With stunning coastlines, a roaring tourist trade and much more it's easy to see why the Isle of Wight would make a great place to invest in property. Today, we use the Isle of Wight as a case study to dive into the data-led way to chose the profitable places in which to buy property.
Hello everyone and welcome to our buy-to-let property investment hotspot series. This is a series of videos where we really look at different towns and cities across the UK and try and spotlight one of them.
Today's video is going to be about the Isle of Wight to try and see what buy-to-let property is like in the Isle of Wight and the potential long-term growth prospects, for that particular area.
So, there's a couple of things to consider in terms of this data. It is data-led, so we have a spreadsheet, here, which we put all the information in, for this particular area and postcode. You can see here all the postcodes that we've looked at and at the data that's being considered. So, I'll go through that, shortly, with you.
But just to, really, kind of, showcase, that it is data led. It's not based on any particular local knowledge of the streets, or the postcodes, let's say, with any given town or city.
There are lots of different options around the UK, different places to consider and invest in. We're not trying to say that this is, fundamentally, the best place, across the UK, right now, to invest. What we are trying to do is just, really, look at the detail for any given town or city and see what the data is suggesting. If you were to consider that area, what postcodes to consider and why.
So, we'll go into a couple of things, shortly, in terms of what data that we're looking at but fundamentally, the Isle of Wight, here, as a location, is quite a big area, it covers lots of different postcodes.
The Isle of Wight
It's an island based off the south of England and primarily it's a tourist hot spot. Now, there's a lot of other reasons to live and work there as well but you can see, here, just before any of these videos, spotlighting an area, we'll just see what the tourist information website looks like.
It gives us a flavour of that particular area and what types of things they're focusing on. As you can see here, it's got stunning coastlines, unique experiences and we'll do the same again from Google Images. It's quite an easy way to try and get an idea of what the local location is like if you are not from that particular area.
So, the Isle of Wight, looking at Google Images. You can see, here, coastlines, beaches, different tourist attractions. That's the main selling point, let's say, as to what the Isle of Wight looks like, from the outside, looking in, with Google and this tourist website.
So, now if we look at what the data says, really to see if the Isle of Wight could be a buy-to-let, property investment hot spot. We'll see what sort of postcodes really shine in this series.
Now, before we get started, there are a few disclaimers, here. This is not financial advice. So, please do not take this as a given, that you should absolutely buy in this location.
It's not that at all. There are a lot of different reasons why you should buy property and not buy a property. There are lots of different areas that you should consider.
Now, before we get started, there are a few disclaimers, here. This is not financial advice. So, please do not take this as a given, that you should absolutely buy in this location. It's not that at all. There are a lot of different reasons why you should buy property and not buy a property. There are lots of different areas that you should consider.
You should really do your own research. This is really just meant as a starting point, to give you the data and the information that our own team look at when we are trying to assess new property locations.
Also, this is based on third-party information, it's not fact-checked data. We've not fact-checked it with other sources, in any way. It's just using publicly available information from websites like Zoopla and Home.co.uk.
Property, like any other asset, is risky. It can go down in price, so, please do not take the historic performances and the historical data that we're showing in these videos as an indication that you are going to, definitely, get future gains or guaranteed, future returns.
That's not the case, at all. As I said, property is risky and it can go down. Historic data and estimated data that we're using in this data-set is certainly not an indication of future performance.
Also, each development is going to be different. So, even with these data-led videos, where we're going to be looking at a particular town or city, for its buy-to-let, potential merits, you might find a location that you like but the development or a property that you are considering in that area, if it's a bad property, it is still going to be a bad property, even if the location is good.
So, you need to do your own research, within any particular property and development, even once you've selected your area.
And finally, really, it is just a bit of a showcase of the different types of data we ourselves use, our team use, when we're trying to assess locations.
And also, when we're speaking to other investors, investors that are local to their towns and cities, investors that are based out of areas or across the whole of the UK and investors that are based overseas. The questions that we get asked, the information that they tend to favour and they tend to look at, we've tried to combine that knowledge, into this data-set.
Now, final kind of indication is that this is average data. So, you will have properties that you find, that can perform better or worse than this data is alluding to or indicating. Because individual properties are always going to be different than average data.
Also, postcodes cover very large areas. So, you will have outliers within this kind of information. It's not a guarantee, as we said, of any definite, future performance. We're just trying to showcase the data that we are seeing and hopefully try and map out a bit of an idea as to how locations have performed and what the future may or may not hold for them.
Is The Isle of Wight a Buy-To-Let Hotspot?
Now, there are lots of different data to go through, lots of content to go through. So, as a quick indicator, is the Isle of Wight a buy-to-let hot-spot? The data certainly looks very positive. There are postcodes within the Isle of Wight area that we would probably favour if we were to do some further research on them.
To show you which postcodes they are, so you can just do a quick version of this video if you wanted to. The primary postcodes that we are considering, in any of these videos, are going to be highlighted in blue, the secondary postcodes, highlighted in orange, or gold colour here.
So, you can see here, these postcodes, across these columns, PO 31, PO 32, PO 36 and PO 40, we've highlighted in blue. So, they would be our primary areas within this location and then secondary areas, so certainly worth further investigation, I wouldn't discount them at all and I would certainly consider them as possible locations, PO 33, 37, 38 and 39, are also worth considering.
Now, our team has gone out and looked for potential properties, developers, agents and platforms that cover these sort of postcodes, that have performed well in this data led research and we have found one that is available in PO 40 that seems to offer an opportunity right now.
So if you are interested, then you can simply click on the link below this video, or the button below this video, depending on where you're viewing it and it will take you to that property project, where you can see more information about that specific property.
So, if you want the quick version of this video, as I said, these postcodes here seem to be performing very well, based on the data and if you want to go straight to a property that's available, just simply click on the link or button below and you can get access to that property, straight away.
If you do want to stick around and look at the data, please do so and I'll go through that with you now.
How we've tried to lay out the data, is we have got three, core, result sections, here. We have shaded, here, the baseline for the area. So, the Isle of Wight at the top and then the postcodes below that are going to be shaded, here, in this blue and orange colour, for your primary and secondary postcodes, to consider.
So, primary postcodes... Essentially, they have passed four, different growth metrics. All four-out-of-four, that we've, internally, decided and created for how we select new locations. And secondary postcodes, we've got here. They have passed three-out-of-four metrics. So, still worth considering. These are the growth metrics that we've fundamentally identified.
Now, there are lots of different data that you can look at. You can look at population growth, you can look at average incomes for the area, you can look at affordability, so times ratios of what prices properties are and what income and affordability might be, in any given location.
The downside to that is that it is very hard to try and show a direct correlation between historic growth and when prices have gone up or when prices have gone down and local markets have stuttered, as well. Because you have so much data to consider.
There are lots of things that will influence a property's price. There are lots of things that will influence a location and how that might develop over a period of time. Both macro and micro data are going to play into that.
What we've tried to do is choose four, key, criteria, four data sets that are easily accessible, they are free to access and they are, typically, provided by well-known resources like Zoopla, so that you know that the data is going to be more accurate and more consistently updated.
Not only that, but it also shows a good indication for different metrics. What we tried to focus on here is past performance, market growth, so what prices properties have been marketed at. Sale increases, so what prices properties have physically sold for and how that has increased or decreased over a period of time. And then just the local demand. So, what is the current market for properties in that area? And that's shown by how quick properties are selling, in any given location.
Hopefully, that group of data just allows us to see, independently, any given area, so we can compare a postcode in London to a postcode in Manchester, for example. Or, a postcode in Birmingham to a postcode in Leeds. And just see, independently, what the data is suggesting.
What we try to do is not only to identify what we want to consider but also some past metrics. So, what will identify whether that area is performing well or not? And these, again, aren't allocated on any specific, proven rule. These are just, internally, what we try and achieve.
So, I'll go through each one of these now and show you exactly what we look for and, specifically, why.
So, first up, is what we class as a heat map and this is for the first growth criteria, which is the historic performance. So, we want to see how the location has, historically, performed and at what sort of local, high-value areas are within a given town or city and really, why that might help in the future.
So, to do that, we're using Mouseprice.com and then we'll also use Zoopla.co.uk. So, if you, first of all, are looking at the new area and you want to use this same criterion, you can use any of these links, all these links will be below this video and article as well. We get the links for postcodes, currently, using Wikipedia. It's very easy to use and find. So, these are the postcodes that have been identified for this area, for the Isle of Wight.
If we go to our first website, we can see a heat map of that particular area. Now, I'm not going to go through the specifics of all the different tools and different ways you can use Mouseprice or Zoopla or the other sites. I'm just going to focus, specifically, on the data-sets that we have created.
So, to understand how an area is performing, where we have seen the most growth across our own portfolio and also properties, where we have tried to assess them, independently and areas, where we have tried to assess them, independently, heat mapping is a great tool to do that.
What this, fundamentally, shows is a given area so you can see here, the Isle of White. Dark reds are going to be high-value property prices. Dark blues are low-value property prices and then you have a scale in between. And that is where we really start to look at... And you can change the transparency here if you want to make it a bit easier to use and read.
What we're trying to find is... Dark blues, locations, tend to perform quite sluggishly over a period of time for growth and low-value areas might be a lower quality of houses or different types of tenant profiles or just, certainly, lower value, in terms of the prices for the area.
What we try and find, in a perfect world, is affordable prices for properties, that gives us a good rental yield. But are nearby areas of good house prices. Because what that might mean then is, if you have an area here, for example, it's showing up as dark red, high-value properties. But an area here, that's slightly lighter, so maybe, green, or light blue.
These properties could be more affordable, more accessible, higher renter yields and people that can't afford to live in this higher-value location may end up buying, locally, in these sorts of areas. Because they are still close by for work, or family life, but more affordable and within budget.
And by having the higher value prices, that helps push up the prices in terms of the ceiling value for any given area. And, that is an indication of what we've seen historically, is performing quite well for growth.
So, we try and use that as the starting point for any new location, if it is just a dark blue area, and is surrounded by other light blue areas, it's probably not an area that we would focus on as potential for growth.
If it's a light blue or even a dark blue but it's surrounded by lots of higher value properties, then that may be an area to consider, further.
So, we use Mouseprice first, just for the area, primarily because it shows us a clearer view and snapshot of the whole location. So, the Isle of Wight, in this example. But then we would drill down further using the heat map from Zoopla.co.uk.
So, this is just a straightforward Zoopla search for properties in this particular postcode. So, we're starting with the postcode at the top, PO 30. It will come up, usually, with a listing. If you click on the map icon instead, though, that then shows you the properties based on a map area. And then you click 'heat', here, and that will give you the heat map version.
Now, the reason why it is not showing any properties is because we have set the price range here as a minimum of 15 million and that's not because we're looking at properties in that price range, it is because we want to try and make the map clearer and clear out all of the pins and stuff that would be showing as the properties.
So, if we were to scroll out... The downside with Zoopla, for the heat maps, is the way in which it shows the imagery. It is quite hard to try and pinpoint particular, detailed locations when you're further afield.
If you scroll in, it gets much clearer and a much better indication. So, you can see here this purple line is the postcode, location. But now we're a bit closer, we can start to see, a little bit clearer, what the price differences are going to be.
So, there's no specific rule of thumb here, we're not looking at any particular percentage or number. What we want to find are high-value areas, good-value locations that are close by to affordable areas, that could be a fit for us for our buy-to-let properties in the Isle of Wight, in this example. So, this particular postcode passes that criteria.
We go back to our spreadsheet. What you can see here is the Isle of Wight, as an area, generally, is pretty positive for the heat map. And, actually, all of the postcodes pass. So, in some locations, that we've done, some of the postcodes don't pass. If they have not passed our initial criteria for heat mapping, then we wouldn't really progress with that location, possibly, any further.
Primarily, here, we are not looking at yields, we are looking at the potential for house price growth, over a period of time. There's no guarantee of that. But what we can do is try and use the data before we choose the properties and before we kind of make our purchases, to try and get, hopefully, close to a result that's going to be positive over a long period of time.
And all of these postcodes look quite good from a heat map perspective. If they pass that, then we can start looking at the next set of data.
So, specifically, as we scroll across here, you can see how these columns correlate, specifically, with these postcodes. So, we've frozen these columns, so, as we scroll across the sheet, you can still see the data, in line with those particular postcodes.
So, first of all, what we're looking at, here, is really the growth of the area, based on actual property prices and also percentage values. Now, there's a couple of columns and stuff to take into account, here. Specifically, there are certain columns that we are really interested in looking at, over-and-above others. I'll explain why that is, shortly.
So, to get this data, first of all, we are on Zoopla, again. If you go to 'house prices', 'house prices and values', and then just put in the postcode, that will bring up the data that we are going to be looking at. And this is, effectively, all the information here, in this top box, this 'Market Activity' box.
As mentioned earlier, there are lots of different websites, lots of different data-sets and stuff you can use. Primarily, we use this because, for lots of different reasons, but it's easy to access, it's easy to understand and, typically, the data is kept up to date, frequently, so, you are on top of any latest changes.
So, the main criteria that we're looking at, here, you can change the years, you can change the property types. We want to keep it relatively generic for property types, just, specifically, in this location. And we are looking at, fundamentally, 'Average Price Paid' and the 'Value Change'.
Now, these are two distinctive data sets that are different and look at different metrics. So, first of all, the average price paid is going to be focusing on property prices that have actually sold or at the prices that people have paid for properties in that area. So, that's very important to see, not just potential growth, that's happened over a period of time but shows the actual growth, so what prices people paid.
The value change is more based around the current average evaluation of the properties and what the previous valuation of the properties was. And this is more like a marketing price. You can see here, the Zoopla Zed-Index is what it is based on. It looks at different criteria sets but, fundamentally, it is the marketing prices for a given area. And it will be clear as to why we made that distinction, when we look at the data, in a second.
The three main timeframes that we're looking over is 12 months, 5 years, and 10 years. 12 months gives us a snapshot as to what's happening, currently. 5 years is quite a good indication as to what it has done, historically but relatively recently. So, any trends. Maybe an area is very up-and-coming, maybe it has had lots of investment, locally. We should, hopefully, have seen that, within that timeframe. And ten years gives us quite a good snapshot as to its overall performance over a longer timeframe. So, that's why we look at those criteria.
And then, what we've done, fundamentally, is just brought all this data into the spreadsheet. So, we check for each postcode, check for each of these elements, on the value change, as a pound value, the value change as a percentage. And then the average price paid as a pound element and then we look at it over 12, 5 and 10-year timeframe.
Now, there are different ways that you can try and correlate or consider this data. The main set of data, that we're really focused on, is this, here. And then, also, a bit further on, these figures, here. But just to focus, currently, on this column, here. What this tells us, is that over the last five years, the marketing values of properties have changed by these sorts of percentage amounts in these postcodes.
Now, there's no rule of thumb that says, if it is above this amount, it is very good, if it is below this amount, it's very bad. What we have tried to do is just look at the data, independently, across lots of different towns, lots of different cities and, really, just see what the data tends to allude to, in terms of historic growth.
The calculation that we've set is about 18%. So, if we see an 18% increase in that particular postcode, over a 5-year timeframe, in the current market, so, this video is being created in July 2018. This data, this rule of thumb, the kind of figures and stuff that we're looking at now, will certainly be different in a market that is very static or in a market that is rapidly growing or in a market that is rapidly declining. It is just, this snapshot of time. So, in 2018, based on what we're seeing across the UK, based on lots of different metrics, lots of different things that might change values... An 18% increase, over a 5-year timeframe, for the last 5 years, for value change, seems to be a positive indicator, for most towns and cities.
So, if the postcode was below 18%, we wouldn't really consider it further as a potential, let's say, for our buy-to-let opportunities, if we were buying in that area. If it's above it, then we would, hopefully, in-line with the other metrics, start to consider that postcode a bit further.
So, you can see here, this particular postcode, PO 30, isn't colour coded. So, it's not passed all of the metrics or even, the majority of metrics, it's failed on a couple. Now, it has passed the heat map, which is good and it has passed this value change, which is good. It is higher than 18% but it has not been colour coded because it falls down on some of the future metrics that we're going to look at, shortly.
All of these postcodes, though, have passed this 18% increase, which is good and so, as I said, this just gives us an idea of how the marketing prices of properties have changed and that's there. Postcode over a period of time.
Average Price Paid
Next up, we're going to be looking at these columns, here. And this really looks at percentages for the average price paid, in the timeframe of 5 years up until the last 12 months and then also 10 years, up until the last 12 months.
Now, this is an average price paid. So, if we go back to the data and we look at say the last 12 months, here. This particular postcode. It gives us an average price paid of £205,000, over the last 12 months. So, to consider what that data actually means, basically, all the properties, in this postcode, combined together, the average price of properties sold and paid is £205,000. Over a 5 year timeframe, that's not looking at a percentage increase, let's say, from 5 years ago, to today. It's just combining all of the properties over a 5 year period and giving you the average price paid for that. And then also the same for a 10-year timeframe.
So, if we were to go from 10 years to 5 years, it's only gone up £9,000 which is a small percentage but the actual price paid 10 years ago, compared to 5 years ago, as a percentage, would likely be higher than that. It's just because they are pulling in all of the data from every single year and fundamentally, bundling it in together which gives you that data set.
What we've then tried to do is pull out a percentage on this. So, we've created our own formulas. You can see here what this formula looks like, which, in this column here, 5 years to 12 months, it's basically this price here, 230 and this price here, 218 and trying to see what the percentage difference is. And it's a 5% difference.
So, you made have had higher than 5% sold price growth but we are looking at averages. We are looking at combined averages and just in this snapshot in time.
Again, there's no rule of thumb that is identified as a gold standard for what that growth should be. We are just looking at different towns, different cities and the metrics that we would like to see achieved, is about 5%, in this column, here.
Any properties or any postcodes, sorry, that are below that 5% level, would not pass this criterion. So, as I mentioned before, PO30 did pass the original two metrics but it falls down here, on the growth, over a period of time. So, the average price paid five years ago, 199, the average price paid 12 months ago, 205. Not that much growth, in that period of time, as allocated or as seen, here.
Anything over 5%, we feel, is a good growth. 16% here, for this postcode. So, PO39 is performing very well. So, 5 years ago, the average price pay was 243, only up until 12 months ago, it was 292. So, very good growth, in that area.
Now, that doesn't mean it's going to continue. That doesn't mean you should, fundamentally, only go for PO39 in the Isle of Wight for your buy-to-let property investment, it's just trying to give you a bit of an indication to how all these postcodes have performed against each other. And, for us, anything above 5%, in this column, is a good metric.
So, that is the third metric that we're going to be looking at.
Speed of Sales
And then the final metric is how quick properties sell in a given area. For this, we use the website Home.co.uk.
So, we go back to our websites, go to Home. You have lots of different data, that is shown on this website. It's very good if you are quite analytical and want to pull out different information.
Specifically, we're focusing on how long properties take to sell. So, this is the actual data from when a property comes on the market to when it reaches a sold status, as indicated here for this postcode.
And you have the mean selling time, median selling time and days. We, typically, chose median because it strips out any of the outliers. So, if properties are, or a couple of properties are selling really quick or a couple of properties are really slow, that doesn't skew the total data for that area, by using the median criteria.
So, that's the data-set we tend to look at. And you can change location here and get different data for each postcode.
So, we pulled that information in, here and you can see how long each postcode takes to sell in days, based on a median selling time.
Again, no gold standard rule of thumb that analysts or websites or other companies will tell you to aim for. We have just got our own internal criteria that we try and achieve and for us, that is about 60 days.
That gives us a clear idea as to how quick the local market is moving. How buoyant it is, how active it is. So, anything below 60 days is a good sign. So again, this PO30 postcode fell down on house average price paid growth and also fell down on how long, currently, properties are taking to sell. So, it's didn't pass those metrics, hence it's not colour coded, as passed, those metrics.
However, these postcodes, here, have. This one is 47 days, this one is 58 and this one is 92 days.
So, 92 days, 81 days, 91 days, these columns here or these cells here, are all higher than our target selling time. If you want to see our targets they are, again, at the top of this sheet. So, sell time, less than 60 days. So, if it's higher than 60 days why have we included them, let's say, as passing our metrics?
And that's why we have blue, as colour coding for properties that have passed all of the metrics. So, PO31, PO32, PO36, and PO40 have passed all of the metrics that we've identified, internally and that look like good areas to consider and do some further research on.
PO33 and then these postcodes, 37, 38, 39, have passed 3-out-of-4 metrics. They have fallen down on one of them but passed all the others. So, if we were to identify say, PO37, here, for now, it's positive for the heat map, that looks good. It's got very good historic, market change, in prices, so, over the last 5 years the market value has gone up by 27%, that is good. Our metric is 18%, so, it has quite good growth. And if you scroll across here, over the last five years, you have got 5% increase in the average price paid. Again, quite a good indicator.
However, it's taking a little bit longer than what we usually like for properties to sell, in that area. And, there could be a whole host of reasons for that. As I said, postcodes are big areas. You will have outliers. So, I wouldn't discount those postcodes. I would have a look at them further and maybe you find a very good development, a very good property in that postcode.
There is, potentially, a property that could sell much quicker than what the average sells for. So, if you are in a postcode with lots of detached houses, they may take a bit longer to sell but if you are buying a terrace or a flat, it might sell a bit quicker. So, that's when it comes down to considering the actual developments on an individual basis.
I hope that helps. I hope that gives you an idea as to what the data says and how we've created the data and how we've mapped it out. And our own rules of thumb, as to what we're trying to see.
So, that's looking at these results, here and it gives us these postcodes, as ones to consider, further. So, if you are looking to buy-to-let and you are considering the Isle of Wight, these are the postcodes that are performing quite well from the data that we've identified.
Now, it is also, obviously, important, to then go on and find the properties, once you've allocated or chosen any given area. Our team has gone out and looked at different developers, agents, platforms that cover, currently, the Isle of Wight area and within that research we've found a project that is in PO40, so a postcode that fits the criteria and if you wanted to look at that project, further, you can do so.
We've got a link below this video and a button below this video. You can simply click on that and that will take you to that project, with further information.
And, simply click on that and that will give you some more, detail. It's not a project that we're selling directly, so, you would need to do your own research on that particular property and that particular development and also the area, make sure you're happy with it. It's a third party that is selling that development but if you click on the link below that will take you to that property deal.
Hope that helps. Hopes that gives you an idea and a bit of a flavour as to what the buy-to-let market is like on the Isle of Wight and what the potential property investment landscape is, in that area. Any questions, as always, don't hesitate to ask. I look forward to catching up with you in the next video.
All the best, take care. Bye.