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).

Friday, 5 January 2018

Ramsgate Apartments are 12.1% more affordable than 10 years ago



My research shows that certain types of Ramsgate property are more affordable today than before the 2007 credit crunch.

Roll the clock back to 2007 just before the credit crunch hit which saw Ramsgate property values plummet like a lead balloon and the Ramsgate property market had reached a peak with the prices for Ramsgate property hitting the highest level they had ever reached.  Between 2008 and 2010, Ramsgate property values lay in the doldrums and only started to rise in 2011, albeit quite slowly to begin with.

Nevertheless, even though property values have now passed those 2007 peaks, my research indicates that Ramsgate property, especially flats/apartments, are now more affordable than they were before the 2008 credit crunch.

Back in 2007, the average value of a Ramsgate flat/apartment stood at £131,204 and today, it stands at £149,409, a rise of £18,205 or 13.9%.

However, between 2007 and today, we have experienced inflation (as measured by the Government’s Consumer Price Index) of 25.97% meaning that in real spending power terms Ramsgate apartments are 12.1% more affordable than in 2007. Looking at it another way, if the average Ramsgate apartment (valued at £131,204 in 2007) had risen by 25.97% inflation over those 10 years, today it would be worth £165,278 (instead of the current £149,409).


The point I’m trying to get across is that Ramsgate property is more affordable than many people think.  Ramsgate first time buyers can get on the ladder as 95% mortgages have been readily available to first-time buyers since 2010.

It really comes down to a choice and if Ramsgate first-time buyers can get over the hurdle of saving the 5% deposit for the mortgage on the property – they will be on to a winner, especially with these ultralow mortgage interest rates, a mortgage can be between 10% and 30% cheaper per month than the rental payments on the same house.

So why aren’t Ramsgate 20 somethings buying their own home?

Back in the 1960’s and 1970’s, renting was considered the poor man’s choice in Ramsgate (and the rest of the Country) a huge stigma was attached to renting. However, over the last 10 years as a country, we have done a complete U-turn in our attitude towards renting - meaning that many people find renting a better option and a lifestyle choice.

Saving the 5% deposit means going without many luxuries in life (such as holidays, every satellite movie and sports channel, socialising or the latest mobile phone – even if only in the short term) therefore instead of saving every last pound to put towards a mortgage deposit Ramsgate 20 somethings choose to rent.

There is no denying the simple fact that over the next 10 to 15 years, the people who choose to rent instead of buy in Ramsgate will continue to rise.

Therefore, everyone in Ramsgate has a responsibility to ensure that an adequate number of quality Ramsgate rental properties are safeguarded to meet those future demands. Interestingly, what I have noticed though over the last few years are the expectations of Ramsgate tenants on the finish and specification of their Ramsgate rental property.

I have perceived that in the past, what a tenant wanted from their Ramsgate rental property was moderately unassuming because renting a property was only a short-term choice to fill the gap before jumping on the property ladder. Before the millennium, wood chip wall paper and twenty-year-old kitchen and bathroom suites were considered the norm.

However, Ramsgate tenants’ expectations are becoming more discerning as each year goes by.  I have also noticed the length of time a tenant remains in their Ramsgate property is becoming longer (and this was backed up recently by stats from a Government Report), although I have noticed a tendency for many Ramsgate landlords not to keep the rental payments at the going market rates  - maybe a topic for a future article for my blog?

The bottom line is this … Ramsgate landlords will need to be more conscious of tenants needs and wants and consider their financial planning for future enhancements to their Ramsgate rental properties over the next five, ten and twenty years -  e.g. decorating, kitchen and bathroom suites etc etc ..

The present-day and future situation of the Ramsgate private rental property market is important, and I frequently liaise with Ramsgate buy-to-let investors looking to spread their Ramsgate rental-portfolios. I also enjoy meeting and working alongside Ramsgate first time landlords, to ensure they can navigate through the minefield of rental voids, the important balance of capital growth and yield and ensuring the property is returned back to you in the future in the best possible condition.

Friday, 29 December 2017

Thanet Property Market and Hammond’s Budget Promise to Build 300,000 more homes




I miss the good old days of George Osborne as Chancellor, with his hardhat and hi-vis jacket. He must have visited every new home building site in the UK with his trademark attire! For the last few years, the nearest Philip Hammond got to donning a ‘Bob the Builder’ outfit was at his grandchild’s birthday party. However, with what appears to be a change in focus by the Tories to ensure they get back in power in 2022, they appear to have fallen in love with house building again with the Chancellor’s promise to create 300,000 new households in a year.

Nationally, the number of new homes created has topped 217,344 in the last year, the highest since the financial crash of 2007/8. Looking closer to home: in total there were 389 ‘net additional dwellings’ in the last 12 months in the Thanet District Council area, a decrease of 39% on the 2010 figure.

The figures show that 73% of this additional housing was down to new build properties. In total, there were 283 new dwellings built over the last year in Thanet. In addition, there were 174 additional dwellings created from converting commercial or office buildings into residential property and a further 8 dwellings were added as a result of converting houses into flats.

While these all added to the total housing stock in the Thanet area, there were 76 demolitions to take into account.



I was encouraged to see some of the new households in the Thanet area had come from a change of use. The planning laws were changed a few years back so that, in certain circumstances, owners of properties didn’t need planning permission to change office space in to residential use.

With the scarcity of building land available locally (or the builders being very slow to build on what they have, for fear of flooding the market), it was pleasing to see the number of developers that had reutilised vacant office space into residential homes in the local council area. Converting offices and shops to residential use will be vital in helping to solve the Thanet housing crisis especially, as you can see on the graph, that the level of building has hardly been spectacular over the last seven years!

Now we have had the autumn budget, Theresa May and Philip Hammond have set out their stall with housing as their key focus. I was glad to see the Government introducing a variety of changes to improve housing, including more funding for the supply side and an injection of urgency into the planning system.

The biggest question is, just where are the Government going to build all these new houses? Maybe a topic for a future article?

Back to the main point though and the focus on the housing market by the Tory’s is good news for all homeowners and buy to let landlords, as it will encourage more fluidity in the market in the longer term, sharing the wealth and benefits of homeownership for all. However, in the short term, demand still outstrips supply for homes and that will mean continued upward pressures on rents for tenants.

Thursday, 21 December 2017

Ramsgate Rents Set to Rise to £810 pm in Next 5 Years



It’s now been a good 12/18 months since annual rental price inflation in Ramsgate peaked at 3.4%. Since then we have seen increasingly more humble rent increases. In fact, in certain parts of the Ramsgate rental market over the autumn, the rental market saw some slight falls in rents. So, could this be the earliest indication that the trend of high rent increases seen over the last few years, may now be starting to buck that trend?

Well, possibly in the short term, but in the coming few years, it is my opinion Ramsgate rents will regain their upward trend and continue to increase as demand for Ramsgate rental property will outstrip supply, and this is why.

The only counterbalance to that improved rental growth would be to meaningfully increase rental stock (i.e. the number of rental properties in Ramsgate). However, because of the Government’s new taxes on landlords being introduced between 2017 and 2021, that means buy-to-let has (and will) be less attractive in the short term for certain types of landlords (meaning less new properties will be bought to let out).

Interestingly, countless market experts assumed at the start of 2017, that the number of rental properties would in fact drop throughout the year. The assumption being as the new tax rules for landlords started to kick in, landlords looked to kick their tenants out, sell up and invest their capital elsewhere. (Although ironically that would lower supply of rental properties, decreasing the supply, meaning rents would increase again!).

Anecdotal evidence suggests, confirmed by my discussions with fellow property, accountancy and banking professionals in Ramsgate, that Ramsgate landlords are (instead of selling up on masse), actually either (1) re-mortgaging their Ramsgate buy-to-let properties instead or (2) converting their rental portfolios into limited companies to side step the new taxation rules.

The sentiment of many Ramsgate landlords is that property has always weathered the many stock market crashes and runs in the last 50 years. There is something inheritably understandable about bricks and mortar – compared to the voodoo magic of the stock market and other exotic investment vehicles like debentures and crypto-currency (e.g. BitCoin). 

Remarkably, there is some good news for tenants, as Tory’s recently published the draft Tenants’ Fee Bill, which is designed to prohibit the charging of tenants lettings fees on set up of the tenancy. However, looking at evidence in Scotland, I expect rents to rise to compensate landlords, thus hammering faithful tenants looking for long-term tenancy agreements the hardest. This growth will be on top of any usual organic rent growth.  It really is swings and roundabouts!

So, what does this all mean for landlords and tenants in Ramsgate? In my considered opinion,

Rents in Ramsgate over the next 5 years will rise by 9.2%, taking the average rent for a Ramsgate property from £742 per month to £810 per month.

To put all that into perspective though, rents in Ramsgate over the last 12 years have risen by 21.5%. In fact, that rise won’t be a straight-line growth either, because I have to take into account the national and local Ramsgate economy, demand and supply of rental property, interest rates, Brexit and other external factors. Please see the graph for my projections



In the past, making money from Ramsgate buy-to-let property was as easy as falling off a log. But with these new tax rules, new rental regulations and the overall changing dynamics of the Ramsgate property market, as a Ramsgate landlord, you are going to need work smarter and have every piece of information, advice and opinion to hand on the Ramsgate, Regional and National property market’s, to enable you to continue to make money.

One place for that information is the Thanet Property Market blog.

Friday, 8 December 2017

Increase in Interest Rates to cost Thanet Home Owners £257.56 a year



Thanet homeowners will be among those affected by the latest rise in the Bank of England interest rates. The first increase in 10 years; they have just been raised from 0.25 percent to 0.5 per cent. This uplift comes as inflation hits a 51-month high of 2.9 per cent whilst the national unemployment rate is at an all-time low of 4.3 per cent.
    
Interestingly, the Governor of the Bank of England has indicated that the interest rate is likely to increase again over the next couple of years, but Mr Carney said mortgages and savings would not be affected in the short term. However, look at all the big banks and just about all of them have increased their standard variable mortgage rate..  

The average Thanet mortgage is £103,025

I have to ask by how much Thanet homeowners (on variable rate or tracker mortgages) will see their repayments increase?

In the CT8-CT12 postcodes there are 15,531 homeowners with a mortgage, of which 6,672 have a variable rate mortgage (the remaining have fixed rate mortgages). The total amount owed by those CT8-CT12 homeowners with those variable rate mortgages is £687,393,235, meaning the average monthly mortgage payment for those home owners on variable rate mortgages before the interest rate rise was £803.31 per month and now its £824.77 per month … meaning

The interest rate rise will cost Thanet
homeowners on average an extra £257.56 per year

Whilst this is the first raise in interest rates in over 10 years, it must be noted it is at a significantly low level compared to figures in the 1970s and early 1990s. Many of my readers talk of interest rates at 17 per cent when Sir Geoffrey Howe increased them to try and combat the hyperinflation (from the fallout of the financial crisis that hit Britain in the 1970’s) and Norman Lamont in September 1992 with the infamous Black Wednesday crisis, when interest rates were raised from 10% to 15% in just one day.
So, what will this interest rate actually do to the Thanet housing market?
Well, if I’m being frank – not a great deal. The proportion of Thanet homeowners with variable rate mortgages (and thus directly affected by a Bank of England rate rise) will be smaller than in the past, in part because the vast majority of new mortgages in recent years were taken on fixed interest rates. The proportion of outstanding mortgages on variable rates has fallen to a record low of 42.3 per cent, down from a peak of 72.9 per cent in the autumn of 2011.
If more Thanet people are protected from interest rate rises, because they are on a fixed rate mortgage, then there is less chance of those Thanet people having to sell their Thanet properties because they can’t afford the monthly repayments or even worse case scenario, have them repossessed.
However, and this will be of interest to both Thanet homeowners and Thanet buy to let landlords …
.. for every 1% increase in the Bank of England interest rate, it will cost the average Thanet homeowner on a variable rate mortgage £85.85 per month

So, what next? Because UK inflation levels are at 2.9 per cent (the country’s highest rate since April 2012) and the Bank of England is tasked by HM Government to keep inflation at 2 per cent using various monetary tools (one of which is interest rates) – you can see why interest rate rises might be on the cards in the future as increasing interest rates tends to dampen inflation.

Now of course there is a certain amount of uncertainty with regard to Brexit and the negotiations thereof, but fundamentally the British economy is in decent shape. People will always need housing and as we aren’t building enough houses (as I have mentioned many times in the Thanet Property Blog), we might see a slight dip in prices in the short term, but in the medium to long term, the Thanet property market will always remain strong for both Thanet homeowners and Thanet landlords alike.

Friday, 1 December 2017

The Thanet House Price Index: 152.01




I had the most interesting conversation the other day with a local Thanet accountant, who asked me about my articles on the Thanet property market. It was quite humbling to be given praise by such a professional, when he commented enthusiastically on the articles I write. He was particularly interested with the graphs, facts and figures contained within them – so much so he recommended his clients read them, as most of them were either Thanet homeowners, Thanet landlords and a lot of the time - both. However, one question that kept me on my toes was, “With so many House-Price-Indices, how do you know which one to use and how can you calculate what is exactly happening in Thanet?


To start with, there are indeed a great number of these Indices, including the Land Registry, Office of National Stats, Halifax, Nationwide and LSL to name but a few. The issue occurs when these different house price indices give diverse pictures of the state of the UK housing market. Whilst some indices measure the average value of every property in the UK (sold or unsold), others measure the average ‘price-paid’ of houses that happen to be sold over a fixed time scale… confusing isn’t it!


A lot of the variance between house price indices occurs because of the distinctive ways in which the numerous indices endeavour to beat these issues. You see, the biggest problem in creating a house-price-index when comparing and contrasting with most other indexes (e.g. inflation where the price a ubiquitous tin of Beans can easily be measured over the months and years), is every home is unique and as Thanet people are only moving every 12.5 years, it appears the only thing that can be measured is the price of property sold in a given month.


By their very nature, all of the indices are only able to paint a picture of the whole of the UK or, at best, the regional housing market. As I have said many times in my articles on the Thanet property market, it is important to look to the medium term when considering house price inflation/deflation. Looking at the month-to-month jumps, many indices look like one of those jumpy lie-detector needles you see in the cold war movies!  


I can guarantee you in the coming few months, on a month-by-month basis, one or more of the indices will say property prices will have dropped. Let me tell you, no property market indices are representative of the housing market in the short term. Many indices have shown a drop around the Christmas and New Year months, even the boom years of 2001 to 2007 and 2013 to 2015.


So, back to the question, how do we work out what is happening in the Thanet Property Market and can there be a Thanet House Price Index?

To calculate what I consider is a fair and proper House Price Index for Thanet, I initially needed to decide on a starting place for the index. I have chosen 2008 as far enough away, but still gives us a medium/long term view. Next, I split all the house sales into their types (Detached/Semi/House /Apartment) to give us an indication of what is actually selling by postcode district. So, for example, below is a table for the CT11 postcode district (the sample shows 2008, 2016 and 2017.


Then I look at the actual numbers of properties sold in the CT11 postcode district. Below is the graph with the numbers for the years already mentioned.


Next, I have looked at the prices paid for those types for every year since 2008, again in this example using the sample years of 2008, 2016 and 2017 for the CT11 postcode.


Finally, I amalgamated the same data points for the other postcode districts covered by Thanet and the surrounding villages, weighted it accordingly, to produce the Thanet House Price Index ... which after all that work, currently stands at for Q4 2017 at 152.01 (Q4 2008 = 100).

I hope you found that of interest and over the coming months and seasons, I shall refer back to Thanet House Price Index in my Thanet Property Blog to give you a flavour of what is really happening in the Thanet Property Market.