Friday 11 December 2015

Stoke-on-Trent House Price Monopoly: How do Prices vary?


Well as the nights draw in, if there is nothing on the telly, the significant other and myself like to play the board game Monopoly. The buying and renting of property, it’s like a busman’s holiday for me! Interestingly, the game was originally invented at the turn of the 20th Century (in 1903) and the game was initially called ‘The Landlord’s Game’!  Anyway, after a few years in the wilderness, the current owners of the game renamed it in 1935 and so began Monopoly as we know it today.

http://static4.businessinsider.com/image/51c341caeab8eaab67000001/how-to-use-math-to-crush-your-friends-at-monopoly-like-youve-never-done-before.jpgSo whether you are a homeowner or landlord in Stoke-on-Trent, what would a Monopoly board look like today in the town? Property prices over the last 80 years have certainly increased beyond all recognition, so looking at the original board, I have substituted some of the original streets with the most expensive and least expensive locations in Stoke-on-Trent today.

Initially, I have focused on the ST4 postcode only, looking at the Brown Squares on the board, the ‘new’ Old Kent Road in Stoke-on-Trent today would be Lovatt Street, with an average value £54,600 (per property) and Whitechapel Road would be Oldfield Street, which would be worth £58,400. What about the posh dark blue squares of Park Lane and Mayfair? Again, looking at ST4, Park Lane would be Park Drive at £377,900 and Mayfair would be Barlaston Old Road at £521,700. Also, I can’t forget the train stations (my favourite squares), and over the last 12 months, the average price that property within a quarter mile of the station sold for was £70,780.

So that got me thinking what you would have had to have paid for a property in Stoke-on-Trent back in 1935, when the game originally came out?

  • The average Stoke-on-Trent detached house today is worth £224,160 would have set you back 405 Pounds 11 shillings and 5 old pence.
  • The average Stoke-on-Trent semi detached house today is worth £124,700 would have set you back 225 Pounds 12 shillings and 4 old pence.
  • The average Stoke-on-Trent terraced / town house today is worth £85,550 would have set you back 154 Pounds 15 shillings and 8 old pence.

Anyway, I hope you enjoyed this bit of fun, but underlying all this is one important fact. Property investing is a long game, which has seen impressive rises over the last 80 years. In my previous articles I have talked about what is happening on a month by month or year by year basis and if you are going to invest in the Stoke-on-Trent property market, you should consider the Stoke-on-Trent property you buy a medium to long term investment, because Buy to let is pretty much what it sounds like – you buy a property in order to rent it out to tenants.

As I reminded a soon to be first time landlord from Barlaston the other week, Buy to let in Stoke-on-Trent (as in other parts of the Country) is very different from owning your own home. When you become a Stoke-on-Trent landlord, you are in essence running a small business – one with important legal responsibilities. On that note, I want to remind landlords of the recent and future changes in legislation when it comes to buy to let. This year, rules have changed about tenant deposits, carbon monoxide detectors and early in the New Year, landlords will have responsibilities to do immigration checks on all their tenants. Failure to adhere to them will mean a minimum of heavy fines in the thousands or in some cases, prison ... it’s a mine field!  That’s why I write the Stoke-on-Trent Property Blog, where it has an extensive library of articles like this one, where I talk about what is happening in the Stoke-on-Trent property market, what to buy (and sometimes not) in Stoke-on-Trent and everything else that is important to know as a Stoke-on-Trent landlord. Please visit the Stoke-on-Trent Property Blog or call in to see us if you have any questions about the local property market

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Wednesday 9 December 2015

Has Osborne killed buy to let in Stoke on Trent?



 Well George Osborne, in his Autumn statement last week, caused Stoke on Trent landlords to ask whether buy to let is a viable investment option, when he announced that landlords, when buying another buy to let property from April 2016 will have to pay an additional 3% stamp duty on top of the standard rate. So for example, on a £100,000 property, the stamp duty goes from nil to £3,000. It becomes quite stark when you look at the middle to upper market, so it means that the stamp duty bill for a £285,000 buy to let home will rise from the current £4,250 to £12,800 from April next year. 
http://static.guim.co.uk/sys-images/Admin/BkFill/Default_image_group/2010/1/28/1264710261129/George-Osborne-001.jpgSome say property in Stoke on Trent will be worth less because potential landlords will not be willing to pay as much for them, and if house builders or existing homeowners don't feel they are going to get as much for them , then there is less motivation to build / sell them?... and the person we can blame for this is George himself. Back in 2012, he choose to utilise the British housing market to kick start the UK economy, with  subsidies, Funding for Lending and Help to Buy. However, whilst that helped the Tory’s get back into power in 2015, some say this impressive growth in the UK property market has been at the expense of pricing out youngsters wanting to buy their first home.
Others say this is the straw that breaks the camel’s back as over the next four years Landlords will slowly lose the ability to offset all their mortgage interest against tax on rental income, after changes announced in the Summer Budget. At the moment, landlords can claim tax relief on buy to let mortgage monthly interest repayments at the top level of tax they pay (ie 40% or 45%). However, over the next four years this will reduced slowly to the basic rate of tax – currently 20%.
Surely this is the end of Buy to Let in Stoke on Trent?.... but before we all run to hills panicking.... let me give you another thought.
Stamp Duty rules were changed in December 2014. Before then, landlords were eagerly buying up properties under the ‘old slab style Stamp Duty’ system. For example, the stamp duty bill on that £285,000 property was lower on the old slab style duty (pre Dec 2014), at £8,550, yet it isn’t a million miles away from new £12,800 stamp duty bill. Interestingly though, George has left a legal loophole in the new rules, because when it comes to selling up, they can offset purchase costs against any eventual capital gains tax, including stamp duty.
I believe that total returns from buy to let will continue to outpace other investments, such as the stock market, gilts, bonds and even pensions. Also, the best part about investing in property is that it is bricks and mortar. You can touch it, you can feel it, and it isn’t controlled by some City whiz kid in Canary Wharf .. the British understand property and that goes a long way!
Buy to let has enough impetus behind it that prospective landlords will continue to buy even with a larger stamp duty bill. Stoke on Trent landlords will need to be savvy with what property they buy to ensure the extra stamp duty costs are mitigated.   Buying buy to let property is a long term venture. In the past, it didn’t matter what property you bought in Stoke on Trent– you could always make money over the long term.  Now with these extra taxes, the adage of ‘any old Stoke on Trent house will make money’ has gone out the window.   You wouldn’t dream of investing in the stock market without at least looking in the newspapers or taking advice and opinion from others, so shouldn’t  you take the same advice and opinion about buying a buy to let property in Stoke on Trent?
One source of information, opinion and advice is the Stoke on Trent Property Blog or you can always pop in to see us or just give us a call

Tuesday 1 December 2015

The Stoke on Trent Property Market and £1,300,000,000,000,000,000 in loose change


The 5th of March 2009 was the date Mervyn King, the then Bank of England Governor, slashed UK interest rates to the unparalleled figure of 0.5%. In just under five months, starting on 8th October 2008, the rate had come down from 4.5% to that low figure, all in an attempt to ensure the British economy survived the worldwide credit crunch. Now as we deck the halls with bows of holly nobody expected that, over six years later, rates would still be at that low level.

In the summer, people were predicting a rise in the New Year, yet now, some forecast it may remain the same for years to come the due to the issues in China. Now, I am not some City Whiz kid with a hotline to Mr Carney at Threadneedle Street, but merely a humble letting agent from Stoke on Trent, so I can not profess to know what will happen to interest rates. However, what I do know, speaking to my Stoke on Trent friends and Stoke on Trent landlords is that these low interest rates have hit savers really hard.

If you added up everyone’s bank and building society savings in the UK, they would add up to £1,300,000,000,000,000,000 (that’s £1.3 trillion), most of which is earning a pittance in interest.  That is why more and more 40 and 50 year old Stoke on Trent landlords have been investing some of that cash into Stoke on Trent bricks and mortar, as they search for a low risk investment opportunity.

Buying a Stoke on Trent buy to let property isn’t risk free, but there are certainly things you can do to mitigate and lower one’s exposure to risk. You see by buying a rental property, it potentially offers an enigmatically decent proposition in terms of being able to obtain attractive returns that beat inflation and savings accounts, yet without taking the levels of risk associated with stock markets.

The UK residential property market has long been the safest form of collateral for lenders of all varieties. Against a backdrop of a greatly changing economic environment, Stoke on Trent house prices have been extraordinarily robust, increasing by over 1632.9% between 1974 and today. Some will say there have been significant property price falls, namely in 1975, 1988 and 2008, yet each time after this has been followed by an upturn in property values. For the record, the stock markets in the same time frame only rose by 432.5%!

.. and that is the best thing about buy to let property. Unlike the stock market, with its unfathomable equities, shares and bonds, that nobody really understands (as they are controlled by some faceless whizzkid in Canary Wharf!) with a buy to let property, landlords can take control and understand their investment .. in fact you can touch and feel the bricks and mortar investment.

..  but before you go out and buy any old Stoke on Trent property, plenty of landlords still get it wrong. You have to be aware of your legal responsibilities when it comes to tenant safety, tenants deposits, energy certificates and in the new year, landlords will have the added responsibility of checking the immigration status of prospective tenants. Get it wrong and big fines and even prison is an option – but that’s why many agents use a letting agent to manage their property for them.

Next, you have to buy the right property at the right price. Recently I have seen some really heart breaking situations in Stoke on Trent and the immediate area, of people paying way too much for a property, only to lose out when they came to sell. One example that comes to mind is that of a property owner in an apartment in Hartley Court on the extremely popular Lock 38 development in Cliffe Vale, only yards away from access to the A500, convenient for Hanley and Newcastle town centres and offering great views across a picturesque stretch of the Trent and Mersey Canal .. a decent first floor one bed apartment, 36 sq metres inside (387 sq ft in old money) sold in July 2008 for £99,950. In the autumn, it only obtained £62,000, a drop of 37.97% or 6.45% a year - a very disappointing result.
I cannot stress enough the importance of doing your homework. One source of information and advice is the Stoke on Trent Property Blog where I have similar articles to this about the Stoke on Trent property market and what I consider to be the best buy to let deals around at any one time in the town, irrespective of which agent it is on the market with.

Wednesday 25 November 2015

Stoke on Trent vs Newcastle under Lyme – Clash of the Property Market Titans!


Many landlords have been asking me my thoughts on the Stoke on Trent property market recently, and in particular, what is happening to property values. My calculations show property values in Stoke on Trent quite interestingly grew in the month of September by 0.2%.  When one looks at the annual growth, Stoke on Trent values are 4.5% higher (when comparing Sept 14 to Sept 15), impressive when you consider the annual growth of property values dropped to -0.8% per annum in April.  On the other hand, there are signs that the fundamental growth of property values in Stoke on Trent has now peaked, despite those average property values being below levels recorded in 2007 (just before the 2008 crash).

Whilst the Stoke on Trent headline rate appears to be better, i.e. the year on year (Sept 14 to Sept 15) growth rate of 4.5% is obviously better than the drop to -0.8% in April 14 to April 15), this impressive rise of Stoke on Trent property values masks the underlying truth in what is really happening to local property values in the City.  Throughout 2015, property values have been yo-yo like on a month by month basis, being quite volatile in nature.  For example,

  • September 2015               0.2% rise
  • August 2015                       0.4% rise
  • July 2015                              0.8% rise
  • June 2015                            0.3% drop
  • May 2015                             1.5% rise
  • April 2015                            0.6% drop
  • March 2015                         1.5% drop

This is in part due to seasonal factors, as well as mortgage approvals increasing over June and July and then falling by over 15% in August, according to the Council of Mortgage Lenders (CML).

The outlook for the Stoke on Trent property market remains positive against the foundations of low mortgage rates and growing consumer confidence. However, I do have to question the recent CML mortgage data and whether that raises issues over whether the rate of growth since the Tory’s were re-elected in the early summer can continue? However, on a positive note, Stoke on Trent property values are still running ahead of salaries and average property values are 20.8% below the levels recorded in 2007.

Talking to fellow property professionals in the City, demand for property has been showing signs of moderating in the final few months of 2015, which in turn will lead to a slight slowdown in the pace of house price growth in the run up to the festive season. You see, it is really important not to read too much into one month’s (September’s) headline figures.

Readers might be interested to note that before the 2008 property crash, all the UK region’s housing markets tended to move up and down in tandem like the Stoke on Trent Synchronised Swimming team at the Fenton Manor Swimming Pool!  Since then though, the Greater London property market took off like a rocket in 2009/10, whilst the rest of the UK only really started to grow in 2012/13, and even then that growth was a lot more modest than the Capital’s.  Looking closer to home, it can even be different in neighbouring towns, areas and cities, so whilst Stoke on Trent property values are 4.5% higher than a year ago (as mentioned above), Newcastle Under Lyme property values are 2.6% higher than a year ago.
I cannot stress enough the importance of doing your homework.  One source of information and advice is the Stoke on Trent Property Blog where I have similar articles to this about the Stoke on Trent property market and what I consider to be the best buy to let deals around at any one time in the City, irrespective of which agent it is on the market with.  

Values of Stoke on Trent Terraced Houses smash through the £115/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 Stoke on Trent, 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 Stoke on Trent 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 Stoke on Trent have risen by 60.52%, compared to Greater London’s 436.2%. This has proved that capital growth increases faster in the more expensive South, 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 Stoke on Trent. However, whilst the figure of 60.52% is an average for the area, certain areas of Stoke on Trent 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 Stoke on Trent 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 Stoke on Trent, and more importantly, how much?

  • The average apartments in the town are currently selling for approximately £154 per square foot.
  • Terraced houses in Stoke on Trent are currently obtaining, on average, £85,300 or £119 per square foot,
  • An average semi in Stoke on Trent is selling for £123,500 (and achieving £144 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 Stoke on Trent houses and apartments, and the yields that can obtained, depending how many bedrooms there are. In the meantime, if you would like to read more articles like this, then can I suggest you visit the Stoke on Trent Property Blog? 

 

 



Thursday 19 November 2015

Stoke-on-Trent Buy To let –Freehold House or Leasehold Flat?



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Well my Stoke-on-Trent Property Blog reading friends, as seems to be all the rage with Jeremy Corben asking the PM questions emailed in to him at Prime Minster Question Times, I to wish to answer a question emailed into me from a potential Stoke-on-Trent landlord last week. Nice chap, lives in Milton, and it turns out, after having a coffee with him, he works in IT, has a spare bit of cash (now the kids have flown the nest) and wanted to buy his first buy to let property.
His main question was ... Do I buy a freehold house or a leasehold flat in Stoke-on-Trent?
Most people will say freehold every time, because you own the land. However, it’s not as simple as that (it never would be would it!). The definitive answer though is to research what Stoke-on-Trent tenants want! The tenant is ultimately your customer, and, if they don't want to rent what you decide is best to buy, then you are not going to have a successful BTL investment. So starting with the tenant in mind and working backwards from there, you won’t go far wrong. In a nutshell, find the demand before you think about creating the supply.
Leasehold flats and apartments in Stoke-on-Trent are excellent in some respects as they offer the landlord certain advantages, including the fact a flat can be initially cheaper to buy. Yields can be quite good, offering better cash flow. The building will already be insured and yes there is a service charge, but it’s still for a service at the end of the day and that cost is spread between many others (i.e. when your freehold house roof goes, its falls 100% on your shoulders) and one of my favourites is that there is often no garden to maintain or blown down fences to replace!

However, some Stoke-on-Trent leasehold flats can suffer from poor capital growth. Some leasehold properties have no cap on the level of the service charge and it may get out of control. The length of the lease will significantly affect value if not renewed before it gets too short. Thankfully there’s not many, but some Stoke-on-Trent apartments/flats have burdensome clauses. Finally, with leases, there can be sub-letting issues – which means you can’t let them out.
So what do the numbers look like? Well since 2003, the average freehold property in Stoke-on-Trent (detached, semis and terraced) has risen from £68,045 to £127,379, a rise of 87% whilst the average Stoke-on-Trent leasehold property (flats and apartments) has gone up in value from £65,333 to £89,079, a more mediocre rise of 36%. 
I was really interested to note that of the 14,176 rental properties in the Stoke-on-Trent City Council area that the Office of National Statistics believe are either let privately or through a letting agency, 2,989 of them (or 21.1%) are apartments. However, there are only 12,417 apartments in the whole council area (be they owned, council rented or privately rented), which represents 11.5% of the whole housing stock in the area. This really intrigued me that, quite obviously, there is a high proportion of Stoke-on-Trent’s leasehold apartments/flats rented to tenants compared to detached, semi’s or terraced. Fascinating don’t you think?
Every Stoke-on-Trent apartment block, every terraced house or semi is different. Like I said at the start, the definitive answer though is to research what Stoke-on-Trent tenants want in the area of Stoke-on-Trent they want. Demand for city centre apartments, near the nightlife and transport links can be popular and can offer the Stoke-on-Trent landlord very good yields with minimal voids. However, Stoke-on-Trent terraced houses and semis, whilst not always offering the best yields (although sometimes they can), they do offer the Stoke-on-Trent landlord decent capital growth.
My advice to the prospective landlord as it is to you is do your homework.  One such website, which only talks about the local buy to let Property Market, is here "the Stoke-on-Trent Property Blog". Another source of info many Stoke-on-Trent landlords use is me and the team! What many Stoke-on-Trent landlords do, irrespective of whether you are a landlord of ours, a landlord with another agent or a DIY landlord, if you see any property in Stoke-on-Trent, that catches your eye as a potential buy to let property, be it a terraced house, semi or flat ... email me and I will email you back with my thoughts (although I will tell you what you need to hear .. not necessarily what you want to hear!)
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