times salary for this!

I have taken the time to compile the data for each Local Authority area in Kent & Medway below and it certainly makes for interesting reading!

You will see that whilst the required salary slightly higher for some areas, it is lower for others and with a £30k average deposit required at 10% LTV, it is probably no surprise that more and more people are needing a loan from ‘the bank of mum and dad’ in order to purchase.

This is a particular challenge at the moment due to the very limited number of 90% LTV mortgages available and restrictions that are in place in terms of borrowing.

Based on average earnings from ONS 2019 figures, on a best-case scenario an individual needs to be earning an average of £21,240 higher than the average salary for Kent & Medway to be able to purchase a property!

Whilst this is slightly higher for some areas, it is lower for others and with a £30k average deposit required at 10% LTV, it is probably no surprise that more and more people are needing a loan from ‘the bank of mum and dad’ in order to purchase.

This is a particular challenge at the moment due to the very limited number of 90% LTV mortgages available and restrictions that are in place in terms of borrowing.

What Does This Mean For Property Investors?

The salary and level of deposit required to purchase a property from a sole income is something that drives rental demand and I think that particularly when it comes to the HMO market, for a single person an HMO provides affordable accommodation whilst also allowing them to have some spare cash which could go towards saving for a deposit. The other strategy that I know a number of investors favour is renting whilst building up a portfolio where they can afford to purchase.

There has been a lot in the media recently about rapidly increasing house prices with headlines such as ‘Record House Price Growth’, ‘Property Market Boom’ and ‘Record Month on Month House Listings’. My advice to investors is to see the picture beyond these captions. There certainly is a property market boom at the moment with significant house price growth, however, the only real litmus test for this is the data released by the Land Registry.

Whilst data from websites such as Rightmove, Zoopla and others are certainly helpful in painting a picture, the cold hard facts are from the Land Registry which last released an index in May. It will be interesting to look back at 2020 when the full data is available!

It is always important to consider the long-term when investing in property and, particularly for those looking to make a new investment, this local area data should be extremely helpful in deciding where to invest.

In addition to growth, it is important to understand current trends and future potential. I previously released an article looking at the Rochester Riverside Development and will be doing further analysis on the future potential of Medway along with Folkestone & Hythe with the aim of supporting you in making an informed investment decision!

I hope that you found this article insightful. If you are considering investing in property, remember that you can book a free 15-minute initial consultation here. Alternatively, you are very welcome to contact me via LinkedIn.

Hasan

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