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Horncastle rents rise by 14.5% since 2005

Article Simon Jory 2017-04-06
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The Horncastle Property Market is a very interesting animal and has been particularly fascinating over the last 12 years when we consider what has happened to Horncastle rents and house prices.

There’s currently much talk of what will happen to the rental property market following Brexit. To judge that, I believe we must look what happened in the 2008/9 credit crunch (and what has happened since) to judge rationale and methodically, the possible ramifications for long-term investors in the Horncastle property market. You see, an important, yet overlooked measure is the performance of rental income vs house prices (i.e. the resultant yields over time). In Horncastle (as for the rest of Great Britain), notwithstanding a slight drop in 2008 and 2009, property rentals have been gradually increasing.

The income from rentals has been progressively increasing over the last 12 years. Today, they are 14.5% higher than they were at the beginning of 2005. In fact, over the last five years, the average growth has been 1.6% per annum. From a landlord’s point of view, increase in average rental income is not to be sneered at. However, the observant readers will be noting that we are ignoring an important factor – our friend inflation.

Turn the clock back to 2005, and we have a property being rented for say £900 a month and that is still being rented at £900 a month today, in Spring of 2017. While the landlord is not getting any less income, this £900 is no longer worth as much. Let me explain, in 2005, £900 may have bought a two-week 4* holiday in Italy. Yet, holidays have increased in line with inflation (which has been 38.5% since 2005), so our holiday would cost today £1,246 (£900 + 38.5% inflation = £1,246). Therefore, the landlord could no longer afford the same holiday, even though having the same amount in pound notes from their rental property.

This means when we compare rents in Horncastle to inflation since 2005, Horncastle landlords are worse off today, when they receive their monthly rental income, than they were in 2005 by 24% in real terms (rents increased by 14.5% since 2005, less the 38.5% inflation since 2005 – net affect 24% drop).

However, rental income is not the only way to generate money from property as property values can increase. Although in the short term, cash flows are diminishing, many Horncastle landlords may be content to accept that for a colossal increase in capital value.

Property values in Horncastle have risen by 17.4% since 2005

Horncastle Property Values and Rents Rises since 2005

This equates to a 1.45% per annum increase over the last 12 years. Even more interesting that this includes the 2008/9 property crash, this will make those Horncastle landlords and investors feel a little better about the information regarding rents after inflation.

Moving forward, the prospects of making easy money on buy to let in Horncastle have diminished, when compared to 2005. Last decade, making money from buy to let was as easy as falling off a log – but not anymore.

It would be true to say, my rental income verses property prices study does lead to noteworthy thoughts. It’s all about judging whether what you have will meet your needs of the investment in the future. It’s the balance of capital growth and yield whilst diversifying this risk.

If you are investing in the Horncastle property market, do your homework and do it well. While some yields may look attractive, there are properties in many areas that do not have the solid rudiments in place to sustain them. If you are looking for capital growth, you might be surprised where the hidden gems really are. If you need impartial advice please feel free to call in, the kettle is on!

For more thoughts on the Horncastle Property market – visit the the Horncastle Property Blog

Sources:

  1. Rents - Sources are a combination of LSL, ONS, Belvoir and Homelet Index’s
  2. Property growth – Land Registry for the local council area
  3. Inflation – Bank of England
  4. Predictions – CW looking at both the press and your town’s historical data - Denton House Research

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Simon Jory

Simon Jory

Simon has been in Estate Agency for over 32 years and is a Fellow of the National Association of Estate Agents. Having working in all kinds of changing market conditions he is well placed to advise on how best to sell your home.

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Anne Pearce

Anne prides herself on working to the highest standards and believes everyone should receive the best possible customer service. With over 20 years' experience she will not miss and opportunity.

Dawn Bannister-Law

Dawn Bannister-Law

Prior to moving to Lincolnshire, Dawn was a valuer for more than 19 years in Bakewell in the Peak District. Dawn strongly believes buyers, sellers, landlords or tenants are all as important as each other

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