Thursday, 31 December 2015

Will the young people of Aylesbury ever own their own home?

I had the most interesting chat with a couple from Bedgrove the other day, whilst viewing one of our rental properties. The property was not for them, but their son, who wanted a second viewing with his parents to get the parental blessing. Now I know that is not the norm, but in this case the parents were going to act as guarantor. We got to discussing the Aylesbury property market and how they had bought their first property in the town 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 main thread of that conversation with you today.
Their son, like many 20 to 30 year olds in Aylesbury, 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 Aylesbury is huge. There are in fact 4701 private rental properties in Aylesbury at the last count, impressive when you consider there are 1,254 council houses in the town. However, let us not forget 19,022 properties are owner occupied (11,918 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, 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 mid £130,000’s (meaning a modest deposit of £6,500 would be required).
When it came to affordability, I was able to tell them that when they bought their first house in Aylesbury in 1988, the ratio of house prices to salary was 7.54 to 1 in Aylesbury ... and here was the surprise for both of us, today’s ratio is only 6.53 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. I am sure many of you like me can remember the sacrifices made to ensure I saved a deposit as quickly as possible. Youngsters today have far much more disposable income than people had in the Callaghan and Thatcher years. But choose to spend it upgrading their mobile phones every 12 months, treating themselves to the newest tablet or PC, a new 50” plasma LCD TV and two sun drenched holidays a year, rather than go without and save for a deposit. It is just not as important now as it was then, attitudes to renting have changed.
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 could not 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 is the new normal.
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.£6,500 in Aylesbury 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.
I cannot see the demand for good, 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 if you are becoming a landlord for the first time that you buy the right property, at the right price, in the right location. One source of information on such matters would be the Aylesbury Property Blog or pop in and have a chat with me when you are passing my office in Temple Street.
Nala and the Mortimers team wish you a Happy and Prosperous 2016

Tuesday, 15 December 2015

Has 2015 been a good year for Aylesbury landlords?

This is a question I have been asked often over the last few weeks by landlords.

I think most of you will give a resounding yes to this question!
Substantial property value increases have given good capital growth to most landlords, by tens of thousands of pounds in many cases.
 Improved income through increased rents and reduced void periods has benefitted most.
Further, many landlords have been able to reduce costs by re mortgaging and taking advantage of the many low fixed rates available in the mortgage market, protecting their cost base for the future against an impending rate rise.
Some landlords have taken advantage of the above positive factors and added to their portfolio through 2015.
However there are a few clouds on the horizon. Extra Stamp Duty for second home purchases, changes to tax relief for buy to let landlords, extra costs for landlords to meet the raft of new and pending legislation.
Many of these factors are not news… we are all aware and they have been much reported in the media. But what we are not sure of is the impact they will have on the market.

Miles Shipside Rightmove Director ‘this is December’s best post-financial crash performance, signalling another round of price rises in 2016. Despite the shortage of suitable stock in many parts of the market, demand for housing is on the up. Although the average price of property coming to the market is already up by a hefty 7.4% compared to a year ago, Rightmove forecasts that prices will reach and breach new records next year’.
Rightmove’s 2016 forecast is for new seller prices to rise by 6%.
Will there be an assault on the market from landlords trying to buy before the new Stamp Duty regime applies in April?
Will first time buyers hold back from buying until after April in the hope prices will reduce once the new Stamp Duty puts landlords at a financial disadvantage and the competition for stock is reduced?
Will there be a rush of landlords through 2016 trying to sell and reduce their gearing in light of pending tax changes? Will this new stock be in sufficient volume to drive down prices as supply outstrips demand?
Will America put up interest rates and will we follow? Or will Janet Yellen back off at the last minute as previously?
I imagine we each have our own views. What we do about it will depend on our own prevailing circumstances and financial situation…I would love to hear from you with your opinions.
Some landlords I have spoken to recently have some interesting thoughts. One landlord intends to invest money into his existing portfolio by moving kitchens into the lounge and where possible turn the kitchen in to a bedroom making one bedroom units into two bedroom units and enhancing the rent (reflecting many of the new builds/conversions that have a similar layout).
Another is remortgaging his whole portfolio to fixed rate schemes with a view to driving his expenses down to offset any increase in his tax bill.
Interestingly I have not spoken to any landlord that intends to sell his portfolio, after all most of us bought a buy to let for the long haul…either to help our retirement income in years to come or in many cases to help  our children when the time comes.
Whatever your view as always it is essential to buy right. There are very few bargains to be had but buying a property that will let well and have a good chance of sensible value growth is essential. There are many new flats on the market and many more waiting to come to market, all at high prices. Whilst these will let well I struggle to see the option for capital growth being as good as a freehold house where supply is much more limited.
As always the Aylesbury Property Blog will keep you touch with market trends,   or pop in to see me in my Temple Street office when you are passing. Enjoy the festive season.

Please feel free to comment below.

Tuesday, 8 December 2015

The Aylesbury Property Market and £1,300,000,000,000,000,000 in loose change

The 5th of March 2009 was the date Mervyn King, the then Bank of England Governor, slashed UK interest rates to the unparalleled figure of 0.5%. In just under five months, starting on 8th October 2008, the rate had come down from 4.5% to that low figure, all in an attempt to ensure the British economy survived the worldwide credit crunch. Now as we deck the halls with bows of holly nobody expected that, over six years later, rates would still be at that low level.

In the summer, people were predicting a rise in the New Year, yet now, some forecast it may remain the same for years to come due to the issues in China. Now, I am not some City Whiz kid with a hotline to Mr Carney at Threadneedle Street, but merely a humble letting agent from Aylesbury, so I cannot profess to know what will happen to interest rates. However, what I do know, speaking to my Aylesbury friends and Aylesbury landlords is that these low interest rates have hit savers really hard.
If you added up everyone’s bank and building society savings in the UK, they would add up to £1,300,000,000,000,000,000 (that’s £1.3 trillion), most of which is earning a pittance in interest.  That is why more and more 40 and 50 year old Aylesbury landlords have been investing some of that cash into Aylesbury bricks and mortar, as they search for a low risk investment opportunity.
Buying an Aylesbury buy to let property is not risk free, but there are certainly things you can do to mitigate and lower exposure to risk. Buying a rental property potentially offers an enigmatically decent proposition in terms of being able to obtain attractive returns that beat inflation and savings accounts, yet without taking the levels of risk associated with stock markets.
The UK residential property market has long been the safest form of collateral for lenders of all varieties. Against a backdrop of a greatly changing economic environment, Aylesbury house prices have been extraordinarily robust, increasing by over 2148% between 1974 and today. Some will say there have been significant property price falls, namely in 1975, 1988 and 2008, yet each time this has been followed by an upturn in property values. For the record, the stock markets in the same time frame only rose by 432.5%!
... and that is the best thing about buy to let property. Unlike the stock market, with its unfathomable equities, shares and bonds, that nobody really understands (apart from some faceless whizzkids in Canary Wharf!) with a buy to let property, landlords can take control and understand their investment .. in fact you can touch and feel the bricks and mortar investment.
...  but before you go out and buy any old Aylesbury property, plenty of landlords still get it wrong. You have to be aware of your legal responsibilities when it comes to tenant safety, tenants deposits, energy certificates and in the new year, landlords will have the added responsibility of checking the immigration status of prospective tenants. Get it wrong and big fines and even prison is an option – but that is why many agents use a letting agent to manage their property for them. Even then you need to be careful with your choice of agent!
Next, you have to buy the right property at the right price. Recently I have seen some situations in Aylesbury and the immediate area, where people pay way too much for a property, only to lose out when they come to sell.
I cannot stress enough the importance of doing your homework. One source of information and advice is the Aylesbury Property Blog where I have similar articles to this about the Aylesbury property market. If you have not visited and you are interested in the local property market in Aylesbury ... you are missing out! ..

Nala waiting for dad to come home and play with her new toy.

Friday, 4 December 2015

The Aylesbury market in 2015

Many landlords have been asking me my thoughts on the Aylesbury property market recently, and in particular, what is happening to property values. Property values in Aylesbury grew in the month of September by 0.4%. When one looks at the annual growth, Aylesbury values are 8.4% higher (when comparing Sept 14 to Sept 15).  However, there are signs that the fundamental growth of property values in Aylesbury has now peaked, despite those average property values being above levels recorded in 2007 (just before the 2008 crash).

Even though prices are higher this month, this impressive rise of Aylesbury property values masks the underlying truth in what is really happening to local property values in the town. Throughout 2015, property values have been yo-yo like on a month by month basis, being quite volatile in nature.  For example,
·         September 2015               0.4% rise

·         August 2015                       1.4% rise

·         July 2015                              1.3% rise

·         June 2015                            0.9% rise

·         May 2015                             0.2% rise
This is in part due to seasonal factors, as well as mortgage approvals increasing over June and July and then falling by over 15% in August, according to the Council of Mortgage Lenders (CML).

The outlook for the Aylesbury property market remains positive against the foundations of low mortgage rates and growing consumer confidence. Aylesbury property values are still running ahead of salaries and average property values are 13.2% above the levels recorded in 2007.
Talking to fellow property professionals in the town, demand for property has been showing signs of moderating in the final few months of 2015, which in turn will lead to a slight slowdown in the pace of house price growth in the run up to the festive season. You see, it is really important not to read too much into one month’s (September’s) headline figures.
Readers might be interested to note that before the 2008 property crash, all the UK region’s housing markets tended to move up and down in tandem like the Aylesbury Synchronised Swimming team.  Since then though, the Greater London property market took off like a rocket in 2009/10, whilst the rest of the UK only really started to grow in 2012/13, and even then that growth was a lot more modest than the Capital’s.
Looking closer to home, it can even be different in neighbouring towns, areas and cities, so whilst Aylesbury property values are 8.4% higher than a year ago (as mentioned above), Milton Keynes property values are 9.1% higher than a year ago.
If you are considering buying to let in the area I cannot stress enough the importance of doing your homework.  One source of information and advice is the Aylesbury Property Blog where I have similar articles to this about the Aylesbury property market and what I consider.  If you have not visited and you are interested in the local property market in Aylesbury….. you are missing out!