Investment decision: Lindfield Gardens v Tormead Road

A landlord came to our office for advice recently asking whether he should invest by buying a five bedroom house in a more affluent area within a short distance of the town centre to let to a large family or to sharers. They were considering the residential area bordered by London Road, Epsom Road, Cross Lanes and Boxgrove Road.

We did some research and found a spacious sized five bedroom townhouse in Lindfield Gardens, with views over Stoke Park and on the bus route into the town centre and then onwards to the Surrey Research Park and Royal Surrey County Hospital.

This property was available for £575,000 and could be let out for £2,750 per month as a family single let to achieve an annual gross yield of 5.7%; or to young professionals (subject to receiving an HMO licence) for £3,850 per month, to achieve an annual gross yield of 8%.

Lindfield Gardens - townhouses

Properties in this area are very popular with families because there are a number of private schools located close by. These include Tormead, Lanesborough, Guildford High School plus George Abbot School so there is great demand from investors and tenants alike, making it a relatively good investment area within a desirable part of town.

Tormead Road is located within a 10-15 minutes walk of the town centre. London Road railway station is nearby, to provide links to both Guildford mainline and all stations to London Waterloo. Spectrum Sports Centre is located on the edge of Stoke Park and Merrow Downs are not far away, so active families are able to enjoy both town and country life here.

A place on which to reflect in Tormead Road

We then compared the property in Lindfield Gardens with a more spacious and therefore bigger five bedroomed detached house on Tormead Road to determine if the landlord would gain more financially, by buying there. The two streets are just five minutes walk apart so provide a useful comparison within the same area of Guildford.

A 5 bedroom detached house in Tormead Road was sold recently for £892,450 with a rental value of £3,350. While a more desirable road and mainly owner occupied it is unlikely to attract sharers as the nearest transport links may be considered too far away.

This means it is likely to be a family single let so while the rental will be £600 per month greater than the single let rental value for Lindfield Gardens it will not attract the premium rental for a shared property. The annual gross yield will be lower than the property in Lindfield Gardens, at 4.5% but the potential capital gain greater having invested more for the property in Tormead Road, will be greater.

Tormead Road

This shows that while properties can achieve a higher rent than others in the same geographical location it does not always suggest there will be higher returns for the investor.

More importantly an investor could purchase an investment property in this desirable area, where there is high demand for rental property, for a lot less than they might have thought possible all because they have done their due diligence on the type of properties available, and at what price, on various roads within a specific area.

In this instance our landlord will have the advantage of being able to offer his tenants the benefit of being located across the road from Stoke Park and on a major bus route, so both parties will be happy.

If you would like any advice on doing your due diligence when choosing properties in a particular area of Guildford or a general discussion on investment opportunities in the area your call will always be welcome. Phone 01483 320207.

Guildford Property Market Update - January 2020

Happy New Year to all our readers.

It is at this time of the year that we all look forward to changes for the better and one way to instigate these changes is to move home to create a new lifestyle for ourselves. It will therefore be interesting to see how the result of the General Election and the exit from Europe will boost house sales.

The UK Market
In their latest Property Index, Rightmove forecast a 2% price rise for the UK in 2020, now that there is a little more certainty following the General Election. Whether there is a pent up demand from the last 3 years of uncertainty remains to be seen. This may not appear until the Spring when listings typically increase as the days become longer.

They suggest that demand for property remains resilient but are understandbly worried about the lack  of supply. The number of UK sales agreed so far in 2019 is down by just 3% on 2018, while the number of properties coming to market was down by 8%. There are several factors to suggest that the market should pick up. Interest rates remain low, lenders are competing to lend, there is high employment and wage growth is making housing a little more affordable.

The Rightmove report therefore expects the number of properties for sale will recover as more new sellers come to market to make up some of last year’s lost ground. However lower stock levels are likely to place an upwards pressure on UK house prices.

Another concern is that first-time buyers are still struggling to save a deposit to buy their first home. If they are unable to get a foot onto the first rung of the property ladder this will hinder sales further up the property ladder. Solving this issue would help to limit rising rents and increase transactions in the housing market.

The Guildford Market
Property stock levels in Guildford have continued to fall, whatever the type of property or the number of bedrooms, by 19%, compared to this time last year.

There has been a slight increase in properties available for sale over the last month, possibly due to sellers knowing the result of the General Election and therefore more confident that they will sell this year. A few properties that did not sell last year have been relisted in the past fortnight.

If one were to look back at the year 2007 (pre-credit crunch) the change in stock levels compared to then are even more significant.

The time that vendors leave their properties on the market continues to increase though it is interesting to note that the number of properties spending between 1 and 2 months on the market (whether they sell or not) has decreased. This might suggest one of two things. Either the vendor was
curious to know whether their property might sell and so was a speculative listing; or more importantly they managed to sell.

The average time taken to sell properties in Guildford over the last 90 days has been 154 days, although half of the sales did occur within 78 days.

Asking prices have continued to increase over the past month by between 1-2% ... but have sales prices also increased?

According to the latest data from Land Registry (available up until Oct 2019) over the last 12 months there was a slight decrease of 1.4% for all properties in Guildford. Detached fell by 0.9%; semi-detached by 0.5%; terraced by 1.1%; and flats by 3.7%.

Is this because agents have been over confident in their original valuation, as suggested by the number of properties on the property portals, with reduced prices; or have buyers had success in negotiating prices down? This confirms again that prices can only be determined by what the market is prepared to spend.

See you again soon for next month's property update when we expect to see further certainty assuming there is progress in the BREXIT negotiations; and an increase in property listings now that owners have returned to normality after the festive season.

To request a copy of the latest Rightmove Price Index report featured in this update, please call 01483 320207 or text 07786 965631. Always happy to have a chat about the local property market too.