Friday, 14 August 2015

Are ‘would be’ Thanet homeowners warming to the idea of renting?




I was reading a report the other day produced by the Halifax, about the UK property market and why more and more of the younger generation seem to be renting rather than buying. I find it fascinating that over the last ten years, the British obsession of buying a house almost as soon as you left school, and the fact that if you rented you were seen as a second class citizen, has turned on its head to a point where the hopes and dreams to own a nice home will be replaced by the ambition simply to live in one.
In the latter half of the 20th Century, you left school, got a job, bought a small house and kept buying and selling property, constantly upgrading until eventually they carried you out in a box. However, the perceived shame and stigma of renting is no longer the case, as it seems that the British are now beginning to accept a lifetime of renting. This is a very important consideration for both Thanet homeowners and Thanet landlords as it will transform the way the Thanet property ladder looks in the future and I might ask whether or not it will exist at all for some people? The make up of households is one important factor, especially in the Thanet property market. The normal stereotypical married couple, two kids and dog of the 1970’s and 80’s has changed. More and more we have the need for larger houses where two families come together after divorces (+ kids) and need a property to house everyone through to an increase in the number of one person households.
Looking at the data for Thanet, of the 13,072 private rental properties in the Thanet District Council area, 37.82% of those rented properties are one person households (4,944 properties). However, when we compare the number of one person Thanet households who have bought their own property with a mortgage (ie therefore they are still in work), of the 36,907 owner occupied households in the area, only 3,123 of those properties are a one person household (ie 8.46%). Compared to a decade ago, this explosion in demand for decent high quality rental properties that one person households require has not been met with an increase in supply of such properties.  More and more I believe Thanet landlords need to consider this change in the make up of Thanet households, as I believe this could be an opportunity. As an aside, another interesting stat that raised an eyebrow was that 19.88% of those 13,072 rental properties (2,600 properties) are lone parents households as well. Again, another possible opportunity that Thanet landlords might want to consider in their future investment plans.
It is true that the Governments introduction in 2013 of the Help to Buy scheme, where first time buyers only needed a 5% deposit, changed the perception of peoples’ ability to buy without having to save ten’s of thousands of pounds for a deposit. However, it might surprise you, 95% mortgages were re-introduced within six months of the Credit Crunch in late 2009, so again it comes down to people’s own perception. Many youngsters think they won’t get a mortgage, so don’t even bother trying.
Coming back to the deposit, it’s still a fact that once you start renting it becomes that much harder to save for a deposit, regardless of the size. Interestingly, 7 out of 8 renters polled by the Halifax (86% to be exact) refuse to sacrifice the quality of accommodation they currently live in to reduce the amount of rent they pay in order to save for a deposit.  This is the crux and the real reason why people aren’t buying but renting... and why demand for renting will continue to grow in the future (ie good news for landlords). Thanet tenants can upgrade the quality and size of the property they live in for a minimal rent increase. The average rent of a two bed property in Thanet is £693pm, but a three bed is only £135pm more at £828pm, whilst the average four bed rent is £1,161pm. If you had to make that jump when buying, the monthly mortgage payments would be stratospherically more than that!  Without any social pressure and better quality rental properties compared to a decade ago, we will become a nation of renters within the next generation, as the UK is becoming more like Europe, where renting is ‘the norm’. Who is going to supply all these properties to rent? Landlords! Whether you are an existing landlord looking to grow your portfolio or looking to become a ‘first time landlord’, my thoughts are take advice from as many people as possible. However, as the majority of landlords buy their buy to let properties in the same town they live, you will need specific advice about Thanet itself. One place for such advice and opinion is the Thanet Property Blog .

Friday, 7 August 2015

Thanet Property Market – Bricks and Mortar!







The Land Registry have just released their latest set of figures for the Thanet Property market. It makes interesting reading, as average property values in Thanet rose by 0.4% in May. This leaves average property values 8.3% higher than 12 months ago, meaning the annual rate of growth in the area fell to its lowest level since June 2014. When we compare Thanet against the regional picture, South East property values rose by 0.9%, leaving them 9.1% higher than a year ago.
Obviously this is a far cry from the price rises we were experiencing in Thanet throughout 2014. At one point (December 2014 to be exact) property values were rising by 10.8% a year. All the same, even with the tempering of the Thanet property values in 2015, property values are still higher. This is good news for local homeowners who had been affected by the downturn after 2007 and still find themselves in negative equity.
However, the thing that concerns me is that the average number of properties changing hands (ie selling) has dropped substantially over the last 12 months in the area. In April 2014, 290 properties sold in Thanet but in April 2015, that figure dropped to 239.  I have been in the Thanet property market for quite a while now and the one thing I have noticed over the last few years has been the subtle change in the traditional seasonality of the Thanet property market. It has been particularly noticeable this year in that the normal post Easter flood of properties coming onto the market was not seen. This has made an imbalance between supply and demand, with less houses coming onto the market there is simply not as much choice of properties to buy in Thanet and with the population of Thanet ever increasing, this will generally strengthen house price growth for the foreseeable future.
So what does all this mean for Thanet landlords or those considering dipping their toe into the buy to let market for the first time? For many people, buy to let looks a good investment, providing landlords with a decent income at a time of low interest rates and stock market unpredictability.
However, if you are thinking of investing in bricks and mortar in Thanet, it is important to do things correctly. As an investment to provide you with income, for those with enough savings to raise a big deposit, buy to let looks particularly good, especially compared to low savings rates and stock market yo-yo’s. I must also remind readers, landlords have two opportunities to make money from property, not only is there the rent (income), but with the property market bouncing back over the last few years, property value increases has spurred on more investors to buy property in the hope of its value continuing to rise.
Savvy landlords with decent deposits can fix their mortgages at just over 3% for five years, making many deals stack up. Nevertheless, low rates cannot stay low forever, because one day they must rise and you need to know your property can stand that test. I saw some Thanet landlords struggling in the mid noughties, when interest rates rose from 3.5% in July 2003 to 5.75% in July 2007. That might not sound a lot, but that was the difference of making a £100 a month profit in 2003 to having to make up a shortfall in the mortgage payments of £100 per month in 2007.
Its true many landlords were thrown a life raft when the base rate dropped to 0.5% in March 2009. Whilst interest rates have remained there since, mark my words, they will rise again in the future. However, even with the potential for costs to rise, demand for decent rental properties remains high as there are ever more tenants in the market, driving up demand and thus rents. The British love of bricks and mortar plus improving mortgage deals also add up to fuel the buoyant Thanet property market.

If you are planning on investing in the Thanet property market, or just want to know more, things to consider for a successful buy to let investment, one source of information is the Thanet Property Blog www.thanetpropertyblog.com. You can email me at a.munns@redstones.co.uk