Roll the clock back 35 years to 1981 when Thatcher was in power, there was a Royal Wedding, Britain won the Ashes and Bucks Fizz won Eurovision with ‘Making your Mind up’. Haven’t things changed? The number of homeowners and property investors who said they wish they had hindsight and bought up every house in Colchester all those years ago, especially when you consider what has happened to the Colchester property market, as property values since 1981 have risen 768%.
Not bad when you consider inflation over the same time period has been 271.9%, meaning in real terms (i.e. after inflation), property values in Colchester are 496.1% higher. It’s no wonder people can’t afford to buy property anymore and landlords are attracted by bricks and mortar. Yet the changes to the Colchester property market run much deeper than property value changes as no one could have predicted how the property market has changed in Colchester over the last 30 years.
Take a look at the graph which shows the Local Authority data for Colchester Borough Council in 1981, 22.1% of Colchester people lived in a Council House, whilst today its 13.5% – a massive drop which can mostly be attributed to Margaret Thatcher allowing Council tenants the right to buy their Council House. The private rental sector since 1981 has, as one would have expected, also changed. The proportion of properties privately rented in the Colchester area (i.e. through a private landlord or a letting agency) has almost doubled, rising from 10.6% to 18.7% of property.
So, let us consider those people who own their own home, surely that has had a massive drop? In 1981, the proportion of people who lived in the Colchester Borough Council area who owned their own home was 67.3% and today it’s 66.3%. Not the seismic change most of you (or I) was expecting!
Home ownership in Colchester during the 1980’s and 1990’s did actually rise but, as I have discussed in previous articles, that was because nearly every Council tenant was buying their council house. Now there are hardly any Council houses for the younger generation to move into (because of the right to buy scheme) so they have no choice but to privately rent.
This is why the buy to let market in Colchester is an investment sector that, I believe, will continue to grow as councils aren’t building council houses in their thousands each year (like they were in the 1950’s/60’s and 70’s). The Colchester property market is constantly changing and for too long buy to let has been heavily dependent on house price growth and yield has been almost forgotten. I see the changes in tax and landlord and tenant law in a different perspective to the soothsayers and see it as bringing many opportunities where yield will become more important. You may need to change your buy to let targets, your methodology to financing or perhaps look at locations other than Colchester to invest your money. This will help shine a light on investing in properties with healthier yields and create more realistic long term buy to let opportunities, instead of short term growth bets and wagers.
As Bucks Fizz said back in 1981, it’s time to make your mind up. The advice I give to my landlords and my blog reading friends is that these changes will make some landlords panic, meaning competition for decent Colchester buy to let bargains will drop as fear of change takes over and amateur property investors flee the market. These opportunities will provide a more stable environment for knowledgeable and wise buy to let landlords to thrive in.
If you’d like a second opinion on an investment property you are considering or would just like an informal chat about any aspect of the Colchester property market please give me a ring on 01206 862288 or email me at firstname.lastname@example.org – I am happy to provide free feedback without obligation.
Feel free to send me a link to a you’re interested in on Rightmove or Zoopla and I will take a look at usually get back to you within 24 hours. I’m also happy to undertake free pre-purchase visits to your shortlist of potential properties to provide a rental valuation.