Cheltenham House Price Monopoly: How do Prices vary?

Over the festive period, you and your family may play the board game Monopoly. The buying and renting of property, it’s like a busman’s holiday for me! Interestingly, the game was originally invented at the turn of the 20^th Century (in 1903) and the game was initially called ‘The Landlord’s Game’!  Anyway, after a few years in the wilderness, the current owners of the game renamed it in 1935 and so began Monopoly as we know it today.

So whether you are a homeowner or landlord in Cheltenham, what would a Monopoly board look like today in the town? Property prices over the last 80 years have certainly increased beyond all recognition, so looking at the original board, I have substituted some of the original streets with the most expensive and least expensive locations in Cheltenham today.

Initially, I have focused on the GL50 postcode only, looking at the Brown Squares on the board, the ‘new’ Old Kent Road in Cheltenham today would be Knapp Road, with an average value £100,000 (per property) and Whitechapel Road would be Manser Street, which would be worth £119,100. What about the posh dark blue squares of Park Lane and Mayfair? Again, looking at GL50, Park Lane would be Montpellier Drive at £708,100 and Mayfair would be Imperial Square at £1,096,100. However, look a little further afield from the GL50 postcode, and such roads as Charlton Park Gate would claim the Mayfair card at £1,840,000! Also, I can’t forget the train stations (my favourite squares), and over the last 6 months, the average price that property within a quarter mile of the station sold for was £307,500.

So that got me thinking what you would have had to have paid for a property in Cheltenham back in 1935, when the game originally came out?

·     The average Cheltenham detached house today is worth £503,570 would have set you back 911 Pounds 2 shillings and 2 old pence.

·    The average Cheltenham semi detached house today is worth £290,370 would have set you back 525 Pounds 7 shillings and 4 old pence.

·   The average Cheltenham terraced / town house today is worth £254,500 would have set you back 460 Pounds 9 shillings and 4 old pence.

·     The average Cheltenham apartment today is worth £200,570 would have set you back 362 Pounds 17 shillings and 10 old pence.

If that sounds like another currency, you must be in your 20’s or 30’s, because it was back in February 1971, that Britain went decimal and hundreds of years of everyday currency was turned into history overnight. On 14th of February of that year, there were 12 pennies to the shilling and 20 shillings to the pound. The following day all that was history and the pound was made up of 100 new pence.

Anyway, I hope you enjoyed this bit of fun, but underlying all this is one important fact. Property investing is a long game, which has seen impressive rises over the last 80 years. In my previous articles I have talked about what is happening on a month by month or year by year basis and if you are going to invest in the Cheltenham property market, you should consider the Cheltenham property you buy a medium to long term investment, because Buy to let is pretty much what it sounds like – you buy a property in order to rent it out to tenants.

As I reminded a soon to be first time landlord from Leckhampton the other week, Buy to let in Cheltenham (as in other parts of the Country) is very different from owning your own home. When you become a landlord, you are in essence running a small business – one with important legal responsibilities. On that note, I want to remind landlords of the recent and future changes in legislation when it comes to buy to let. This year, rules have changed about tenant deposits, smoke alarms and early in the New Year, landlords will have responsibilities to do immigration checks on all their tenants. Failure to adhere to them will mean a minimum of heavy fines in the thousands or in some cases, prison ... it’s a mine field!  

If I can help you in the new year, then please do contact me at neil.west@belvoir.co.uk 

Seasons Greetings to you and your families.

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

The 5^th 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 8^th 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.

I am not some City Whiz kid with a hotline to Mr Carney at Threadneedle Street, but merely a humble letting agent, so I can not profess to know what will happen to interest rates. However, what I do know, 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 olds have been investing some of that cash into  bricks and mortar, as they search for a low risk investment opportunity.

Buying a buy to let property isn’t risk free, but there are certainly things you can do to mitigate and lower one’s exposure to risk. You see by buying a rental property, it 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, Gloucester  house prices have been extraordinarily robust, increasing by over 2113.5% between 1974 and today. Some will say there have been significant property price falls, namely in 1975, 1988 and 2008, yet each time after 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 (as they are controlled by some faceless whizzkid 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 Gloucester 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’s why many agents use a letting agent to manage their property for them.

Next, you have to buy the right property at the right price. Recently I have seen some really heart breaking situations in Gloucester and the immediate area, of people paying way too much for a property, only to lose out when they came to sell. One example that comes to mind is that of a property owner in one of those apartments in Bayswater House on the popular Harescombe Drive, close to Gloucester Royal Hospital .. a decent, well presented, top floor, one bed apartment, 43 sq metres inside (462 sq ft in old money) sold in October 2008 for £135,000. In the autumn, it only obtained £85,000, a drop of 37.04% or 5.05% a year - a very disappointing result.

I cannot stress enough the importance of doing your homework and I can help you. If you would like some advice please contact me on neil.west@belvoir.co.uk 

Has George Osborne killed buy to let in Cheltenham and Gloucester?

George Osborne, in his Autumn statement last week, caused Cheltenham and Gloucester landlords to ask whether buy to let is still a viable investment option, when he announced that landlords, when buying another buy to let property from April 2016 will have to pay an additional 3% stamp duty on top of the standard rate. So for example, It means that the stamp duty bill for a £285,000 buy to let home will rise from the current £4,250 to £12,800 from April next year.

Some say property in Cheltenham and Gloucester will be worth less because potential landlords will not be willing to pay as much for them, and if house builders or existing home-owners don't feel they are going to get as much for them , then there is less motivation to build / sell them?... and the person we can blame for this is George himself. Back in 2012, he choose to utilise the British housing market to kick start the UK economy, with subsidies, Funding for Lending and Help to Buy. However, whilst that helped the Tory’s get back into power in 2015, some say this impressive growth in the UK property market has been at the expense of pricing out youngsters wanting to buy their first home.

Others say this is the straw that breaks the camel’s back as over the next four years Landlords will slowly lose the ability to offset all their mortgage interest against tax on rental income, after changes announced in the Summer Budget. At the moment, landlords can claim tax relief on buy to let mortgage monthly interest repayments at the top level of tax they pay (i.e. 40% or 45%). However, over the next four years this will reduced slowly to the basic rate of tax – currently 20%.

Surely this is the end of Buy to Let in Cheltenham and Gloucester? Before we all run to hills panicking .. let me give you another though......

Stamp Duty rules were changed in December 2014. Before then, landlords were eagerly buying up properties under the ‘old slab style Stamp Duty’ system. For example, the stamp duty bill on that £285,000 property was lower  at £8,550, yet it isn't a million miles away from new £12,800 stamp duty bill. 

I believe that total returns from buy to let will continue to outpace other investments, such as the stock market, gilts, bonds and even pensions. Also, the best part about investing in property is that it is bricks and mortar. You can touch it, you can feel it, and it isn't controlled by some City whiz kid in Canary Wharf .. the British understand property and that goes a long way!

Buy to let has enough impetus behind it that prospective landlords will continue to buy even with a larger stamp duty bill. Cheltenham and Gloucester landlords will need to be savvy with what property they buy to ensure the extra stamp duty costs are mitigated. Buying buy to let property is a long term venture. In the past, it didn't matter what property you bought in Cheltenham and Gloucester or at what price – you would always make money. Now with these extra taxes, the adage of ‘any old Cheltenham and Gloucester house will make money’ has gone out the window. You wouldn't dream of investing in the stock market without at least looking in the newspapers or taking advice and opinion from others, so why would you take the same advice and opinion about buying a buy to let property in Cheltenham and Gloucester? 

Laxton Walk, Cheltenham 6% Yield

I've just spotted this 3 bed property on the market for offers over £140,000. You should be able to rent this for around £750 PCM to a family. 

                            http://www.zoopla.co.uk/for-sale/details/38591170

On the market with The Property Centre. I bet its sold by this time next week. This is an ideal rental property as will let to a family who tend to stay longer than couples without children . 

Give Property Centre  a call if you are interested in this or give me a call or drop me an email if you need any advice. 

neil.west@belvoir.co.uk   01242 221188 

Values of Gloucester Terraced Houses smash through the £190/sqft barrier

    Values of Gloucester Terraced Houses smash through the £190/sqft barrier

The Council of Mortgage Lenders (CML) latest snapshot of the buy to let mortgage market shows us that buy to let landlords haven’t been put off by the Chancellors announcements on the way buy to let’s are taxed.

Last month, the CML stated £1.4billion was borrowed by UK landlords to purchase 10,500 buy to let properties, up 26.5% from the same month in 2014, when only 8,300 properties were bought with a buy to let mortgage. Go back two years and the number of buy to let mortgages used for purchasing (again not re-mortgaging) is 36.4% higher! Even more interesting has been the fact that the average amount borrowed has risen as well. The average buy to let mortgage last month was £133,330, up from £128,480 a year ago.

In Gloucester, I am speaking to more and more landlords, be they seasoned professional landlords or first time landlords, as they read reports that the Gloucester rental market is doing reasonably well, with rents and property values rising. Interestingly, one landlord recently asked how much he should be paying per square foot (more of that in a second).

The first thing you have to decide is whether you want great capital growth or great rental yield, as every knowledgeable landlord knows, you can’t have both. Over the last twenty years, property values in Gloucester have risen by 205.42%, compared to Greater London’s 436.2%. This has proved that capital growth increases faster in the more expensive Capital, but your investment money doesn’t go very far, meaning there won’t be as much rental yield from a 1 bed flat in Chelsea (2% per year at best with a fair wind) as a 2 bed semi in Gloucester. However, whilst the figure of 205.42% is an average for the area, certain areas of Gloucester have seen capital growth much higher than that and others areas much worse.

If you recall in an earlier article, my research reveals that Gloucester apartments tend to generate a better yield than houses, probably because several sharers can afford to pay more than a single family. But houses tend to appreciate in value more rapidly and may well be easier to sell, simply because there are fewer being built.

So what should you be buying in Gloucester, and more importantly, for how much?

• The average apartments in the city are currently selling for approximately £205 per square foot.
• Terraced houses in Gloucester are currently obtaining, on average, £150,200 or £191 per square foot,
• An average semi in Gloucester is selling for £191,300 (and achieving £200 per square foot).

Now these are of course averages, but it gives you a good place to start from. In the coming weeks, I will look at rents being achieved on Gloucester houses and apartments, and the yields that can be obtained, depending how many bedrooms there are.  

Cheltenham Buy To let –Freehold or Leasehold

            Do I buy a freehold house or a leasehold flat in Cheltenham?

Most people will say freehold every time, because you own the land. However, it’s not as simple as that (it never would be would it!). The definitive answer though is to research what Cheltenham tenants want in the area of Cheltenham they want! The tenant is ultimately your customer, and, if they don't want to rent what you decide is best to buy, then you are not going to have a successful BTL investment.

So starting with the tenant in mind and working backwards from there, you won’t go far wrong. In a nutshell, find the demand before you think about creating the supply Leasehold flats and apartments in Cheltenham are excellent in some respects as they offer the landlord certain advantages, including the fact a flat can be initially cheaper to buy. Yields can be quite good, offering better cash flow. The building will already be insured and yes there is a service charge, but it’s still for a service at the end of the day and that cost is spread between many others (i.e. when your freehold house roof goes, its falls 100% on your shoulders) and one of my favourites there is often no garden to maintain or blown down fences to replace! 

However, some Cheltenham leasehold flats can suffer from poor capital growth. Some leasehold properties have no cap on the level of the service charge and it may get out of control. The length of the lease will significantly affect value if not renewed before it gets too short. Thankfully there’s not many, but some Cheltenham apartments/flats have burdensome clauses. Finally, with leases, there can be sub-letting issues – which means you can’t let them out.

So what do the numbers look like? Well since 2003, the average freehold property in Cheltenham (detached, semis and terraced) has risen from £190,299 to £334,564, a rise of 76% whilst the average Cheltenham leasehold property (flats and apartments) has gone up in value from £121,795 to £183,610, a more mediocre rise of 51%. 

I was really interested to note that of the 10,260 rental properties in the Cheltenham Borough Council area that the Office of National Statistics believe are either let privately or through a letting agency, 5,790 of them (or 56.4%) are apartments. However, there are only 13,832 apartments in the whole council area (be they owned, council rented or privately rented), which represents 27.2% of the whole housing stock in the area. This really intrigued me that, quite obviously, there is a high proportion of Cheltenham’s leasehold apartments/flats rented to tenants compared to detached, semi’s or terraced. Fascinating don’t you think?

Every Cheltenham apartment block, every terraced house or semi is different. Like I said at the start, the definitive answer though is to research what Cheltenham tenants want in the area of Cheltenham they want. Demand for town centre apartments, near the nightlife and transport links can be popular and can offer the Cheltenham landlord very good yields with minimal voids. However, Cheltenham terraced houses and semis, whilst not always offering the best yields (although sometimes they can), they do offer the Cheltenham landlord decent capital growth.

My advice to the prospective landlord as it is to you is do your homework. A great source of info many Cheltenham landlords use is me! What many Cheltenham landlords do, irrespective of whether you are a landlord of ours, a landlord with another agent or a DIY landlord, if you see any property in Cheltenham, that catches your eye as a potential buy to let property, be it a terraced house, semi or flat ... email me and I will email you back with my thoughts . I will tell you what you need to hear .. not want to hear.

email me on neil.west@belvoir.co.uk

Gloucester Tenants Pay 29.5% of their Salary in rent

I had the most interesting chat with a local Gloucester landlord the other day about my thoughts on the Gloucester property market. The subject of the affordability of renting in Gloucester came up in conversation and how that would affect tenant demand. Everyone wants a roof over their head, and since the Second World War, owning one’s home has been an aspiration of many Brits.  However, with rents at record highs, many are struggling to save enough for a house deposit.

Let’s be honest, it’s easy to get stuck in a cycle of paying the rent and bills and not saving, but even saving just a small amount each month will sooner or later add up.  George Osborne announced such schemes as the upcoming Help to Buy ISA, where the Government will top up a first time buyers deposit.

Therefore, I thought I would do some research into the Gloucester property market and share with you my findings.  Gloucester tenants spend on average just under a third of their salary to have a roof over their head.  According to my latest monthly research, the average cost of renting a home in Gloucester is £611 per month.  When the average annual salary of a Gloucester worker stands at £24,782 per year, that means the average Gloucester tenant is paying 29.5% of their salary in rent.  I doubt there is much left to save for a deposit towards a house after that.

You see one of the reasons for rents being so high is property prices being high.  As I have mentioned before, there is a severe lack of new properties being built in Gloucester.  It’s the classic demand vs supply scenario, where demand has increased, but the number of houses being built hasn’t increased at the same level.  Also, Gloucester people aren’t moving home as often as they did in the 80’s and 90’s, meaning there are fewer properties on the market to buy.  If you recall, a few weeks ago I said back in Spring 2008, there were over 1,700 properties for sale in Gloucester and since then this has steadily declined year on year, so now there are only 596 for sale in the city.

So, the planners in Gloucester haven’t allowed enough properties to be built in the city and existing Gloucester homeowners are not moving home as much as they used to, thus creating a double hit on the number of properties to buy.  This is a long term thing and the continuing diminishing supply of housing has been happening for a number of decades and there simply aren’t enough properties in Gloucester to match demand, these are the reasons houses prices in Gloucester have remained quite buoyant, even though economically, over the last 5 years, it was one of the worst on record for the country and the South West region as a whole.

However, things might not be all doom and gloom as originally thought, as a recent Halifax Survey  (their Generation Rent 2015 Survey) suggested  more and more people may be long term, if not lifelong tenants. In fact there is evidence in the report to suggest that the perception of how difficult it is to get on the housing ladder is vastly different between parents and people aged 20 to 45.  It seems from this survey that the state of the UK economy has shifted priorities quite significantly in quite a short space of time.  With fewer people able to save up the deposit required by mortgage lenders, more and more people are continuing to rent.  This delay in moving up the property ladder has driven rents across the UK up as more people were seeking rental properties .

It is often said that more people in central Europe rent for longer or never own their own property. The last two census in 2001 and 2011 show that proportionally the percentage of people who own their own home in Britain is slowly reducing and, as a country, we are becoming more and more like Germany.   That isn’t a bad thing as Germany is considered to have a more successful economy, one of the main stays, often quoted,  is because they have a much more flexible and mobile workforce, (which renting certainly gives) and from that, they have a higher personal income than in the UK.      

Therefore, if we are turning into a more European model and the youngsters of Gloucester and the Country have changed their attitudes, demand for rental properties will only and can only go from strength to strength, good news for Gloucester tenants as wages will start to rise and good news for Gloucester landlords, especially as property values in Gloucester are now 7.7% higher than year ago! 

How EU Migration has changed the Cheltenham Property Market

The argument of migration and what it does, or doesn’t do, for the country’s economic well being is something that has been hotly contested over the last few years. In my article today, I want to talk about what it has done for the Cheltenham Property market.

Before we look at Cheltenham though, let us look at some interesting figures for the country as a whole. Between 2001 and 2011, 971,144 EU citizens came to the UK to live and of those, 171,164 of them (17.68%) have bought their own home. It might surprise people that only 5.07% of EU migrants managed to secure a council house. However, 676,091 (69.62%) of them went into the private rental sector.  This increase in population from the EU has, no doubt, added great stress to the UK housing market.

Looking at the figures, the housing market as a whole is undoubtedly affected by migration but it has been the private rented housing sector, especially in those areas where migrants come together, that is affected the most.  Indeed, I have seen that many EU migrants often compete for such housing not with UK tenants but with other EU migrants. 

In 2001, 3.68 million people rented a property from a landlord in the UK.  Ten years later in 2011, whilst EU migration added an additional 676,091 people renting a property from a landlord, there were actually an additional 4.14 million people who became tenants and were not EU migrants, but predominately British!

As a landlord, it is really important to gauge the potential demand for your rental property, especially if you are a landlord who buys property in areas popular with EU migrants.  To gauge the level of EU migration (and thus demand), one of the best ways to calculate the growth of migrants is to calculate the number of people who ask for a National Insurance number (which EU members are able to obtain).

In Cheltenham, migration has risen over the last few years. For example, in 2009 there were 714 migrant national Insurance cards (NIC) issued and the year after in 2010, 875 NIC cards were issued. However, in 2014, this had increased to 1,169 NIC’s. However, if the pattern of other migrations since WW2 continues, over time there will be an increasing demand for owner occupied property, which may affect the market in certain areas of high migrant concentration. On the other hand, over time some households move into the larger housing market, reducing concentrations and pressures.

In essence, migration has affected the Cheltenham property market; it couldn’t fail to because of the additional working age migrants that have moved into the Cheltenham area since 2005. However, it has not been the main influence on the market. Property values in Cheltenham today are only 0.96% higher than they were in 2005. According to the Office of National Statistics, rents for tenants in the South West have only grown on average by 0.96% a year since 2005 .... I would say if it wasn’t for the migrants, we would be in a far worse position when it came to the Cheltenham property market. This was backed up by the then Home Secretary Theresa May back in 2012 - more than a third of all new housing demand in Britain is caused by inward migration and there is evidence that without the demand caused by such immigration, house prices would be 10% lower over a 20 year period.

New House Building slumps by 50.52%

Gloucester Property Market Crisis as New House Building slumps by 50.52%

One of the key factors that determine the price of anything is the demand and supply of the item that is being bought and sold. When it comes to property, demand can change overnight, but it takes years and years to build new properties, thus increasing the supply.

The Conservatives have pledged to build over 1 million homes by 2020. I am of the opinion that as a country, irrespective of which party, we have not built enough homes for decades, and if the gap between the number of households forming and the number of new homes being built continues to grow, we are in danger of not being able to house our children or grand children. I believe the country is past the time for another grand statement of ambition by another Housing Minister. Surely it’s right to give normal Gloucester families back the hope of a secure home, be that rented or owned? 

To give you an idea of the sorts of numbers we are talking about, in the Gloucester City Council area in 2006, 710 properties were built. In 2007 that rose to 880 and a year later in 2008, it peaked at 970. By 2014, that figure had dropped by a massive 50.52% to 480 properties built.

The outcome of too few homes being built in Gloucester means the working people of the city are being priced out of buying their first home and renters are not getting the quality they deserve for their money. The local authority isn't building the estates they were after the war and housing associations are having their budgets tightened year on year, meaning they have less money to spend on building new properties. I know of many Gloucester youngsters, who are living with their parents for longer because they cannot afford to get onto the housing ladder and growing families are unable to buy the bigger homes they need.

I talk to many Gloucester business people and they tell me they need a flexible and mobile workforce, but the high cost of moving home and lack of decent and affordable housing are barriers to attracting and retaining employees. Furthermore, building new homes is a powerful source of growth, creating jobs across the county and supporting hundreds of Gloucester businesses. It is true that landlords have taken up the mantle and over the last 15 years have bought a large number of properties. The Government need to be thankful to all those Gloucester landlords, who own the 9,508 rental properties in the city. Most local landlords only have a handful of rented properties (to aid their retirement), and without them, I honestly don’t know who would house all the extra people in Gloucester!

Please feel free to contact me on neil.west@belvoir.co.uk

Could your Gloucester property save you from Pension oblivion?

If you were born in the early 1970’s or late 1960’s, if you haven’t started to think about it yet, retirement is closer than you think. In fact the number of years you have left to work is less than the number of years you have worked. The basic state pension is worth £115.95 a week for a single person in 2015/16 (or £6,029 a year) and £231.90 a week for a couple (£12,118 a year) .

As a household, could you live on just over £12k a year?

However, could the property you are living in save you from poverty when you reach retirement? You see, a regular income is vital in retirement, and the bricks and mortar you own in Gloucester could provide a way for you to finance life when you retire.

If you are in your 30’s, instead of saddling yourself with bigger and bigger mortgages, going from your first time buyer flat, to a terraced, to the semi and then the large detached house, you could instead keep your terraced or small semi, turning it into buy a buy to let property, let the rent pay the mortgage and then rely on capital growth to provide you with a lump sum when you sell the property and retire.  One of the biggest plus points of buy to let is what is known as leverage. Let me explain ... say you have a deposit of 25% and the value of the property rises by 3% a year, your gains in fact multiply to 12%.  However, if property prices drop, 'leverage' can be catastrophic, as losses will also be multiplied. Property values have dropped a number of times in the last 50 years, but they always seem to bounce back ... property must be seen as a long term investment.

Let me explain how leverage could work for you. If you had bought a Gloucester house in Spring of 1983 for £30,000, using a 75% mortgage and 25% deposit, (meaning your deposit would be £7,500). Today, that Gloucester property would have risen in value to £193,173, a rise of 543.9%. However, when you look at the growth on just your deposit, the rise is even better ... instead of 543.9%, we see a rise of 2476% (remembering that the mortgage would have been paid off).

However, buy to let is not all about capital growth and in retirement, income is more important than capital growth, as rent is the key to a steady income.

So surely the best strategy is to buy those Gloucester properties with the high rents (when compared to the value of the property). These are called high yield properties in the buy to let world because the monthly return is so much greater. So surely they are the best in Gloucester? Possibly, but the properties that offer these higher yields (in the order of 5% to 6% per year) tend to be in “ not so nice areas “ of  Gloucester, historically they haven’t offered such good capital growth when compared to the city average, and have a higher tendency for void periods and such properties tend to attract tenants that have a greater propensity to be high maintenance.

Therefore, if a high maintenance rental portfolio wasn’t for you, another strategy could be buy a property with relatively smaller rental returns of 4% to 5% per year (i.e. lower yields), but in a more up market area . Properties such as these tend to suffer from less void periods (i.e. when there is no tenant in the property paying you rent) and they historically have had better long term capital growth when compared to the city average.

Every landlord is different and every property is different. All I suggest to you is do your homework. I am always happy to give advise and would be more than happy to talk to you.

Gloucester's £1.6 Billion Mortgage Timebomb

Eight years ago, in the summer of 2007, hardly anyone had heard of the term ‘credit crunch’, but now the expression has entered our daily language and even the Oxford Dictionary.  It took a few months throughout the autumn of 2007, before the crunch started to hit the Gloucester Property market, but in November / December 2007, and for the following seventeen months, Gloucester property values dropped each and every month like the proverbial stone. The Bank of England soon realised in the late summer of 2008 that the British economy was stalling under the continued pressure of the Credit Crunch. Therefore, between October 2008 and March 2009, interest rates dropped six times in six months from 5% to 0.5% to try and stimulate the British economy. 

Thankfully, after a period of stagnation, the Gloucester property market started to recover slowly in 2011, but really took off strongly in late 2013 / early 2014 as property prices started to rocket. However, the heat was taken out of the market in late 2014/early 2015, with the new mortgage lending rules and some uncertainty, when some people had a dose of pre–election nerves.  

With the Conservatives having been re-elected in May, the Gloucester property market regained its composure and in fact, there has been some ferocious competition among mortgage lenders, which has driven mortgage rates to record lows. However these record low interest rates cannot continue forever and they will go up. In the past it was not the first rate rise that was the catalyst for many homeowners and landlords to remortgage but the second or third increase.  The reason being that it was only by the time of the third rate rise, it started to hit the wallet.  However, the issue is, by the time of the second or third rate rise the best fixed rates are no longer available as they had been pulled by the banks months before.

But here is the good news for Gloucester homeowners and landlords, over the last few months a mortgage price war has broken out between lenders, with many slashing the rates on their deals to the lowest they have ever offered.  I read that the well respected UK financial website Moneyfacts said only a few of weeks ago, the average two year fixed rate mortgage has fallen from 3.6% twelve months ago to just under 2.8%.

Interestingly, according to the Council of Mortgage Lenders, the level of mortgage lending had soared to a seven year high in the UK.  So what about Gloucester?  In Gloucester, if you added up everyone’s mortgage, it would total £1.6 billion.  Even more interesting is when we look at Gloucester and split it down into the individual areas of the city,

• GL1 - Central Gloucester £354.3m
• GL2 -   Arlingham, Cambridge, Churcham, Churchdown, Down Hatherley, Elmore, Framilode, Frampton on Severn, Hardwicke, Hempsted, Highnam, Longford, Longlevens, Longney, Maisemore, Minsterworth, Moreton Valence, Norton, Over, Podsmead, Priors Norton, Quedgeley, Rudford, Sandhurst, Saul, Slimbridge, Tibberton, Twigworth, Walham, Waterwells Business Park, Whitminster £883.5m
• GL3- Barnwood, Brockworth, Churchdown, Coopers Hill, Great Witcombe, Hucclecote, Innsworth, Little Witcombe, Witcombe  £427.7m

Since 1971, the average interest rate has been 7.93%, making the current 0.5% very low.  So, if interest rates were to rise by only 2%, according to my research, the 12,337 Gloucester homeowners, who have a variable rate mortgage would, combined, have to pay an approximate additional £18,240,000 a year in mortgage payments.  That means every Gloucester homeowner with a variable rate mortgage, will on average have to pay an additional £1,478 a year or £123 a month in interest payments.

I know over the last couple of posts, I have talked about mortgages a lot however, I am not a mortgage arranger but a letting agent and as regular readers know, I always talk about what I consider to be the most important issues when it comes to the Gloucester Property market and at the moment, in my humble opinion, this is the most important thing!

Crisis in the Cheltenham Property Market ..probably

I don’t know about you, but if you watch Sky News every waking hour or read the newspapers, it always seems we as a Country, Europe or the World seem to lurch from one crisis to another. Another week, another crisis averted. It was only last summer the doommongers were predicting the end of the world over the supposed house price bubble that many believed was developing in the South. Property prices were rising at 20%+ per annum in London, only for things to ease as the property market in the capital showed a controlled slowdown and cooling in activity with price growth easing to a more realistic 8% to 9% per annum. Interestingly, there was no panic when some modest price drops were seen in some of London’s highest priced suburbs.

However, the latest  crisis is the buy to let boom and as George Osborne always likes to be topical, in the July emergency budget, he declared that he will start to scale back, from 2017, the tax relief that those high income tax rate landlords with a mortgage have benefited from. The Daily Mail ran headlines stating it was the end of the private landlord; predicting many landlords will give up on buy to let altogether and we will be inundated with rental properties up for sale as landlords feel squeezed from the market.

Even the Governor of the Bank of England, recently cautioned that the buy to let property market could destabilise the whole UK property market. He was concerned landlords who bought with high loan to value mortgages could be spooked if there is a property crash, they would panic because of negative equity, sell cheaply, which would worsen house price falls.

End of the world then?   .. this week, yes probably, but next week .. that’s another story!  Before we all go and live like a hermit in the Scottish highlands, let me explain to you my perspective on the whole subject. Two thirds of buy to let properties bought in the last eight years have been bought mortgage free – so they won’t be affected by the Chancellors’ tax changes.  Also, something I feel is often overlooked but very important, is the fact that landlords historically have only been able to normally borrow up to 75% of the value of the rental property.  In the last property crash of 2008, property values dropped by the not so insignificant figure of 18.47% in Cheltenham, but even then, when we had the credit crunch and the world’s banking sector was on the brink, no landlord would have been in negative equity in Cheltenham.

I believe we have a case of ‘bad news selling newspapers’ and I believe that buy to let, and the property market as a whole, will carry on relatively intact. It’s true reducing tax relief will hit landlords who pay the higher rate of income tax and this may slightly diminish buy to let as an investment vehicle but I doubt people will sell. Many landlords have been lazy with their investments, buying with their heart, not their head. You would never dream of investing in the stock market without doing your homework and talking to people in the know. If you want to make money in the Cheltenham property market as a buy to let landlord, it’s all about having the right property and as you grow, the right portfolio mix to offer a balanced investment that will give you both yield and capital growth.

Interest rates set to rise !!!!

Interest rates set to rise – How will that affect the Cheltenham property market?

The Bank of England has been indicating recently that UK interest rates will be going up in the not too distant future. Therefore, if you are one of the 16,665 homeowners in Cheltenham, who own your own home with a mortgage, then you need to consider your options and start to budget for an interest rate rise. However, if you are a landlord, who owns one of the 10,321 rental properties in the town, whilst your exposure to interest rate rises is lower, it is most certainly something you should be aware of.

Since the spring of 2009, British interest rates have been at a record low of 0.5%. It’s not a case of if, but when, they will rise. Some people think it will be before Christmas, although I am of the opinion, it will early in the New Year around Easter time, when they do rise. I also expect those rises will be slow, steady and limited. It depends on what is happens to UK wage rises, UK inflation and the general state of the British economy. Nevertheless, as much most of us in Cheltenham would love to pull the shutters and stick two fingers up to the world, we have to recognise we are part of a global economy and global economic worries still exist to prevent an abrupt and instantaneous rate rise.

Those Cheltenham landlords, who do have a mortgage, need to realise that as interest rates rise, their monthly mortgage costs rise. It’s easy to say you will look at your mortgage next month, then before you know it, Christmas will be here!  Don’t forget, mortgage lenders have always removed the juicy low rate mortgage deals a few months before interest rate rise. Speak to a qualified mortgage arranger, there are lots of them in Cheltenham and seriously consider fixing your mortgage rate now.  You didn’t buy your Cheltenham buy to let property for it to become a millstone around your neck. It’s all about mitigating your costs and maximising your income to make your Cheltenham buy to let property the investment you want it to be.

However, on the other side of the coin, two in three landlords who have bought property since 2007, have done so without a mortgage. A rise in interest rates might be a good thing. Let me give you some background first, then I’ll explain why. Cheltenham landlords have see their return on investment for their Cheltenham buy to let property, over the last couple of years, perform very well indeed with Cheltenham property values rising by 19.58% since the Spring of 2009. However, when rates do rise, whilst more expensive mortgage rates will ease the demand for borrowing, on the other hand, it may temper house price growth, making the property market more competitive... and therefore, we should see the return of some bargain property buys in Cheltenham!

Finally though, can I ask all Cheltenham homeowners and Cheltenham landlords, who have a mortgage that isn’t fixed, they need to recognise that rates will rise throughout 2016 to 2018 and will continue to move steadily upwards towards more viable and feasible long term levels.  I am not qualified to give that advice and this is my personal opinion, so please speak to a qualified mortgage arranger and, if appropriate, fix your mortgage before interest rates rise. Don’t say I didn’t warn you!

In the meantime, if you are a landlord looking for a bargain now, don’t despair ... there are plenty out there, if you know where to look! One place is Rightmove, another Zoopla and another OnTheMarket. However, sometimes, you can’t see the wood for the trees. At the time of writing, Rightmove had  over 800 properties for sale in Cheltenham, Zoopla 600 plus  properties for sale in the town and OnTheMarket around 240  properties ... where do you start? 

I can help you here ! If you see a property that may be of interest, please email the link to me neil.west@belvoir.co.uk and I will give you my opinion on its suitability as a buy to let investment. 

Cheltenham – The 10 year Time Bomb on Home Ownership

Many people think the British obsession with owning your own home started with Margaret Thatcher in the early 1980’s, when she allowed council tenants to buy their council houses under the right to buy scheme. However, the growth actually started just after the Second World War. Looking at the country as a whole in 1951 30% of residential property was owner occupied then, every ten years that rose incrementally to 39% by 1961; 51% by 1971; 58% by 1981 and 68.07% by 2001 but after that, it dropped to 63.4% by 2011 and continues to drop today.

Young adults tend to start to think about settling down and moving out of the family home in their early-mid twenties.  After a couple of years, they will have a choice of either buying their first house (albeit with a mortgage) or decide to privately rent for the long term (because the Council House waiting list is measured in decades at the moment!). The ratio of people owning a house with a mortgage verses privately renting is an extremely important guide to what people are doing about their housing needs and what their attitude to renting vs buying is.  With that in mind, within the next ten years, I am predicting there will be more people renting privately in Cheltenham than own a property with a mortgage and that the British love affair of property ownership will fade as the decades roll on.

This is a really important change in the way we live, as I explained to a local Cheltenham landlord the other day, knowing when and where the demand of tenants is going to come from in the coming decade is just as important as knowing the supply side of the buy to let equation, in relation to the number of properties built in the town; Cheltenham property prices and Cheltenham rents.

In the Cheltenham Borough Council area as a whole there are 10,260 households that are privately rented via a landlord or letting agency verses 16,876 households that are owned with a mortgage, so my prediction appears to be outrageous. However, when we look deeper (as the devil is always in the detail), 7,885 of those 16,876 households are 35 to 49 year olds and 4,742 are households of 50 to 64 year olds. I would expect all the 50+ years to be paying their mortgage off as they enter retirement as I would with some of the people in their mid/late 40’s. 

Meanwhile, at the other end, in the 25 to 34 age range (the age most people bought their first home in the 1970’s/80’s/90’s) only 3,110 of the 7,172 households occupied by those 25 to 34 year olds are owner occupiers with mortgages, because 4.062 households are privately rented. This means only 43.3% of 25 to 34 year olds have bought their house (with a mortgage). Twenty years ago, that would have a much higher percentage of homeowners (between 75% to 85%).

It can be seen that as the older generation pay their mortgages off as they start to get to retirement and the younger generation aren’t jumping on the property ladder like they were 20 or 30 years ago, the private rental sector will take up the slack as more and more people will want a roof over their head, but won’t buy one but rent one. With Local Authorities and Housing Associations not building houses anywhere near like the number of houses they were building in the 1950’s, 60’ and 70’s, the private landlord appears to have good demand for their rental properties for many decades to come.

This will create a polarisation in the housing market between those, mostly older, households who own outright and those, mostly younger, households who rent. Our housing market is very much turning into the European model. However, all is not lost, the younger generation will inherit their parents properties, which in turn will enable them to buy, albeit later in life.

Cheltenham Landlord’s mortgages top £616 million!

We Brits can’t stop talking about property. The hot topic of discussion is the subject of the Cheltenham Property market, but in particular, buy to let. We hear of  people who  are buying up buy to let properties quicker than an ace Monopoly player .. or so it would seem if you read the Sunday papers. So is the buy to let market a surefire way to make money?  Is it something everyone should be jumping into? The answer is Yes and No to all those questions!

A landlord only has to flick through Rightmove or Zoopla, pick any property at random and agree a price. Then, find a modest deposit of 25% (often by remortgaging their own home) which, for an average Cheltenham terraced house, would mean finding £55,113 for the deposit (as the average Cheltenham terraced house is currently worth £220,454) and borrow the rest with a low interest rate buy to let mortgage.  Finally, the landlord would rent out the property in a matter of hours for top dollar and live happily ever after, with the rent then covering the mortgage payments, with loads of money to spare and come retirement have a portfolio of property that would have quadrupled in value in fifteen years. Sounds wonderful – doesn’t it? Or does it???

Let us not forgot that the half of one per cent Bank of England base rate is artificially low. The international money markets can be fickle and if interest rates do rise quicker and higher than expected because of some unforeseen global economic situation, that monthly profit will soon turn into a loss as the mortgage will be more than the rent. Even though tenants are staying longer in their rental property, tenants still come and go and my guidance to landlords is they should allow for void periods, plus the maintenance costs of a rental property and of course, agents fees. .. all things that eat into that profit.

Interestingly, by my calculations, there are approximately 3,290 Cheltenham landlords owing in excess of £616 million in mortgages on those Cheltenham buy to let properties.  An impressive amount when you consider Cheltenham only has 0.308% of all the rental properties in the Country. It really does come down to a number of important factors going forward to ensure you are water tight for the future. A lot of my existing landlords are fixing their mortgage rates. One told me that the Metro Bank are currently offering a 5 year fixed BTL remortgage rate at 3.79% for 5 years (based on a 75% loan). I don’t give financial advice, so you must speak with a qualified mortgage advisor.. but that sounds very fair!

However, one thing I do know is that buy to let is a long term investment, it’s a ten, fifteen, twenty year plan and property prices will go down as well as up. You wouldn’t dream of investing in the stock market without advice, so why invest in the Cheltenham Property Market without advice?

Need some free advice ? Please call me on 01242 221188 or email me on neil.west@belvoir.co.uk 

The ‘Liquorice Allsorts’ Gloucester Property Market

Despite the UK economy heading in the right direction with record low mortgage rates and unemployment  figures dropping, the rate of property prices rising in Gloucester has tempered since the start of the year. This slow but sure downward trend in the rate of growth has been in evidence since mid-2014.  Property value increases continue to outpace the growth in salaries, however the gap is closing, helped by a lift in salaries over the last 6 months.  

Property values in the South West region as a whole are 3.6% higher than a year ago. Compare this to the neighbouring regions of the South East at 9.1% higher and the West Midlands at 3.5%, the majority of the country continue to see annual house price gains - the exception being Wales which recorded a slight  decline of -0.6%.

Even with the tempering in house price inflation, it does not necessarily change my outlook that property prices are likely to be firmer over the second half of 2015 amid heightening activity in the Gloucester property market.  As stated in a previous article, there is a current shortage of properties on the market, restricting supply, which in turn will provide stability and support to Gloucester property prices. 

Property investment is a long term business.  Buying the right sort of property is vital. I have recently been speaking with a number of Gloucester landlords about the importance of a balanced portfolio, when buying and renting out property. The balance between buying properties that offer good monthly returns (high yields) but quite often offer poor capital growth (i.e. they don't increase in value that much over the years compared with the average) verses properties that do go up in value quicker but often offer a lower yield.  So, what type of properties have performed best over the last few years in Gloucester, especially in terms of their capital growth?

When comparing  what the average price of detached, semi detached, terraced and flats were selling for back at the start of the Millennium to the present.  The results are quite remarkably different, almost like a bag of Liquorice Allsorts, as the different types of property have performed poles apart over the last 15 years:

·     Detached Houses in 2000 were selling on average for £125,334 and so far in 2015, they have been selling on average in Gloucester for £292,6162, a rise of 133%

·     Semi -Detached Houses in 2000 were selling on average for £77,087 and so far in 2015, they have been selling on average in Gloucester for £174,214 a rise of 126%

·    Terraced Houses in 2000 were selling on average for £52,471 and so far in 2015, they have been selling on average in Gloucester for £128,819 a rise of 146%

·       Flats and Apartments in 2000 were selling on average for £43,585 and so far in 2015, they have been selling on average in Gloucester for £102,056 a rise of 134%

Moving forward, what should new and existing buy to let landlords do with this information?  Well, the questions I seem to be asked on an almost daily basis by landlords are:

· “Should I sell my property in Gloucester?”

· “Is the time right to buy another buy to let property in Gloucester and if not Gloucester, where?”

· “Are there any property bargains out there in Gloucester to be had?”

If you would like the answers to these questions, give me a call on 01452 387334 or email me on neil.west@belvoir.co.uk 

Bricks and Mortar

The Land Registry have released their latest set of figures for the Cheltenham Property market. It makes interesting reading, as average property values in Cheltenham rose by 0.4% in May. This leaves average property values 4.5% higher than 12 months ago, meaning the annual rate of growth in the town fell to its lowest level since April 2014. When we compare Cheltenham against the regional picture, South West property values fell by 0.6%, leaving them 1.1% higher than a year ago. Obviously this is a far cry from the price rises we were experiencing in Cheltenham throughout 2014. At one point (December 2014 to be exact) property values were rising by 6.7% a year. All the same, even with the tempering of the Cheltenham property values in 2015, property values are still higher. 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 (ie selling) has dropped substantially over the last 12 months in the town. In April 2014, 233 properties sold in Cheltenham but in April 2015, that figure dropped to 126.  I have been in the Cheltenham 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 Cheltenham 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 less houses coming onto the market there is simply not as much choice of properties to buy in Cheltenham and with the population of Cheltenham ever increasing, this will generally strengthen house price growth for the foreseeable future.

So what does all this mean for Cheltenham 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 decent income at a time of low interest rates and stock market unpredictability. However, if you are thinking of investing in bricks and mortar in Cheltenham, 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 over the last few years, property value increases has 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 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.

Its true 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, mark my words, they will rise again in the future. However, even with the potential for costs to rise, demand for decent 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 up to fuel the buoyant Cheltenham property market.

If you are planning on investing in the Cheltenham property market, or just want to know more, you can contact me on 01242 221188 or neil.west@belvoir.co.uk