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?