Friday, 16 October 2015

What effect will HS1 extension have on Ramsgate?




Those readers of the Thanet Property Blog will know of my interest in everything to do with the Broadstairs, Ramsgate and Margate Property markets. I have recently spoken to several landlords who have asked whether or not now is the time to invest in Buy to Lets in Ramsgate with the HS1 extension coming in the near future. In order for me to answer this question let me tell you a bit about HS1 extension:
The HS1 extension,  is being funded by Whitehall, Network Rail and the County Council. It is estimated £12 million will be spent on the Canterbury to Ramsgate section, upgrading the track, electrification, improvements to bridges, signalling and level crossings etc., to help increase the maximum speed of the trains. When the line has been completed in 2019, Ramsgate commuters will be able to reduce their journey times, but by how much?
Of the eleven trains that leave Ramsgate each day before 9am, the average journey time to London St.Pancras  is 1 hr 36 mins. However, leave on the 0655 and only takes 1 hr 18 mins and 0728 an eye watering 1 hr 14 mins!  The HS1, when completed, the line will enable commuters to be sipping Champagne at St Pancras within 63 minutes!
Those extra ten minutes don’t sound alot, but as part of my research, around the UK, there is almost a psychological barrier for commuters when they get past an hour. The best example is East Anglia. Grantham, whose town’s average property values are only £159,500, is 1 hr 14 mins away from Kings Cross (next door to St Pancras) and even at rush hour there is no rush! One stop down in Peterborough, and whilst the journey isn’t much different at 52 minutes, the platform is fuller than chipmunk’s cheeks and property values jump by over 20%, meaning the average value of a property in Peterborough is around £201,500.
So what does that mean for potential investors? Well the average value of a 3 bed property in Peterborough is £168,200 and the average rent is £710per month. In Grantham its £165,100 but the average rent is only £614 a month, meaning Peterborough landlords achieve average yields of 5.1% compared to 4.4% in Grantham. 
In light of the above, the HS1 extension will allow tenants to move in and out of London more easily and quickly. Ramsgate, with its parks, great bars and seaside location, will enable people to live in great surroundings, and only be 63 minutes from heart of London. With rents in London being £2500 to £3000 per month for a two bed apartment, in Ramsgate they are a fifth of that and a season ticket being only around £5,180 per year into London, demand should increase tremendously, when the tenants see how quick and easy it is to get in and out of London. This can only mean rents will rise tremendously, with an increase in yields.

Property type
Avg. current value
Avg. Current Yield
Avg. £ per sq ft.
Avg. £ paid (last 12m)
Avg. Number of  beds
Detached
£280,250
4.06%
£217
£258,711
3.4
Semi-detached
£200,100
4.77%
£198
£194,441
3
Terraced
£171,600
5.83%
£174
£167,968
3
Flats
£121,350
5.44%
£191
£113,633
1.8

So with yields set to rise, as demand from tenants will directly increase rents, what will happen to   property prices in the town?
Property values are quite reasonable at the moment in Ramsgate at an average at £192,600. Several sources are predicting a sharp increase in property prices in Ramsgate over the coming years. I am of the opinion that whilst we will see yields rise from 2019 onwards. Property values will be affected in the short term by other factors.   Some landlords will buy in the short term, with the anticipation of uplift in yields post 2019. The increase yields will naturally drive property prices up post 2020.
I think we may be looking at the next St.Albans, which everyone knows has been one of the South East’s star performers in buy to let investment.
If you are planning on investing in the Thanet property market, or just want to know more, things to consider for a successful buy to let investment, one source of information is the Thanet Property Blog http://www.thanetpropertyblog.com/.

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