Friday, 15 November 2019

The money to buy a new iPhone11 represents just over a seventh of a Thanet first-time buyers mortgage deposit


Many mature readers of this Thanet property market blog will remember buying their first home as 20 or 30 somethings, probably in Thanet many years ago, yet read the newspapers now and feel it is all doom and gloom for todays’ first-time buyers.  So, I wanted to look at the facts, instead of newspaper headlines.

Back in 1995, the average Thanet first time buyers house cost £24,950, whilst official figures state today it is £133,900

So, looking at today’s property prices, it could be perceived that owning a home is beyond the reach of most Thanet first time buyers and that renting is the only way for younger members of Thanet society to have a roof over their head .. or is it?

100% mortgages (so no deposit needed to be saved) were rife in the 2000’s and Northern Rock were famous for their 125% mortgages ( i.e. you borrowed 25% more than what you were paying for the house, again with no deposit ). Yet when the credit crunch hit in 2008 such mortgages disappeared overnight – ending the dream of homeownership for many. Yet would it surprise you to hear that 95% mortgages (i.e. the first-time buyer would need to save a 5% deposit) have been available since late 2009 and 100% mortgages (i.e. no deposit) were made available in 2016.

It is £124 per month cheaper to buy a typical Thanet first-time buyer home than to rent the equivalent property.

Prospective Thanet first-time buyers could make a saving of £1,484 per year on average if they moved from renting to owning. My calculations assume that first-time buyers raise a deposit of just 5 per cent and make mortgage payments over 35 years with the Barclays 95% mortgage with a fixed interest rate of 2.48 per cent interest. At this level…

Today, the average deposit needed by a
Thanet first-time buyer is £6,695

Those able to raise that deposit, would pay £472 pm on average in mortgage payments, while the average rent for the same property would be £596 pm and the household income to support such a mortgage would only need to be from £28,268 pa.

Of course, buying your first home is a massive financial commitment and investment with up-front costs to ponder on, yet long-term the financial benefits can be substantial. With annual savings of £1,484 a year, this can really mount up over time and, of course, once the mortgage is paid off, one will have a valuable asset.

Yet, the elephant in the room is the raising of the 5% deposit

Well most first time buyers, even most of you who are now in your 50’s and 60’s may have used the Bank of Mum and Dad to help with the deposit, yet it’s only fair that most parents still expect their offspring to contribute to the deposit and this is where it comes down to choice. I have spoken to many of my friends and family to reconfirm my initial thoughts that it comes down to priorities and choices in life. To save the deposit mentioned above, sacrifices are required to save that amount of money.

According to a survey in 2018, the average millennial goes out two nights a week and spends on average £63.36 per night out, that’s nearly £6,600 per year - a very expensive hobby. Nearly a third of millennials surveyed had smashed their mobile phone in the last 12 months.

Then there is the obsession of having the latest tech, with the need to constantly be upgrading one’s mobile phone. In fact, the cost of the brand new iPhone 11, recently released, is just shy of £900.

Even those on contracts can expect to pay upwards of £80 per month for the newest phone upgrade, yet if they kept their old phone after two years, a sim only deal with the same minutes and data would set them back no more than £25 per month … it comes down to choices. Save for a deposit and reduce your expenditure on socialising and mobiles etc and have a valuable asset at the end of your mortgage or continue as you are.

I am not here to make a judgement – everyone is free to make their own choices in life – all I am doing is highlighting the real situation - so you are aware of the full story.

Value of FTB properties taken as the average of your local authority from the Land Registry in the lower tenth-quartile of values.  Mortgage deal correct at time of writing.  Mobile phone charges taken from typical averages.  Survey was done by SellMyPhone in 2018

Wednesday, 13 November 2019

Is This the End of No-Fault Section 21 Evictions for the 31,142 Thanet Tenants?

In the late spring, the Government announced that they were planning to end no-fault evictions for tenants living in private rented accommodation.

I have had a number of Thanet landlords contact me anxious that removing a tenant from their Thanet buy-to-let property in the future had possibly become a lot more problematic. Yet, at the launch of the consultation on the changes to the piece of legislation relating to no-fault evictions (called the Section 21 amendments), the Government wanted to assure British landlords that they would be protected by the bolstering of the existing Section 8 legislation. The current Section 8 allows landlords grounds for recovery of their properties for reoccupation of the landlord, non-payment of rent and other legitimate factors.

13,890 Thanet landlords are affected by this
potential change in the law

Yet, it is comforting for Thanet landlords and tenants in the fact that most competent letting agents very rarely have to evict a tenant. In the worst-case scenarios the tenant needs evicting (normally because rent hasn’t been paid) or because the landlord is either selling their buy-to-let investment or moving back into their property. Look at the consultation - it has been indicated that those grounds will not be removed from section 8 powers during the government’s consultation and the talk is they will be bolstered and improved. To put the removal of Section 21 notices into some context…

Only 22,527 section 21 notices made it to Court last year, out the 4.5million private rented households

Scotland banned no fault evictions (i.e. their own version of a Section 21) two years ago, and the model suggested by Westminster is similar to that of the new Scottish system. Landlords, tenants and agents have had to adapt north of the border, and there hasn’t been the mass exodus of landlords from the market since then.

Yet the call in the lettings and legal profession is … if the Government is intent on making these changes, we need well-funded courts which specialise in housing and tenancy matters (like there are for family law and children). Especially when the landlord manages the property themselves (without an agent), the issue of eviction comes about from a breakdown in communication between landlord and tenant.

The courts could use their mediation skills to make it simpler and faster for tenants and landlords to obtain quick and available justice instead of the existing drawn out procedures under Section 8, which helps no one (not even tenants). This is important as the demand for Thanet rental properties is growing and people need a home to live in – fact.

Thanet needs an additional 662 buy-to-let properties per year
for the next decade to meet the demand from Thanet tenants

As an agent in Thanet, I know most Thanet landlords consider buy-to-let in Thanet as a long-term investment, with the average landlord looking to retain their buy-to-let property for at least 10 years and beyond.

Talking to other agents around the country, over 90% of Section 21 notices are made by the tenant, not the landlord. Removing the Section 21 notice could affect tenants more than landlords.

Replacing Section 21 with a process that requires a landlord to firstly have a good reason, and secondly go through due process, will likely remove the more unprincipled landlords from the property market.

That is great news as those unprincipled landlords will either sell their properties to new buy-to-let Thanet landlords, or to tenants who want to buy them. So, it could be a small win for people looking for a new Thanet home, and a disappointment for unprincipled landlords simply looking for a cash cow ‘have no care about the property or tenant’ investment vehicle.

If you are a Thanet landlord and want to know more about this, whether you are a landlord of ours, a Thanet landlord with another Thanet agent or a self-managing landlord, feel free to drop me a line or pick up the phone (I don’t bite) to chat about the implications of this and other legislative changes that are on the horizon.

Stats from the Ministry of Justice, Census and projections from ONS and English Housing Survey

Thursday, 10 October 2019

Mending the Broken Thanet Property Market



The long-lasting issue of the Thanet property market are laid bare as the final 2018 property transaction figures have just been published and they continue the post credit crunch trend of less people moving.

29% less of Thanet people are selling their homes annually since the credit crunch, when compared to the post Millennium years of 2000 to 2005 

This is not just an issue of the Thanet housing market slowing down since the credit crunch - the challenge is to split out shorter-term factors such as Brexit and the elections from longer-term structural issues of the UK society, because when these most recent property transaction figures are seen against longer-term trends for Thanet, they suggest more significant issues in the Thanet housing market.

In the late 1990’s, 2,645 properties were sold annually in the Thanet area, then in the same area, the Millennium boom saw transactions rise to 3,672 per annum. Property sales then almost halved to 1,925 per annum in the challenge of the global financial crash and subsequent retrenchment of the mortgage market. Post credit crunch (2012 and beyond) locally, on average, 2,606 properties have sold annually.


So, whilst there was a recovery from 2013 onwards, it was rather uninspiring when compared to the pre-credit crunch years, with a lacklustre performance in property transactions since mid 2010’s.

You might ask why we should be concerned about the number of property transactions and not the change in property values? 

The number of transaction numbers are a far more exact bellwether for the health and potency of the local housing market.

As less people have been selling their homes locally, this is not only bad for the Thanet housing market but for the economy locally, especially when you consider how many allied businesses (builders, decorators, solicitors, removal vans, estate agents, mortgage arrangers and other people) lose out as a result.

Some say the deficiency of supply of property, mainly affordable first-time buyer property, is the chief reason why transaction figures remain stubbornly low. Others suggest the absence of suitable housing stock up the property ladder (particularly bungalows for the older generation), combined with rising demand, is causing a bottleneck in our local housing market.

I know there has been much talk from Westminster about grand home-building programmes, yet we now require them to deliver on these undertakings and even then, it will be a few decades before we see a seismic change in the Thanet property market.

In the short-term, a quicker improvement may come from modifications to stamp duty. First time buyers don’t need to pay Stamp Duty up to a certain level, yet those Stamp Duty concessions could be extended to those mature homeowners looking to downsize. This could liberate a meaningful number of mature family homes occupied principally by these mature generation and the tax lost through Stamp Duty could be replenished by a revaluation of the Council Tax bands?

Council Tax bandings were set in 1991 and the seven bands, the highest band starts at £320,000 (based on 1991 values). It seems irrational to us that upper value band, set in the 1991 revaluations, has not been increased, particularly as house prices in London have risen by over 400 per cent during in the last 25 years.

That would mean higher tax for those who don’t move yet less tax for those that do move – because we believe it would boost a far more liquid Thanet property market.
Just a thought of mending the local property market – what are your thoughts?

Monday, 7 October 2019

How long is the average Ramsgate property on the market for?



If you are either selling or buying a property in Ramsgate, there are a few reasons why it may be taking some time to sell your Ramsgate home or find that perfect place to call your new home. It may e taking longer than you thought to find a buyer for your home because of the current state of the property market or finding that perfect Ramsgate home may be taking too long because of a lack of properties to buy.

So, taking everything into consideration, all of these factors invite an obvious question; how long is too long to persist in the Ramsgate property market?

If you are looking to sell your Ramsgate property, it may have become infuriating when your home has been on the market for longer than you anticipated. Perhaps the property market is purely in a position where it's challenging to get a property sold quickly, or sold at the price you want to achieve for it. If you do live in a Ramsgate home that is towards the upper reaches of the price band, you have to be open to the idea that because it's worth so much more than the average property in Ramsgate and so more than most individuals can afford, you will have to wait longer to get it sold.

Your Ramsgate home might be taking longer to sell because your asking price is simply too high. Even if you are prepared to take a realistic offer, if you have an unrealistic asking price your overpriced Ramsgate property will undoubtedly turn off potential buyers from even being inclined to book a viewing.

Looking at the market in Ramsgate compared to a year ago makes very interesting reading…




When it comes to the average length of time on the market, it’s the detached homes in Ramsgate that appear to be taking longer to sell, yet the length of time Ramsgate terraced homes and apartments seem to be on the market has dropped. Semi-detached homes have remained the same.



The overall average length of time a Ramsgate property remains on the market has dropped by 3.3%, from 90 days a year to 87 days today 
 
The question that remains is, if you are having no luck selling should you leave your Ramsgate property on the market or not? This is basically down to your personal circumstances - a big decider has to be if you are moving up market or downsizing.

Buyers will compare your Ramsgate property to all the other homes on the market using the portals such as Rightmove, On the Market and Zoopla and even if your asking price is realistic, if your marketing (brochures, pictures, even video walk through) isn’t top dollar, they will dismiss your property.

Remember, the average buyer only views 4.5 properties before they buy and on average, each buyer will only spend just over 25 minutes viewing each home … 
 
The more properties that are on the market, the greater the choice for buyers (yet more competition for house sellers), so we wanted to look at how many homes were for sale in Ramsgate now, compared to 12 months ago.

As you can see, there are some big differences between the property types in Ramsgate.




As for buying a Ramsgate property, searching for that dream house can take time as you have to consider the needs of your spouse, children, schooling, etc., what you can realistically afford and whether your current location can accommodate you until you find that perfect Ramsgate home.

Don’t forget that upwards of 10% of homes do not make it to the portals (the portals are Rightmove, Zoopla and On the Market), so don’t just rely on the portals to let you know what is coming on the market. The number of times I speak to disappointed buyers who missed out because other buyers registered directly with the agent for property, whilst they relied on the portals.

When it comes to buying a Ramsgate home, and so you do not make any decisions you will regret later on, taking your time is always the more practical option. The amount of money that is involved in buying a home and all the costs connected with it means that you should not rush into buying or selling without due consideration.

Tuesday, 1 October 2019

76.3% of Thanet OAP’s own their own home … and they are worth £1,109.1m

Yes, that number is staggering isn’t it ….

Of the 8,836 households in Thanet where the head of the household is 65 years or older, an astounding 6,738 (or 76.3%) of those are owned, which is just above the national average of 74.1%, which sounds great – yet nothing could be further from the truth.

I chat with many Thanet pensioners who would like to move but cannot, as there is a scarcity of such properties for Thanet mature people to downsize into. Due to their scarcity and high demand, Thanet bungalows on average get a 12% to 22% premium per square metre premium over two storey properties. To add insult to injury, a recent NHBC reported that only 1% of new builds in the Country were single storey bungalows (compared to 7% in the mid 1990’s).

Thanet OAP’s are sitting on £1,109.1m of equity in these Thanet homes

In a survey conducted a couple of years ago by YouGov, they established that just over one third of homeowning people aged 65 and over in the Country were looking to downsize into a smaller home. Yet, the Tory’s over the last nine years have appeared to target all their attention on first-time buyers with stratagems such as Starter Homes to safeguard the youngsters of the UK not becoming perpetual members of ‘Generation Rent’. Equally though, this doesn’t address the long-lasting under-supply of suitable retirement housing essential to the needs of the Thanet’s hastily ageing population.

Lamentably, the Thanet’s housing stock is tragically unprepared for this demographic shift to the 'overextended middle age’, and this has created a new 'Generation Confined’ quandary where older people cannot move.

Also, those older Thanet retirees’ who do live in the limited number of Thanet bungalows are finding it difficult to live on their own, as they are unable to leave their bungalow because of a lack of sheltered housing and ‘affordable’ care home places.

Meaning those older Thanet retirees can't leave their Thanet bungalows, younger Thanet retirees in their larger 2 storey family houses can't buy those Thanet bungalows (occupied by the older retirees) and those Thanet people in the 30’s and 40’s can't buy those larger 2 storey family houses (occupied by the younger retirees) they need to for their growing families ... it’s like everyone is waiting for everyone because of the bottleneck at the top.

For those wanting to see the complete stats for Thanet as whole …

Thanet’s (and the rest of the UK’s) property prices have soared over the last 50 years because the number of properties built has not kept up with demand. With restrictive planning regulations, migration, people living longer and excessive divorce rates (meaning one family becomes two) we need, as a Country, 240,000 properties to be built a year since the Millennium to just stand still.
At the turn of the Millennium, the Country was constructing on average 180,000 to 190,000 households a year, that figure dropped in the five years after the Credit Crunch to 135,000 and 145,000 households a year. Although we built 217,000 last year, we still have all those 19 years to make up for.
The answer …. allow more land for starter homes, bungalows and sheltered accommodation because land prices are stifling the property market as the large building firms are more likely to focus on traditional houses and apartments than bungalows (because they make more money from them).
My thoughts for the savvy Thanet property investors – until the Government change the planning rules and allow more land to be built on – Bungalows, especially ones that need some TLC after someone has passed away bungalows are a great bet for flipping and even potential rental returns for future property investment as more and more OAP’s will be renting in the decades to come?

Friday, 27 September 2019

The leasehold and ground rents scandal of Thanet

Freehold or Leasehold .. which is best? 

Well, when buying a property in the UK there are two main types of ownership – freehold and leasehold and, when boiled down, they mean the following...

Freehold : The person who owns the freehold of a property owns the property and the land it stands on.

Leasehold : As a leaseholder you do not own the land the property is built on. A leaseholder essentially rents the property from the freeholder for a number of years, decades or in some Victorian terraced houses, for centuries.

All apartments have to be sold as leasehold properties because of the very nature that you have a neighbour above or below you (so both of you can’t own the land) with the length of the lease being over 100 years (even more sometimes).

However, with some apartments – particularly Victorian and Edwardian houses converted into numerous apartments – which are sold on the basis that the leasehold apartment owner also owns part of the freehold (with other leaseholders in the same building), having what is known as 'share of freehold'. Similarly, the Government also brought in legislation a number of years ago for more modern apartment blocks built in the 20th century where it allowed leaseholders to club together and have the right to purchase the freehold together.

Now we must stress, there is nothing wrong with leasehold – it’s been a useful type of home-ownership since Norman times, it’s just that with a leasehold comes a potential extra responsibility. If there are four apartments in a block, who pays for the leaking roof when all benefit from a watertight roof? Who pays for the bad foundations, when all benefit from good foundations? Who pays for building insurances? .. the list goes on – so clauses are added to the leasehold agreement to ensure everyone is protected and pays their fair share of the joint costs of the building with service charges and a nominal ground rent (ground rent is a nominal rent, commonly quite low, often in the region of £50 per year to the freeholder of the property).

Whilst houses tend to be sold as freehold as it's a more unambiguous set-up, given there is only one property on the land. Contentiously however, in the last 10 to 15 years this has not always been the case with new-builds as some new homes’ builders have sold the leasehold to the buyer and retained the freehold. There is nothing wrong with that, it’s just in some cases (not all) they also added some oppressive clauses to the lease of the property they were selling, which could be the next PPI scandal - albeit for property.

Government reports have emerged recently that suggest 12,000 leaseholders in the UK are facing ground rents – which they pay to the freeholder – that double in cost, usually every 10 years, but occasionally more frequently.

Builders started to add clauses into leasehold property sales with ground rent being set at £300 and £400 a year, yet it doubled every ten years. Though unwary first-time buyers were habitually told that their 500 and 999-year leases were practically freehold, the clauses inescapably meant that the ground rent would spiral to ridiculous levels meaning the average ground rent would be £23,750 a year by 2070 and £379,900 a year by 2130, making the properties practically unsellable today, with owners often left unable to re-mortgage too.

So, how many people are affected by this in our local area?

Well, using Government data, our research suggests that in Thanet 8 householders have bought a detached house, semi-detached house or town house (which would normally be freehold) as leasehold. Not all these have onerous lease clauses, yet some do. I know it doesn’t sound a lot, yet that is potentially 8 lives ruined with houses they can’t sell - making them prisoners in their own property.

The good news is the Government is on the case and serious about sorting this issue out as they have proposed a ban on the future sale of houses as leasehold, as well as cutting ground rents to zero. Yet stern questions remain about the future of homeowners in existing leaseholds. Westminster wants the builders to set up compensation plans, and we will say many (not all) have stepped up to the mark and started to sort this, although some campaigners have said the schemes are not fit for purpose, let’s hope they are wrong.

Wednesday, 25 September 2019

Are Thanet Builder's Constructing the Wrong Type of Property?


The British housing market has never been so newsworthy. Every other day, there is an article in the newspaper or online about impending house price drops, house price rises, building on green belt, mortgage rates up/down, first time buyer affordability and the woes of being a buy to let landlord, to mention but a few.  As a nation, we have a strong national desire to be homeowners.
The English Housing Survey stated the proportion of owner occupied households increased steadily from 52% in the early 1980s to 2003 when it reached its peak of 71%. Since then, owner occupation gradually declined to 63% in 2014, yet in fact increased to 64% in 2017 and has stayed there since.

One of the main motives of home ownership is the prospective tax-free capital appreciation that can be obtained. It’s no wonder the phrase ‘as safe as houses’ is popular in the English language, as many homeowners use home-ownership as a nest egg or even a pension pot, as savings rates are at extraordinarily low levels.

Yet even with the news that home-ownership is on the rise, the biggest seismic shift to the Thanet property market is the growth of the rental market, which has more than doubled in the last 15/20 years. So how can the social housing sector (Council Housing) remain roughly at the same level since the millennium, home-ownership slightly grow, yet the private rental sector be so huge? Well it comes down to the fact that many more homes have been built in Thanet in the last 15/20 years, and a lot of them have been bought for buy to let, or Thanet homeowners with second hand starter homes have also sold them to buy to let landlords and they have bought larger brand new homes.

Yet the question we wanted to ask is ... are we building the right sort of homes, especially when it comes to the number of bedrooms? Whilst the data doesn’t exist for Thanet, the country’s stats are available and it makes fascinating reading...

Stats for local authority from the Census

Looking at the graph in 2008, 59% of new homes built were one and two beds, yet last year that had dropped to 35%.

The Housing Minster said recently he was concerned that new homebuilders were building the wrong types of homes in the wrong places at the wrong prices. Many (not all) tenants are tenants because they can’t afford the deposit and as there is a direct coloration between the rent’s landlords charge and tenant’s earnings (i.e. as earnings go up, rents go up and vice versa), and earnings for the last seven years have been subdued, the property tenants have been able to afford in Thanet are the smaller one and two bed properties. Yet a lot of these tenants are now having families (with the need for larger property with three, even four bedrooms).

Looking at the stats for Thanet, it can be seen the vast majority of homeowners live in the larger properties with more bedrooms, whilst private rental tenants are in the smaller properties (with less bedrooms).

Stats for Bedrooms for UK – English Housing Survey
Our concern is - will young families and professionals be able to afford to live and work in Thanet, especially as the local authorities are unable to build council housing (aka Social Housing)?
One symptom of all these issues mentioned above is the massive growth in multi-family households (i.e. households containing two or more families), which have increased by 42% in under a decade. Now of course many will be because of older couples moving in with their adult children yet many are unrelated families sharing a house, something that simply shouldn’t be happening in 2019.
If we don’t increase the supply of the ‘right’ sort of homes, what will their living conditions be like?

Whilst we are still a country of homeowners and even though there has been a slight growth in numbers, the long term trend is downwards if we don’t build enough of the ‘right’ new homes, in the ‘right’ location and the ‘right’ price, Thanet people will continue to increasingly rent ... which is only good news for Thanet buy to let landlords.