Local property market information for the serious investor

Month: April 2018

2% More Cardiff Home Owners Wanting to Move Than 12 Months Ago

As I have mentioned a number times in my local property market blog, with not enough new-build properties being built in Cardiff and the surrounding area to keep up with demand for homes to live in (be that tenants or homebuyers), it’s good to know more Cardiff home sellers are putting their properties on to the market than a year ago.

At the start of 2007 there were 4,211 properties for sale in Cardiff but by February 2008, when the credit crunch was really beginning to bite, that number had risen to 8,500 properties on the market at a time when demand was at an all-time low, thus creating an imbalance in the local property market.

Basic economics dictates that if there is too much supply of something and demand is poor (which it was in the Credit Crunch years of 2008/9) … prices will drop. In fact, house prices dropped between 15% and 20% depending on the type of Cardiff property between the end of 2007 and Spring 2009.

However, over the last five years, we have seen a steady decrease in supply of properties coming onto the market for sale and steady demand, meaning Cardiff property prices have remained robust.  A stable housing market is one of the foundations of a successful British economy, as it’s all about getting the healthy balance of buyer demand with a good supply of properties. Nevertheless, if you had asked me a couple of years ago, I would have said we were beginning to see there was in fact NOT enough properties coming on to the market for sale … meaning in certain sectors of the Cardiff property market, house prices were overheating because of this lack of supply.

So, it is pleasing to note, looking at the recent numbers …

There are 2% more properties for sale in Cardiff today than a year ago

There were 2,525 properties for sale 12 months ago, and today that stands at 2,574. It doesn’t sound a lot, yet this is a small step in the right direction to a more stable property market.

Even better news, since the Chancellor announced the stamp duty rule changes for first time buyers (FTB), my fellow agents in Cardiff say that the number of FTB’s registering on the majority of agent’s books has increased year on year. That has still to follow through into more FTB’s buying their first home, however, with the heightened levels of confidence being demonstrated by both Cardiff house sellers and potential house buyers, I do foresee the Cardiff Property Market will show steady yet sustained improvement during the first half of 2018.

What does this mean for Cardiff landlords or those considering dipping their toe into the buy to let market for the first time? Landlords will need to keep improving their properties to ensure they get the best tenants. It is true that demand amongst FTB’s is increasing, albeit from a low base. Even with the new landlord tax rules, buy to let in Cardiff still looks a good investment, providing Cardiff landlords with a good income at a time of low interest rates and a roller coaster stock market.

If you are thinking of investing in bricks and mortar in Cardiff, it is important to do things correctly as making money won’t be as easy as it has been over the last twenty years.  With a greater number of properties on the market .. comes greater choice. Don’t buy the first thing you see, buy with your head as well as your heart … and don’t forget the first rule of Buy To Let Investment …..

I will tell you that 1st rule in a couple of weeks!

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Cardiff Private Rents hit £19.18 per sq. foot

As I am sure you are aware, one the best things about my job as an agent is helping Cardiff landlords with their strategic portfolio management. Gone are the days of making money by buying any old Cardiff property to rent out or sell on. Nowadays, property investment is both an art and science. The art is your gut reaction to a property, but with the power of the internet and the way the Cardiff property market has gone in the last 11 years, science must also play its part on a property’s future viability for investment.

Many metrics most property professionals (including myself) use when deciding the viability of a rental property is what properties are selling for, the average rent, the yield and an average value per square foot.

However, another metric I like to use is the average rent per square foot. The reason being is that is a great way to judge a property from the point of view of the tenant … what space they get for their money. Now of course, location (location, location in a Phil and Kirstie style) has a huge influencing factor when it comes to rents (and hence rent per square foot). Like people buying a property, tenants also have that balancing act between better/worse location, more vs. less money and size of accommodation (bigger and more rooms equalling more money) and where they live (location) verses making ends meet.

Interestingly, I know there are a lot of you in Cardiff who like to see my statistics on the Cardiff property market, so before I talk about the rental figures per square foot, I wanted to share the £ per square foot on the values. In Cardiff, the current AVERAGE figures are being achieved (and I must stress, these are average figures, so there will an enormous range in these figures), but on average, properties in Cardiff, split down by type are achieving …

  • Cardiff Detached Property – £269 / sq ft
  • Cardiff Semi Detached Property – £243 / sq ft
  • Cardiff Terraced Property – £224 / sq ft
  • Cardiff Apartments – £245 / sq ft

So, the rental figures:

The extent of space you get for your rent is replicated in the space you get for your money when buying a property. The average size of rental property in the Cardiff area is 813.1 sq ft (interesting when compared to the national average of 792.1 sq ft)

This means the average rent per square foot currently being

achieved on a Cardiff rental property is £19.18 per sq ft per annum

So, what we can deduce from this?  Well the devil is always in detail!

Whilst I was able to quote the average overall figure and the fact my research showed it was quite clear from data that there is relationship between the average £ per sq ft figures on property values and average £ per sq ft on rental figures as a property grows in size. However, something quite intriguing happens to those figures, in terms of what the property will sell for and what it will rent for, when we change and increase the size of the property.

My research showed that doubling the size of any Cardiff property doesn’t mean you will double the value of it … in either value or rent. This is because the marginal value increases diminish as the size of the property increases. In layman’s terms … Subject to a few assumptions, double the size of the house doesn’t mean double the value … what really happens is a doubling of the size gives only an approximately 40% to 65% uplift in value, but here comes the even more fascinating part … when it came to the rental figures, double the size of the house meant only 20% to 45% in increase in rent.

 

In a future article, I will be discussing the actual added value an extension can bring … but in the meantime, in an overall and sweeping statement, most of the time it makes sense to extend if you are going to live in the property as long as the extension is proportionate to the property, but if you are going to rent it out … possibly not.

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