When buying property, the old adage is location, location, location. But can a postcode really make that much of a difference to the returns from an investment property? Can you charge a premium for a good postcode? Does a poor postcode mean a poor rental proposition? More importantly, what impact does it have on yields? In this report we will look at the issues involved and try to answer the question 'can a postcode actually make or lose you money?'
Postcodes were, of course, designed to help deliver mail but they are used for various other purposes including insurance and classifying neighbourhood wealth. So it's not unlikely they could have some impact on desirability, prices and rents. They can be more controversial than you might expect - around the country there are examples of campaigns to get postcodes changed, where it is claimed it will improve the neighbourhood. Typical of this was a campaign some years ago in Windsor and Maidenhead where residents asked for their 'downmarket' Slough SL postcode to be replaced by a personalised WM one.
Being practical now, chances are desirability of an area is more about physical factors than postcode. Some areas have better travel links and amenities and services than others, even those areas that are close by. School catchment areas are a hot issue. Crime rates are another, as this data is published on a postcode basis making problem areas easy to spot. Of course some of these factors, while critical if buying, are less critical if renting.
One interesting development is the increasing use of portals to find rental property. These allow tenants to search using a favoured postcode, while possibly overlooking a better and cheaper property in the next road.