Friday, 16 February 2018

Ramsgate’s ‘Millennials’ set to inherit £302,503 each in property!

That got your attention ... didn’t it!

But before we start, what is Generation X, let alone Generation Z, Millennials, Baby
Boomers  ... these are phrases banded around about the different life stages
(or subcomponents) of our society. But when terminologies like this are used as
often and habitually as these phrases (i.e. Gen X this, Millennial that etc.), it appears
particularly vital we have some practical idea of what these terms actually mean.
The fact is that everyone uses these phrases, but often, like myself, they are not
exactly sure where the lines are drawn ...until now…
So, for clarity …

Generation Z: Born after 1996
Millennials: Born 1977 to 1995   
Generation X: Born 1965 to 1976
Baby Boomers: Born 1946 to 1964
Silent Generation: Born 1945 and before

My research shows there are 5,116 households in Ramsgate owned by Ramsgate
Baby Boomers (born 1946 to 1964) and Ramsgate’s Silent Generation (born 1945
and before). It also shows there are 7,606 Generation X’s of Ramsgate (Ramsgate
people born between 1965 to 1976). Looking at demographics, homeownership
statistics and current life expectancy, around two-thirds of those Ramsgate 7,606
Generation X’s have parents and grandparents who own those 5,116 Ramsgate

… and they will profit from one of the biggest inheritance explosions of any post-war
generation to the tune of £1.208bn of Ramsgate property or £238,094 each but they
will have to wait until their early 60’s to get it!

However, it’s the Millennials that are in line for an even bigger inheritance windfall.

There are 6,093 Millennials in Ramsgate and my research shows around two thirds
of them are set to inherit the 5,207 Ramsgate Generation X’s properties. Those
Generation X’s Ramsgate homes are worth £1.229bn meaning, on average, each
Millennial will inherit £302,503; but not until at least 2040 to 2060!

While the Ramsgate Millennials have done far less well in amassing their own
savings and assets, they are more likely to take advantage of an inheritance boom
in the years to come. This will probably be very welcome news for those Ramsgate
Millennials, including some from poorer upbringings who in the past would have
been unlikely to receive gifts and legacies.

However, inheritance is not the magic weapon that will get the Millennials on to
the Ramsgate housing ladder or tackle growing wealth cracks in UK society, as the
inheritance is unlikely to be made available when they are trying to buy their first
home…but before all you Ramsgate Millennials start running up debts, over 50% of
females and around 35% of men are going to have to pay for nursing home care.
Interestingly, I read recently that a quarter of people who have to pay for their care,
run out of money.

So, if you are a Ramsgate Millennial there potentially will be nothing left for you.
Of course, most parents want to give their children an inheritance, the consideration
that what you have worked genuinely hard for over your working life won’t go to your
children to help them through their lives is a really awful one … maybe that is why I am
seeing a lot of Ramsgate grandparents doing something meaningful, and
helping their grandchildren, the Millennials, with the deposit for their first house.

One solution to the housing crisis in Ramsgate (and the UK as a whole) is if
grandparents, where they are able to, help financially with the deposit for a
house. Buying is cheaper than renting – we have proved it many times in these
articles … so, it’s not a case of not affording the mortgage, the issue is raising
the 5% to 10% mortgage deposit for these Millennials.

Maybe families should be distributing a part of the family wealth now (in the form
of helping with house deposits) as opposed to waiting to the end… it will make so
much more of a difference to everyone in the long run.

Just a thought?

Wednesday, 14 February 2018

Thanet’s £154,480,560 “Rentirement” Property Market Time Bomb

Yes, I said ‘rentirement’, not retirement ... rentirement and it relates to the 871 (and growing)
Thanet people, who don’t own their own Thanet home but rent their home, privately from
a buy to let landlord and who are currently in their 50’s and early to mid-60’s.

The truth is that these Thanet people are prospectively soon to retire with little more than
their state pension of £155.95 per week, probably with a small private pension of a couple
of hundred pounds a month, meaning the average Thanet retiree can expect to retire on
about £200 a week once they retire at 67.

The average rent in Thanet is £739 a month, so a lot of the retirement “income” will be
taken up in rent, meaning the remainder will have to be paid for out their savings or the
taxpayer will have to stump up the bill (and with life expectancy currently in the mid to
late 80’s, that is quite a big bill …  a total of £154,480,560 over the next 20 years to be
paid from the tenant’s savings or the taxpayers coffers to be precise!

You might say it’s not fair for Thanet tax payers to pick up the bill and that these mature
Thanet renters should start saving thousands of pounds a year now to be able to afford
their rent in retirement.  However, in many circumstances, the reason these people are
privately renting in the first place is that they were never able to find the money for a
mortgage deposit on their home in the first place, or didn’t earn enough to qualify for
a mortgage …and now as they approach retirement with hope of a nice council
bungalow, that hope is diminishing because of the council house sell off in the 1980’s!

For a change, the Thanet 30 to 40 somethings will be better off, as their parents are
more likely to be homeowners and cascade their equity down the line when their
parents pass away.  For example, that is what is happening in Europe where renting
is common, the majority of people rent in their 20’s, 30’s and 40’s, but by the time they
hit 50’s and 60’s (and retirement), they will invest the money they have inherited from their
parents passing away and buy their own home.

So, what does this all mean for buy to let landlords in Thanet?
Have you noticed how the new homes builders don’t build bungalows anymore ... in fact some would said the ‘bungalow storey’ is over.  The waning in the number of bungalows being built has more to do with supply than demand.  The fact is that for new homes builders there is more money in constructing houses than there is in constructing bungalows.  Bungalows are voracious when it comes to land they need as because bungalow has a larger footprint for the same amount of square meterage as a two/three storey house due to the fact they are on one level instead of two or three.
That means, as demand will continue to rise for bungalows supply will remain the same.  We all know what happens when demand outs strips supply … prices (i.e. rents) for bungalows will inevitably go up.

Friday, 9 February 2018

Ramsgate Private Rents Hit £11.56 per sq. foot

As I am sure you are aware, one of the best things about my job as an agent is helping Thanet
landlords with their strategic portfolio management. Gone are the days of making money by
buying and old Thanet property to rent out or sell on. Nowadays, property investment is both
an art and science. The art is your gut reaction to a property, but with the power of the internet
and the way the Thanet property market has gone in the last 11 years, science must also play
its part on the property's future viability for investment.

Many metrics most property professionals (including myself) use when deciding the viability of a
rental property is what properties are selling for, the average rent, the yield and an average value
per square foot.

However, another metric I like to use is the average rent per square foot. The reason being is that
it is a great way to judge a property from the point of view of the tenant... What space they get for
their money. Now of course, location has a huge influencing factor when it comes to rents (and
hence rent per square foot). Like people buying a property, tenants also have that balancing act
between better/worse location, more vs. less money and the size of accommodation (bigger and
more rooms equalling more money) and where they live (location) verses making ends meet.

Interestlingly, I know there are a lot of you in Thanet who like to see my statistics on the Thanet
property market, so before I talk about the rental figures per square foot, I wanted to share the
£ per square foot on the values. In Ramsgate for example, the current AVERAGE figures are being
achieved (and I must stress, these are average figures, so there will be an enormous range in these
figures), but on average, properties in Rasmgate, split down by type are achieving...

  • Ramsgate Detached Property - £265 / sq ft
  • Ramsgate Semi Detached Property - £242 / sq ft
  • Ramsgate Terraced Property - £224 / sq ft
  • Ramsgate Apartments - £232 / sq ft
So, the rental figures;

The extent of space you get for your rent is replicated in the space you get for your money when
buying a property. The average size of rental property in the Ramsgate area is 745.1 sq ft
(interesting when compared to the national average of 792.1 sq ft)

This means the average rent per square foot currently being
achieved on a Ramsgate rental property is £11.56 per sq ft per annum

So, what can we deduce from this? Well the devil is always in the detail!

Whilst I was able to quote the average overall figure and the fact my research showed it was quite
clear from data that there is relationship between the average £ per sq ft figures on property
values and average £ per sq ft on rental figures as a property grows in size. However, something
quite intriguing happens to those figures, in terms of what the property will sell for and what it
will rent for, when we change and increase the size of the property.

My research showed that doubling the size of any Thanet property doesn't mean you will double
the value of it... in either value or rent. This is because the marginal value increases diminish as
the size of the property increases. In layman's terms... subject to a few assumptions, double the
size of the house doesn't mean double the value... what really happens is a doubling of size gives
only an approximately 40% to 65% uplift in value, but here comes the even more fascinating part...
When it came to the rental figures, double the size of the house meant only a 20% to 45% increase
in rent.

In a future article, I will be discussing the actual added value an extension can bring... but in the
meantime, in an overall and sweeping statement, most of the time it makes sense to extend if
you are going to live in the property as long as the extension is proportionate to the property,
but if you are going to rent it out... Possibly not.

Friday, 2 February 2018

Margate Buy-to-Let Return / Yields – 3.2% to 8.07% a year

The mind-set and tactics you employ to buy your first Margate buy to let property needs to be different to the tactics and methodology of buying a home for yourself to live in. The main difference is when purchasing your own property, you may well pay a little more to get the home you (and your family) want, and are less likely to compromise. When buying for your own use, it is only human nature you will want the best, so that quite often it is at the top end of your budget (because as my parents always used to tell me - you get what you pay for in this world)

Yet with a buy to let property, if your goal is a higher rental return - a higher price doesn't always equate to higher monthly returns - in fact quite the opposite. Inexpensive Margate properties can bring in bigger monthly returns. Most landlords use the phrase "yield" instead of monthly return. To calculate the yield on a buy to let property one basically takes the monthly rent, multiplies it by 12 to get the annual rent and then divides it by the value of the property.

This means, if one increases the value of the property using this calculation, the subsequent yield drops. Or to put it another way, if a Margate buy to let landlord has the decision of two properties that create the same amount of monthly rent, the landlord can increase their rental yield by the selecting lower priced property.

To give you an idea of the sort of returns in Margate...

Now of course these are averages and there will always be properties outside the lower and upper ranges in yields, they are a fair representation of the gross yields you can expect in the Margate area.

As we move forward, with the total amount of buy to let mortgages amounting to £199,310,614,000 in the country, landlords needs to be aware of the investment performance of their property, especially in the era of tax increases and tax relief reductions. Landlords are looking to maximise their yield - and are doing so by buying cheaper properties.

However, before everyone in Margate starts selling their upmarket properties and buying cheap ones, yield isn't the only factor when deciding on what Margate buy to let property to buy. Void periods (i.e. the time when there isn't a tenant in the property between the tenancies) are an important factor and those properties at the cheaper end of the rental spectrum can suffer higher void periods too. Apartments can also have service charges and ground rents that aren't accounted for in these gross yields. Landlords who are looking for capital growth, an altered investment strategy may be required.

In Margate, for example, over the last 20 years, this is how the average price paid for the four different types of Margate property have changed...

  • Margate Detached properties have increased in value by 263.1%
  • Margate Semi-Detached properties have increased in value by 296.8%
  • Margate Terraced properties have increased in value by 327.8%
  • Margate Apartments have increased in value by 312.5%
It is very much a balancing act of yield, capital growth and void periods when buying in Margate. Every landlord's investment strategy is unique to them. If you would like a fresh pair of eyes to look at your portfolio, be you a private landlord that doesn't use a letting agent or a landlord that uses one of my competitors - then feel free to drop in and let's have a chat. What have you got to lose? 30 minutes and my tea making skills are legendary!

Friday, 26 January 2018

With Thanet Annual Property Values 9.3% Higher, This is My 2018 Forecast

Looking at the newspapers between Christmas and New Year, it seemed that this year's sport in the column inches was to predict the future of the British housing market. So to go along with that these are my thoughts on the Thanet property market.
With the average 5-year fixed rate mortgage at 1.98% (down from 3.47% in 2014) and 2-year fixed rate at 1.47% (down from 2.37% in 2014), mortgage interest rates offered by lenders are at an all-time low (even with the slight increase on the Bank of England base rate a few months ago). Added to this, there has been a low unemployment rate of 4.8% in Thanet, which has contributed to maintain a decent level demand for property in Thanet in 2017 (interestingly - an impressive 769 properties were sold in Ramsgate alone in the last 12 months), whilst finally, the number of properties for sale in the town has remained limited, thus providing support for Thanet house prices, meaning ...
Thanet Property Values are 9/3% higher than a year ago
However, moving into 2018, there will be greater pressures on people's incomes as inflation starts to eat into real wage packet growth, which will wield a snowballing strain on consumer confidence. Interestingly though, information from the website Rightmove suggested over a third of property it had on its books in october and november had their asking prices reduced, the highest percentage of asking price reductions in the same time frame, over 5 years. Still, a lot of that could have been house-sellers being overly optimistic with their initial pricing.
In terms of what will happen to Thanet property values in the next 12 months, a lot will be contingent on the type of Brexit we have and the impact on the whole of the UK economy. A lot of people will talk about the Central London property market in the coming year, and if the banking and finance sectors are negatively affected with a poor brexit deal, then the london market is likely to see more of an impact.
Nevertheless, the bottom line is Thanet homeowners and Thanet landlords should be aware of what happens in the rollercoaster housing market of Central London, but not panic if prices do drop suddenly there in 2018. Over the last 8 ears, the Central London property market has been in a world of its own (Central London house prices have grown 89.6% in this last 8 years, whilst in Thanet, they have only risen 55.3%). So we might see a heavy correction in the Capital, whilst more locally, something a little more subdued.
Hindsight is always better than foresight and predicting anything economic is all well and good when you know what is around the corner. At least we have the Brexit divorce settlement sorted and, as the UK economy and the UK housing market is intertwined, it all depends on how we deal as a Country with the Brexit issue. However, we have been through the global financial crisis reasonably intact... I am sure we can get through this together as well?
Oh, and house prices in the Thanet over the next 12 months? I believe they will end up between 1.2% higher and 2.6% higher, although it will probably be a bumpy ride to get to those sorts of figures.
If you would like to read more articles on my thoughts on the Thanet property market - please visit the Thanet Property Market Blog.

Friday, 19 January 2018

Youngsters unable to buy their first home in Thanet – Are the Baby Boomers and Landlords to Blame?

Talk to many Thanet 20 something’s, where home ownership has looked but a vague dream, many of them have been vexatious towards the Baby Boomer generation and their pushover ‘easy go lucky’ walk through life; jealous of their free university education with grants, their eye watering property windfalls, their golden final salary pensions and their free bus passes.

If you had bought a property in Thanet for say £12,000 in first quarter of 1977, today it would be worth £263,726, a windfall increase of 2097.7%.

But to blame the 60 and 70 year olds of Thanet for that sort of rise seems a little unfair, with the value of the homes rising like rocket, I don't believe they can be censured or made liable for that. A few weeks ago, I discussed in my blog the number of people in the Thanet area who have two or more spare bedrooms (meaning they are under-occupying the house). I see many mature members of Thanet society, rattling around in large 4/5 bed houses where the kids have flown the nest years ago ... but should they be blamed?

We are all just human, and the mature members of UK society have just reacted to the inducements of our property and tax system. The mature generations who joined the property market party in the 1970’s and 1980’s were able to take out huge mortgages, protected in the knowledge that inflation would corrode the real value of the mortgage, while wage gains would boost their ability to repay.

Neither do I directly blame the multitude of Thanet buy to let landlords, buying up their 10th or 11th property to add to their buy to let empire. They too, are humbly reacting to the peculiar historic inducements of the UK property market.

So, who is to blame?

Well, hyperinflation in the 1970’s meant the real value of people’s mortgages was whipped out (as mentioned above). Margaret Thatcher and Nigel Lawson are also good people to blame with Maggie selling off millions of council houses and Nigel Lawson’s delayed ending of the MIRAS tax relief in 1987; meaning he too can get his share of indignation. The Blair/Brown combo doubled stamp duty in 1997 and again in 2000, which, as a tax on property transactions, precludes a more efficient distribution of the current housing stock. The Government has had plenty of opportunity to change the draconian stamp duty rules to incentivise those mature Thanet house movers to downsize.

However, I have started to see over the last few years a change in Government policy towards housing. The new breed of Thanet buy to let landlords that have come about since the Millennium, have had their wings clipped over the last couple of years, with the introduction of new tax rules (meaning it is slightly more difficult to make money out of property unless you have all the national information and Thanet property trends to hand).

It’s easy to think the only reason that hundreds of first time buyers have been priced out of the Thanet housing market is because of these landlords. Yet, I believe landlords have been undervalued with the Thanet homes they provide for Thanet people. With first time buyers struggling to save for a deposit, if it weren’t for those landlords buying up those homes over the last 10/15 years, we would have a bigger housing crisis than we have today. Since the global financial crisis of 2008/9, local councils have had to cut services, so certainly didn’t have enough money to build new homes ... homes that were provided to Thanet by these buy to let landlords.

One side of the argument is that 688 homes are being bought up by buy to let landlords each year in the Thanet District Council area when otherwise they might have become available to other buyers, the other side of the argument is the current national average deposit is £51,800, which is, by far, the greatest barrier to those wanting to buy their first home. Those homes bought by local buy to let landlords are not left idle, as they equate to 4,815 of new homes for local people, most of whom who see renting as a better option because of the choice, the simplicity and the flexibility which renting brings.

In the 60’s/70’/80’s, the traditional thoughts that you were a failure unless you owned your own home have now all but disappeared, because if you ask many young people, they would probably say renting was the perfect option for them at certain times of their life.

Friday, 12 January 2018

My thoughts on the future of the Ramsgate Buy-To-Let Market

I was recently reading a report by the Home website which suggested that hordes of landlords are selling their buy-to-let investments due ti increasing burdens on them in the buy-to-let market. Their findings suggest the number of new properties that came onto the market nationally (for sale) jumped by 11% across the UK as a result.

Those increasing burdens include new tax rules coming in over the next 3 to 4 years and the announcement that all self-managing landlords (i.e. landlords that don't use a letting agent to look after their buy-to-let property) will soon need to register with compulsory redress scheme to resolve tenant arguments and disputes; as Westminster wants to heighten standards in the Private Rented sector.

Interestingly I was chatting with a self-managed landlord from Manston, when I was out socially over the festive period, who didnt reliase the recent legislations that have hit the Private Rented sector, including the 'Right to Rent' regulations which came in to operation last year. Landlords have to certify their tenants have the legal rights to live in the UK. This includes checking and taking copies of their tenant's

Overall, Ramsgate does match the national trend, with the number of properties on the market actually rising by 20% in the last year.  It was particularly interesting to see the number of semis increase by 38%, yet the number of terraced on the market drop by 5%.

However, speaking with my team and other property professionals in the town, the majority of that movement in the number of properties and the types of properties on the market isn’t down to landlords dumping their properties on the market. The whole property market has changed in the last 12 months, with the majority of the change in the number and type of properties for sale due to the owner-occupier market, not landlords (a subject I will write about soon in my Thanet Property Market blog later this Spring?). You see, for the last ten years, each month there has always been a small number of Ramsgate landlords who have been releasing their monies from their Ramsgate buy to let properties - as is the nature of all investments!

Nationally, the number of rental properties coming on to the market to rent fell by 16% in Q4 2017 compared to Q4 2016 .. but that isn’t because there are 16% less rental properties to rent – it’s because tenants are staying in their rental properties longer meaning less are coming on the market to be RE-LET.

Nevertheless, some Ramsgate landlords will want to release the equity held in their Ramsgate buy to let properties in 2018. All I suggest is that you speak with your letting agent first, as putting a rental property on the open market often spooks the tenants to hand in their notice days after you put it on the market (because they don’t like the uncertainty and also believe they will become homeless!). This means you have an empty property, costing you money with no rent coming in.  However, some letting agents who specialise in portfolio management have select lists of landlords that will buy with sitting tenants in. If you have a portfolio in the Ramsgate area and are considering selling some or all of them – drop me a line as I might have a portfolio landlord for you (with the peace of mind that you won’t have any rental voids).