I recently
had an interesting chat with a couple who live on the western edge of Milton
Keynes. They are thinking of buying their first buy to let property and they
wanted my opinion on the state of the market and whether it was a good time to
invest.
They were
particularly worried that with all the newspaper headlines of a booming housing
market, there wouldn’t be any demand by tenants. One of the best pieces of advice
I can give to those looking to invest in property is a simple trick of the
trade. You can judge the affordability of an area’s property market (and thus
how much demand there could be) by simply finding the ratio of the average
property price to the average salary. The lower the ratio, the more affordable a
property is.
When we put
this to the test, we found that Milton Keynes currently has an average property
value of around £235,400 with the average salary being £29,399 per year. This
is a ratio of 1 to 8. (as a comparison, Luton’s is 1 to 7.19 and Aylesbury is
an eye popping 1 to 11.23 ). Milton Keynes’ level of ratio is very fair,
compared with other parts of the UK (the UK average is nearer 1 to 9.5), but even
with such reasonable ratios (meaning property is relatively affordable) that
doesn’t tell the whole story. On these sorts of figures, that would mean a
first time buyer would need to have a salary of £47,080 to buy an average
property in MK, and that is a lot of money in anyone’s terms, especially young MK
first time buyers in the their early 20’s.
However,
even worse than the issue of affordability, is the raising of the 5% deposit, you
then need to add in buying fees and costs which will be in the order of between
£13,500 and £14,500. Tenant’s inability to raise that sort of money for the
deposit is driving demand for rental property. If you would like some advice
about buying to let, be you a landlord with a portfolio or someone thinking of
investing in the MK rental market, please email me on stephen.tunney@belvoirlettings.com
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