£895.70pm – The Profit made by every Aylesbury Property Owner over the last 20 years

As we go headlong into 2018, I believe UK interest rates will stay low, even with the additional 0.25% increase that is expected in May or June. That rise will add just over £20 to the typical £160,000 tracker mortgage, although with 57.1% of all borrowers on fixed rates, it will probably go undetected by most buy-to-let landlords and homeowners. I forecast that we won’t see any more interest rate rises due to the fragile nature of the British economy and the Brexit challenge. Even though mortgages will remain inexpensive, with retail price inflation outstripping salary rises, it will still very much feel like a heavy weight to some Aylesbury households.

Now it’s certain the Aylesbury housing market in 2017 was a little more subdued than 2016 and that will continue into 2018. Property ownership is a medium to long-term investment so looking at that long-term time frame; the average Aylesbury homeowner who bought their property 20 years ago has seen its value rise by more than 300%.

This is important as house prices are a national obsession and tied into the health of the UK economy as a whole. The majority of that historic gain in Aylesbury property values has come from property market growth, although some of it will have been added by homeowners modernising, extending or developing their Aylesbury homes.

Taking a look at the different property types in Aylesbury and the profit made by each type, it makes interesting reading..

However, I want to put aside all that historic growth and profit and looking forward to what will happen in the future. I want to look at the factors that could affect future Aylesbury (and the Country’s) house price growth/profit; one important factor has to be the building of new homes both locally and in the country as a whole. This has picked up in 2017 with 217,350 homes coming on to the UK housing ladder in the last year (a 15% increase on the previous year’s figures of 189,690. However, Philip Hammond has set a target of 300,000 a year, so still plenty to go!

Another factor that will affect property prices is my prediction that the balance of power between Aylesbury buy-to-let landlords and Aylesbury first-time buyers should tip more towards the local first-time buyers in 2018.

The Council of Mortgage Lenders expects the number of buy to let mortgages to drop by 34% from levels seen in 2015. This is because of taxes being increased recently on buy-to-let and harder lending criteria for buy to let mortgages, which means I foresee a gradual move in the balance of power in favour of first-time buyers rather than buy-to-let landlords. First time buyers will also be helped by The Chancellor eradicating Stamp Duty for all properties up to £300,000 bought by first-time buyers in the recent budget.

This means Aylesbury buy-to-let landlords will have to work smarter in the future to continue to make decent returns (profits) from their Aylesbury buy-to-let investment. Even with the tempering of house price inflation in Aylesbury in 2017, most Aylesbury buy to let landlords (and homeowners) are still sitting on a copious amount of growth from previous years.

The question is, how do you, as an Aylesbury buy to let landlord ensure that continues?

Since the 1990’s, making money from investing in buy-to-let property was as easy as falling off a log. Looking forward though, with all the changes in the tax regime and balance of power, making those similar levels of return in the future won’t be as easy. Over the last ten years, I have seen the role of the forward thinking letting agents evolve from a ‘rent collector’ and basic property management to a more holistic role, or as I call it, ‘landlord portfolio strategic leadership’. Thankfully, along with myself, there are a handful of letting agents in Aylesbury whom I would consider exemplary at this landlord portfolio strategy where they can give you a balanced structured overview of your short, medium and long-term goals, in relation to your required return on investment, yield and capital growth requirements. If you would like such advice, speak with your current agent – or whether you are a landlord of ours or not – without any cost or commitment, feel free to drop me a line.

With Aylesbury Annual Property Values 7.5% Higher, This is My 2018 Forecast

Looking at the newspapers between Christmas and New Year, it seemed that this year’s sport in the column inches was to predict the future of the British housing market. So to go along with that these are my thoughts on the Aylesbury property market.

With the average 5-year fixed rate mortgage at 1.98% (down from 3.47% in 2014) and 2-year fixed rate at 1.47% (down from 2.37% in 2014), mortgage interest rates offered by lenders are at an all-time low (even with the slight increase on the Bank of England base rate a few months ago). Added to this, there has been a low unemployment rate of 3% in Aylesbury, which has contributed to maintain a decent level demand for property in Aylesbury in 2017 (interestingly – an impressive 1,782 Aylesbury properties were sold in last 12 months), whilst finally, the number of properties for sale in the town has remained limited, thus providing support for Aylesbury house prices, meaning …

Aylesbury Property Values are 7.5% higher than a year ago

However, moving into 2018, there will be greater pressures on people’s incomes as inflation starts to eat into real wage packet growth, which will wield a snowballing strain on consumer confidence. Interestingly though, information from the website Rightmove suggested over a third of property it had on its books in October and November had their asking prices reduced, the highest percentage of asking price reductions in the same time frame, over five years. Still, a lot of that could have been house-sellers being overly optimistic with their initial pricing.

In terms of what will happen to Aylesbury property values in the next 12 months, a lot will be contingent on the type of Brexit we have and the impact on the whole of the UK economy. A lot of people will talk about the Central London property market in the coming year, and if the banking and finance sectors are negatively affected with a poor Brexit deal, then the London market is likely to see more of an impact.

Nevertheless, the bottom line is Aylesbury homeowners and Aylesbury landlords should be aware of what happens in the rollercoaster housing market of Central London, but not panic if prices do drop suddenly there in 2018. Over the last 8 years, the Central London property market has been in a world of its own (Central London house prices have grown by 89.6% in those last 8 years, whilst in Aylesbury, they have only risen by 57.23%). So we might see a heavy correction in the Capital, whilst more locally, something a little more subdued.  

Hindsight is always better than foresight and predicting anything economic is all well and good when you know what is around the corner. At least we have the Brexit divorce settlement sorted and, as the UK economy and the UK housing market are intertwined, it all depends on how we deal as a Country with the Brexit issue. However, we have been through the global financial crisis reasonably intact ... I am sure we can get through this together as well?

Oh, and house prices in Aylesbury over the next 12 months? I believe they will end up between 0.4% higher and 1.6% higher, although it will probably be a bumpy ride to get to those sorts of figures.

My thoughts on the future of the Aylesbury Buy-To-Let Market

I was recently reading a report by the Home website which suggested that hordes of landlords are selling their buy-to-let investments due to increasing burdens on them in the buy-to-let market. Their findings suggest the number of new properties that came onto the market nationally (for sale) jumped by 11% across the UK as a result.

Those increasing burdens include new tax rules coming in over the next 3 to 4 years and the announcement that all self-managing landlords (i.e. landlords that don’t use a letting agent to look after their buy-to-let property) will soon need to register with a compulsory redress scheme to resolve tenant arguments and disputes; as Westminster wants to heighten standards in the Private Rented Sector. 

Interestingly I was chatting with a self-managed landlord from Wendover, when I was out socially over the festive period, who didn’t realise the other recent legislations that have hit the Private Rented sector, including the ‘Right to Rent’ regulations which came in to operation last year. Landlords have to certify their tenants have the legal right to live in the UK. This includes checking and taking copies of their tenant’s passport or visa before the tenancy is signed. Of course, if you use a letting agent to manage your property, they will usually sort this for you (as they will with the redress scheme when that is implemented).

If you are a self-managed landlord though, the consequences are severe because if you let a property to a tenant who is living in the UK illegally, you will be fined up to £3,000. That same Wendover landlord popped into my offices in the New Year, and I checked all his paperwork and ensured he was on the right side of the law going forward – and I offer the same to any landlord in the Aylesbury area if you want me to cast my eye over your buy to let matters.

But what of all these extra properties being dumped onto the market in Aylesbury? When I looked at the records the number of properties on the market in Aylesbury now, as opposed to a year ago, the numbers tell an interesting story …

Overall, Aylesbury doesn’t match the national trend, with the number of properties on the market actually increasing by an impressive 68% in the last year.  It was particularly interesting to see the number of detached properties increase by 114% and the number of semis on the market has increased by 78%.

However, speaking with my team and other property professionals in the town, the majority of that movement in the number of properties and the types of properties on the market isn’t down to landlords dumping their properties on the market. The whole property market has changed in the last 12 months, with the majority of the change in the number and type of properties for sale due to the owner-occupier market, not landlords (a subject I will write about soon in my Aylesbury Property Market blog later this Spring?). You see, for the last ten years, each month there has always been a small number of Aylesbury landlords who have been releasing their monies from their Aylesbury buy to let properties - as is the nature of all investments!

Nationally, the number of rental properties coming on to the market to rent fell by 16% in Q4 2017 compared to Q4 2016 .. but that isn’t because there are 16% less rental properties to rent – it’s because tenants are staying in their rental properties longer meaning less are coming on the market to be RE-LET.

Nevertheless, some Aylesbury landlords will want to release the equity held in their Aylesbury buy to let properties in 2018. All I suggest is that you speak with your letting agent first, as putting a rental property on the open market often spooks the tenants to hand in their notice days after you put it on the market (because they don’t like the uncertainty and also believe they will become homeless!). This means you have an empty property, costing you money with no rent coming in.  However, some letting agents who specialise in portfolio management have select lists of landlords that will buy with sitting tenants in. If you have a portfolio in the Aylesbury area and are considering selling some or all of them – drop me a line as I might have a portfolio landlord for you.  

Youngsters unable to buy their first home in Aylesbury – Are the Baby Boomers and Landlords to Blame?

Talk to many Aylesbury 20 something’s, where home ownership has looked but a vague dream, many of them have been vexatious towards the Baby Boomer generation and their pushover ‘easy go lucky’ walk through life; jealous of their free university education with grants, their eye watering property windfalls, their golden final salary pensions and their free bus passes.

If you had bought a property in Aylesbury for say £22,000 in first quarter of 1977, today it would be worth £483,498, a windfall increase of 2097.72%.

But to blame the 60 and 70 year olds of Aylesbury for that sort of rise seems a little unfair, with the value of the homes rising like rocket, I don't believe they can be censured or made liable for that. A few weeks ago, I discussed in my blog the number of people in the Aylesbury area who have two or more spare bedrooms (meaning they are under-occupying the house). I see many mature members of Aylesbury society, rattling around in large 4/5 bed houses where the kids have flown the nest years ago ... but should they be blamed?

We are all just human, and the mature members of UK society have just reacted to the inducements of our property and tax system. The mature generations who joined the property market party in the 1970’s and 1980’s were able to take out huge mortgages, protected in the knowledge that inflation would corrode the real value of the mortgage, while wage gains would boost their ability to repay.

Neither do I directly blame the multitude of Aylesbury buy to let landlords, buying up their 10th or 11th property to add to their buy to let empire. They too, are humbly reacting to the peculiar historic inducements of the UK property market.

So, who is to blame?

Well, hyperinflation in the 1970’s meant the real value of people’s mortgages was whipped out (as mentioned above). Margaret Thatcher and Nigel Lawson are also good people to blame with Maggie selling off millions of council houses and Nigel Lawson’s delayed ending of the MIRAS tax relief in 1987; meaning he too can get his share of indignation. The Blair/Brown combo doubled stamp duty in 1997 and again in 2000, which, as a tax on property transactions, precludes a more efficient distribution of the current housing stock. The Government has had plenty of opportunity to change the draconian stamp duty rules to incentivise those mature Aylesbury house movers to downsize.

However, I have started to see over the last few years a change in Government policy towards housing. The new breed of Aylesbury buy to let landlords that have come about since the Millennium, have had their wings clipped over the last couple of years, with the introduction of new tax rules (meaning it is slightly more difficult to make money out of property unless you have all the national information and Aylesbury property trends to hand).

It’s easy to think the only reason that hundreds of first time buyers have been priced out of the Aylesbury housing market is because of these landlords. Yet, I believe landlords have been undervalued with the Aylesbury homes they provide for Aylesbury people. With first time buyers struggling to save for a deposit, if it weren’t for those landlords buying up those homes over the last 10/15 years, we would have a bigger housing crisis than we have today. Since the global financial crisis of 2008/9, local councils have had to cut services, so certainly didn’t have enough money to build new homes ... homes that were provided to Aylesbury by these buy to let landlords.

One side of the argument is that 511 homes are being bought up by buy to let landlords each year in the Aylesbury Vale District Council area when otherwise they might have become available to other buyers, the other side of the argument is the current national average deposit is £51,800, which is, by far, the greatest barrier to those wanting to buy their first home. Those homes bought by local buy to let landlords are not left idle, as they equate to 3,576 of new homes for local people, most of whom who see renting as a better option because of the choice, the simplicity and the flexibility which renting brings.

In the 60’s/70’/80’s, the traditional thoughts that you were a failure unless you owned your own home have now all but disappeared, because if you ask many young people, they would probably say renting was the perfect option for them at certain times of their life. 

Despite Property Values Rising - Are Aylesbury Apartments Just As Affordable As 10 Years Ago?

Research shows that certain types of Aylesbury property are just as affordable today than they were before the 2007 credit crunch.

Roll the clock back to 2007 just before the credit crunch hit which saw Aylesbury property values plummet like a lead balloon and the Aylesbury property market had reached a peak with the prices for Aylesbury property hitting the highest level they had ever reached.  Between 2008 and 2010, Aylesbury property values lay in the doldrums and only started to rise in 2011, albeit quite slowly to begin with.

Nevertheless, even though property values have now passed those 2007 peaks, my research indicates that Aylesbury property, especially flats/apartments, are now just as affordable as they were before the 2008 credit crunch (in real terms).

Back in 2007, the average value of an Aylesbury flat/apartment stood at £157,530 and today, it stands at £197,976, a rise of £40,446 or 25.7%.

However, between 2007 and today, we have experienced inflation (as measured by the Government’s Consumer Price Index) of 25.97% meaning that in real spending power terms Aylesbury apartments are 0.3% more affordable than in 2007. Looking at it another way, if the average Aylesbury apartment (valued at £157,530 in 2007) had risen by 25.97% inflation over those 10 years, today it would be worth £198,441 (instead of the current £197,976)… not much different in real terms.

The point I’m trying to get across is that Aylesbury property is more affordable than many people think.  Aylesbury first time buyers can get on the ladder as 95% mortgages have been readily available to first-time buyers since 2010.

It really comes down to a choice and if Aylesbury first-time buyers can get over the hurdle of saving the 5% deposit for the mortgage on the property – they will be on to a winner, especially with these ultralow mortgage interest rates, a mortgage can be between 10% and 30% cheaper per month than the rental payments on the same house.

So why aren’t Aylesbury 20 somethings buying their own home?

Back in the 1960’s and 1970’s, renting was considered the poor man’s choice in Aylesbury (and the rest of the Country) a huge stigma was attached to renting. However, over the last 10 years as a country, we have done a complete U-turn in our attitude towards renting - meaning that many people find renting a better option and a lifestyle choice.

Saving the 5% deposit means going without many luxuries in life (such as holidays, every satellite movie and sports channel, socialising or the latest mobile phone – even if only in the short term) therefore instead of saving every last pound to put towards a mortgage deposit Aylesbury 20 somethings choose to rent.

There is no denying the simple fact that over the next 10 to 15 years, the people who choose to rent instead of buy in Aylesbury will continue to rise.

Therefore, everyone in Aylesbury has a responsibility to ensure that an adequate number of quality Aylesbury rental properties are safeguarded to meet those future demands. Interestingly, what I have noticed though over the last few years are the expectations of Aylesbury tenants on the finish and specification of their Aylesbury rental property.

It was perceived that in the past, that what a tenant wanted from their Aylesbury rental property was moderately unassuming because renting a property was only a short-term choice to fill the gap before jumping on the property ladder. Before the millennium, wood chip wall paper and twenty-year-old kitchen and bathroom suites were considered the norm.

However, Aylesbury tenants’ expectations are becoming more discerning as each year goes by.  I have also noticed the length of time a tenant remains in their Aylesbury property is becoming longer (and this was backed up recently by stats from a Government Report), although I have noticed a tendency for many Aylesbury landlords not to keep the rental payments at the going market rates  - maybe a topic for a future article for my blog?

The bottom line is this … Aylesbury landlords will need to be more conscious of tenants needs and wants and consider their financial planning for future enhancements to their Aylesbury rental properties over the next five, ten and twenty years -  e.g. decorating, kitchen and bathroom suites etc etc ..

The present-day and future situation of the Aylesbury private rental property market is important, and I frequently liaise with Aylesbury buy-to-let investors looking to spread their Aylesbury rental-portfolios. I also enjoy meeting and working alongside Aylesbury first time landlords, to ensure they can navigate through the minefield of rental voids, the important balance of capital growth and yield and ensuring the property is returned back to you in the future in the best possible condition.

4.46% of Aylesbury Vale is Built on ... Building Plot Dilemma or Not?

Well the fallout from the recent Budget is still continuing.  I was chatting to a couple of colleagues the other day, when one said, “There isn’t enough land to build all these 300,000 houses Philip Hammond wants to build each year”.

...and if you read the Daily Mail, you would be forgiven for thinking the Country was at bursting point ... or is it?

It was 60 years ago the first satellite was launched (Sputnik). All the Superpowers have used them to take high definition pictures of each other for decades, but now satellites and their high-powered cameras are being used for more peaceful purposes. The European Environment Agency (EEA) have been taking high definition pictures of the UK from outer-space to give us a focused picture of what every corner of the Country really looks like … and the findings will come as a surprise.

As my blog readers know, I always like to ask the important questions relating to the Aylesbury property market. If you are an Aylesbury landlord or Aylesbury homeowner, this knowledge will enable you to make a more considered opinion on your direction and future in the Aylesbury property market. Like every aspect of all economic life, it’s all about supply and demand, because over the last twenty or so years, there has been an imbalance in the British (and Aylesbury) housing market, with demand outstripping supply, meaning the average value of a property in Aylesbury Vale has risen by 411.69%, taking an average value from £66,700 in 1995 to £341,300 today.

Using the information from the EEA and data crunched by Sheffield University with their Corine-Land Cover project, I posed them a few questions about the local area, interesting questions I would like to share with you …

1. What proportion of the whole of Aylesbury Vale is built on?

4.46%

That surprised you, didn’t it! In the study, land classified as ‘urban fabric’ defined as land which has between 50% and 100% of the land surface is built on, (meaning up to a half might be gardens or small parks, but the majority is built on).

2. How much land is intensively built on locally?

Of that amount mentioned above, how much of it is high-density urban fabric? (i.e. where 80% to 100% is built on – still leaving 20% for gardens)  Less than 0.1%  - again I bet that surprised you!

3. So how is the land used locally?

Industry                                 0.35%

Pastures                                 45.55%

Arable Farmland                  43.62%

...the rest being made up of various other minor types such as airfields and forests, etc.

Aylesbury and the surrounding areas are greener than you think! In fact, I read that property covers less of the UK than the land revealed when the tide goes out. The assumption that vast bands of our local area have been concreted over doesn't stand up to inspection. However, the effect of housing undoubtedly spreads beyond its actual footprint, in terms of noise, pollution and roads.

Now I am not suggesting for one second we concrete over every inch of the locality, but the bottom line is we, as a country, are growing at a quicker rate than the households we are building. I appreciate the emotional effect of housing is greater than other land use types because most of us spend the vast majority of our time surrounded by it. As Brits, we live our lives driving along roads, walking on footpaths and working and living in buildings meaning we tend, as a result, to considerably overemphasise how much of it there is.

In fact, I was only flying home recently back from a short break abroad, when I looked down and I was reminded just how green Britain actually is!

The bottom line is Aylesbury people and the local authorities are going to have to put their weight into building more homes for people to live in. There is going to have to be some give and take on both sides, otherwise house prices will continue to rise exponentially in the future and Aylesbury youngster’s won’t be able to buy their own Aylesbury home, meaning Aylesbury rents and demand for private rented accommodation in Aylesbury can (and will) also grow. 

Aylesbury Property Market and Hammond’s Budget Promise to Build 300,000 more homes

I miss the days of George Osborne as Chancellor, with his hardhat and hi-vis jacket. He must have visited every new home building site in the UK with his trademark attire! For the last few years, Philip Hammond hasn’t come close to even donning a ‘Bob the Builder’ outfit. However, with what appears to be a change in focus by the Tories to try and ensure they get back in power in 2022, they appear to have fallen in love with house building again with the Chancellor’s promise to create 300,000 new households in a year.

Nationally, the number of new homes created has topped 217,344 in the last year, the highest since the financial crash of 2007/8. Looking closer to home: in total there were 1,323 ‘net additional dwellings’ in the last 12 months in the Aylesbury Vale District Council area, an increase of 106% on the 2010 figure.

The figures show that 91% of this additional housing was down to new build properties. In total, there were 1,208 new dwellings built over the last year in Aylesbury Vale. In addition, there were 131 additional dwellings created from converting commercial or office buildings into residential property and a further 3 dwellings were added as a result of converting houses into flats.

While these all added to the total housing stock in the Aylesbury Vale area, there were 19 demolitions to take into account.

I was encouraged to see some of the new households in the Aylesbury area had come from a change of use. The planning laws were changed a few years back so that, in certain circumstances, owners of properties didn’t need planning permission to change office space in to residential use.

With the scarcity of building land available locally (or the builders being very slow to build on what they have, for fear of flooding the market), it was pleasing to see the number of developers that had reutilised vacant office space into residential homes in the local council area. Converting offices and shops to residential use will be vital in helping to solve the Aylesbury housing crisis especially, as you can see on the graph, that the level of building has hardly been spectacular over the last seven years!

Now we have had the autumn budget, Theresa May and Philip Hammond have set out their stall with housing as their key focus. I was glad to see the Government introducing a variety of changes to improve housing, including more funding for the supply side and an injection of urgency into the planning system.

The biggest question is, just where are the Government going to build all these new houses? 

Back to the main point though and the focus on the housing market by the Tory’s is good news for all homeowners and buy to let landlords, as it should encourage more fluidity in the market in the longer term, sharing the wealth and benefits of homeownership for all. However, in the short term, demand still outstrips supply for homes and that will mean continued upward pressures on rents for tenants.

Aylesbury Rents Set to Rise to £955 pm in Next 5 Years

It’s now been a good 12/18 months since annual rental price inflation in Aylesbury peaked at 3.4%. Since then we have seen increasingly more humble rent increases. In fact, in certain parts of the Aylesbury rental market over the autumn, the rental market saw some slight falls in rents. So, could this be the earliest indication that the trend of high rent increases seen over the last few years, may now be starting to buck that trend?

Well, possibly in the short term, but in the coming few years, it is my opinion Aylesbury rents will regain their upward trend and continue to increase as demand for Aylesbury rental property will outstrip supply, and this is why.

The only counterbalance to that improved rental growth would be to meaningfully increase rental stock (i.e. the number of rental properties in Aylesbury). However, because of the Government’s new taxes on landlords being introduced between 2017 and 2021, that means buy-to-let has (and will) be less attractive in the short term for certain types of landlords (meaning less new properties will be bought to let out).

Interestingly, countless market experts assumed at the start of 2017, that the number of rental properties would in fact drop throughout the year. The assumption being as the new tax rules for landlords started to kick in, landlords looked to kick their tenants out, sell up and invest their capital elsewhere. (Although ironically that would lower supply of rental properties, decreasing the supply, meaning rents would increase again!).

Anecdotal evidence suggests, confirmed by my discussions with fellow property, accountancy and banking professionals in Aylesbury, that Aylesbury landlords are (instead of selling up on masse), actually either (1) re-mortgaging their Aylesbury buy-to-let properties instead or (2) converting their rental portfolios into limited companies to side step the new taxation rules.

The sentiment of many Aylesbury landlords is that property has always weathered the many stock market crashes and runs in the last 50 years. There is something inheritably understandable about bricks and mortar – compared to the voodoo magic of the stock market and other exotic investment vehicles like debentures and crypto-currency (e.g. BitCoin). 

Remarkably, there is some good news for tenants, as Tory’s recently published the draft Tenants’ Fee Bill, which is designed to prohibit the charging of tenants lettings fees on set up of the tenancy. However, looking at evidence in Scotland, I expect rents to rise to compensate landlords, thus hammering faithful tenants looking for long-term tenancy agreements the hardest. This growth will be on top of any usual organic rent growth.  It really is swings and roundabouts!

So, what does this all mean for landlords and tenants in Aylesbury? In my considered opinion,

Rents in Aylesbury over the next 5 years will rise by 9.2%, taking the average rent for an Aylesbury property from £875 per month to £955 per month.

To put all that into perspective though, rents in Aylesbury over the last 12 years have risen by 21.5%. In fact, that rise won’t be a straight-line growth either, because I have to take into account the national and local Aylesbury economy, demand and supply of rental property, interest rates, Brexit and other external factors. 

In the past, making money from Aylesbury buy-to-let property was as easy as falling off a log. But with these new tax rules, new rental regulations and the overall changing dynamics of the Aylesbury property market, as a Aylesbury landlord, you are going to need work smarter and have every piece of information, advice and opinion to hand on the Aylesbury, Regional and National property market’s, to enable you to continue to make money. 

Increase in Interest Rates to cost Aylesbury Home Owners £263.10 a year

Aylesbury homeowners will be among those affected by the latest rise in the Bank of England interest rates. The first increase in 10 years; they have just been raised from 0.25 percent to 0.5 per cent. This uplift comes as inflation hits a 51-month high of 2.9 per cent whilst the national unemployment rate is at an all-time low of 4.3 per cent.

    

Interestingly, the Governor of the Bank of England has indicated that the interest rate is likely to increase again over the next couple of years, but Mr Carney said mortgages and savings would not be affected in the short term. However, look at all the big banks and just about all of them have increased their standard variable mortgage rate..  

The average Aylesbury mortgage is £105,241

I have to ask by how much Aylesbury homeowners (on variable rate or tracker mortgages) will see their repayments increase?

In the HP20 postcode there are 2,145 homeowners with a mortgage, of which 921 have a variable rate mortgage (the remaining have fixed rate mortgages). The total amount owed by those HP20 homeowners with those variable rate mortgages is £96,978,458, meaning the average monthly mortgage payment for those home owners on variable rate mortgages before the interest rate rise was £820.59 per month and now its £842.51 per month … meaning

The interest rate rise will cost Aylesbury

homeowners on average an extra £263.10 per year

Whilst this is the first raise in interest rates in over 10 years, it must be noted it is at a significantly low level compared to figures in the 1970s and early 1990s. Many of my readers talk of interest rates at 17 per cent when Sir Geoffrey Howe increased them to try and combat the hyperinflation (from the fallout of the financial crisis that hit Britain in the 1970’s) and Norman Lamont in September 1992 with the infamous Black Wednesday crisis, when interest rates were raised from 10% to 15% in just one day.

So, what will this interest rate actually do to the Aylesbury housing market?

Well, if I’m being frank – not a great deal. The proportion of Aylesbury homeowners with variable rate mortgages (and thus directly affected by a Bank of England rate rise) will be smaller than in the past, in part because the vast majority of new mortgages in recent years were taken on fixed interest rates. The proportion of outstanding mortgages on variable rates has fallen to a record low of 42.3 per cent, down from a peak of 72.9 per cent in the autumn of 2011.

If more Aylesbury people are protected from interest rate rises, because they are on a fixed rate mortgage, then there is less chance of those Aylesbury people having to sell their Aylesbury properties because they can’t afford the monthly repayments or even worse case scenario, have them repossessed.

However, and this will be of interest to both Aylesbury homeowners and Aylesbury buy to let landlords …

.. for every 1% increase in the Bank of England interest rate, it will cost the average Aylesbury homeowner on a variable rate mortgage £87.70 per month

So, what next? Because UK inflation levels are at 2.9 per cent (the country’s highest rate since April 2012) and the Bank of England is tasked by HM Government to keep inflation at 2 per cent using various monetary tools (one of which is interest rates) – you can see why interest rate rises might be on the cards in the future as increasing interest rates tends to dampen inflation.

Now of course there is a certain amount of uncertainty with regard to Brexit and the negotiations thereof, but fundamentally the British economy is in decent shape. People will always need housing and as we aren’t building enough houses (as I have mentioned many times in the Aylesbury Property Blog), we might see a slight dip in prices in the short term, but in the medium to long term, the Aylesbury property market will always remain strong for both Aylesbury homeowners and Aylesbury landlords alike.

One in 16 rental properties in the Aylesbury area will be illegal in 2018

As the winter months draw in and the temperature starts to drop, keeping one’s home warm is vital. Yet, with the price of gas and electricity rising quicker than a Saturn V rocket and gas, oil and electricity taking on average 4.4% of a typical Brit’s pay packet (and for those Brit’s with the lowest 10% of incomes, that rockets to an eye watering 9.7%), whether you are a tenant or homeowner, keeping your energy costs as low as possible is vital for the household budget and the environment as a whole.

For the last 10 years, every private rental property must have an Energy-Performance-Certificate (EPC) rating.  The property is given an energy rating, very similar to those on washing machines and fridges with the rainbow coloured graph, of between A to G (A being the most efficient and G the least). New legislation comes in to force next spring (2018) for English and Welsh private landlords making it illegal to let a property that does not meet a certain energy rating. After the 1^st of April next year, any new tenant moving into a private rented property or an existing tenant renewing their tenancy must have property with an energy performance rating of E or above on the property’s EPC and the new law will apply for all prevailing tenancies in the spring of 2020. After April 2018, if a landlord lets a property in the ‘F’ and ‘G’ ratings (i.e. those properties with the worst energy ratings) Trading Standards could fine the landlord up to £4,000.

Personally, I have grave apprehensions that many Aylesbury landlords may be totally unaware that their Aylesbury rental properties could fall below these new legal minimum requirements for energy efficiency benchmarks. Whilst some households may require substantial works to get their Aylesbury property from an F/G rating to an E rating or above, my experience is most properties may only need some minor work to lift them from illegal to legal. By planning and acting now, it will mitigate the need to find tradespeople in the spring when every other Aylesbury landlord will be panicking and paying top dollar for work to comply.

Whilst there is money and effort involved in upgrading the energy efficiency of rental property, a property that is energy efficient will have greater appeal to tenants and other buy-to-let landlords/investors and this will enable you to obtain higher rents and sale price (when you come to sell your investment).

So, how many properties are there in the area that are F and G rated .. well quite a few in fact. Looking at the whole of the Aylesbury Vale District Council area, of the 9,234 privately rented properties, there are ..

430 rental properties in the F banding

137 rental properties in the G banding

That means just over one in 16 rental properties in the Aylesbury and surrounding area has an Energy Performance Certificate (EPC) rating of F or G. From April next year it will be illegal to rent out those homes rated F and G homes with a new tenancy.

Talking with the Energy Assessors that carry out our EPC’s, they tell me most of a building’s heat is lost through draughty windows/doors or poor insulation in the roof and walls. So why not look at your EPC and see what the assessor suggested to improve the efficiency of your property? 

I can find the EPC of every rental property in Aylesbury, so irrespective of whether you are a client of mine or not, don’t hesitate to contact me via email (or phone) if you need some guidance on finding out the EPC rating or need a trustworthy contractor that can help you out? 

Aylesbury Homeowners Are Only Moving Every 13 Years (part 2)

In the credit crunch of 2008/9 the rate of home moving plunged to its lowest level ever. In 2009 the rate at which a typical house would change hands slumped to only once every 21 years. The biggest reason being that confidence was low and many homeowners didn’t want to sell their home as Aylesbury property prices plunged after the onset of the financial crisis in 2008. However, since 2009, the rate of home moving has increased (see the table and graph below), meaning today:

The average period of time between home moves in

Aylesbury is now 13 years.

This is an increase of 61.31 per cent between the credit crunch fallout year of 2009 and today, but still it is a 21.27 per cent drop in moves by homeowners, compared to 15 years ago (The Noughties).

So why aren’t Aylesbury homeowners moving as much as they did in the Noughties?

The causes of the current state of play are numerous. In last weeks article I talked about how ‘real’ incomes and savings had been dropping. Another issue is the long-term failure in the number of properties being built. Only a few weeks ago in the blog, I was discussing the draconian planning rules meaning house builders struggle to locate building land to actually build on.

Back in the 1960’s and 1970’s, as a country, we were building on average 300,000 and 350,000 households a year. The Barker Review a few years ago said that for the UK to stand still and keep up with housing demand (through immigration, people living longer, a just under 50% increase in the number of households with a single person since the 1980’s and family makeup (i.e. divorce makes one household now two)) we needed to build 240,000 households a year. Over the last few years, we have only been building between 135,000 and 150,000 households a year.

Finally, as the UK Population gets older, there is no getting away from the fact that a maturing population is a less mobile one.

So, what does this mean for Aylesbury homeowners and landlords?

Well, if Aylesbury people are less inclined to move or find it hard to sell a property or acquire a new one, they are probably less likely to move to an improved job or a more prosperous part of the UK.

Many of the older generation in Aylesbury are stuck in property that is simply too big for their needs. The fact is that, in Aylesbury Vale, more than five out of every ten (or 51.2 per cent) owned houses has two or more spare bedrooms; or to be more exact ...

25,761 of the 50,302 owned households in the Aylesbury Vale

area have two or more spare bedrooms.

So, as their children and grandchildren struggle to move up the housing ladder, with those young families bursting at the seams in homes too small for them i.e. overcrowding, we have a severe case of under-occupation with the older generation - grandparents staying put in their bigger homes, with a profusion of spare bedrooms.

Regrettably, I cannot see how the rate of properties being sold will rise any time soon. Many commentators have suggested the Government should give tax breaks to allow the older generation to downsize, yet in a recent White Paper on housing published just weeks before the General Election, there was no reference of any thoughtful and detailed policies to inspire or support them to do so.

This means that there could be an opportunity for Aylesbury buy to let landlords to secure larger properties to rent out, as the demand for them will surely grow over the coming years. As for homeowners; well those in the lower and middle Aylesbury market will find it a balanced sellers/buyers market, but will find it slightly more a buyers market in the upper price bands.

Interesting times ahead!