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Derby Property Provides A Higher ROI Than Monaco!

Derby Property Provides A Higher ROI Than Monaco!
There was a very interesting article in Bricks and Mortar in the Times recently about the different costs of buying property around the world based on the costs of flat in Monaco. The 2.02km2 principality hosted the F1 Grand Prix yesterday in driving rain, has a population of 37,800 and property prices are going ever upwards due to the lack of space. At the top end prices are £62,600/sq.m. just below those of Hong Kong of £75,530/sq.m. whilst a middle of the range flat would cost about the same as in Mayfair, £30,000/sq.m.
  These figures got me thinking about Derby’s prices/sq.m. The average 3 bed terrace (let as a 4 bed house) in Surrey Street has a floor plan of about 80 sq.m equal to a value of about £1,575/sq.m. assuming a value of £125,000, whilst a 2 bed terrace (let as a 3 bed house) in the same street has an average floor plan of 70 sq.m equal to £1,570/sq.m. assuming a value of £110,000.
 
Location Purchase price/sq.m. Rent/sq.m./year ROI
Monaco flat £30,000 £660 2.2%
4 bed Derby terrace £1,575 £151 9.5%
3 bed Derby terrace £1570 £130 8.3%
 
I realise we are comparing average property prices in a high value location with terrace houses in Derby, but it demonstrates a differential factor of about 20 times, pretty high whichever way you look at it. Of course one should bear in mind that for this one has a magnificent view, sunshine, the harbour, the gambling and no income tax, but in Monaco the majority of properties are flats and not houses. Also one needs a huge deposit to buy in Monaco and a huge salary to pay for a cost of living about 30% more than in London.
 
Thinking though in terms of rental income, a 3 bedroom flat rents in Monaco for about £55/sq.m. which gives an ROI of just over 2%. This compares with an average of 3.2% in France and the average of 4.2% in the UK. Unfortunately one does not know if that is gross or net but if you take the above examples in Surrey Street, the gross exclusive student rent for a 4 bedroom house let for 48 weeks is about £12,100 giving a gross ROI of 9.5% and for the 3 bedroom house is about £9,075 giving a gross ROI of 8.3%.
 
From these simple figures one can see that student lets in Derby provide a much better income return than Monaco. On the other hand one should not forget property appreciation, which is in the region of 15% to 20% per year in Monaco where Derby is in the region of 2% to 5% at best.
 
From the figures one can also see why so many investors in student properties went for 4 bed properties rather than 3 bedrooms, which has resulted in too many 4 bed houses. The main thing is to have a balanced portfolio with some 3s, some 2s and some 4s but nowadays more of the former than the latter. As an aside, we have new landlords bringing us new 4 bed houses and are understandably disappointed when we tell them that there are already too many available.

Want to talk about making the best of your rental properties? Give us a call.
 

William Barron, Blue i Properties, Derby
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