Friday, 31 July 2015

Why are less Thanet people moving house?

During my school years, my parents seemed to move every other year (or it seemed that way). In reality, looking back at the house moves, we actually moved three times before I left home. However, whilst my parents kept the removal van people in business whilst I was at school, from research I have carried out it shows things have changed considerably in Thanet over the last few decades, and interestingly, the trend is getting worse ... for the removal van people at any rate!
In Thanet, there are 55,719 properties. However, after we remove the 7,232 council houses, 13,661 privately rented houses and 649 houses where the occupants live rent free, that leaves us with 34,177 owned properties (be that 100% outright, with a mortgage or shared ownership). This means 63.6% of the properties in Thanet are occupied by the owner (the national average is interestingly 64.2%) but the number of people who have sold and moved house in Thanet, over the last 12 months, has only been 1,914. This means on these figures, the homeowners of Thanet are only moving on average every 17.85 years.
These are the reasons. Firstly, the cost of moving house has risen over the last twenty years. Secondly, with many remortgaging their properties in the mid 2000’s before the price crash of 2008, there is a reluctance or inability in a small minority of homeowners to finance a home sale/purchase, due to lack of equity. These are both factors driving fewer moves by existing homeowners.
However, the big effect has been the change in house price inflation. Back in the 1970’s and 1980’s, house prices were doubling every 5 to 7 years. Even in Greater London, with its stratospheric property price increases over the last few years, it has taken 13 years (August 2002 to be exact) for property values to double to today’s levels.
This change to a relatively low inflation Thanet property market (i.e. Thanet property values not rising quickly) is significant because the long term consequences of sustained low house price growth is that it eats into mortgage debt more slowly than when property price inflation is higher. Thanet homeowners cannot rely on inflation to shrink their debt in real terms as much as they did in say the 1970’s and 1980’s.
So what does this all mean for Thanet buy to let landlords? Well for the same reasons existing Thanet homeowners aren’t moving, less ‘twenty something’s’ are buying their first home as well. Thanet youngsters may aspire to own their own home, but without the social pressure from their peers and parents to buy their first property as soon people reach their early 20’s, the memory of the 2008 housing crisis and the belief the hard times either aren't over or the worst is yet to come, current and would-be homeowners are warming to the idea of renting. I also believe UK society has changed, with the youngster’s wanting prosperity and happiness; but wanting it all now... instantly... today... without the sacrifice, work and patience that these things take. As a society, we expect things instantly, and if it doesn’t come easy, doesn’t come quick, some youngsters ask if it is really worth the effort to save for the deposit? Why go without holidays, the newest iPhone, socialising four times a week and the fancy satellite package for a couple of years, to save for that 5% deposit if there is no longer a social stigma in renting or pressure to buy as there was... say... a generation ago?
Even though, in real terms, property prices are 5% cheaper than they were ten years ago (when adjusted by inflation), 22.9% of Thanet properties are privately rented (nearly double it was twenty years ago). As a result, the demand for rental properties continues to grow from tenants, meaning those wishing to invest in the buy to let market, over the long term, might be on to a good thing? For advice and opinion on the Thanet Buy To let property market, one source of information is The Thanet Property Blog

Thursday, 16 July 2015

Affordability of housing in Thanet

Talking to an elderly relative recently, he reminded me that in his day, you could have bought a property for the same price of what a decent second hand car would sell for today and that his father was buying property for the same price as a decent 50 inch LCD TV!  Now of course, these are only headline prices and we have had wage growth and inflation.  Interestingly, since the Second World War, property values in Thanet doubled in 1961, 1971, 1975, 1980, 1988, 2000 and 2006.
Looking at more recent times, since the start of the Millennium, these increases in property values have generated large increases in equity for many homeowners but on the other side of the coin also making housing unaffordable for other people.  It might interest readers to note that most of Europe experienced sharp increases in property values in the early years of 2000’s, with only Spain beating  us (although we know what has happened to the Spanish property market over the last few years!).  In the 2000’s, the British situation was different in two regards.  First the property value boom started earlier and saw more sustained increases, second, the regional pattern was fairly uniform.
However, since 2010, the regional pattern has been completely different in the UK.  Compared with  2007 (the last property boom), average property values today in England and Wales are 1.2% higher, whilst in Greater London, they are 35.7% higher, whereas in Thanet they are 7.01% higher. The London property market has been like a different country.  Looking specifically at Thanet though, it has continued for first time buyers to get on the housing ladder.  The best measure of the affordability of housing is the ratio of Thanet Property Prices to Thanet Average Wages, (the higher the ratio, the less affordable properties are).  
·         1997       3.42 to 1  (i.e. the average value of a Thanet property was 3.42 times higher than the average annual wage in Thanet)
·         2000       3.87 to 1
·         2002       4.59 to 1
·         2003       6.45 to 1
·         2007       7.62 to 1
·         2009       7.28 to 1
·         2012       7.49 to 1
·         Today    8.36 to 1
You  can see quite clearly, even though we had an improvement just after the 2007 property crash (i.e. the ratio dropped), in following subsequent years with Thanet house price’s rising but wages not keeping up with them,  the ratio started rise.  This has meant there has been a deterioration in affordability of property in Thanet over the last couple of years.  This is one of the (many) reasons why the younger generation is deciding more and more to rent instead of buy their own house.  The local Council sold off council houses in the Thatcher years and for many on low incomes or with little capital, owning a home has simply never been an option.
With fewer people able to save up the deposit required by mortgage lenders, more and more people are looking to rent, this has also resulted in a change in attitudes towards renting over the last decade.  This delay in moving up the property ladder has driven rents up in Thanet over the last few years, as more people are seeking properties to rent.  All these things have combined to make the demand for rental property in Thanet rise.  If you are an existing landlord or someone thinking of become a first time landlord looking for advice and opinion and what (or not to buy in Thanet), one source of information is the Thanet Property Blog

Friday, 10 July 2015

Thanet Buy To let – Bedrooms?

Last week, a landlord from Thanet emailed me to ask, after reading the Thanet Property Blog, if he should extend his terraced house making an extra bedroom in the loft. He had a builder friend who owed him a favour, and thought a good way would be get an ‘inexpensive’ extension.
Having more useable space is generally thought to be consistent with better quality accommodation and homeowners and tenants are prepared to pay for it. If you added a bedroom to a two bed terraced to make a three bed terraced, it will add 10% to the value of the property.  Turn a three bed terraced into a four bed terraced and 9% will be added to the value. Looking at semi detached properties, and turn a two into a three bed and 12% will be added to the value, whilst making a three bed semi into four bed will add 9% in value.
However, before you rush off to the planning department there are some important considerations, whether you are a homeowner or landlord.  What would be the cost of making that extra bedroom? The average value of a terraced house in Thanet is currently £177,400 whilst the average value of a semi detached house is £205,500, meaning to make money the cost of the extension would need to be less than £16,853 on the terraced property and £21,682 on the semi detached house. Talking to a number of trades people in the district, most are booking up into the New Year. Also, no matter how good a friend he was, I know of no builders that would charge as little as that. Maybe the builder was just thinking of a bit of pointing work on the chimney!
Well, that got me thinking about how bedrooms affected rental prices and rent-ability as well.   Interestingly below, you will see that whilst bedrooms do have an effect on the rent that can be achieved and the rent-ability of the property – the difference does not warrant the expense, hassle and trouble of extending.
·         29.2% of the one bed properties on the market to rent in Thanet have a tenant with an average rent of £848 per month
·         37% of the two bed properties on the market to rent in Thanet have a tenant with an average rent of £674 per month
·         44% of the three bed properties on the market to rent in Thanet have a tenant with an average rent of £951 per month
·         7.4% of the four bed properties on the market to rent in Thanet have a tenant with an average rent of £1,141 per month
No, if you want to increase the value of your property, be you a Thanet landlord or homeowner, there are things that cost a lot less than building extra bedrooms. Spruce up the exterior, emulsion all the rooms, install fresh carpets and curtains. For homeowners, a matter of a few hundred pounds will add thousands whilst for landlords, these things can add an extra 10% to the rent that you can achieve. For more advice and opinion on the Thanet Property Market, visit the Thanet Property Blog.

Monday, 6 July 2015

Another Thanet property property to the auctions

Just saw this property on rightmove. Its in Glencoe Road, a popular road next to Dane Park.  Its up for auction so not for the inexperienced property buyer.The guide price is £100,000. Houses in Glencoe sell for around £160,000. This house will  rent easily for  £750.00 per month. That is a yield of 5.6%.
You never know at auction on a slow day you might get it below £160,000, improving the yield.
Its up for auction on 22nd July.

Right move link below.

Thursday, 2 July 2015

Is the Thanet Property Market in crisis?

Since the 1960’s more people have owned their own home than rented but, for many young Thanet people, the dream of buying their own home is dying...or is it? Since the turn of the Millennium, in Thanet (as in the rest of the Country) there has been a significant change in the proportion of people who own their own home in Thanet. In 2001, 70.35% of homes in Thanet were owner occupied, today the figure is 62.01%, a significant decline in such a short time.  Buy to let landlords can find tenants because young people say they cannot afford a deposit to buy unless they inherit money or are given a loan from the Bank of Mum and Dad
In Thanet, only 30.77% of 25 to 34 year olds have a mortgage. When you compare Thanet against the national average of 35.93%, it just shows how different parts of the country have different housing markets. However, the really interesting fact is this  ...Roll the clock back to 1991 and nationally, 67% of 25 to 34 year olds had a mortgage. After WW2, the supply of properties being built kept up with demand as millions of council homes were built (the most being built in 1950s, surprisingly under Tory Governments!). Also private house building increased in the 1950’s, but especially in the 1960’s and 1970’s, and as the Country  got more prosperous it meant that by 1971, there were more home owners than renters.
However, since the 1970’s, the population has grown but the number of new properties being built hasn’t kept up at the same rate, the result is that there have been huge rises of property prices in the early ‘70s, the late 80s and more recently between 1999 and 2004. Interestingly, since the early 1970’s, out of the 34 richest countries in the world, the UK has seen highest property prices rises.
95% mortgages have been available to first time buyers since late 2009, but with property prices rising by 204.6% since the Summer of 1997  in Thanet, as property prices have been rising and first time buyers have been saving, the amount they have to save is continually rising at the same time. The stress on saving even for that kind of deposit, coupled with the new stricter mortgage rules introduced in 2014, means that most 20/30 something’s in Thanet are renting instead of buying.
The issue quite simply comes back down to a lack of new homes being built. In Thanet, only 428 properties a year are being built whilst the population is rising by 827 a year. The supply of new homes has been limited by planning laws, local councils not having the money to build council houses, hard hitting green belt limitations, and our old friend NIMBY’ism.  With a rising population and net migration, especially from the EU, the mismatch between demand and supply is why we have the problem. Until Politician’s have the backbone to realise the Country needs a lot more decent homes built, the problem will just get worse.

In the meantime, demand for rental property will continue to grow because people need a roof over their head at the end of the day ......fact.