167% increase in Colchester Property Values since the Millennium

Traditional Font Doors on a Terraced House in England

 

Here’s some positive new for Colchester property owners.  Did you know that Colchester house values have risen by 167% since the Millennium whilst average salaries in and around the town have risen by just 51% over the same period ?  Not such good news for those struggling to get onto the property ladder of course.  This is just one factor that has pushed home ownership further out of reach for many of Colchester’s population as they contend with having to raise sizable deposits whilst at the same time meeting stricter lending criteria.

You won’t be surprised to learn that the private rental sector in Colchester has grown significantly throughout the last twenty years with buy-to-let investors purchasing many of the newly built residential properties built with owner occupiers in mind.  For example, in the Colchester Constituency, 20 years ago there were 38,845 properties, whilst the most recent figures show that there are 45,489 – a growth of 6,644 properties.

Anecdotal evidence appears to suggest that a large proportion of those 6,644 were bought by buy-to-let landlords, as over the same 20-year time frame, the number of rental properties grew from 2,033 to 10,487 – a rise of nearly 8500 !

Some folks have suggested that this historic growth in the Colchester rental market may start to change following the introduction of the new tax regulations for landlords set out in the last budget. However the numbers appear to tell a different story.  Across the board, mortgage borrowing rose to a 9 year high in March of this year as the British property markets traditional Easter sales activity corresponded with landlords rushing to beat the new stamp duty changes. According to the latest figures buy-to-let landlords borrowed over £7 billion in March which was a massive 163% up on the £2.7bn borrowed in March of the previous year.

From my own perspective, I don’t think that the buy-to-let market in Colchester will decline as a result of the recent changes and here are some of the reasons why:

Firstly, you have to consider what or where are the alternative investment options if not in property ?  The stock market ?  Perhaps, but you may be surprised to learn that last week the stock market was just 5.54% higher than at the start of the Millenium !  Of course the markets have risen and fallen during that time but right now overall gains in stocks look pretty poor compared with the 167.8% rise in Colchester property prices over the same period

Secondly, its true that the 3% stamp duty is the first of a number tax changes to be introduced between 2017 and 2021. In addition to the rise in stamp duty landlords will also face constraint in their ability to offset mortgage interest. If landlords start selling their portfolios, that could lead to a significant numbers of second hand properties being put on the market. Yet that in itself may not be an altogether bad thing.  As I have mentioned in previous articles there is a serous shortage of properties for sale in Colchester as currently stock of property for sale is as low as it has ever been during the last six years.

Thirdly, with fewer rental properties in Colchester, as supply declines and demand remains constant, this will create a squeeze in the rental market causing rents to rise. During the past 18 months rents have risen in almost every area of the town.  Whilst the rate of increase has slowed down this year I believe that rents will continue to rise as landlords look to recover increased costs.  As a consequence of these and other factors the return on investment, rental property will continue to attract landlords.

 

If you’d like to have an informal chat about any aspect of the Colchester property market please feel free to call me on 01206 862288 or email: grahamwood@hometorent.co.uk

I’m happy to provide free feedback on any investment property you may be considering.  If you send me the hyperlink to the property from Rightmove or Zoopla  I will usually respond within 24 hours. I am also happy to undertake free pre-purchase visits to your short list of potential properties to provide a rental valuation.

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