Stoke on Trent House Prices up 24.7% in the last 5 Years

Over the last 5 years, we have seen some interesting subtle changes to the Stoke on Trent property market as buying patterns of landlords have changed ever so slightly.

The background to this story was the recently published set of buy-to-let (BTL) lending statistics. Roll the clock back 12 months and 6,700 BTL mortgages were granted (in the same month) for £900m, meaning the average BTL mortgage was £134,200. Looking at last month’s figures, and as one might expect with the Brexit issue overhanging the property market, the lending figures were down, yet not by the amount I originally thought. Last month, just over 6,100 new buy-to-let mortgages were granted for a total sum of £800m (meaning the average landlord mortgage was a respectable £131,100). Yet, when I looked back to the boom year of the 2014 property market, in the corresponding same month, only £1,030 million was borrowed on 8,300 buy-to-let properties (meaning the average buy-to-let mortgage was £124,100). It seems Brexit is having no effect on landlords buying habits.

Looking closer to home in Stoke on Trent, throughout 2018, I have been regularly chatting to more and more landlords, be they seasoned professional Stoke on Trent BTL landlords or FTL’s (first time landlords) and their attitude is mostly positive. Instead of reading the scare-papers (oops sorry newspapers), those Stoke on Trent landlords that look with their eyes, will see the Stoke on Trent property market is doing reasonably well, with medium term rents and property values rising; as quite obviously from the mortgage figures .. landlords are still buying.

The question I get asked all the time is .. “What type of buy-to-let property should I buy?  You can make money from property through both the rent (expressed as a yield when compared to the value of the property) and how the actual value of the home itself changes.

Since 2014, property values in Stoke on Trent have risen by 24.7%.

We have records of what each type of property (i.e. Detached/Semi/Terraced/Apartments) has achieved per square metre going back 20 years … and looking back over the last 5 years, these are the numbers ..

	2014 Stoke on Trent Average Value £/Sq.M	Current Stoke on Trent Average Value £/Sq.M
Detached	£1,686	£2,077
Semi Detached	£1,363	£1,719
Terraced	£1,154	£1,453
Apartments	£1,351	£1,647

    
They all look to have similar percentage uplifts, however as you can see from the table there is in fact some variation throughout and although only slight this can equate to thousands of pounds in monetary terms.

Price Changes in Stoke on Trent in Last 5 years by Type
Detached	23.2%
Semi Detached	26.1%
Terraced	26.0%
Apartments	21.9%
Overall Average	24.7%

This has proved that semis and terraced houses have performed the best .. although like the £/Sq.M figures, these are just averages. When investing, whilst Stoke on Trent apartments haven’t been the best performers in terms of capital growth, they do tend to generate a slightly better yield than houses, probably because several sharers can afford to pay more than a single family. But houses tend to appreciate in value more rapidly and may well be easier to sell, simply because there are fewer being built.

Now these are of course averages, but it gives you a good place to start from. The bigger picture here though is this - irrespective of what is happening in the world, be it Brexit/no Brexit, China, Trump, whatever, Stoke on Trent people still need a roof over their heads and we as a Country haven’t built enough homes to keep up with the demand since the late 1980’s. This means even if we have a short term wobble in 2019 when it comes to property values ..in the medium term, demand will always outstrip supply and prices and rents will increase – because, I doubt the local authority, let alone Westminster, have the billions of pounds required to build the one hundred thousand Council houses per year nationally for the next decade to fix this issue – meaning as the population increases, the only people who can fulfil the demand for accommodation in the medium term is the private BTL landlord.

Before I go …on average, housing associations and local authorities have built around 26,500 houses each year since 2010. The Labour government had a lower average, building about 19,000 homes per year, yet in the 1960’s, under both administrations, 180,000 councils were built per year!

Stoke on Trent Tenant’s Deposits held total £8,330,400

With the Government preparing to control tenant’s deposits at five weeks rent, Stoke on Trent landlords will soon only be protected in the event of a single month of unpaid rental-arrears, at a time when Universal Credit has seen some rent arrears quadrupling and that’s before you consider damage to the property or solicitor costs.

It can’t be disputed that the deposits Stoke on Trent tenants have to save for, certainly raises the cost of renting, putting another nail in the coffin of the dream of home ownership for many Stoke on Trent renters whilst at the same time, those same deposits being unable to provide Stoke on Trent landlords with a decent level of protection against unpaid rent or damage to the property.

In fact, the total of all the tenants’ deposits in

Stoke on Trent, deposited or protected, is £8,330,400

 

When you consider the value of all the privately rented properties in Stoke on Trent total £2,379,867,120, the need for decent landlord insurance to ensure you are adequately covered as a Stoke on Trent landlord is vital.

However, I want to consider the point of view of the Stoke on Trent tenant.  Several housing charities believe spending more than a third of someone’s salary on rent as exorbitant, yet for the tenants they find themselves in that very position.  I feel especially sorry for the Stoke on Trent youngsters in their 20’s who want to rent a place for themselves, as they face having to pay out the rent and try and save for a deposit for a home.

The average 22 to 29-year-old in Stoke on Trent spends 25% of their typical salary on a one bed rental property

….and 31% of their salary for a 2-bed home in Stoke on Trent.

 

40 years ago, British people who rented spent an average of 10% of their salary on rent, and only 14% in London.  Looking in even greater detail, according to the ONS, over the past 60 years the proportion of total spending on all housing (renting and mortgages) has doubled from 9% in the late 1950’s to 18% today.  Whilst on the other hand, the proportion of total expenditure on food has halved (33% to 16%), as has the proportion of total spending on clothing (10% to 5%) ... it’s a case of swings and roundabouts!

Yet landlords also face costs that need to be covered from rents including mortgages, landlord insurance (especially the need for the often-inadequate deposits to cover the loss of rent and damage), maintenance and licensing.  In fact, rents in the last 10 years have failed to keep up with UK inflation, so in real terms, landlords are worse off when it comes to their rental returns (although they have gained on the increase in Stoke on Trent property values – but that is only realised when a property sells).

There are a small handful of Stoke on Trent landlords selling some/or all of their rental portfolio as their portfolios become less economically viable with the recent tax changes for buy to let landlords, which will result in fewer properties available to rent.

However, this will reduce the supply and availability of Stoke on Trent rental properties, meaning rents will rise (classic textbook supply and demand), thus landlords return and yields will rise.  Yet, because tenants still can’t afford to save the deposit for a home (as we discussed above) and we are all living longer, the demand for rental properties across Stoke on Trent will continue to grow in the next twenty to thirty years as we turn to more European ways where the norm is to rent rather than buy in the 20’s and 30’s age range. This will mean new buy-to-let landlords will be attracted into the market, buy properties for the rental market in Stoke on Trent and enjoy those higher yields and returns … isn’t it interesting that things mostly always go full circle?

Stoke-on-Trent Property Market – Outlook for 2019

Stoke-on-Trent property values are unexpectedly 6.6% higher than at the end of 2017, notwithstanding the uncertainty and threats over the potential impact of Brexit in 2019. This has exceeded all the predictions (aka guesses) of all the City of London economists, in an astonishing sign of strength for the local Stoke-on-Trent and wider national economy.

Nevertheless, the statistics from the Land Registry come after a lethargic year for the number of properties in Stoke-on-Trent compared to the actual prices achieved for those properties.  All this against a framework of amplified political ambiguity and ensuing years of rising Stoke-on-Trent property values that have reduced the affordability of homes in the locality. 

The average value of a Stoke-on-Trent property today

currently stands at £153,600

Looking in finer detail, it isn’t a surprise that 4,596 property sales in Stoke-on-Trent over the last 12 months is somewhat lower than the long-term average over the last 20 years of 5,387 property sales per year in Stoke-on-Trent as the long-term trend of people moving less has meant a decline in the number of property transactions.

I believe locally, Stoke-on-Trent property value growth will be more reserved in 2019 after two decades of weaker wage rises. One of main drivers in the demand (and thus the price people are prepared to pay for a home) is the growth of peoples wage packets. Interestingly, wage inflation over the last six months has risen from 2.4% in the late summer to its current level of 3.3% (which is higher than the average since the Millennium, which has been a modest 2.1%). One of the reasons why wages are growing in the short term is the unemployment rate in the country currently only stands at 4.1%, continuing to stay close to its lowest level since the 1970’s.

However, even though Stoke-on-Trent salaries and wages are rising comparatively higher than they were last year, looking over the long term, Stoke-on-Trent property values are 179.56% higher than they were in January 2002, yet average salaries are only 76.1% higher over the same time frame. This means over the last few years, with average property values so high comparative to salary/wages, many Stoke-on-Trent potential buyers have been priced out of being able to purchase their first home.

At first glance, these stats are actually rather positive during this reported time of political uncertainty and the height of Brexit commotion ... because I genuinely believe that to be the case. The press have always looked for the bad news (well they do say it is that that sells newspapers), and whilst I am not entering into the pros and cons of Brexit itself, the numbers do stack up quite well since the Brexit vote took place nearly 3 years ago.

Moving forward, when taken with the recent reduction in short to medium term number of property transactions (i.e. the number of Stoke-on-Trent properties sold), it should be noted that a lot of the this buoyant house price increase has a lot more to do with a shortage of properties on the market rather than an uplift in the Stoke-on-Trent housing market generally.

And we can’t forget that Stoke-on-Trent isn’t in its own little bubble, as there are noteworthy differences across the UK in property value inflation. House prices in London and the South East have hardly risen or even fallen in some places, whilst in the Midlands, North and other parts of the country they have generally increased. 

Looking forward, I would say to the homeowners and buy to let landlords of the locality that I expect Stoke-on-Trent house price growth to remain stable between 1.4% and 2.1% by the end of this year (although they could dip slightly during the summer) ... as long as nothing unexpected happens in the world economically or politically of course.