Why should you consider getting into buy to let in Cheltenham

A recent article, when we spoke about the difference between Cheltenham and Gloucester property markets, produced a number emails and a couple of people popped by my offices for a chat about investing in buy to let.

Many people in our part of Gloucestershire, over the last few years, have seen the buy to let market become all about nest egg investment. It is fuelled by pitiful interest rates on building society savings. It reflects the fact that building society savings accounts are paying half a per cent interest and pension returns are struggling to match expectations, turning more and more people into landlords to secure their future.  So what can you expect from your rental property investment? In the short term, rental yields are important, and in Cheltenham, the average annual yield is in the order of 3.8% per year. However, that is based on averages, and as most landlords in Cheltenham tend to buy starter home homes, apartments and terraced houses, the majority of which are achieving 4.5% to 6.2% per year depending on location and price in the area.

In the long term though, the question of capital growth is as important, if not more important (because if you have great short term yields, but the value of the property doesn't keep up with the rest of the market, you will have an asset that in real terms is dropping). The average property value in Cheltenham currently stands at £303,800 and property values in Cheltenham have risen by 17.6% in the last 5 years. On the other hand, property investment is a long term game, so I wanted to share with you the research I did for a couple of Cheltenham landlords. Roll the clock back 10 years to 2004, the average value of a property in Cheltenham was £196,985. 15 years to 1999 makes interesting reading, as the average Cheltenham property value was only £101,112, 30 years makes it £31,809 and just for a bit of fun, we looked at 1974 at it was £12,010!

However, if one looks at say a 30 year investment period, if you had put £31,809 into the stock market in 1984 instead of buying a house in Cheltenham, your shares today would be worth £190,573. Put the same £31,809 money in a Building Society account and you reinvested the interest back into the account, and your Building Society passbook would have £177,357. Compare that with the property market in Cheltenham and the property would be worth £303,800 today (as mentioned above). Not bad until you realise that with the rental property you would have received in excess of £162,000 in rent over those 30 years, which wouldn’t have received with the Building Society account!

If you would like to discuss my thoughts on the rental markets in Cheltenham and Gloucester, feel free to pop into my offices in Cheltenham or Gloucester, or pick up the phone or email me on neil.west@belvoir.co.uk