Stoke on Trent’s private renting set to hit 22,588 households by 2021 - Is Buy to Let immoral? (Part 1)

Can we blame the 55 to 70-year-old Stoke on Trent citizens for the current housing crisis in the city?

Also known as the ‘Baby Boomer Generation’, these Stoke on Trent people were born after the end of the Second World War as the country saw a massive rise in births as they slowly recovered from the economic hardships experienced during wartime.

Throughout the 1970’s and 1980’s, they experienced (whilst in their 20’s, 30’s and 40’s) an unparalleled level of economic growth and prosperity throughout their working lifetime on the back of improved education, government subsidies, escalating property prices and technological developments, they have emerged as a successful and prosperous generation.

...Yet some have suggested these Stoke on Trent baby boomers have (and are) making too much money to the detriment of their children, creating a ‘generational economic imbalance’, where mature people benefit from house-price growth while their children are forced either to pay massive rents or pay large mortgages.

Between 2001 and today, average earnings rose by 65%,

but average Stoke on Trent house prices rose by 158.7%

The issue of housing is particularly acute with the generation called the Millennials, who are young people born between the mid 1980’s and the late 1990’s. These 18 to 30 years, moulded by the computer and internet revolution, are finding as they enter early adult life, very hard to buy a property, as these ‘greedy’ landlords are buying up all the property to rent out back to them at exorbitant rents ... it’s no wonder these Millennials are lashing out at buy to let landlords, as they are seen as the greedy, immoral, wicked people who are cashing in on a social despair.

Like all things in life, we must look to the past, to appreciate where we are now.

The three biggest influencing factors on the Stoke on Trent (and UK) property market in the later half of the 20^th Century were, firstly, the mass building of Council Housing in the 1950’s and 60’s. Secondly, for the Tory’s to sell most of those Council Houses off in the 1980’s and finally 15% interest rates in the early 1990’s which resulted in many houses being repossessed. It was these major factors that underpinned the housing crisis we have today in Stoke on Trent.

 To start with, in 1995 the USA relaxed its lending rules by rewriting the Community Reinvestment Act. This Act saw a relaxation on the Bank’s lending criteria’s as there was pressure on these banks to lend on mortgages in low wage neighbourhoods, as the viewpoint in the USA was that anyone (even someone on the minimum wage) any working class person should be able to buy a home.  Unsurprisingly, the UK followed suit in the early 2000’s, as Banks and Building Society’s relaxed their lending criteria and brought to the market 100% mortgages, even Northern Rock started lending every man and his dog 125% mortgages.

 So when we roll the clock forward to today, and we can observe those very same footloose banks from the early/mid 2000’s (that lent 125% with a just note from your Mum and a couple of breakfast cereal tokens), ironically reciting the Bank of England backed hymn-sheet of responsible-lending. On every first time buyer mortgage application, they are now looking at every line on the 20-something’s banks statements, asking if they are spending too much on socialising and holidays ... no wonder these Millennials are afraid to ask for a mortgage (as more often than not after all that – the answer is negative).

Conversely, you have unregulated Buy To Let mortgages. As long as you have a 25% deposit, have a pulse, pass a few very basic yardsticks and have a reasonable job, the banks will literally throw money at you ... I mean Virgin Money are offering 2.99% fixed for 3 years – so cheap!

So, in Part Two later in the week, I will continue this emotive article and show you some very interesting findings on why young people aren’t buying property anymore (and it’s not what you think!).

Stoke on Trent Property Market Sees An Unpredicted Autumn Boost of 15%

Well, it doesn’t seem like two minutes ago that it was Christmas – and now it’s all over! One cold December morning, after arranging the office’s Christmas cards I thought I would nip out for a quick festive coffee and mince pie at my favourite local coffee shop Tsp.  I met an old client of mine in the coffee shop and we got talking about the Stoke on Trent property market. I had just completed my research for my next blog article and I would like to share with you the parts of the conversation relating to the Stoke on Trent property market.

He asked me what my thoughts were about the last half of the year in regard to the Stoke on Trent property market and if there were any great buy to let deals around. In reply I said that, in my view, shrugging off the uncertainty of the initial post Brexit vote, I have seen an increase in supply and a rise in the number of properties selling at the lower to middle end of the market, meaning both first time buyers and buy to let landlords have been returning in the last few months – proof the market is beginning to bounce back.

So let’s look at the numbers ..

In November 2016, according to the three main property portals (Rightmove, Zoopla and OnTheMarket) there were a total of 315 properties for sale in ST1. In November 2015, there were only 275 properties for sale, a rise of 15%.

When I split it down into bedrooms (note things like building plots and part commercial/part residential etc won’t be in these figures so the numbers below wont exactly match up to those in the above paragraph).

	# Properties on the market in Nov 2015	# Properties on the market in Nov 2016	Per cent Change
5+ Bedrooms	2	6	+200%
4 Bedrooms	36	46	+28%
3 Bedrooms	99	93	-6%
2 Bedrooms	118	149	+26%
1 Bedroom	14	17	+21%

.. and when I looked at type of properties  .. it got even more interesting

Type of Property	# Properties on the market in Nov 2015	# Properties on the market in Nov 2016	Per cent Change
Detached	30	34	+13%
Semi	72	44	-39%
Terraced	96	138	+44%
Flat	30	31	+3%

As the number of ST1 properties put up for sale has risen by 15%, homeowners have become more realistic about how much their homes are worth. This increase in homeowners wanting to sell suggests there is renewed confidence in the Stoke on Trent property market and there are also signs that people are being more realistic about pricing their property.

 
As you can see, there has been a significant uplift in terraced properties, which means they are a great choice for first time buyers and landlords. So with a combination of realistic pricing and more properties on the market – both first time buyers and landlords alike might be able to pick up a few bargains! 

Stoke-on-Trent property price rises set to be more restrained in 2017 due to Brexit

While Brexit has not yet had a sizeable impact on the Stoke-on-Trent housing market, my analysis is pointing to the fact that the economic viewpoint still remains uncertain and Stoke-on-Trent property price growth is likely to be more subdued in 2017 - although that isn’t a bad thing so let me explain.

Since the summer, apart from a little wobble of uncertainty a few weeks after the Referendum vote, property values (and the economy), on the whole has outperformed what most people were anticipating. In fact, when I looked at the property prices for our Stoke-on-Trent City Council area, these were the results...

 October 2016              - drop of 0.11%

September 2016         - drop of 0.88%
August 2016                - rise of 0.15%
July 2016                     - drop of 0.13%
June 2016                    - rise of 3.79%

The UK property market continues to perform robustly (because we can’t just look at Stoke-on-Trent as if in its own little bubble) with annual price growth set to end this year at 6.91% and most West Midlands region property market at 6.2%.

Talking to fellow agents in London, the significant tidal wave of growth seen from 2013 through to 2015 in the capital has subdued over the last six months. However, as that central London house price wave has started to ripple out, agents are starting to see stronger property growth values in East Anglia and the South East regions outside of London, than what is being seen within the M25. So, fellow Stoke-on-Trent landlords and homeowners, is this the time to get your surfboards ready for the London wave?

Well, we in Stoke-on-Trent haven’t really been affected by what is happening in the central London property mega bubble (i.e. Kensington, Chelsea, Marylebone, Mayfair etc.). The property market locally is more driven by sentiment, especially the ‘C’ word ... confidence. The main forces for a weaker Stoke-on-Trent Property market relate to economic uncertainty surrounding the Brexit process, which I believe will impact unhelpfully on consumer confidence in the run up to and just after the serving of the Section 50 Notice by the end of Q1 2017.

In addition, the influence of reforms to the taxation of landlords is expected to result in a reduced demand from buy to let landlords, which will limit upward pressure on property values. However, on the other side of the coin, demand from tenants has been strong, but this has been counterbalanced by a strong supply of rental properties. In my opinion, there is a slight risk of rents not growing as much in 2017 as they have in 2016, but by 2018 they will rise again to counteract Philip Hammond’s changes to tenant fees.

The broader Stoke-on-Trent rental market looks relatively positive with modest rental growth expected and rents might rise further if landlords begin to sell properties in an effort to offset to the impact of tax rises.

So what do I predict will happen to the Stoke-on-Trent housing market in 2017? In Stoke-on-Trent, I believe property values are expected to rise by 1.5% in 2017, compared to a rise of 3.8% this year, then picking up again with a rise of 2.4% in 2018, 3.1% in 2019, 4.6% 2020 and 6.1% in 2021.

But these predictions do not take into account any effect of a possible snap General Election or further referendum on ratifying any Brexit deal (if that comes to pass in the future).

Stoke on Trent OAP’s sitting on £371.7 m of Property

Stoke on Trent people aged over 65 currently hold just about the same housing wealth in their homes than the annual GDP of the whole of the Orkney Islands … and this is a problem for everyone in Stoke on Trent!

Many retiree’s want to move but cannot, as there is a shortage of such homes for mature people to downsize into.  Due to the shortage, bungalows command a 10% to 20% premium per square foot over houses of the same size with stairs. To add to the woes, in 2014, just 1% of new builds in the UK were bungalows, according to the National House Building Council - down from 7% in 1996.

My research has found that there are 2,584 households in Stoke on Trent owned outright (i.e. no mortgage) by over 65 year olds.  Taking into account the average value of a property in Stoke on Trent, this means £371.7 million of equity is locked up in these Stoke on Trent homes, as you can see this figure is not much less than the GDP of the whole of the Orkney Islands being £385 million of

A recent survey by YouGov, found that 36% of people aged over 65 in the UK are looking to downsize into a smaller home.  However, the Government seems to focus all its attention on first-time buyers with strategies such as Starter Homes to ensure the youngsters of the UK don’t become permanent members of ‘Generation Rent’.  Conversely, this overlooks the chronic under-supply of appropriate retirement housing essential to the needs of the Stoke on Trent’s rapidly ageing population. Regrettably, the Stoke on Trent’s housing stock is woefully unprepared for this demographic shift to the 'stretched middle age’, and this has created a new 'Generation Trapped’ dilemma where older people cannot move.

Some OAP’s who are finding it difficult to live on their own, are unable to leave their bungalow because of a lack of sheltered housing and ‘affordable’ care home places.  So, older retirees can't leave bungalows, younger retirees can't buy bungalows and younger people can't buy family houses.

Interestingly, adding insult to injury, the problem will only get worse, as in the 50 year old to 64 year old homeownership age range there are an additional 2,088 Stoke on Trent households that are mortgage free and a further 1,548 Stoke on Trent households who will be completing their mortgage responsibility.  With Government projections showing the proportion of over 65’s will rise by over a third from the current 17.7% to 24.3% of the population in the next 20 years ... this can only add greater pressure to the Stoke on Trent Property market.

House prices have rocketed over the last 40 years because the supply of property has not kept up with demand. With migration, people living longer and high divorce rates (meaning one family becomes two) we need, as a Country, 240,000 properties to be built a year to just stand still.  In the 1990’s and early 2000’s, the Country was building on average 180,000 to 190,000 households a year, but since the Credit Crunch (2009), that has only been between 130,000 and 145,000 households a year.

The solution …. release more land for starter homes, bungalows and sheltered accommodation because land prices are killing the housing market as the large firms dominating the construction industry are more likely to focus on traditional houses and apartments.  My opinion – until the Government change the planning rules and allow more land to be built on – Bungalows could be a decent bet for future investment as they continue to attract ever growing premiums?

Stoke-on-Trent Property Market – Q4 Update

Well, wasn’t 2016 eventful. The ups and downs of Brexit, the Queen’s 90^th, Andy Murray winning Wimbledon and becoming world no1, Trump, Bake Off to Channel 4 and something close to the hearts of every buy to let landlord and homeowner in Stoke-on-Trent ... the Stoke-on-Trent property market.

So, let’s look at the headlines for the Stoke-on-Trent property market...

In the last month, Stoke-on-Trent property values dropped by 0.1%, leaving them, year on year 6.2% higher, whilst interestingly, Stoke-on-Trent asking prices are down 1.1% month on month. All three statistics go to show the Stoke-on-Trent property market has recovered well after the summer lull, which was worsened by the uncertainty surrounding the EU vote back in June. Irrespective of all the issues, the average value of a Stoke-on-Trent home now stands at £143,100.

Generally, Stoke-on-Trent asking prices continue to hold up well, as asking prices are 4.9% higher year on year. At this time of year, asking prices tend to drop on the run up to Christmas and locally, they have dropped by 1.1% this month (November 2016), although this compares well with last year’s drop in Stoke-on-Trent asking prices, as we also saw asking prices drop by 1.1% in November 2015.

Now it’s true to say, after chatting with fellow property professionals in Stoke-on-Trent, all of us have seen the number of property sales fall slightly, suggesting a slowing market, but it is very early days and it could be the time of year. Also, the numbers are limited, so it’s interesting to take note from a recent survey by the Royal Institution of Chartered Surveyors, stating new buyer enquiries and new instructions are falling at the same rate, suggesting that there will not be a downward pressure on property values.

Looking at the figures for the UK (as we can’t just look at Stoke-on-Trent in isolation), property values are generally rising slower than a few years ago, but on a positive note, there's still growth across the UK. You see, slowing property value growth isn't solely Brexit related, but after a number years of double digit rises in property values, affordability has weakened and cooling price growth is widely seen to be a natural correction of the market.

On the other hand, interest rates being at a record low of 0.25% are helping the property market. The cut in interest rates in the late summer was the medicine for the post-Brexit worry and will, as a consequence, ensure that the UK economy continues to be underpinned by buoyant property prices.

 So, what will happen in 2017 in the Stoke-on-Trent property market?

Some say until we know what type of exit the UK will make from the EU it is hard to evaluate the outcome. Although, I believe, the whole Brexit issue is a sideshow to the main issue in the UK (and Stoke-on-Trent) housing market as a whole. As I have mentioned time and time again over the last few months, the biggest issue is demand outstripping supply when it comes to the number of households required to house us all. Stoke-on-Trent has an ever-growing population: with immigration (we still have at least two years of free movement from EU members into the UK), people living longer and the fact we need thousands of additional households as the country has nearly 115,000 divorces a year (where one household becomes two households).  These are interesting times ahead! 

Buy to Let property in Stoke-on-Trent

We don't usually add properties we are marketing on the Blog but we have one in Tunstall that is a great little investment property and is in decent condition with a great tenant already in place and would give you c.8% gross yield with little effort.

 

https://www.martinco.com/property/for-sale/231186

 

The tenant seems to be settled but if they did leave then there is further scope to modernise the property to add value.  Give us a call if you want to book a viewing

Stoke on Trent Semi Detached House Prices rise by 219% in 20 years

The semi-detached house with its bay windows and net curtains has long been ridiculed as an emblem of safe, lacklustre and desperately uncool suburban life; the homes of the likes of Hyacinth Bucket in Keeping up Appearances and more latterly Alan Partridge – but they could have the last laugh - having enjoyed the highest price growth of any property type in Stoke on Trent, up by an average 219% increase in the last twenty years.
The semi can now laugh in the face of its posher detached counterpart, which saw a rise of only 200% in the same 20-year period. Looking at smaller properties, flats/apartments only rose 131%, whilst terraced houses did better at 207% (although they were starting from a lower base and demand from buy to let landlords has had a big part in driving the values on that type of house (i.e. the price a buy to let landlord is prepared to pay is driven by the rent the landlord can achieve).

In 1996 the average value of a Stoke on Trent semi stood at £37,700,

today it stands at £120,000

Such is the attractiveness of semis, which are cheaper than detached houses but have most of the same benefits for families. Semi-detached houses were built in their hundreds of thousands by the Victorians and Edwardians between the wars and through to the present day. Interestingly in the late 19^th Century and early 20^th century – they often weren’t referred to as semi-detached – but as villas!
So whilst Europeans live on top of each other in apartments us British chose, in the late Victorian and early Edwardian times, suburban comfort, being near … but not too near, the neighbours! I once heard someone say the semi-detached house was a peculiar crossbreed that doesn’t stand on its own — it is inseparable from its neighbour — yet somehow still embodies a dream of suburban independence.

Nearly one in two houses in Stoke on Trent is a semi-detached house

 There are 53,317 semi-detached properties in Stoke on Trent and they represent 45.69% of all the households in Stoke on Trent. Stoke on Trent has such a mix of semi-detached properties with the older classic bay fronted semis to more modern ones built in the last couple of decades. Especially with the older ones, the semi offered a hall to provided separation between the reception rooms and privacy for their occupants. Also the downstairs offered larger rooms to accommodate dining tables, whilst upstairs, bedrooms were smaller, yet cosy.

However, probably the most overlooked aspect of popularity for semis is the garden. The front garden, designed to separate the house from the world, and the back garden designed for private relaxation. The semi in the suburbs was relaxing, well presented, plumbed and enhanced by a garden so that when a window was opened the air had a chance of being genuinely fresh… and it’s for all those reasons why 775 semi-detached houses have been sold in Stoke on Trent since March 2016 alone.  Still as popular today as they were with the Victorians all those years ago – some things just stand the test of time!

Another possible investment property

I have just got back to the office from a morning of appointments and managed to get caught in the rain again.  Whilst I dry off I thought I would have a look at what has come to the market recently that would make a good investment/rental property.  Have a look at this one!

 http://www.rightmove.co.uk/property-for-sale/property-54875434.html

 

 

 

 

 

Anyone who speaks to us will know that there is a real shortage of good quality 3 bed rental property and if the pictures do it justice then we always have tenants looking for properties like this.  Outside needs a bit of a tidy but rent would be in the region of £575 -£595 giving a gross yield of around 6-7%.  It is the type of property where void periods are minimised and as the local economy picks up it should increase in value.

Today's investment property

Here’s one that caught my eye because we have just rented one out just down the road.  It’s a bit dated inside and needs modernising but is larger than the one we rented recently and once done should get a rent of £525 - £550pcm (maybe even more depending on the quality of the finish).

http://www.rightmove.co.uk/property-for-sale/property-60645425.html

As always with good quality 3 bed semi’s we can find tenants relatively quickly so it wouldn’t sit empty for long.  This would make a great longer term investment and whilst the yield may be a more modest 5-6% to start with over time this is the type of property in demand and rents are likely to go up and you should see a decent level of capital growth