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Is the Buy-to-Let market in the Salisbury area still a worthwhile investment?

Is the Buy-to-Let market in the Salisbury area still a worthwhile investment?

This is a question that I am often asked and I don’t think there is ever a definitive ‘correct’ answer. The key when looking at an Investment property is the yield – what return can you get for your investment?

Many agents consider the yield when recommending suitable Buy-to-Let properties but the search criteria is often vague – usually limited purely to the number of bedrooms and generalised area. The most important factor to consider when purchasing an investment property is whether or not it would rent – does the property that you have purchased appeal to the largest possible client base?

Of course, not everyone looks to purchase a property purely as an investment and therefore the property type, location, price and required yield may all vary for a number of reasons.

I have often advised, that if I was purchasing a Buy-to-Let property, then I would look at a two double bedroom property that would rent out in the region of £750 - £800 a month. The expected purchase price would be in the region of £210,000. This would result in a yield of between 4.3% - 4.6%. But is this realistic? Looking in the SP1, SP2, SP3 and SP4 postcodes, is £210,000 still a competitive price to base any calculations on. The answer to this varies greatly depending on which specific postcode is considered.

I have investigated the current housing market trends (as listed on Rightmove in January 2019), breaking down the local area into postcode and also house size, to see more accurately what results the average house sale price, the average rental price and the average yield within those areas have on each other. Below is a more detailed breakdown of the analysis:

SP1 Postcode

Studio + 1 Bedroom:

  • Average sale: £183,335
  • Average rent: £649
  • Average yield: 4.25%

2 Bedroom:

  • Average sale: £238,751
  • Average rent: £764
  • Average yield: 3.84%

3 bedroom:

  • Average sale: £346,347
  • Average rent: £993
  • Average yield: 3.44%

4+ Bedroom:

  • Average sale: £572,560
  • Average rent: £1300
  • Average yield: 2.72%  

Average of all property sizes:

§ Average sale: £335,248

§ Average rent: £926.50

§ Average yield: 3.32%

 

SP2 Postcode

Studio + 1 Bedroom:

  • Average sale: £135,340
  • Average rent: £660
  • Average yield: 5.85%

2 Bedroom:

  • Average sale: £209,008
  • Average rent: £750
  • Average yield: 4.31%

3 bedroom:

  • Average sale: £292,674
  • Average rent: £807
  • Average yield: 3.31%

4+ Bedroom:

  • Average sale: £478,150
  • Average rent: £1212
  • Average yield: 3.04%

Average of all property sizes:

  • Average sale: £278,793
  • Average rent: £857.25
  • Average yield: 3.69%

SP3 Postcode

Studio + 1 Bedroom:

  • Average sale: £235,000 (only 1 property sold)
  • Average rent: £655
  • Average yield: 3.34%

2 Bedroom:

  • Average sale: £242,268
  • Average rent: £749
  • Average yield: 3.70%

3 bedroom:

  • Average sale: £387,875
  • Average rent: £1113
  • Average yield: 3.45%

4+ Bedroom:

  • Average sale: £694,946
  • Average rent: £2250 (only 1 property available to rent)
  • Average yield: 3.88%

Average of all property sizes:

  • Average sale: £390,022
  • Average rent: £1191.75
  • Average yield: 3.67%

SP4 Postcode

Studio + 1 Bedroom:

  • Average sale: £143,333
  • Average rent: £674
  • Average yield: 5.64%

2 Bedroom:

  • Average sale: £232,427
  •  Average rent: £788
  • Average yield: 4.07%

3 bedroom:

  • Average sale: £305,332
  • Average rent: £968
  • Average yield: 3.80%

4+ Bedroom:

  • Average sale: £474,404
  • Average rent: £1458
  • Average yield: 3.70%

Average of all property sizes:

  • Average sale: £288,374
  • Average rent: £972
  • Average yield: 4.04% 

Average across all postcode areas combined:

  • Average sale: £323,109
  • Average rent: £986.88
  • Average yield: 3.67%

Far too often advice is given on yields and limited to general areas or house size, and actually as proved in the analysis above, the information is far more useful when it is broken down further.

Referring back to the earlier suggestion that I would look to invest in a 2 bedroom house at £210,000, the reality is that currently, I would only be able to do that in the SP2 area, as the sale prices in the other locations are higher – and I would be effectively priced out of the market. Yes, the rental average is lower, but the yield at 4.31% offers the best return for my investment in a 2 bedroom house.

However, it is also apparent that studio flats and 1 bedroom properties should also be considered, especially in the SP2 and SP4 areas where the yields are 5.85% and 5.64% respectively. It should of course be remembered though that the smaller properties often also incur some form of service charge or ground maintenance which would impact on this final yield figure.

If the property size is of the most importance to you, what do the figures show is the best average yield across all of the areas investigated? The figures below display this:

Studio + 1 Bedroom:

  • Average sale: £174,252
  • Average rent: £660
  • Average yield: 4.54%

2 Bedroom:

  • Average sale: £230,613
  • Average rent: £763
  • Average yield: 3.97%

3 bedroom:

  • Average sale: £333,057
  • Average rent: £970
  • Average yield: 3.49%

4+ Bedroom:

  • Average sale: £554,515
  • Average rent: £1555
  • Average yield: 3.36%

Not unexpectedly, the smaller the property, the better the yield. Obviously this is due to the fact that the rental prices are a lot more stable and competitive at the lower end of the market than those at the top end. There is always a ceiling to what someone might pay on a rental which isn’t necessarily reflected in what someone could sell for.

If the property size is not of the utmost importance to any investment though, and it is the area that is more important, then the SP4 postcode, with a general yield of 4.04% offers the best return. The competitive rental figures and comparatively low sale prices are a good combination to investment.

If you have any questions on the market conditions in Salisbury and the surrounding area, or you are just interested in what your house might be worth on the sales or lettings market, don’t hesitate to call your local experts, Woolley & Wallis on 01722 424535 (lettings) or 01722 424524 (sales) to discuss.

 
Luke Skinner
Written by

Luke Skinner

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