Friday, 17 May 2019

Unemployment - the Secret Driver of the Thanet Property Market?


If you have been reading my articles on the Thanet property market recently, you will see that in the three years since the referendum of the ‘B’ word (that word is banned in our household), we have proved beyond doubt that it (whose name shall remain nameless) has had no effect on the Thanet property market (or the UK as a whole).
So one might ask, what does affect the property market locally? Well many things on the demand side include wages, job security, interest rates, availability of mortgages, confidence in the economy, inflation, speculative demand ... the list goes on. Yet as my blog readers will note, I like to delve deeper into the numbers and I have found an interesting correlation between unemployment and the number of properties sold (i.e. transactions).

Why transaction levels and not house prices? Well just looking at Thanet house prices as a bellwether has flaws. Many property market commentators and economists believe transaction numbers (the number of properties sold) give a more accurate and candid indicator of the health of the property market than just house values alone. The reason is twofold. First most people when they sell also buy, so if property values have dropped by 10% or risen by 10% on the one you are selling, it would have done the same on the one you are buying - meaning to judge the health of a property market is very one dimensional. Secondly, the act of moving is very much a human thing. Property habitually conveys a robust emotional connection with homeowners - a connection that few would attribute to their other investments like their savings or stock market investments. Moving home could be described as a human enterprise, moving from one chapter of one’s life to another. When people move home, it shows they are moving forward in their lives and so this gives a great indicator of the health of the property market.

Looking at Thanet’s figures on the graph, you can see an inverse relationship between unemployment and housing transaction levels.


Property transactions in Thanet dropped by 58.79%, whilst unemployment in Thanet rose by 27.41% during the 2007 to 2009 Global Financial Crash


There is clearly a relationship between conditions in the Thanet job market and the number of people who move home ... interesting don’t you think?


Now I am not saying unemployment is the only factor influencing the Thanet property - but it has to be said there is a link.

As a country (and indeed here in Thanet) over the last 40 years, we have seen a shift in the outlook over the purpose of housing and the development of the religion of following house prices (and I appreciate the irony of me writing these articles on Thanet - feeding that habit!) Yet, when did owning a home turn from buying a roof over your head to an out and out investment vehicle? I do wish people would stop fretting about their intrinsic value being associated with their Thanet home. Now of course, I am not dismissing the current levels of Thanet house prices - we just have to take into consideration other metrics alongside them when judging the health of the property market locally.

One final thought, looking on a broader scale in the UK, those towns and cities whose property markets bounced back after the Global Financial Crash had high levels of employment and low unemployment whilst places with high unemployment and relatively low employment have, on the other hand, typically under-performed.  
So the next time you are considering a house move or buying a buy to let property in Thanet ... don’t make your judgement on house price growth alone.


Friday, 10 May 2019

Thanet House Prices Up 0.2% in a Year - What does that mean for local Landlords and Homeowners?



The balancing act of being a Thanet Buy To Let landlord is something many do well at. Talking to numerous Thanet landlords, they are very aware of their tenants’ capability to pay the rent and their own need to raise rents on their rental properties.  Despite the ‘perceived ‘dark clouds of Brexit, evidence suggests many landlords feel more confident than they were in the Summer and Autumn of 2018 about aiming to push rents higher on their Thanet Buy To Let properties.


Looking at the data for the last 7 years, this shows that throughout the Summer months, the rents new tenants have had to pay on move in have increased at a higher rate than during the colder months of Winter.  This is because the Summer months are normally a time when renters like to move, meaning demand increases for rental properties yet supply remains pretty ridged.


Yet the Winter stats buck that trend and this is great news.

Rents in Thanet on average for new tenants moving in have risen 2.4% for the month, taking overall annual Thanet rents 2.7% higher for the year.

However, several Thanet landlords have expressed their apprehension about a slowing of the housing market in Thanet and I believe, based on this new evidence, they may be overstated. Before we get the bubbly out though, the other part of investing in property is what is happening to capital values (which will also be of interest to all the homeowners in Thanet as well as the Thanet Buy To let landlords). I believe the Thanet property market has been trying to find some form of balance since the New Year. According to the Land Registry….

Property Values in Thanet are 0.2% higher than they were 12 months ago.

Yet, these figures reflect the sales of Thanet properties that took place in the early Spring of 2018 and only exchanged and completed during the Summer / early Autumn months of last year.

The reality is the number of properties that are on the market in Thanet today has risen by 19% since the Spring.

and that will have a dampening effect on the property market.  As tenants have had less choice, buyers now have more choice .. and that will temper Thanet property prices as we head into the middle of 2019.

Be you a Thanet landlord or Thanet homeowner, if you are preparing to sell your Thanet property in 2019, it’s important, especially with the rise in the number of properties on the market, that you are pricing your property realistically when you bring it to the market. With the likes of Rightmove, Zoopla and OnTheMarket on everybody’s mobile phones and laptops, buyers have access to every property on the market and they will compare and contrast your home with other properties like yours – and will more than likely dismiss your property rather than view it. To all the Thanet homeowners that aren’t planning to sell though – this talk of price changes is only on paper profit or loss. To those that are moving .. most people that sell, are buyers as well, so as you might not get as much for yours, the one you will want to buy won’t be as much. Look at the deal as a whole, the difference between what you sell yours for and what you buy at. Finally, all the Thanet landlords – keep your eye’s peeled – I have a feeling there may be some decent Thanet buy to let deals to be had in the coming months.

Wednesday, 8 May 2019

New Home Building in Thanet 2018 slips to 50.4% below the post Millennium average


Nationally, the number of new homes created in 2018 was 222,194, the highest since 1989. Yet since 2002, the average number of properties built in the UK has only been 146,700 per year. You would think, seeing all the new homes sites around, you could ask are we building too many houses, especially off the back of those impressive 2018 build figures? However, to keep up with the ever-growing population, lifestyles and people living longer, official reports state the Country actually needs 240,000 new homes built every year to just stand still.
It is estimated, by the Chartered Institute of Housing, that the current national backlog of new homes required is in the order of 4.7 million (i.e. because of the bottled-up household formation by younger adults living with parents, shared housing and unaffordability). As a Country, we cannot meet all these needs immediately and it will take time to build up an effectual plan to address these issues. 
Looking closer to home, you will also see from the graph below the long-term trend of new homes building (the yellow dotted line) has been going in a downward direction. In fact, the 2018 new homes build stats for Thanet are 50.4% below the post Millennium average.


The cure is simple: we need more homes… yet who is going to build (and pay) for them. Some Thanet people will say why can’t the local authority build most of them?

In 2018, 238 new dwellings were created in the Thanet Council area and of those 238; interestingly 47 were Council and Housing Association homes.

So, if our local authority had a more ambitious annual target of say an additional 500 homes on top of those figures, where could they be built and how would they be paid for? Of course, there are the normal apprehensions about infrastructure issues such as roads, schools, hospital capacity and doctors’ surgeries but our local authority has a Local Plan and that has the locations of where they envisage the new housing will be built (and the infrastructure that goes with it).

The Tories lifted the cap on what local authorities could borrow to build Council houses in late 2018 meaning Councils could borrow more money to build more Council houses. Let’s say we built those 500 homes a year for the next 5 years in Thanet, that would cost the local authority £375 million to build, which would produce in total £17.4 million in rent. At current interest rates, the interest would be £9.5m per year leaving a surplus of £7.9m for property maintenance and management – meaning the Council houses pay for themselves! 

Therefore, what does all this mean for Thanet homeowners and Thanet buy-to-let landlords?

Well, the chances of our local authority getting the full funding for an extra 500 homes a year is slim as there is only so much money to borrow. If every UK local authority got funding for 500 additional homes a year for the next 5 years, an impressive 867,500 homes would be built in those 5 years but that would require the councils to borrow £130.1bn – and Central Government doesn’t have that kind of money for Councils to borrow (more like £10bn to £15bn).

The 4.7million long term housing shortage means house prices will remain strong in the long term (despite blips like Brexit etc). Demand for private rental properties will continue to grow and if you read my recent article on rents, this can only be good news for Thanet landlords. This attention on the housing crisis by the Government is good news for all Thanet homeowners and Thanet buy to let landlords, as it will encourage more fluidity in the market in the longer term, sharing the wealth and benefits of homeownership for all. However, in the short term, demand still outstrips supply for homes and that will mean continued upward pressures on rents for tenants and stability on house prices.

Tuesday, 30 April 2019

Ramsgate Buy To Let Annual Returns Hit 13.24% in Last 10 Years



Many Thanet people ponder the best places to invest their hard-earned savings and the best piece of advice I can give you is to do your homework and speak to lots of people. It depends on your attitude to risk versus reward. Normally, the lower the risk, the lower the reward whilst a higher risk is normally associated with the possibility of higher returns, yet nothing is guaranteed. At the same time, higher risk also means higher possible losses on your investment - yet if one looks at the bigger picture, the biggest threat to investing, predominantly when the investment is made in the short term, isn’t risk but actually volatility.

So where should you invest? Building society, the stock market, gold or property are options. This article isn’t designed to give you advice – just show you how different investments have performed over the last decade.

Let me start with the humble semi-detached house in Ramsgate ... which in 2009 was worth £161,100 … so assuming I bought that property for that figure, then I looked at what if I had invested the same amount of money in a building society, into gold and finally the stock market…





Savings Account
Gold
Stock Market
Ramsgate Semi Detached House
2009 capital
£161,100
£161,100
£161,100
£161,100
2019 capital
£161,100
£204,400
£209,800
£256,400
2019 capital & interest/rent
£200,600
£204,400
£280,300
£363,900


Putting your money into the stock market (FTSE100) would have brought a return of 30.2% on your capital over those 10 years and an average of 3.79% a year in dividends (making an overall increase of 74%).

Gold doesn’t earn interest – yet it has increased in value by 26.9% over the same 10 years whilst putting your money in the building society, the money hasn’t increased in value, but would have earned you interest of 24.46% or the equivalent of 2.21% per year.

Investing in an average semi-detached house in Ramsgate over the last 10 years has seen the capital increase by 59% (an equivalent of 4.75% per annum) and the income (i.e. the rent) has provided a return, based on the original purchase price, of 125.88% or the annual equivalent of 8.49% … meaning the overall return, based on the original purchase price of an average semi-detached property in Ramsgate, is 13.24% per annum.



Notwithstanding No.11 Downing Street’s grab at the profits of buy to let landlords by hitting the buy to let sector with several fiscal punishments with a 3% stamp duty level, a decrease in high rate tax relief for landlords and an increase in rate of CGT on residential property profits, the facts remain that ‘bricks and mortar’ is still one of the preeminent and most constant investments available.


The bottom line is, the buy to let investment remains the mainstay of the British property market, serving to support aspiring homeowners as they work to conquer the, sometimes difficult, financial obstacles of home ownership. With Central Government over the last 30 years only paying lip service to address the lack of new homes being built or tackling the affordability on a consequential scale, it is highly probable this will continue for the next 5/10/15 years as there will always be a call for a respectable, and above all, honest buy to let landlords delivering decent housing to those that need it.


Wednesday, 2 January 2019

As OAP’s set to rise to 1 in 3 of Thanet’s population by 2037 – Where are they all going to live?

With constant advances in technology, medicine and lifestyles, people in the Thanet area are, on average, living longer than they might have a few decades ago. As Thanet's population ages, the problem of how the older generation are accommodated is starting to emerge. We, as a district, have to consider how we supply decent and appropriate accommodation for Thanet’s growing older generation’s accommodation needs while still offering a lifestyle that is both modern and desirable. 

In 1997 in Thanet, around one in every four people (23%) were aged 65 years and over (and the local authority area as a whole), this remained around one in every four people (23%) in 2017 but it is projected to increase to reach nearly one in every three people (31%) by 2037, meaning..

Over the next 19 years, the growth of the over 65 population in Thanet will grow by 34.8% - a lot more than the overall growth population of Thanet of 17.7% over the same time frame.

In fact, the number of those over 90 is expected to nearly double in our local authority from 1,666 (1.2%) in 2017 to 3,223 (1.9%) by 2037.


And looking at the proportional percentage changes over those years..


Looking at Thanet and the local authority as a whole, there is a distinct under supply of bungalows and retirement living (i.e. sheltered) accommodation. The majority of sheltered accommodation fit for retirement is in the ex-local authority sector whilst the majority of private sector bungalows were built in the 1960s/70s/80s and are beginning to show their age (although that means there is often an opportunity for Thanet investors and Thanet buy to let landlords to buy a tired bungalow, do it up and flip it/rent it out).
In the medium to longer term, we need to build more bungalows and sheltered accommodation and, if we do that, that won’t only be of benefit to the elderly population of Thanet – it will have a direct knock-on effect to the younger and middle-aged population by unlocking those family homes the older generation homeowners live in.  
There have been 17 Housing Ministers since 1997. No one ever seems to stay in the job long enough to create a consensus and direction in Government Policy on the vital issue of the country’s housing shortage, yet the sound bites and White Papers seem only to focus exclusively on first-time buyers when there is an even more severe and disregarded shortage in suitable housing for the older generation.

This scantiness affects both mature homeowners trapped in unsuitably big family properties, unable to find smaller bungalows or suitable retirement apartments, whilst the waiting list for Council sheltered accommodation is putting a strain on other aspects of social care. In both circumstances, policy coming (or not coming) out of Government is repressing the supply and type of accommodation mature people desire, need and want, whilst at the same time, increasing the cost (and taxes) for social and NHS care.

Maybe we need tax breaks for people to downsize or planning permissions that stipulate bungalows only. Whichever way you look .. there are challenging times ahead for us all.