Thursday 29 June 2017


 Canterbury’s housing affordability hits a ratio of 11.12 to 1
 
 

A Canterbury homeowner emailed me last week, following my article posted in the Canterbury Property Blog about the change in attitude to renting by the youngsters of Canterbury and how they thought it was too expensive for first time buyers to buy in Canterbury.  There can be no doubt that buy to let landlords have played their part in driving up property values in Canterbury (and the UK) and from that made housing a lot less affordable for the 20 and 30 somethings of Canterbury.
In the email, they said they thought the plight of the first-time buyers in Canterbury was like a novice tennis player, playing tennis with Andy Murray. If you played him once you will unquestionably lose and if you were to play him 100 times you would lose 100 times. That is what they thought it was like for all the 20 something’s first time buyers of Canterbury going against all the buy to let landlords.

They went on to ask if the Bank of England (BoE) should be tasked to control house price inflation in the same way as the BoE controls inflation.  The BoE has a target for the annual inflation rate of the Consumer Prices Index of 2%, whilst it is also required to support the Government’s economic policy, including its objectives for growth and employment.  So, should BoE be charged with containing buy to let housing market, by possibly changing the rules on the loan-to-value (LTV) ratio’s?
So, let’s look at how affordable Canterbury is.  The best measure of the affordability of housing is the ratio of Canterbury Property Prices to Canterbury Average Wages, (the higher the ratio, the less affordable properties are).   (i.e. looking at the table below, for example in 2014, the average value of a Canterbury property was 9.02 times higher than the average annual wage in Canterbury).

1998 
2000
2002
2004
2006
2008
2010
2012
2014
2016 (EST)
4.42
5.29
6.84
8.02
8.78
8.98
8.14
8.43
9.02
11.12

This deterioration in affordability of property in Canterbury over the last couple of years has been one of the reasons why the younger generation is deciding more and more to rent instead of buy their own house. 
... but it’s not the only reason.
 
A quick look on Money Supermarket today found 169 lenders prepared to offer 75% LTV Buy to let Mortgages and none at 85% LTV.  Lenders have self-imposed a high level of entry for buy to let landlords (i.e. putting down at least 25% of the purchase price in cash).  The BoE don’t need to meddle there!  Also, the Tories have certainly done lots to level the playing field in favour of first time buyers.  For nearly a year now, Landlords have had to pay an additional 3% in stamp duty on any buy to let purchase and over the coming four years, tax rules on landlord’s claiming mortgage interest relief will affect their pocket.  Neither, it doesn’t help that the local Authority sold off council houses in the Thatcher years and so for many on low incomes or with little capital, owning a home has simply never been an option (today or in the past).  
It’s easy to look at the headlines and blame landlords.  First time buyers have been able to access 95% LTV mortgages since 2010, meaning even today, a first-time buyer could purchase a 2 bed terraced in Canterbury for around £200,000 and only need to find £10,000 deposit.  Yes, a lot of money, but first time buyers need to decide what is important to them.  Either save up for a couple of years to save the deposit and go without two annual foreign holidays, the full Satellite or Cable TV package with Sports and Movies costing three figures a month, the latest mobile phone and out socialising ... or not as the case maybe?
I think we as a Country have changed ... renting is returning to be the norm.  So my opinion is, landlords have it tough.  Let’s not blame them for the ‘perceived’ woes of the nation ... because to be frank … we haven’t always been a country of homeowners.  Roll the clock back to 1964, and nationally, 30% of people rented their home from a private landlord – today – its only 15.3% nationally.

If you are an existing landlord or someone thinking of become a first-time landlord looking for advice and opinion and what (or what not to buy in Canterbury) then please do get in touch. 

Wednesday 7 June 2017



What will the General Election do to 9,236 Canterbury Homeowners?





In Canterbury, of the 19,850 households, 5,148 homes are owned without a mortgage and 4,088 homes are owned by a mortgage. Many homeowners have made contact me with asking what the General Election will do the Canterbury property market?  The best way to tell the future is to look at the past.


I have looked over the last five general elections and analysed in detail what happened to the property market on the lead up to and after each general election. Some very interesting information has come to light. 


Of the last five general elections (1997, 2001, 2005, 2010 and 2015), the two elections that weren’t certain were the last two (2010 with the collation and 2015 with unexpected Tory majority). Therefore, I wanted to compare what happened in 1997, 2001 and 2005 when Tony Blair was guaranteed to be elected/re-elected versus the last knife edge uncertain votes of 2010 and 2015 ... in terms of the number of houses sold and the prices achieved. 


Look at the first graph below comparing the number of properties sold and the dates of the general elections:
  




 


It is clear, looking at the number of monthly transactions (the blue line), there is a certain rhythm or seasonality to the housing market. That rhythm/seasonality has never changed since 1995 (seasonality meaning the periodic fluctuations that occur regularly based on a season - i.e. you can see how the number of properties sold dips around Christmas, rises in Spring and Summer and drops again at the end of the year). 


To remove that seasonality, I have introduced the red line. The red line is a 12 month ‘moving average’ trend line which enables us to look at the ‘de-seasonalised’ housing transaction numbers, whilst the yellow arrows denote the times of the general elections. It is clear to see that after the 1997, 2001 and 2005 elections, there was significant uplift in number of households sold, whilst in 2010 and 2015, there was slight drop in house transactions (i.e. number of properties sold). 


Next, I wanted to consider what happened to property prices. In the graph below, I have used that same 12-month average, housing transactions numbers (in red) and yellow arrows for the dates of the general elections but this time compared that to what happened to property values (pink line).


  


It is quite clear none of the general elections had any effect on the property values.  Also, the timescales between the calling of the election and the date itself also means that any property buyer’s indecisiveness and indecision before the election will have less of an impact on the market. 

So finally, what does this mean for the landlords of the 5,955 private rented properties in Canterbury? Well, as I have discussed in previous articles (and just as relevant for homeowners as well) property value growth in Canterbury will be more subdued in the coming few years for reasons other than the general election. The growth of rents has taken a slight hit in the last few months as there has been a slight over supply of rental property in Canterbury, making it imperative that Canterbury landlords are realistic with their market rents. But, in the long term, as the younger generation still choose to rent rather than buy ... the prospects, even with the changes in taxation, mean investing in buy-to-let still looks a good bet.