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