I’ve written a number of articles about York property now, specifically how property prices in York are outperforming other areas in Yorkshire and even in some cases, the North of England. However, is this actually a good thing for landlords and investors?
After all, profit is directly related to yield and when assessing a yield on a property, this is a function of annual rent over purchase price. Invariably, investors want to maximise the yield on a property but with increasing property prices, this will undoubtedly have an impact on yields achieved on properties.
Take the Centurion Square development located on Skeldergate, York for instance. A good spec 2-bed flat in this development would, around 10 years ago, have cost a landlord or investor circa £160,000 and at that time, rented for £850 per calendar month equating to a whopping 6.38% gross yield.
That same 2-bed flat on the market nowadays would cost in the region of £260,000 and would achieve a market rent of £950 per calendar month achieve a 4.38% gross yield. What this tells us is yields are getting squeezed out as and this is indicative of many landlords tapping into Serviced Accommodation and Houses of Multiple Occupancy to maximise yields but as ventures, are much more labour and admin intensive than the traditional buy to let method.
Properties in York are unequivocally more expensive than they were ten years ago. In fact, according to Zoopla, over the last ten years, of the 42,469 properties sold on the 5,203 streets in York, properties have increased on average by over £40,000. Whilst this doesn’t sound like a great deal of capital growth, it is worth refreshing our memories of what event took place in the property market. Property prices at this time were at an all time high due to sentiment and demand versus supply pressures and this inevitably resulted in the property crash. Furthermore, Zoopla also records that over the last 10 years, property prices in Yorkshire and the Humber, as a whole, have on average increased by £4,067. Therefore, in isolation, there is an argument to say that York has outperformed the rest of Yorkshire & the Humber as a whole in terms of capital growth by around a factor of 10.
Whilst yields may be decreasing, capital growth is what will earn a landlord true long-term wealth. So, in response to the question, “Is buy to let in York still profitable?”, absolutely, but this on the basis of focusing on a long-term investment plan. York landlords need to generate a cashflow positive income and play the long game. There is no such thing as a ‘get rich quick’ scheme and anyone in the property industry who tells you otherwise should be avoided at all costs.