Friday, 29 May 2015

482% Return for Thanet Buy to Let landlords since 2000?

Buy to let is essentially different from investing in stocks and shares or putting money in the Building Society. Whilst these other investments (Building Society Passbooks, Stocks and Shares etc) are passive  ie once the  money has been invested it you leave it alone, with buy to let, things are more hands on, in fact it’s almost a business. One thing the landlords I speak to say is the fact that they like buy to let because it is both an investment as well as a business. It is this factor that attracts many of my Thanet landlords – they are making their own decisions rather than entrusting them to others (such as City Whiz Kidzs in London playing roulette with their Pension Pot).
So if you are investing in the Thanet property market, you can earn from your investment in two ways. When a property increases in value over time, it is known as 'capital growth'. Capital growth, also known as capital appreciation, this has been strong in recent times in Thanet, but the value of property does go up as well as down just like shares do but the initial purchase price rarely decreases.  Rental income is what the tenant pays you - hopefully this will grow over time. If you divide the annual rent into the value (or purchase price) of the property, this is your yield, or annual return.
I was talking to a landlord who bought a flat in the Ramsgate Road area of Thanet. He bought a very pleasant 2 bed flat in 2000 for £51,000. It sold again in January just gone for £112,500, a rise of 120.58% in just over 14 years – a compound annual return of 5.81%.
However, the real returns are for those Thanet landlords who borrowed money to purchase their buy to let property. They have made significantly higher returns than those who paid 100% cash. If the landlord had borrowed 75% of the £51,000 purchase price of the Ramsgate Road flat on an interest only 75% mortgage, he would have only needed to invest £12,750 (as his 25% deposit... borrowing the remaining £38,250), but his £12,750 would be worth today, £74,250  (£112,500 less £38,250 interest only mortgage)... a rise of 482.35%) - a compound annual return of 13.41%... and I haven’t even mentioned the rent he would have received in those 14 years!
This demonstrates how the Thanet buy to let market has not only provided very strong returns for average investors since 2000 but how it has permitted a group of motivated buy to let Thanet landlords to become particularly wealthy. In fact, if this landlord had continued to remortgage the property as it went up in value, he could by our reckoning have had an additional two or three properties (albeit with larger mortgages but greater future potential).
As my article mentioned a few weeks ago, more and more Thanet people may be giving up on owning their own home and are instead accepting long term renting whilst buy to let lending continues to grow from strength to strength. If you want to know what (and would not) make a decent property to buy in Thanet for buy to let, then one place for such information would be the Thanet Property Blog.

Friday, 22 May 2015

Attitudes to homeownership and renting in Thanet

Speaking to a Bank Manager the other day in Thanet, we got talking about the state of the Thanet property market and whether we, as a Country, are turning more and more to the European style of property ownership, where it is the norm to rent as a opposed to automatically buying once you have a good job etc.
Even though a recent report by the Halifax stated homeownership remains a goal for 85% of twenty to forty five year olds, there is information emerging that attitudes in the UK towards renting your own home as opposed to owning it have softened, showing more and more, that renting is being seen as a life style choice.  In fact it is recognised in learned circles that the cycle of renting is also repeated by the fact that people who grow up primarily in rented accommodation are themselves more likely to rent than buy.
The biggest barrier often mentioned to buying a house is the claim that they are not buying property at the moment because of a lack of sufficient wages and by the high level of deposits but like we said a few weeks ago, in Thanet, if a couple, one on two thirds of the average Thanet salary of £37,237 pa (so that would be around £25,000 a year) and the other on the Minimum wage, assuming they had a reasonable credit history they would be showered with lenders offering them a 95% mortgage (a reasonable credit history means they haven’t defaulted on loans, paid all their bills on time nor got any County Court Judgements. Just because you missed just one credit card payment wont mean you have messed up your credit score and your ability to get a mortgage) and they would only need to find £8,500 as a deposit to buy a decent three bed semi in Broadstairs or top of the range (and I mean top of the range) two or three bed apartment with sea views in Ramsgate or Margate. comes down to the perceived capability of the youngsters in Thanet to buy nowadays.
Interestingly, when I looked at the Thanet figures, the average Thanet tenant has a older profile (especially the 50 + year olds) than the English and Welsh average, as can be seen from the graph below. I know the Thanet area attracts a lot of mature people to retire here, but I always assumed they bought instead of renting.  I know we have a large number of mature tenants at our agency, but I always thought that was the exception to the rule. Obviously not!  (And that is good news for landlords as they make excellent tenants)
So what does all this mean for Thanet landlords and future Thanet landlords? I honestly believe there is a difference between the hope and perceived capability of the younger generation to buy a home. Although homeownership is seen as advantageous by a majority, many tenants admitted in the Halifax report they are not taking the steps they need to purchase their own home.

As the local authority aren’t building any properties in Thanet, people still need a roof over the head, and that is why, as I mentioned a few weeks ago in the Thanet Property Blog, the demand for rental properties will only continue to steadily rise in the coming decade. If want to know where the Thanet Property market is heading and where you should (and shouldn’t buy), maybe the one place you should visit is the Thanet Property Blog or send me an email to

Friday, 15 May 2015

What will General Election result do to the Thanet Property Market?

After the shock of the Conservatives returning to power with a majority at Westminster, all the potential issues and possible uncertainties of a hung parliament has lifted the cloud from the Thanet property market.  Talking to other Thanet agents, surveyors and solicitors in the area over the last few days, there are signs this has started a new impetus in the Thanet property market after a subdued six months, when an amalgamation of tougher lending conditions, a natural correction after the strong recovery in Thanet property prices in 2014, and political uncertainty ahead of the General Election slowed demand.
Against the back drop of Labour’s election promises of rent controls and three year tenancies, some Thanet buy to let landlords were waiting to see how these new policies would be implemented before they committed themselves to buying more property for their buy to let portfolio. Now that uncertainty has been removed, the long term picture is very positive.
So, with all that uncertainty now removed, where next for the Thanet property market?  Well with inflation at zero and with the Money markets happy David Cameron is still at No.10, the Bank of England have no reason to raise interest rates until 2016 at the earliest. As mortgage rates are at their lowest levels since 2010, landlords with large deposits will now be wooed by the mortgage companies in the coming months with low rates.
You see over the past couple of years, Thanet landlords have benefitted from a booming Thanet job market. Unemployment in Thanet has dropped to 4.05%, as a year ago, 4,994 people were claiming unemployment benefit compared to today’s 3,437. With more jobs and better pay, as the level of rents is directly linked to tenant’s wages, there has been an increase in the rental prices tenants are willing to pay for good quality Thanet properties.
Some landlords might be nervous about Tory’s plans for the housing market over the next five years in terms of tenant demand for their rental properties. One plan is for Housing Association tenants to have the right to buy their property. These kind of tenants were never in the private rented sector and will actually increase the supply of properties in the housing stock in decades to come. The Government ‘Help to Buy Scheme’ has only helped to buy 78 Thanet properties since April 2013. Considering 1,847 properties have changed hands in the last year alone in Thanet, I don’t think it has made a huge difference to our local property market.
The biggest matter, when it comes to tenant demand of rental property going forward, comes from the shift in the mindset and attitudes towards renting itself. Twenty years ago you were seen as a second class citizen if you rented a property. In Thanet, as in the rest of the UK (apart from Central London), renting continues to offer good value for money for tenants.  If you are an existing landlord in Thanet or thinking of becoming one (or as we like to call you .. a FTL .. a ‘first time landlord’), then I must suggest you seek out specialist advice and opinion. Like many agents in Thanet, we will happily give you our opinion on the current state of the  market and the advantages/disadvantages to investing in the Thanet property market if you pop into our offices. However,  if time is at a premium, another source of information on the Thanet Property Market is the Thanet Property Blog

Friday, 8 May 2015

Rents Paid By Tenants In Thanet On The Rise

With Easter just gone and considering we are a quarter of the way through 2015, I was talking to landlord from Broadstairs the other day about what is happening to the level of rents that are being achieved in the Thanet property market.
In terms of rents in Thanet, it appears that rents being achieved for new rentals (ie when the tenant moves out and new tenant moves in) have risen in the order of 3.8% in the last 12 months on top of the range modern properties, yet remained static for older Victorian terraced houses and converted apartments. However, landlords with existing sitting tenants, irrespective of age are not increasing their rents, as most landlords prefer to keep their existing tenant paying the same rent and have the peace of mind that their tenant remains, paying the rent (thus reducing the risk of a void period).
It must be remembered rents dropped by 2.0% over 2008/9, due to oversupply in the rental market in 2009.) A lot of the people who couldn’t sell their property in Thanet in 2008/9 when the Credit Crunch hit in 2008, decided to let their house out instead of selling at a loss. In fact, the number of houses on the market in Thanet dropped by 50.7% between July 2008 and January 2010, a lot of which came on to the rental market in Thanet. However, looking at the longer term though, tenants have had it good  because since the turn of the Millennium, average wages have grown by 46%, but rents outside London have only grown by 36% rental growth over this period.
I told the landlord that there is a lack of new rental properties in Thanet coming on the market, in fact according to the Office of National Statistics, there are only 35 new rental properties are coming to the market each month in Thanet but the population of Thanet is rising by 62 people a month – something will have to give soon! This is compounded by the fact a number of landlords are looking to sell their rental properties in the coming months, as the property market in Thanet has improved. This further compounded as tenants in existing rental properties appear to be staying in properties for longer periods of time.
Looking at the rents charged in Thanet, historic evidence in the UK suggests private market rents have moved in line with general inflation. Government figures only go back as far as the year 2000, but looking at other countries with similar housing markets (America, Australia, Ireland and Holland) the fact is rents paid by tenants tend to rise in line or just ahead of inflation.
As short term wage growth in Thanet has eased off recently, rising by only 1.3% in the last 12 months, taking average salaries in Thanet to £37,237pa, with the tax breaks announced by The Chancellor in the Budget, I believe, even though rents have kept pace with inflation in the past, renting as an option has become more affordable, and is increasingly seen as a lifestyle choice. With returning economic growth and expected increases in the rate of growth of wages, above inflation rental growth could rise.
If you want a chat about the local Thanet property market, pop in for a coffee or email me

Friday, 1 May 2015

Two Speed Ramsgate Property Market?

Even with the General Election on the horizon, property values in Ramsgate are still 1.27% higher than they were 3 months ago, the diversion and ambiguity of an election typically makes house sellers who need to sell, price their property more realistically (although this only lasts a couple of months). Looking specifically at it from a Ramsgate landlord’s point of view, the Ramsgate properties favoured by investors are in short supply in many parts of the area because of a number of factors. One of the factors has been that we seen the number of first time buyers coming to buy their first home increase over the last 12 months in Ramsgate.  Another factor has been the fact that the banks have been pushing ‘let to buy’ (yes ‘let to buy’ is different to ’buy to let’) to homeowners (more of ‘let to buy’ in an up and coming article). Next, because of the banks, who are chasing low risk landlords with high deposits with very low mortgage rates- and the low risk landlords with high deposits tend to be attracted to the safer modern two and three bed town houses and semis in Ramsgate.
As I mentioned a few weeks back, the pension rules are changing which means buy to let landlords can use some, or all, of their pension pot to buy a property.  It shouldn’t be forgotten there are tax implications taking more than a quarter of your pension pot out (see the article from a couple of weeks ago) , so whilst many pension pots may not be able fund a suitably big enough tax free lump sum to buy the property outright, for most it will provide enough for the 25% deposit (required by most BTL mortgage providers). It shouldn’t be forgotten landlords that the interest paid on the mortgage is tax deductible against the rent, thus lowering your income tax paid.
In the last 12 months, I have noticed a particular uplift in interest from ‘50 something’ Ramsgate people wanting to become landlords for the first time. In Ramsgate, the highest returns for the lowest investment are at the lower end of the market eg the classic Victorian terraced house . Unfortunately Victorian terraced houses , with two bedrooms are coming to the market in smaller numbers than the larger four bed’s  in  top end sectors of the Ramsgate property market. When looking at the actual numbers, in the later part of the Summer of 2014 in Ramsgate, in one month alone 240 two bed properties were on the market in Ramsgate. However, in January this year, a notoriously excellent bumper month for properties coming on to the market, there were only 221 two bed properties on the market in Ramsgate to choose from. Today, that figure stands at only 151 ..whilst the number of four and five beds has increased significantly ... interesting don’t you think?
At that lower end of the property market in Ramsgate, (ie where first time buyers and landlord investors compete with each other to buy those smaller properties), I believe throughout 2015, there will be a slow and steady tipping of the scales between supply and demand. In fact, from what i am seeing and hearing, early anecdotal evidence has suggested over the last few months (although we will need to look at figures later in the Spring once we have the data from The Land Registry), we are beginning to see a polarised Ramsgate property market, where we have high demand but low supply at the bottom end of the property market, yet high supply but lower demand at the top of market .. and that can only mean one thing ... prices will go up quicker on the smaller properties than the larger ones in Ramsgate, thus narrowing the gap for people looking to move up market!
My thoughts on the Thanet Property market can always be found on the Thanet Property blog here