Tuesday, 24 January 2017

Aylesbury Unemployment Drops to 3.2% , its impact on the Property Market

It was late May 2016, The Right Hon. Member for Tatton, Mr George Osborne, published an official HM Treasury analysis stating UK house prices would be lower by at least 10% (and up to 18%) by the middle of 2018 compared with what is expected if the UK remained in the European Union. So, eight months on from the Referendum, are we beginning to see signs of that prophecy? The simple answer is yes and no. 

A good barometer of the housing market the share price of the big UK builders. Much was made of Barratt’s share price dropping by 42.5% in the two weeks after Brexit, along with Taylor Wimpey’s equally eye watering drop in the same two weeks by 37.9%. Studying the most recent set of data from the Land Registry, property values in Aylesbury are 0.23% down month on month (and the month before that, they had barely grown with an increase of only 0.11%) – so is this the time to panic and run for the hills?  

Doom and Gloom then? Well, let’s consider the other side of the coin. 

It is dangerous to look at short term. I have mentioned in several articles, that the heady days of Aylesbury property prices rising quicker than a thermometer in the desert sun between the years 2011 and late 2016 are long gone. Yet it might surprise you that during those impressive years of house price growth, the growth wasn’t smooth and all upward. Aylesbury property values dropped by 1.18% in January 2012 and 2.06% in June 2013 – and no one batted an eyelid then. 

You see, property values in Aylesbury are still 12.16% higher than a year ago, meaning the average value of an Aylesbury property today is £371,100. Even the shares of those new home builders Barratt have increased by 43.3% since early July and Taylor Wimpey’s have increased by 37.3%. The Office for Budget Responsibility, the Government Spending Watchdog, recently revised down its forecast for house-price growth in the coming years - but only slightly.  

The Aylesbury housing market has been steadfast partly because the wider economy has performed better than expected since Brexit. There is a robust link between the unemployment rate and property prices, and a flimsier one with wage growth. Unemployment in the AVDC area stands at 3,300 people (3.2%), which is considerably better than a few years ago. In 2013 there were 5,400 people unemployed (5.8%) in the same council area.  

However, inflation is the only thing that does worry me. Looking at all the pundits, it will reach at least 3% (if not more) in the latter part of 2017 as the drop in Sterling in late 2016 renders our imports with higher prices. If that transpires then the Bank of England, whose target for inflation is 2%, may raise interest rates from 0.25%. However, that won’t be so much of an issue as 81.6% of new mortgages in the UK in the last two years have been fixed-rate and who amongst us can remember 1992 with Interest rates of 15%!  

Forget Brexit and yes inflation will be a thorn in the side – but the greatest risk to the Aylesbury (and British) property market is that there are simply not enough properties available thus keeping house prices artificially high. Good news for those on the property ladder, but not for those first-time buyers that aren’t!

Posing for a treat.

Friday, 20 January 2017

£8.48bn – The total value of all Aylesbury Property Market

“How much would it cost to buy all the properties in Aylesbury?”

This fascinating question was posed by the 11-year-old son of one of my Aylesbury landlords when they both popped into my office before the Christmas break (that seems an age away now!). I thought to myself, that over the Christmas break, I would sit down and calculate what the total value of all the properties in Aylesbury are worth … and just for fun, work out how much they have gone up in value since his son was born back in the autumn of 2005.

In the last 11 years, since the autumn of 2005, the total value of Aylesbury property has increased by 77% or £3.69 billion to a total of £8.48 billion. The FTSE100 has only risen by 30.78% and inflation (i.e. the UK Retail Price Index) rose by 37% during the same 11 years. 

When I delved deeper into the numbers, the average price currently being paid by Aylesbury households stands at £300,629.… but you know me, I wasn’t going to stop there, so I split the property market down into individual property types in Aylesbury; the average numbers come out like this .. 

Aylesbury Property Market
Average Value of a Detached Property
Average Value of a Semi-Detached Property
Average Value of a Terraced/Town House Property
Average Value of an Apartment

 ... yet it got even more fascinating when I multiplied the total number of each type of property by the average value. Even though detached houses are expensive, when you compare them with the much cheaper terraced/town houses and apartments, you can quite clearly see detached properties don’t fare any better in terms of total pound note value of the terraced/town houses and apartments.

Total Value of all the Aylesbury Detached Properties
Total Value of all the Aylesbury Semi-Detached Properties
Total Value of all the Aylesbury Terraced/Town House Properties
Total Value of all the Aylesbury Apartments

 What does this all mean for Aylesbury?  Well as we enter the unchartered waters of 2017 and beyond, even though property values are already declining in certain parts of the previously over cooked Central London property market, the outlook in Aylesbury remains relatively good as over the last five years, the local property market was a lot more sensible than central London’s.

Aylesbury house values will remain resilient for several reasons. Firstly, demand for rental property remains strong with continued immigration and population growth.  Secondly, with 0.25 per cent interest rates, borrowing has never been so cheap and finally the simple lack of new house building in Aylesbury not keeping up with current demand, let alone eating into years and years of under investment – means only one thing – yes it might be a bumpy ride over the next 12 to 24 months but, in the medium term, property ownership and property investment in Aylesbury has always, and will always, ride out the storm.


As always, my articles can be found at the Aylesbury Property Market Blog here or you can pop in to see me any time you are passing my office in Temple Street.

Tuesday, 17 January 2017

Forecasts for the Aylesbury property market 2017.

There have been many wild predictions in the media for 2017...according to those that tell us they know best we are going to see something between a crash and a boom! Not overly helpful. I enlisted the help of some friends and local professionals working on the front line to get their view...

As always if you are thinking of buying for the first time or adding to your existing portfolio get in touch ian@mortimersaylesbury.co.uk

Monday, 9 January 2017

Are there good returns to be had in Aylesbury in 2017?

It is great to be in the new year! Once December arrives the new year always seems to take an age to arrive. When it does you can wipe that slate clean and the next 12 months stretch endlessly out in front of you with all the great opportunity a new year brings. Many of you will be considering property matters.

The mortgage market has changed and the affordability criteria mean you will most likely need a 40% deposit to get the best rates. If you are buying a two bedroom property that equates to a substantial £100,000 plus costs including weighted Stamp Duty.

Is it best to sit back and wait for the market prices to ease before committing? Unfortunately this does not look like a good strategy as supply is so weak that the number of buyers still supports current pricing.

What does your £250,000 buy in the current market. As frequent readers know I always suggest buying a two bedroom house if budget allows and Fairford Leys is my suggested location.
This what you can buy today...click here.

You can buy a two bedroom house in a great location for your money but what will it rent for...click here.

So lets say you buy at the full price of £250,000 and achieve a rent of £900, lower than those shown here. That gives you a gross yield of 4.32% still way better than the miserly banks will give you. PLUS you get capital growth! A year ago my sales colleagues were selling similar property around £200,000, so if you had taken this action a year ago you would have around £50,000 plus your monthly return to show for your efforts. Not bad for a pretty safe investment of £100,000.

Obviously there is no guarantee that returns will be as good over the next few years but most of us consider property a long term strategy, for our pension pot or as a legacy for children.

Pension rules have been relaxed and several of my landlords have taken advantage to generate a deposit by drawing down from their pension (not for everybody). Some have had endowment policies mature (remember them!) while others have inherited money. But whatever your situation, YES there are still good returns to be had, but you need to be canny over where you buy and what you pay. You need to take the right legal and financial advice, taking advantage of the best buying methods to ensure maximum returns and tax efficiency.
I can help with many of these areas and put in touch with the right professionals, no obligation, no fuss, just helpful advice. You can read the 'John and Alice story' here

Good luck for 2017 whatever your plans.

Nala has promised to smile more this year


Friday, 6 January 2017

Can we blame Aylesbury landlords for the housing crisis in the town?

Many of these landlords are also known as the ‘Baby Boomer Generation’. These Aylesbury people were born after the end of the Second World War as the country saw a massive rise in births as they slowly recovered from the economic hardships experienced during wartime.

Throughout the 1970’s and 1980’s, they experienced (whilst in their 20’s, 30’s and 40’s) an unparalleled level of economic growth and prosperity throughout their working lifetime on the back of improved education, government subsidies, escalating property prices and technological developments. They have emerged as a successful and prosperous generation. 

Yet some have suggested these Aylesbury baby boomers have (and are) making too much money to the detriment of others, creating a ‘generational economic imbalance’, where mature people benefit from house-price growth while others are forced to pay massive rents or pay large mortgages.

Between 2001 and today, average earnings rose by 65%,
but average Aylesbury house prices rose by 123.6% 

The issue of housing is particularly acute for the generation called the Millennials, who are young people born between the mid 1980’s and the late 1990’s. These 18 to 30 year olds, moulded by the computer and internet revolution, are finding as they enter adult life, that it is very hard to buy a property. These ‘greedy’ landlords are buying up all the property to rent back out to them at exorbitant rents ... it’s no wonder these Millennials are lashing out at buy to let landlords, as they are seen as greedy, immoral, wicked people cashing in on a social despair.

Like all things in life, we must look to the past, to appreciate where we are now.
The three biggest influencing factors on the Aylesbury (and UK) property market in the latter half of the 20th Century were, firstly, the mass building of Council Housing in the 1950’s and 60’s. Secondly, for the Tory’s to sell many of those Council Houses in the 1980’s and finally 15% interest rates in the early 1990’s which resulted in many houses being repossessed. It was these major factors that underpinned the housing crisis we have today in Aylesbury.
In 1995 the USA relaxed its lending rules by rewriting the Community Reinvestment Act. This Act saw a relaxation on the Bank’s lending criteria as there was pressure on these banks to grant mortgages in low wage neighbourhoods, as the viewpoint in the USA was that anyone (even someone on the minimum wage) any working class person should be able to buy a home.  Unsurprisingly, the UK followed suit in the early 2000’s, as Banks and Building Society’s relaxed their lending criteria and brought to the market 100% mortgages, even Northern Rock started lending every man and his dog 125% mortgages. 

We can observe today those very same banks (that lent 125% with a just note from your Mum and a couple of breakfast cereal tokens), reciting the Bank of England hymn-sheet of responsible-lending. On every first time buyer mortgage application, they are now looking at every line on the 20-something’s bank statements, asking if they are spending too much on socialising and holidays ... no wonder these Millennials are reluctant to ask for a mortgage (as more often than not after all that – the answer is negative). 

Conversely, you have unregulated Buy To Let mortgages. As long as you have a 25% deposit, have a pulse, pass a few very basic yardsticks and have a reasonable job, the banks will throw money at you ... I mean Virgin Money are offering 2.99% fixed for 3 years – so cheap!
In 1971, around 50% of people owned their own home and, as the baby-boomers got better jobs and pay that rose to 69% by 2001. Homeownership was here to stay as for many it’s very much a cultural thing here in Britain to own your own home. 

Many of these same baby boomers started to jump on the band wagon of Aylesbury buy to let properties as an investment. Aylesbury first time buyers were in competition with Aylesbury landlords to buy these smaller starter homes … pushing house prices up in the 2000’s beyond the reach of many first time buyers. Alas, it is not as simple as that. Other factors come into play, such as economics, the banks and government policy. But are Aylesbury landlords really fanning the flames of the Aylesbury housing crisis? 

The landlords of the 4,701 Aylesbury rental properties are not exploitive and are in fact, making many positive contributions to Aylesbury and the people of Aylesbury. Aylesbury (and the rest of the UK) isn’t building enough properties to keep up with the demand; with high birth rate, job mobility, growing population and longer life expectancy.
According to the Barker Review, for the UK to stand still and meet current demand, the country needs to be building 8.7 new households each year for every 1,000 households already built. Nationally, we are currently running at 5.07 per thousand and in the early part of this decade were running at 4.1 to 4.3 per thousand. 

It doesn’t sound like a lot of difference, but for Aylesbury to meet its obligation on the building of new homes, Aylesbury would need to build 251 households each year. We are missing that figure by around 105 households a year.

For the Government to buy the land and build those additional 105 households, it would need to spend £40,160,927 a year in Aylesbury alone. Add up all the additional households required over the whole of the UK and the Government would need to spend £23.31bn each year.

It is the property developers who are buying the old run-down houses and office blocks and turning them into new attractive homes to be rented privately to Aylesbury families or Aylesbury people who need council housing because the local authority hasn’t got enough properties to go round.  

The bottom line is that, as the population grows, there aren’t enough properties being built for everyone. Rogue landlords need to be put out of business, whilst tenants should expect a more regulated rental market, with greater security for tenants, where they can rely on good landlords providing them high standards from their safe and modernised home. As in Europe, where most people rent rather than buy, it doesn’t matter who owns the house – all people want is a clean, decent roof over their head at a reasonable rent.  

So only you, the reader, can decide if buy to let is immoral, but first let me ask this question - if the private buy to let landlords had not taken up the slack and provided a roof over these people’s heads over the last decade ... where would these tenants be living now?

If you are a landlord future demand looks secure set against this climate. If you are thinking of becoming a landlord demand is not what should concern you. Buy the right product in the right location at the right price and all will be well. To discuss your plans get in touch ian@mortimersaylesbury.co.uk
Nala is happy now it is so cold, makes her feel at home!