“How's the Canterbury housing market doing?” asked an upbeat Canterbury landlord last week. “Quite strange”, I replied. Our landlord was perplexed! Let me explain...
Saturday, 26 November 2016
“How's the Canterbury housing market doing?” asked an upbeat Canterbury landlord last week. “Quite strange”, I replied. Our landlord was perplexed! Let me explain...
Even the Brexit vote has not hindered Canterbury’s steady rise in property value, as Canterbury property values went up 1.75% last month alone, leaving Canterbury values 9.6% higher than a year ago. An increase in demand from buyers and an uninspiring level of supply (i.e. the number of properties on the market) has driven up the value of the Canterbury’s housing.
...And that is where the issue is. With Brexit, the coalition of the 2010-15, a double-dip recession and post credit crunch fallout – I was perplexed that the Canterbury property market (and values) has remained so strong, still 14.75% higher than 20 months ago. That is until you start to consider the real reasons why we find ourselves in such a great place.
The Canterbury (and the UK) housing market is built on the foundations of basic economic rules that any GCSE Economics student should understand. However, at a time when, as a country, we seem eager to uncouple ourselves from all manner of proven facts, anything is up for grabs.
Even the wary RICS said throughout the UK, most of its Chartered Surveyors anticipated house prices to increase in the next six months, which seems contradictory given economic cautions from Mr Hammond and HM Treasury. Even though inflation will rise to around 2% to 3% in 2017 and perhaps a little more in 2018 because of Sterling’s devaluation, together with a high probability of a decelerating GDP and a slight rise in unemployment, how can the RICS and most of my landlords be so confident about the value of our homes?
Well, look at from where we are starting. Nationally, a base of low unemployment, low inflation and preposterously low interest rates, while in Canterbury, the local economy is doing quite well for itself. Confidence also plays a part. Confidence can supersede basic economic facts for a short time at least, which is why actual property market changes tend to be more exaggerated, as confidence can turn both positive and negative very quickly. The fact is, there is a long-term relationship between property values, wages and unemployment. For example, looking at the graph below, you can quite clearly see the ratio of property values to earnings is nowhere near as high as it reached in 2008 and currently is in the middle of the range for the last 30 years. As a country, we are in a good place.
By April 2017, Article 50 will be invoked. This will bring additional political tomfooleries and economic ups and downs. With both purchasers and vendors predisposed by the 24-hour news cycle, which let’s face it, gets more haphazard by the day, it is likely to prove a challenging couple of years … and yes, Canterbury property values might drop slightly in 2017, but based on what we know of the UK plc now, the UK and Canterbury property values are not projected to move that much over 2017 or 2018. Going into the next two years, we are in much better financial shape as a country compared to the last two crashes of 1987 and 2008.
But, on the other side of the coin, what we also know is that we don't know much about the form of our economic future or indeed many other facets of our lives. Confidence will continue to be the key player in the Canterbury housing market for a while longer - yet this may spur some much-needed second-hand market activity? Now, where is my crystal ball?
Tuesday, 22 November 2016
The Canterbury Property Market continues to disregard the end of the world prophecies of a post Brexit fallout with a return to business as usual as we head towards Christmas.
The challenge every Canterbury property buyer has faced over the last few years is a lack of choice – there simply hasn't been much to choose from when buying (be it for investment or owner occupation). Levels are still well down on what would be considered healthy levels from earlier in this decade, as there is still a substantial demand/supply imbalance. Until we start to see consistent and steady increases in properties coming on to the market in Canterbury, the market is likely to see upward pressure on property values continue.
For example, last month CT2 saw 71 new properties coming on to the market, not bad when you consider for the last year the average has been predominantly in the 40 to 60 range. With the average Canterbury property value hitting a record high, reaching almost £331,000 according to my research, this shortage of properties on the market over the last two years has contributed to this ‘fuller' average property figure.
As I write this article, 2.1% of Canterbury properties are up for sale. In terms of actual chimney pots, that equates to 320 properties on the market in Canterbury (within 2 miles of the centre of Canterbury) – which, when compared to only a year ago when that figure stood at 317, is a slight increase in the number of properties available to buy. Split down into the type of property, it makes even more fascinating reading...
- Detached Properties in Canterbury - 59 on the market a year ago compared to 41 on the market now – a decrease of 31%
- Semi Detached Properties in Canterbury - 55 on the market a year ago compared to 73 on the market now - an increase of 33%
- Terraced Properties in Canterbury - 54 on the market a year ago compared to 63 on the market now - an increase of 17%
- Flats / Apartments Properties in Canterbury - 132 on the market a year ago compared to 114 on the market now – a decrease of 14%
This is evidence of strength in the Canterbury housing market that many didn't expect. Many believed that the Canterbury property market wasn't going to be strong enough post Brexit - as what was a sellers' market before the Brexit vote and Buyers' market in the early months after it, may now be somewhere in between and the market might just be coming back into balance.
However, all this will mean property values won't continue to grow at the same extent they have been over the last 12 to 18 months, and in some months (especially on the run up to Christmas and early in the New Year), values might dip slightly. This won't be down to Brexit but a re-balancing of the Canterbury Property Market – which is good news for everyone.
For more thoughts on the Canterbury Property Market, please visit the Canterbury Property Blog www.canterburypropertyblog.com
Thursday, 17 November 2016
I was having a most interesting chat the other day with a Canterbury landlord when we were looking at a property. We got talking about the Canterbury Property Market and this landlord brought up the subject of a report he had read from the Royal Institution of Chartered Surveyors (RICS) and PricewaterhouseCoopers (PwC) that stated almost 1.8m new rental homes are needed by 2025 to keep up with current demand from tenants. He wanted to know what this meant for Canterbury.
Well my blog reading friends, some commentators said last Winter that buy to let was about to die, what with the new stamp duty changes and how mortgage tax relief will be calculated. Others even said 500,000 rental properties would flood the market nationally in the 12 months after the new Stamp Duty rules came into force on the 1st April 2016 as landlords left the rental market. Well, all I can say is, I wish all the landlords of those half a million properties would hurry up and put them on the market – because I have plenty of other potential landlords wanting to buy them!
Back to the matter in hand.. if the RICS and PwC are indeed correct, what does this mean for Canterbury? The fact is, as a country, we are facing a precarious rental shortage and need to get Canterbury building in a way that benefits a cross-section of Canterbury society, not just the fortunate few. I call on the Prime Minister to drop the higher stamp duty tax on buy to let purchases to ease the pressure on the rental market.
Of the 19,900 households in Canterbury, currently 17,000 tenants live in 6,000 private rented properties. If we apportion those 1.8m households equally around the Country, that means in nine years’ time, the number of rental properties in Canterbury needs to rise by 2,500 (i.e. 42.8%) .. taking the total number of rented properties in the city to 8,500.
That means Canterbury landlords need to buy around 300 properties a year between now and 2025 to meet that demand – because according to my calculations, an additional 7,300 people will want to live in all those 'additional' Canterbury rental properties – so why is the government penalising landlords?
Thankfully the new housing minister Gavin Barwell detached Teresa May's new administration from the Cameron/Osborne laser-like focus of just home ownership to solve our housing issues, saying "we need to build more homes for every single type of person needing a home and not focus on one single tenure". The private rented sector became a stooge under David Cameron's watch and still, with increasingly unaffordable Canterbury house prices, the majority of new Canterbury households will be relying on the rental sector in the future to house them. I can only say Westminster must put in place the measures that will allow the rental sector to flourish. Any restrictions on the supply of rental property will push up rents (bad news for tenants), thus side-lining those members of Canterbury society who are already struggling. Let's hope this new Government continues to see the contribution landlords give to the country as a whole.
Wednesday, 9 November 2016
Whilst I don't like the man - the American people have spoken.
.. but this isn't the end of the world for the UK or its Property market!
Cancel the Nuclear Shelter off Amazon and just take a deep breath for a second.
There are questions about the level of competence of
Trump but before you all go and panic ... don't forget that Reagan was also
regarded as grossly incompetent — by the world's media and the High Brow
Washington establishment .. but not by Republican voters in 1980 (and
re-elected in 1984)
There are plenty of other factors, closer to home, that we need to be concerned about than the President of the US and the effect of the UK Housing Market
.. just my opinion ............
Tuesday, 8 November 2016
Over the last month, the Canterbury property market has seen some interesting movement in house prices, as property values in the Canterbury City Council area rose by 1.6% in the last month, to leave annual price growth at 8.2%. These compare well to the national figures where property prices across the UK saw a monthly uplift of 0.42%, meaning the annual property values across the country are 8.3% higher, this is all despite the constraining factors of Stamp Duty changes in the spring and more recently our friend Brexit.
Looking at the figures for the last 18 months makes even more fascinating reading, whereby house prices are 12.5% higher, again thought provoking when compared to the national average figure of 13.6% higher.
However, it gets more remarkable when we look at how the different sectors of the Canterbury market are performing. Over the last 18 months, in the Canterbury City Council area, the best performing type of property was the semi, which outperformed the area average by 0.61% whilst the worst performing type was the apartment, which under-performed the area average 0.84%.
Now the difference doesn’t sound that much, but remember two things, this is only over eighteen months and secondly, the gap of 1.4% (the difference between the semi at +0.61% and apartments at -0.84%) converts into a few thousand pounds’ disparity, when you consider the average price paid for a semi-detached property in Canterbury itself over the last 12 months was £260,800 and the average price paid for a Canterbury apartment was £200,600 over the same time frame.
I know all the Canterbury landlords and homeowners will want to know how each of the property types have performed, so this is what has happened to property prices over the last 18 months in the area...
- Overall Average +12.5%
- Detached +12.6%
- Semi Detached +13.1%
- Terraced +12.4%
- Apartments +11.5%
So, what does all this mean to Canterbury homeowners and Canterbury landlords and what does the future hold?
When I looked at the month-by-month figures for the area, you can quite clearly see there is a slight tempering of the Canterbury property market over these last few months. I have mentioned in previous articles that the number of properties on the market in Canterbury has increased this summer, something that hasn’t happened since 2008. Greater choice for buyers means, using simple supply and demand economics, that top prices won’t be achieved on every Canterbury property. You see some of that growth in Canterbury property values throughout early 2016 may have come about because of a surge in house purchase activity resulting from the increase in stamp duty on second homes from April, thus providing a temporary boost to prices.
However, it may be possible the recent pattern of robust employment growth, growing real earnings and low borrowing costs will tilt the demand/supply seesaw in favour of sellers and exert upward pressure on prices once again in the quarters ahead.
...And Canterbury property values, assuming that everything goes well with Brexit, I believe in twelve months’ time we should see values in the order of 4% to 7% higher.
Tuesday, 1 November 2016
As the trees turn from green to hues of red and brown, the Canterbury property market has a confident feel to it. With the underlying fundamentals of a continued lack of properties being built, a shortage of properties (both in terms of quantity and quality) coming to the market and the continued low mortgage rate environment, buyer enquiries from first time buyers and buy to let landlords is strong and motivation is even stronger, given those inexpensive lending rates and general demand caused by under supply.
Now of course, there are a few potential hurdles coming towards us in the coming months that could affect the Canterbury (and UK) property market. Mrs. May has yet to get her teeth into Brexit negotiations and we don’t know what the US Presidential elections might do to the money markets around the world, meaning that on the run up to Christmas, some savvy buyers may take advantage of the lack of certainty by making cheeky offers, but I don’t believe these will have a huge impact on property values (like the 2008 Credit Crunch).
You see, property ownership, whether it’s for yourself as a homeowner or buy to let landlord, is a long-term investment. In fact, focusing on buy to let, a number of landlords who own property in Canterbury have made contact with me recently asking for my thoughts on the future of the buy to let market in Canterbury. Well, as the Politician Edmund Burke said in the 18th century, "Those who don't know history are destined to repeat it." .. in other words, to see the future you must consider the past.
Since the Millennium, the housing market has had everything thrown at it. The recent Brexit, last year’s General Election, the near melt down of the World Economy with the Credit Crunch, The Dot Com boom and bust, the housing market crisis in 2008, the housing boom of 2001 to 2004 .. the list goes on. In fact, here is a graph (courtesy of the Land Registry) of average Property values since the Millennium in the Canterbury City Council area.
Even though we had the Dot Com bubble burst in 2000, two years later in January 2002, property values in the Canterbury City Council area have risen from £83,500 (in Jan 2000) to £111,500 .. and kept rising to October 2007, when they peaked at £212,700. Then we had the Credit Crunch and property prices continued to fall until June 2009, where they averaged £176,300 .. but look where they are now… £264,200
The point I am trying to get across is long term future property values are more helpful to landlord investors than the month by month headline grabbing micro movements in the property market. Look at the graph and you will see the growth in property values is an upward trend BUT, the average darts about as each month goes by. So, don’t watch the property indexes and panic if values drop next month or the month afterwards, because even in the glory days of 2001 to 2004 and 2012 to 2014, without fail, values always dropped slightly around Christmas, but people will always need a roof over their heads, and if they can’t buy and the council aren’t building anymore .. only buy to let landlords can meet that demand.
Canterbury landlords are being hit in the pocket with the new up and coming taxation rules and yes we might have a bumpy ride on the run up to Christmas (because of the points raised earlier), Brexit or no Brexit, but the trend will be a slow and steady upward momentum of property values, demand for rental properties and yields in the Canterbury property market into 2017 and beyond.