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 

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

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

In the latter half of the 20th Century, you left school, got a job, bought a small house and kept buying and selling property, constantly upgrading until eventually they carried you out in a box. However, the perceived shame and stigma of renting is no longer the case, as it seems that the British are now beginning to accept a lifetime of renting. This is a very important consideration for both Gloucester homeowners and Gloucester landlords as it will transform the way the Gloucester property ladder looks in the future and I might ask whether or not it will exist at all for some people? The make up of households is one important factor, especially in the Gloucester property market. The normal stereotypical married couple, two kids and dog of the 1970’s and 80’s has changed. More and more we have the need for larger houses where two families come together after divorces (+ kids) and need a property to house everyone through to an increase in the number of one person households.

Looking at the data for Gloucester, of the 8,012 private rental properties in the Gloucester City Council area, 31.95% of those rented properties are one person households (2,560 properties). However, when we compare the number of one person Gloucester households who have bought their own property with a mortgage (ie therefore they are still in work), of the 33,858 owner occupied households in the area, only 3,324 of those properties are a one person household (ie 9.82%). Compared to a decade ago, this explosion in demand for decent high quality rental properties that one person households require has not been met with an increase in supply of such properties. More and more I believe Gloucester landlords need to consider this change in the make up of Gloucester households, as I believe this could be an opportunity. As an aside, another interesting stat that raised an eyebrow was that 16.1% of those 8,012 rental properties (1,289 properties) are lone parents households as well. Again, another possible opportunity that Gloucester landlords might want to consider in their future investment plans.

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

Coming back to the deposit, it’s still a fact that once you start renting it becomes that much harder to save for a deposit, regardless of the size. Interestingly, 7 out of 8 renters polled by the Halifax (86% to be exact) refuse to sacrifice the quality of accommodation they currently live in to reduce the amount of rent they pay in order to save for a deposit. This is the crux and the real reason why people aren’t buying but renting... and why demand for renting will continue to grow in the future (ie good news for landlords). 

Gloucester tenants can upgrade the quality and size of the property they live in for a minimal rent increase. The average rent of a two bed property in Gloucester is £569pm, a three bed £184pm more at £753pm,  If you had to make that jump when buying, the monthly mortgage payments would be stratospherically more than that! Without any social pressure and better quality rental properties compared to a decade ago, we will become a nation of renters within the next generation, as the UK is becoming more like Europe, where renting is ‘the norm’.

Who is going to supply all these properties to rent? Landlords! Whether you are an existing landlord looking to grow your portfolio or looking to become a ‘first time landlord’, my thoughts are take advice from as many people as possible. However, as the majority of landlords buy their buy to let properties in the same town they live, you will need specific advice about Gloucester. I can help you with this and can be contacted on 01452 387334 or neil.west@belvoir.co.uk.

Why are less Cheltenham people moving house?

During my school years, my parents seemed to move every other year (or it seemed that way). In reality, looking back at the house moves, we actually moved three times before I left home. From research I have carried out it shows things have changed considerably in Cheltenham over the last few decades, and interestingly, the trend is getting worse ... for the removal van people at any rate!

In Cheltenham, there are 51,251 properties. However, after we remove the 6,261 council houses, 10,990 privately rented houses and 543 houses where the occupants live rent free, that leaves us with 33,457 owned properties (be that 100% outright, with a mortgage or shared ownership). This means 65.3% of the properties in Cheltenham are occupied by the owner (the national average is interestingly 64.2%) but the number of people who have sold and moved house in Cheltenham, over the last 12 months, has only been 2,787. This means on these figures, the homeowners of Cheltenham are only moving on average every 12 years.

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

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

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

So what does this all mean for Cheltenham buy to let landlords? Well for the same reasons existing Cheltenham homeowners aren't moving, less ‘twenty something’s’ are buying their first home as well. Cheltenham youngsters may aspire to own their own home, but without the social pressure from their peers and parents to buy their first property as soon people reach their early 20’s, the memory of the 2008 housing crisis and the belief the hard times either aren't over or the worst is yet to come, current and would-be homeowners are warming to the idea of renting. 

I also believe UK society has changed, with the youngster’s wanting prosperity and happiness; but wanting it all now... instantly... today... without the sacrifice, work and patience that these things take. As a society, we expect things instantly, and if it doesn’t come easy, doesn’t come quick, some youngsters ask if it is really worth the effort to save for the deposit? Why go without holidays, the newest iPhone, socialising four times a week and the fancy satellite package for a couple of years, to save for that 5% deposit if there is no longer a social stigma in renting or pressure to buy as there was... say... a generation ago?

Even though, in real terms, property prices are 5% cheaper than they were ten years ago (when adjusted by inflation), 21.4% of Cheltenham properties are privately rented (nearly double it was twenty years ago). As a result, the demand for rental properties continues to grow from tenants, meaning those wishing to invest in the buy to let market, over the long term, might be on to a good thing? For advice and opinion on the Cheltenham Buy To let property market, please contact me on neil.west@belvoir.co.uk or 01242 221188 

To Let on Lease - 25 apartments / mews houses

Belvoir are delighted to offer to let as a whole 25 residential units in Gloucester . A stone's throw from the docks  and recently refurbished . 

They would be ideal  as serviced apartments or to let on individual ASTs .

       http://www.rightmove.co.uk/commercial-property-to-let/property-53091968.html

Long lease - 10 years plus, FRI Lease , The rent for the whole 25 is negotiable but would be around £90,000 to £100,000 PA , depending on the agreed terms of the lease . 

I think that let on ASTs , should bring in around £140,000 pa ( less voids and costs). If you want to find out more , get in touch with me on 01452 387334 or neil.west@belvoir.co.uk