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? 

 

 

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

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!)

 

 

 

Stoke on Trent Tenants Pay 33.9% of their Salary in rent

I had the most interesting chat with a local Stoke on Trent landlord the other day about my thoughts on the Stoke on Trent property market. The subject of the affordability of renting in Stoke on Trent came up in conversation and how that would affect tenant demand. Everyone wants a roof over their head, and since the Second World War, owning one’s home has been an aspiration of many Brits.  However, with rents at record highs, many are struggling to save enough for a house deposit.

Let’s be honest, it’s easy to get stuck in a cycle of paying the rent and bills and not saving, but even saving just a small amount each month will sooner or later add up.  George Osborne announced such schemes as the upcoming Help to Buy ISA, where the Government will top up a first time buyers deposit.

Therefore, I thought I would do some research into the Stoke on Trent property market and share with you my findings.  Stoke on Trent tenants spend on average just over a third of their salary to have a roof over their head.  According to my latest monthly research, the average cost of renting a home in Stoke on Trent is £482 per month.  When the average annual salary of a Stoke on Trent worker stands at £17,037 per year, that means the average Stoke on Trent tenant is paying 33.9% of their salary in rent.  I doubt there is much left to save for a deposit towards a house after that, and that my Stoke on Trent Property Blog reading friends is such a shame for the youngsters of Stoke on Trent.

You see one the reasons for rents being so high is property prices being high.  As I have mentioned before, there is a severe lack of new properties being built in Stoke on Trent.  It’s the classic demand vs supply scenario, where demand has increased, but the number of houses being built hasn’t increased at the same level.  Also, Stoke on Trent people aren’t moving home as often as they did in the 80’s and 90’s, meaning there are fewer properties on the market to buy.  If you recall, a few weeks ago I said back in Spring 2008, there were over 3,600 properties for sale in Stoke on Trent and since then this has steadily declined year on year, so now there are only 1,362 for sale in the City.

So, the planners in Stoke on Trent haven’t allowed enough properties to be built in the City and existing Stoke on Trent homeowners are not moving home as much as they used to, thus creating a double hit on the number of properties to buy.  This is a long term thing and the continuing diminishing supply of housing has been happening for a number of decades and there simply aren’t enough properties in Stoke on Trent to match demand, these are the reasons houses prices in Stoke on Trent have remained quite buoyant, even though economically, over the last 5 years, it was one of the worst on record for the country and the West Midlands region as a whole.

However, things might not be all doom and gloom as originally thought, as a recent Halifax Survey  (their Generation Rent 2015 Survey) suggested  more and more people may be long term, if not lifelong tenants. In fact there is evidence in the report to suggest that the perception of how difficult it is to get on the housing ladder is vastly different between parents and people aged 20 to 45.  It seems from this survey that the state of the UK economy has shifted priorities quite significantly in quite a short space of time.  With fewer people able to save up the deposit required by mortgage lenders, more and more people are continuing to rent.  This delay in moving up the property ladder has driven rents across the UK up as more people were seeking rental properties .

 It is often said that more people in central Europe rent for longer or never own their own property. The last two census in 2001 and 2011 show that proportionally the percentage of people who own their own home in Britain is slowly reducing and, as a country, we are becoming more and more like Germany.   That isn’t a bad thing as Germany is considered to have a more successful economy, one of the main stays, often quoted,  is because they have a much more flexible and mobile workforce, (which renting certainly gives) and from that, they have a higher personal income than in the UK.      

Therefore, if we are turning into a more European model and the youngsters of Stoke on Trent and the Country have changed their attitudes, demand for rental properties will only and can only go from strength to strength, good news for Stoke on Trent tenants as wages will start to rise and good news for Stoke on Trent landlords, especially as property values in Stoke on Trent are now 2.6% higher than year ago!