In recent years it has become increasingly difficult for first time buyers to get onto the first rung of the property ladder, as house prices have continued to rise. Many have stretched themselves too far which has led some into real difficulties, as evidenced by the sub-prime lending crisis in the US.
It’s vitally important therefore that prospective first time buyers do their research fully before committing to a purchase. It’s important to know that you can afford the purchase and that you are buying into an area (and property) that will prove a good investment. It is with this latter element that this article is focused on.
When searching for a property to buy, it’s usually helpful to identify areas to focus your search on. These areas should have three main qualities; they should be somewhere that you’d like to live, somewhere that’s affordable, and somewhere which you feel has good house price growth prospects.
You’ll probably have a good idea which areas you view as desirable. Factors such as commuting distance, presence of local amenities, and aesthetic appeal will usually be used to come up with a shortlist of possible areas. How, though, do you then decide which of those areas is likely to prove the best investment?
There are several indicators that you can use to gauge whether an area is up and coming and therefore may represent a good long-term investment. Some of the key indicators include:
If the central or local government have committed to large scale regeneration of an area, then this should have the effect of boosting medium and long-term house prices in the area. If more jobs are created, then more people will want to move into the area, creating extra demand for properties. Similarly, the creation of better amenities, should make the area a more enticing proposition for future house buyers.
– Presence of a green belt
House prices are a simple matter of supply and demand. If lots of people want to live in an area but there is a limited number of houses available, then prices will become inflated. A green belt is where there is a designated area around a village or town that cannot be built on. It will therefore mean that there is limited ability for the supply of houses to increase, so there’s a good chance (if demand remains high) that prices will rise above the average domestic rate.
– Transport links
Convenience is the single greatest commodity in the Western world. We all want to minimise the amount of time that we waste in commuting to and from our place of work. Areas that have good transport links will tend to remain popular. It’s worth considering, also, whether there are any plans to build a new motorway, or add a railway station or an airport? Of course, sometimes there can be negatives associated with transport links as well as positives. We’d all like convenient access to an airport but we don’t want to be too close to it or under its flight path!
– Age and employment mix
Up and coming areas may be characterised by a younger than average population. And the employment mix can be important too. An early that has lots of young professionals may have better scope for increasing house prices than an area that is characterised by blue-collar workers. Another thing to consider is whether there’s a reliance on just one major industry. For example, if many of the population are employed in financial services (or companies that rely on the financial services companies), then there may be a risk if that particular industry suffers a major downturn.
Note: Local estate agents may be a good source of information on localities, and there are also websites that provide useful information too.
– Consider recent local price growth
The media often talk about house price growth rates as if they are uniform across all areas. They are not. At a national level, average house prices might, for example, be down 5% but, despite this, the likelihood is that there will be areas where the house prices are continuing to rise. Finding an area that has shown good recent house price rises is not a guarantee of continued growth but it may be a good sign that you are being into an area with good prospects.
– Crime rate
We’d all prefer to buy in areas that have a low crime rate, so it’s important to gauge whether crime is a problem for the area that you are looking at. Sometimes you might see an area that, on the face of it, looks really good, only to find that it’s close to a housing estate that is notoriously bad.
What you’re trying to do is the double act of assessing both the current desirability of living in the area and the future attractiveness to other buyers. i.e. you want it to immediately be a good home but also for the area (and the value of your house) to appreciate significantly in the forthcoming years.
Taking some time to speak to estate agents, your solicitor, friends, family, etc may pay dividends in the long run, if it helps you to choose an area which is up-and-coming.