Tuesday, 28 July 2015

Aylesbury Property Market – Bricks and Mortar!

The Land Registry have just released their latest set of figures for the Aylesbury Property market. It makes interesting reading, as average property values in Aylesbury rose by 0.8% in May. This leaves average property values 9.7% higher than 12 months ago, meaning the annual rate of growth in the town fell to its lowest level since July 2014. When we compare Aylesbury against the regional picture, South East property values rose by 0.9%, leaving them 9.1% higher than a year ago.
At one point (November 2014 to be exact) property values were rising by 11.6% a year. This is good news for local homeowners who had been affected by the downturn after 2007 and still find themselves in negative equity.
However, the thing that concerns me is that the average number of properties changing hands (i.e. selling) has dropped substantially over the last 12 months in the town. In March 2014, 127 properties sold in Aylesbury but in March 2015, that figure dropped to 112.  I have been in the Aylesbury property market for quite a while now and the one thing I have noticed over the last few years has been the subtle change in the traditional seasonality of the Aylesbury property market. It has been particularly noticeable this year in that the normal post Easter flood of properties coming onto the market was not seen. This has made an imbalance between supply and demand, with fewer houses coming onto the market there is simply not as much choice of properties to buy in Aylesbury. With the population of Aylesbury ever increasing, this will generally strengthen house price growth for the foreseeable future.
So what does all this mean for Aylesbury landlords or those considering dipping their toe into the buy to let market for the first time? For many people, buy to let looks a good investment, providing landlords with a sensible income at a time of low interest rates and stock market unpredictability.
However, if you are thinking of investing in bricks and mortar in Aylesbury, it is important to do things correctly. As an investment to provide you with income, for those with enough savings to raise a big deposit, buy to let looks particularly good, especially compared to low savings rates and stock market yo-yo’s. I must also remind readers, landlords have two opportunities to make money from property, not only is there the rent (income), but with the property market bouncing back  property value increases have spurred on more investors to buy property in the hope of its value continuing to rise.
Savvy landlords with decent deposits can fix their mortgages at just over 3% for five years, making many deals stack up. Nevertheless, low rates cannot stay low forever, because one day they must rise and you need to know your property can stand that test. I saw some Aylesbury landlords struggling in the mid noughties, when interest rates rose from 3.5% in July 2003 to 5.75% in July 2007. That might not sound a lot, but that was the difference of making a £100 a month profit in 2003 to having to make up a shortfall in the mortgage payments of £100 per month in 2007.
Many landlords were thrown a life raft when the base rate dropped to 0.5% in March 2009. Whilst interest rates have remained there since but they will rise again in the future. However, even with the potential for costs to rise, demand for good rental properties remains high as there are ever more tenants in the market, driving up demand and thus rents. The British love of bricks and mortar plus improving mortgage deals also add fuel to the buoyant Aylesbury property market.
If you are planning on investing in the Aylesbury property market, or just want to know more things to consider for a successful buy to let investment, one source of information is the Aylesbury Property Blog http://theaylesburypropertyblog.blogspot.co.uk/
Nala in full posing mode.

Monday, 27 July 2015

Are ‘would be’ Aylesbury homeowners warming to the idea of renting?

I was reading a report the other day produced by the Halifax, about the UK property market and why more and more of the younger generation are renting rather than buying. I find it fascinating that over the last ten years, the British obsession of buying a house almost as soon as you left school, has turned on its head to a point where the hopes and dreams to own a nice home will be replaced by the ambition simply to live in one.

In the latter half of the 20th Century, you left school, got a job, bought a small house and kept buying and selling property, constantly upgrading until eventually they carried you out in a box. However it seems that the British are now beginning to accept a lifetime of renting. This is a very important consideration for both Aylesbury homeowners and Aylesbury landlords as it will transform the way the Aylesbury property ladder looks in the future and I might ask whether or not it will exist at all for some people? The make up of households is one important factor, especially in the Aylesbury property market. The normal stereotypical married couple, two kids and dog of the 1970’s and 80’s has changed. More and more we have the need for larger houses where two families come together after divorces (+ kids) and they need a property to house everyone, through to an increase in the number of one person households.

Looking at the data for Aylesbury, of the 8,096 private rental properties in the Aylesbury Vale District Council area, 27.37% of those rented properties are one person households (2,216 properties). However, when we compare the number of one person Aylesbury households who have bought their own property with a mortgage (i.e. therefore they are still in work), of the 49,702 owner occupied households in the area, only 4,254 of those properties are a one person household (i.e. 8.56%). Compared to a decade ago, this explosion in demand for decent high quality rental properties that one person households require has not been met with an increase in supply of such properties.  More and more Aylesbury landlords need to consider this change in the make up of Aylesbury households, as I believe this could be an opportunity. As an aside, another interesting stat that raised an eyebrow was that 12.44% of those 8,096 rental properties (1,007 properties) are lone parents households as well. Again, another possible opportunity that Aylesbury landlords might want to consider in their future investment plans.

It is true that the Governments introduction in 2013 of the Help to Buy scheme, where first time buyers only needed a 5% deposit, changed the perception of peoples’ ability to buy without having to save ten’s of thousands of pounds for a deposit. However, 95% mortgages were re-introduced within six months of the Credit Crunch in late 2009, so again it comes down to people’s own perception. Many youngsters think they won’t get a mortgage, so don’t even bother trying.

Coming back to the deposit, it’s still a fact that once you start renting it becomes that much harder to save for a deposit, regardless of the size. 7 out of 8 renters polled by the Halifax (86% to be exact) refuse to sacrifice the quality of accommodation they currently live in to reduce the amount of rent they pay in order to save for a deposit.  This is the crux and the real reason why people aren’t buying but renting... and why demand for renting will continue to grow in the future (i.e. good news for landlords). Aylesbury tenants can upgrade the quality and size of the property they live in for a minimal rent increase. The average rent of a two bed property in Aylesbury is £806pm, a three bed is £287pm more at £1,093pm, whilst the average four bed rent is £1,337pm. If you had to make that jump when buying, the monthly mortgage payments would be stratospherically more than that!  Without any social pressure and better quality rental properties compared to a decade ago, we will become a nation of renters within the next generation, as the UK is becoming more like Europe, where renting is ‘the norm’. Who is going to supply all these properties to rent? Landlords! Whether you are an existing landlord looking to grow your portfolio or looking to become a ‘first time landlord’, take advice from as many people as possible. However, as the majority of landlords buy their buy to let properties in the same town they live, you will need specific advice about Aylesbury itself. One place for such advice and opinion is the Aylesbury Property Blog, or pop in to my temple Street office for a chat when you are passing. 01296 398555

Tuesday, 21 July 2015

Aylesbury Buy To let – Bedrooms?

Last week, a landlord from Aylesbury emailed me to ask, after reading the Aylesbury Property Blog, if he should extend his terraced house making an extra bedroom in the loft. He had a builder friend who owed him a favour, and thought it a good way would be get an ‘inexpensive’ extension.

Having more useable space is generally thought to be consistent with better quality accommodation and homeowners and tenants are prepared to pay for it. If you added a bedroom to a two bed terraced to make a three bed terraced, it will add 10% to the value of the property.  Turn a three bed terraced into a four bed terraced and 9% will be added to the value. Looking at semi detached properties, and turn a two into a three bed and 12% will be added to the value, whilst making a three bed semi into four bed will add 9% in value.

However, before you rush off to the planning department there are some important considerations, whether you are a homeowner or landlord.  What would be the cost of making that extra bedroom? The average value of a terraced house in Aylesbury is currently £226,000 whilst the average value of a semi detached house is £281,900, meaning to make money the cost of the extension would need to be less than £21,470 on the terraced property and £29,599 on the semi detached house. Talking to a number of trades people in the town, most are booking up into the New Year. Also, no matter how good a friend he was, I know of no builders that would charge as little as that. Maybe the builder was just thinking of a bit of pointing work on the chimney!

Well, that got me thinking about how bedrooms affected rental prices and rent-ability as well.   Interestingly below, you will see that whilst bedrooms do have an effect on the rent that can be achieved and the rent-ability of the property – the difference does not warrant the expense, hassle and trouble of extending.

·         23.2% of the one bed properties on the market to rent in Aylesbury have a tenant with an average rent of £653 per month

·         38.9% of the two bed properties on the market to rent in Aylesbury have a tenant with an average rent of £805 per month

·         54.2% of the three bed properties on the market to rent in Aylesbury have a tenant with an average rent of £1,038 per month

·         30% of the four bed properties on the market to rent in Aylesbury have a tenant with an average rent of £1,459 per month

No, if you want to increase the value of your property, be you an Aylesbury landlord or homeowner, there are things that cost a lot less than building extra bedrooms. Spruce up the exterior, emulsion all the rooms, install fresh carpets and curtains. For homeowners, a matter of a few hundred pounds will add thousands whilst for landlords, these things can add an extra 10% to the rent that you can achieve. I can help point you in the right direction if you are thinking of updating or making improvements. For more advice and opinion on the Aylesbury Property Market, visit the Aylesbury Property Blog http://theaylesburypropertyblog.blogspot.co.uk/
C'mon tell me where the treats are!

Tuesday, 7 July 2015

Why are fewer Aylesbury people moving house?

During my earlier years, people seemed to move every other year (or it seemed that way). However, whilst many people used to keep the removal van folks in business , from research I have carried out it shows things have changed considerably in Aylesbury over the last few decades, and interestingly, the trend is getting worse ... for the removal van people at any rate!

In Aylesbury, there are 28,877 properties. However, after we remove the 4,562 council houses, 4,701 privately rented houses and 256 houses where the occupants live rent free, that leaves us with 19,358 owned properties (be that 100% outright, with a mortgage or shared ownership). This means 67% of the properties in Aylesbury are occupied by the owner (the national average is interestingly 64.2%) but the number of people who have sold and moved house in Aylesbury, over the last 12 months, has only been 2,292. This means on these figures, the homeowners of Aylesbury are only moving on average every 8.44 years. (Part of the reason we have so little sales stock at present!)

These are the reasons. Firstly, the cost of moving house has risen over the last twenty years. Secondly, with many owners remortgaging their properties in the mid 2000’s before the price crash of 2008, there is a reluctance or inability in a small minority of homeowners to finance a home sale/purchase, due to lack of equity. These are both factors driving fewer moves by existing homeowners.

However, the big effect has been the change in house price inflation. Back in the 1970’s and 1980’s, house prices were doubling every 5 to 7 years. Even in Greater London, with its stratospheric property price increases over the last few years, it has taken 13 years (August 2002 to be exact) for property values to double to today’s levels.

This change to a relatively low inflation Aylesbury property market (i.e. Aylesbury property values not rising quickly) is significant because the long term consequences of sustained low house price growth is that it eats into mortgage debt more slowly than when property price inflation is higher. Aylesbury homeowners cannot rely on inflation to shrink their debt in real terms as much as they did in say the 1970’s and 1980’s.

So what does this all mean for Aylesbury buy to let landlords? Well for the same reasons existing Aylesbury homeowners aren’t moving, fewer ‘twenty something’s’ are buying their first home as well. Aylesbury youngsters may aspire to own their own home, but without the social pressure from their peers and parents to buy their first property as soon as they reach their early 20’s, the memory of the 2008 housing crisis and the belief that hard times either aren't over or the worst is yet to come (think Grexit), current and would-be homeowners are warming to the idea of renting. I also believe UK society has changed, with the youngster’s wanting prosperity and happiness; but wanting it all now... instantly... today... without the sacrifice, work and patience that these things take. This is often coupled with little knowledge of the costs of home ownership as we parents have shielded them from the costs of the real world! As a society, we expect things instantly, and if it doesn’t come easy, doesn’t come quick, some youngsters ask if it is really worth the effort to save for the deposit? Why go without holidays, the newest iPhone, socialising four times a week and the fancy satellite package for a couple of years, to save for that deposit if there is no longer a social stigma in renting or pressure to buy as there was... say... a generation ago?

Even though, in real terms, property prices are 5% lower than they were ten years ago (when adjusted by inflation), 16.3% of Aylesbury properties are privately rented (nearly double the level of twenty years ago). As a result, the demand for rental properties continues to grow from tenants, meaning those wishing to invest in the buy to let market, over the long term, might be on to a good thing?

 For advice and opinion on the Aylesbury Buy To let property market, one source of information is The Aylesbury Property Blog but you could pop in to my office in Temple Street, I am not known for my coffee making skills but I will make you welcome and try to help. 01296 398555

I am shortly away on my hols , Nala and her sitter are on guard duty in my absence.

Friday, 3 July 2015

Affordability of housing in Aylesbury

Talking to an elderly relative recently, he reminded me that in his day, you could have bought a property for the same price of that a decent second hand car would sell for today and that his father was buying property for the same price as a decent 50 inch LCD TV!  Now of course, these are only headline prices and we have had wage growth and inflation.  Interestingly, since the Second World War, property values in Aylesbury doubled in 1961, 1971, 1975, 1980, 1988, 2000 and 2006.

Looking at more recent times, since the start of the Millennium, these increases in property values have generated large increases in equity for many homeowners but on the other side of the coin have also made housing unaffordable for others.  It might interest readers to note that most of Europe experienced sharp increases in property values in the early years of 2000’s, with only Spain beating  us (although we know what has happened to the Spanish property market over the last few years!).  In the 2000’s, the British situation was different in two regards.  First the property value boom started earlier here and saw more sustained increases, second, the regional pattern was fairly uniform.

However, since 2010, the regional pattern has been completely different in the UK.  Compared with  2007 (the last property boom), average property values today in England and Wales are 1.2% higher, whilst in Greater London, they are 35.7% higher, and in Aylesbury they are 13.21% higher. The London property market has been like a different country.  Looking specifically at Aylesbury though, it has continued to be difficult for first time buyers to get on the housing ladder.  The best measure of the affordability of housing is the ratio of Aylesbury Property Prices to Aylesbury Average Wages, (the higher the ratio, the less affordable properties are). 

·         1997       4.48 to 1   (i.e. the average value of a Aylesbury property was 4.48 times higher than the average annual wage in Aylesbury)

·         2000       5.57 to 1

·         2002       6.60 to 1

·         2003       7.50 to 1

·         2007       8.48 to 1

·         2009       7.63 to 1

·         2012       8.38 to 1

·         Today    9.35 to 1

You  can see quite clearly, even though we had an improvement just after the 2007 property crash (i.e. the ratio dropped), in following subsequent years with Aylesbury house price’s rising but wages not keeping up with them,  the ratio started rise.  This has meant there has been a deterioration in affordability of property in Aylesbury over the last couple of years.  This is one of the (many) reasons why the younger generation is deciding more and more to rent instead of buy their own house.  The local Council sold off council houses in the Thatcher years and for many on low incomes or with little capital, owning a home has simply never been an option.

With fewer people able to save up the deposit required by mortgage lenders, more and more people are looking to rent, this has also resulted in a change in attitudes towards renting over the last decade. We are increasingly shifting to the European model of renting rather than owning our homes.  This has driven rents up in Aylesbury over the last few years, as more people are seeking properties to rent.  All these things have combined to make the demand for rental property in Aylesbury rise.

  If you are an existing landlord or someone thinking of becoming a first time landlord looking for advice and opinion on what (or not) to buy in Aylesbury, one source of information is the Aylesbury Property Blog http://theaylesburypropertyblog.blogspot.co.uk/