Saturday, 21 April 2018

Homeownership Amongst Ramsgate’s Young Adults Slumps to 40.3%

The degree to which young Ramsgate people are locked out of the Ramsgate housing market has been revealed in new statistics.

A Ramsgate landlord was asking me the other week to what effect homeownership rates in Ramsgate in the early to middle aged adult age range had affected the demand for rental property in Ramsgate since the Millennium. I knew anecdotally that it affected the Ramsgate rental market, but I wanted some cold hard numbers to back it up. As you know, I like a challenge when it comes to the stats.. so this is what I found out for the landlord, and I’d like to share them with you as well.

As anyone in Ramsgate, and most would say those born more recently, are drastically less likely to own their own home at a given age than those born a decade earlier, let’s roll the clock back to the Millennium and compare the figures from then to today.

In the year 2000, 40.8% of Ramsgate 28-year olds (born in 1972) owned their own home, whilst a 28 year old today born in 1990) would have a 21.8% chance of owning their own home. Next, let’s look at someone born ten years before that. So, going back to the Millennium, a 38 year Ramsgate person (therefore born in 1962) would have a 60.2% chance of owning his or her own home and a 38 year today in Ramsgate (born in 1980) would only have a 46.9% chance of owning their own home.

Since the Millennium, overall general homeownership in the 25 to 44 year old age range in Ramsgate has reduced from 55.75% to 40.30%

If you look at the graph below, split into the four age ranges of 25 year olds (yo) to 29yo, 30yo to 34yo, 35yo to 39yo and finally 40yo to 44 yo, you will quite clearly see the changes since the Millennium in Ramsgate. The fact is the figures in Ramsgate show the homeownership rate has proportionally fallen the most for the youngest (25yo to 29yo) age range compared to the other age ranges.

The landlord suggested this deterioration in homeownership in Ramsgate across the age groups could be down to the fact that more of those born in the 1980’s and 1990’s (over those born in the 60’s and 70’) are going to University and hence entering the job market at an older age or those young adults are living with their parents longer.

I read some national homeownership statistics of different age groups with the same number of years after they left education (rather than at the same age) and that gave an identical dip to the graph above.  Neither are these drops in homeownership related with a significant increase in the number of young adults living with their parents. Again, nationally, that has hardly changed over the last 20 years as the percentage of 30-year-olds living with Mum and Dad only increased from 22% of those born in the early ‘70s to 23% of those born in the early ‘80s. 

So, what does this mean for the rental market in Ramsgate?

Only one thing .. with the local authority not building Council houses, Housing Associations strapped for cash to build new properties and the younger generation not buying, there is only one way these youngsters can obtain a roof over their head and have a home of their own .. through the private landlord sector. Now with the new tax rules and up and coming licensing rules, Ramsgate landlords will have to work smarter to ensure they make the investment returns they have in the past. If you ever want to pick my brains on the future direction of the Ramsgate rental market .. drop me line or pop in next time you are passing my office.

Friday, 13 April 2018

225 First Timer Buyers in Margate Bought Their First Home in 2017

A little bit of good news this week on the Thanet Property Market as recently released data shows that the number of first time buyers taking out their first mortgage in 2017 increased more than in any other year since the global financial crisis in 2009. The data shows there were 225 first time buyers in Margate, the largest number since 2006.

I expect in 2018 that this increase of first time buyers will level out and maybe dip slightly as, nationally, figures demonstrate that first time buyer’s average household income was £40,691 and this represented 17.3% of their take home pay. Although, it might surprise readers that it is actually cheaper to buy than it is to rent at the ‘starter home’ end of the housing market. Many of you can remember mortgage rates at 12% ... even 15%. Today, at the time of writing this article, I found on the open market, 189 first time buyer mortgages at 95% (meaning only a 5% deposit was required) with 3 year fixed rates from a reputable High Street bank at 2.49% ... they even did a 3 year fixed rate 100% mortgage for 2.89%!

Interestingly, looking at the other end of the market, the buy-to-let investment in Margate was subdued, with only 46 buy-to-let properties being purchased with a mortgage. However, I must stress, whilst there is no hard and fast data on the total numbers of landlords buying buy-to-let, as HM Treasury believes only 30% to 40% of buy-to-let property is bought with a mortgage. This means there would have been further cash only buy-to-let purchases in Margate – it’s just that the data isn’t available at such a granular level.

In terms of the level of mortgage debt in Margate, looking specifically at the CT9 postcode, there has been a steady rise in borrowing over the last couple of years.

This is pleasing to see, as new mortgage debt is created by first time buyers, buy-to-let landlords and home movers themselves, that is being roughly equalled by the amount being paid off with mature mortgaged homeowners in their 50’s and 60’s finally paying off their mortgage.

So, what does all this mean for the Thanet Property Market?  Well, the stats paint a picture, but they don’t inform us of the whole story. The upper end of the Thanet property market has been weighed down by the indecision around the Brexit negotiations and rise in stamp duty in 2014, when made it considerably more expensive to buy a home costing more than £1m. The middle part of the Thanet property market has been affected by issues of mortgage affordability and lack of good properties to buy, as selling prices have reached the limit of what buyers can afford under existing mortgage regulations. The lower to middle Thanet property market was hit by tax changes for buy-to-let landlords, although this has been offset by the increase in first time buyers.

If you are in the market and selling now and want to ensure you get your Thanet property sold, the bottom line is you have to be 100% realistic with your pricing from day one and you might not get as much as you did say a year ago (but the one you want to buy will be less – swings and roundabouts?). I know it’s not comfortable hearing that your Thanet home isn’t worth as much as you thought, but Thanet buyers are now unbelievably discerning. 

So, if you are thinking of selling your Thanet property in the coming months, don’t ask the agent out a few days before you want to put the property on the market, get them out now and ask them what you need to do to ensure you get maximum value in the shortest possible time. I, like most Thanet agents, will freely give that advice to you at no cost or commitment to you.

Friday, 16 March 2018

An extension could add £56,400 to the value of your Thanet home

As our families grow bigger the need for more space, be that bedrooms or reception rooms,
has grown with it. Also, as our older generation lives longer and nursing home bills continue
to rise quicker than a rocket on the 5th of November  (the average nursing home bill in the
area being £706 per week) many families are bringing two households into one larger one.

So, should you move somewhere larger, or extend your Thanet property to make it large
enough for you and your family? In some circumstances the choice has been made for you.
If you live in an apartment with no garden, there isn’t much of an opportunity of making it
larger. But if you have a house with a garden or an attic with sufficient headroom, extending
your home becomes a real prospect.

Even if it makes more sense to extend or move, the choice hangs on a number of different
dynamics – your future plans, money (both saved and access to finance), in what way you
are emotionally attached to your home, the particular area of Thanet you live in and finally,
the type/style of house you prefer.

Interestingly, the average British home is 968 sq.ft, which as you can see from the table,
is in the middle of developed nations when it comes to the size of a property. Of the
1.11m homes sold in 2016 in England and Wales, the average floor area of the houses
was 1,119 sq.ft – that’s about an eighth the size of an Olympic sized swimming pool.
Apartments averaged 530 sq.ft that’s just over ten times bigger than an average garden
shed. Looking at apartments and houses together, the average size of properties sold in
England and Wales 968 sq.ft  – are slightly smaller than the European average, and much
smaller than households in the US.

So back to the question in hand.. extending does mean you will have a lot of
inconvenience whilst the work is being carried out. The location of your Thanet property,
the quality of construction, what type of room(s) you want to add, your plot, neighbouring
building lines, planning regulations and the overall demand for your type of Thanet home,
will make a vast difference to the financial repercussions of extending versus moving.
A medium-sized 270 sq.ft single storey extension (say around 17ft x 16ft) will add on average £56,400 to the value of a property in Thanet
It’s important to note the end result of the extension needs to be a sensible and realistic
home. A two bed semi-detached house extended to a four bedrooms with no lawn or
driveway, or a home with outsized reception rooms downstairs and miniscule bedrooms
upstairs, could be problematic if  and when you come to sell your home in the future.
Irrespective of whether your strategy is to live in your extended home for a long time,
you will want to side-step outlaying a lot of money on costly building work that will make
it tougher to sell.
In terms of what it would cost to build an extension, you can expect to pay on average
between £140 to £200 per sq.ft, depending whether the extension is a single or double
storey extension and other factors including finish and type of extension (note – I have seen
it cost a lot more than these figures – so please speak with a builder) … So taking a mid line
figure, that same 270 sq.ft extension on your Thanet home would cost on average £55,080.
However, moving means there are substantial costs incurred - Estate Agency fees,
Removal Van, Survey Fees, Legal fees and Stamp Duty on the property you are buying.
Neither option is the obvious choice and comparing the costs of extending your Thanet
home to that of moving is not a stress-free undertaking.
How realistic each option is will probably come down to one thing .. your mortgage provider.
You will need a considerable sum of equity in your Thanet home before you can think of
increasing your mortgage more, because most lenders will require you to have at least 10%
to 20% equity left in your property after the extension or move has been done.
The best advice I can give .. don’t assume anything …. get advice and opinion from builders, mortgage brokers, architects, mortgage people and of course… an agent. Look at your
options and make an educated decision with all the superficial and objective facts in front of you.

Wednesday, 14 March 2018

Thanet Property Market – The 22.1% ‘New Build Premium’

According to the National House Building Council (NHBC), 26,142 new homes were
registered to be built in the South East last year, on par with 2016 levels of 26,147 dwellings.
Great news when you consider it is one of the highest number of new builds in the region
since the pre-recession levels of the Credit Crunch and the uncertainty of Brexit and the
General Election.
So, when a landlord recently asked me why the brand-new property she was considering
buying was a lot more expensive compared to a second-hand/existing property of similar
type, accommodation, location and structure I thought this would make a fascinating topic
to do some homework on … homework I want to share with the homeowners and landlords
of Thanet.
You might believe that the difference between purchasing a new build home against
purchasing a second-hand/existing home is just individual preference. Some buyers/tenants
like the ostentatious trendy modern feel of a new home, whilst others like a home that has
stood the test of time.

So, what is the right answer? Well, I am going to be looking at some statistics that shows

there is a real difference in the Thanet District Council area’s property market when in to
comes to new vs existing homes and the price paid. Looking at the average price paid for
existing (second-hand) versus a brand new home since 1996, one can see from the graph
it makes interesting reading.

On this second graph, one can see the percentage difference in average price paid between
new and existing…

Yet possibly nothing is ever that easy, as there are issues with these statistics.
The overall average for the whole Thanet District Council area for the ‘new build premium’
(new build premium being the additional price a buyer pays for buying a new property
compared to a second-hand one) over the last 21 years has been 22.1%. These statistics
actually show that it is problematic to compare like with like because it is impossible to
completely separate all the different factors of type, accommodation, location and
structure etc.

One would have to have a mirror image second-hand Thanet home and a duplicate new build
right next door to each other, then calculate out which Thanet house buyers or Thanet buy to
let landlords would pay more for? Perhaps if everything was the same (all things being equal),
there might not be any difference in what buyers would be prepared to pay… but then again,
it’s like new cars versus cars that have a few hundred miles on the clock ... there is always a difference on the forecourt … because things are never wholly equal.
What I do know is that my statistics of the Thanet property market show that new build
Thanet apartments are worth more to people than their second-hand equivalents, whilst
the difference is negligible between new build Thanet detached houses and second-hand
Thanet detached houses.
However, I believe the really important lesson in all these statistics is the fact that ‘new
build premium’ for new-build versus buying a second-hand property increases in a buoyant
market and reduces in a tougher market.  So, if you want to buy new and the only
consideration is money … try buying in a tougher challenging property market.

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.