The ‘Liquorice Allsorts’ Canterbury Property market

Despite the UK economy heading in the right direction with record low mortgage rates and unemployment  figures dropping,  the rate of property prices rising in Canterbury have tempered since the start of the year. This slow, but sure downward trend in the rate of growth has been in evidence since mid-2014.  Property value increases continue to outpace the growth in salaries, however the gap is closing, helped by a lift in salaries over the last 6 months.  Property values in the South East region as a whole are 9.1% higher than a year ago.  Compare this to the neighbouring regions of the East 8.8% higher and the South West at 3.6%, the majority of the country continue to see annual house price gains - the exception being Wales which recorded a slight decline of -0.6%.

Even with the tempering in house price inflation, it does not necessarily change my outlook that property prices are likely to be firmer over the second half of 2015 amid heightening activity in the Canterbury property market.  As stated in a previous article, there is a current shortage of properties on the market, restricting supply, which in turn will provide stability and support to Canterbury property prices. Therefore, my overall opinion is that Canterbury property prices will rise by 6% over 2015 and roughly the same in 2016.

Property investment is a long term business.  Buying the right sort of property is vital. I have recently been speaking with a number of Canterbury landlords about the importance of a balanced portfolio, when buying and renting out property. The balance between buying properties that offer good monthly returns (high yields) but quite often offer poor capital growth (i.e. they don't increase in value that much over the years compared with the average) verses properties that do go up in value quicker but often offer a lower yield.  So, what type of properties have performed best over the last few years in Canterbury, especially in terms of their capital growth?

When comparing what the average price of detached, semi-detached, terraced and flats were selling for back at the start of the Millennium to the present.  The results are quite remarkably different, almost like a bag of ‘Liquorice Allsorts’, as the different types of property have performed poles apart over the last 15 years:

Detached Houses in 2000 were selling on average for £183,550 and so far in 2015, they have been selling on average in Canterbury for £499,313 a rise of 172%

Semi -Detached Houses in 2000 were selling on average for £94,800 and so far in 2015, they have been selling on average in Canterbury for £280,833 a rise of 196%

Terraced Houses in 2000 were selling on average for £83,523 and so far in 2015, they have been selling on average in Canterbury for £236,264 a rise of 183%

Flats and Apartments in 2000 were selling on average for £78,917 and so far in 2015, they have been selling on average in Canterbury for £185,024 a rise of 134%Moving forward, what should new and existing buy to let landlords do with this information?  Well, the questions I seem to be asked on an almost daily basis by landlords are:

 “Should I sell my property in Canterbury?”

“Is the time right to buy another buy to let property in Canterbury and if not Canterbury, where?”

“Are there any property bargains out there in Canterbury to be had?”

 Many other Canterbury landlords, who are with us and other  Canterbury letting agents, like to pop in for a coffee or pick  up the phone or email us to  discuss the Canterbury property market, how Canterbury compares with its closest rivals (Maidstone, Ashford, and Royal Tunbridge Wells), and hopefully answer the three questions above.  I don’t bite, I don’t do hard sell, I will just give you my honest and straight talking opinion and look forward to hearing from you.

Canterbury Property Market – Bricks and Mortar!

 

The Land Registry have just released their latest set of figures for the Canterbury Property market. It makes interesting reading, as average property values in Canterbury rose by 0.4% in June. This leaves average property values 8.3% higher than 12 months ago, meaning the annual rate of growth in the City fell to its lowest level since June 2014. When we compare Canterbury against the regional picture, South East property values rose by 0.4%, leaving them 8.4% higher than a year ago.

Obviously this is a far cry from the price rises we were experiencing in Canterbury throughout 2014. At one point (November 2014 to be exact) property values were rising by 11% a year. All the same, even with the tempering of the Canterbury property values in 2015, property values are still higher. This is good news for local homeowners who had been affected by the downturn after 2007 and still find themselves in negative equity.

However, the thing that concerns me is that the average number of properties changing hands (i.e. selling) has dropped substantially over the last 12 months in the City. In April 2014, 75 properties sold in Canterbury but in April 2015, that figure dropped to 50.  I have been in the Canterbury property market for quite a while now and the one thing I have noticed over the last few years has been the subtle change in the traditional seasonality of the Canterbury property market. It has been particularly noticeable this year in that the normal post Easter flood of properties coming onto the market was not seen. This has made an imbalance between supply and demand, with less houses coming onto the market there is simply not as much choice of properties to buy in Canterbury and with the population of Canterbury ever increasing, this will generally strengthen house price growth for the foreseeable future.

So what does all this mean for Canterbury landlords or those considering dipping their toe into the buy to let market for the first time? For many people, buy to let looks a good investment, providing landlords with a decent income at a time of low interest rates and stock market unpredictability.

However, if you are thinking of investing in bricks and mortar in Canterbury, it is important to do things correctly. As an investment to provide you with income, for those with enough savings to raise a big deposit, buy to let looks particularly good, especially compared to low savings rates and stock market yo-yo’s. I must also remind readers, landlords have two opportunities to make money from property, not only is there the rent (income), but with the property market bouncing back over the last few years, property value increases has spurred on more investors to buy property in the hope of its value continuing to rise.

Savvy landlords with decent deposits can fix their mortgages at just over 3% for five years, making many deals stack up. Nevertheless, low rates cannot stay low forever, because one day they must rise and you need to know your property can stand that test. I saw some Canterbury landlords struggling in the mid noughties, when interest rates rose from 3.5% in July 2003 to 5.75% in July 2007. That might not sound a lot, but that was the difference of making a £100 a month profit in 2003 to having to make up a shortfall in the mortgage payments of £100 per month in 2007.

Its true many landlords were thrown a life raft when the base rate dropped to 0.5% in March 2009. Whilst interest rates have remained there since, mark my words, they will rise again in the future. However, even with the potential for costs to rise, demand for decent rental properties remains high as there are ever more tenants in the market, driving up demand and thus rents. The British love of bricks and mortar plus improving mortgage deals also add up to fuel the buoyant Canterbury property market.

If you are planning on investing in the Canterbury property market, or just want to know more, things to consider for a successful buy to let investment, one source of information is the Canterbury Property Blog www.canterburypropertyblog.com .

Are ‘would be’ Canterbury homeowners warming to the idea of renting?

 

I was reading a report the other day produced by the Halifax, about the UK property market and why more and more of the younger generation seem to be renting rather than buying. I find it fascinating that over the last ten years, the British obsession of buying a house almost as soon as you left school, and the fact that if you rented you were seen as a second class citizen, has turned on its head to a point where the hopes and dreams to own a nice home will be replaced by the ambition simply to live in one.

In the latter half of the 20th Century, you left school, got a job, bought a small house and kept buying and selling property, constantly upgrading until eventually they carried you out in a box. However, the perceived shame and stigma of renting is no longer the case, as it seems that the British are now beginning to accept a lifetime of renting. This is a very important consideration for both Canterbury homeowners and Canterbury landlords as it will transform the way the Canterbury property ladder looks in the future and I might ask whether or not it will exist at all for some people? The make up of households is one important factor, especially in the Canterbury property market. The normal stereotypical married couple, two kids and dog of the 1970’s and 80’s has changed. More and more we have the need for larger houses where two families come together after divorces (+ kids) and need a property to house everyone through to an increase in the number of one person households.

Looking at the data for Canterbury, of the 10,665 private rental properties in the Canterbury City Council area, 27.62% of those rented properties are one person households (2,946 properties). However, when we compare the number of one person Canterbury households who have bought their own property with a mortgage (i.e. therefore they are still in work), of the 40,107 owner occupied households in the area, only 3,025 of those properties are a one person household (i.e. 7.54%). Compared to a decade ago, this explosion in demand for decent high quality rental properties that one person households require has not been met with an increase in supply of such properties.  More and more I believe Canterbury landlords need to consider this change in the make up of Canterbury households, as I believe this could be an opportunity. As an aside, another interesting stat that raised an eyebrow was that 12.91% of those 10,665 rental properties (1,377 properties) are lone parents households as well. Again, another possible opportunity that Canterbury landlords might want to consider in their future investment plans.

It is true that the Governments introduction in 2013 of the Help to Buy scheme, where first time buyers only needed a 5% deposit, changed the perception of peoples’ ability to buy without having to save ten’s of thousands of pounds for a deposit. However, it might surprise you, 95% mortgages were re-introduced within six months of the Credit Crunch in late 2009, so again it comes down to people’s own perception. Many youngsters think they won’t get a mortgage, so don’t even bother trying.

Coming back to the deposit, it’s still a fact that once you start renting it becomes that much harder to save for a deposit, regardless of the size. Interestingly, 7 out of 8 renters polled by the Halifax (86% to be exact) refuse to sacrifice the quality of accommodation they currently live in to reduce the amount of rent they pay in order to save for a deposit.  This is the crux and the real reason why people aren’t buying but renting... and why demand for renting will continue to grow in the future (i.e. good news for landlords). Canterbury tenants can upgrade the quality and size of the property they live in for a minimal rent increase. The average rent of a two bed property in Canterbury is £1,059pm, but a three bed is only £98pm more at £1,157pm, whilst the average four bed rent is £1,383pm. If you had to make that jump when buying, the monthly mortgage payments would be stratospherically more than that!  Without any social pressure and better quality rental properties compared to a decade ago, we will become a nation of renters within the next generation, as the UK is becoming more like Europe, where renting is ‘the norm’. Who is going to supply all these properties to rent? Landlords! Whether you are an existing landlord looking to grow your portfolio or looking to become a ‘first time landlord’, my thoughts are take advice from as many people as possible. However, as the majority of landlords buy their buy to let properties in the same town they live, you will need specific advice about Canterbury itself. One place for such advice and opinion is the Canterbury Property Blog www.canterburypropertyblog.com

Why are less Canterbury people moving house?

 

 

During my school years (some years ago......), my parents seemed to move every other year (or it seemed that way). In reality, looking back at the house moves, we actually moved four times before I left home. However, whilst my parents kept the removal van people in business whilst I was at school, from research I have carried out it shows things have changed considerably in Canterbury over the last few decades, and interestingly, the trend is getting worse ... for the removal van people at any rate!

In Canterbury, there are 19,850 properties. However, after we remove the 4,089 council houses, 5,955 privately rented houses and 352 houses where the occupants live rent free, that leaves us with 9,454 owned properties (be that 100% outright, with a mortgage or shared ownership). This means 47.6% of the properties in Canterbury are occupied by the owner (the national average is interestingly 64.2%) but the number of people who have sold and moved house in Canterbury, over the last 12 months, has only been 1,261. This means on these figures, the homeowners of Canterbury are only moving on average every 7.49 years.

These are the reasons. Firstly, the cost of moving house has risen over the last twenty years. Secondly, with many re-mortgaging their properties in the mid 2000’s before the price crash of 2008, there is a reluctance or inability in a small minority of homeowners to finance a home sale/purchase, due to lack of equity. These are both factors driving fewer moves by existing homeowners.

However, the big effect has been the change in house price inflation. Back in the 1970’s and 1980’s, house prices were doubling every 5 to 7 years. Even in Greater London, with its stratospheric property price increases over the last few years, it has taken 13 years (August 2002 to be exact) for property values to double to today’s levels.

This change to a relatively low inflation Canterbury property market (i.e. Canterbury property values not rising quickly) is significant because the long term consequences of sustained low house price growth is that it eats into mortgage debt more slowly than when property price inflation is higher. Canterbury homeowners cannot rely on inflation to shrink their debt in real terms as much as they did in say the 1970’s and 1980’s.

So what does this all mean for Canterbury buy to let landlords? Well for the same reasons existing Canterbury homeowners aren’t moving, less ‘twenty something’s’ are buying their first home as well. Canterbury youngsters may aspire to own their own home, but without the social pressure from their peers and parents to buy their first property as soon people reach their early 20’s, the memory of the 2008 housing crisis and the belief the hard times either aren't over or the worst is yet to come, current and would-be homeowners are warming to the idea of renting. I also believe UK society has changed, with the youngster’s wanting prosperity and happiness; but wanting it all now... instantly... today... without the sacrifice, work and patience that these things take. As a society, we expect things instantly, and if it doesn’t come easy, doesn’t come quick, some youngsters ask if it is really worth the effort to save for the deposit? Why go without holidays, the newest iPhone, socialising four times a week and the fancy satellite package for a couple of years, to save for that 5% deposit if there is no longer a social stigma in renting or pressure to buy as there was... say... a generation ago?

Even though, in real terms, property prices are 5% cheaper than they were ten years ago (when adjusted by inflation), 30% of Canterbury properties are privately rented (nearly double it was twenty years ago). As a result, the demand for rental properties continues to grow from tenants, meaning those wishing to invest in the buy to let market, over the long term, might be on to a good thing? For advice and opinion on the Canterbury Buy To let property market, one source of information is The Canterbury Property Blog www.canterburypropertyblog.com .

Affordability of housing in Canterbury

 

 

Talking to an elderly relative recently, he reminded me that in his day, you could have bought a property for the same price of what a decent second hand car would sell for today and that his father was buying property for the same price as a decent 50 inch LCD TV!  Now of course, these are only headline prices and we have had wage growth and inflation.  Interestingly, since the Second World War, property values in Canterbury doubled in 1961, 1971, 1975, 1980, 1988, 2000 and 2006.

 

Looking at more recent times, since the start of the Millennium, these increases in property values have generated large increases in equity for many homeowners but on the other side of the coin also making housing unaffordable for other people.  It might interest readers to note that most of Europe experienced sharp increases in property values in the early years of 2000’s, with only Spain beating  us (although we know what has happened to the Spanish property market over the last few years!).  In the 2000’s, the British situation was different in two regards.  First the property value boom started earlier and saw more sustained increases, second, the regional pattern was fairly uniform.

 

However, since 2010, the regional pattern has been completely different in the UK.  Compared with  2007 (the last property boom), average property values today in England and Wales are 1.2% higher, whilst in Greater London, they are 35.7% higher, whereas in Canterbury they are 7.01% higher. The London property market has been like a different country.  Looking specifically at Canterbury though, it has continued for first time buyers to get on the housing ladder.  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). 

 

1997      4.17 to 1  (i.e. the average value of a Canterbury property was 4.17 times higher than the average annual wage in Canterbury)

2000      5.28 to 1

2002      6.83 to 1

2003      7.37 to 1

2007      9.07 to 1

2009      7.12 to 1

2012      8.33 to 1

Today    9.29 to 1

You  can see quite clearly, even though we had an improvement just after the 2007 property crash (i.e. the ratio dropped), in following subsequent years with Canterbury house price’s rising but wages not keeping up with them,  the ratio started rise.  This has meant there has been a deterioration in affordability of property in Canterbury over the last couple of years.  This is one of the (many) reasons why the younger generation is deciding more and more to rent instead of buy their own house.  The local Council sold off council houses in the Thatcher years and for many on low incomes or with little capital, owning a home has simply never been an option.

With fewer people able to save up the deposit required by mortgage lenders, more and more people are looking to rent, this has also resulted in a change in attitudes towards renting over the last decade.  This delay in moving up the property ladder has driven rents up in Canterbury over the last few years, as more people are seeking properties to rent.  All these things have combined to make the demand for rental property in Canterbury rise.  If you are an existing landlord or someone thinking of become a first time landlord looking for advice and opinion and what (or not to buy in Canterbury), one source of information is the Canterbury Property Blog www.canterburypropertyblog.com .

Canterbury Buy To let – Bedrooms?

Last week, a landlord from Canterbury emailed me to ask, after reading the Canterbury Property Blog, if he should extend his terraced house making an extra bedroom in the loft. He had a builder friend who owed him a favour, and thought a good way would be get an ‘inexpensive’ extension.

Having more useable space is generally thought to be consistent with better quality accommodation and homeowners and tenants are prepared to pay for it. If you added a bedroom to a two bed terraced to make a three bed terraced, it will add 10% to the value of the property.  Turn a three bed terraced into a four bed terraced and 9% will be added to the value. Looking at semi-detached properties, and turn a two into a three bed and 12% will be added to the value, whilst making a three bed semi into four bed will add 9% in value.

However, before you rush off to the planning department there are some important considerations, whether you are a homeowner or landlord.  What would be the cost of making that extra bedroom? The average value of a terraced house in Canterbury is currently £228,700 whilst the average value of a semi-detached house is £245,700, meaning to make money the cost of the extension would need to be less than £21,726 on the terraced property and £25,798 on the semi-detached house. Talking to a number of trades’ people in the City, most are booking up into the New Year. Also, no matter how good a friend he was, I know of no builders that would charge as little as that. Maybe the builder was just thinking of a bit of pointing work on the chimney!

Well, that got me thinking about how bedrooms affected rental prices and rent-ability as well.   Interestingly below, you will see that whilst bedrooms do have an effect on the rent that can be achieved and the rent-ability of the property – the difference does not warrant the expense, hassle and trouble of extending.

17.1% of the one bed properties on the market to rent in Canterbury have a tenant with an average rent of £613 per month

35.9% of the two bed properties on the market to rent in Canterbury have a tenant with an average rent of £1,035 per month

32.9% of the three bed properties on the market to rent in Canterbury have a tenant with an average rent of £1,151 per month

14.9% of the four bed properties on the market to rent in Canterbury have a tenant with an average rent of £1,397 per month

No, if you want to increase the value of your property, be you a Canterbury landlord or homeowner, there are things that cost a lot less than building extra bedrooms. Spruce up the exterior, emulsion all the rooms, install fresh carpets and curtains. For homeowners, a matter of a few hundred pounds will add thousands whilst for landlords, these things can add an extra 10% to the rent that you can achieve. For more advice and opinion on the Canterbury Property Market, visit the Canterbury Property Blog www.canterburypropertyblog.com

INVESTMENT OPPORTUNITY - STUDENT LET - POTENTIAL OF +7% YIELD

INVESTMENT OPPORTUNITY. It’s not too often that you will hear me harping on about one of my own properties for sale, but this one is too good an opportunity to miss!

We have just placed the property on the market this morning and as we have also handled the management of the property for the past four years, we know quite a bit with regard to its ‘rent-ability’, plus the important yield!

For starters, the properties location is superb and we have a regular queue of students looking to rent this property when placed on the market. The monthly rent is £1360 per month, which equals £14960 per annum (based upon 11 months’ rent, i.e. 12 month Tenancy with half rent July / August). Based upon these figures, the property would deliver a yield of 5.65%.

Now for the interesting part………………… to the front of the property is a garage, which could be (subject to planning permission) transformed into a bedroom, offering FIVE BEDROOMS. How do I know this? Well, we also manage the property next door and that’s exactly what the Landlord has done!

So, let’s now do the maths on the 5 bed configuration. This would then offer a monthly rent of £1700 per month, which equals £18700 per annum (based upon 11 months’ rent, i.e. 12 month Tenancy with half rent July / August). Based upon these figures, the property would deliver a cracking yield of 7.06%.

Check the property out at http://www.martinco.com/property/for-sale/202621 and give me call for further details.

Canterbury Buy To Let – Demand and Supply

Following on from my recent article about the state of the Canterbury property market and in particular what had happened to the rents Canterbury tenants have had to pay since the Credit Crunch, if you recall, I said rents in Canterbury are 7.4% higher than they were in 2008. A Canterbury landlord has since rung me after reading the Canterbury Property Blog, wanting to know more of the story of what was happening to current rents in the City. The reason he asked was that his current agent hadn’t increased his rent for a number of years and was concerned if he was getting the best return from his buy to let investment.

The Canterbury rental market is all about supply and demand (isn’t it so in all parts of the economy?). On the supply side, 408 rental properties have come up for let in the last 31 days in Canterbury. That is a lot when you consider there are 5,955 rental properties in Canterbury, meaning 6.85% of the rental stock of properties in Canterbury are coming onto the market each month (it is normally around 5% around the UK).  However, when you strip out the student properties, which account for around 50% to 55% from these numbers (because by definition each student property changes its tenants each year), the remaining rental properties (in what is called the professional lets sector), the percentage is much lower than the norm.  One reason for this lack of new rental properties coming on the market is the fact that professional tenants seem to be staying in properties longer.

With this lack of supply, newer tenants have to pay more to secure the property they want. And this is the crux of the matter ...properties they want. Older properties in Canterbury, that haven’t been maintained, still retain their wood chip wallpaper from the 1970’s and thread bare carpets have seen their rents drop. Tenants want either modern properties with all the mod cons or older style properties that have been presented to an exceptional standard – and they are prepared to pay for the privilege. Rents for top quality properties in Canterbury have risen by 0.5% in the last month Any properties, old or modern, put on the market in good or excellent condition will rent in a matter of days.   

Interestingly, looking at Canterbury property values, the Land Registry have just released their latest set of data on property values. Throughout April 2015 (the latest set of data), property values rose in Canterbury, with 0.4% growth, meaning they are now 8.9% higher than they were a year ago.  When one looks at the regional picture, the South East average property values rose by 0.8% in the last month. The difference doesn’t concern me, as the regional and local property values always even themselves out over the months. 

Looking forward, after considering all the statistics and talking to other property professionals, I expect property values in Canterbury to rise by 3% to 5% over the coming 12 months, following the Conservative victory.  In a forthcoming article, I will discuss how the number of properties changing hands each month has dropped considerably in the last 10 to 15 years in the City. 

...And so back to our landlord. Each property is unique and so as his tenancy agreement allows him to inspect the property with notice to the tenant, we will be visiting the property next week.  For more in depth thoughts and opinions like this on the Canterbury Property market ...visit the Canterbury Property Blog www.canterburypropertyblog.com

Canterbury Buy To Let – Should you look further afield?

I was at a recent business networking event in Canterbury, when a landlord (who it transpired had a couple of Buy to let properties) bent my ear on where the next hot spot town or city is to invest his money in and where the best rental yields are. Now it can be tempting to just look at Canterbury when growing a buy to let property portfolio, but there can be big differences in the amount of rental income you receive and how much your property will appreciate by considering other locations in the country.

Now regular readers of my articles of the Canterbury Property Blog know of my love of the ‘buy to let seesaw’. On one side of the seesaw is yield and the other capital growth. Landlords should be looking for a high rental yield so that they can comfortably cover any mortgage payments and make some profit from the income return, but you also want the property to rise in value over time so you can get some capital growth when you come to sell. However, high yielding property in say such areas as Wincheap and Sturry in Canterbury, (so the seesaw arm with yield on it goes up on one side), will suffer from low capital growth (so the other arm with capital growth on the seesaw goes down).  The relationship works in reverse as well, so in such upmarket areas as the New and Old Dover Road’s, properties offer good capital growth, but at the expense of a decent yield.  

The North East and North West of the UK are landlord magnets for great yields. The average yield in Canterbury today is 5.82%, which when you compare with say Hartlepool in the North East, which achieves 7.73% or  9.43% in the Anfield area of Liverpool, doesn’t look too healthy. Now of course, these are only averages and some of my Canterbury landlords are achieving 6% to 8% on some of their Canterbury properties, but at the expense of capital growth. Anyway, after wasting a tank full of petrol up the A1 to Teeside or the M1 to Home of the ‘The Reds’,  that Liverpool property, would have dropped in value by 2.2% in the last 12 months and the Hartlepool property would have dropped by 1.4%.

When you compare the long term house price growth, it gets even worse. Since 1995, property values in Canterbury have risen by 219.37%,compared with Hartlepool at 21.02% and Liverpool  at 90.11% – it just shows you shouldn’t always chase the yield because of the poor increases in property values in those two places. As I always like to explain to landlords, a decent yield is important, but when you come to sell your buy to let property it would also be nice to make a decent profit.

At the end of the day, as a Canterbury landlord, you want to be making gains from both your rent and house price growth, particularly when you want to sell, because when combined, the rental yield and capital growth, which gives you the real return on your investment. Finally though, do you know Hartlepool and Liverpool as well you know Canterbury? Do you know where the good and bad areas are in both those places? Are you happy that it would require you to take a day out of work if there was an issue with your property in the North?  If you can’t answer yes to all three questions, then maybe you should be considering a property closer to home? The graph below makes a very interesting comparison...... Happy hunting!!

Canterbury Property Market – Post Election Blues?

 

 

With the election now over and the stability of Downing Street secure, with David Cameron and his Blue Tories as the largest party in Westminster, in Canterbury (as in the rest of the UK) average wages are beginning to grow faster than inflation. This is good news for the Canterbury housing market, as some buyers may be willing or able to pay higher prices given the more certain political outlook and attractive inexpensive mortgage rates. However, sellers who think they have the upper hand due to the lack of property for sale should be aware that we should start to see an increase in the number of people putting their properties on to the market in Canterbury giving buyers some extra negotiating power.

At the last election in May 2010, there were 386 properties for sale in Canterbury and by October 2010, this had risen to 495, an impressive rise of 28% in five months. An increase in the supply of properties coming on to the market could tip the balance in the demand and supply economics seesaw, thus potentially denting prices. However, as most sellers are buyers and confidence is high, this means there will be good levels of property and buyers, well into the summer, as demand will continue to slightly outstrip supply.

Just before we leave the aftermath of the election, it is important to consider what the uncertainty in April did to the Canterbury property market. I mentioned a few weeks ago that property values (i.e. what properties were actually selling for) had dropped by 0.2% in March 2015. Now new data has been released from Rightmove about April’s asking prices of property in Canterbury. It shows that pre-election nerves finally came home to roost in the final weeks of electioneering, with the average price of property coming to market only increasing by a very modest 1.1% (April is normally one of the best months of the year for house price growth).

I am sure our local MP, Julian Brazier would agree that the biggest issue is the lack of new properties being built in Canterbury. The Conservative manifesto pledged to build 200,000 discounted starter homes for first-time buyers in the next five years. For Canterbury to gets its share, that would mean only 110 such properties being built in Canterbury each year for the next five years, not much when you consider there are 60,771 properties in Canterbury.

Housing is not a big issue for Conservative voters and because London is an increasingly Labour city where the biggest housing issues are found by a country mile, so will it remain on the ‘to do list’ but won’t get recognition it deserves. Until another political party gets back into power, nothing will seismically change in the property market, thus demand for housing will continue to outstrip supply, meaning property values will increase (good news for landlords). However, as rents tend to go up and down with tenant wages, in the long term, rents are still only 7.4% higher than they were in 2008 (good news for tenants)... with renting everyone wins!

Is the Canterbury Property Market in crisis?

 

Since the 1960’s more people have owned their own home than rented but, for many young Canterbury people, the dream of buying their own home is dying...or is it? Since the turn of the Millennium, in Canterbury (as in the rest of the Country) there has been a significant change in the proportion of people who own their own home in Canterbury. In 2001, 72.4% of homes in Canterbury were owner occupied, today the figure is 65.9%, a significant decline in such a short time.  Buy to let landlords can find tenants because young people say they cannot afford a deposit to buy, unless they inherit money or are given a loan from the Bank of Mum and Dad

 

In Canterbury, only 35.74% of 25 to 34 year olds have a mortgage. When you compare Canterbury against the national average of 35.93%, it just shows how different parts of the country have different housing markets. However, the really interesting fact is this  ...Roll the clock back to 1991 and nationally, 67% of 25 to 34 year olds had a mortgage. After WW2, the supply of properties being built kept up with demand as millions of council homes were built (the most being built in 1950s, surprisingly under Tory Governments!). Also private house building increased in the 1950’s, but especially in the 1960’s and 1970’s, and as the Country  got more prosperous it meant that by 1971, there were more home owners than renters.

 

However, since the 1970’s, the population has grown but the number of new properties being built hasn’t kept up at the same rate, the result is that there have been huge rises of property prices in the early ‘70s, the late 80s and more recently between 1999 and 2004. Interestingly, since the early 1970’s, out of the 34 richest countries in the world, the UK has seen highest property prices rises.

 

95% mortgages have been available to first time buyers since late 2009, but with property prices rising by 229.4% since the early Winter of 1996 in Canterbury, as property prices have been rising and first time buyers have been saving, the amount they have to save is continually rising at the same time. The stress on saving even for that kind of deposit, coupled with the new stricter mortgage rules introduced in 2014, means that most 20/30 something’s in Canterbury are renting instead of buying.

 

The issue quite simply comes back down to a lack of new homes being built. In Canterbury, only 518 properties a year are being built whilst the population is rising by 1,584 a year. The supply of new homes has been limited by planning laws, local councils not having the money to build council houses, hard hitting green belt limitations, and our old friend NIMBY’ism.  With a rising population and net migration, especially from the EU, the mismatch between demand and supply is why we have the problem. Until Politian’s have the backbone to realise the Country needs a lot more decent homes built, the problem will just get worse.

In the meantime, demand for rental property will continue to grow because people need a roof over their head at the end of the day ......fact.

1183% Return for Canterbury Buy To Let landlords since 1999

 

Buy to let is essentially different from investing in stocks and shares or putting money in the Building Society. Whilst these other investments (Building Society Passbooks, Stocks and Shares etc) are passive  ie once the  money has been invested it you leave it alone, with buy to let, things are more hands on, in fact it’s almost a business. One thing the landlords I speak to say is the fact that they like buy to let because it is both an investment, as well as a business. It is this factor that attracts many of my Canterbury landlords – they are making their own decisions rather than entrusting them to others (such as City Whiz Kidzs in London playing roulette with their Pension Pot!).

 

So if you are investing in the Canterbury property market, you can earn from your investment in two ways. When a property increases in value over time, it is known as 'capital growth'. Capital growth, also known as capital appreciation, has been strong in recent times in Canterbury, but the value of property does go up as well as down just like shares do, but the initial purchase price rarely decreases.  Rental income is what the tenant pays you - hopefully this will grow over time. If you divide the annual rent into the value (or purchase price) of the property, this is your yield, or annual return.

 

I was talking to a landlord who bought a terraced house in the St Peters Place area of Canterbury. He bought a very pleasant 3 bed terrace in 1999 for £72,000. It sold again in February just gone for £285,000, a rise of 295.83% in just over 15 years – a compound annual return of 9.61%

 

However, the real returns are for those Canterbury landlords who borrowed money to purchase their buy to let property. They have made significantly higher returns than those who paid 100% cash. If the landlord had borrowed 75% of the £72,000 purchase price of the St Peters Place terraced house on an interest only 75% mortgage, he would have only needed to invest £18,000 (as his 25% deposit... borrowing the remaining £54,000), but his £18,000 would be worth today, £231,000  (£285,000 less £54,000 interest only mortgage)... a rise of 1183.33% - a compound annual return of 18.55%... and I haven’t even mentioned the rent he would have received in those 15 years!

 

This demonstrates how the Canterbury buy to let market has not only provided very strong returns for average investors since 1999, but how it has permitted a group of motivated buy to let Canterbury landlords to become particularly wealthy. In fact, if this landlord had continued to re-mortgage the property as it went up in value, he could by our reckoning have had an additional two or three properties (albeit with larger mortgages but greater future potential).

 

As my article mentioned a few weeks ago, more and more Canterbury people may be giving up on owning their own home and are instead accepting long term renting whilst buy to let lending continues to grow from strength to strength. If you want to know what (and would not) make a decent property to buy in Canterbury for buy to let, then one place for such information would be the Canterbury Property Blog. www.canterburypropertyblog.com or email Canterbury@martinco.com

Are Attitudes to Home Ownership changing in Canterbury?

 

 

Speaking to a Bank Manager the other day in Canterbury, we got talking about the state of the Canterbury property market and whether we, as a Country, are turning more and more to the European style of property ownership, where it is the norm to rent as a opposed to automatically buying once you have a good job etc.

Even though a recent report by the Halifax stated homeownership remains a goal for 85% of twenty to forty five year olds, there is information emerging that attitudes in the UK towards renting your own home as opposed to owning it have softened, showing more and more, that renting is being seen as a life style choice.  In fact it is recognised in learned circles that the cycle of renting is also repeated by the fact that people who grow up primarily in rented accommodation are themselves more likely to rent than buy.

The biggest barrier often mentioned to buying a house is the claim that they are not buying property at the moment because of a lack of sufficient wages and by the high level of deposits, but like we said a few weeks ago, in Canterbury, if a couple, one on say three quarters of the average Canterbury salary of £33,130 pa (so that would be around £25,000 pa) and the other on the Minimum Wage, assuming they had a reasonable credit history they would be showered with lenders offering them a 95% mortgage (a reasonable credit history means they haven’t defaulted on loans, paid all their bills on time nor got any County Court Judgements. Just because you missed just one credit card payment won’t mean you have messed up your credit score and your ability to get a mortgage) and they would only need to find £7,500 as a deposit to buy a decent apartment in an up market area of Canterbury or a good honest 2 bed terraced house in average part of the City (e.g. East Canterbury). ..it comes down to the perceived capability of the youngsters in Canterbury to buy nowadays.

Interestingly, when I looked at the Canterbury figures, the average Canterbury tenant has a younger profile (especially the sub 24 year olds) than the English and Welsh average, as can be seen from the graph below. However, some of this can be explained by the high Student population. What interested me as well was the relatively large number of people renting over the age of 50! I know we have a large number of mature tenants at our agency, but I always thought that was the exception to the rule. Obviously not!  (And that is good news for landlords as they make excellent tenants.)

So what does all this mean for Canterbury landlords and future Canterbury landlords? I honestly believe there is a difference between the hope and perceived capability of the younger generation to buy a home. Although homeownership is seen as advantageous by a majority, many tenants admitted in the Halifax report they are not taking the steps they need to purchase their own home.

As the local authority aren’t building any properties in Canterbury, people still need a roof over the head, and that is why, as I mentioned a few weeks ago in the Canterbury Property Blog, the demand for rental properties will only continue to steadily rise in the coming decade. If want to know where the Canterbury Property market is heading and where you should (and shouldn’t buy), maybe the one place you should visit is the Canterbury Property Blog www.canterburypropertyblog.com or send me an email to canterbury@martinco.com

Rents Paid By Tenants In Canterbury On The Rise

 

 

With May nearly gone and considering we are nearly halfway through 2015, I was talking to landlord from Tyler Hill the other day about what is happening to the level of rents that are being achieved in the Canterbury property market.

In terms of rents in Canterbury, it appears that rents being achieved for new rentals (i.e. when the tenant moves out and new tenant moves in) have risen in the order of 3.8% in the last 12 months on top of the range modern properties, yet remained static for older Victorian terraced houses and converted apartments. However, landlords with existing sitting tenants, irrespective of age are not increasing their rents, as most landlords prefer to keep their existing tenant paying the same rent and have the peace of mind that their tenant remains, paying the rent (thus reducing the risk of a void period).

It must be remembered rents dropped by 2.0% over 2008/9, (due to oversupply in the rental market in 2009.) A lot of the people who couldn’t sell their property in Canterbury in 2008/9 when the ‘Credit Crunch’ hit in 2008, decided to let their house out instead of selling at a loss. In fact, the number of houses on the market in Canterbury dropped by 58% between June 2008 and January 2010, a lot of which came on to the rental market in Canterbury. However, looking at the longer term though, tenants have had it good because since the turn of the Millennium, average wages have grown by 46%, but rents outside London have only grown by 36% rental growth over this period.

I told the landlord that there is a lack of new rental properties in Canterbury coming on the market, in fact according to the Office of National Statistics, there are only 43 new rental properties are coming to the market each month in Canterbury but the population of Canterbury is rising by 132 people a month – something will have to give soon! This is compounded by the fact a number of landlords are looking to sell their rental properties in the coming months, as the property market in Canterbury has improved. This further compounded as tenants in existing rental properties appear to be staying in properties for longer periods of time.

Looking at the rents charged in Canterbury, historic evidence in the UK suggests private market rents have moved in line with general inflation. Government figures only go back as far as the year 2000, but looking at other countries with similar housing markets (America, Australia, Ireland and Holland) the fact is rents paid by tenants tend to rise in line or just ahead of inflation.

As short term wage growth in Canterbury has eased off recently, rising by only 1.3% in the last 12 months, taking average salaries in Canterbury to £33,130pa, with the tax breaks announced by The Chancellor in the Budget, I believe, even though rents have kept pace with inflation in the past, renting as an option has become more affordable, and is increasingly seen as a lifestyle choice. With returning economic growth and expected increases in the rate of growth of wages, above inflation rental growth could rise.

If you want a chat about the local Canterbury property market, pop in for a coffee or email me on canterbury@martinco.com .

Faversham - £175K - Yield just under 5%

Good afternoon readers. Bit of a rainy day out there today, but here's a bit of sunshine on the market. Our predictions re post election are bearing fruit, with properties coming on to the market thick and fast …………….it’s another bargain in Faversham.

It’s just come on the market this afternoon and yet again, it’s ticking all the right boxes with regard to the rental market. It’s the right place, right price and also good condition. Just waiting for a tenant to move in!

As ever, these properties are in great demand with two similar properties being rented by us in the past week in Faversham. With a conservative estimate on the rental figure, I would reckon that this property should rent out at a minimum of £725 per month, which at the asking price of £175,000 will give you a yield of just under 5%.

Check this one out at the following link and give the agent a call http://www.rightmove.co.uk/property-for-sale/property-34660800.html

Should you wish to discuss any other specific properties or just a general chat re the current market, please contact me on 01227 455717 or call in and see me at 23 Watling Street in Canterbury.

What does the General Election result mean for the Canterbury Property Market?

 

After the shock of the Conservatives returning to power with a majority at Westminster, all the potential issues and possible uncertainties of a hung parliament has lifted the cloud from the Canterbury property market.  Talking to other Canterbury agents, surveyors and solicitors in the area over the last few days, there are signs that this has started a new impetus for the Canterbury property market after a subdued six months, when an amalgamation of tougher lending conditions, a natural correction after the strong recovery in Canterbury property prices in 2014, and political uncertainty ahead of the General Election slowed demand.

Against the back drop of Labour’s election promises of rent controls and three year tenancies, some Canterbury buy to let landlords were waiting to see how these new policies would be implemented before they committed themselves to buying more property for their buy to let portfolio. Now that uncertainty has been removed, the long term picture is very positive.

So, with all that uncertainty now removed, where next for the Canterbury property market?  Well with inflation at zero and with the money markets happy David Cameron is still at No.10, the Bank of England have no reason to raise interest rates until 2016 at the earliest. As mortgage rates are at their lowest levels since 2010, landlords with large deposits will now be wooed by the mortgage companies in the coming months with low rates.

You see over the past couple of years, Canterbury landlords have benefitted from a booming Canterbury job market. Unemployment in the city has dropped to 1.6%, as a year ago 1,229 people were claiming unemployment benefit compared to today’s 806. With more jobs and better pay, as the level of rents is directly linked to tenant’s wages, there has been an increase in the rental prices tenants are willing to pay for good quality Canterbury properties.

Some landlords might be nervous about Tory’s plans for the housing market in the next five years in terms of tenant demand for their rental properties. One plan is for Housing Association tenants to have the right to buy their property. These kind of tenants were never in the private rented sector and will actually increase the supply of properties in the housing stock in decades to come. The Government ‘Help to Buy Scheme’ has only helped to buy 31 Canterbury properties since April 2013. Considering 693 properties have changed hands in the last year alone in Canterbury, I don’t think it has made a huge difference to our local property market.

The biggest matter, when it comes to tenant demand of rental property going forward, comes from the shift in the mindset and attitudes towards renting itself. Twenty years ago you were seen as a second class citizen if you rented a property. In Canterbury, as in the rest of the UK (apart from Central London), renting continues to offer good value for money for tenants.  If you are an existing landlord in Canterbury or thinking of becoming one (or as we like to call you .. a FTL .. a ‘first time landlord’), then I must suggest you seek out specialist advice and opinion. Like many agents in Canterbury, we will happily give you our opinion on the current state of the market and the advantages/disadvantages to investing in the Canterbury property market if you pop into our offices. However, if time is at a premium, another source of information on the Canterbury Property Market is the Canterbury Property Blog at www.canterburypropertyblog.com

Canterbury Property Market – What is really happening?

I had an interesting conversation with a local Canterbury accountant the other day. He is quite an observant chap (I know this because I have known him for a few years .. but I suppose you have to be, to be an accountant!). Anyway, he mentioned a few things he had noticed recently in Canterbury, one that Canterbury property prices had gone up in the last few years but nowhere near the growth levels that were being achieved in central London, and secondly, that he thought the number of for sale boards in Canterbury (and more importantly ones with sold slips on them) had increased over the last couple of years.

 

The rate of house price inflation in Canterbury continues to slow with growth of 10.4% in the 12 months to February compared to 11% just under six months ago, according to the latest Land Registry data. However, there is considerable local variation with house price growth ranging from 7.7% in East Sussex to 12% in Medway over the last 12 months.

 

Whilst Canterbury hasn’t seen the +20% per year in house price growth of London over the last couple of years,  Canterbury has seen  a sharp uplift in the number of properties sold throughout  2014 as base line demand for housing grows, which suggests there is substance to the recent pick-up in house price growth in the City. Since the Second World War in the UK, when the number of properties sold has grown, property values grew soon after. The 16.9% uplift in property transactions in Canterbury in 2014, compared to 2013, indicates the most significant recovery in house market activity in Canterbury (outside London) since 2007.

 

When you compare Canterbury with London, you could be looking at two different countries. In London, its mid / late teens house price to earnings ratios are impacting demand (i.e. the average property value is often 15 or 17 times the average wage in London .. in fact in Knightsbridge the ratio can be 30 to 1).  However, the number of people wanting to sell has dropped considerably, meaning that falling sales volumes combined with a general slowdown in activity in the run up to the General Election are resulting in lower mortgage approvals for home purchase.

 

Transactions are a great indicator for house prices. The acceleration in house price growth in London in the last two years was preceded by three years of rising transactions. A similar pattern is being registered in the Canterbury area, as pent up demand returns to the market supported by low mortgage rates and an improving economic outlook.

 

But before you get the champagne out, while the uplift in activity is welcome news, the number of Canterbury property sales in 2014 are still 23.1% lower than the level seen in 2007 and property values are 3.2% above the 2007 levels. The ongoing housing recovery is far from broad based and remains focused on middle to higher value areas within Canterbury where households have equity and find it easier to access mortgage finance. If you want to know more about the Canterbury Property Market, please visit the Canterbury Property Blog www.canterburypropertyblog.com or send me an email to canterbury@martinco.com.