69.4% of Stoke-on-Trent Voters voted to leave the EU – What now for the 72,123 local Landlords and Homeowners?

It’s 5.50am as I start to type this article and David Dimbleby has just announced the UK will be leaving the EU as the final votes are counted. As most of the polls suggested a Remain Vote, it came as a surprise to most people, including the City. The Pound has dropped 6% this morning after the City Whiz kids got their predictions wrong and MP’s from the Remain camp are using words like “challenging times ahead”.

 .. and now the vote has been made .. what next for the Stoke property market and in particular for the Landlords of the 14,176 properties in the private rental sector

The Chancellor, during the campaign, suggested property prices would drop by 18%. Using Treasury estimates, their method of calculating this was tenuous at best, but focused around the abrupt and hasty increase in UK interest rates, which in turn would raise the cost of mortgages, and therefore lower demand for property, causing a drop in property prices.… and I would say, yes .. that will probably happen.

 Stoke Property Values

 Stoke property values will probably drop in the coming 12 to 18 months – but by 18% - I am sorry I find that a little pessimistic and believe that figure was rhetoric to get homeowners and landlords to vote in a particular way. But the UK property market is quite a monster.

And whilst property prices did drop nationally by 18.7% between the peak of 2007 and bottom of the market in 2009, when one compares property values today in the country, compared to that all-time high of 2007, (the period before the financial crisis of the Credit Crunch of 2008/9) .. they are still up 10.14% higher.

 Another Credit Crunch?

 And so, notwithstanding the Credit Crunch, the worst global economic outlook since the 1930s and the recession it brought us, a matter of a few years later, the Government were panicking in 2012/13/14 that the housing market was a runaway train.

Now the same Credit Crunch doom-mongers and Sooth-Sayers that predicted soup kitchens in 2008/9 are predicting Brexit meltdown. Bad news sells newspapers. Stock markets may rise, stock markets may fall, yet the British public continued to buy property in 2009/10 and beyond. Aspiring first time buyers and buy to let landlords dusted themselves down, took a deep breath and carried on buying… because us Brit’s love our Bricks and Mortar .. we need a roof over our head.

 However, as mentioned previously, if the value of the pound drops, in the past UK Interest Rates have risen to reverse that drop. However, whilst a cheaper pound will make your pint of Sangria a little more expensive on your Spanish holiday this year and make your brand new BMW pricer .. it will make British export cheaper! Which is great for the economy.

Interest rates

… and what of interest rates? Since 2009, interest rates have been at 0.5% and lots of people have become accustomed to those sorts of levels. So what if interest rates rise .. end of the world? Interest rates in the 1986/88 property boom were on average 9.25%, the 1990’s they were on average around 6.5% and uber-boom years (when UK property values were rising by 20% a year for three or four straight years across the UK) .. 4.5%. Many of you reading this who are in their 50’s and older will remember interest rates at 15%.

 But I suspect interest rates won’t rise that much anyway, as Mark Carney (Governor of the Bank Of England) knows, raising interest rates causes deflation – which is the last thing the British economy needs at the moment. In fact they have been printing money (aka Quantitative Easing) for the last few years (which causes inflation) to the tune of £375bn a month. A bit of inflation because the pound has slipped on the money markets (not too much mind you) might be a good thing?

 .. because whilst property values might drop in the country, they will bounce back. It’s only a paper loss.. because it only becomes real if you sell. And if you have to sell, again as most people move up market when they sell, whilst your property might have dropped by 5% or 10%, the one you want to buy would have dropped by the same 5% to 10% .. and here is the best part – (and work your sums out) you would actually be better off because the more expensive property you would be purchasing would have come down in value (in actual pound notes) more than the one you are selling.

The Stoke-on-Trent landlords of the 14,176 Stoke buy to let properties have nothing to fear nor do the tenants living in their properties.

 Buy to let is a long term investment. I think there might even be some buy to let bargains in the coming months as some people, irrespective of evidence, panic.  Even if we pull up the drawbridge at Dover and immigration stopped today, the British population will still increase at a rate that will exceed the current property building level. Britain is building 139,600 properties a year, but needs according to the eminent ‘Barker Review of Housing Supply Report’, the country needs to build about 250,000 properties a year to even stand still, and as the the birth rate is increasing, the population is living longer and just under a quarter of all UK households now are occupied by a single person demand is only going up whilst supply is stifled. Greater demand than supply equals higher prices. That is definitely a fact.

So, what will happen next?

Well, there are many challenges ahead. The country has spoken and we are now in unchartered territory – but we have been through a couple of World Wars, an Oil Crisis, Black Monday, Black Wednesday, 15% interest rates and a Credit Crunch … and we survived!

And the value of your Stoke-on-Trent  property? It might have a short term wobble… but in the long term -it’s safe as houses regardless.

 

What does 2016 have in store for the Stoke on Trent Property Market?

Stoke on Trent house prices up or Stoke on Trent house prices down? ... and if so, by how much? Those of you who read the Stoke on Trent Property Blog will know I am not the sort of person who pulls punches nor someone who ever fails to give a forthright and straight talking opinion – so here are my thoughts for the 72,123 Stoke on Trent homeowners and landlords.

The average Stoke on Trent property is 5.5% higher today than it was a year ago, which doesn’t sound a lot, but when you consider inflation is currently running at -0.1% (ie consumer/retail prices are dropping) and average salary growth is only around 2.5% pa, this is bad news for first time buyers as property affordability continues to decrease (although I was reading in The Times the other day that wage inflation (ie salary growth) is showing signs of weakening).

Some commentators have said the higher stamp duty taxes announced a few weeks ago in the Autumn Statement for buy to let landlords, concerns over first time buyer affordability and the outlook of UK interest rate rises in 2016 will really dampen the property market. I hope you all read my previous article about what the new stamp duty rule changes would REALLY mean for Stoke on Trent landlords in my blog, but I believe the real issue in the Stoke on Trent property market is the shortage of property to buy, as people either worry there will be no suitable house to move to, or cannot afford to upgrade. However, on the supply side, Mr Osborne said in his Autumn Statement that he will change the planning laws to ensure the government meets the pledge made at the General Election (back in May) of 200,000 new homes a year.  All I can say is .. good luck George hitting those numbers!

Why? Because houses take years to build .. not months .. so George and his fabled house building aside .... where does that leave us in Stoke on Trent in 2016?

Well, talking of supply ... whilst Mr Osborne builds his properties (and let’s be honest - a week doesn’t go by without him being filmed on a building site with a high viz jacket and hard hat building a house here and there!), let us look at the shortage of properties for sale. Back in October 2011, 2,333 properties were for sale in Stoke on Trent .. today that figure is 1,194. On the face of it, this means there is less choice for Stoke on Trent buyers – but it also means with a restricted supply of properties for sale .. it keeps property prices high for Stoke on Trent house sellers.

Everything isn’t all doom and gloom though ... again back in October 2011, the average property in Stoke on Trent took 138 days to find a buyer .. latest figures state this has dropped to 97 days .. a drop of 30% in how long it takes to find a buyer. However, when you delve even deeper, the best performing type of property today in Stoke on Trent is the 1 bed, which only takes 81 days to find a buyer (on average) compared to the 4 bed, which takes 112 days. It just goes to show, even though the average has dropped since 2011, how varied that change has been! 

So, back to the question everyone is asking .... What will happen to property values in Stoke on Trent in 2016?  I am going to suggest they will rise between 4% and 5% ... nothing out of the ordinary, but unless something cataclysmic happens in the world, 2016 will be like 2015!

Stoke on Trent Landlords could be fined £615,000 per year

“Who would want to move to Stoke on Trent in weather like this?”, was what one landlord said to me as we shook hands outside his property, the other afternoon. It was windy, cold, it had been raining most of the day and it was the last appointment of the day at 5.45pm. I will admit, as I had been out of the office all day, I was looking forward to getting home, putting the fire on, and watching telly with a big mug of tea.. but this landlord lived in neighbouring Stafford and this was the earliest he could do. 

It turned out he had been self-managing the property himself over the last few years, but was worried with all the new legislation that had been introduced recently. He was particularly concerned about the up and coming ‘Right to Rent’ legislation, so as his tenant had handed in their notice recently, on this new tenancy he called us for our opinion.

For those Stoke on Trent landlords that don’t know, landlords will need to check the immigration status of any new tenants moving into properties from February 2016 or face a £3,000 fine. It is called the 'Right to Rent' rules. However, tenants should also be aware that as well as traditional landlords, tenants who sub let rooms and homeowners who take in lodgers, must also check the right of prospective tenants to reside in the UK.

Our landlord from Stafford wanted to know how much of a real issue was ‘Right to Rent’ in Stoke on Trent. I was able to tell him, the last available figures (from a couple of years ago) show that 205 people (whom were registered as Non-UK Born Short-term Residents) moved into private rented accommodation in the Stoke on Trent City Council area in one year alone. If all of those people weren’t supposed to be in the UK, that would be a fine of £615,000 to the landlords of the City.

It doesn’t sound a lot when you think there are 270,726 residents in Stoke on Trent City Council area, and of those, 249,591 people (or 92.19%) were born in the UK. But Stoke on Trent is a cosmopolitan city as the country of birth of the residents in the Stoke on Trent City Council area can be split down as follows:

• UK                                                                          92.19%
• Ireland                                                                 0.22%
• Europe                                                                                 2.05%
• Africa                                                                      1.05%
• Middle East and Asia                                        4.07%
• Americas and Caribbean                                 0.28%
• Australia and Pacific region                            0.12% 
   

However, it must also be recognised that landlords, by checking up on tenants, could potentially be accused of discrimination under the Equality Act. This is a real minefield for landlords, especially when you consider that not all of the 5,542 Europeans in the area necessarily have the right to live in the UK either.  

In a nutshell, Stoke on Trent landlords will need to check and retain copies of certain documents that show a potential tenant has the right to live in the UK. These include ....

• UK Passport
• EEA Passport/Identity card
• Travel document or Permanent Residence Card showing indefinite leave to remain
• Paperwork from Home Office stating their Immigration status
• Certificate of registration or naturalisation as a British citizen.
   

I hope the new law will target dishonest landlords who repeatedly fail to carry out Right to Rent checks by making it a criminal offence. This means they could face imprisonment for failing to check on their tenants. That is why more and more landlords are asking agents to manage their properties, so they can stay the right side of the law.

So what did our landlord do?

Well after our chat, he asked us to find a tenant and manage the property for him - he had been reading the Stoke on Trent Property Blog for a while and because of the knowledge we impart to the landlords of Stoke on Trent, we obviously know what we are talking about.  Even better news for him, even though this would cost him agency fees, I was able to get him an additional £50 per month for his property (when we found him a tenant one week later). Now, together with the peace of mind we will keep him the right side of the law and put a stop to midnight phone calls complaining about dripping taps, it was a win-win situation for everyone.

Will the young people of Stoke-on-Trent ever own their own home?

I had the most interesting chat with a mature couple (in their early/mid 50’s) from Light Oaks the other day, whilst viewing one of our rental properties. The property wasn’t for them, but their son, who wanted a second viewing with his parents to get the parental blessing. Now I know that isn’t the norm, but in this case the parents were going to act as guarantor. We got chatting about the Stoke-on-Trent property market and how they had bought their first property in the city just after they got married in the late 1980’s when they were in their early/mid 20’s. Anyway, we got chatting about how the youngsters of the UK seem to rent more than buy nowadays and from that the conversation covered a number of similar topics. I want to share the highlights of that conversation with you today.

Their son, like many 20 to 30 year olds in Stoke-on-Trent, desperately wants to own his own property and the parents said he had read in the Telegraph recently, when you compare house prices to earnings, the current 20 to 30 something’s generation have to spend more of their salary in mortgage payments than any previous generation. The demand for private rental sector accommodation in Stoke-on-Trent is huge. There are in fact 16,020 private rental properties in Stoke-on-Trent at the last count, impressive when you consider there are 19,838 council houses in the city. However, let us not forget 72,123 properties are owner occupied (36,648 with a mortgage).

Let us all be honest, private renting doesn’t have the stigma it had a few decades ago and it might surprise people that even though us Brit’s class ourselves as a nation of homeowners, roll the clock back 100 years and over 75% of people rented their own home (and it was all from private landlords as council housing only started to come in with the ‘homes for hero’s’ after the first World War). It might also surprise you to learn that at the time of the 1971 census, still more people rented than owned their own home.

Looking at the affordability issue, I have proved time and time again, it is in fact cheaper to buy a property than rent, when one looks at starter homes for first time buyers. 95% mortgages have been available to first time buyers for over four years and whilst you could certainly find better properties in better condition in better areas, terraced houses can be bought for as little as the late £30,000’s in of Stoke-on-Trent (meaning a modest deposit of £1,900 would be required).

When it came to affordability, I was able to tell them that when they bought their first house in Stoke-on-Trent in 1988, the ratio of house prices to salary was 5.34 to 1 in Stoke-on-Trent ... and here was the surprise for both of us, today’s ratio is only 5.23 to 1!

I said I believed there had been a cultural attitude change towards renting property in Britain and that this quiet revolution was likely to be permanent. In the 60’s, 70’s and 80’s, saving for the deposit was everything and buying a house was everything. Youngsters today have much more disposable income today than people had in the Callaghan and Thatcher years, but choose to spend it upgrading their mobile phones every 12 months, the newest tablet or PC, a newest 50” plasma LCD TV and two sun drenched holidays a year, than go without and save for a deposit.

Yes, there are horror stories of tenants living in rat infested properties with landlords who charge massive rents and don’t repair their properties. But that is very much the exception as most tenants rent homes of a quality they couldn’t ever to afford to buy. Twenty years ago, if you said you rented a property, you were considered the lowest of the low ... but now it’s the norm.

So with mortgage affordability being well within the bounds of most first time buyers, the level of deposit required for a 95% being surprisingly modest (starting off at c.£1,900 in Stoke-on-Trent as mentioned above) until we change our attitudes, the UK housing market is slowly but surely turning into a more European model, where people rent for long periods of their life, then eventually inherit their parents properties and subsequently become homeowners themselves, albeit later in life.

Hence, I cannot see the demand for decent, high quality rental properties dropping in the next 10 to 20 years, but only ever increasing as the population continues to soar. Just make sure you by the right property, at the right price, in the right location

Stoke-on-Trent Landlords count the cost of a Tory Election win

Can you remember 10.05pm on Thursday, 7^th May 2015 ... with the shock news that BBC Exit Polls suggested the Conservatives would be returned with majority? The middle classes in Milton and Norton-in-the Moors exhaled a huge sigh of relief, as Stoke-on-Trent landlords, faced with rent controls from Red Ed and the Labour Party, now had something to cheer about as the Tory’s were always considered to be a political party that accepted the importance of the rental market, supported its development while properly targeting the lawbreaker landlords renting out below standard rental accommodation.

Since May though, George Osborne announced future rises in stamp duty for buy to let landlords and a change in the interest relief on buy to let mortgages, some people have started to question that loyalty. However, things could have been a lot worse for Stoke-on-Trent landlords as previous ideas of making landlord’s pay more tax was the idea (which was seriously considered) of increasing Capital Gains Tax rates to the landlord’s own income tax levels. If Landlords would have had to pay capital gains tax of 40% to 45% on any uplift in value, I can tell you here and now, that would have made investing in property a non starter for almost everyone.

However, I will admit the loss of mortgage higher rate tax relief will make a number of properties not stack up financially. The new rules are likely to slow demand in the Stoke-on-Trent housing market, which is in fact good news for the other landlords, as there is less competition from 'amateur' landlords offering too much.

Just a thought, but making Stoke-on-Trent landlords think twice and

run their numbers more cautiously is not such a bad thing.

 

So looking at the numbers, the November figures have just been released and they show a growth of property values in Stoke-on-Trent of 0.6% over the month of November. That figure doesn’t surprise me due to the time of year. It’s quite dangerous to look at one month in isolation, so looking at a more medium term view, over the last 12 months, property values in Stoke-on-Trent have risen by 5%, not bad when you consider inflation is running at -0.1%.

However, regular readers of the Stoke-on-Trent Property Blog know my passion for looking deeper into the stats. The really interesting information is the value growth, but what types of property are actually selling in Stoke-on-Trent?  Looking at all the properties sold, as recorded by the Land Registry, within 3 miles of the centre of Stoke-on-Trent in September 2015 (this data always runs a couple of months behind the house price data) compared to September 2007 (a couple of months before the credit crunch started to bite and the subsequent property crash).

	Sept 2007	Sept 2015	Difference
Detached in Stoke-on-Trent	16	29	+81%
Semis in Stoke-on-Trent	109	77	-29%
Terraced Houses in Stoke-on-Trent	206	117	-43%
Apartments / Flats in Stoke-on-Trent	76	15	-80%

 

Now I have mentioned in previous articles that the numbers of properties selling in the town has certainly dropped post 2008, but what amazed me were the drop in the number of semis, terraces and in particular the apartments selling in Stoke-on-Trent, compared to the sales of detached properties, which rose considerably.

Less properties are selling than last decade in Stoke-on-Trent

and the types of properties selling have changed ...

interesting times ahead for the Stoke-on-Trent Property market!

 

Therefore, all I can say to the landlords of Stoke-on-Trent is do your homework, make sure the numbers do stack up, take advice and opinion from professionals and above all, for those of you planning to add to your portfolio, buy the right property at the right price.

Where will Stoke upon Trent Property Prices be by 2021?

I was having lunch the other day with a local Stoke upon Trent solicitor friend of mine, when the subject of property came up.  He asked me my thoughts on the Stoke upon Trent property market for the next five years.  Property prices are both a British national obsession and a key driver of the British consumer economy.  So what will happen next in the property market? So here is what I told him, and now wish, my blog reading friends, to share with you.

Before I can predict what will happen over the next five years to Stoke upon Trent house prices, firstly I need to look at what has happen over the last five years.  One of the key drivers of the housing market and property values is unemployment (or lack of it), as that drives confidence and wage growth – key factors to whether people buy their first house, existing homeowners move up the property ladder and even buy to let landlords have an appetite to continue purchasing buy to let property.

When the Tory led government came to power in May 2010, the total number of people who were unemployed in the City stood at 2,765 (or 6.56% of the working age population in Stoke upon Trent parliamentary constituency). Last month, this had dropped to 1,012 people (or 2.4% of the working age population).

As the Stoke upon Trent job market has improved with better job prospects, salaries are rising too, growing at their highest level since 2009, at 3.4% per year in the private sector (as recently reported by the ONS).  That is why, even with the turbulence of the last few years, property values in the Stoke upon Trent area are 0.24% higher today than they were five years ago.

Many home occupiers have held back moving house over the past seven to eight years following the Credit Crunch but with the outlook more optimistic, I expect at least some to seize the opportunity to move home, releasing pent up demand as well as putting more stock onto the market. With a more stable economy in the City, this will, I believe, drive a slow but clearly defined five year wave of activity in home sales and continued house price growth in Stoke upon Trent.

I forecast that the value of the average home

in Stoke upon Trent will increase by 17.2% by 2021

 

17.2% might sound optimistic to some, but according to Land Registry, values are currently rising in Stoke upon Trent at 5.5% year on year, I believe my forecast to be fair, reasonable and a reflection of both positive (and negative) aspects of the local property market and wider UK economy as whole.

However, it wouldn’t be correct not to mention those potential negative issues as I do have some slight concerns about the future of Stoke upon Trent housing market.  The number of properties for sale in Stoke upon Trent is lower than it was five years ago, restricting choice for buyers (yet the other side of the coin is that that keeps prices higher). Interest rates were being predicted to rise around Easter 2016, but now I think it will be nearer Christmas 2016 and finally the new buy to let taxation rules which are being introduced between 2017 and 2021 (although choosing the right sort of property / portfolio mix in Stoke upon Trent will, I believe, mitigate those issues with the next taxation rules).

I am telling the landlords I speak to, that with interest rates at their current level 0.5%, the cash in your Building Society Passbook is going to grow so slowly that it might as well be kept under their bed. Property prices, by contrast, have rocketed over the years, even after the property crashes, far outstripping bank accounts and inflation.

So my final thought ...  property is a long term investment, it has its’ up and downs, but it has always outperformed, in the long term, most investments. Those in their 40’s and 50’s in Stoke upon Trent would be mad not to include property in their long term financial calculations. Just make sure you buy the right property, at the price in the right location.

54.7% of Stoke on Trent tenants in the private rented sector are on Housing Benefit

“What does the ideal Stoke on Trent tenant look like?”, asked one of my landlords from Werrington the other day, to which he carried on before I could reply, “Let me guess, a professional couple, both in their 30’s, flawlessly tidy, pays their rent early, doesn’t complain or fuss, who has no plans to move and cheerfully accepts annual rent rises”.

Before I can answer that question properly, I have always believed all a landlord wants (and expects) of their tenants is to pay their rent on time and look after the property as if it were their own. In return, the landlord should provide a property that is warm, clean, modern and damp free and sort any issues (such as repairs) quickly and without fuss. 

Back to the tenants – tenants tend to fall into several groups ... 20 something professionals; young and middle aged families; corporate tenants (ie their employer finds their employee a house to live in); students; older singles/couples and housing benefit claimants – and they come with different needs and wants. So choosing who best suits your Stoke on Trent property – and steering clear of bad tenants – is a big factor in making property investment a success.

One topic that I am often asked is should they, as a landlord, accept tenants on housing benefit?

It might interest the landlords of Stoke on Trent that of the 14,176 private rented properties in the local council area, 54.7% of the tenants of those properties are on some form of housing benefit.

(7,762 properties to be exact). I know many landlords have suffered late rent payments with tenants on benefit, especially since 2008, when local authorities started paying housing benefit to tenants rather than directly to the landlords, but you can’t ignore the fact that housing benefit tenants make up a significant proportion of the Stoke on Trent rental population. My opinion is that the final choice of accepting such tenants has to be the landlords but you can’t tar every tenant with the same brush (I will always give you a balanced opinion if ever asked).

Interestingly, it might surprise some readers of the Stoke on Trent Property Blog, when we compare Stoke on Trent to the national picture, Stoke on Trent’s Housing benefit claimants are higher, as nationally a lower proportion of private tenants claim the benefit. Nationally, 39.2% of the tenants of the 3,891,467 rental properties in Great Britain claim some form of housing benefit (ie 1,526,915 properties).

Now, let us look at the occupations of Stoke on Trent tenants, which makes even more fascinating reading. Of the 14,176 privately rented properties in the Stoke on Trent area, 9,072 head tenants (the head tenant being classified as the head of the household) are in employment (the other 5,104 rental property head tenants either being retired, long term sick, students or job seekers).

Splitting those 9,072 head tenants down into their relevant professions, 2,235 of them are Managers, Directors, Senior Officials, Professional or Technical Professions, 660 in Administrative and secretarial occupations, 1,146 in Skilled Trades, 1,018 in the Caring, Leisure and other service occupations, 1,144 Sales and Customer Service Occupations, 1,035 Process, Plant and Machine Operatives and finally, 1,834 in Elementary Occupations.
The one thing I have always known anecdotally, but until I did my research, never had anything to back it up with, was the high proportion of professionals and skilled trades renting property in Stoke on Trent – intriguing! Maybe in future articles, I will look deeper into the corporate tenant market, young and middle aged families, students and older persons rental markets.... but in the meantime, if you want more news, views and commentary about the Stoke on Trent property market, there are many similar articles like this on here the Stoke on Trent Property Blog