Wednesday, 19 September 2018

Value of Ramsgate Property Market falls £83.3m


The combined value of Ramsgate’s housing market has fallen by £83,338,200 in the last 6 months, meaning the average value of a Ramsgate property has decreased in value by an average of £6,325.  

This is great news for Ramsgate first time buyers and Ramsgate buy to let landlords, as there is a slight hesitation in the market because of the uncertainty over Brexit. As I have always said, investing in Ramsgate property, be it for you to live in or as a buy to let investment, is a long-term game. In the grand scheme of things, this minor change over the last 5 or 10 years is nothing.

The RICS’s latest survey of its Chartered Surveyor members showed that nationally the number of properties actually selling has dropped for the 16th month in a row. Locally in Ramsgate, certain sectors of the market are matching that trend, yet others aren’t. It really depends which price band and type of property you are looking for, as to whether it’s a buyers or sellers market. 

The RICS also said its member’s lettings data showed a lower number of rental properties coming on to the market. Anecdotal evidence suggests that (and this is born out in the recent English Housing Survey figures) Ramsgate tenants over the last few years are stopping in their rental properties longer, meaning less are coming onto the market for rent. I have noticed locally, that where the landlord has gone the extra mile in terms of decoration and standard of finish, this has certainly helped push rents up (although those properties where the landlord has been remiss with improvements and standard of finish are in fact seeing rents drop). Ramsgate tenants are getting pickier – but will pay top dollar for quality. So much so, I believe there will be a cumulative rise of around fourteen to sixteen per cent over the course of the next five years in private rents for the best properties on the market.

Back to the Ramsgate Property Values though … 

This drop in Ramsgate property values doesn’t particularly concern me. The fact is that over the last 6 months 253 properties have sold for a combined value of £61,383,872. You see, that drop must be seen in perspective in that 6 months ago, the total value of Ramsgate property stood at £3,195,588,456 (£3.20bn), and today it stands at £3,112,250,256 (£3.11bn) .. this change is a drop in the ocean.

In the short term, say over the next six months and assuming nothing silly happens in Korea, the Middle East or Brexit negotiations, it will be more of the same until the end of the year. In the meantime, the on-going challenges ensuring we as a Country build more homes (although the Office of National Statistics figures released in July showed nationally the number of new homes started to be built over the second Quarter of 2018 had dropped dramatically) makes me think that Ramsgate (and Nationally) property value is likely to recommence an upward trajectory as we go into 2019.

One final thought for all the buy to let landlords in Ramsgate (and indirectly this does affect all you Ramsgate homeowners too). I do hope the recent tax changes towards buy to let landlords don’t bite as deep as it is possibly starting to with certain landlords I know.  We talked about this in an article a few weeks ago and I know why the Government wanted to change the balance by taxing landlords and providing a lift for first time buyers .. however, this may well come at the expense of higher rents for those Ramsgate tenants that don’t become first time buyers, as the appeal of buy to let potentially weakens.

Monday, 20 August 2018

‘Taxing’ Time for the 2,655 Ramsgate Buy To Let Landlords

Over the last twenty years, there has been a shift in the way the Ramsgate (and the UK’s) property market works. In the 1960’s, 70’s, 80’s and 90’s, a large majority of twenty somethings saved up their 5% deposit, went without life’s luxuries of going out and holidays etc., for a couple of years and then bought their first home with their hard earned savings.

By 2000, 40.8% of Ramsgate 25 to 29 years owned their own home (compared to 46% Nationally (and 57% of Ramsgate 30 to 34 year olds in 2000 owned their own home – again compared to 64.2% nationally) whilst the remaining youngsters mostly rented from the Council and in some rare cases, privately rented.

Now it’s 2018, and those levels of homeownership have slipped dramatically and now only 21.8% of Ramsgate 25 to 29 year olds own their own home and 38.4% of Ramsgate 30 to 34 year olds own their own home (interestingly mirroring the National picture of 24.5% for the younger age cohort and 64.2% for the older 30 to 34 year cohort).


There was concern in Government since the late Noughties that this shift from homeownership to private renting wasn’t good for the well-being of the Country and things needed to change, to make it a more level playing field for first time buyers. House prices needed to be more realistic and there needed to be a carrot and stick for both landlords and first time buyers.

In the 1980’s and 1990’s, interest rates were the weapon of choice of Government to cool or heat up the UK housing market – and it did work – up to a point. It’s just interest rates also affected so many other sectors of the UK economy (and not always a in good way). The policy of interest rates to control the economy is called ‘Monetary Policy’. Monetary policy is primarily concerned with the management of interest rates (and the supply of money) and is carried out by the Bank of England (under direction from the Government).

It’s just in this post Credit Crunch, Brexit environment, the use of higher interest rates wouldn’t directly affect landlords (as around two thirds of buy to let properties are bought without a mortgage). Therefore, an increase in interest rates would have hardly any effect on landlords and hit the first time buyers - the people the Government would be trying to help!

Also, given muted growth of real income (i.e. real income being the growth salaries after inflation) in the past few years, an uplift in interest rates (from their ultra-low 0.5% current levels) would have a massive effect on Brit’s household disposable income. Yet, over 90% of new mortgages in 2018 being taken are fixed rate and with such low rates, it has made buying a property comparatively attractive.

Instead, over the last 8 years, the Government has encouraged first time buyers and clipped the wings of landlords with another type of economic policy – Fiscal Policy (Fiscal Policy is the collective term for the taxing (and spending) actions of the Government).  First time buyers have had the Help to Buy Scheme, Stamp Duty Exemption and contributions to their deposit by HMRC. On the other side the coin, landlords have had the way they are able to offset the tax relief of their mortgage payments against income change (for the worse), an increase in Stamp Duty (for the worse) and they will be hit with additional costs as the Government will be phasing out fees to tenants in the next 12 to 18 months.

So, what does this all mean for the 2,655 Ramsgate landlords?

The days of making money in Ramsgate buy to let with your eyes closed are long gone. There are going to be testing times for Ramsgate landlords, yet there is still a defined opportunity for those Ramsgate landlords who are willing to do their homework and take guidance from specialists and experts.

It’s all about looking at your Ramsgate portfolio (or getting a property professional to do so) and ascertaining if your current portfolio, mortgage and gearing are designed to hit what you want from the investment (because that is what it is – an investment) in terms of income now and income in the future, capital growth and when you plan to dispose of your assets.

I have seen many Ramsgate landlords (both who use me and my competitors) to manage their rental property or find them tenants – and on many occasions recently, I have told them to SELL – yes sell some of their portfolio to either reduce mortgage debt or buy other types of property that match what they want in the short and long-term from their investments. I know that sounds strange – but my role isn’t just to collect the rent  .. it’s also to give strategic advice and opinion on the landlord’s portfolio to help them meet their current and future investment goals.

The opportunities will appear in the Ramsgate property market for Ramsgate landlords from gentler growth in property values linked with a restrained Ramsgate property market, meaning if you put in the time, there will be deals and great bargains to have. Many landlords in Ramsgate (both clients and non-clients) send me Rightmove links each week, asking my opinion on the suitability of the investment. Some are exceptional – whilst others are duds. The bottom line is, private renting will continue to outgrow first time buyers in the next 5 to 10 years and as we aren’t building enough homes in the UK, which means rents can only go in one direction – upwards!

Friday, 3 August 2018

What Will Happen to Margate Property Values Now That Interest Rates Have Risen?

The current average value of a property in Margate currently stands at £228,000 and the base rates are now at 0.75%. In many of my articles, I talk about what is happening to property values over the short term (i.e. the last 12 months or the last 5 years), but to answer this question we need to go back over 40 years, to 1975. 

The average value of a Margate property in 1975 was £11,038

However, since 1975, we have experienced in the UK, inflation of 807.5%.

Back in 1975, the average salary was £2,291 and average car was £1,840. A loaf of bread was 16p, milk was 28p a pint and a 2lb bag of sugar was 30p. Inflation has increased prices, so comparing like for like, we need to change these prices into today’s money. In real spending power terms, an average value of a Margate house in 1975, expressed in terms of today’s prices is £100,181. 

That means in real terms, property costs a lot more today, than in the mid 1970’s, but has it always been that way? Looking at the important dates of the UK property market, you can see from this table, the last two property boom years of 1989 and 2007, show that there was a significant uplift in the cost/value of property (when calculated in today’s prices).


Before we move on, hold onto the thought that you can quite clearly see from the table, in real terms, properties are cheaper today in Margate than they were in 2007!
So, it made me wonder if there was a link between house prices, inflation and other external economic factors, such as interest rates? Interest rates have a strong influence on inflation and property values, principally because changes in the interest rate affect the cost of mortgage payments for homeowners and they affect the flow of foreign currency in (or out) of an economy, thus changing the exchange rate and prices we can sell our goods and services abroad and prices we pay on imports.
So how exactly do interest rates affect property values?
When interest rates rise, it has a substantial effect on increasing the monthly cost of mortgages. Higher mortgage payments will discourage prospective homebuyers or people looking to move up market (meaning their mortgage payments go up) – thus making it comparatively cheaper to rent.
Furthermore, the high cost of mortgage payments sometimes also pushes some existing home owners to sell, meaning there is an increase in house sellers and a decline in house purchasers, and as the law of economics state, when supply is increased and demand falls, (house) prices fall. Another fallout of a rise in mortgage payments is a rise in repossessions. Interestingly, repossessions in the UK rose from 15,000 per annum in the late 1980’s to over 75,000 per annum in the early 1990’s, meaning even more properties came onto the market, exasperating the issue of over supply – pushing property values even lower. 


High interest rates caused property values to fall in mid 1970’s, early 1980’s and most recently, the early 1990’s (who can remember the 15% mortgage rate!) Conversely though, the drop in property values in 2008/2009 – was not due to interest rates, but due to the credit crunch and global recession.
So, what will happen if when interest rates rise?


It is vital to remember that interest rates are not the only factor affecting property values. Now that interest rates have increased (which they have from 0.5% to 0.75%), property values can also continue to rise (it happened throughout the mid to late 1980’s and again between the boom years of 2002 and 2007). When confidence in the economy is good, and we as a Country experience a period of rising real incomes (i.e. after inflation), then the British in the past have continued to buy bricks and mortar, notwithstanding the rise in interest rates.
Another important factor on property values is the supply of housing. A big reason in the current level of Margate house prices is due to the shortage of supply, which has kept property values higher than I would have expected. An additional factor is whether homeowners have a variable or fixed rate mortgage. 90.6% of new mortgages taken in the last Quarter were at a fixed rate, and 66.2% of all mortgaged homeowners are on fixed-rate mortgages, therefore, they will not notice the effects of higher interest rate payments until they re-mortgage in a few year’s time, meaning there is frequently a time-lag between higher interest rates and the effect on property values. Another factor on mortgages is the ability to get one in the first place. Back in 2014, mortgage providers were told to be stricter on their lending criteria when arranging mortgages following the footloose days of 125% loan to value mortgages with the Northern Rock. These new rules are a lot more rigorous on borrowers' ability to repay the payments (although it makes me laugh, when with starter homes it nearer is always cheaper to buy then rent!).
I think the final point is this … affordability is the key. Look at the graph (the red bars) and you will see in REAL HOUSE PRICE terms – it’s cheaper to buy a home today than it was in 2007, yet why aren’t we seeing people buying property at the levels we were seeing in the 2000’s before the credit crunch? Again, looking at the reasons why, I will talk about in future articles.
In conclusion, interest rates are important – but nowhere near as important on the Margate (and British) property market than they were 15 or 20 years ago.


So, before I go, one final thought - how do we measure the success of the Margate property market? Well I believe one measure that is a good bellwether is the number of property transactions, as that could show a more truthful picture of the health of the property market than property values. Maybe I should talk about that in an up and coming article?


Friday, 27 July 2018

The Thanet Bank of Mum and Dad Lent £2.72m Last Year


My analysis has shown that up to the end of the last quarter, Thanet first time buyers purchased 226 Thanet properties.  With wages rising at 2.8%, unemployment at a low rate of 4.2% (down from 4.6% from a year earlier and the joint lowest since 1975), national GDP rising at 1.87% and inflation at 2.3%, tied in with indifferent house price growth (compared to a few years ago), this has given first time buyers a chance to get a foot hold on the Thanet property market.

Over the last year, the average purchase price of a Thanet first time buyer property has been £170,200 and the average deposit was £27,572. Furthermore, my calculations show the average Thanet parents contributed £12,063 of that £27,572 figure.

You see “The Bank of Mum and Dad (Thanet Branch)” is for countless Thanet twenty something’s, perceived to be the only way they will ever be able to afford their first home. In fact, Thanet parents put up a substantial £2.72m in the last 12 months to help their nearest and dearest progeny onto the property ladder. This assistance towards the deposit makes a huge difference, enabling Thanet youngsters who thought they couldn’t get on the housing ladder more able to do so.

With mortgage rates at all-time lows, few Thanet twenty something’s would struggle to make mortgage repayments, but it is the requirement of the deposit which is the issue, although as parents (and grandparents) are helping out where they can, it does little to address the real problems of the housing market, whether for people renting or buying their first home.

If you think about it, as a Country we have been fortunate that the older generation who control the biggest share of the nation’s wealth are so plentiful to those following after. We need to remember, though, that this generosity is
 a sign of the issues of the British housing shortage, not its solution. 

But before I leave this article … note I used the word PERCEIVED in a previous paragraph. Yes, the average first time buyer deposit is 16.1%, but that is an average. Did you know 95% mortgages returned to first time buyers in late 2009 and have been available ever since? Also, lenders like Barclays and many local Building Society’s now offer 100% mortgages (i.e. no deposit) at 2.75% fixed for three years.

The perception is you need 15%, 20% even a 25% deposit to be a first-time buyer – you don’t! You don’t need any deposit, but (there is always a but!)...

Over the last decade, many renters have upgraded themselves into homes that they (or any generation before them) could never have ever afforded as a first time buyer in the past. You see the British housing market started to change with the dawn of the new Millennium and I am seeing a slow but steady attitude change when it comes to renting. Those tenants have found the price difference of upgrading from the typical 1970’s TV show Rigsby “Rising Damp” style rental property to plush terraced house or even semi-detached home, with all the mod cons, comparatively inexpensive (when compared to the increase in mortgage payments if they had to make the move as buyers).

Renting isn’t seen as the poor man’s choice, as many young (and increasing older) people are becoming more at ease and comfortable with the flexibility offered by private renting a property rather than jumping ‘lemming like’ into home ownership. Thanet landlords will continue to see growth in sector, and like Germany, todays renters will become homeowners in 20 years’ time – when they will inherit the wealth of their parent’s home.

Monday, 16 July 2018

Extra Funding Is Required for Affordable Homes in Thanet



In my blog about the Thanet Property Market I mostly only talk about two of the three main sectors of the local property market, the ‘private rented sector’ and the ‘owner occupier sector’. However, as I often stress when talking to my clients, one cannot forget the third sector, that being the ‘social housing sector’ (or council housing as some people call it). 
In previous articles, I have spoken at length about the crisis in supply of property in Thanet (i.e. not enough property is being built), but in this article I want to talk about the other crisis – that of affordability. It is not just about the pure number of houses being built but also the equilibrium of tenure (ownership vs rented) and therein, the affordability of housing, which needs to be considered carefully for an efficient and effectual housing market.
An efficient and effectual housing market is in everyone’s interests, including Thanet homeowners and Thanet landlords, so let me explain ..

An average of only 86 Affordable Homes per year have been built Thanet District Council since 2009

The requirement for the provision of subsidised housing has been recognised since Victorian times. Even though private rents have not kept up with inflation since 2005 (meaning tenants are better off) it’s still a fact there are substantial numbers of low-income households in Thanet devoid of the money to allow them a decent standard of housing.
Usually, property in the social housing sector has had rents set at around half the going market rate and affordable shared home ownership has been the main source of new affordable housing yet, irrespective of the tenure, the local authority is simply not coming up with the numbers required. If the local authority isn’t building or finding these affordable homes, these Thanet tenants still need housing, and some tenants at the lower end of the market are falling foul of rogue landlords. Not good news for tenants and the vast majority of law abiding and decent Thanet landlords who are tarnished by the actions of those few rogue landlords, especially as I believe everyone has the right to a safe and decent home.

Be it Tory’s, Labour, SNP, Lib Dems, Greens etc, everyone needs to put party politics aside and start building enough homes and ensure that housing is affordable. Even though 2017 was one of the best years for new home building in the last decade (217,000 home built in 2017) overall new home building has been in decline for many years from the heady days of the early 1970s, when an average of 350,000 new homes were being built a year.  As you can see from the graph, we simply aren’t building enough ‘affordable’ homes in the area.



The blame cannot all be placed at the feet of the local authority as Council budgets nationally, according to Full-Fact, are 26% lower than they have been since 2010.  
So, what does this mean for Thanet homeowners? Well, an undersupply of affordable homes will artificially keep rents and property prices high. That might sound good in the short term, but a large proportion of my Thanet landlords find their children are also priced out of the housing market. Also, whilst your Thanet home might be slightly higher in value, due to this lack of supply of homes at the bottom end of the market, as most people move up the market when they do move, the one you want to buy will be priced even higher.
Problems at the lower end of the property market will affect the middle and upper parts. There is no getting away from the fact that the Thanet housing market is all interlinked .. it’s not called the Property ‘Ladder’ for nothing!


Friday, 6 July 2018

1,175 Margate Landlords Plan to Expand Their Buy To Let Portfolios


A noteworthy number of buy to let landlords in Britain plan to buy more properties over the next year notwithstanding the frustrations, challenges and seismic changes in the private rented sector. According to Aldermore, the specialist Buy To Let lender, their research shows around 41% of portfolio buy to let landlord’s objective is to grow their buy to let portfolio (Portfolio landlords are landlords that own more than one property). So, I thought, “Are Thanet landlords feeling the same?” If so, if these numbers were applied to the Thanet private rental market, what sort effect would it have on the Thanet property market as whole? Talking to the landlords I deal with, most are feeling quite optimistic about the future of the Thanet rental market and the prospect it presents notwithstanding the doom and gloom prophecies that the property market will shrink. Many of those landlords who are looking to enlarge their portfolio are doing so because they still see the Thanet rental market as a decent investment opportunity. With top of the range Bank and Building Society Savings Accounts only reaching 1.5% a year, the rollercoaster ride of Crypto currency and the yo-yoing of the Stock Market, the simple fact is, with rental yields in Thanet far outstripping current savings rates, the short term prospect of a minor drop in property prices isn’t putting off Thanet landlords. The art to buying a Thanet buy to let investment is to buy the profit on the purchase price, not the anticipation of the future sale price. No matter what the historical economy has thrown at us, with the global meltdown in 2008/9, dotcom crash of 2000, ERM in 1992, the three day week, oil crisis and hyperinflation in the 1970’s (the list goes on) ... the housing market has always bounced back stronger in the long term. That’s the point ... long term. Investing in buy to let is a long-term strategy. The simple fact is, over the long term with the increasing demand for rental properties, predominantly among Millennials as many cannot afford to get on the property ladder, and with councils not building enough properties of any kind, many youngsters are having to resort the private rental market for their accommodation needs. So, what of the numbers involved in Thanet? Lets look at the numbers for Margate for example. There are 1,316 landlords that own just one buy to let (BTL) property in Margate and 2,866 Margate landlords, who are portfolio landlords. Between those 2,866 Margate portfolio BTL landlords, they own a total of 6,015 Margate BTL properties and they can be split down into the size of landlord portfolio in the graph below….


If I apply the Aldermore figures that means 1,175 Margate landlords have plans to expand their BTL portfolio in the coming year or so. However, the Aldermore Research also showed that 8% of private landlords intended to reduce the number of properties they own. They put this down to continuing Government intervention in the housing market (as many landlords mentioned too many limitations and higher taxation) while some believed that tenants are excessively protected to the disadvantage of the landlord. I would say there is no repudiating that the buy to let market has taken a bit of a beating, thanks to a plethora of Government regulation, new mortgage underwriting rules in 2014 and George Osborne’s tax changes. Yet there still remains an overall consciousness of optimism among the vast majority of Thanet buy to let landlords. Despite these latest changes, many landlords still view buy to let as a good investment, as long as you buy right and expand your portfolio taking into account the second rule of buy to let … assess your position on the ‘buy to let seesaw’ of capital growth and yield. If you want to buy right and assess your own portfolio on the yield/capital growth seesaw ... drop me a note. I don’t bite and the opinion I give, whether you are landlord of mine or not as the case may be, is given freely, without obligation or cost. The choice is yours. Thank you for reading this article. To read others, please visit my Thanet Property Blog.

Friday, 25 May 2018

£685 pcm – The Average Thanet Rent


The rents paid by Thanet tenants are now standing at £685 per calendar month (PCM), a rise of 0.59% year on year and 0.71% higher month on month.

However, this attention-grabbing monthly rent figure masks stark differences in the various different parts of the Thanet rental market.  Demand in Thanet for high quality family homes with two or three bedrooms in good catchment areas for schools remains really robust due to tenants wanting access to the schools.  Other influencing factors that make certain areas popular are the proximity to transport links. However, I have noticed a drop in demand (and thus rents achieved) for property where the landlord hasn’t kept the property fresh; in terms of decoration, carpets, replacement windows and poor heating.

So, what does all this mean for Thanet landlords and tenants?
With the new tax rules for landlords, many believed that the number of rental properties would narrow throughout 2017, as landlords sold up their Buy to let properties and looked to invest their money elsewhere, but evidently this hasn’t happened (yet).  Feasibly Thanet landlords are re-mortgaging their Thanet buy to let properties instead, as they still believe it’s a safer investment than looking, say at the stock market?
However, demand remained strong in 2017 for Thanet private rental properties, meaning the rents being achieved were at a decent level for landlords. Keeping your outgoings low is also an important consideration and so I looked on a well-known financial services comparison site this morning and found a High Street bank offering a 5-year fixed rate for Buy to let landlords with a 40% deposit/equity for 2.17% … I can remember (as I am sure many of my readers of this blog can) when mortgage rates were at 15% - this is cheap money!
Looking at property values in Thanet, over the last 12 months and specifically at the lower of the market where buy to let landlords tend to buy their rental properties.  Flats/apartments have risen in value by 1.22% whilst terraced properties have risen by 4.53%.

Some Thanet landlords have seen the yields they are achieving remain squeezed.

However, most landlords can start to feel assured that as capital growth in Thanet remains at a more realistic figure (good for long term stability in the property market) and long-term rents are on the rise, the overall corresponding annual return on investment (Annual ROI being annual capital + annual yield) has stabilised in all areas and is now starting to grow.

With additional people seeing renting as a long-term option, even with the challenges of the new tax regime, Thanet landlords, with the support of a good advice and opinion, should continue to see renting as a good investment vehicle.