Tuesday, 29 December 2015

Values of Canterbury Terraced Houses smash through the £285/sqft barrier

The Council of Mortgage Lenders (CML) latest snapshot of the buy to let mortgage market shows us that buy to let landlords haven’t been put off by the Chancellors announcementson the way buy to let’s are taxed.
 
Last month, the CML stated £1.4billion was borrowed by UK landlords to purchase 10,500 buy to let properties, up 26.5% from the same month in 2014, when only 8,300 properties were bought with a buy to let mortgage. Go back two years and the number of buy to let mortgages used for purchasing (again not re-mortgaging) is 36.4% higher! Even more interesting has been the fact that the average amount borrowed has risen as well. The average buy to let mortgage last month was £133,330, up from £128,480 a year ago.
 
In Canterbury, I am speaking to more and more landlords, be they seasoned professional landlords or FTL’s (first time landlords), as they read reports that the Canterbury rental market is doing reasonably well, with rents and property values rising.  Interestingly, one landlord recently asked how much he should be paying per square foot (more of that in a second).
 
The first thing you have to decide is whether you want great capital growth or great rental yield, as every knowledgeable landlord knows, you can’t have both. Over the last twenty years, property values in Canterbury have risen by 232.29%, compared to Greater London’s 436.2%. This has proved that capital growth increases faster in the more expensive Capital, but your investment money doesn’t go very far, meaning there won’t be as much rental yield from a 1 bed flat in Chelsea (2% per year at best with a fair wind) as a 2 bed semi in Canterbury. However, whilst the figure of 232.29% is an average for the area, certain areas of Canterbury have seen capital growth much higher than that and others areas much worse (we have talked about those in previous articles).
 
If you recall in an earlier article, my research reveals that Canterbury apartments tend to generate a better yield than houses, probably because several sharers can afford to pay more than a single family. But houses tend to appreciate in value more rapidly and may well be easier to sell, simply because there are fewer being built.
 
So what should you be buying in Canterbury, and more importantly, how much?
 
The average apartments in the city are currently selling for approximately £292 per square foot.
 
Terraced houses in Canterbury are currently obtaining, on average, £247,200 or £289 per square foot.
 
An average semi in Canterbury is selling for £262,900 (and achieving £264 per square foot). 
 
Now these are of course averages, but it gives you a good place to start from. In the coming weeks, I will look at rents being achieved on Canterbury houses and apartments, and the yields that can be obtained, depending how many bedrooms there are. In the meantime, if you would like to read more articles like this, then can I suggest you visit the Canterbury Property Blog at www.canterburypropertyblog.com .

Tuesday, 15 December 2015

Canterbury Buy To let –Freehold House or Leasehold Flat?

As seems to be all the rage with Jeremy Corbyn asking the PM questions emailed in to him at Prime Minster Question Times, I to wish to answer a question emailed into me from a potential Canterbury landlord last week. Nice chap, lives in Tyler Hill, and it turns out, after having a coffee with him, he works in IT, has a spare bit of cash (now the kids have flown the nest) and wanted to buy his first buy to let property.
His main question was ... Do I buy a freehold house or a leasehold flat in Canterbury?
Most people will say freehold every time, because you own the land. However, it’s not as simple as that (it never would be would it!). The definitive answer though is to research what Canterbury tenants want in the area of Canterbury they want! The tenant is ultimately your customer, and, if they don't want to rent what you decide is best to buy, then you are not going to have a successful BTL investment. So starting with the tenant in mind and working backwards from there, you won’t go far wrong. In a nutshell, find the demand before you think about creating the supply.
Leasehold flats and apartments in Canterbury are excellent in some respects as they offer the landlord certain advantages, including the fact a flat can be initially cheaper to buy. Yields can be quite good, offering better cash flow. The building will already be insured and yes there is a service charge, but it’s still for a service at the end of the day and that cost is spread between many others (i.e. when your freehold house roof goes, its falls 100% on your shoulders) and one of my favourites is that there is often no garden to maintain or blown down fences to replace!
However, some Canterbury leasehold flats can suffer from poor capital growth. Some leasehold properties have no cap on the level of the service charge and it may get out of control. The length of the lease will significantly affect value if not renewed before it gets too short. Thankfully there’s not many, but some Canterbury apartments/flats have burdensome clauses. Finally, with leases, there can be sub-letting issues – which means you can’t let them out.
So what do the numbers look like? Well since 2003, the average freehold property in Canterbury (detached, semis and terraced) has risen from £180,657 to £325,748, a rise of 81% whilst the average Canterbury leasehold property (flats and apartments) has gone up in value from £137,329 to £192,668, a more mediocre rise of 40%. 
I was really interested to note that of the 10,665 rental properties in the Canterbury City Council area that the Office of National Statistics believe are either let privately or through a letting agency, 4,143 of them (or 38.8%) are apartments. However, there are only 11,463 apartments in the whole council area (be they owned, council rented or privately rented), which represents 18.9% of the whole housing stock in the area. This really intrigued me that, quite obviously, there is a high proportion of Canterbury’s leasehold apartments/flats rented to tenants compared to detached, semi’s or terraced. Fascinating don’t you think?
Every Canterbury apartment block, every terraced house or semi is different. Like I said at the start, the definitive answer though is to research what Canterbury tenants want in the area of Canterbury they want. Demand for city centre apartments, near the nightlife and transport links can be popular and can offer the Canterbury landlord very good yields with minimal voids. However, Canterbury terraced houses and semis, whilst not always offering the best yields (although sometimes they can), they do offer the Canterbury landlord decent capital growth.
My advice to the prospective landlord, as it is to you, is do your homework.  One such website, which only talks about the Canterbury buy to let Property Market, is the Canterbury Property Blog. Another source of info many Canterbury landlords use is me! What many Canterbury landlords do, irrespective of whether you are a landlord of ours, a landlord with another agent or a DIY landlord, if you see any property in Canterbury, that catches your eye as a potential buy to let property, be it a terraced house, semi or flat ... email me and I will email you back with my thoughts (although I will tell you what you need to hear .. not want to hear!)

Tuesday, 8 December 2015

Canterbury Tenants Pay 35.9% of their Salary in rent

 
I had the most interesting chat with a local Canterbury landlord the other day about my thoughts on the Canterbury property market. The subject of the affordability of renting in Canterbury came up in conversation and how that would affect tenant demand. Everyone wants a roof over their head, and since the Second World War, owning one’s home has been an aspiration of many Brits.  However, with rents at record highs, many are struggling to save enough for a house deposit.
Let’s be honest, it’s easy to get stuck in a cycle of paying the rent and bills and not saving, but even saving just a small amount each month will sooner or later add up.  George Osborne announced such schemes as the upcoming Help to Buy ISA, where the Government will top up a first time buyers deposit.
Therefore, I thought I would do some research into the Canterbury property market and share with you my findings.  Canterbury tenants spend on average just over a third of their salary to have a roof over their head.  According to my latest monthly research, the average cost of renting a home in Canterbury is £979 per month.  When the average annual salary of a Canterbury worker stands at £32,705 per year, that means the average Canterbury tenant is paying 35.9% of their salary in rent.  I doubt there is much left to save for a deposit towards a house after that, and that my Canterbury Property Blog reading friends is such a shame for the youngsters of Canterbury.
You see one the reasons for rents being so high is property prices being high.  As I have mentioned before, there is a severe lack of new properties being built in Canterbury.  It’s the classic demand vs supply scenario, where demand has increased, but the number of houses being built hasn’t increased at the same level.  Also, Canterbury people aren’t moving home as often as they did in the 80’s and 90’s, meaning there are fewer properties on the market to buy.  If you recall, a few weeks ago I said back in Summer 2008, there were over 560 properties for sale in Canterbury and since then this has steadily declined year on year, so now there are only 284 for sale in the City.
So, the planners in Canterbury haven’t allowed enough properties to be built in the City and existing Canterbury homeowners are not moving home as much as they used to, thus creating a double hit on the number of properties to buy.  This is a long term thing and the continuing diminishing supply of housing has been happening for a number of decades and there simply aren’t enough properties in Canterbury to match demand, these are the reasons houses prices in Canterbury have remained quite buoyant, even though economically, over the last 5 years, it was one of the worst on record for the country and the South East region as a whole.
However, things might not be all doom and gloom as originally thought, as a recent Halifax Survey  (their Generation Rent 2015 Survey) suggested  more and more people may be long term, if not lifelong tenants. In fact there is evidence in the report to suggest that the perception of how difficult it is to get on the housing ladder is vastly different between parents and people aged 20 to 45.  It seems from this survey that the state of the UK economy has shifted priorities quite significantly in quite a short space of time.  With fewer people able to save up the deposit required by mortgage lenders, more and more people are continuing to rent.  This delay in moving up the property ladder has driven rents across the UK up as more people were seeking rental properties.
It is often said that more people in central Europe rent for longer or never own their own property. The last two census in 2001 and 2011 show that proportionally the percentage of people who own their own home in Britain is slowly reducing and, as a country, we are becoming more and more like Germany.   That isn’t a bad thing as Germany is considered to have a more successful economy, one of the main stays, often quoted,  is because they have a much more flexible and mobile workforce, (which renting certainly gives) and from that, they have a higher personal income than in the UK.      
Therefore, if we are turning into a more European model and the youngsters of Canterbury and the Country have changed their attitudes, demand for rental properties will only and can only go from strength to strength, good news for Canterbury tenants as wages will start to rise and good news for Canterbury landlords, especially as property values in Canterbury are now 8.4% higher than year ago!

Wednesday, 2 December 2015

Has Osborne killed buy to let in Canterbury?

 
Well George Osborne, in his Autumn statement last week, caused Canterbury landlords to ask whether buy to let is a viable investment option, when he announced that landlords, when buying another buy to let property from April 2016 will have to pay an additional 3% stamp duty on top of the standard rate. So for example, it means that the stamp duty bill for a £285,000 buy to let home will rise from the current £4,250 to £12,800 from April next year. 
 
Some say property in Canterbury will be worth less because potential landlords will not be willing to pay as much for them, and if house builders or existing homeowners don't feel they are going to get as much for them , then there is less motivation to build / sell them?... and the person we can blame for this is George himself. Back in 2012, he choose to utilise the British housing market to kick start the UK economy, with  subsidies, Funding for Lending and Help to Buy. However, whilst that helped the Tory’s get back into power in 2015, some say this impressive growth in the UK property market has been at the expense of pricing out youngsters wanting to buy their first home.
 
Others say this is the straw that breaks the camel’s back as over the next four years Landlords will slowly lose the ability to offset all their mortgage interest against tax on rental income, after changes announced in the Summer Budget. At the moment, landlords can claim tax relief on buy to let mortgage monthly interest repayments at the top level of tax they pay (ie 40% or 45%). However, over the next four years this will reduced slowly to the basic rate of tax – currently 20%.
Surely this is the end of Buy to Let in Canterbury? Probably.. but before we all run to hills panicking .. let me give you another thought.
Stamp Duty rules were changed in December 2014. Before then, landlords were eagerly buying up properties under the ‘old slab style Stamp Duty’ system. For example, the stamp duty bill on that £285,000 property was lower on the old slab style duty (pre Dec 2014), at £8,550, yet it isn’t a million miles away from new £12,800 stamp duty bill. Interestingly though, George has left a legal loophole in the new rules, because when it comes to selling up, they can offset purchase costs against any eventual capital gains tax, including stamp duty.
I believe that total returns from buy to let will continue to outpace other investments, such as the stock market, gilts, bonds and even pensions. Also, the best part about investing in property is that it is bricks and mortar. You can touch it, you can feel it, and it isn’t controlled by some City whiz kid in Canary Wharf .. the British understand property and that goes a long way!
Buy to let has enough impetus behind it that prospective landlords will continue to buy even with a larger stamp duty bill. Canterbury landlords will need to be savvy with what property they buy to ensure the extra stamp duty costs are mitigated.   Buying buy to let property is a long term venture. In the past, it didn’t matter what property you bought in Canterbury or at what price – you would always make money. Now with these extra taxes, the adage of ‘any old Canterbury house will make money’ has gone out the window.   You wouldn’t dream of investing in the stock market without at least looking in the newspapers or taking advice and opinion from others, so why would you take the same advice and opinion about buying a buy to let property in Canterbury?
One source of information, opinion and advice is the Canterbury Property Blog www.canterburypropertyblog.com .

Tuesday, 24 November 2015

How EU Migration has changed the Canterbury Property Market

 
The argument of migration and what it does, or doesn’t do, for the country’s economic wellbeing is something that has been hotly contested over the last few years. In my article today, I want to talk about what it has done for the Canterbury Property market.
Before we look at Canterbury though, let us look at some interesting figures for the country as a whole. Between 2001 and 2011, 971,144 EU citizens came to the UK to live and of those, 171,164 of them (17.68%) have bought their own home. It might surprise people that only 5.07% of EU migrants managed to secure a council house. However, 676,091 (69.62%) of them went into the private rental sector.  This increase in population from the EU has, no doubt, added great stress to the UK housing market.
Looking at the figures, the housing market as a whole is undoubtedly affected by migration but it has been the private rented housing sector, especially in those areas where migrants come together, that is affected the most.  Indeed, I have seen that many EU migrants often compete for such housing not with UK tenants but with other EU migrants. In 2001, 3.68 million rented a property from a landlord in the UK.  Ten years later in 2011, whilst EU migration added an additional 676,091 people renting a property from a landlord, there were actually an additional 4.14 million people who became tenants and were not EU migrants, but predominately British!
As a landlord, it is really important to gauge the potential demand for your rental property, especially if you are a landlord who buys property in areas popular with the Eastern European EU migrants.  To gauge the level of EU migration (and thus demand), one of the best ways to calculate the growth of migrants is to calculate the number of people who ask for a National Insurance number (which EU members are able to obtain).
In Canterbury, migration has risen over the last few years. For example, in 2007 there were 1,389 migrant national Insurance cards (NIC) issued and the year after in 2008, 1,510 NIC cards were issued. However, in 2014, this had increased to 2,126 NIC’s. However, if the pattern of other migrations since WW2 continues, over time there will be an increasing demand for owner occupied property, which may affect the market in certain areas of high migrant concentration. On the other hand, over time some households move into the larger housing market, reducing concentrations and pressures.
In essence, migration has affected the Canterbury property market; it couldn’t fail to because of the additional 14,868 working age migrants that have moved into the Canterbury area since 2005. However, it has not been the main influence on the market. Property values in Canterbury today are 22% higher than they were in 2005. According to the Office of National Statistics, rents for tenants in the South East have only grown on average by 0.95% a year since 2005 .... I would say if it wasn’t for the migrants, we would be in a far worse position when it came to the Canterbury property market. This was backed up by the then Home Secretary Theresa May back in 2012 - more than a third of all new housing demand in Britain is caused by inward migration and there is evidence that without the demand caused by such immigration, house prices would be 10% lower over a 20 year period.
If you want to know more about the Canterbury property market, then for more articles like this, please visit the Canterbury Property Blog www.canterburypropertyblog.com .

Saturday, 21 November 2015

Herne Bay - potential 5.82% yield at £165K - 2 bed apartment



Blinking flip!………..Is it cold or is it cold!! Winter is certainly with us. Whilst keeping warm and checking Rightmove this morning, I found a great investment has just come onto the property market in Herne Bay. It’s a two bed apartment for £165K with Kimber Woodward and it’s a real cracker.

Let’s start with the asking price. At £165K it’s a great bargain and at this price will not be around long. The location is brilliant, as it’s close to the major road infrastructure of the Thanet Way, creating easy access for young professional tenants. It’s age / condition is also excellent, so it’s ‘good to go’ from an investment viewpoint.

Turning to the rental aspect of the property, I’ll take a real conservative viewpoint and state that the rental figure would be (at the very worse!) £750 per month, which will give you a good yield of 5.45% and at £800 per month, it would take the yield to a cracking 5.82%.

What about the capital growth? Well, these apartments in Weyman Terrace were built circa 2013 and the growth in the past year has been circa 7.81%. Try getting that at a building society!

Again, this is proving my view on the Herne Bay market, i.e. great area to invest in, with an good capital growth!

Check it out at http://www.rightmove.co.uk/property-for-sale/property-56116580.html and give the agent a call.

Tuesday, 17 November 2015

Canterbury Property Market Crisis as New House Building slumps by 55.74%



One of the key factors that determine the price of anything is the demand and supply of the item that is being bought and sold. When it comes to property, demand can change overnight, but it takes years and years to build new properties, thus increasing the supply.
 
The Conservatives have pledged to build over 1 million homes by 2020. I am of the opinion that as a country, irrespective of which party, we have not built enough homes for decades, and if the gap between the number of households forming and the number of new homes being built continues to grow, we are in danger of not being able to house our children or grand children. I believe the country is past the time for another grand statement of ambition by another Housing Minister. Surely its right to give normal Canterbury families back the hope of a secure home, be that rented or owned? As a city, we need to exert pressure on our local MP Julian Brazier, so they can make sure Westminster is held accountable, to ensure there is a comprehensive plan, with enough investment, that can actually get these homes built.
 
To give you an idea of the sorts of numbers we are talking about, in the Canterbury City Council area in 2006, 470 properties were built. In 2007 that rose to 570 and a year later in 2008, it peaked at 1,220. By 2014, that figure had dropped by a massive 55.74% to 540 properties built.
 
The outcome of too few homes being built in Canterbury means the working people of the city are being priced out of buying their first home and renters are not getting the quality they deserve for their money. The local authority isn’t building the estates they were after the war and housing associations are having their budgets tightened year on year, meaning they have less money to spend on building new properties. I know of many Canterbury youngsters, who are living with their parents for longer because they cannot afford to get onto the housing ladder and growing families are unable to buy the bigger homes they need.
 
I talk to many Canterbury business people and they tell me they need a flexible and mobile workforce, but the high cost of moving home and lack of decent and affordable housing are barriers to attracting and retaining employees. Furthermore, building new homes is a powerful source of growth, creating jobs across the county and supporting hundreds of Canterbury businesses. It is true that landlords have taken up the mantle and over the last 15 years have bought a large number of properties. The Government need to be thankful to all those Canterbury landlords, who own the 5,955 rental properties in the city. Most local landlords only have a handful of rented properties (to aid their retirement), and without them, I honestly don’t know who would house all the extra people in Canterbury!
 
Moving forward, those Canterbury landlords have many pitfalls, both in the short term and medium term. For instance, were you aware that the rules of changes for new tenancies from the 1st October 2015 (with some imposing penalties including losing the right to require the tenant to vacate, if they are done incorrectly) or in the medium term, the planned change in the way buy to let’s are taxed?
 
More than ever, the days of buying any old property in Canterbury and you would be set for life are gone. Now, it’s all about ensuring you stay the right side of the law, buying the right property (and that might mean even selling some to buy others), so you build the right portfolio for you as a landlord. One source of info on all of these issues, where you will find other articles similar to this on the Canterbury property market, is the Canterbury Property Blog www.canterburypropertyblog.com 

 

Monday, 9 November 2015

Canterbury house owners desert the housing market with an 8 year low

 
Even though the housing market is in an upbeat state in many parts of the UK, getting on the property ladder is still challenging for many and regarded as unattainable by some.  However, that goal has become even worse recently in Canterbury as the number of houses available to buy is at an 8 year all time low.
Back in Summer 2008, there were over 560 properties for sale in Canterbury and since then this has steadily declined year on year, so now there are only 284 for sale in the city.  This continuing diminishing supply of housing has been happening over those years for a while and there simply aren’t enough properties in Canterbury to match demand.
According to a recent report by the National Association of Estate Agents, that said, “There are now 11 house hunters fighting after every available house which isn’t sustainable.”   What that means is Canterbury youngsters, who are looking to buy their first home, are finding themselves being squeezed out by the competition.  However, in the meantime, nobody wants to live with parents until they are in their 30’s, so that in turn creates demand for more rental properties, which means landlords have a greater demand for more rental properties so are buying more, resulting in even less smaller properties for the youngsters to buy, it’s a vicious circle.   
Talking to fellow agents, mortgage arrangers, surveyors and solicitors in the City, all of whom have extensive dealings in the Canterbury property market like myself, most of us agree the movement in the Canterbury market is taking place in the middle to upper market, higher up the property ladder and it’s second and third steppers pushing through the properties that are being bought and sold.
That has meant as people tend to move less in the middle to upper market, the number of the properties actually selling has drastically reduced over the last couple of years.
When we look at the individual areas of the city, it paints an interesting picture.
  • CT1 - Canterbury city centre 35 properties sold in May 2015 (the most recent set of figures from the HM Land Registry), whilst over the Summer months of 2014, the number of properties selling in this postcode was always between 51 and 56 per month. (Interestingly the average value of those properties was £233,707).
  • CT2 - Harbledown, Rough Common, Sturry, Fordwich, Blean, Tyler Hill, Broad Oak, Westbere 23 properties sold in May 2015 (with an average value of £279,049), whilst over the Autumn months of 2014, the number of properties selling in this postcode reached into the mid/late 40’s.
  • CT3 - Wingham 14 properties sold in May 2015 (with an average value of £224,428), whilst over the Summer months of 2014, the number of properties selling in this postcode reached into the mid/late 40’s. 
  • CT4 - Chartham, Bridge 65 properties sold in May 2015 (the most recent set of figures from the HM Land Registry), whilst over the Summer months of 2014, the number of properties selling in this postcode was always between 83 and 97 per month. (Interestingly the average value of those properties was £353,688).
So what does this all mean for homeowners and landlords alike in Canterbury?  Demand for Canterbury property is good, especially at the lower end of the market.  However, with fewer properties coming up for sale, it means property prices are proving reasonably stable too.
 
You see I believe a more stable, consistent Canterbury property market, with less people seeing property as an easy way to make a quick buck (as many did in the early 2000’s when prices were rising at nearly 20% a year so people were buying and selling every other minute), but a property market that has a steady growth of property values in Canterbury, year on year, without the massive peaks and troughs we saw in the late 1980’s and mid/late 2000’s might just be the thing that the Canterbury property market needs in the long term.
 
For more insights, comments and facts on the Canterbury Property market please visit the Canterbury Property Blog www.canterburypropertyblog.com where you will find many similar articles to this.

Thursday, 5 November 2015

In search of the Holy Grail?


A few days ago, one of our Landlords contacted me with a question regarding one of his other student properties that he owns up in Durham. In a nutshell, the property was being rented out to students and he was looking at his position in the next couple of years, i.e. rent or sell. He also asked if he could achieve a similar return / yield if he sold in Durham and purchased in Canterbury.

Regular readers will know that to achieve the Holy Grail of Lettings of a) a great yield and b) fabulous capital growth can be a real challenge, if not impossible, therefore this required a degree of research on behalf of the Landlord to offer him some sound advice.

To enable me to respond, it was necessary to manage some research and get back to him with some facts and figures.

The property in question in Durham was bought for circa £230K and has a monthly rent of £1646, which in turn gives a respectable gross yield of nearly 8.6%.

My first area of research was the latest Land Registry data, which was published a few days ago on the 28th Oct 2015.

In the table below, we can see two key pieces of information regarding the capital growth, i.e. the South East has grown by 8.5% in the past 12 months, as opposed to the prices in the North East which have decreased by 0.3% in the same period. Interesting to also note that the North East is the only region in England and Wales that has decreased in the past 12 months.



When I ‘drilled down’ to county level, i.e. Kent & Durham, we found the problem was compounded, i.e. Kent has grown by 8.5% in the past 12 months, as opposed to the prices in County Durham which have decreased by 1.9% in the same period. (As per the table below). Of interest, I have left the data of the other counties between Durham at the top and Kent at the bottom, showing the variants between other counties.
 
 
 
 
As my regular readers will note, the most important consideration you will make before investing in property is the balance between annual return/yield and the annual value increase/capital growth. However, what affects those two things (yield and capital growth) in Canterbury or indeed Durham, are very varied and complex. The quantity of property and whether property is owner occupied, social housing (posh words for council housing) or private renting has a big difference on yield and capital growth.
The scenario above is a near perfect example of the dilemma facing investment Landlords regarding yield v capital growth and whilst the Landlord in question has not yet made a decision, by making such research for him we have been able to provide him with some of the tools to make an informed decision.
Therefore, if you are looking for a sound investment, always check the area carefully and try to obtain some honest & sound local advice.
Good hunting!
 
 

Tuesday, 3 November 2015

Could your Canterbury property save you from Pension oblivion?



If you were born in the early 1970’s or late 1960’s, if you haven’t started to think about it yet, retirement is closer than you think. In fact the number of years you have left to work is less than the number of years you have worked. The basic state pension is worth £115.95 a week for a single person in 2015/16 (or £6,029 a year) and £231.90 a week for a couple (£12,118 a year) as long as your partner has paid their stamp (although there are certain get of jail cards if they haven’t).

As a household, could you live on just over £12k a year?
However, could the property you are living in, in Canterbury, save you from poverty when you reach retirement? You see, a regular income is vital in retirement, and the bricks and mortar you own in Canterbury could provide a way for you to finance life when you retire.
If you are in your 30’s, instead of saddling yourself with bigger and bigger mortgages, going from your first time buyer flat, to a terraced, to the semi and then the large detached house, you could instead keep your terraced or small semi, turning it into buy a buy to let property, let the rent pay the mortgage and then rely on capital growth to provide you with a lump sum when you sell the property and retire.  One of the biggest plus points of buy to let is what is known as leverage. Let me explain ... say you have a deposit of 25% and the value of the property rises by 3% a year, your gains in fact multiply to 12%.  However, if property prices drop, 'leverage' can be catastrophic, as losses will also be multiplied. Property values have dropped a number of times in the last 50 years, but they always seem to bounce back ... property must be seen as a long term investment.
Let me explain how leverage could work for you. If you had bought a Canterbury house in spring of 1983 for £60,000, using a 75% mortgage and 25% deposit, (meaning your deposit would be £15,000). Today, that Canterbury property would have risen in value to £434,274, a rise of 623.8%. However, when you look at the growth on just your deposit, the rise is even better ... instead of 623.8%, we see a rise of 2795% (remembering that the mortgage would have been paid off).
However, buy to let is not all about capital growth and in retirement, income is more important than capital growth, as rent is the key to a steady income.
So surely the best strategy is to buy those Canterbury properties with the high rents (when compared to the value of the property). These are called high yield properties in the buy to let world because the monthly return is so much greater. So surely they are the best in Canterbury? Possibly, but the properties that offer these higher yields (in the order of 5% to 6% per year) tend to be in such areas as Hales Place in Canterbury, historically they haven’t offered such good capital growth when compared to the city average, have a higher tendency for void periods and such properties tend to attract tenants that have a greater propensity to be high maintenance.
Therefore, if a high maintenance rental portfolio wasn’t for you, another strategy could be buy a property with relatively smaller rental returns of 3% to 4% per year (i.e. lower yields), but in a more up market area such as St Dunstans. Properties such as these tend to suffer from less void periods (i.e. when there is no tenant in the property paying you rent) and they historically have had better long term capital growth when compared to the city average.
Every landlord is different and every property is different. All I suggest to you is do your homework.
As regular readers will know, I am happy to share my knowledge and experience of the Canterbury property market, high yields, high capital growth, what to buy, what not to buy and where to buy in the Canterbury Property market can always be found on the Canterbury Property Blog www.canterburypropertyblog.com .

Tuesday, 27 October 2015

Canterbury Property Market - Asking Prices Drop but Values rise


Those of you who regularly read my weekly articles in the Canterbury Property Blog will know I like to keep abreast of the Canterbury property market. Something attracted my attention this week about the local property market, something I wanted to share with my many readers.
Over the last month, there appears to have been an anomaly in the local property market, whereby asking prices in the city have dropped, yet property values have increased.  The average asking price of a Canterbury property, according to Rightmove, fell 1.2% this month yet the average value of a Canterbury property rose by 0.9%.
So how does this relate in monetary terms?  This anomaly has driven the average asking price of a Canterbury property down slightly to £271,400 whilst the average value is now £299,200.
So why the difference? Technically an ‘asking price’ can be any price that a homeowner wants to place his or her property on the market for. Unfortunately, many times this is done without research and can result in overpriced properties that don't sell. As the Summer months are normally slightly quieter those left on the market wanting to sell often temper their asking prices in these months to try and generate interest in their property.
On the other side of the coin, the property ‘value’ is the price that a willing buyer is prepared to pay and a willing seller is prepared to sell at.   Therefore, in a nutshell, Canterbury property values are continuing to rise and those homeowners in Canterbury who have properties on the market, last month on average, reduced their asking prices .. great news for property owners and buyers alike!
In previous articles, I have spoken about the continued fundamental shortage of property coming on to the market compared to buyer demand. That is especially true for homeowners wanting to upgrade to a better house/better location.  I can appreciate Canterbury home owners are reluctant to put their own property on the market speculatively and wait for the right property to become available and some high demand locations can suffer from a property stalemate.
Most homeowners don’t want to sell their house and then have nothing to buy.
But that’s the beauty of the much maligned English and Welsh house buying process. You can find a purchaser for your property, then ask them to wait. By agreeing a sale (subject to contract) before you try to buy sounds concerning to many, but with fewer properties for sale you need to have a buyer for your property or you will be treated as a less serious buyer yourself. If you cannot find the right home for you, you can slow the deal with your purchaser until it comes along. If nothing suitable does comes along and you lose your buyer then the worst outcome is that you have to find another purchaser or take your property off the market and stay put for now, and as long as you mention this at the start they must not commit to any costs until you have agreed your onward purchase.
However, for the landlord/buy to let investors, these potential problems are nothing further from the truth. As I write this article, there are over 140 flats for sale, over 60 terraced houses and 30 semis for sale in Canterbury.  Landlord/Buy to let investors can normally pick up some bargains in the Autumn months, as sellers who are selling their homes often have a pressing need to sell by this time.
The types of houses a Canterbury landlord typically buys, are not the same types as the homeowners wanting to move to a posher area of the city as they are attracted by larger semis and detached properties. The best types of properties for buy to let are the smaller flats, terraced and semis (not the big detached ones). There are in fact too many of these smaller properties for sale .. just look at the numbers of properties for sale (mentioned in the previous paragraph).
If you are a landlord or thinking of becoming one for the first time, and you want to read more articles like this about the Canterbury Property Market together with regular postings on what I consider the best buy to let deals in Canterbury, out of the many properties on the market,  irrespective of which agent is selling it, then you might like to visit the Canterbury Property Blog www.canterburypropertyblog.com

Friday, 23 October 2015

St Thomas’s Catchment Area mean homeowners profit by £23,880

 
I was having a chat with a Canterbury property investor the other day, when he asked if schools, especially primary schools, affected the local property market in terms of demand from buyers and tenants to a property.  Anecdotally, I have always known this to be true, a good school creates good demand and good demand does affect house prices.  So, I asked my colleagues on the front line, who take the phone calls from people putting themselves on our mailing list and they confirmed that most people cite location as their number one factor.
After looking through our mailing list, it confirms there is a close correlation between the high demand areas of Canterbury and the close proximity to a good primary school.  Talking to my team in a recent morning meeting, they agreed many people would look to increase their budget quite significantly, whilst others would consider downgrading their property requirements to be close to a good primary school.
Those of you who regularly read this blog will know I like a challenge, so I decided to look at the science behind these assumptions.  According to the SchoolGuide website, St Thomas Catholic Primary School is one of the best primary schools in Canterbury.  Its figures are certainly impressive. Their last Ofsted Report classified it as Good, 100% of 11-year pupils achieving Level 4 or above in maths, reading and writing whilst 38% of them achieved level 5. Finally, the schools’ KS2 rating was classed as Excellent.
Looking at property sales within half a mile of St Thomas, property values have risen in value since 2000 by 122.22%, whilst according to recent figures, the Canterbury average as a whole has risen in the same time frame by 113.19%.
That means the parents of St Thomas have seen the values of their properties rise proportionally 7.98% more than the Canterbury average (that equates to £23,880 extra over the last 15 years for those local homeowners!)... interesting don’t you think?
However, whilst a good primary school significantly contributes more to house prices, the same can’t be said for secondary schools. There are two reasons for this, firstly, as secondary schools are much larger, so their catchment areas are correspondingly much larger, meaning parents don’t need to live so close to the school. Secondly, in the UK, whilst the difference between the top 25% and bottom 25% of secondary schools is not insignificant, in the primary school sector, the difference between the top 25% and bottom 25%, according to the London School of Economics, is considerably and significantly more.
Many other Canterbury landlords, both who are with us and many who are with other Canterbury agents, like to pop in for a coffee or ring/email us to discuss the Canterbury property market, to consider how Canterbury compares with its closest rivals and hopefully we can answer all their questions. You must take lots of advice and seek out the best opinion. One good source of opinion, specific to the Canterbury property market is the Canterbury Property Blog www.canterburypropertyblog.com . I don’t bite, I don’t do hard sell, and I will just give you my honest and straight talking opinion.

Wednesday, 14 October 2015

Faversham - £145K with a potential 5.79% yield


 
Morning all! Well winter feels like it’s on its way and so are the Autumn bargains. It’s been a bit scarce recently with the Buy to Let goodies, but scanning the web this morning, there's one that caught my eye. So today, we are off to Faversham where a property has just come on this morning with Your Move and from a couple of calculations on my note pad, it looks a good investment.
It’s a two bedroom flat in Sommerville Close in Faversham and is on the market for £145K. From the details it looks like it’s already rented and comes packaged with a Tenant.
In the past few months we have seen a really good demand for such properties and we would estimate a rent of circa £650 to £700 per month. This coupled with the purchase price would deliver a respectable yield of 5.38% and 5.79% respectively.

Check it out further at http://www.rightmove.co.uk/property-for-sale/property-36947586.html and give the agent a call.


Tuesday, 13 October 2015

Canterbury’s £1.2 billion Mortgage Powder Keg

Eight years ago, in the summer of 2007, hardly anyone had heard of the term ‘credit crunch’, but now the expression has entered our daily language and even the Oxford Dictionary.  It took a few months throughout the autumn of 2007, before the crunch started to hit the Canterbury Property market, but in November / December 2007, and for the following seventeen months, Canterbury property values dropped each and every month like the proverbial stone. The Bank of England soon realised in the late summer of 2008 that the British economy was stalling under the continued pressure of the Credit Crunch. Therefore, between October 2008 and March 2009, interest rates dropped six times in six months from 5% to 0.5% to try and stimulate the British economy. 
Thankfully, after a period of stagnation, the Canterbury property market started to recover slowly in 2010, but really took off strongly in late 2013 / early 2014 as property prices started to rocket. However, the heat was taken out of the market in late 2014/early 2015, with the new mortgage lending rules and some uncertainty, when some people had a dose of pre–election nerves.  
With the Conservatives having been re-elected in May, the Canterbury property market regained its composure and in fact, there has been some ferocious competition among mortgage lenders, which has driven mortgage rates to record lows. Whilst I have no actual figures to back this up, I know an awful lot of long serving bank managers, mortgage arrangers and people in the finance industry, all of whom have told me on previous occasions when interest rates rose (1987, 1992, 1997 and 2003), it wasn’t the first rate rise that was the catalyst for many homeowners and landlords to re-mortgage but the second or third increase.  The reason being that it was only by the time of the third rate rise,  it started to hit the wallet.  However, the issue is, by the time of the second or third rate rise the best fixed rates, were in all instances, no longer available as they had been pulled by the banks months before.
But here is the good news for Canterbury homeowners and landlords, over the last few months a mortgage price war has broken out between lenders, with many slashing the rates on their deals to the lowest they have ever offered.  I read that the well respected UK financial website Moneyfacts said only a couple of weeks ago, the average two year fixed rate mortgage has fallen from 3.6% twelve months ago to just under 2.8%.
Interestingly, according to the Council of Mortgage Lenders, the level of mortgage lending had soared to a seven year high in the UK.  So what about Canterbury?  In Canterbury, if you added up everyone’s mortgage, it would total £1.2 billion.  Even more interesting is when we look at Canterbury and split it down into the individual areas of the city,
CT1 - Canterbury city centre£338.7m
CT2 - Harbledown, Rough Common, Sturry, Fordwich, Blean, Tyler Hill, Broad Oak, Westbere £341m
CT3 - Wingham £276.4m
CT4 - Chartham, Bridge £340m
Since 1971, the average interest rate has been 7.93%, making the current 0.5% very low.  So, if interest rates were to rise by only 2%, according to my research, the 2,330 Canterbury homeowners, who have a variable rate mortgage would, combined, have to pay an approximate additional £13,680,000 a year in mortgage payments.  That means every Canterbury homeowner with a variable rate mortgage, will on average have to pay an additional £5,871 a year or £489 a month in interest payments.
I know over the last couple of posts, I have talked about mortgages a lot however, I am not a mortgage arranger but a letting / estate agent and as regular readers know, I always talk about what I consider to be the most important issues when it comes to the Canterbury Property market and at the moment, in my humble opinion, this is the most important thing!
Buy to let is all about maximising your investment, increasing income and reducing costs.  I give advice, opinions, thoughts, concerns, worries, expectations and fears about the Canterbury Property market in my blog on the Canterbury Property Blog.  If you are interested in the Canterbury Property Market, you might learn something by visiting the blog. www.canterburypropertyblog.com

Friday, 9 October 2015

Landlords Information Evening - Monday 19th October 2015 - Canterbury



Running from 17.30hrs until 20.30hrs on Monday 19th October 2015, is a really good information evening in conjunction with the National Landlords Association (NLA). The evening is chaired by Marion Money of the NLA and various guest speakers deliver relevant and useful information regarding the rental market. The event is open to all and free to attend.

It's a great opportunity to hear from a number of guest speakers, plus network with other landlords and suppliers.

I have been asked to present at the event and will give a view of the Canterbury property market, plus an insight into the student market, demand and availability.

The address of the venue is: Darwin Conference Suite, Darwin College, University of Kent, Canterbury CT2 7NY

Tuesday, 6 October 2015

Interest rates set to rise – How will that affect the Canterbury property market?



A couple of weeks ago, I mentioned in this blog about how the Bank of England has been indicating recently that UK interest rates will be going up in the not too distant future. Therefore, if you are one of the 18,529 homeowners in Canterbury, who own your own home with a mortgage, then you need to consider your options and start to budget for an interest rate rise. However, if you are a landlord, who owns one of the 11,876 rental properties in the city, whilst your exposure to interest rate rises is lower, it is most certainly something you should be aware of.
Since the spring of 2009, British interest rates have been at a record low of 0.5%. It’s not a case of if, but when, they will rise. Some people think it will be before Christmas, although I am of the opinion, it will early in the New Year around Easter time, when they do rise. I also expect those rises will be slow, steady and limited. It depends on what is happens to UK wage rises, UK inflation and the general state of the British economy. Nevertheless, as much most of us in Canterbury would love to pull the shutters and stick two fingers up to the world, we have to recognise we are part of a global economy and global economic worries still exist to prevent an abrupt and instantaneous rate rise.
Those Canterbury landlords, who do have a mortgage, need to realise that as interest rates rise, their monthly mortgage costs rise. It’s easy to say you will look at your mortgage next month, then before you know it, Christmas will be here! Don’t forget, mortgage lenders have always removed the juicy low rate mortgage deals a few months before interest rate rise. Speak to a qualified mortgage arranger, there are lots of them in Canterbury and seriously consider fixing your mortgage rate now.  You didn’t buy your Canterbury buy to let property for it to become a millstone around your neck. It’s all about mitigating your costs and maximising your income to make your Canterbury buy to let property the investment you want it to be.
However, on the other side of the coin, two in three landlords who have bought property since 2007, have done so without a mortgage. A rise in interest rates might be a good thing. Let me give you some background first, then I’ll explain why. Canterbury landlords have seen their return on investment for their Canterbury buy to let property, over the last couple of years, perform very well indeed with Canterbury property values rising by 28.43% since the Spring of 2009. However, when rates do rise, whilst more expensive mortgage rates will ease the demand for borrowing, on the other hand, it may temper house price growth, making the property market more competitive... and therefore, we should see the return of some bargain property buys in Canterbury!
Finally though, can I ask all Canterbury homeowners and Canterbury landlords, who have a mortgage that isn’t fixed, they need to recognise that rates will rise throughout 2016 to 2018 and will continue to move steadily upwards towards more viable and feasible long term levels.  I am not qualified to give that advice and this is my personal opinion, so please speak to a qualified mortgage arranger and, if appropriate, fix your mortgage before interest rates rise. Don’t say I didn’t warn you!
In the meantime, if you are a landlord looking for a bargain now, don’t despair ... there are plenty out there, if you know where to look! One place is Rightmove, another Zoopla and another OnTheMarket. However, sometimes, you can’t see the wood for the trees. At the time of writing, Rightmove had 278 properties for sale in Canterbury, Zoopla 220 properties for sale in the city and OnTheMarket 38 properties ... where do you start? A lot of savvy Canterbury landlords like to visit the Canterbury Property Blog www.canterburypropertyblog.com, where, irrespective of which agent is selling it, I regularly post what I consider out of the hundreds of properties on the market, to be the best buy to let deal in Canterbury.   

Tuesday, 29 September 2015

Crisis in the Canterbury Property Market ..probably?


I don’t know about you, but if you watch Sky News every waking hour or read the newspapers, it always seems we as a Country, Europe or the World seem to lurch from one crisis to another. Another week, another crisis averted. It was only last summer the soothsayers were predicting the end of the world over the supposed house price bubble that many believed was developing in the South. Property prices were rising at 20%+ per annum in London, only for things to ease as the property market in the Capital showed a controlled slowdown and cooling in activity with price growth easing to a more realistic 8% to 9% per annum. Interestingly, there was no panic when some modest price drops were seen in some of London’s highest priced suburbs.
However, last month’s crisis is the buy to let boom and as George Osborne always likes to be topical, in the July emergency budget, he declared that he will start to scale back, from 2017, the tax relief that those high income tax rate landlords with a mortgage have benefited from. The Daily Mail ran headlines stating it was the end of the private landlord; predicting many landlords will give up on buy to let altogether and we will be inundated with rental properties up for sale as landlords feel squeezed from the market.
Even Mr Carney, the Governor of the Bank of England, recently cautioned that the buy to let property market could destabilise the whole UK property market. He was concerned landlords who bought with high loan to value mortgages could be spooked if there is a property crash, they would panic because of negative equity, sell cheaply, which would worsen house price falls.
End of the world then?   .. this week, yes probably, but next week .. that’s another story!  Before we all go and live like a hermit in the Scottish highlands, let me explain to you my perspective on the whole subject. As I mentioned a few weeks ago, two thirds of buy to let properties bought in the last eight years have been bought mortgage free – so they won’t be affected by the Chancellors’ tax changes.  Also, something I feel is often overlooked but very important, is the fact that landlords historically have only been able to normally borrow up to 75% of the value of the rental property.  In the last property crash of 2008, property values dropped by the not so insignificant figure of 17.93% in Canterbury, but even then, when we had the credit crunch and the world’s banking sector was on the brink, no landlord would have been in negative equity in Canterbury.
I believe we have a case of ‘bad news selling newspapers’ and I believe that buy to let, and the property market as a whole, will carry on relatively intact. It’s true reducing tax relief will hit landlords who pay the higher rate of income tax and this may slightly diminish buy to let as an investment vehicle, but I doubt people will sell. Many landlords have been lazy with their investments, buying with their heart, not their head. You would never dream of investing in the stock market without doing your homework and talking to people in the know. If you want to make money in the Canterbury property market as a buy to let landlord, it’s all about having the right property and as you grow, the right portfolio mix to offer a balanced investment that will give you both yield and capital growth.
The Canterbury buy to let market still offers good investment opportunities to new and old alike. Those who have bought in the last twelve to eighteen months have reaped the benefit from buying in Canterbury, because the city offered a combination of reasonable house prices with subsequently increasing rents.  Property values have risen by 13.18% in the last eighteen months in Canterbury, whilst looking at rents, in Q2 2015, average rental values for new tenancies were 11% higher than Q2 2014, which is particularly interesting as they only rose by 4.5% between Q2 2013 and Q2 2014.
I cannot stress enough the importance of doing your homework. One source of information and advice is the Canterbury Property Blog where I have similar articles to this about the Canterbury property market and what I consider to be the best buy to let deals around at anyone time in the City, irrespective of which agent it is on the market with. If you haven’t visited and you are interested in the local property market in Canterbury.......you are missing out! ..

Tuesday, 22 September 2015

My concerns about the Canterbury Property market

 
 
 
I am genuinely concerned about the Canterbury property market, but in a way that might surprise you.  Rightmove announced that average ‘asking prices’ fell slightly last month by 0.4% in the South East, leaving them 5.8% higher than a year ago.  Whilst it could be said that monthly change is very modest, in the same period a year ago, we saw a monthly fall of 0.6% in the South East, which is more the norm given the onset of  schools breaking up and everyone going on holiday.
 
Looking at all the data on the Canterbury property market; putting aside the need for more houses to be built in the next decade to balance out the increase in population (helped in part by inward European migration) but not matched by a similar increase in housing being built; my research shows there is a widening gap between what property buyers want and what is available to buy.  In a nutshell, many more buyers are looking for the smaller one and two bed properties (the typical terraced and smaller semi detached houses/apartments), whilst there are a larger proportion of the four and five properties, which are the typical detached properties available.
 
Demand for smaller properties comes from both first time buyers and the growing number of buy to let landlords, where it is more cost effective and efficient to buy smaller properties to let out compared to larger properties which tend to offer poorer returns.  Also, landlords with larger loans (on those larger more expensive properties) will also be hit harder with the changes in the way tax is paid on buy to let investments, which start in 2017.
 
If you recall, a few weeks ago I did some research on how different types of properties had performed in Canterbury since the year 2000.  I revisited those calculations and it hit me how different types of properties had performed over the last 15 years.  In a nutshell, this mismatch of demand and supply isn’t a new phenomenon, it’s been happening under our noses for years!
 
In the last 15 years, the average terraced house in Canterbury has risen in value from £83,523 to £236,264 whilst the detached house has risen in value from £183,550 to £499,313.  Nothing seems amiss until you look at the percentage growth.  The terraced has grown in value by 183% whilst the detached by only 172% meaning the gap between the inexpensive terrace’s and expensive detached properties has in percentage terms narrowed (this isn’t just a Canterbury thing, it has happened all across the Country).
 
I am concerned because more houses need to be built, not only in Canterbury, but in the South East and the UK as a whole.  In particular, there is specific need for more affordable starter homes for the growing demand from both tenants (and the landlords that will buy them) and first time buyers.  The Tories need to face up to the fact that unless they can get the builders, the planners (to release more building land), the banks (to finance it) and themselves together, to ensure long term plans can be made, and implemented, this issue will continue to worsen.
 
The country needs 200,000 houses a year to be built to keep up with demand, let alone reverse the imbalance between demand and supply.  Last year, only 141,040 properties were built, the year before 135,510 and 146,850 in the year before that.  This means only one thing for Canterbury landlords.  Unless David Cameron starts to rip up huge swathes of the British countryside and build on acres and acres of green belt, demand will always exceed supply when it comes to property for the foreseeable future.
 
Therefore, investment in the local Canterbury property market as a buy to let investment could be the best move to make as the stock market investments are possibly on the wane.  Everyone is different and trust me, there are many pitfalls in buy to let.  You must take lots of advice and seek out the best opinion.  One source of opinion, specific to the Canterbury property market is the Canterbury Property Blog www.canterburypropertyblog.com