As
I am sure you are aware, one the best things about my job as an agent is
helping Mid Sussex landlords with their strategic portfolio management. Gone
are the days of making money by buying any old property to rent out or sell on.
Nowadays, property investment is both an art and science. The art is your gut
reaction to a property, but with the power of the internet and the way the Mid
Sussex property market has gone in the last 11 years, science must also play
its part on a property’s future viability for investment.
Many
metrics most property professionals (including myself) use when deciding the
viability of a rental property is what properties are selling for, the average
rent, the yield and an average value
per square foot.
However,
another metric I like to use is the average rent
per square foot. The reason being is that is a great way to judge a property
from the point of view of the tenant; what space they get for their money. Now
of course, location has a huge influencing factor when it comes to rents (and
hence rent per square foot). Like people buying a property, tenants also have
that balancing act between better/worse location, more vs. less money and size
of accommodation (bigger and more rooms equalling more money) and where they
live (location) verses making ends meet.
Interestingly,
I know there are a lot of you in Mid Sussex who like to see my statistics on
the Mid Sussex property market, so before I talk about the rental figures per
square foot, I wanted to share the £ per square foot on the values. Looking at Haywards
Heath as an example, the current AVERAGE figures are being achieved (and I must stress, these are average
figures, so there will an enormous range in these figures), but on average
properties in Haywards Heath split down by type are achieving;
- Haywards Heath Detached Property - £430 / sq. ft.
- Haywards Heath Semi Detached Property - £388 / sq. ft.
- Haywards Heath Terraced Property - £381 / sq. ft.
- Haywards Heath Apartments - £355 / sq. ft.
So,
the rental figures:
The
extent of space you get for your rent is replicated in the space you get for
your money when buying a property. The average size of rental property in the Haywards
Heath area is 817.32 sq. ft. (interesting when compared to the national average
of 792.1 sq. ft.)This means the average rent per square foot currently being achieved
on a Haywards Heath rental property is £16.51 per sq. ft. per annum.
So,
what we can deduce from this? Well the devil
is always in detail!
Whilst
I was able to quote the average overall figure and the fact my research showed
it was quite clear from data that there is relationship between the average £ per sq. ft. figures on property
values and average £ per sq. ft. on rental figures as a property grows in size.
However, something quite intriguing happens to those figures, in terms of what
the property will sell for and what it will rent for, when we change and increase
the size of the property.
My research showed that doubling the size of any
Haywards Heath property doesn’t mean you will double the value of it, in either
value or rent. This is because the marginal value
increases diminish as the size of the property increases. In layman’s terms subject to a few assumptions, double
the size of the house doesn’t mean double the value. What really happens is a
doubling of the size gives only an approximately 40% to 65% uplift in value, but
here comes the even more fascinating part, when it came to the rental figures,
double the size of the house meant only 20% to 45% in increase in rent.
