How EU Migration has changed the Canterbury Property Market

 

The argument of migration and what it does, or doesn’t do, for the country’s economic wellbeing is something that has been hotly contested over the last few years. In my article today, I want to talk about what it has done for the Canterbury Property market.

Before we look at Canterbury though, let us look at some interesting figures for the country as a whole. Between 2001 and 2011, 971,144 EU citizens came to the UK to live and of those, 171,164 of them (17.68%) have bought their own home. It might surprise people that only 5.07% of EU migrants managed to secure a council house. However, 676,091 (69.62%) of them went into the private rental sector.  This increase in population from the EU has, no doubt, added great stress to the UK housing market.

Looking at the figures, the housing market as a whole is undoubtedly affected by migration but it has been the private rented housing sector, especially in those areas where migrants come together, that is affected the most.  Indeed, I have seen that many EU migrants often compete for such housing not with UK tenants but with other EU migrants. In 2001, 3.68 million rented a property from a landlord in the UK.  Ten years later in 2011, whilst EU migration added an additional 676,091 people renting a property from a landlord, there were actually an additional 4.14 million people who became tenants and were not EU migrants, but predominately British!

As a landlord, it is really important to gauge the potential demand for your rental property, especially if you are a landlord who buys property in areas popular with the Eastern European EU migrants.  To gauge the level of EU migration (and thus demand), one of the best ways to calculate the growth of migrants is to calculate the number of people who ask for a National Insurance number (which EU members are able to obtain).

In Canterbury, migration has risen over the last few years. For example, in 2007 there were 1,389 migrant national Insurance cards (NIC) issued and the year after in 2008, 1,510 NIC cards were issued. However, in 2014, this had increased to 2,126 NIC’s. However, if the pattern of other migrations since WW2 continues, over time there will be an increasing demand for owner occupied property, which may affect the market in certain areas of high migrant concentration. On the other hand, over time some households move into the larger housing market, reducing concentrations and pressures.

In essence, migration has affected the Canterbury property market; it couldn’t fail to because of the additional 14,868 working age migrants that have moved into the Canterbury area since 2005. However, it has not been the main influence on the market. Property values in Canterbury today are 22% higher than they were in 2005. According to the Office of National Statistics, rents for tenants in the South East have only grown on average by 0.95% a year since 2005 .... I would say if it wasn’t for the migrants, we would be in a far worse position when it came to the Canterbury property market. This was backed up by the then Home Secretary Theresa May back in 2012 - more than a third of all new housing demand in Britain is caused by inward migration and there is evidence that without the demand caused by such immigration, house prices would be 10% lower over a 20 year period.

If you want to know more about the Canterbury property market, then for more articles like this, please visit the Canterbury Property Blog www.canterburypropertyblog.com .

Herne Bay - potential 5.82% yield at £165K - 2 bed apartment

Blinking flip!………..Is it cold or is it cold!! Winter is certainly with us. Whilst keeping warm and checking Rightmove this morning, I found a great investment has just come onto the property market in Herne Bay. It’s a two bed apartment for £165K with Kimber Woodward and it’s a real cracker.

Let’s start with the asking price. At £165K it’s a great bargain and at this price will not be around long. The location is brilliant, as it’s close to the major road infrastructure of the Thanet Way, creating easy access for young professional tenants. It’s age / condition is also excellent, so it’s ‘good to go’ from an investment viewpoint.

Turning to the rental aspect of the property, I’ll take a real conservative viewpoint and state that the rental figure would be (at the very worse!) £750 per month, which will give you a good yield of 5.45% and at £800 per month, it would take the yield to a cracking 5.82%.

What about the capital growth? Well, these apartments in Weyman Terrace were built circa 2013 and the growth in the past year has been circa 7.81%. Try getting that at a building society!

Again, this is proving my view on the Herne Bay market, i.e. great area to invest in, with an good capital growth!

Check it out at http://www.rightmove.co.uk/property-for-sale/property-56116580.html and give the agent a call.

Canterbury Property Market Crisis as New House Building slumps by 55.74%

One of the key factors that determine the price of anything is the demand and supply of the item that is being bought and sold. When it comes to property, demand can change overnight, but it takes years and years to build new properties, thus increasing the supply.

 

The Conservatives have pledged to build over 1 million homes by 2020. I am of the opinion that as a country, irrespective of which party, we have not built enough homes for decades, and if the gap between the number of households forming and the number of new homes being built continues to grow, we are in danger of not being able to house our children or grand children. I believe the country is past the time for another grand statement of ambition by another Housing Minister. Surely its right to give normal Canterbury families back the hope of a secure home, be that rented or owned? As a city, we need to exert pressure on our local MP Julian Brazier, so they can make sure Westminster is held accountable, to ensure there is a comprehensive plan, with enough investment, that can actually get these homes built.

 

To give you an idea of the sorts of numbers we are talking about, in the Canterbury City Council area in 2006, 470 properties were built. In 2007 that rose to 570 and a year later in 2008, it peaked at 1,220. By 2014, that figure had dropped by a massive 55.74% to 540 properties built.

 

The outcome of too few homes being built in Canterbury means the working people of the city are being priced out of buying their first home and renters are not getting the quality they deserve for their money. The local authority isn’t building the estates they were after the war and housing associations are having their budgets tightened year on year, meaning they have less money to spend on building new properties. I know of many Canterbury youngsters, who are living with their parents for longer because they cannot afford to get onto the housing ladder and growing families are unable to buy the bigger homes they need.

 

I talk to many Canterbury business people and they tell me they need a flexible and mobile workforce, but the high cost of moving home and lack of decent and affordable housing are barriers to attracting and retaining employees. Furthermore, building new homes is a powerful source of growth, creating jobs across the county and supporting hundreds of Canterbury businesses. It is true that landlords have taken up the mantle and over the last 15 years have bought a large number of properties. The Government need to be thankful to all those Canterbury landlords, who own the 5,955 rental properties in the city. Most local landlords only have a handful of rented properties (to aid their retirement), and without them, I honestly don’t know who would house all the extra people in Canterbury!

 

Moving forward, those Canterbury landlords have many pitfalls, both in the short term and medium term. For instance, were you aware that the rules of changes for new tenancies from the 1st October 2015 (with some imposing penalties including losing the right to require the tenant to vacate, if they are done incorrectly) or in the medium term, the planned change in the way buy to let’s are taxed?

 

More than ever, the days of buying any old property in Canterbury and you would be set for life are gone. Now, it’s all about ensuring you stay the right side of the law, buying the right property (and that might mean even selling some to buy others), so you build the right portfolio for you as a landlord. One source of info on all of these issues, where you will find other articles similar to this on the Canterbury property market, is the Canterbury Property Blog www.canterburypropertyblog.com 

 

Canterbury house owners desert the housing market with an 8 year low

 

Even though the housing market is in an upbeat state in many parts of the UK, getting on the property ladder is still challenging for many and regarded as unattainable by some.  However, that goal has become even worse recently in Canterbury as the number of houses available to buy is at an 8 year all time low.

Back in Summer 2008, there were over 560 properties for sale in Canterbury and since then this has steadily declined year on year, so now there are only 284 for sale in the city.  This continuing diminishing supply of housing has been happening over those years for a while and there simply aren’t enough properties in Canterbury to match demand.

According to a recent report by the National Association of Estate Agents, that said, “There are now 11 house hunters fighting after every available house which isn’t sustainable.”   What that means is Canterbury youngsters, who are looking to buy their first home, are finding themselves being squeezed out by the competition.  However, in the meantime, nobody wants to live with parents until they are in their 30’s, so that in turn creates demand for more rental properties, which means landlords have a greater demand for more rental properties so are buying more, resulting in even less smaller properties for the youngsters to buy, it’s a vicious circle.   

Talking to fellow agents, mortgage arrangers, surveyors and solicitors in the City, all of whom have extensive dealings in the Canterbury property market like myself, most of us agree the movement in the Canterbury market is taking place in the middle to upper market, higher up the property ladder and it’s second and third steppers pushing through the properties that are being bought and sold.

That has meant as people tend to move less in the middle to upper market, the number of the properties actually selling has drastically reduced over the last couple of years.

When we look at the individual areas of the city, it paints an interesting picture.

• CT1 - Canterbury city centre 35 properties sold in May 2015 (the most recent set of figures from the HM Land Registry), whilst over the Summer months of 2014, the number of properties selling in this postcode was always between 51 and 56 per month. (Interestingly the average value of those properties was £233,707).

• CT2 - Harbledown, Rough Common, Sturry, Fordwich, Blean, Tyler Hill, Broad Oak, Westbere 23 properties sold in May 2015 (with an average value of £279,049), whilst over the Autumn months of 2014, the number of properties selling in this postcode reached into the mid/late 40’s.

• CT3 - Wingham 14 properties sold in May 2015 (with an average value of £224,428), whilst over the Summer months of 2014, the number of properties selling in this postcode reached into the mid/late 40’s. 

• CT4 - Chartham, Bridge 65 properties sold in May 2015 (the most recent set of figures from the HM Land Registry), whilst over the Summer months of 2014, the number of properties selling in this postcode was always between 83 and 97 per month. (Interestingly the average value of those properties was £353,688).

So what does this all mean for homeowners and landlords alike in Canterbury?  Demand for Canterbury property is good, especially at the lower end of the market.  However, with fewer properties coming up for sale, it means property prices are proving reasonably stable too.

 

You see I believe a more stable, consistent Canterbury property market, with less people seeing property as an easy way to make a quick buck (as many did in the early 2000’s when prices were rising at nearly 20% a year so people were buying and selling every other minute), but a property market that has a steady growth of property values in Canterbury, year on year, without the massive peaks and troughs we saw in the late 1980’s and mid/late 2000’s might just be the thing that the Canterbury property market needs in the long term.

 

For more insights, comments and facts on the Canterbury Property market please visit the Canterbury Property Blog www.canterburypropertyblog.com where you will find many similar articles to this.

In search of the Holy Grail?

A few days ago, one of our Landlords contacted me with a question regarding one of his other student properties that he owns up in Durham. In a nutshell, the property was being rented out to students and he was looking at his position in the next couple of years, i.e. rent or sell. He also asked if he could achieve a similar return / yield if he sold in Durham and purchased in Canterbury.

Regular readers will know that to achieve the Holy Grail of Lettings of a) a great yield and b) fabulous capital growth can be a real challenge, if not impossible, therefore this required a degree of research on behalf of the Landlord to offer him some sound advice.

To enable me to respond, it was necessary to manage some research and get back to him with some facts and figures.

The property in question in Durham was bought for circa £230K and has a monthly rent of £1646, which in turn gives a respectable gross yield of nearly 8.6%.

My first area of research was the latest Land Registry data, which was published a few days ago on the 28th Oct 2015.

In the table below, we can see two key pieces of information regarding the capital growth, i.e. the South East has grown by 8.5% in the past 12 months, as opposed to the prices in the North East which have decreased by 0.3% in the same period. Interesting to also note that the North East is the only region in England and Wales that has decreased in the past 12 months.

When I ‘drilled down’ to county level, i.e. Kent & Durham, we found the problem was compounded, i.e. Kent has grown by 8.5% in the past 12 months, as opposed to the prices in County Durham which have decreased by 1.9% in the same period. (As per the table below). Of interest, I have left the data of the other counties between Durham at the top and Kent at the bottom, showing the variants between other counties.

 

 

 

 

As my regular readers will note, the most important consideration you will make before investing in property is the balance between annual return/yield and the annual value increase/capital growth. However, what affects those two things (yield and capital growth) in Canterbury or indeed Durham, are very varied and complex. The quantity of property and whether property is owner occupied, social housing (posh words for council housing) or private renting has a big difference on yield and capital growth.

The scenario above is a near perfect example of the dilemma facing investment Landlords regarding yield v capital growth and whilst the Landlord in question has not yet made a decision, by making such research for him we have been able to provide him with some of the tools to make an informed decision.

Therefore, if you are looking for a sound investment, always check the area carefully and try to obtain some honest & sound local advice.

Good hunting!

 

 

Could your Canterbury property save you from Pension oblivion?

If you were born in the early 1970’s or late 1960’s, if you haven’t started to think about it yet, retirement is closer than you think. In fact the number of years you have left to work is less than the number of years you have worked. The basic state pension is worth £115.95 a week for a single person in 2015/16 (or £6,029 a year) and £231.90 a week for a couple (£12,118 a year) as long as your partner has paid their stamp (although there are certain get of jail cards if they haven’t).

As a household, could you live on just over £12k a year?

However, could the property you are living in, in Canterbury, save you from poverty when you reach retirement? You see, a regular income is vital in retirement, and the bricks and mortar you own in Canterbury could provide a way for you to finance life when you retire.

If you are in your 30’s, instead of saddling yourself with bigger and bigger mortgages, going from your first time buyer flat, to a terraced, to the semi and then the large detached house, you could instead keep your terraced or small semi, turning it into buy a buy to let property, let the rent pay the mortgage and then rely on capital growth to provide you with a lump sum when you sell the property and retire.  One of the biggest plus points of buy to let is what is known as leverage. Let me explain ... say you have a deposit of 25% and the value of the property rises by 3% a year, your gains in fact multiply to 12%.  However, if property prices drop, 'leverage' can be catastrophic, as losses will also be multiplied. Property values have dropped a number of times in the last 50 years, but they always seem to bounce back ... property must be seen as a long term investment.

Let me explain how leverage could work for you. If you had bought a Canterbury house in spring of 1983 for £60,000, using a 75% mortgage and 25% deposit, (meaning your deposit would be £15,000). Today, that Canterbury property would have risen in value to £434,274, a rise of 623.8%. However, when you look at the growth on just your deposit, the rise is even better ... instead of 623.8%, we see a rise of 2795% (remembering that the mortgage would have been paid off).

However, buy to let is not all about capital growth and in retirement, income is more important than capital growth, as rent is the key to a steady income.

So surely the best strategy is to buy those Canterbury properties with the high rents (when compared to the value of the property). These are called high yield properties in the buy to let world because the monthly return is so much greater. So surely they are the best in Canterbury? Possibly, but the properties that offer these higher yields (in the order of 5% to 6% per year) tend to be in such areas as Hales Place in Canterbury, historically they haven’t offered such good capital growth when compared to the city average, have a higher tendency for void periods and such properties tend to attract tenants that have a greater propensity to be high maintenance.

Therefore, if a high maintenance rental portfolio wasn’t for you, another strategy could be buy a property with relatively smaller rental returns of 3% to 4% per year (i.e. lower yields), but in a more up market area such as St Dunstans. Properties such as these tend to suffer from less void periods (i.e. when there is no tenant in the property paying you rent) and they historically have had better long term capital growth when compared to the city average.

Every landlord is different and every property is different. All I suggest to you is do your homework.

As regular readers will know, I am happy to share my knowledge and experience of the Canterbury property market, high yields, high capital growth, what to buy, what not to buy and where to buy in the Canterbury Property market can always be found on the Canterbury Property Blog www.canterburypropertyblog.com .

Canterbury Property Market - Asking Prices Drop but Values rise

Those of you who regularly read my weekly articles in the Canterbury Property Blog will know I like to keep abreast of the Canterbury property market. Something attracted my attention this week about the local property market, something I wanted to share with my many readers.

Over the last month, there appears to have been an anomaly in the local property market, whereby asking prices in the city have dropped, yet property values have increased.  The average asking price of a Canterbury property, according to Rightmove, fell 1.2% this month yet the average value of a Canterbury property rose by 0.9%.

So how does this relate in monetary terms?  This anomaly has driven the average asking price of a Canterbury property down slightly to £271,400 whilst the average value is now £299,200.

So why the difference? Technically an ‘asking price’ can be any price that a homeowner wants to place his or her property on the market for. Unfortunately, many times this is done without research and can result in overpriced properties that don't sell. As the Summer months are normally slightly quieter those left on the market wanting to sell often temper their asking prices in these months to try and generate interest in their property.

On the other side of the coin, the property ‘value’ is the price that a willing buyer is prepared to pay and a willing seller is prepared to sell at.   Therefore, in a nutshell, Canterbury property values are continuing to rise and those homeowners in Canterbury who have properties on the market, last month on average, reduced their asking prices .. great news for property owners and buyers alike!

In previous articles, I have spoken about the continued fundamental shortage of property coming on to the market compared to buyer demand. That is especially true for homeowners wanting to upgrade to a better house/better location.  I can appreciate Canterbury home owners are reluctant to put their own property on the market speculatively and wait for the right property to become available and some high demand locations can suffer from a property stalemate.

Most homeowners don’t want to sell their house and then have nothing to buy.

But that’s the beauty of the much maligned English and Welsh house buying process. You can find a purchaser for your property, then ask them to wait. By agreeing a sale (subject to contract) before you try to buy sounds concerning to many, but with fewer properties for sale you need to have a buyer for your property or you will be treated as a less serious buyer yourself. If you cannot find the right home for you, you can slow the deal with your purchaser until it comes along. If nothing suitable does comes along and you lose your buyer then the worst outcome is that you have to find another purchaser or take your property off the market and stay put for now, and as long as you mention this at the start they must not commit to any costs until you have agreed your onward purchase.

However, for the landlord/buy to let investors, these potential problems are nothing further from the truth. As I write this article, there are over 140 flats for sale, over 60 terraced houses and 30 semis for sale in Canterbury.  Landlord/Buy to let investors can normally pick up some bargains in the Autumn months, as sellers who are selling their homes often have a pressing need to sell by this time.

The types of houses a Canterbury landlord typically buys, are not the same types as the homeowners wanting to move to a posher area of the city as they are attracted by larger semis and detached properties. The best types of properties for buy to let are the smaller flats, terraced and semis (not the big detached ones). There are in fact too many of these smaller properties for sale .. just look at the numbers of properties for sale (mentioned in the previous paragraph).

If you are a landlord or thinking of becoming one for the first time, and you want to read more articles like this about the Canterbury Property Market together with regular postings on what I consider the best buy to let deals in Canterbury, out of the many properties on the market,  irrespective of which agent is selling it, then you might like to visit the Canterbury Property Blog www.canterburypropertyblog.com

St Thomas’s Catchment Area mean homeowners profit by £23,880

 

I was having a chat with a Canterbury property investor the other day, when he asked if schools, especially primary schools, affected the local property market in terms of demand from buyers and tenants to a property.  Anecdotally, I have always known this to be true, a good school creates good demand and good demand does affect house prices.  So, I asked my colleagues on the front line, who take the phone calls from people putting themselves on our mailing list and they confirmed that most people cite location as their number one factor.

After looking through our mailing list, it confirms there is a close correlation between the high demand areas of Canterbury and the close proximity to a good primary school.  Talking to my team in a recent morning meeting, they agreed many people would look to increase their budget quite significantly, whilst others would consider downgrading their property requirements to be close to a good primary school.

Those of you who regularly read this blog will know I like a challenge, so I decided to look at the science behind these assumptions.  According to the SchoolGuide website, St Thomas Catholic Primary School is one of the best primary schools in Canterbury.  Its figures are certainly impressive. Their last Ofsted Report classified it as Good, 100% of 11-year pupils achieving Level 4 or above in maths, reading and writing whilst 38% of them achieved level 5. Finally, the schools’ KS2 rating was classed as Excellent.

Looking at property sales within half a mile of St Thomas, property values have risen in value since 2000 by 122.22%, whilst according to recent figures, the Canterbury average as a whole has risen in the same time frame by 113.19%.

That means the parents of St Thomas have seen the values of their properties rise proportionally 7.98% more than the Canterbury average (that equates to £23,880 extra over the last 15 years for those local homeowners!)... interesting don’t you think?

However, whilst a good primary school significantly contributes more to house prices, the same can’t be said for secondary schools. There are two reasons for this, firstly, as secondary schools are much larger, so their catchment areas are correspondingly much larger, meaning parents don’t need to live so close to the school. Secondly, in the UK, whilst the difference between the top 25% and bottom 25% of secondary schools is not insignificant, in the primary school sector, the difference between the top 25% and bottom 25%, according to the London School of Economics, is considerably and significantly more.

Many other Canterbury landlords, both who are with us and many who are with other Canterbury agents, like to pop in for a coffee or ring/email us to discuss the Canterbury property market, to consider how Canterbury compares with its closest rivals and hopefully we can answer all their questions. You must take lots of advice and seek out the best opinion. One good source of opinion, specific to the Canterbury property market is the Canterbury Property Blog www.canterburypropertyblog.com . I don’t bite, I don’t do hard sell, and I will just give you my honest and straight talking opinion.

Faversham - £145K with a potential 5.79% yield

 

Morning all! Well winter feels like it’s on its way and so are the Autumn bargains. It’s been a bit scarce recently with the Buy to Let goodies, but scanning the web this morning, there's one that caught my eye. So today, we are off to Faversham where a property has just come on this morning with Your Move and from a couple of calculations on my note pad, it looks a good investment.

It’s a two bedroom flat in Sommerville Close in Faversham and is on the market for £145K. From the details it looks like it’s already rented and comes packaged with a Tenant.

In the past few months we have seen a really good demand for such properties and we would estimate a rent of circa £650 to £700 per month. This coupled with the purchase price would deliver a respectable yield of 5.38% and 5.79% respectively.

Check it out further at http://www.rightmove.co.uk/property-for-sale/property-36947586.html and give the agent a call.

Canterbury’s £1.2 billion Mortgage Powder Keg

Eight years ago, in the summer of 2007, hardly anyone had heard of the term ‘credit crunch’, but now the expression has entered our daily language and even the Oxford Dictionary.  It took a few months throughout the autumn of 2007, before the crunch started to hit the Canterbury Property market, but in November / December 2007, and for the following seventeen months, Canterbury property values dropped each and every month like the proverbial stone. The Bank of England soon realised in the late summer of 2008 that the British economy was stalling under the continued pressure of the Credit Crunch. Therefore, between October 2008 and March 2009, interest rates dropped six times in six months from 5% to 0.5% to try and stimulate the British economy. 

Thankfully, after a period of stagnation, the Canterbury property market started to recover slowly in 2010, but really took off strongly in late 2013 / early 2014 as property prices started to rocket. However, the heat was taken out of the market in late 2014/early 2015, with the new mortgage lending rules and some uncertainty, when some people had a dose of pre–election nerves.  

With the Conservatives having been re-elected in May, the Canterbury property market regained its composure and in fact, there has been some ferocious competition among mortgage lenders, which has driven mortgage rates to record lows. Whilst I have no actual figures to back this up, I know an awful lot of long serving bank managers, mortgage arrangers and people in the finance industry, all of whom have told me on previous occasions when interest rates rose (1987, 1992, 1997 and 2003), it wasn’t the first rate rise that was the catalyst for many homeowners and landlords to re-mortgage but the second or third increase.  The reason being that it was only by the time of the third rate rise,  it started to hit the wallet.  However, the issue is, by the time of the second or third rate rise the best fixed rates, were in all instances, no longer available as they had been pulled by the banks months before.

But here is the good news for Canterbury homeowners and landlords, over the last few months a mortgage price war has broken out between lenders, with many slashing the rates on their deals to the lowest they have ever offered.  I read that the well respected UK financial website Moneyfacts said only a couple of weeks ago, the average two year fixed rate mortgage has fallen from 3.6% twelve months ago to just under 2.8%.

Interestingly, according to the Council of Mortgage Lenders, the level of mortgage lending had soared to a seven year high in the UK.  So what about Canterbury?  In Canterbury, if you added up everyone’s mortgage, it would total £1.2 billion.  Even more interesting is when we look at Canterbury and split it down into the individual areas of the city,

CT1 - Canterbury city centre£338.7m

CT2 - Harbledown, Rough Common, Sturry, Fordwich, Blean, Tyler Hill, Broad Oak, Westbere £341m

CT3 - Wingham £276.4m

CT4 - Chartham, Bridge £340m

Since 1971, the average interest rate has been 7.93%, making the current 0.5% very low.  So, if interest rates were to rise by only 2%, according to my research, the 2,330 Canterbury homeowners, who have a variable rate mortgage would, combined, have to pay an approximate additional £13,680,000 a year in mortgage payments.  That means every Canterbury homeowner with a variable rate mortgage, will on average have to pay an additional £5,871 a year or £489 a month in interest payments.

I know over the last couple of posts, I have talked about mortgages a lot however, I am not a mortgage arranger but a letting / estate agent and as regular readers know, I always talk about what I consider to be the most important issues when it comes to the Canterbury Property market and at the moment, in my humble opinion, this is the most important thing!

Buy to let is all about maximising your investment, increasing income and reducing costs.  I give advice, opinions, thoughts, concerns, worries, expectations and fears about the Canterbury Property market in my blog on the Canterbury Property Blog.  If you are interested in the Canterbury Property Market, you might learn something by visiting the blog. www.canterburypropertyblog.com

Landlords Information Evening - Monday 19th October 2015 - Canterbury

Running from 17.30hrs until 20.30hrs on Monday 19th October 2015, is a really good information evening in conjunction with the National Landlords Association (NLA). The evening is chaired by Marion Money of the NLA and various guest speakers deliver relevant and useful information regarding the rental market. The event is open to all and free to attend.

It's a great opportunity to hear from a number of guest speakers, plus network with other landlords and suppliers.

I have been asked to present at the event and will give a view of the Canterbury property market, plus an insight into the student market, demand and availability.

The address of the venue is: Darwin Conference Suite, Darwin College, University of Kent, Canterbury CT2 7NY

Interest rates set to rise – How will that affect the Canterbury property market?

A couple of weeks ago, I mentioned in this blog about how the Bank of England has been indicating recently that UK interest rates will be going up in the not too distant future. Therefore, if you are one of the 18,529 homeowners in Canterbury, who own your own home with a mortgage, then you need to consider your options and start to budget for an interest rate rise. However, if you are a landlord, who owns one of the 11,876 rental properties in the city, whilst your exposure to interest rate rises is lower, it is most certainly something you should be aware of.

Since the spring of 2009, British interest rates have been at a record low of 0.5%. It’s not a case of if, but when, they will rise. Some people think it will be before Christmas, although I am of the opinion, it will early in the New Year around Easter time, when they do rise. I also expect those rises will be slow, steady and limited. It depends on what is happens to UK wage rises, UK inflation and the general state of the British economy. Nevertheless, as much most of us in Canterbury would love to pull the shutters and stick two fingers up to the world, we have to recognise we are part of a global economy and global economic worries still exist to prevent an abrupt and instantaneous rate rise.

Those Canterbury landlords, who do have a mortgage, need to realise that as interest rates rise, their monthly mortgage costs rise. It’s easy to say you will look at your mortgage next month, then before you know it, Christmas will be here! Don’t forget, mortgage lenders have always removed the juicy low rate mortgage deals a few months before interest rate rise. Speak to a qualified mortgage arranger, there are lots of them in Canterbury and seriously consider fixing your mortgage rate now.  You didn’t buy your Canterbury buy to let property for it to become a millstone around your neck. It’s all about mitigating your costs and maximising your income to make your Canterbury buy to let property the investment you want it to be.

However, on the other side of the coin, two in three landlords who have bought property since 2007, have done so without a mortgage. A rise in interest rates might be a good thing. Let me give you some background first, then I’ll explain why. Canterbury landlords have seen their return on investment for their Canterbury buy to let property, over the last couple of years, perform very well indeed with Canterbury property values rising by 28.43% since the Spring of 2009. However, when rates do rise, whilst more expensive mortgage rates will ease the demand for borrowing, on the other hand, it may temper house price growth, making the property market more competitive... and therefore, we should see the return of some bargain property buys in Canterbury!

Finally though, can I ask all Canterbury homeowners and Canterbury landlords, who have a mortgage that isn’t fixed, they need to recognise that rates will rise throughout 2016 to 2018 and will continue to move steadily upwards towards more viable and feasible long term levels.  I am not qualified to give that advice and this is my personal opinion, so please speak to a qualified mortgage arranger and, if appropriate, fix your mortgage before interest rates rise. Don’t say I didn’t warn you!

In the meantime, if you are a landlord looking for a bargain now, don’t despair ... there are plenty out there, if you know where to look! One place is Rightmove, another Zoopla and another OnTheMarket. However, sometimes, you can’t see the wood for the trees. At the time of writing, Rightmove had 278 properties for sale in Canterbury, Zoopla 220 properties for sale in the city and OnTheMarket 38 properties ... where do you start? A lot of savvy Canterbury landlords like to visit the Canterbury Property Blog www.canterburypropertyblog.com, where, irrespective of which agent is selling it, I regularly post what I consider out of the hundreds of properties on the market, to be the best buy to let deal in Canterbury.   

Crisis in the Canterbury Property Market ..probably?

I don’t know about you, but if you watch Sky News every waking hour or read the newspapers, it always seems we as a Country, Europe or the World seem to lurch from one crisis to another. Another week, another crisis averted. It was only last summer the soothsayers were predicting the end of the world over the supposed house price bubble that many believed was developing in the South. Property prices were rising at 20%+ per annum in London, only for things to ease as the property market in the Capital showed a controlled slowdown and cooling in activity with price growth easing to a more realistic 8% to 9% per annum. Interestingly, there was no panic when some modest price drops were seen in some of London’s highest priced suburbs.

However, last month’s crisis is the buy to let boom and as George Osborne always likes to be topical, in the July emergency budget, he declared that he will start to scale back, from 2017, the tax relief that those high income tax rate landlords with a mortgage have benefited from. The Daily Mail ran headlines stating it was the end of the private landlord; predicting many landlords will give up on buy to let altogether and we will be inundated with rental properties up for sale as landlords feel squeezed from the market.

Even Mr Carney, the Governor of the Bank of England, recently cautioned that the buy to let property market could destabilise the whole UK property market. He was concerned landlords who bought with high loan to value mortgages could be spooked if there is a property crash, they would panic because of negative equity, sell cheaply, which would worsen house price falls.

End of the world then?   .. this week, yes probably, but next week .. that’s another story!  Before we all go and live like a hermit in the Scottish highlands, let me explain to you my perspective on the whole subject. As I mentioned a few weeks ago, two thirds of buy to let properties bought in the last eight years have been bought mortgage free – so they won’t be affected by the Chancellors’ tax changes.  Also, something I feel is often overlooked but very important, is the fact that landlords historically have only been able to normally borrow up to 75% of the value of the rental property.  In the last property crash of 2008, property values dropped by the not so insignificant figure of 17.93% in Canterbury, but even then, when we had the credit crunch and the world’s banking sector was on the brink, no landlord would have been in negative equity in Canterbury.

I believe we have a case of ‘bad news selling newspapers’ and I believe that buy to let, and the property market as a whole, will carry on relatively intact. It’s true reducing tax relief will hit landlords who pay the higher rate of income tax and this may slightly diminish buy to let as an investment vehicle, but I doubt people will sell. Many landlords have been lazy with their investments, buying with their heart, not their head. You would never dream of investing in the stock market without doing your homework and talking to people in the know. If you want to make money in the Canterbury property market as a buy to let landlord, it’s all about having the right property and as you grow, the right portfolio mix to offer a balanced investment that will give you both yield and capital growth.

The Canterbury buy to let market still offers good investment opportunities to new and old alike. Those who have bought in the last twelve to eighteen months have reaped the benefit from buying in Canterbury, because the city offered a combination of reasonable house prices with subsequently increasing rents.  Property values have risen by 13.18% in the last eighteen months in Canterbury, whilst looking at rents, in Q2 2015, average rental values for new tenancies were 11% higher than Q2 2014, which is particularly interesting as they only rose by 4.5% between Q2 2013 and Q2 2014.

I cannot stress enough the importance of doing your homework. One source of information and advice is the Canterbury Property Blog where I have similar articles to this about the Canterbury property market and what I consider to be the best buy to let deals around at anyone time in the City, irrespective of which agent it is on the market with. If you haven’t visited and you are interested in the local property market in Canterbury.......you are missing out! ..

WWW.CANTERBURYPROPERTYBLOG.COM

My concerns about the Canterbury Property market

 

 

 

I am genuinely concerned about the Canterbury property market, but in a way that might surprise you.  Rightmove announced that average ‘asking prices’ fell slightly last month by 0.4% in the South East, leaving them 5.8% higher than a year ago.  Whilst it could be said that monthly change is very modest, in the same period a year ago, we saw a monthly fall of 0.6% in the South East, which is more the norm given the onset of  schools breaking up and everyone going on holiday.

 

Looking at all the data on the Canterbury property market; putting aside the need for more houses to be built in the next decade to balance out the increase in population (helped in part by inward European migration) but not matched by a similar increase in housing being built; my research shows there is a widening gap between what property buyers want and what is available to buy.  In a nutshell, many more buyers are looking for the smaller one and two bed properties (the typical terraced and smaller semi detached houses/apartments), whilst there are a larger proportion of the four and five properties, which are the typical detached properties available.

 

Demand for smaller properties comes from both first time buyers and the growing number of buy to let landlords, where it is more cost effective and efficient to buy smaller properties to let out compared to larger properties which tend to offer poorer returns.  Also, landlords with larger loans (on those larger more expensive properties) will also be hit harder with the changes in the way tax is paid on buy to let investments, which start in 2017.

 

If you recall, a few weeks ago I did some research on how different types of properties had performed in Canterbury since the year 2000.  I revisited those calculations and it hit me how different types of properties had performed over the last 15 years.  In a nutshell, this mismatch of demand and supply isn’t a new phenomenon, it’s been happening under our noses for years!

 

In the last 15 years, the average terraced house in Canterbury has risen in value from £83,523 to £236,264 whilst the detached house has risen in value from £183,550 to £499,313.  Nothing seems amiss until you look at the percentage growth.  The terraced has grown in value by 183% whilst the detached by only 172% meaning the gap between the inexpensive terrace’s and expensive detached properties has in percentage terms narrowed (this isn’t just a Canterbury thing, it has happened all across the Country).

 

I am concerned because more houses need to be built, not only in Canterbury, but in the South East and the UK as a whole.  In particular, there is specific need for more affordable starter homes for the growing demand from both tenants (and the landlords that will buy them) and first time buyers.  The Tories need to face up to the fact that unless they can get the builders, the planners (to release more building land), the banks (to finance it) and themselves together, to ensure long term plans can be made, and implemented, this issue will continue to worsen.

 

The country needs 200,000 houses a year to be built to keep up with demand, let alone reverse the imbalance between demand and supply.  Last year, only 141,040 properties were built, the year before 135,510 and 146,850 in the year before that.  This means only one thing for Canterbury landlords.  Unless David Cameron starts to rip up huge swathes of the British countryside and build on acres and acres of green belt, demand will always exceed supply when it comes to property for the foreseeable future.

 

Therefore, investment in the local Canterbury property market as a buy to let investment could be the best move to make as the stock market investments are possibly on the wane.  Everyone is different and trust me, there are many pitfalls in buy to let.  You must take lots of advice and seek out the best opinion.  One source of opinion, specific to the Canterbury property market is the Canterbury Property Blog www.canterburypropertyblog.com

 

Canterbury – The 10 year Time Bomb on Home Ownership

 

Many people think the British obsession with owning your own home started with Thatcher in the early 1980’s, when she allowed council tenants to buy their council houses under the right to buy scheme. However, the growth actually started just after the Second World War. Looking at the country as a whole in 1951 30% of residential property was owner occupied then, every ten years that rose incrementally to 39% by 1961; 51% by 1971; 58% by 1981 and 68.07% by 2001 but after that, it dropped to 63.4% by 2011 and continues to drop today.

Young adults tend to start to think about settling down and moving out of the family home in their early-mid twenties.  After a couple of years, they will have a choice of either buying their first house (albeit with a mortgage) or decide to privately rent for the long term (because the Council House waiting list is measured in decades at the moment!). The ratio of people owning a house with a mortgage verses privately renting is an extremely important guide to what people are doing about their housing needs and what their attitude to renting vs buying is.  With that in mind, within the next ten years, I am predicting there will be more people renting privately in Canterbury than own a property with a mortgage and that the British love affair of property ownership will fade as the decades roll on.

This is a really important change in the way we live, as I explained to a local Canterbury landlord the other day, knowing when and where the demand of tenants is going to come from in the coming decade is just as important as knowing the supply side of the buy to let equation, in relation to the number of properties built in the city; Canterbury property prices and Canterbury rents.

In the Canterbury City Council area as a whole there are 10,665 households that are privately rented via a landlord or letting agency verses 19,029 households that are owned with a mortgage, so my prediction appears to be outrageous. However, when we look deeper (as the devil is always in the detail), 8,553 of those 19,029 households are 35 to 49 year olds and 6,408 are households of 50 to 64 year olds. I would expect all the 50+ years to be paying their mortgage off as they enter retirement as I would with some of the people in their mid/late 40’s. 

Meanwhile, at the other end, in the 25 to 34 age range (the age most people bought their first home in the 1970’s/80’s/90’s) only 2,238 of the 5,122 households occupied by those 25 to 34 year olds are owner occupiers with mortgages, because 2,884 households are privately rented. This means only 43.6% of 25 to 34 year olds have bought their house (with a mortgage). Twenty years ago, that would have a much higher percentage of homeowners (between 75% to 85%).

It can be seen that as the older generation pay their mortgages off as they start to get to retirement and the younger generation aren’t jumping on the property ladder like they were 20 or 30 years ago, the private rental sector will take up the slack as more and more people will want a roof over their head, but won’t buy one but rent one. With Local Authorities and Housing Associations not building houses anywhere near like the number of houses they were building in the 1950’s, 60’ and 70’s, the private landlord appears to have good demand for their rental properties for many decades to come.

This will create a polarisation in the housing market between those, mostly older, households who own outright and those, mostly younger, households who rent. Our housing market is very much turning into the European model. However, all is not lost, the younger generation will inherit their parents properties, which in turn will enable them to buy, albeit later in life.

If you are a landlord or thinking of become a landlord, and would like to read more articles like this and other information on the Canterbury Property Market, then please visit the Canterbury Property Blog  www.canterburypropertyblog.com

George Osborne – The Canterbury landlord’s friend?

 

Well the last few weeks has been rather hectic as Canterbury landlords, some who use us to manage their properties and other landlords who just read our Canterbury Property Blog, have been sending me emails or picking the phone up to me about the new rules on buy to let taxation announced in the recent budget. George Osborne confirmed in the recent summer budget that the tax relief given to landlords on mortgage interest payments, on their buy to let (BTL) properties, would be reduced over the coming years for higher rate income tax payers. The Chancellor said the tax relief that private buy to let landlords (who pay the higher rate of income tax) would change in 2017 from the current 45%/40% and would steadily reduce over the following four years to the existing 20% by 2020.

With 30% of residential property in Canterbury being privately rented (as there are 5,955 privately rented properties in the City), these changes are potentially something that will not only affect most Canterbury landlords, but also the tenants and the wider property market as a whole. The choice of rental properties could drop, especially at the top end of the market which could push up rents.

However, Canterbury landlords could protect themselves by reassigning one or more rental properties into a company structure (e.g., a Limited Company, Partnership or Sole Trader) and by doing so, the total tax paid is greatly reduced, because a company only pays tax on the profit. Nonetheless, before everyone goes off setting up companies for their BTL portfolios, it must also be noted, if a sole trader firm is started, stamp duty needs to be paid, yet if the owner is in business with a partner, they could enjoy some stamp duty relief.  The biggest tax variation is Capital Gains Tax (CGT) where the tax bill will be much higher when you come to sell your portfolio. In essence, by going into business with your BTL properties, you will potentially have a modest stamp duty to pay when you start, but you will have a lot less monthly tax to pay, irrespective of the interest rate, but the CGT bill will be much higher when you come to sell ... as you can see, it is not a ‘get out of jail card’. Now it must be remembered, I am not a tax advisor, so you must take advice from a qualified person (more of that later).

Those planning to purchase a BTL property will have to factor these new rules into their calculations, and this could affect the offers they are willing to make. However, I am not that concerned, as the scaremonger reports fail to see the fact that two out of three BTL properties that have been bought since 2007 have been purchased without the support of BTL mortgage. With those two thirds of landlords paying cash for the purchase of their rental properties, that means two thirds of landlords will be totally unaffected by the changes.

So what of the future? The British love their Bricks and Mortar, it’s an asset that they can touch and feel and has a 70 year track record of capital growth that has out stripped inflation. Buy to let will still be attractive to Canterbury investors and let me explain why. If you invested £80,000 in Canterbury property in September 1987, today it would be worth £314,836. If you had invested the same £80,000 in to the London Stock Market (the FTSE 100 to be exact), it would be only be worth £229,012 today, whilst Inflation would have taken the original £80,000 and pushed it up to £166,254.

It’s true some central London landlords relying solely on the tax breaks rather than high yields may be forced out of the market, but even those landlords could seek to recoup any losses by increasing rents. However, those landlords may leave the market and this could constrict the availability of rented houses even more than it is already, increasing rents and thus pushing yields even higher for landlords and BTL investors still in the market... thus attracting new landlords into the market because of those higher yields.

The reality is, there is too much demand and not enough supply of homes for people to live in in the City. Official figures show the population in Canterbury is rising by 1,586 persons per year (i.e., demand rising), but only 518 properties are being built each year (i.e., supply is low). This sets up the Canterbury (and UK) property market to continue to create strong and steady returns, irrespective of any tax loophole being there (or not as the case maybe).

Canterbury Landlord’s mortgages top £333 million!

The Brits can’t stop talking about property. The hot topic of discussion at the posh dinner parties of Harbledown, Tyler Hill and Fordwich’s movers and shakers is the subject of the Canterbury Property market, but in particular, buy to let. These people are buying up buy to let properties quicker than an ace Monopoly player .. or so it would seem if you read the Sunday papers. So is the buy to let market a sure fire way to make money?  Is it something everyone should be jumping into? Is it a sure fire way to make money? The answer is Yes and No to all those questions!

Firstly, the government gives tax breaks to landlords, as it allows the mortgage interest payments on a buy to let property to be tax deductible. Also, a landlord only has to flick through Rightmove or Zoopla, pick any property at random and agree a price. Then, find a modest deposit of 25% (often by remortgaging their own home) which for an average Canterbury terraced house, would mean finding £59,066 for the deposit (as the average Canterbury terraced house is currently worth £236,264) and borrow the rest with a low interest rate buy to let mortgage.  Finally, the landlord would rent out the property in a matter of hours for top dollar and live happily ever after, with the rent then covering the mortgage payments, with loads of money to spare and come retirement have a portfolio of property that would have quadrupled in value in fifteen years. Sounds wonderful – doesn’t it? Or does it???

Let us not forgot that the half of one per cent Bank of England base rate is artificially low. The international money markets can be fickle and if interest rates do rise quicker and higher than expected because of some unforeseen global economic situation, that monthly profit will soon turn into a loss as the mortgage will be more than the rent. Even though tenants are staying longer in their rental property, tenants still come and go and my guidance to landlords is they should allow for void periods, plus the maintenance costs of a rental property and of course, agents fees. .. all things that eat into that profit.

nterestingly, by my calculations, there are approximately 1,783 Canterbury landlords owing in excess of £333 million in mortgages on those Canterbury buy to let properties.  An impressive amount when you consider Canterbury only has 0.167% of all the rental properties in the Country. It really does come down to a number of important factors going forward to ensure you are water tight for the future. A lot of my existing landlords are fixing their mortgage rates. One told me that the Metro Bank are currently offering a 5 year fixed BTL remortgage rate at 3.79% for 5 years (based on a 75% loan). I don’t give financial advice, so you must speak with a qualified mortgage advisor.. but that sounds very fair!

However, one thing I do know is that buy to let is a long term investment, it’s a ten, fifteen, twenty year plan and property prices will go down as well as up. You wouldn’t dream of investing in the stock market without advice, so why invest in the Canterbury Property Market without advice? We give bespoke detailed advice to our landlords to enable them to spot trends in the Canterbury Property Market before others, enabling them to buy better properties at better prices. For example, did you know that detached properties are selling for around 1% lower than 12 months ago in Canterbury yet semis are selling for 11% more (with every other type in between). This means we can advise on which properties will go up in value better (or lose less if property prices drop), we can also advise which have lower voids and which properties have higher maintenance issues.  

Information on the local property market and ability to process it is the strongest asset we can give you. As Lois Horowitz, the famous author says, ”Not having the information you need when you need it leaves you wanting. Not knowing where to look for that information leaves you powerless. In a society where information is king, none of us can afford that”. One place to find information on the Canterbury Property Market is the Canterbury Property Blog, where you will find many articles just like this. www.canterburypropertyblog.com .