Wednesday, 27 April 2016
I don’t know about you, but I find if you read the Daily Mail, there are only three topics that make the blood boil of ‘Middle England’. Bureaucracy from Brussels, House Prices and the late Princess of Wales. Ignoring the late Princess if I can for this article, but if we as a country were to unshackle ourselves from the chains of Brussels (the first topic), could we inadvertently effect the second topic and make UK house values drop?
If you read all the newspapers, the Brexit debate seems to be focused solely on central London. Many commentators have said Brexit would mean central London would have a lower standing in the world, meaning less people would be employed in Central London, with the implication of lower wages, fewer jobs etc., in Central London ... but we are in Canterbury, not Marylebone, Mayfair or any part of Zone 1 London.
Now on the run up to the vote on the 23rd of June, I predict the ‘in’ camp will start to scare homeowners with forecasts of negative equity, and the ‘out’ camp will appeal to the 20 somethings, who have been priced out of the property market with the prospect of a new era of inexpensive housing, should the fears of central London estate agents and developers, who believe the bottom will fall out of the market if we do leave, become real. The only reason the Mayfair’s, Knightsbridge’s, and Kensington’s of central London are attractive to foreign buyers are political and economic steadiness, an open and honest legal system and a lively cultural life. None of that is threatened by Brexit.
... But again, we are in Canterbury and central London is 61 miles away. We are hometown to the Kent County Cricket Club, Canterbury Cathedral and Katie Derham, and whilst the central London property market exploded after 2009, that explosion really and honestly didn’t affect the Canterbury property market. So, putting central London aside, what would an ‘in’ or ‘out’ vote really mean for the 9,200 property owners of Canterbury?
Initially, over the coming months, on the run up to referendum, I believe it will be like the run up to last year’s General Election. With the short-term uncertainty in the country, quite often, big decisions are put on ice and people are less likely to make big money purchases i.e. buy a property. However, in the four months up to last year’s Election, property values in Canterbury increased by 1.65%, not bad for a country that thought it would get a hung parliament! So that argument doesn’t hold much weight with me.
Post vote, should the UK opt to leave Brussels, there would be a much more noteworthy impact. I believe that a vote to stay in the EU would see the Canterbury property market return to a status quo very quickly, but the contrasting result could lead to some changes. The principal menace to the Canterbury (and UK) housing market could be variation (in an upwards direction) in interest rates as a result of a Brexit, which could theoretically see the cost of mortgages grow swiftly, pricing many out of the market … but then two thirds of landlords buy without a mortgage, so that won’t affect them. Also, according to the Bank of England, 80.33% of all new mortgages taken out in 2015 were fixed rate. Looking at all mortgages as a whole, according to the Bank of England, 44% of all UK mortgagees have a fixed rate mortgage, but 56% don’t, so if you aren’t on a fixed rate ... talk to your mortgage broker now, because they can only go in one direction!
So in reality, if I really knew what will happen, I wouldn’t be a letting / estate agent in Canterbury, but a City Whiz Kid in London earning millions. However, I suspect whatever decision the electorate of Canterbury and the country as a whole makes, over the long term it won’t have a major effect on the Canterbury property market. We have seen off ‘the end of the world’ credit crunch of 2008/9 and subsequent property crash, the 1988 Nigel Lawson induced post dual-MIRAS property crash, the 1979 Winter of Discontent property crash, the 1974 oil crisis that stimulated another property crash ... hell, we can even go back nearly a century with the 1926 post General Strike slump in property prices...
Today, property prices are 246.59% higher than 21 years ago in Canterbury and are 9% higher than 12 months ago. So, make your own decision on 23rd of June 2016 safe in knowledge that whatever the result, there might be some short term volatility in the Canterbury property market, but in the long term (and property investment is a long term strategy) there aren’t enough houses in Canterbury to live in either to buy or rent … and until the Government allow more properties to be built – the Canterbury property market, will be just fine ... even if it has a little blip in the summer, there could be some property bargains on the run up to Christmas to be had!
For more advice and opinion on the Canterbury property market, even where those buy to let bargains could be found now ... visit the Canterbury Property Blog www.canterburypropertyblog.com
Wednesday, 20 April 2016
The ‘Right to Buy’ scheme was a policy introduced by Maggie Thatcher in 1980 which gave secure council tenants the legal right to buy the Council home they were living in with huge discounts. The heyday of Council ‘Right to Buy’ was in the 80’s and 90’s, when 1,719,368 homes in the country were sold in this manner between October 1980 and April 1998. However, in 1997, Tony Blair reduced the discount available to tenants of council houses and the numbers of properties being bought under the Right to Buy declined.So what does this mean for Canterbury homeowners and landlords? Well quite a lot in fact!
Looking at the figures for our local authority, whilst the number of ‘Right to Buys’ have dwindled over the last few years to an average of only 14 ‘Right to Buy’ sales per year, one must look further back in time. Looking at the overall figures, 3,004 Council properties were bought by council tenants in the Canterbury City Council area between 1980 and 1998. Big numbers by any measure and even more important to the whole Canterbury property market (i.e. every Canterbury homeowner, Canterbury landlord and even Canterbury aspiring first time buyers) when you consider these 3,004 properties make up a colossal 32.5% of all the privately owned properties in our area (because in local authority area, there are only 9,236 privately owned properties).
Canterbury first time buyers and landlords can now buy these ex-council properties second hand (or the PC brigade like to call them ‘pre-loved ex–local authority dwellings’) as those original 80’s and 90’s tenants (now homeowners) have more than passed the time of any claw back of the discount they received (council discount was repayable if the first owner sold within a stipulated time period - usually 5 years).
Now let us all be honest, some (not all), but some ex-council properties lack the vital KSA that some landlords crave. The new homes builders know all about KSA (or Kerb-Side-Appeal) as they dress up the exteriors of their new homes to make them more appealing to buyers ... and if you don’t believe me ... why do Show homes exist? Going on the exterior looks of a modern property might be a theoretically good way of choosing a Canterbury buy-to-let property, but in a challenging market, some Canterbury investors are finding a more no-nonsense down to earth approach brings the largest returns.
Yes, the modern stuff being built in Canterbury is lovely, but too many landlords purchase buy to let property solely based on where they would choose to live themselves, instead of choosing with a business head and choosing where a tenant would want to live ... because remember the first rule of buy to let property … you aren’t going to live the property yourself. What an ex-council property lack in terms of KSA, they more than make up for in other ways. Tenants are more worried about how close the property is to a particular school or family members for child care matter to them far more than the look of a property.
Whilst ex-council properties tend to increase in value at a slower rate than more modern properties, that is more than made up in the much higher yields – and those built between the wars or just after are really well built. Tenant demand for such properties is good since Canterbury property values are so expensive, a lot of people can’t get mortgages to buy, so they will reconcile themselves to renting, meaning there is a good demand for that sort of property to rent. Also, the very fact the council were forced to sell these Canterbury properties in the 80’s and 90’s, means that today’s younger generation who would have normally got a council house to live in themselves, now can’t as many were sold ten or twenty years ago.
So to Canterbury landlords I say this … don’t dismiss ex-council houses and apartments – but remember the 1st rule of buy to let (see above). However, those very same Canterbury landlords should go in with their eyes open and take lots of advice. Not all ex-council properties are the same and even though they have good demand and high yields, they can also give you other headaches and issues when it comes to the running of the rental property. One source of advice is the Canterbury Property Blog www.canterburypropertyblog.com … that just leaves the 2,661 council houses still owned by the local authority to be sold to their tenants in the coming years!
Tuesday, 12 April 2016
My parents bought their first house in the late 1950’s and they were in their early 20’s. Interestingly, looking at some research by the Post Office from a few years ago, in the 1960’s the average age people bought their first house was 23. By the early 1970s, it had reached 27, rising to 28 in the early 1980’s.
This year alone, 1,387 people in Canterbury will turn 28 and 2,115 in 2017 .. and dare I say 3,198 in 2018 .. year in year out the conveyor belt carries on .. where are the Canterbury youngsters going to live?
Ask a Canterbury ‘twenty something’ and they will say they do not expect to buy until they are in their mid thirties - seven years later than the 1980’s. Some people even say they will never be able to buy a property and the newspapers have labelled them ‘Generation Rent’ as they are people born in the 1980s who have no hope of getting on the property ladder. One of the major problems facing young Canterbury people is the large deposit needed to get a mortgage .. or is it?
The average price paid for an apartment in Canterbury over the last 12 months has been £189,000 meaning our first time buyer would need to save £9,450 as a deposit (as 95% mortgages have been available to first time buyers since 2010) plus a couple of thousand for solicitors and survey costs. A lot of money, but people don’t think anything today of spending a couple of thousand pounds to go on holiday; the latest iPhone upgrade or the latest 4K HD television. That amount could soon be saved if these ‘luxuries’ were withheld over a couple of years but attitudes have changed.
Official figures, from the Office for National Statistics, show the average male in Canterbury with a full-time job earns £606.80 per week whilst the average female salary is £492.50 a week, meaning, even if one of them worked part time, they would still comfortably be able to get a mortgage for an apartment.
I was reading a report/survey commissioned by Paragon Mortgages from the autumn of last year. The thing that struck me was that when tenants were asked about their long term housing plans, some 35% of participating tenants intend to remain within the rental sector and 24% intended to buy a house in the future, with the proportion of respondents citing the “unaffordability” of housing as the reason for renting privately increasing from 69% to 74%.
However, time and time again, in the starter home category of property (i.e. apartments), nine times out of ten the mortgage payments to buy a Canterbury property are cheaper than having to rent in Canterbury. It is the tenant’s perception that they believe they can’t buy, so choose not to. Renting is now a choice. Tenants can upgrade to bigger and better properties and move up the property ladder quicker than their parents or grand parents (albeit they don’t own the property). Over the last decade, culturally in the UK, there has been a change in the attitude to renting so, unless that attitude changes, I expect that the private rental sector in Canterbury (and the UK as a whole) is likely to remain a popular choice for the next twenty plus years. With demand for Canterbury rental property unlikely to slow and newly formed households continuing to choose the rental market instead of purchasing a property. I also forecast that renting will continue to offer good value for money for tenants and recommend landlords pursue professional advice and adopt a realistic approach to rental increases to ensure that they are in line with inflation and any void periods are curtailed. One such place for advice, comment and opinion is the Canterbury Property Blog www.canterburypropertyblog.com
Wednesday, 6 April 2016
“The growth of the private rented sector, and the arrival of an investor class of buy to let landlords within it, is an issue that won’t be going away anytime soon, no matter what you read in the Daily Mail”, I said, as I chatted over a coffee with a landlord client of mine at The Sandwich Bar on St Margaret’s Street in the city. Whether you are a landlord of mine (or not as the case maybe), I am always happy to look over any properties you are thinking of buying for buy to let purposes and more so over a coffee!
Some commentators are saying buy to let is about to die, with the new stamp duty changes and how mortgage tax relief will be calculated. Some say 500,000 rental properties will flood the market nationally in the next 12 months as landlords leave the rental market. Have you heard the phrase ‘Bad news sells newspapers’? Let me explain why buy to let in Canterbury is only going in one direction – and not the direction the papers say they are going.
According to Sheffield University, buy to let landlords will continue fueling the growth of the private rented sector in the coming decades. By their estimates (and they are considered a centre of excellence on the topic), the rate of homeownership nationally will fall to 50% whilst the rate of private sector renting will increase to 35% by 2032. Although in Canterbury homeownership has already dropped below that estimated 2032 national figure, with only 47.6% of properties being occupied by homeowners ... as one would expect because of our high density of rental properties, which interestingly, in Canterbury, currently stands at 30% today.
Therefore, the demand for rental accommodation in Canterbury will grow by 1,221 households in the next five years ... and these are the reasons why, irrespective of the distractions set out in the newspapers
Canterbury property values over the last six years have risen a lot more than average wages/salaries, meaning as homeownership and mortgage availability is dependent on your ability to pay has served to push home ownership further out of reach for many, at a time when the stock of council houses has actually withered. (Nationally, the number of council houses in the last ten years has dropped from 3.16m to 2.18m households - a drop of 31.1%).
Now it’s true the Tory’s efforts to fix the deficiency of affordable housing have focused on those who want to buy a home, ranging from Help to Buy and their much vaunted Help to Buy ISA, and Starter Homes Scheme, an initiative offering a 20% discount for first time buyers … but if you are unable to save for the deposit ... none of this means anything to the ‘20 something’s’ of Canterbury ... and they still need a roof over their heads!
Currently, 16,951 people live in private rented accommodation in Canterbury
These are big numbers and a sizeable chunk of the electorate. So whilst it appears Canterbury “Generation Rent” youngsters will continue to rent and to not to buy for the reasons set out above, Canterbury buy-to-let landlords will be lifted by the projections of greater rental demand. Canterbury and the area around it still offers the prospect of strong economic growth forecasts and has a reputation as a lively and desirable place to live. You see, with the new rules on tax, more and more landlords will be looking to move away from the previous honeypot of central London, because its higher prices meant lower rental yields. With the new tax rules and central London’s cooling of house price inflation, more and more landlords will look further afield, including Canterbury (interestingly, I have already been chatting to a few central London landlords after they read the Canterbury Property Blog).
So, by 2021, the number of rental properties in Canterbury will rise to 8,397
This prediction in growth of the Canterbury rental market is even on the back of the government clamping down on tax reliefs for landlords. The point is this, gone are the days of making guaranteed returns on BTL property. For the last 20 to 30 years, irrespective of which property you bought, making decent money on buy to let property was like shooting fish in a barrel – anyone could do it - but not now. You must take a more considered approach to your existing and future portfolio, especially in Canterbury. The balance of capital growth and yield, especially in this low interest rate world we live in, means Canterbury landlords need to do more homework to ensure the investment in property gives the desired returns. One place for Canterbury landlords and homeowners to visit for such information is the Canterbury Property Market Blog.