Wednesday, 20 April 2016

Thanet’s ‘Generation Rent’ to grow by 2,801 households by 2021

The growth of the private rented sector, and the arrival of an investor class of buy to let landlords within it, is an issue that won’t be going away anytime soon, no matter what you read in the Daily Mail”, I said, as I chatted over a coffee with a landlord client of mine at Woody’s on the parade in Margate. Whether you are a landlord of mine (or not as the case maybe), I am always happy to look over any properties you are thinking of buying for buy to let purposes and more so over a coffee!

Some commentators are saying buy to let is about to die, with the new stamp duty changes and how mortgage tax relief will be calculated. Some say 500,000 rental properties will flood the market nationally in the next 12 months as landlords leave the rental market. Have you heard the phrase ‘Bad news sells newspapers’? Let me explain why buy to let in Thanet is only going in one direction – and not the direction the papers say they are going.

According to Sheffield University, buy to let landlords will continue fuelling the growth of the private rented sector in the coming decades. By their estimates (and they are considered a centre of excellence on the topic), the rate of homeownership nationally will fall to 50% (today it is 63.6% in Thanet) by 2032, while the rate of private sector renting will increase to 35% (interestingly, in Thanet it stands at 22.9% today).

Therefore, the demand for rental accommodation in Thanet will grow by 2,801 households in the next five years ... and these are the reasons why, irrespective of the distractions set out in the newspapers
Thanet property values over the last six years have risen a lot more than average wages/salaries, meaning as homeownership and mortgage availability is dependent on your ability to pay has served to push home ownership further out of reach for many, at a time when the stock of council houses has actually withered. (Nationally, the number of council houses in the last ten years has dropped from 3.16m to 2.18m households - a drop of 31.1%).

Now it’s true the Tory’s efforts to fix the deficiency of affordable housing have focused on those who want to buy a home, ranging from Help to Buy and their much vaunted Help to Buy Isa, and Starter Homes Scheme, an initiative offering a 20% discount for first time buyers … but if you are unable to save for the deposit ... none of this means anything to the ‘20 something’s’ of Thanet ... and they still need a roof over their heads!

Currently, 30,587 people live in private rented accommodation in Thanet

These are big numbers and a sizeable chunk of the electorate. So whilst it appears Thanet “Generation Rent” youngsters will continue to rent and to not to buy for the reasons set out above, Thanet buy-to-let landlords will be lifted by the projections of greater rental demand. Thanet and the area around it still offers the prospect of strong economic growth forecasts and has a reputation as a lively and desirable place to live. You see, with the new rules on tax, more and more landlords will be looking to move away from the previous honeypot of central London, because its higher prices meant lower rental yields. With the new tax rules and central London’s cooling of house price inflation, more and more landlords will look further afield, including Thanet (interestingly, I have already been chatting to a few central London landlords after they read the Thanet Property Blog).

So, by 2021, the number of rental properties in Thanet will rise to 19,262

This prediction in growth of the Thanet rental market is even on the back of the government clamping down on tax reliefs for landlords. The point is this, gone are the days of making guaranteed returns on BTL property. For the last 20 to 30 years, irrespective of which property you bought, making decent money on buy to let property was like shooting fish in a barrel – anyone could do it  - but not now. You must take a more considered approach to your existing and future portfolio, especially in Thanet. The balance of capital growth and yield, especially in this low interest rate world we live in, means Thanet landlords need to do more homework to ensure the investment in property gives the desired returns. One place for Thanet landlords and homeowners to visit for such information is the Thanet Property Market Blog.

Info on Stats –
1.      Numbers on current figures taken form the Office of National Stats from the Census.
2.      Assumed growth in rental figures using the the average of a number of commentators predictions of the growth of rental market nationally from 15.6% to 22% by 2021 (then applied to your town/city’s location

Thursday, 14 April 2016

2 Flats within the same block with Freehold of the building. A great little buy to let investment.

Its not very often you see an opportunity like this become available. 2 flats (1x 1bed, 1 x 2 bed) in a block of 3 . The sale includes the freehold. Both flats are tenanted with an annual income of £10,000. There is one other flat which has another owner. They share 1/3 of the maintenance costs. The price for the flats and freehold is £195,000.00.The maintenance costs are See the details here.

Monday, 11 April 2016

Only 2,935 Council Houses in Thanet left – opportunity or problem?

The ‘Right to Buy’ scheme was a policy introduced by Maggie Thatcher in 1980 which gave secure council tenants the legal right to buy the Council home they were living in with huge discounts. The heyday of Council ‘Right To Buys’ was in the 80’s and 90’s, when 1,719,368 homes in the country were sold in this manner between October 1980 and April 1998. However, in 1997, Tony Blair reduced the discount available to tenants of council houses and the numbers of properties being bought under the Right to Buy declined.

So what does this mean for Thanet homeowners and landlords? Well quite a lot in fact!

Looking at the figures for our local authority, whilst the number of ‘Right to Buys’ have dwindled over the last few years to an average of only 12 ‘Right to Buy’ sales per year, one must look further back in time. Looking at the overall figures, 5,411 Council properties were bought by council tenants in the Thanet District Council area between 1980 and 1998. Big numbers by any measure and even more important to the whole Thanet property market (i.e. every Thanet homeowner, Thanet landlord and even Thanet aspiring first time buyers) when you consider these 5,411 properties make up a colossal 15.9% of all the privately owned properties in our area (because in local authority area, there are only 33,986 privately owned properties).

Thanet first time buyers and landlords can now buy these ex-council properties second hand (or the PC brigade like to call them ‘pre-loved ex–local authority dwellings’) as those original 80’s and 90’s tenants (now homeowners) have more than passed the time of any claw back of the discount they received (council discount was repayable if the first owner sold within a stipulated time period - usually 5 years).

Now let us all be honest, some (not all), but some ex-council properties lack the vital KSA that some landlords crave. The new homes builders know all about KSA (or Kerb-Side-Appeal) as they dress up the exteriors of their new homes to make them more appealing to buyers ... and if you don’t believe me ... why do Show homes exist? Going on the exterior looks of a modern property might be a theoretically good way of choosing a Thanet buy-to-let property, but in a challenging market, some Thanet investors are finding a more no-nonsense down to earth approach brings the largest returns.

Yes, the modern stuff being built in Thanet is lovely, but too many landlords purchase buy to let property solely based on where they would choose to live themselves, instead of choosing with a business head and choosing where a tenant would want to live ... because remember the first rule of buy to let property … you aren’t going to live the property yourself. What an ex-council property lack in terms of KSA, they more than make up for in other ways.  Tenants more worried about how close the property is to a particular school or family members for child care matter to them far more than the look of a property.

Whilst ex-council properties tend to increase in value at a slower rate than more modern properties, that is more than made up in the much higher yields – and those built between the wars or just after are really well built. Tenant demand for such properties is good since Thanet property values are so expensive, a lot of people can’t get mortgages to buy, so they will reconcile themselves to renting, meaning there is a good demand for that sort of property to rent. Also, the very fact the council were forced to sell these Thanet properties in the 80’s and 90’s, means that today’s younger generation who would have normally got a council house to live in themselves, now can’t as many were sold ten or twenty years ago.

So to Thanet landlords I say this … don’t dismiss ex-council houses and apartments – but remember the 1st rule of buy to let (see above). However, those very same Thanet landlords should go in with their eyes open and take lots of advice. Not all ex-council properties are the same and even though they have good demand and high yields, they can also give you other headaches and issues when it comes to the running of the rental property. One source of advice is the Thanet Property Blog that just leaves the 2,935 council houses still owned by the local authority to be sold to their tenants in the coming years!

Friday, 1 April 2016

Values of Thanet Terraced Houses smash through the £190/sqft barrier

The Council of Mortgage Lenders (CML) latest snapshot of the buy to let mortgage market shows us that buy to let landlords haven’t been put off by the Chancellors announcements on the way buy to let’s are taxed.
Last month, the CML stated £1.4billion was borrowed by UK landlords to purchase 10,500 buy to let properties, up 26.5% from the same month in 2014, when only 8,300 properties were bought with a buy to let mortgage. Go back two years and the number of buy to let mortgages used for purchasing (again not re-mortgaging) is 36.4% higher! Even more interesting has been the fact that the average amount borrowed has risen as well. The average buy to let mortgage last month was £133,330, up from £128,480 a year ago.
In Thanet, I am speaking to more and more landlords, be they seasoned professional landlords or FTL’s (first time landlords), as they read reports that the Thanet rental market is doing reasonably well, with rents and property values rising.  Interestingly, one landlord recently asked how much he should be paying per square foot (more of that in a second).
The first thing you have to decide is whether you want great capital growth or great rental yield, as every knowledgeable landlord knows, you can’t have both. Over the last twenty years, property values in Thanet have risen by 232.29%, compared to Greater London’s 436.2%. This has proved that capital growth increases faster in the more expensive Capital, but your investment money doesn’t go very far, meaning there won’t be as much rental yield from a 1 bed flat in Chelsea (2% per year at best with a fair wind) as a 2 bed semi in Thanet. However, whilst the figure of 232.29% is an average for the area, certain areas of Thanet have seen capital growth much higher than that and others areas much worse (we have talked about those in previous articles).
If you recall in an earlier article, my research reveals that Thanet apartments tend to generate a better yield than houses, probably because several sharers can afford to pay more than a single family. But houses tend to appreciate in value more rapidly and may well be easier to sell, simply because there are fewer being built.
So what should you be buying in Thanet, and more importantly, how much?
·         The average apartments in the district are currently selling for approximately £217 per square foot.
·         Terraced houses in Thanet are currently obtaining, on average, £183,300 or £191 per square foot,
·         An average semi in Thanet is selling for £219,700 (and achieving £206 per square foot). 
Now these are of course averages, but it gives you a good place to start from. In the coming weeks, I will look at rents being achieved on Thanet houses and apartments, and the yields that can be obtained, depending how many bedrooms there are.