Cambridge Property Values .. the long climb back to 2007 values

 

 Some landlords have been speaking to me recently about stories in the press and their concerns about local property market. They have been concerned that property values seem rather high and were worried about paying too much for their next buy to let property. In the past few years, if you were going to be buying in Cambridge, it was vital to ensure you build in some capital growth by buying cheaply or finding a way to add value.

As my regular readers of the Cambridge Property Blog will note, the most important consideration you will make before investing in property is the balance between annual return/yield and the annual value increase/capital growth. However, what affects those two things (yield and capital growth) in Cambridge are very varied and complex. The quantity of property and whether property is owner occupied, social housing (posh words for council housing) or private renting has a big difference on yield and capital growth. Interestingly, property values in Cambridge have increased by an impressive 10.2% in the last 12 months.  So are properties too expensive?

Looking at the market and looking at every property sale in Cambridge that sold in 2007 and again in the last few months of 2014, property values are on average 29.5% higher today in Cambridge than they were in 2007 (the peak of last property boom), even more impressive when you consider they dropped by 19.4% in 2008/9. On the face of it, a 10.2% increase over the last 12 months in Cambridge property values is notable, especially as those same property values are 29.5% higher than the boom of 2007.  Surely this suggests properties are too expensive in Cambridge?

Well, the answer is both Yes and No.

Yes, the headline sales price that Cambridge property is currently selling for, is 29.5% higher than 2007, yet No, because these headline sales price figures don't take into account inflation. Since 2007, inflation has been around 26.2%. So instead of property values being 29.5% more expensive than the 2007 boom, they are in fact only 3.3% more expensive than the boom in real terms (29.5% house price growth less 26.2% inflation equates to the 3.3%). People think inflation is a bad thing, eating away at the real value of your savings. It can however, be advantageous to property investors. 

 My answer to landlords is get the best advice and opinion you can. Speak to me, speak to others, do your homework and drive a hard bargain when buying, thus ensuring when prices do start to rise again, you are in pole position.