Tuesday 28 July 2015

Stoke-on-Trent Property Market – Bricks and Mortar!


The Land Registry have just released their latest set of figures for the Stoke-on-Trent Property market. It makes interesting reading, as average property values in Stoke-on-Trent rose by 0.7% in May. This leaves average property values 0.6% lower than 12 months ago. When we compare Stoke-on-Trent against the regional picture, West Midlands property values rose by 0.1%, leaving them 3.5% higher than a year ago.

Obviously this is a far cry from the price rises we were experiencing in Stoke-on-Trent throughout 2014. At one point (January 2014 to be exact) property values were rising by 3.6% a year. All the same, even with the tempering of the Stoke-on-Trent 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 City. In April 2014, 196 properties sold in Stoke-on-Trent but in April 2015, that figure dropped to 169.  I have been in the Stoke-on-Trent 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 Stoke-on-Trent 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 Stoke-on-Trent and with the population of Stoke-on-Trent ever increasing, this will generally strengthen house price growth for the foreseeable future.

So what does all this mean for Stoke-on-Trent 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 Stoke-on-Trent, 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 Stoke-on-Trent 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 Stoke-on-Trent property market.

If you are planning on investing in the Stoke-on-Trent or Newcastle under Lyme property market, or just want to know more things to consider for a successful buy to let investment then please just call us or pop in for an informal chat

Friday 17 July 2015

Great Newcastle under Lyme property opportunity


Hi everyone, it’s getting to the end of what has been a really busy week (the end for those who don’t work Saturdays that is!). I was taking a glance at rigthmove, as I do, and saw this one being marketed by Louis Taylor, it needs doing up but it’s a 3 bed semi in a popular rental area so must be worth a look. 

 

http://li.zoocdn.com/48caa70d7634778be6c4ef28f89a6ed660c4136b_645_430.jpg


You can see from the photos that it is a bit dated and needs some work but after a decent refurb it will rent for £650pcm and should return close to 7% gross yield

Monday 13 July 2015

Why are less Stoke-on-Trent people moving house?


During my school years, my parents seemed to move every other year (or it seemed that way). In reality, looking back at the house moves, we actually moved three times before I left home. However, whilst my parents kept the removal van people in business whilst I was at school, from research I have carried out it shows things have changed considerably in Stoke-on-Trent over the last few decades, and interestingly, the trend is getting worse ... for the removal van people at any rate!

In Stoke-on-Trent, there are 116,820 properties. However, after we remove the 26,371 council houses, 16,020 privately rented houses and 1,876 houses where the occupants live rent free, that leaves us with 72,553 owned properties (be that 100% outright, with a mortgage or shared ownership). This means 62.1% of the properties in Stoke-on-Trent are occupied by the owner (the national average is interestingly 64.2%) but the number of people who have sold and moved house in Stoke-on-Trent, over the last 12 months, has only been 4,310. This means on these figures, the homeowners of Stoke-on-Trent are only moving on average every 16.83 years.

These are the reasons. Firstly, the cost of moving house has risen over the last twenty years. Secondly, with many remortgaging their properties in the mid 2000’s before the price crash of 2008, there is a reluctance or inability in a small minority of homeowners to finance a home sale/purchase, due to lack of equity. These are both factors driving fewer moves by existing homeowners.

However, the big effect has been the change in house price inflation. Back in the 1970’s and 1980’s, house prices were doubling every 5 to 7 years. Even in Greater London, with its stratospheric property price increases over the last few years, it has taken 13 years (August 2002 to be exact) for property values to double to today’s levels.

This change to a relatively low inflation Stoke-on-Trent property market (i.e. Stoke-on-Trent property values not rising quickly) is significant because the long term consequences of sustained low house price growth is that it eats into mortgage debt more slowly than when property price inflation is higher. Stoke-on-Trent homeowners cannot rely on inflation to shrink their debt in real terms as much as they did in say the 1970’s and 1980’s.

So what does this all mean for Stoke-on-Trent buy to let landlords? Well for the same reasons existing Stoke-on-Trent homeowners aren’t moving, less ‘twenty something’s’ are buying their first home as well. Stoke-on-Trent youngsters may aspire to own their own home, but without the social pressure from their peers and parents to buy their first property as soon people reach their early 20’s, the memory of the 2008 housing crisis and the belief the hard times either aren't over or the worst is yet to come, current and would-be homeowners are warming to the idea of renting. I also believe UK society has changed, with the youngster’s wanting prosperity and happiness; but wanting it all now... instantly... today... without the sacrifice, work and patience that these things take. As a society, we expect things instantly, and if it doesn’t come easy, doesn’t come quick, some youngsters ask if it is really worth the effort to save for the deposit? Why go without holidays, the newest iPhone, socialising four times a week and the fancy satellite package for a couple of years, to save for that 5% deposit if there is no longer a social stigma in renting or pressure to buy as there was... say... a generation ago?

Even though, in real terms, property prices are 5% cheaper than they were ten years ago (when adjusted by inflation), 13.7% of Stoke-on-Trent properties are privately rented (nearly double it was twenty years ago). As a result, the demand for rental properties continues to grow from tenants, meaning those wishing to invest in the buy to let market, over the long term, might be on to a good thing? For advice and opinion on the Stoke-on-Trent Buy To let property market, one source of information is The Stoke-on-Trent Property Blog or call in to see us at either our Hanley or Newcastle office

 

 

Thursday 9 July 2015

2 Bed apartment in Stoke-on-Trent with an 8% return...


Image result for bellingham grove images


Halfway through another week and, here's another hot property coming your way. This is a really nice example of a 2 bed apartment in Hanley. It just looks like it needs a lick of paint and ready to rent at £450pcm, the last one of these we had let in a couple of days.


You will need to bear in mind though, that this will probably be a leasehold property, so there may be an element of service charges / ground rent which if memory serves is around £600PA in total.

My door is always open if you want to pop in for a chat about investing in Stoke-on-Trent and Newcastle under Lyme, Feel free to pop in and see us at my offices on Piccadilly, Hanley and Merrial Street Newcastle.

 

Wednesday 8 July 2015

Affordability of housing in Newcastle under Lyme


Talking to an elderly relative recently, he reminded me that in his day, you could have bought a property for the same price of what a decent second hand car would sell for today and that his father was buying property for the same price as a decent 50 inch LCD TV!  Now of course, these are only headline prices and we have had wage growth and inflation.  Interestingly, since the Second World War, property values in Newcastle under Lyme doubled in 1961, 1971, 1975, 1980, 1988, 2000 and 2006.

Looking at more recent times, since the start of the Millennium, these increases in property values have generated large increases in equity for many homeowners but on the other side of the coin also making housing unaffordable for other people.  It might interest readers to note that most of Europe experienced sharp increases in property values in the early years of 2000’s, with only Spain beating  us (although we know what has happened to the Spanish property market over the last few years!).  In the 2000’s, the British situation was different in two regards.  First the property value boom started earlier and saw more sustained increases, second, the regional pattern was fairly uniform.

However, since 2010, the regional pattern has been completely different in the UK.  Compared with  2007 (the last property boom), average property values today in England and Wales are 1.2% higher, whilst in Greater London, they are 35.7% higher, whereas in Newcastle under Lyme they are 8.72% lower. The London property market has been like a different country.  Looking specifically at Newcastle under Lyme though, it has continued for first time buyers to get on the housing ladder.  The best measure of the affordability of housing is the ratio of Newcastle under Lyme Property Prices to Newcastle under Lyme Average Wages, (the higher the ratio, the less affordable properties are).  

·         1997       3.54 to 1  (i.e. the average value of a Newcastle under Lyme property was 3.54 times higher than the average annual wage in Newcastle under Lyme)

·         2000       3.69 to 1

·         2002       4.36 to 1

·         2003       5.19 to 1

·         2007       6.91 to 1

·         2009       5.97 to 1

·         2012       6.10 to 1

·         Today    6.81 to 1

You  can see quite clearly, even though we had an improvement just after the 2007 property crash (i.e. the ratio dropped), in following subsequent years with Newcastle under Lyme house price’s rising but wages not keeping up with them,  the ratio started rise.  This has meant there has been a deterioration in affordability of property in Newcastle under Lyme over the last couple of years.  This is one of the (many) reasons why the younger generation is deciding more and more to rent instead of buy their own house.  The local Council sold off council houses in the Thatcher years and for many on low incomes or with little capital, owning a home has simply never been an option.

With fewer people able to save up the deposit required by mortgage lenders, more and more people are looking to rent, this has also resulted in a change in attitudes towards renting over the last decade.  This delay in moving up the property ladder has driven rents up in Newcastle under Lyme over the last few years, as more people are seeking properties to rent.  All these things have combined to make the demand for rental property in Newcastle under Lyme rise.  If you are an existing landlord or someone thinking of becoming a first time landlord looking for advice and opinion and what (or not to buy in Newcastle under Lyme) then we are always delighted if you pop into either our Newcastle or Hanley office or give us a call for a chat about the local property market