Property Investment - Gallery Magazine June 08
Tuesday, 10 June 2008
local investors have increasingly been looking to local property as a safe port
With plunging stock markets globally, and poorly performing pensions, local investors have increasingly been looking to local property as a safe port in the storm. This, along with the launch of high profile new developments (such as Castle Quay) being sold off plan, has encouraged an increasing number of locals to look to buy-to-let as an investment.
History suggests that such an investment is unlikely to go wrong. A look at prices in Jersey since the 80’s shows property investment consistently proving gloom merchants wrong. The local market barely noticed the crash in prices in the UK in the early nineties, and similarly is still buoyant as many parts of England are seeing declining values this year, although there are now signs of a slight slowdown. This is perhaps surprising in an environment where the State imposes strict controls on ownership and/or occupancy of all but a handful of homes (Only recently the states reversed the policy of reducing qualies down from 12 years – solely to take potential buyers out the market place). On the face of it such intervention might sound worrying to investors, but such policies have prevented a boom and bust bubble occurring, a good thing for long term investors.
The recent trend in investment has seen buyers accepting returns of as low as 3%, in order to take advantage of the capital growth of their investment. What may seem an unappealing proposition can look very attractive in a market where some homes rose over 20% in value in the last year. So for those looking at entering this area, or property owners whose investment may be under achieving, here are a few tips:
1 When buying off plan remember that your flat will be competing with a number of similar apartments in the same development for tenants. Take advise from your letting agent regarding how to decorate and finish your apartment to make tenants choose yours over the others, thereby avoiding costly voids – periods where the flat is empty.
2. Use an agent. In jersey many lettings are to corporations, who have established relationships with local estate agents. These companies are normally searching on behalf of incoming j cats, and do not have time to trawl through private ads for property. An experienced agent will also draw up a tailor made lease for your property which will greatly reduce the risk of conflict with the tenants at a later date.
3. Consider having your property professionally managed. A good relationship between landlord and tenant will work in both parties interest, the agent will nurture this relationship making sure things run smoothly, whilst protecting their clients financial interest and confidentiality. This often encourages tenants to renew their leases. Agents have their own tradesmen etc, who will act promptly and are often cheaper than private landlords’ tradesmen . In the same way that corporate tenants prefer to lease through agents, they will often prefer a professionally managed property over a similar one that is not.
4. Do the maths. Get advice from an experienced agent as to what rental value is likely to be achieved before you buy your property. Worryingly, some buyers are unaware how they are going to make money from their investment, assuming short term capital gains as a given. I believe that this type of investment needs to be approached with a longer term view, as after three years of unprecedented gains in local property prices a slowdown in price rises is likely.
5. Consider renting the property furnished. The majority of lets in jersey have historically been unfurnished. We have in recent years seen an increase in demand for furnished lets, especially from tenants from further afield (we have recently let properties to j cats from Australia, South Africa and the far east). A furnished property can attract a substantial premium.
These are just a few starter tips for landlords, for a full appraisal of your properties rental potential contact slomans on 879787 or pop in to their office in the royal square.
Simon Sloman, Director Slomans Estate Agents
