Thursday, 30 April 2015
Even with the pending General Election, property values in Canterbury are still 1.27% higher than they were 3 months ago, the diversion and ambiguity of an election typically makes house sellers who need to sell, price their property more realistically (although this only lasts a couple of months). Looking specifically at it from a Canterbury landlord’s point of view, the Canterbury properties favoured by investors are in short supply in many parts of the city because of a number of factors. One of the factors has been that we have seen the number of first time buyers coming to buy their first home increase over the last 12 months in Canterbury. Another factor has been the fact that the banks have been pushing ‘let to buy’ (yes ‘let to buy’ is different to ’buy to let’) to homeowners (more of ‘let to buy’ in an up and coming article). Next, because of the banks, who are chasing low risk landlords with high deposits with very low mortgage rates - and the low risk landlords with high deposits tend to be attracted to the safer modern two and three bed town houses and semis in Canterbury.
As I mentioned a few weeks back, the pension rules are changing which means buy to let landlords can use some, or all, of their pension pot to buy a property. It shouldn’t be forgotten that there are tax implications taking more than a quarter of your pension pot out (see the article from a couple of weeks ago), so whilst many pension pots may not be able fund a suitably big enough tax free lump sum to buy the property outright, for most it will provide enough for the 25% deposit (required by most BTL mortgage providers). It shouldn’t be forgotten landlords that the interest paid on the mortgage is tax deductible against the rent, thus lowering your income tax paid.
In the last 12 months, I have noticed a particular uplift in interest from ‘50 something’ Canterbury people wanting to become landlords for the first time. In Canterbury, the highest returns for the lowest investment are at the lower end of the market e.g. the classic apartment . Unfortunately apartments , with one bedroom are coming to the market in smaller numbers than the larger four bed’s in top end sectors of the Canterbury property market. When looking at the actual numbers, in the latter part of the Summer of 2014 in Canterbury, in one month alone 64 one bed properties were on the market in Canterbury. However, in January this year, a notoriously excellent bumper month for properties coming on to the market, there were only 52 one bed properties on the market in Canterbury to choose from. Today, that figure stands at only 43 ..whilst the number of four and five beds has increased significantly ... interesting don’t you think?
At that lower end of the property market in Canterbury, (i.e. where first time buyers and landlord investors compete with each other to buy those smaller properties), I believe throughout 2015, there will be a slow and steady tipping of the scales between supply and demand. In fact, from what I am seeing and hearing, early anecdotal evidence has suggested over the last few months (although we will need to look at figures later in the Summer, once we have the data from The Land Registry), we are beginning to see a polarised Canterbury property market, where we have high demand but low supply at the bottom end of the property market, yet high supply but lower demand at the top of market .. and that can only mean one thing ... prices will go up quicker on the smaller properties than the larger ones in Canterbury, thus narrowing the gap for people looking to move up market!
Wednesday, 22 April 2015
“The way it works in Canterbury is this, you have to rent where you want to live, or buy where you don’t want to live,”
I had this really interesting chat with one on my tenants the other day, on renewal of their tenancy agreement. They are a lovely couple, early thirties and I know they have decent jobs in Canterbury. They have been tenants of ours for quite a while, so I know them quite well. We got talking and I enquired if they ever thought of buying a property for themselves, to which they replied back with the title of this article. It made me think and so I did some more research into the subject which I want to share with you.
After the end of the Second World War, just over a quarter of the UK population owned their own home, the rest rented from private landlords or the local Council. If someone told you in the 1970’s and 1980’s that they rented, they were considered a second class citizen. Everyone wanted to own their own home .. it was the done thing. We think that home ownership will inevitably happen, but it won't.
It all changed in the 1970’s, when two things happened. Firstly, the number of people who owned their own home broke through the 50% barrier in 1971 and by 1981 it was at 57%. Tied in with that, the average house prices in Canterbury were doubling at one point every four years in the 1970’s so property and profit started to feed off each other.
To put that growth in context, if we were to look at the last 85 years in Canterbury, in 1930, the average Canterbury property was worth £609. It took 16 years for Canterbury property values to double, rising £1,505 by 1946. Another 15 years and the average Canterbury property doubled again to £2,858 in 1961. The next doubling only took 10 years, as by 1971 the average Canterbury property had reached £5,811 in value.
It was (as mentioned above) the 1970’s when things really took off, as by 1975 (i.e. only four years) they had doubled to £12,162 and they doubled again to £24,347 by 1980. It took another eight years for values to double again, as an average Canterbury property reached £50,926 in 1988. Twelve years had to pass until the doubled again in 2000 (£104,782 and just six years to double again by 2006, when they reached £211,331. Where are we today? The average property value in Canterbury currently stands at £285,400.
We could blame Maggie Thatcher for making home ownership the ultimate goal, but what we now need to consider is that the country is turning on its head and we need to, as a Country, love renting again. Some blame the banks, but obtaining a 95% mortgage is hard work, but nowhere near impossible. A typical Canterbury first time buyer would only need to save £8,000 for a deposit and fees and they could buy a very decent property. For example, you could buy a property on the Thanington Estate in Canterbury, and it would be cheaper each month in mortgage payments than renting.
People might say on the surveys they want to buy, but when it comes down to it, if you have been living in a top of the range large property in South Canterbury , but the bank will only lend you enough to buy a smaller property on the Thanington Estate, what would you do? Don’t get me wrong, the Thanington Estate has really pulled its socks up over the last ten years, but it isn’t South Canterbury, is it? Again, if you were a twenty something, what would you do? Look again at the title of the post ... “The way it works is, you have to rent where you want to live, or buy where you don’t want to live,”
With tenant demand only going in one direction, that is probably why more and more people are getting into buy to let in Canterbury. With the new rules on pensions and the ability to use them to buy residential rental properties from April onwards, this could be the time for you to buy a rental property. You must take advice on your pension from an Independent Financial Advisor (there are plenty in Canterbury) and you must take advice from people who know what to buy (and not to buy) in Canterbury to ensure you get the best from your investment.
Wednesday, 15 April 2015
I was having an interesting chat the other day with a couple of solicitors at a Canterbury business networking event, when the subject of a lack of property for first time buyers came into the conversation. I followed the chat up with an email with my findings, findings which I would like to share with you today.
At the time of the last census in 2011, there are 3,401,675 properties in England that were privately rented, of which it is estimated, were owned by over 1.25 million private landlords. The rapid growth of buy-to-let is hugely controversial, especially as only ten years before that, there were only 1,798,864 properties under private renting in England. Buy to let landlords have been held responsible for forcing up property prices and preventing our younger generations from being able to buy. There is also growing resentment toward the billions of pounds in tax relief (estimated to be nearly £10 billion) landlords claim on their mortgage interest -tax relief not available to homeowners.
They may be asset rich thanks to recently rising property values, but let us not make the landlords the ‘bogiemen’ they could easily be called. Despite all these benefits enjoyed by private landlords, let us not forget the good they have done, especially in Canterbury.
Property values today in Canterbury are still 3.2% above the 2007 property boom levels (2007 being the peak of last property boom before everything dropped in 2008/9), yet inflation has risen by 26% in the same time frame, so in real terms, properties today are 22.8% CHEAPER than they were in 2007. Just think how low they would be without landlords buying all those rental properties in the city. Interest rates are at an all time low and first time buyers only need to save a £8,000 deposit to secure a lovely 3 bed town house in Thanington with a 95% mortgage. Forget what the papers say, first time buyers can borrow money relatively easily on a 95% mortgage and nine times out of ten, it’s cheaper to buy than rent. So why aren’t people buying?
The number of people choosing to rent, either for lifestyle or economic reasons, has grown over the last 15 years. I also believe they will continue to grow for some time to come (as does every report on the subject). In fact I would go as far to predict the number of rental properties in Canterbury will have risen from the 10,665 properties recorded in 2011 to 13,900 by 2021. Sound fanciful? Well in 2001, there were only 6,124 privately rented properties in Canterbury.
It is a fact that we as a Country are more and more turning into a European model when it comes to homeownership, where the norm is renting for the first ten years, as opposed to the norm from the 1960’s to 1990’s, where first time buyers were encouraged to buy as soon as they left school and got a job.
Tenants, in particular, will also feel the benefit from potential changes in the market. The likelihood of interest rate increases in late 2015, existing economic conditions, combined with the uncertainty of new Government manifestos following the General Election in May will result in low demand for people to buy, yet also put a dampening effect on increases in rent. As long as landlords buy the right sort of property, that allows for a reasonable yield, decent capital growth, everyone will be a winner. If you want a chat about what would make the best sort a property that would offer that in Canterbury, then please email me at email@example.com or visit my Canterbury Property Blog www.canterburypropertyblog.com
Saturday, 4 April 2015
South East property asking prices jumped by more than £6,400 to £363,992 in February according to Rightmove, an increase of 1.8% from January and 8.1% higher than a year ago. After the traditionally quiet months of January and February, the property market has started to warm up, but talking to some Canterbury Estate Agents, they are reporting their lowest ever stocks of quality property for sale. However, asking prices have no relation to what property sells for (i.e. their REAL value), is the issue a lack of supply?
Putting aside Canterbury’s continual housing supply shortage, (we only built 5,187 properties in the last decade but the population of Canterbury grew by 15,867), this is now, according to some people, being exaggerated by an increase in homes being owned by buy to let investors, who tend to be buying a property as part of a long term pension plan and are more likely to keep it for longer than an owner/ occupier would. I have also seen unwillingness among homeowners looking to move, to put their own property on the market as they can find few suitable properties to make it worth their while going through the whole moving process.
Talking to some Canterbury landlords only last week, I said that I believe this is the new norm in the Canterbury property market, and is the consequence of over 35 years of not enough homes being built to meet the escalating growth in household numbers, resulting in a lack of quality homes for sale in many popular areas of Canterbury.
When one looks at the historic data, in June 2008, there were 603 properties on the market in Canterbury compared to today’s 271. Should we be worried? Well in January 2010, there were only 253 properties for sale in Canterbury, but seven months later in August 2010, this had jumped to 583 properties, for it to drop to 273 properties in January 2014. The number of properties on the market is a cyclical thing in Canterbury, it always has been and always will be. As we go into the Spring of 2015, the number of new properties coming onto the market will increase ... just as the daffodils will flower.
So are landlords to blame? Well, on one side of the coin, yes they are. If they buy a property to rent out, that means someone can’t buy it to live in. However, it doesn’t matter if someone wants to live in a property if they can’t afford the deposit and upkeep .. and the youngsters of Canterbury still need a roof over their head. So on the other side of the coin, if the Council aren’t building any properties and people can’t afford the large deposit for the mortgage, then Canterbury landlords have stepped in and bought property to rent out to them. Canterbury landlords have bought 4,541 properties over the last decade (investing approximately £1.296billion buying those Canterbury rental properties), meaning there were at the last count, 27,278 Canterbury properties being privately rented out to tenants. Canterbury tenants are in fact getting a good deal as well, as average rents in Canterbury are 5.9% above where they were seven years ago. That sounds like a win-win situation for everyone to me. Stop blaming landlords and start building more properties in Canterbury .. that is the only answer.
In the meantime, the demand from Canterbury tenants for Canterbury property is only set to rise over the coming years. If you want some advice and opinion on where (or not) to buy, please visit the Canterbury Property Blog where we discuss such matters in greater depth www.canterburypropertyblog.com .