The make-up of Southend rental properties is changing…

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 renting 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 stigma of renting no longer exists, as it seems that the British are now beginning to accept a lifetime of renting. This is a very important consideration for both Burton homeowners and Burton landlords as it will transform the way the Burton 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 Burton 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, often with kids, and need a property everyone to live in.

Looking at the data for Burton, of the 7,152 private rental properties in East Staffordshire Council area, 33.76% of those rented properties are one person households – 2,415 properties. However, when we compare the number of one person Burton households who have bought their own property with a mortgage, of the 32,879 owner occupied households in the area, only 2,522 of those properties are a one person household – 7.67%. Compared to a decade ago, this explosion in demand for decent high quality rental properties for multiple occupants has not been met with an increase in supply of such properties.

More and more, I believe Burton landlords need to consider this change in the make up of Burton households, as I believe this could be an opportunity. Another interesting statistic that raised an eyebrow was that 17.14% of those 7,152 rental properties (1,226 properties) are lone parents households as well. Again, another possible opportunity that Burton landlords might want to consider in their future investment plans.

It is true 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 a 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 is still a fact that once you start renting it becomes that much harder to save for a deposit, regardless of the size. Interestingly, 86% of renters polled by the Halifax refused 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 and why demand for renting will continue to grow in the future.

Burton tenants can upgrade the quality and size of the property they live in for a minimal increase rent. The average rent of a two bed property in Burton is £513pcm, but a three bed is only £81pcm more at £594pcm, whilst the average four bed rent is £775pcm. 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. So, who is going to supply all these properties to rent?

Landlords of course!

Whether you are an existing landlord looking to grow your portfolio or looking to become a ‘first time landlord’, I suggest you 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 Burton itself.

One place for such advice and opinion is the Burton Property Blog and that’s where I come in!

Investing in bricks and mortar in Southend

 

The Land Registry has just released their latest set of figures for the Southend Property market. It makes interesting reading, as average property values in Westclff on sea increased by 0.7% in May. This leaves average property values 3.0% higher than 12 months ago. When we compare Southend against the regional picture, East Midlands property values rose by 0.2%, leaving them 2.9% higher than a year ago.

Obviously this is a far cry from the price rises we were experiencing in Southend throughout 2014. At one point in November 2014, property values were rising by 4.9% a year. All the same, even with the tempering of the Leigh on sea 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 that are changing hands. This has dropped substantially over the last 12 months in the town. In April 2014, 77 properties sold in Westcliff on sea but in April 2015, that figure dropped to 45. I have been in the Burton 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 Southend 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 Leigh on sea and with the population of Southend ever increasing, this will generally strengthen house price growth for the foreseeable future.

So what does all this mean for Southend 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 Westcliff on sea, 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 rental 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 for ever because one day they must rise and you need to know your property can stand that test. I saw some Southend 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.

It’s true that 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 Burton property market.

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

 

 

Which semi-detached house should I buy in SOUTHEND?

One of our landlords asked if they should buy a 3 or 2 bed semi detached property to rent out to tenants.

The average asking price of a 3 bed semi in Bexley is £373,000 today compared to £303,700 for a 2 bed semi. The 3 bed semi achieves an average rental price of £1,430 per month compared to £1,150 per month for a two bed semi.

That’s a yield of 4.5% for the 2 bed against 4.6% for the 3 bed. So they are very similar but you might find that a 3 bed semi is slightly easier to rent out (less void periods) and will be easier to sell in the future.

What about capital growth? According to the Halifax Price Index, Bexley has seen an increase in property values of 51.97% between 2009 and 2014. This means that, in 2009, the average price of a 3 bedroom semi would have been £245,440 and the 2 bed semi £199,840.

Therefore, the initial extra investment of £45,600 for the 3 bed semi, gives you an extra £23,000 in capital growth and let’s not forget, that according to recent figures, you could also be seeing an extra £3,360 per annum in rent.

If you would like some advice with your potential investment, please call, email or come and see us in our offices.

 

 

Housing market confidence bounces back

 

According to a survey conducted by the HomeOwners Alliance, myhomemove and BLP Insurance, confidence in the housing market is rebounding as concerns about stamp duty and negative equity fade away.

The report revealed that people’s concerns about housing have receded ‘across the board’ over the last year. Most dramatically, the numbers saying that negative equity is a problem has slumped in the last 12 months by more than 10%. Concerns about stamp duty rates have seen a near identical drop.

The proportion of adults who say stamp duty is a serious problem has dropped from 64% in 2014 to 51% in 2015, In the wake of the government’s reforms of the system last year, one third say they feel the recent changes to stamp duty have made it more affordable for them to buy their first home or to move up the property ladder.  The HomeOwners Alliance campaigned strongly for reform of the stamp duty system, and welcomed the reduction in rates at the lower end of the housing market and abolition of the hated “slab” system.

Concerns about estate agent fees, conveyancers’ fees and being able to pay off the mortgage have all eased over the past year.  Yet the ability for aspiring first-time buyers to get on the property ladder continues to be a top housing concern with 83% of UK adults saying it is a serious problem.  Among those aspiring to get on the ladder, house prices, saving for a deposit, the ability to get a mortgage/remortgage[1] and quality of housing are rated as more significant issues than among UK adults generally.

Key findings from the survey include:

Ability for aspiring first-time buyers to get onto the property ladder (83% saying it is a serious problem) and saving for a deposit (83%) top the list of housing concerns nationally, followed by house prices (76%) and the ability to get a mortgage (72%).

The proportion of adults who say negative equity is a serious problem has dropped down to 49% from 64% last year; after a steady increase in house prices. Negative equity continues to be a key concern in Northern Ireland, with 68% saying it is a serious problem.  

Concern over stamp duty rates has also fallen sharply (64% in 2014 to 51% in 2015), with 1 in 3 saying that the recent changes to stamp duty have made it more affordable for them to buy their first home or move up the property ladder.   

Housing anxiety has subsided, with UK adults saying they are less concerned than last year across the board, including property/solicitor fees, and the quality of housing.

Regionally, concern about high house prices continues to be greater in London than in other regions. (60% of Londoners say house prices are a very serious problem compared with 40% in the UK generally).  The proportion saying house prices are a very serious problem in London has risen 5% in the past year.  Those living in Northern Ireland and the North East are more concerned with housing availability and negative equity than elsewhere in the UK.

Nearly half of adults (49%) say gazumping is a serious issue, while 43% say gazundering is a serious issue.  51% of adults believe that the homebuying/selling process in this country is a serious issue.

The leasehold and freehold system is causing widespread concern across the UK, with 42% of adults saying it is a serious problem. In London, East Midlands and East of England, around half of people say it is a serious problem.

Aspiration to own your own home has edged up slightly, with 69% wanting to own, compared to 68% last year and 65% in January 2013.

Aspiring homeowners are significantly more concerned than UK adults, with house prices (84% vs 76%) and the quality of housing (57% vs 49%).
 

 

Are we on the brink of a remortgage surge?

 

New research from the Nottingham Building Society has found that brokers are forecasting an increase in remortgaging over the next 12 months as their clients aim to cut costs following rate reductions.

Its study found 58% of brokers expect a rise in remortgaging inquiries with nearly one in 10 (9%) forecasting a dramatic increase.

The research from the society, which offers a mortgage service that searches the whole of the market to find the best deal for customers, found that brokers are forecasting a rise in the number of five and 10-year fixed deals available. Around 48% of brokers believe there will be more five-year deals while 40% are forecasting an increase in 10-year deals.

However brokers are reporting a rise in customers giving up on remortgage and mortgage deals because the process has become more time-consuming and difficult – more than two out of five (41%) say they’ve seen an increase in customers giving up.

Brokers’ confidence on remortgaging is supported by consumer research which shows that 16% of homeowners are considering switching between March and August this year. The biggest group of homeowners contemplating this are those aged 25-34, many of whom may be in their first home and want to move on to better deals.

However, 19% of homeowners aged 45-54 and 9% of those in the 55-64 category, are also thinking of doing this, but The Nottingham’s research suggests that many people aged 40 and over have struggled to secure new deals.

Ian Gibbons, Nottingham Mortgage Services Senior Mortgage Broking Manager, said: “Brokers believe remortgaging could be a major growth area in the coming year and that is reflected in the new deals being launched by lenders.

However there remains an issue about customers giving up on applications because the process has changed since they last took out a home loan which underlines the need for the expert support provided by brokers and the whole of market service.”
 

 

House price optimism wobbles in June

Halifax has reported through its Housing Market Confidence Tracker, that following the General Election in May house price confidence hit its highest level in four years before slipping back in June.

House price optimism slipped from +68 in May to +64 in June, yet remains substantially higher than at the beginning of the year (+52 in January).

The dip in confidence in June comes despite continued rise in real wage growth, together with record low numbers of homes available for sale pushing average house prices over £200,000 for the first time ever.

Nevertheless, while the May high was short-lived, the percentage of Britons predicting an increase in the average property price of more than 5% over the next 12 months has still risen from 34% to 38% in the last quarter.

This increased optimism also corresponds with a fall in the net figure for buying sentiment, from +35 in February 2015 to +25 in June 2015. More than half (56%) of Britons said in June they think it will be a good time to buy property over the next 12 months, compared to 61% who said this in February 2015. At the same time there’s been an increase in the net figure for selling sentiment from +27 in February 2015 to +32 in June 2015).

With the Governor of the Bank of England saying improving economic figures means an interest rate rise has moved closer, nearly half of Britons (48%) expect mortgage interest rates to be higher in 12 months’ time (compared to 45% in Q1, March 2015).

Raising a deposit is still seen as one of the main barriers to homeownership (55% mention this), ahead of job security (47%) and rising property prices (35%).

While concerns over raising a deposit have fallen in the last quarter (61% of Britons cited this as a barrier to buying in Q1, March 2015), this is still higher than the proportion who said this in Q1, April 2011 (50%). At the same time concerns about rising prices have continued to increase, with more than a third citing this as a barrier to buying (35%) compared to just 15% who said this in Q1, April 2011.

Londoners are less likely than those in any other region to say it is a ‘good time to buy’ (38% of Londoners say this compared with 56% of Britons overall), making it the only region where the proportion who think the next 12 months will be a bad time to buy exceeds the proportion who think it will be a good time.

Those in the South East are more confident than in any other region that house prices will be higher in 12 months’ time (90% say this compared to 69% of Britons overall) with those in the North East and the West Midlands the least likely to say this (both 59%).

Martin Ellis, housing economist at Halifax, said: "Economic growth, together with increasing real earnings growth and historic low mortgage rates are all supporting the continued rise in house price optimism. It’s not been a smooth increase though as while there was a noticeable spike in optimism straight after the General Election result, this has now fallen off slightly.

A key factor in maintaining optimism over house price growth has been the fact that the stock of homes available for sale is currently at record low levels. If this growth is to be sustainable then we need to see a comprehensive house building plan rolled out across the UK, and soon.”

10 things landlords should really know but don't

 

 

According to the Residential Landlords Association, there are more than 100 rules and regulations that landlords need to abide by to let out a property, but how much do landlords really know?

Steve Coyle, operations director, at Cullen Property outlines his top 10 things landlords should really know but often don’t:

1.    Tenant Fees are illegal in Scotland.

Any ‘Tenant Fees’ are illegal in Scotland.  This includes, referencing fees, agency fees, holding fees, sign up or inventory fees etc.  Basically the only two things tenants should pay for in the process of letting a property are a) rent, and b) deposit.

2.    Deposits must be placed in a Tenancy Deposit Scheme.

Any deposit funds must be placed in one of the three designated government backed Tenancy Deposit Schemes (TDS) within 30 working days of a lease starting/the deposit being received.  Failure to do so is a criminal act and may make the landlord liable for a fine at court of three times the deposit amount being payable from him/her to the tenants. Putting the money into a separate bank account doesn’t qualify.

3.    Tenants can report bad housing.

Tenants can report poor housing (e.g. no running water, excessive mould etc) to the Private Rented Housing Panel (PRHP) who have the power to stop the rent being paid to the landlord until the property is in a satisfactory condition again.

4.    Lease paperwork is very important.

Allowing a tenant to move into a property without a proper AT5 or Short Assured Tenancy contract could mean that the landlord has inadvertently created an Assured Tenancy, meaning that the tenant has the right to live there indefinitely as long as they continue to pay the rent.  The Landlord has few powers to gain re-possession under an Assured Tenancy.

5.    Check your insurance policy.

Insurance policies, like most things in life, mean that you generally get what you pay for.  Cheapest usually means least amount of cover.  Some policies won’t cover even basic items like fire and flood depending on what caused them so make sure you read the small print.  It’s too late to start reading it after an incident has occurred.

6.    Smoke alarms – what the law says.

All letting properties must now legally have hard-wired smoke alarms in the living room, hallway and other ‘living areas’ and a hard-wired heat detector in the kitchen.  This applies to one bedroom and two bedroom flats as much as larger properties too.  HMO flats and properties over two levels have further requirements.  

7.    Know about the Factor Act.

Arranging communal repairs could now be classed as being in contradiction of the Factors Act.  Collecting and using other peoples’ money to pay for any repair in a communal area could technically leave the arranger in breach of the law.  Ideally, each owner should pay the main contractor their share of the costs rather than the ‘stair secretary’.

8.    Tax evasion is illegal.

Landlords who earn an income from their rental property must generally complete a Tax return.  Letting property is, in effect, running a small business and should be treated as such.  HM Revenue & Customs can impose hefty fines on anyone discovered to be evading tax.  Generally, the interest part of any mortgage can be off-set against the tax bill for the property along with various other concessions.  Check the HMRC website for full details.

9.    Check-ins and check-outs.

Conducting a proper check-in and check-out is essential.  These should include a full inventory check, condition report check, and a full set of dated digital photographs.  If the Landlord and the tenant can’t agree on what the tenant may be liable for at the end of the lease then the check-in and check-out evidence is the only way the Landlord can prove his case.  In contested cases, TDS adjudicators start from a position of ‘the money belongs to the tenant’, and it’s up to the Landlord to prove otherwise.

And finally, for all those reading this and saying to themselves, ‘Well, I never knew that!’…

10.    Ignorance is no excuse

It’s important for landlords to keep up-to-date with letting rules and regulations.‘Ignorantia juris non excusat’ or ‘ignorantia legis neminem excusat’ is Latin and is a legal principle holding that a person who is unaware of a law may not escape liability for violating that law merely because he or she was unaware of its content. The translation being: “Ignorance of the law does not excuse" or "Ignorance of the law excuses no one" so be sure to do your homework and keep abreast of new rules and regulations.