Stoke-on-Trent Home Owners Are Only Moving Every 18 Years (Part 1)

As I mentioned in a previous article, the average house price in Stoke-on-Trent is 4.15 times the average annual Stoke-on-Trent salary. This is more or less the same as the last peak of 2008, when the ratio was 4.16. A number of City commentators anticipated that in the ambiguity that trailed the Brexit vote, UK (and hence Stoke-on-Trent) property prices might drop like a stone. The point is - they haven’t.

Now it’s true the market for Stoke-on-Trent’s swankiest and poshest properties looks a little fragile (although they are selling if they are realistically priced) and overall, Stoke-on-Trent property price growth has slowed, but the lower to middle Stoke-on-Trent property market appears to be quite strong.

Scratch under the surface though, and a different long-term picture is emerging away from what is happening to property prices. Stoke-on-Trent people are moving home less often than they once did. Data from the Office of National Statistics shows that the number of properties sold in 2016 is again much lower than it was in the Noughties. My statistics show…

The Total Number of Property Sales Per Annum in the Stoke-on-Trent City Council Area Since 1995
1995	1996	1997	1998	1999	2000	2001	2002	2003	2004	2005
3,620	3,831	4,093	3,698	3,980	3,840	4,534	5,901	6,532	6,624	5,488
2006	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016
6,336	6,231	3,103	2,254	2,282	2,245	2,287	2,749	3,324	3,353	3,600

 

 

Even though we are not anywhere near the post credit crunch (2008 and 2009) low levels of property sales, the torpor of the Stoke-on-Trent housing market following the 2016 Brexit vote has seen the number of property sales in Stoke-on-Trent and the surrounding local authority area level off to what appears to be the start of a new long term trend (compared the Noughties).

Interestingly, it was the 1980’s that saw the highest levels of people moving home. Nationally, everyone was moving on average every decade. Even though it was during the Labour administration of the late 1970’s where the right to buy one’s council house started, it was the Housing Act of 1980 that that really got council tenants moving, as Thatcher’s Tory government financially encouraged council tenants to buy their council-rented homes - for which countless then sold them on for a profit and moved elsewhere. The housing market was awash with money as banks were allowed to offer mortgages as well as the existing building societies, meaning it made it simpler for Brits to borrow even more money on mortgages and to climb up the housing ladder.

But coming back to today, looking at the property sales figures in the Stoke-on-Trent area since 2010/11, a new trend of number of property sales appears to have started. Interestingly, this has been mirrored nationally. The reasons behind this are complex, but a good place to start is the growth rate of real UK household disposable income, which has fallen from 5.01% a year in 2000 to 1.68% in 2016. Also, things have deteriorated since the country voted to leave the EU as consumer price inflation has risen to 2.7% per annum, meaning inflation has eaten away at the real value of wages (as they have only grown by 1.1% in the same time frame).

With meagre real income growth, it has become more difficult for homeowners to accumulate the savings needed to climb up the housing ladder as the level of saving has also dropped from 4.26% of household income to -1.11% (i.e. people are eating into their savings).

Next week I will be discussing how these (and other issues) has meant the level of Stoke-on-Trent people moving home has slumped to once every 18 years.

Stoke-on-Trent Wages Outstrip House Price Growth by 14.51% since 2007

I recently read a report by the Yorkshire Building Society that 54% of the country has seen wages (salaries) rise faster than property prices in the last 10 years. The report said that in the Midlands and North, salaries had outperformed property prices since 2007, whilst in other parts of the UK, especially in the South, the opposite has happened and property prices have outperformed salaries quite noticeably.
As regular readers of my blog know, I always like to find out what has actually happened locally in Stoke-on-Trent. To talk of North and South is not specific enough for me. Therefore, to start, I looked at what has happened to salaries locally since 2007. Looking at the Office of National Statistics (ONS) data for Stoke-on-Trent City Council, some interesting figures came out...

 

	Stoke-on-Trent	West Midlands	Nationally
2007	£19,900	£22,417	£23,920
2008	£20,452	£23,390	£24,960
2009	£20,862	£23,754	£25,506
2010	£21,882	£24,398	£26,088
2011	£22,100	£24,190	£26,010
2012	£21,876	£24,404	£26,432
2013	£22,615	£25,116	£26,931
2014	£21,939	£25,022	£27,097
2015	£22,594	£25,589	£27,508
2016	£23,171	£26,406	£28,132

 Salaries in Stoke-on-Trent have risen by 16.44% since 2007 (although it’s been a bit of a rollercoaster ride to get there!) - interesting when you compare that with what has happened to salaries regionally (an increase of 17.79%) and nationally, an increase of 17.61%.

Next, I needed to find what had happened to property prices locally over the same time frame of 2007 and today. Net property values in Stoke-on-Trent are 1.93% higher than they were in late 2007 (not forgetting they did dip in 2008 and 2009). Therefore...

Wages in the Stoke-on-Trent area have increased at a higher rate than property values to the tune of 14.51% ... meaning, Stoke-on-Trent is in line with the regional trend

Moving from a 2 bed Stoke on Trent Property to a 4 bed will cost you £779 pm

Moving to a bigger home is something Stoke on Trent people with growing young families aspire to. Many people in two bedroom homes move to a three-bedroom home and some even make the jump to a four-bed home. Bigger homes, especially three-bed Stoke on Trent homes are much in demand and it can be a costly move.

If you live in Stoke on Trent in a two-bedroom property and wish to move to a four-bedroom house in Stoke on Trent, you would need to spend an additional £197,265 (or £779.20 pm in mortgage payments (based on the UK Bank average standard variable rate)). However, going straight to a four bed from a two-bed home is quite rare as most people jump from a two to three-bedroom home, then later in life, from a three to four-bedroom home.

So, after being asked my thoughts on moving home in Stoke on Trent by a friend recently, please find my analysis of the local property market and then some thoughts. To start with, let us see what the average property price is for a Stoke on Trent property by the number of bedrooms it has.

Average Property Price in Stoke on Trent by Bedroom
1 bed	2 bed	3 bed	4 bed	5 bed
£71,668	£94,010	£140,772	£291,275	£336,212

I then decided to calculate what it would cost to make the jump upmarket from one bedroom to two bedrooms, two to three bedrooms etc, etc, both in actual money and in mortgage payments (using the current standard variable rate of UK Banks of 4.74% - so the mortgage cost could be higher or lower depending on the mortgage taken).

 

	Stoke on Trent
	Price Difference to make the move	Cost per month to move up market (Mortgage)
1 bed to 2 bed	£22,341	£88.25
2 bed to 3 bed	£46,762	£184.71
2 bed to 4 bed	£197,265	£779.20
3 bed to 4 bed	£150,502	£594.48
4 bed to 5 bed	£44,938	£177.50

 

There are some interesting jumps in costs when moving upmarket as a Stoke on Trent buyer. The cost of moving from one to two beds, and two to three beds is relatively reasonable, whilst the jump from three to four beds in Stoke on Trent is quite high and therefore financially prohibitive for most families. This helps provide a partial explanation as to why some four-bed properties are currently taking slightly longer to sell.

As an aside, there is a lesson here for all my blog readers. You can quite clearly see why the larger 4 and 5 bed properties don’t offer the best returns for buy to let. Simply put the monthly finance costs and rents achieved don’t match up so well (i.e. a mortgage for a 4 bed home in Stoke on Trent would cost you 106.91% compared to a 3 bed mortgage, but the jump in rent would be a lot less than that). I don’t wish to be dismissive about the solidity of investing in larger properties because it does depend on your circumstances. Four bedroom properties sometimes offer other advantages. Pick up the phone if you want to know what they are in more detail.

A further look at the stock of properties in Stoke on Trent is revealing.

Housing Stock in Stoke on Trent by Bedrooms
1 bed	2 bed	3 bed	4 bed	5 bed
2.28%	43.15%	39.28%	13.21%	2.07%

 

The most active purchasers are 20 and 30 something home-owning parents with growing families. Many look to more modern developments for the perfect balance of access to decent primary schools, commutability and lifestyle. For landlords looking to buy within Stoke on Trent, they face stiff competition from these 20/30 something families, making the three bedroom Stoke on Trent home massively in demand, often attracting spirited offers and selling within weeks of listing. This mix of homebuyers and landlords is a pressure point in the Stoke on Trent property market.  Again, if you are a landlord, call me and I will show you areas with decent returns where you aren’t in so much competition with young Stoke on Trent family homebuyers.

Yet, the cost of an additional bedroom can be too much for some Stoke on Trent buyers. It is quite challenging moving home the first time, but to then find you are priced out on the next move up the ladder can be quite disconcerting, with families often having to move to a different part of town to get the bigger home they need.

 Nevertheless, that’s the position many homeowners find themselves in with the cost of the additional bedroom being too much to bear. To those buying their home for the first time, all I suggest is they not only consider the mortgage payments and other costs of their first home, but also do their homework into their next rung up the Stoke on Trent property ladder. Thinking about it now will keep you ahead of the game in the future; as your number of bedrooms, family property needs and lifestyle wants change.

 ..and Stoke on Trent landlords – well these changes in the way people live also mean there are opportunities to be had in the Stoke on Trent rental market. Many Stoke on Trent landlords are starting to pick my brain on this, so if you don’t want to miss out – drop me a line.

 

A Superb Investment Property in Fegg Hayes, ST6

                


As an Estate Agent & Letting Agent in Stoke on Trent, I’m often asked “why do you advertise other agents properties as investments?”  My answer is quite simple, “I too am a Landlord with a property portfolio and am quite happy to share my knowledge and experience!”
So, while out on my travels, earlier this week, I came across this 3 Bedroom Property in Fegg Hayes.  It appears to have everything that it should have in terms of a family home,  3 Bedrooms (1 en-suite), Breakfast Kitchen and an enclosed Rear Garden,  all for an asking price of OIRO £124,950.
In my experience, this property could achieve a monthly income of £625pcm, providing an annual yield of 6%, which is a reasonable return on your money.  Check out the link below and decide for yourself………

http://www.rightmove.co.uk/property-for-sale/property-51724335.html