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

What will the 0.25% Interest Rate do to the Stoke on Trent Property Market?

I had an interesting chat with an Endon landlord who owns a few properties in the city. He popped his head in to my office as his wife was shopping in the area (and let’s be honest talking about the Stoke on Trent Property Market is a lot more interesting than clothes shopping!). We had never spoken before (because he uses another agent in the city to manage his Stoke on Trent properties) yet after reading my blog on the Stoke on Trent Property Market for awhile, the landlord wanted to know my thoughts on how the recent interest rate cut would affect the Stoke on Trent property market and I would also like to share these thoughts with you…… 

Well it’s been a few weeks now since interest rates were cut to 0.25% by the Bank of England as the Bank believed Brexit could lead to a materially lower path of growth for the UK, especially for the manufacturing and construction industries. You see for the country as a whole, the manufacturing and construction industries are still performing well below the pre credit crunch levels of 2008/09, so the British economy remains highly susceptible to an economic shock. This is especially important in Stoke on Trent, because even though we have had a number of local success stories in manufacturing and construction, a large number of people are employed in these sectors. In Stoke on Trent, of the 118,501 people who have a job, 16,003 are in the manufacturing industry and 9,639 in Construction meaning

13.5% of Stoke on Trent workers are employed in the Manufacturing

sector and 8.1% of Stoke on Trent workers are in Construction 

The other sector of the economy the Bank is worried about, and an equally important one to the Stoke on Trent economy, is the Financial Services industry. Financial Services in Stoke on Trent employ 3,298 people, making up 2.8% of the Stoke on Trent working population.

 

Together with a cut in interest rates, the Bank also announced an increase in the quantity of money via a new programme of Quantitative Easing to buy £70bn of Government and Private bonds. Now that won’t do much to the Stoke on Trent property market directly, but another measure also included in the recent announcement was £100bn of new funding to banks. This extra £100bn will help the High St banks pass on the base rate cut to people and businesses, meaning the banks will have lots of cheap money to lend for mortgages .. which will have a huge effect on the Stoke on Trent property market (as that £100bn would be enough to buy half a million homes in the UK). 

It will take until early in the New Year to find out the real direction of the Stoke on Trent property market and the effects of Brexit on the economy as a whole, the subsequent recent interest rate cuts and the availability of cheap mortgages. However, something bigger than Brexit and interest rates is the inherent undersupply of housing (something I have spoken about many times in my blog and the specific affect on Stoke on Trent). The severe undersupply means that Stoke on Trent property prices are likely to increase further in the medium to long term, even if there is a dip in the short term. This only confirms what every homeowner and landlord has known for decades .. investing in property is a long term project and as an investment vehicle, it will continue to outstrip other forms of investment due to the high demand for a roof over people’s heads and the low supply of new properties being built.

For more thoughts on the Stoke on Trent Property Market, please feel free to come and talk to us at either our Hanley or Newcastle office