Today, in Money Week I saw that the Bank of England is expecting interest rates to be up to 3% by 2017. Now, this is only three years away; which means we all should pay more attention to the houses we have (and the mortgage), the houses we want and the up and coming neighbourhoods we want to live in.
You know what we think about houses: these are homes and anyone who sees their house as their main investment is getting the game of wealth wrong.
Did I mention that according to a study by TD Direct Investing young people in the UK still think that buying a house as early as possible is a savvy financial move? We believe other kinds of investments are probably more important.
Still, if you are set on owning a house at least you ought to make sure its value will increase in time. A way to do that is to buy in an up-and-coming neighnourhood; one that is just about to become the place where everyone want to live.
As a rule, most of the value of the house is not about the house itself.
Houses change value because of where they are: how close they are to shops, the theatre, parks, countryside and transport. Most of all, the value of a house depends on the neighbourhood.
It is simple: buy a house in a great neighbourhood and you have an expensive property the value of which is fairly stable. Buy a house in an up-and-coming neighbourhood, you’ll live in a great place and the value of your house will be increasing.
The important question then is
How to identify an up-and-coming neighbourhood?
Of course you can always be ‘scientific’ about it and track prices, count ‘For Sale’ signs and talk to real estate agents (realtors).
I just thought, I’ll suggest five unorthodox ways to spot an up-and-coming neighbourhood. I love science but when choosing a house and a neighbourhood your heart should be involved as well. Remember, that this is your home not your main investment?
When choosing our house, John looked at all available houses in a two miles radius. He chose the house we live in because when he came to look at it the neighbours were having a pancake race.
This is not scientific; yet the houses on our road have increased in price faster than comparable ones around and they lost no value after 2008.
There you have it; now, please keep an open mind.
1. Take a walk around the neighbourhood
This one is probably not very original.
To spot an up-and-coming neighbourhood you’ll have to take lots of walks. Look at the houses and look carefully.
This is not about the size, looks and/or structural soundness of the houses. This is about:
- Have they been painted recently?
- Are the gardens well kept?
- Are the streets clean?
- Are there any little touches – like communal flowerbeds – around?
- Are the cars clean?
Now, let me tell you how I’d choose:
- If all houses are in top shape and the cars are clean, I’ll stay away. Houses being maintained to a high standard is a sign that this is an established and prosperous neighbourhood. What about the cars? Well, I just don’t like to live in a place where people don’t have anything better to do than keep their cars clean.
- If the houses generally look like the owners have been asleep for the last ten-fifteen years, the gardens are un-kept and there are no communal touches, I’ll stay away. This sounds like a depressed neighbourhood that is not on its way up.
- If there are some houses that are well maintained, the gardens are flowering and the streets are clean (optional, some communal touches), I’ll consider it. This may be an up-and-coming neighbourhood.
2. Visit between 7.50 and 8.30 in the morning
One of our neighbours was telling me that when they were choosing where to rent she felt very dubious about our road. It was the large houses!
She thought that to live in this houses one should be well off (self-made, of course, the neighbourhood is not uppity enough for inherited wealth) and very likely old(er).
What changed her mind?
They came to view the house at 8.15 in the morning and she saw that school children left from almost each of the houses on the road.
This is why, I’m telling you visit the neighbourhood (and street) where you want to buy a house and watch what happens in the morning.
If you only see people in pinstripe living the houses, think again. If you see people in dressing gowns collecting the mail or putting the rubbish bins out, think again.
If you see school children walking to school with their parents, this may be an up-and-coming neighbourhood.
Don’t hurry to make up your mind yet; check out my next point.
3. Walk down the High Street
Yep, take a walk down the High Street of the place where you think of buying.
There is no High Street? I’d get out of there – this means that there is no community and who needs a house in an over-grown night hotel?
Whether you like the High Street or not is important but not as much as the type of vendors you find there:
- If you notice that the high street is mainly charity shops, real estate agents and coffee bars, it is likely that the neighbourhood is already expensive (many charity shops is usually a sign that the retail business rents are far too expensive);
- If there are betting shops, pubs and cheap(er) supermarket chains, I’d say it is unclear whether the neighbourhood is up-and-coming;
- If you find a mixture of independent shops, cafes and eating out places, you may be onto something.
4. Go to the pharmacy
Yep, go to the pharmacy. Even the large ones, like Boots, stock what they sell.
Go around the isles and if you notice that the place sells twenty kinds of haemorrhoid cream and no baby products, this may not be an up-and-coming area after all.
5. Have a coffee
Once all this has been done, go for a coffee. Look around you.
Is the coffee bar full? Are there families with children around?
Is there a buzz?
It is hard to describe but I’ve noticed that the ‘spirit of a place’ is in its coffee bars. You’ll know what I mean.
You are very welcome to try and spot an up-and-coming neighbourhood the ‘normal’ way. By all means, do your proper research and track house prices, calculate house sales ratios and talk to estate agents.
Using these five unorthodox pointers is so much more fun and, I believe, offers a very similar chance of spotting an up-and-coming neighbourhood.
And the best part is that it will be a neighbourhood you really like.
Have you used any of these pointers when looking for a house? What other signs you notice?