A Stoke on Trent homeowner emailed me last
week, following my article posted in the Stoke on Trent Property Blog about the
change in attitude to renting by the youngsters of Stoke on Trent and how they
thought it was too expensive for first time buyers to buy in Stoke on Trent. There can be no doubt that buy to let
landlords have played their part in driving up property values in Stoke on
Trent (and the UK) and from that made housing a lot less affordable for the 20
and 30 somethings of Stoke on Trent.
In the email, they said they
thought the plight of the first-time buyers in Stoke on Trent was like a novice
tennis player, playing tennis with Andy Murray. If you played him once you will
unquestionably lose and if you were to play him 100 times you would lose 100
times. That is what they thought it was like for all the 20 something’s first time
buyers of Stoke on Trent going against all the buy to let landlords.
They went on and asked if
the Bank of England (BoE) should be tasked to control house price inflation in
the same way as the BoE controls inflation. The BoE has a target for the annual inflation
rate of the Consumer Prices Index of 2%, whilst it is also required to support
the Government’s economic policy, including its objectives for growth and
employment. So, should BoE be charged with
containing buy to let housing market, by possibly changing the rules on the
loan-to-value (LTV) ratio’s?
So, let’s look at how affordable Stoke on
Trent is? The best measure of the
affordability of housing is the ratio of Stoke on Trent Property Prices to Stoke
on Trent Average Wages, (the higher the ratio, the less affordable properties
are). (i.e. looking at the table below,
for example in 2014, the average value of a Stoke on Trent property was 4.07
times higher than the average annual wage in Stoke on Trent.)
|
1998
|
2000
|
2002
|
2004
|
2006
|
2008
|
2010
|
2012
|
2014
|
2016 (EST)
|
|
2.31
|
2.32
|
2.36
|
3.79
|
4.46
|
4.16
|
3.63
|
3.73
|
4.07
|
4.15
|
This deterioration in affordability of
property in Stoke on Trent over the last couple of years has been one of the reasons why the
younger generation is deciding more and more to rent instead of buy their own
house.
... but it’s
not the only reason.
A quick look
on Money Supermarket today found 169 lenders prepared to offer 75% LTV Buy to
let Mortgages and none at 85% LTV. Lenders
have self-imposed a high level of entry for buy to let landlords (i.e. putting
down at least 25% of the purchase price in cash). The BoE don’t need to meddle there! Also, the Tories have certainly done lots to level the playing
field in favour of first time buyers. For nearly a year now, Landlords have had to
pay an additional 3% in stamp duty on any buy to let purchase and over the
coming four years, tax rules on landlord’s claiming mortgage interest relief
will affect their pocket. It doesn’t help that the local Authority sold
off council houses in the Thatcher years and so for many on low incomes or with
little capital, owning a home has simply never been an option (today or in the
past).
It’s easy to look at the headlines and blame
landlords. First time buyers have been
able to access 95% LTV mortgages since 2010, meaning even today, a first-time
buyer could purchase a 3 bed semi in Stoke on Trent for around £120,000 and
only need to find £6,000 deposit. Yes, a
lot of money, but first time buyers need to decide what is important to them. Either save up for a couple of years to save the
deposit and go without two annual foreign holidays, the full Satellite or Cable
TV package with Sports and Movies costing three figures a month, the latest
mobile phone and out socialising ... or not as the case maybe?
I
think we as a Country have changed ... renting is returning to be the norm.
So my opinion is, landlords have it tough.
Let’s not blame them for the ‘perceived’
woes of the nation ... because to be frank … we haven’t always been a country
of homeowners. Roll the clock back to 1964,
and nationally, 30% of people rented their home from a private landlord – today
– its only 15.3% nationally.
If you are an existing
landlord or someone thinking of become a first-time landlord looking for advice
and opinion and what (or what
not to buy in Stoke on Trent), one source of information is the Stoke on Trent
Property Blog
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