Following a discussion with a local landlord who lives in Danbury, we got chatting about his two buy to let properties in Chelmsford and how property in the Melbourne Estate, where one of properties is, (around Queensland Crescent) was so different to the Tile Kiln area (around Linnet Drive), where he owned the other. We got talking about the two properties in both areas and he wanted some advice on where to buy the next one. I did a comparison between the two and was surprised to find that the property market in the Melbourne Estate area had outperformed the Tile Kiln development market by 34%!
The average price of 3 bed house (semi and town house) on the Melbourne Estate is £178,300. When you consider the rents that are achieved in the Melbourne Estate are an average of £936 pm, this gives us a yield of 6.29% per year. So is the Melbourne Estate the best investment? Well, in the Tile Kiln development, where the garages are at the back with those nice pathways at the front, the average value of a property is £254,000 (for a 3 bed) and the average rent is £996 pm, giving a much lower yield of 4.7% per year, making the yield/ return on the Tile Kiln, 34% less than property in Melbourne estate, so surely it is the best investment, isn’t it?
This, however, is a great example of annual yield/return not being the only factor when choosing an investment property, as you should also consider how much the value of the property goes up in the long term. In the last 11 years, property values have only risen on average by 30.6% in the Melbourne Estate (rising from £136,500 to the £178,300 mentioned above), which is very impressive considering there was the 2008 property crash). However, average property values for 3 beds on the Tile Kiln development have risen on average by 61.4% in the same time frame (as average values rose from £157,300 to the £254,000 mentioned above).
