Is now the time to invest in Peterborough?

[Narsing]

Hi Emma,

 

I am planning to invest BTL In peterborough. I need to know is it good location for investment. 

[Jason McClean]

Hi Emma

 

Interested in Peterborough as relatively local - what sort of prices/returns are you seeing there?

[Wes Boswell]

Likewise, I only currently invest in Northampton but looking at other areas to diversify my portfolio.  What sort of returns are you seeing in Peterborough Emma? 

 

Hi Jason - I see you're Thrapston based; do you invest there or more widely.  Any tips?

[ChrisB]

I own a 1 bed flat in the Woodston area of Peterborough and having been monitoring the City and surrounding area for the last year or so my view is that Peterborough prices are extremely cheap compared to somewhere like Cambridge which, considering its only half an hour away, is quite a surprise.

My 1 bed flat is valued at about £69k and I get £495/m. With ground rent of £10 per year and Maintenance / Insurance at £175 for 2014-2015, this aids the profit.

Having been keeping an eye on the market, prices aren't increasing a great deal but there is a huge demand for rental properties. Decent 1/2 bed flats can be found for £65-85k and would achieve rents of £425-£525 a month and similarly 2/3 bed houses can be found for £95-£125k with rental figures ranging from £500-£650/m depending on property, location, etc.  Therefore there is the potential of decent yields but minimal capital growth.

Hope that helps   

[Jason McClean]

Hi Wes

 

I've got three properties in Kettering and one in Thrapston. I like investing local as you are never too far away. Typically I go for three bed family homes as I like to target middle class families as tenants for reliability and property maintenance reasons.

 

Peterborough sounds interesting but I would not be interested in flats, just houses.

[Wes Boswell]

Interesting to read what you're both doing Chris and Jason!

 

I've done some research on Peterborough tonight and agree that on the face of it, property values look far lower than I was expecting with reasonable rental values.  I am definitely going to focus my search on this area now, the yields are very strong and the ROI looks very good too in the region of 11-13%!

 

I had heard Peterborough was about to go through a significant regeneration project.  Do either of you know if this is confirmed and going ahead?  Might be the right time to get involved!

 

Jason - like you, I currently am a big fan of 3-bed houses for families.  They stay longer, tend to look after the house more and in my experience always pay the rent on time.  I do have one flat though and the benefit with this is the lack of maintenance required.  You know you're not going to have to put a fence back up or replace roof tiles after a stormy night!

[Jason McClean]

Peterborough is a good city, great train links and lots of amenities. I think there is a buzz and I'll be checking estate agents myself given some of the experiences mentioned above.

[Mark Robertson]

Sorry to resurrect an older post, but I've just joined the forum and am interested in Peterborough as an investment area.  

 

I live near Cambridge, and the returns in Cambridge for buy-to-let are not good if you're just buying in.  Property prices have increased a lot over the last 3-5 years but rents have lagged behind.  Having lived around here for 15 years I can see the growth in Cambridge in terms of new build, jobs growth and the rental demand.  We rented a place last year in Cambourne whilst we refurbished a house nearby and there wasn't much choice of property to rent, and what there was seemed to move quickly.  

 

Is it the same story in Peterborough with regard to rental demand, or do properties sit vacant for longer?  I'm seeing quite a lot to rent on Rightmove in the 2 bed apartment sector.  I'm also a bit concerned that there are quite a few blocks of apartments for sale in Peterborough as the investors are looking to sell out completely.  Should I be concerned, or is it simply a case of someone selling for personal reasons?  A few investors at the same time could be just a coincidence, or is there a fundamental issue I've missed?

 

Is there an over-supply of apartments and are 3 bed houses the way to go in Peterborough?  Any advice appreciated, and happy to pass on what I learn on the way.

[Jason McClean]

For the first time in over a year I've had estate agents calling offering me tenanted property for sale. More than twice in the last week alone.

 

I think landlords are already trying to ditch properties before they become a tax problem in 2017 onwards. I am considering doing the same myself. Maybe that's what's happening in Peterborough.

 

Unless you can buy a property outright, with the new tax laws, why on earth would you invest in rental property?

[Mark Robertson]

I agree that getting only 20% tax relief on interest expense has spooked a few investors. Perhaps this will push down prices in some sectors as existing investors look to get out = More supply.  

 

But I don't think they will achieve the prices being asked as the demand from new investors will not be there.   For anyone new buying in, you have to factor in 20% of your mortgage interest cost as an additional expense and this just depresses net yields.  The gross yields on offer will have to increase to make these properties attractive to new investors, even if you don't need a mortgage.  Rents probably won't increase in the short term so prices will have to fall. 

[Jason McClean]

Hi Mark

 

More worrying is that your net rental income is taxable, without being allowed any mortgage interest expenses.

 

So earn £12,000 in rent and pay £10,000 in mortgage. Traditionally you'll pay 20 or 40% tax on £2000 profit. Now you are paying 20 or 40% tax on £12,000 regardless of profit.

 

And that £12,000 is added to your allowances, so once you hit £43,000 you go to 40% tax. Anyone with more than one property and on average wage will be into the 40% tax bracket quickly...

 

That's what's spooking investors I expect.