Friday, 27 July 2018

The Thanet Bank of Mum and Dad Lent £2.72m Last Year


My analysis has shown that up to the end of the last quarter, Thanet first time buyers purchased 226 Thanet properties.  With wages rising at 2.8%, unemployment at a low rate of 4.2% (down from 4.6% from a year earlier and the joint lowest since 1975), national GDP rising at 1.87% and inflation at 2.3%, tied in with indifferent house price growth (compared to a few years ago), this has given first time buyers a chance to get a foot hold on the Thanet property market.

Over the last year, the average purchase price of a Thanet first time buyer property has been £170,200 and the average deposit was £27,572. Furthermore, my calculations show the average Thanet parents contributed £12,063 of that £27,572 figure.

You see “The Bank of Mum and Dad (Thanet Branch)” is for countless Thanet twenty something’s, perceived to be the only way they will ever be able to afford their first home. In fact, Thanet parents put up a substantial £2.72m in the last 12 months to help their nearest and dearest progeny onto the property ladder. This assistance towards the deposit makes a huge difference, enabling Thanet youngsters who thought they couldn’t get on the housing ladder more able to do so.

With mortgage rates at all-time lows, few Thanet twenty something’s would struggle to make mortgage repayments, but it is the requirement of the deposit which is the issue, although as parents (and grandparents) are helping out where they can, it does little to address the real problems of the housing market, whether for people renting or buying their first home.

If you think about it, as a Country we have been fortunate that the older generation who control the biggest share of the nation’s wealth are so plentiful to those following after. We need to remember, though, that this generosity is
 a sign of the issues of the British housing shortage, not its solution. 

But before I leave this article … note I used the word PERCEIVED in a previous paragraph. Yes, the average first time buyer deposit is 16.1%, but that is an average. Did you know 95% mortgages returned to first time buyers in late 2009 and have been available ever since? Also, lenders like Barclays and many local Building Society’s now offer 100% mortgages (i.e. no deposit) at 2.75% fixed for three years.

The perception is you need 15%, 20% even a 25% deposit to be a first-time buyer – you don’t! You don’t need any deposit, but (there is always a but!)...

Over the last decade, many renters have upgraded themselves into homes that they (or any generation before them) could never have ever afforded as a first time buyer in the past. You see the British housing market started to change with the dawn of the new Millennium and I am seeing a slow but steady attitude change when it comes to renting. Those tenants have found the price difference of upgrading from the typical 1970’s TV show Rigsby “Rising Damp” style rental property to plush terraced house or even semi-detached home, with all the mod cons, comparatively inexpensive (when compared to the increase in mortgage payments if they had to make the move as buyers).

Renting isn’t seen as the poor man’s choice, as many young (and increasing older) people are becoming more at ease and comfortable with the flexibility offered by private renting a property rather than jumping ‘lemming like’ into home ownership. Thanet landlords will continue to see growth in sector, and like Germany, todays renters will become homeowners in 20 years’ time – when they will inherit the wealth of their parent’s home.

Monday, 16 July 2018

Extra Funding Is Required for Affordable Homes in Thanet



In my blog about the Thanet Property Market I mostly only talk about two of the three main sectors of the local property market, the ‘private rented sector’ and the ‘owner occupier sector’. However, as I often stress when talking to my clients, one cannot forget the third sector, that being the ‘social housing sector’ (or council housing as some people call it). 
In previous articles, I have spoken at length about the crisis in supply of property in Thanet (i.e. not enough property is being built), but in this article I want to talk about the other crisis – that of affordability. It is not just about the pure number of houses being built but also the equilibrium of tenure (ownership vs rented) and therein, the affordability of housing, which needs to be considered carefully for an efficient and effectual housing market.
An efficient and effectual housing market is in everyone’s interests, including Thanet homeowners and Thanet landlords, so let me explain ..

An average of only 86 Affordable Homes per year have been built Thanet District Council since 2009

The requirement for the provision of subsidised housing has been recognised since Victorian times. Even though private rents have not kept up with inflation since 2005 (meaning tenants are better off) it’s still a fact there are substantial numbers of low-income households in Thanet devoid of the money to allow them a decent standard of housing.
Usually, property in the social housing sector has had rents set at around half the going market rate and affordable shared home ownership has been the main source of new affordable housing yet, irrespective of the tenure, the local authority is simply not coming up with the numbers required. If the local authority isn’t building or finding these affordable homes, these Thanet tenants still need housing, and some tenants at the lower end of the market are falling foul of rogue landlords. Not good news for tenants and the vast majority of law abiding and decent Thanet landlords who are tarnished by the actions of those few rogue landlords, especially as I believe everyone has the right to a safe and decent home.

Be it Tory’s, Labour, SNP, Lib Dems, Greens etc, everyone needs to put party politics aside and start building enough homes and ensure that housing is affordable. Even though 2017 was one of the best years for new home building in the last decade (217,000 home built in 2017) overall new home building has been in decline for many years from the heady days of the early 1970s, when an average of 350,000 new homes were being built a year.  As you can see from the graph, we simply aren’t building enough ‘affordable’ homes in the area.



The blame cannot all be placed at the feet of the local authority as Council budgets nationally, according to Full-Fact, are 26% lower than they have been since 2010.  
So, what does this mean for Thanet homeowners? Well, an undersupply of affordable homes will artificially keep rents and property prices high. That might sound good in the short term, but a large proportion of my Thanet landlords find their children are also priced out of the housing market. Also, whilst your Thanet home might be slightly higher in value, due to this lack of supply of homes at the bottom end of the market, as most people move up the market when they do move, the one you want to buy will be priced even higher.
Problems at the lower end of the property market will affect the middle and upper parts. There is no getting away from the fact that the Thanet housing market is all interlinked .. it’s not called the Property ‘Ladder’ for nothing!


Friday, 6 July 2018

1,175 Margate Landlords Plan to Expand Their Buy To Let Portfolios


A noteworthy number of buy to let landlords in Britain plan to buy more properties over the next year notwithstanding the frustrations, challenges and seismic changes in the private rented sector. According to Aldermore, the specialist Buy To Let lender, their research shows around 41% of portfolio buy to let landlord’s objective is to grow their buy to let portfolio (Portfolio landlords are landlords that own more than one property). So, I thought, “Are Thanet landlords feeling the same?” If so, if these numbers were applied to the Thanet private rental market, what sort effect would it have on the Thanet property market as whole? Talking to the landlords I deal with, most are feeling quite optimistic about the future of the Thanet rental market and the prospect it presents notwithstanding the doom and gloom prophecies that the property market will shrink. Many of those landlords who are looking to enlarge their portfolio are doing so because they still see the Thanet rental market as a decent investment opportunity. With top of the range Bank and Building Society Savings Accounts only reaching 1.5% a year, the rollercoaster ride of Crypto currency and the yo-yoing of the Stock Market, the simple fact is, with rental yields in Thanet far outstripping current savings rates, the short term prospect of a minor drop in property prices isn’t putting off Thanet landlords. The art to buying a Thanet buy to let investment is to buy the profit on the purchase price, not the anticipation of the future sale price. No matter what the historical economy has thrown at us, with the global meltdown in 2008/9, dotcom crash of 2000, ERM in 1992, the three day week, oil crisis and hyperinflation in the 1970’s (the list goes on) ... the housing market has always bounced back stronger in the long term. That’s the point ... long term. Investing in buy to let is a long-term strategy. The simple fact is, over the long term with the increasing demand for rental properties, predominantly among Millennials as many cannot afford to get on the property ladder, and with councils not building enough properties of any kind, many youngsters are having to resort the private rental market for their accommodation needs. So, what of the numbers involved in Thanet? Lets look at the numbers for Margate for example. There are 1,316 landlords that own just one buy to let (BTL) property in Margate and 2,866 Margate landlords, who are portfolio landlords. Between those 2,866 Margate portfolio BTL landlords, they own a total of 6,015 Margate BTL properties and they can be split down into the size of landlord portfolio in the graph below….


If I apply the Aldermore figures that means 1,175 Margate landlords have plans to expand their BTL portfolio in the coming year or so. However, the Aldermore Research also showed that 8% of private landlords intended to reduce the number of properties they own. They put this down to continuing Government intervention in the housing market (as many landlords mentioned too many limitations and higher taxation) while some believed that tenants are excessively protected to the disadvantage of the landlord. I would say there is no repudiating that the buy to let market has taken a bit of a beating, thanks to a plethora of Government regulation, new mortgage underwriting rules in 2014 and George Osborne’s tax changes. Yet there still remains an overall consciousness of optimism among the vast majority of Thanet buy to let landlords. Despite these latest changes, many landlords still view buy to let as a good investment, as long as you buy right and expand your portfolio taking into account the second rule of buy to let … assess your position on the ‘buy to let seesaw’ of capital growth and yield. If you want to buy right and assess your own portfolio on the yield/capital growth seesaw ... drop me a note. I don’t bite and the opinion I give, whether you are landlord of mine or not as the case may be, is given freely, without obligation or cost. The choice is yours. Thank you for reading this article. To read others, please visit my Thanet Property Blog.