Average Rent Paid by Tenants in Stoke on Trent on the rise

Back in the Spring, there was a surge in Stoke on Trent landlords buying buy to let property in Stoke on Trent as they tried to beat George Osborne’s new stamp duty changes which kicked in on the 1^st April 2016. To give you an idea of the sort of numbers we are talking about, below are the property statistics for sales either side of the deadline in ST1. 

Jan 2016 – 25 properties sold

Feb 2016 – 30 properties sold

March 2016 – 73 properties sold

April 2016 – 30 properties sold

May 2016 – 35 properties sold 

Normally, the number of sales in the Spring months is very similar, irrespective of the month. However, as one can see, this year was a completely different picture as landlords moved their purchases forward to beat the stamp duty increase. You would think that even with a basic knowledge of supply and demand economics, rents would be affected in a downwards direction?

 

 

However, there appears to be no apparent effect on the levels of rent being asked in Stoke on Trent - and more importantly achieved - and this direction of rents is not likely to inverse any time soon, particularly as legislation planned for 2017 might reduce rental stock and push property values ever upward. The decline of buy to let mortgage interest tax relief will make some properties lossmaking, forcing landlords to pass on costs to tenants in the form of higher rents just to stay afloat. Even those who can still operate may be deterred from making further investments, reducing rental stock at a time of severe property shortage. 

.. but it’s not all bad news for tenants. Whilst average rents in Stoke on Trent since 2005 have increased by 14.8%, inflation has been 38.5% over the same time frame, meaning Stoke on Trent tenants are 23.7% better off in real terms when it comes to their rent (which is a sizeable chunk of most people’s monthly household budgets) 

Year	Average Rent in Stoke on Trent per month
2005	343
2006	351
2007	363
2008	374
2009	377
2010	375
2011	381
2012	387
2013	393
2014	397
2015	403
2016	410

I found it particularly interesting looking at the rent rises over the last five years in Stoke on Trent, as it was five years ago we started to see the very early green shoots of growth of the Stoke on Trent economy.  As a whole, following the Credit crunch (2011), rents in Stoke on Trent have risen by an average of 1.4% a year – fascinating don’t you think? 

The view I am trying to portray is that while renting is often portrayed as the unfavourable alternative to home ownership, many young Stoke on Trent professionals like renting as it gives them adaptability with their life. Rents will continue to rise which is good news for landlords as buy to let is an investment but, as can be seen from the statistics, tenants have also had a good deal with below inflation increases in rents in the past. It’s a win-win situation for everyone although on a very personal note, it’s imperative in the future that tenants are not thwarted from saving for a deposit by excessive rental hikes – there has to be a balance.

Stoke-on-Trent Property Values increase by 0.2% ... good or bad news?

“How's the Stoke-on-Trent housing market doing?” asked an upbeat Stoke-on-Trent landlord last week.  “Quite strange”, I replied. Our landlord was perplexed! Let me explain... 

Even the Brexit vote has not hindered Stoke-on-Trent’s steady rise in property value, as Stoke-on-Trent property values went up 0.2% last month alone, leaving Stoke-on-Trent values 6.79% higher than a year ago. An increase in demand from buyers and an uninspiring level of supply (i.e. the number of properties on the market) has driven up the value of the Stoke-on-Trent’s housing.

...And that is where the issue is. With Brexit, the coalition of the 2010-15, a double-dip recession and post credit crunch fallout – I was perplexed that the Stoke-on-Trent property market (and values) has remained so strong, still 12.5% higher than 20 months ago. That is until you start to look into the real reasons why we find ourselves in such a great place. 

The Stoke-on-Trent (and the UK) housing market is built on the foundations of basic economic rules that any GCSE Economics student should understand. However, at a time when, as a country, we seem eager to uncouple ourselves from all manner of proven facts, anything is up for grabs.  

Even the wary RICS said throughout the UK, most of its Chartered Surveyors anticipated house prices to increase in the next six months, which seems contradictory given economic cautions from Mr Hammond and HM Treasury. Even though inflation will rise to around 2% to 3% in 2017 and perhaps a little more in 2018 because of Sterling’s devaluation, together with a high probability of a decelerating GDP and a slight rise in unemployment, how can the RICS and most of my landlords be so confident about the value of our homes?

Well, look at from where we are starting. Nationally, a base of low unemployment, low inflation and preposterously low interest rates. Confidence also plays a part. Confidence can supersede basic economic facts for a short time at least, which is why actual property market changes tend to be more exaggerated, as confidence can turn both positive and negative very quickly. The fact is, there is a long-term relationship between property values, wages and unemployment. For example, looking at the graph below, you can quite clearly see the ratio of property values to earnings is nowhere near as high as it reached in 2008 and currently is in the middle of the range for the last 30 years. As a country, we are in a good place.

 

By April 2017, Article 50 will be invoked. This will bring additional political tomfooleries and economic ups and downs. With both purchasers and vendors predisposed by the 24-hour news cycle, which let’s face it, gets more haphazard by the day, it is likely to prove a challenging couple of years … and yes, Stoke-on-Trent property values might drop slightly in 2017, but based on what we know of the UK plc now, the UK and Stoke-on-Trent property values are not projected to move that much over 2017 or 2018.  Going into the next two years, we are in much better financial shape as a country compared to the last two crashes of 1987 and 2008. 

But, on the other side of the coin, what we also know is that we don't know much about the form of our economic future or indeed many other facets of our lives. Confidence will continue to be the key player in the Stoke-on-Trent housing market for a while longer - yet this may spur some much needed second-hand market activity? Now, where is my crystal ball?

Stoke-on-Trent Housing Crisis? Only 1.4% of Stoke-on-Trent Homes Are For Sale

The Stoke-on-Trent Property Market continues to disregard the end of the world prophecies of a post Brexit fallout with a return to business as usual after the summer break. 

The challenge every Stoke-on-Trent property buyer has faced over the last few years is a lack of choice – there simply hasn't been much to choose from when buying (be it for investment or owner occupation). Levels are still well down on what would be considered healthy levels from earlier in this decade, as there is still a substantial demand/supply imbalance. Until we start to see consistent and steady increases in properties coming on to the market in Stoke-on-Trent, the market is likely to see upward pressure on property values continue.

 

 

For example, last month St1 saw 123 new properties coming on to the market, not bad when you consider for the last year the average has been in the 60 to 80 range. With the average Stoke-on-Trent property value hitting a record high, reaching almost £141,200 according to my research, this shortage of properties on the market over the last two years has contributed to this ‘fuller' average property figure.

As I write this article, 1.40% of Stoke-on-Trent properties are up for sale. In terms of actual chimney pots, that equates to 1,236 properties on the market in Stoke-on-Trent (within 3 miles of the centre of Stoke-on-Trent) – which, when compared to only a year ago when that figure stood at 1,386, is a slight decrease in the number of properties available to buy. Split down into the type of property, it makes even more fascinating reading...

·         Detached Properties in Stoke-on-Trent  - 178 on the market a year ago compared to 145 on the market now – a decrease of 19%

·         Semi Detached Properties in Stoke-on-Trent - 420 on the market a year ago compared to 338 on the market now – a decrease of 20%

·         Terraced Properties in Stoke-on-Trent - 459 on the market a year ago compared to 502 on the market now - an increase of 9%

·         Flats / Apartments Properties in Stoke-on-Trent  - 176 on the market a year ago compared to 151 on the market now – a decrease of 14%

This is evidence of strength in the Stoke-on-Trent housing market that many didn't expect. Many believed that the Stoke-on-Trent property market wasn't going to be strong enough post Brexit - as what was a sellers' market before the Brexit vote and Buyers' market in the early months after it, may now be somewhere in between and the market might just be coming back into balance. 

However, all this will mean property values won't continue to grow at the same extent they have been over the last 12 to 18 months, and in some months (especially on the run up to Christmas and early in the New Year), values might dip slightly. This won't be down to Brexit but a re-balancing of the Stoke-on-Trent Property Market – which is good news for everyone.

Private Renting set to grow by 6,900 Stoke on Trent households by 2025

I was having a most interesting chat the other day with a Stoke on Trent landlord when we were looking at a property. As I am sure you are aware, I am always happy to cast my eye over any potential buy to let purchase in Stoke on Trent, be that you emailing me a Rightmove link, a brochure in the post or even treading the carpet and seeing it together. I don't charge for that, and you don't even need to be a client of mine. We got talking about the Stoke on Trent Property Market and this landlord brought up the subject of a report he had read from the Royal Institution of Chartered Surveyors (RICS) and PricewaterhouseCoopers (PwC) that stated almost 1.8m new rental homes are needed by 2025 to keep up with current demand from tenants. He wanted to know what this meant for Stoke on Trent. 

Well my blog reading friends, some commentators said last Winter that buy to let was about to die, what with the new stamp duty changes and how mortgage tax relief will be calculated. Others even said 500,000 rental properties would flood the market nationally in the 12 months after the new Stamp Duty rules came into force on the 1st April 2016 as landlords left the rental market. Well, all I can say is, I wish all the landlords of those half a million properties would hurry up and put them on the market – because I have plenty of other potential landlords wanting to buy them! 

Back to the matter in hand.. if the RICS and PwC are indeed correct, what does this mean for Stoke on Trent? The fact is, as a country, we are facing a precarious rental shortage and need to get Stoke on Trent building in a way that benefits a cross-section of Stoke on Trent society, not just the fortunate few. I call on the Prime Minister to drop the higher stamp duty tax on buy to let purchases to ease the pressure on the rental market.  

Of the 116,800 households in Stoke on Trent, currently 36,700 tenants live in 16,000 private rented properties. If we apportion those 1.8m households equally around the Country, that means in nine years’ time, the number of rental properties in Stoke on Trent needs to rise by 6,900 (i.e. 42.8%) .. taking the total number of rented properties in the city to 22,900. 

 

That means Stoke on Trent landlords need to buy around 800 properties a year between now and 2025 to meet that demand – because according to my calculations, an additional 15,700 people will want to live in all those 'additional' Stoke on Trent rental properties – so why is the government penalising landlords? 

Thankfully the new housing minister Gavin Barwell detached Teresa May's new administration from the Cameron/Osborne laser-like focus of just home ownership to solve our housing issues, saying "we need to build more homes for every single type of person needing a home and not focus on one single tenure". The private rented sector became a stooge under David Cameron's watch and still, with increasingly unaffordable Stoke on Trent house prices, the majority of new Stoke on Trent households will be relying on the rental sector in the future to house them. I can only say Westminster must put in place the measures that will allow the rental sector to flourish. Any restrictions on the supply of rental property will push up rents (bad news for tenants), thus side-lining those members of Stoke on Trent society who are already struggling. Let's hope this new Government continues to see the contribution landlords give to the country as a whole.

6.1% of Stoke on Trent People live in Shared Households

I had an interesting chat the other day with a Stoke on Trent landlord. He said he had been chatting with an architect friend of his who said back in the mid 2000’s, the developments he was asked to draw were a balance of one and two bed properties, compared to today where the majority of the buildings he is designing are more towards two and sometimes three bedrooms. Now of course, this was all anecdotal but it made me think if similar things were happening in the Stoke on Trent property market?

This is a really important point as I explained to this landlord, as knowing when and where the demand of tenants is going to come from in the coming decade is just as important as knowing the supply side of the buy to let equation, in relation to the number of properties built in Stoke on Trent, Stoke on Trent property prices, Stoke on Trent yields and Stoke on Trent rents.  

In 2001, there were 103,200 households with a population of 240,600 in the Stoke on Trent City Council area. By 2011, that had grown to 107,600 households and a population of 249,000.

.. meaning, between 2001 and 2011, whilst the number of households in the Stoke on Trent City Council area grew by 4.24%, the population grew by 3.48%

 

Nothing surprising there then. But, as my readers will know, there is always a but! My analysis of the 2011 Census results, using the most recent in-depth data on household formation (eg ‘one person households’, ‘couples/ family households’ or ‘couple + other adults households and multi -adult households’), has displayed a sudden and unexpected break with the trends of the whole of the 20^th Century. There has been a seismic change in household formation in Stoke on Trent between 2001 and 2011.

Between 2001 and 2011, the population of Stoke on Trent grew, as did the number of Stoke on Trent properties (because of new home building). However, the growth rate of new properties built in Stoke on Trent was much lower than expected though, but still the population has grown by what was expected, meaning the average household size was larger than anticipated in Stoke on Trent. In fact, average household size (ie the number of people in each property) in 2011 was almost exactly the same as in 2001, the first time for at least 100 years it had not fallen between censuses. (Since 1911, household size has decreased by around 20% every decade).

Looking at figures specifically for Stoke on Trent itself,

·         One person households - 32.2%         

·         Couples/family households – 61.7%

·         Couple + other adults/multi-adult households – 6.1%

This decline was reflected in large scale shifts in the mix of household types. In particular, there were far more “couple + other adults households and multi -adult households” than expected (6.1% is quite a lot of households). It can be put down to two things; increased international migration and changes to household formation. A particularly important reason for the difference can probably be attributed to the evidence that migrants initially form fewer households (ie two couples share one property) than those who have lived in the UK all their lives. Also, changes to household formation patterns amongst the rest of the population, including adult children living longer with their parents and more young adults living in shared accommodation (as can be seen in the growth of HMO properties (Homes of Multiple Occupation). 

So, what does all this mean for Stoke on Trent Homeowners and Landlords? Quite a lot in fact. There has been a subtle shift to slightly larger households in the last decade, meaning smart landlords might be tempted to buy slightly larger properties to rent out – again good news for homeowners who will get top dollar for their home as they sell on. But now with Brexit, household formation might swing the other way in the next decade? Who knows? Watch this space!

House Prices in Stoke-on-Trent rise by more than 11% in the last 18 months

Over the last month, the Stoke-on-Trent property market has seen some interesting movement in house prices, as property values in the Stoke-on-Trent City Council area dropped by 1.0% in the last month, to leave annual price growth at 5.5%. These compare well to the national figures where property prices across the UK saw a monthly uplift of 0.42%, meaning the annual property values across the Country are 8.3% higher, this is all despite the constraining factors of Stamp Duty changes in the spring and more recently our friend Brexit.

Looking at the figures for the last 18 months makes even more fascinating reading, whereby house prices are 11.5% higher, again thought provoking when compared to the national average figure of 13.6% higher.

However, it gets more remarkable when we look at how the different sectors of the Stoke-on-Trent market are performing. Over the last 18 months, in the Stoke-on-Trent City Council area, the best performing type of property was the detached, which outperformed the area average by 0.42% whilst the worst performing type was the apartment, which under-performed the area average by 0.51%.

Now the difference doesn’t sound that much, but remember two things, this is only over eighteen months and the gap of 0.92% (the difference between the detached at +0.42% and apartments at -0.51%) converts into a few thousand pounds disparity, when you consider the average price paid for a detached property in Stoke-on-Trent itself over the last 12 months was £215,500 and the average price paid for a Stoke-on-Trent apartment was £95,300 over the same time frame. 

I know all the Stoke-on-Trent landlords and homeowners will want to know how each of the property types have performed, so this is what has happened to property prices over the last 18 months in the area...

·         Overall Average          +11.5%

·         Detached                     +12.0%

·         Semi Detached            +11.8%

·         Terraced                     +11.0%

·         Apartments                 +10.9% 

So what does all this mean to Stoke-on-Trent homeowners and Stoke-on-Trent landlords and what does the future hold?   

When I looked at the month-by-month figures for the area, you can quite clearly see there is a slight tempering of the Stoke-on-Trent property market over these last few months. I have mentioned in previous articles that the number of properties on the market in Stoke-on-Trent has increased this summer, something that hasn’t happened since 2008. Greater choice for buyers means, using simple supply and demand economics, that top prices won’t be achieved on every Stoke-on-Trent property. You see, some of that growth in Stoke-on-Trent property values throughout early 2016 may have come about because of a surge in house purchase activity, an indirect result of the increase in stamp duty on second homes from April, thus providing a temporary boost to prices.

However, it may be possible the recent pattern of robust employment growth, growing real earnings and low borrowing costs will tilt the demand/supply seesaw in favour of sellers and exert upward pressure on prices once again in the quarters ahead. 

...And Stoke-on-Trent property values, assuming that everything goes well with Brexit, I believe in twelve months’ time we may see values in the order of 2% to 3% higher.

 

 

Stoke on Trent Property Market in 2017 and Beyond

As the trees turn from green to hues of red and brown, the Stoke on Trent property market has a confident feel to it. With the underlying fundamentals of a continued lack of properties being built, a shortage of properties (both in terms of quantity and quality) coming to the market and the continued low mortgage rate environment, buyer enquiries from first time buyers and buy to landlords is strong and motivation is even stronger, given those inexpensive lending rates and general demand caused by under supply. 

Now of course, there are a few potential hurdles coming towards us in the coming months that could affect the Stoke on Trent (and UK) property market. Mrs. May has yet to get her teeth into Brexit negotiations and we don’t know what the US Presidential elections might do to the money markets around the world, meaning that on the run up to Christmas, some savvy buyers may take advantage of the lack of certainty by making cheeky offers, but I don’t believe these will have a huge impact on property values (like the 2008 Credit Crunch). 

You see, property ownership, whether it’s for yourself as a homeowner or buy to let landlord, is a long term investment. In fact, focusing on buy to let, a number of landlords who own property in Stoke on Trent have made contact with me recently asking for my thoughts on the future of the buy to let market in Stoke on Trent.  Well, as the Politician Edmund Burke said in the 18^th century, "Those who don't know history are destined to repeat it." .. in other words, to see the future you must look into the past. 

Since the Millennium, the housing market has had everything thrown at it. The recent Brexit, last year’s General Election, the near melt down of the World Economy with the Credit Crunch, The Dot Com boom and bust, the housing market crisis in 2008, the housing boom of 2001 to 2004 .. the list goes on. In fact here is a graph (courtesy of the Land Registry) of average Property values since the Millennium in the Stoke on Trent City Council area.

Even though we had the Dot Com bubble burst in 2000, two years later in January 2002, property values in the Stoke on Trent City Council area have risen from £35,500 (in Jan 2000) to £40,500 .. and kept rising to October 2007, when they peaked at £108,500. Then we had the Credit Crunch and property prices continued to fall until March 2009, where they averaged £87,500 .. but look where they are now…  £102,100.

The point I am trying to get across is long term future property values are more helpful to landlord investors than the month by month headline grabbing micro movements in the property market.  Look at the graph and you will see the growth in property values is an upward trend BUT, the average darts about as each month goes by.  So don’t watch the property indexes and panic if values drop next month or the month afterwards, because even in the glory days of 2001 to 2004 and 2012 to 2014, without fail, values always dropped slightly around Christmas, but people will always need a roof over their heads, and if they can’t buy and the council aren’t building anymore  .. only buy to let landlords can meet that demand. 

Stoke on Trent landlords are being hit in the pocket with the new up and coming taxation rules and yes we might have a bumpy ride on the run up to Christmas (because of the points raised earlier), Brexit or no Brexit, but the trend will be a slow and steady upward momentum of property values, demand for rental properties and yields in the Stoke on Trent property market into 2017 and beyond.

What is really happening in the Stoke on Trent Property Market?

Well its been a few months since Brexit and as we settle into the Autumn with Great British Bake Off, Strictly and the Football season ... the newspapers are returning to their mixed messages of good news, bad news and indifferent news about the Brit’s favourite subject after the weather ... the property market.

The thing is the UK does not have one housing market. Instead, it is a patchwork of mini property markets all performing in a different way. At one end of scale is Kensington and Chelsea, which has seen average prices drop in the last twelve months by 6.2% whilst in our West Midlands region, house prices are 6.4% higher. But what about Stoke on Trent?

Property prices in Stoke on Trent are 6.6% higher than a year ago and 4% higher than last month.

So what does this mean for Stoke on Trent landlords and homeowners? Not that much unless you are buying or selling in reality. Most sellers are buyers anyway, so if the one you are buying has gone up, yours has gone up.  Everything is relative and what I would say is, if you look hard enough, there are even in this market, still some bargains to be had in Stoke on Trent.

However, the most important question you should be asking though is not only is what happening to property prices, but exactly which price band is selling? I like to keep an eye on the property market in Stoke on Trent on a daily basis because it enables me to give the best advice and opinion on what (or not) to buy in Stoke on Trent.

If you look at Stoke on Trent and split the property market into four equalled sized price bands. Each price band would have around 25% of the property in Stoke on Trent, from the lowest in value band (the bottom 25%) all the way through to the highest 25% band (in terms of value).

·         Nil to £80k                           581 properties for sale and 269 sold (stc) i.e. 31% sold

·         £80k to £120k                     565 properties for sale and 374 sold (stc) i.e. 39% sold

·         £120k to £170k                  528 properties for sale and 363 sold (stc) i.e. 40% sold    

·         £170k +                                 514 properties for sale and 294 sold (stc) i.e. 36% sold

Fascinating don’t you think that it is the middle Stoke on Trent market that is doing the best?

The next nine months’ activity will be crucial in understanding which way the market will go this year after Brexit ... but, Brexit or no Brexit, people will always need a roof over their head and that is why the property market has ridden the storms of oil crisis’ in the 1970’s, the 1980’s depression, Black Monday in the 1990’s, and latterly the credit crunch together with the various house price crashes of 1973, 1987 and 2008.

And why? Because of Britain’s chronic lack of housing will prop up house prices and prevent a post spike crash. ... there is always a silver lining when it comes to the property market!

698% - Rise in Stoke on Trent Property Prices since 1981

Roll the clock back 35 years to 1981, and Mrs. T was in power, we had a Royal Wedding, Britain won the Ashes and Bucks Fizz won Eurovision with ‘Making your Mind up’.   Haven’t things changed.  The number of homeowners and property investors who said they wish they had hindsight and bought up every house in Stoke on Trent all those years ago, especially when you consider what has happened to Stoke on Trent property values, as…  

Stoke on Trent Property Values since 1981 have risen by 698%. 

Not bad when you consider inflation over the same time period has been 271.9%, meaning in real terms (i.e. after inflation), property values in Stoke on Trent are 426.1% higher.   It’s no wonder people can’t afford to buy property anymore and landlords are attracted by bricks and mortar. Yet the changes to the Stoke on Trent Property market run much deeper than property value changes as no one could have predicted how the property market has changed in Stoke on Trent over the last 30 years. 

 

 

Looking at the Local Authority data for Stoke on Trent City Council in 1981, 36% of Stoke on Trent people lived in a Council House, whilst today its 24.2% ... a massive drop which can mostly be attributed to Margaret Thatcher allowing Council tenants the right to buy their Council House.  The private rental sector since 1981 has, as one would have expected, also changed.  The proportion of properties privately rented in the Stoke on Trent area (i.e. through a private landlord or a letting agency) has almost doubled, rising from 7.5% to 14.4% of property.

So, let us consider those people who own their own home, surely that has had a massive drop?  In 1981, the proportion of people who lived in the Stoke on Trent City Council area who owned their own home was 56.4% … and today its … 59.4%. Not the seismic change most of you were expecting (including myself!).

Homeownership in the 1980’s and 1990’s in Stoke on Trent did in fact rise, but as I have discussed in previous articles in the ‘Stoke on Trent Property Market Blog’, that was because nearly every Council tenant was buying their council house. Now there are hardly any Council houses for the younger generation to move into (because of the right to buy scheme) so they have no choice but to privately rent. 

.. and this is why the buy to let market in Stoke on Trent is an investment sector that will continue to grow as councils aren’t building council houses in their thousands each year (like they were in the 1950’s/60’s and 70’s).  The Stoke on Trent property market is constantly changing and buy to let for too long has been heavily dependent on house price growth, where yield has been almost forgotten.  I see the changes in tax and landlord and tenant law in a different perspective to the sooth-sayers and see it as bringing many opportunities where yield will become more important.   

Like Bucks Fizz said in their song, it’s time to make your mind up. The advice I give to my landlords, and also to you my blog reading friends is this; these changes will make some landlords panic, meaning competition for decent Stoke on Trent buy to let bargains will reduce as fear of change kicks in and amateur investors flee the market.  These opportunities will provide a more stable platform for knowledgeable and wise Stoke on Trent buy to let landlords to thrive in.  If you want to learn more about the Stoke on Trent Property Market, feel free to pop in to the office for a chat, or failing that, visit the Stoke on Trent Property Blog, where you will find many more articles like this solely on the one topic of the Property Markets in Stoke on Trent and Newcastle under Lyme