1,644 Cheltenham Properties lie empty - An injustice for the 2,713 people on the Cheltenham Council House Waiting List?

Easy problems should have easy solutions  - shouldn’t they?

Problems like Cheltenham’s housing crisis, where we have a rudimentary numerical problem of too few homes for too many people ... the answer is clearly to build more property in Cheltenham - but that, unfortunately for those desperately seeking to purchase or let a property, takes a lot of time and huge amounts of money. So what of other solutions?

The most recent set of figures from 2015 state there are 1,644 empty homes in the Cheltenham Borough Council area. So it begs the question ... why not put them back onto the system and help ease the Cheltenham housing crisis? Whilst they stand empty 2,713 Cheltenham households (not people – households) are on the Council House Waiting List for council houses. Surely, we can undoubtedly all agree that property left empty for years and years isn’t morally right with the burgeoning Council House Waiting List, not to also mention the issue of homelessness.

But a different story emerges when you look deeper into the numbers. Of those 1,644 homes lying empty, only 388 properties were empty for more than six months. The local authority has to report a property being empty, even if its for a week. So many of the Cheltenham properties are either awaiting new homeowners or, in the case of rental properties, new tenants. Also most certainly, some properties are being refurbished and renovated, while others properties have homeowners who are anxious to sell but cannot find a buyer.

And this is where its gets even more interesting. Of the 388 long-term vacant properties (those empty more than six months), 37 belong to the council. However, before we all go Council-bashing, anecdotal evidence suggests these empty council houses are habitually in need of so much restoration that it’s not worth the Council’s while to do and are in the roughest parts of the council estates, they are properties that even the Council find difficult to fill.

The fact is that the number of genuinely long term empty properties is only a tiny drop in the ocean of the 50,929 properties in the area covered by Cheltenham Borough Council and, even if every one of those empty homes were filled with tenants tomorrow, it would only meet a small fraction of Cheltenham housing needs.

So what does this mean for all the homeowners and landlords of Cheltenham? Well it means with demand being so high, especially for rental properties, the certainty of the rental market growing is an inevitability because young people cannot buy and councils don’t have the money to build new council houses. 

£4,400 boost to Gloucester First time buyers

There’s a whole legion of wannabe Gloucester first-time buyers keen to get on the property ladder and they now have a 3% price advantage over the previously quicker responding army of Gloucester landlords with cash at the ready. Since the start of April, buy to let landlords have had to pay an additional 3% stamp duty so whilst demand from some Gloucester buy to let landlords has dropped away, in the interim, it offers Gloucester first time buyers  a chance to fill the vacuum with less competition from cash rich landlords (over two thirds of BTL properties were purchased without a mortgage in the last 7 years) who could bid more and complete quicker.

Looking at the average value of a terraced house in Gloucester currently standing at £148,300, that means if our Gloucester FTB went up against a Gloucester landlord, the landlord would have to pay an additional £4,449 in stamp duty. Early anecdotal evidence from fellow property professionals in the city is suggesting landlords are reducing their offers slightly on Gloucester properties to reflect the extra stamp duty.

Whilst on the face of it, it appears landlords are being punished by No.11 Downing Street, I actually believe this increase in stamp duty for landlords is a good thing for the Gloucester property market as a whole.

Since 2011/12, the Gloucester property market has performed very well indeed. Over the last 12 months, £574,284,171 has been spent buying 2,829 Gloucester properties. Figures from the Land Registry have just been released and month on month in our council area, property values are 0.1% lower, yet 4.3% higher year on year. These figures are nowhere near the heady days of 2003 (February to be exact), when Gloucester property prices rose by 24.3% in 12 months.

So as property values in Gloucester (and the UK as whole) start to stabilize and come back to some kind of balance, I am beginning to see savvy landlords view the Gloucester property market in a different light. Even with the Spring rush, gone are the days where you could make limitless money on anything that had a door, a few windows and roof. This stamp duty change has made more and more landlords,  take advice on what or not to buy and what to pay, meaning Gloucester landlords are being more calculated with their Gloucester BTL purchases.

What effect Brexit may have remains to be seen, however there is still an acute housing shortage so probably over the medium/ long term , thinks will carry on as usual.

Brexit and Cheltenham Property market – 7% more properties on the market

April Fools Day was no joke for some landlords, as they rushed their buy to let property purchases throughout late March to beat the extra 3% stamp duty George Osborne imposed on buy to let properties after the 31^st March 2016. Because some investors brought forward their 2016 property purchases to save the extra tax, speaking to fellow property professionals in Cheltenham, all of us have noticed, demand to buy in April and May from these landlords has eased.

Then we have the Brexit issue, which is also having a tempering effect on the Cheltenham property market – although if you recall I wrote about this a few weeks ago, and whilst an exit will have an effect – it won’t be the end of the world scenario some commentators are suggesting. In another article I wrote previously, I spoke of the growth rate of Cheltenham property values, and whilst the rate of growth is slowing, Cheltenham property values are still 4.7% higher year on year, albeit the growth rate month on month has started to moderate when compared to the heady days of month on month rises of 2014 and 2015. Interestingly though, a very recent members survey of the Royal Institution of Chartered Surveyors states that only 17% of members believed property values would increase over the next Quarter compared to 44% at the end of 2015.

All this had led to increase in the number of properties for sale. For example in the GL50 postcode, which  comprises of a large part of  Cheltenham , there were 259 properties for sale in the postcode in December (of which 47 came on to the market for the first time). In January, February and March, 251 properties came onto the market in the postcode district (or an average of 83 per month), meaning by end of the first Quarter, there were 278 properties available for homeowners and landlords alike to buy in GL50 (i.e. a rise of 7.3% more properties for sale). The reason this is important is because I expected the number to be slightly lower because of the normal Spring rush in the property market. Interestingly, these figures are mirrored in neighbouring postcodes throughout the Cheltenham area.

Nevertheless, I believe this easing of the Cheltenham property market is a good thing, as investment landlords wont have to pay top dollar to secure a property because of the lower competition. On the face of it, this easing should be bad news for the 73,402 Cheltenham homeowners, but nothing could be further from the truth. The majority of homeowners that move, move up market, (i.e. from a flat to terrace/town house, then a semi and then detached), so whilst last year you would have achieved a top dollar figure for your property, you would would have had to have paid an even higher top dollar to secure the one you wanted to buy. The Swings and Roundabouts of the Cheltenham Property Market!

However, all the signals suggest that whatever the aftermath of the approaching EU referendum, in the long term, the disparity between demand for Cheltenham property and the supply (i.e. the number of actual properties) will still exercise a sturdy and definitive influence on the Cheltenham property market. It would surprise me that if by 2021, whichever way we vote in late June, assuming we don’t have another credit crunch or issues like a major world conflict, property prices will be between 20% to 25% higher than they are today. 

Gloucester Rental Market in Crisis ?

‘An Englishman’s Home is his Castle’ is the phrase that was coined in Victorian times as the UK has a reputation for being a country of home owners  .. but is this really true ? In a league of the top 46 economic nations of the world, where owning your property is permissible, the UK is only ranked no.37.

As I mentioned a couple of weeks ago, at the end of the First World War, 77% of people rented their home (the vast majority renting from a private landlord as Council Housing was still very much in its infancy). Home ownership rose very slowly in the 1920’s and started to grow as the economy grew after the Great Depression. However, after the Luftwaffe had flattened huge swathes of housing in the early 40’s, the priority was to get people into clean and decent accommodation .. so Local Authority’s (Councils) took up the baton and they built large council estates in the 1950’s and 1960’s.

As the UK economy got back on its feet in the middle part of the 20th Century and wages rose, people decided they wanted to own their own home instead of renting. Throughout the post war decades, it became easier to secure a mortgage. Interestingly, by 1977, 61.6% of 30 to 34 year olds were owner occupiers with a mortgage compared to 8.7% of 30 to 34 year olds being in private rented accommodation (the remaining either being in council housing or living with friends or family). Ten years later, in 1987, we saw some significant growth in home ownership, as 68.2% of 30 to 34 year olds had a mortgage and only 4.6% of people privately rented. A decade later and there wasn’t much change as, in 1997, the homeownership figure was 68.3% but private renting had jumped to 12.1% in the same 30 to 34 year old age group.

Move on another ten years to the 2007 figures, and this showed a slight drop in home ownership to 65.8% but renting had continued to increase to 18.7% (in the 30 to 34 year old age group). The latest set of figures is for 2014, and only 47.2% of 30 to 34 year olds had a mortgage and an eye watering 33.4% of 30 to 34 year olds privately rent.

When we look at the Gloucester figures of home ownership, looking back to 1991, 73.36% of Gloucester households were owned by the homeowner, whilst 4.76% of Gloucester households were privately rented, whilst the 2011 census showed home ownership in Gloucester had dropped to 65.49% and private rented had increased to 18.05%. Much of the recent rise in the occurrence of private renting in Gloucester since the turn of the Millennium is not because property has become more expensive, but the fact these 30 somethings haven’t got a council house to move into (because they were all sold off) – so they have to rent. The selling of council housing in the 1980’s  artificially grew home ownership in the 1980’s, but as these people have got older, the younger generation didn’t have the same opportunity to buy their council house in the 1990’s, 2000’s or 2010’s. That is why, unless the council start building council houses by the acre, and hundreds of acres, private renting will continue to grow in Gloucester.

33% of Cheltenham people Rent - Is that Healthy?

Renting used to be a dirty word in the 60’s and 70’s. You either lived in a ‘Rigsby Rising Damp’ style bedsit with wood chip on the wall and a coin operated electric meter (that buzzed in the night) or you lived in a council house. In the latter part of the 20th Century, the British were persuaded that rent payments were ‘wasted money’. However, owning often makes less financial sense than renting and as the rate of home ownership is starting to drop substantially, as we roll the clock forward to today, there is no stigma at all to renting .. everyone is doing it. In fact, of the 112,874 residents of Cheltenham, 37,702 of you rent your house from either the local authority/social provider (ie council house or housing association) or private landlords – meaning 33.4% of Cheltenham people are tenants.

The idea of home ownership is deeply embedded in the British soul, in fact 73,402 Cheltenham people live in an owner occupied property (or 65.03%). Housing is at the heart of Government policy, as George Osborne has promised 200,000 new properties a year so first time buyers can buy their first home whilst recently changing the tax laws for buy to let landlords. To get votes, Margaret Thatcher (and everyone since) ran election campaigns promising everybody their own home, and as a country, we seem to equate home ownership to the ideal British life.

So as more and more people are renting nowadays, are we turning to a more European way of living? Well, I believe, as a country, we are. In fact, home ownership could be affecting your health! The UK, according to Bloomberg, is only the 21st most healthy country in the world. Germany is at No.10 and Switzerland at No.4 and home ownership is at 52.5% and 44% respectively in those countries (in the UK it is 64.8%).

I am not suggesting that low home ownership rates in Switzerland and Germany are directly linked to health, nor, do I expect Brits to all go to Berlin, Zurich or Düsseldorf and realise how happy people are when they don't need to worry about all the stresses which accompany home ownership. 

Renting is here to stay in Cheltenham and it’s growing incrementally each year. Even with the new tax rules for landlords, buy to let is still a viable investment option for most people in the town. There has never been a better time to buy buy to let property in Cheltenham, but buy wisely. Gone are the days that you would make profit on anything with four walls and a roof. Take advice, take opinion, do your homework.

Only 4,197 Council Houses in Gloucester left – opportunity or problem?

The ‘Right to Buy’ scheme was a policy introduced by Margaret Thatcher in 1980 which gave secure council tenants the legal right to buy the council home they were living, with huge discounts. The heyday of Council ‘Right To Buys’ was in the 80’s and 90’s, when 1,719,368 homes in the country were sold in this manner between October 1980 and April 1998. However, in 1997, Tony Blair reduced the discount available to tenants of council houses and the numbers of properties being bought under the Right to Buy declined.

So what does this mean for Gloucester homeowners and landlords? Well quite a lot in fact!

Looking at the figures for the local authority, whilst the number of ‘Right to Buys’ have dwindled over the last few years to an average of only 14  sales per year, one must look further back in time. Looking at the overall figures, 2,683 Council properties were bought by council tenants in the Gloucester City Council area between 1980 and 1998. Big numbers by any measure and even more important to the whole Gloucester property market (i.e. every Gloucester homeowner, Gloucester landlord and even Gloucester aspiring first time buyers) when you consider these 2,683 properties make up a colossal 6.96% of all the privately owned properties in our area (because in local authority area, there are only 38,502 privately owned properties).

Gloucester first time buyers and landlords can now buy these ex-council properties second hand (or as some like to call them ‘pre-loved ex–local authority dwellings’) as those original 80’s and 90’s tenants (now homeowners) have more than passed the time of any claw back of the discount they received (council discount was repayable if the first owner sold within a stipulated time period - usually 5 years).

Now let us all be honest, some (not all), but some ex-council properties lack the vital KSA that some landlords crave. The new homes builders know all about KSA (or Kerb-Side-Appeal) as they dress up the exteriors of their new homes to make them more appealing to buyers ... and if you don’t believe me ... why do Show homes exist? Going on the exterior looks of a modern property might be a theoretically good way of choosing a Gloucester buy-to-let property, but in a challenging market, some Gloucester investors are finding a more no-nonsense down to earth approach brings the largest returns.

Yes, the modern stuff being built in Gloucester is lovely, but too many landlords purchase buy to let property solely based on where they would choose to live themselves, instead of choosing with a business head and choosing where a tenant would want to live ... because remember the first rule of buy to let property … you aren’t going to live the property yourself. What an ex-council property lack in terms of KSA, they more than make up for in other ways.  Tenants more worried about how close the property is to a particular school or family members for child care matter to them far more than the look of a property. 

Whilst ex-council properties tend to increase in value at a slower rate than more modern properties, that is more than made up in the much higher yields – and those built between the wars or just after are really well built. Tenant demand for such properties is good since Gloucester property values are so expensive, a lot of people can’t get mortgages to buy, so they will reconcile themselves to renting, meaning there is a good demand for that sort of property to rent. Also, the very fact the council were forced to sell these Gloucester properties in the 80’s and 90’s, means that today’s younger generation who would have normally got a council house to live in themselves, now can’t as many were sold ten or twenty years ago. 

So to Gloucester landlords I say this … don’t dismiss ex-council houses and apartments – but remember the 1st rule of buy to let (see above). However, those very same Gloucester landlords should go in with their eyes open and take lots of advice. Not all ex-council properties are the same and even though they have good demand and high yields, they can also give you other headaches and issues when it comes to the running of the rental property. 

If you would like more advice, please do contact me neil.west@belvoir.co.uk 

Has owning a home become an unattainable dream for the 1,687 Cheltenham 28 year olds

My parents bought their first house in the 1960’s, they were in their early 20’s. Interestingly, looking at some research by the Post Office from a few years ago, in the 1960’s the average age people bought their first house was 23. By the early 1970s, it had reached 27, rising to 28 in the early 1980’s.

This year alone, 1,687 people in Cheltenham will turn 28 and 1,819 in 2017 .. and dare I say 1,943 in 2018 .. year in year out the conveyor belt carries on .. where are the Cheltenham youngsters going to live?

Ask a Cheltenham ‘twenty something’ and they will say they do not expect to buy until they are in their mid thirties - seven years later than the 1980’s. Some people even say they will never be able to buy a property and the newspapers have labelled them ‘Generation Rent’ as they are people born in the 1980s who have no hope of getting on the property ladder. One of the major problems facing young Cheltenham people is the large deposit needed to get a mortgage .. or is it?

The average price paid for an apartment in Cheltenham over the last 12 months has been £190,700 meaning our first time buyer would need to save £9,535 as a deposit (as 95% mortgages have been available to first time buyers since 2010) plus a couple of thousand for solicitors and survey costs. A lot of money, but people don’t think anything today of spending a couple of thousand pounds to go on holiday; the latest iPhone upgrade or the latest 4K HD television. That amount could soon be saved if these ‘luxuries’ were withheld over a couple of years but attitudes have changed.

Official figures, from the Office for National Statistics, show the average male in Cheltenham with a full-time job earns £592.00 per week whilst the average female salary is £491.80 a week, meaning, even if one of them worked part time, they would still comfortably be able to get a mortgage for an apartment.

I was reading a report/survey commissioned by Paragon Mortgages from the autumn of last year. The thing that struck me was that when tenants were asked about their long term housing plans, some 35% of participating tenants intend to remain within the rental sector and 24% intended to buy a house in the future, with the proportion of respondents citing the “unaffordability” of housing as the reason for renting privately increasing from 69% to 74%.

However, time and time again, in the starter home category of property (ie apartments), nine times out of ten the mortgage payments to buy a Cheltenham property are cheaper than having to rent in Cheltenham. It is the tenant’s perception that they believe they can’t buy, so choose not to. Renting is now a choice. Tenants can upgrade to bigger and better properties and move up the property ladder quicker than their parents or grand parents (albeit they don’t own the property). Over the last decade, culturally in the UK, there has been a change in the attitude to renting so, unless that attitude changes, I expect that the private rental sector in Cheltenham (and the UK as a whole) is likely to remain a popular choice for the next twenty plus years. With demand for Cheltenham rental property unlikely to slow and newly formed households continuing to choose the rental market instead of purchasing a property. I also forecast that renting will continue to offer good value for money for tenants and recommend landlords pursue professional advice and adopt a realistic approach to rental increases to ensure that they are in line with inflation and void periods are kept to a minimum.

Gloucester’s ‘Generation Rent’ to grow by 1,949 households by 2021

Some commentators are saying buy to let is about to die, with the new stamp duty changes and how mortgage tax relief will be calculated. Some say 500,000 rental properties will flood the market nationally in the next 12 months as landlords leave the rental market. Have you heard the phrase ‘Bad news sells newspapers’? Let me explain why buy to let in Gloucester is only going in one direction – and not the direction the papers say they are going.

According to Sheffield University, buy to let landlords will continue fuelling the growth of the private rented sector in the coming decades. By their estimates (and they are considered a centre of excellence on the topic), the rate of home ownership nationally will fall to 50% (today it is 69.1% in Gloucester) by 2032, while the rate of private sector renting will increase to 35% (interestingly, in Gloucester it stands at 16.8% today).

Therefore, the demand for rental accommodation in Gloucester will grow by 1,949 households in the next five years ... and these are the reasons why, irrespective of the distractions set out in the newspapers

         

Gloucester property values over the last six years have risen a lot more than average wages/salaries, meaning as homeownership and mortgage availability is dependent on your ability to pay has served to push home ownership further out of reach for many, at a time when the stock of council houses has actually withered. (Nationally, the number of council houses in the last ten years has dropped from 3.16m to 2.18m households - a drop of 31.1%).

Now it’s true the governments efforts to fix the deficiency of affordable housing have focused on those who want to buy a home, ranging from Help to Buy and their much vaunted Help to Buy Isa, and Starter Homes Scheme, an initiative offering a 20% discount for first time buyers … but if you are unable to save for the deposit ... none of this means anything to the ‘20 something’s’ of Gloucester ... and they still need a roof over their heads!

Currently, over 20,000 people live in private rented accommodation in Gloucester

These are big numbers and a sizeable chunk of the electorate. So whilst it appears Gloucester “Generation Rent” youngsters will continue to rent and to not to buy for the reasons set out above, Gloucester buy-to-let landlords will be lifted by the projections of greater rental demand. Gloucester and the area around it still offers the prospect of strong economic growth forecasts and is a desirable place to live. You see, with the new rules on tax, more and more landlords will be looking to move away from the previous honeypot of central London, because its higher prices meant lower rental yields. With the new tax rules and central London’s cooling of house price inflation, more and more landlords will look further afield, including Gloucester.

So, by 2021, the number of rental properties in Gloucester will rise to 13,406

This prediction in growth of the Gloucester rental market is even on the back of the government clamping down on tax reliefs for landlords. The point is this, gone are the days of making guaranteed returns on BTL property. For the last 20 to 30 years, irrespective of which property you bought, making decent money on buy to let property was like shooting fish in a barrel – anyone could do it  - but not now. You must take a more considered approach to your existing and future portfolio, especially in Gloucester. The balance of capital growth and yield, especially in this low interest rate world we live in, means Gloucester landlords need to do more homework to ensure the investment in property gives the desired returns. 

4.5% rise in Gloucester Property Values adds weight to the City’s Housing Crisis

Gloucester’s continuing housing shortage is putting the City’s (and the Country’s) repute as a nation of homeowners ‘under threat’, as the number of houses being built continues to be woefully inadequate in meeting the ever demanding needs of the growing population in the City.   In fact, I was talking to my uncle the other day at a family get together; the subject of the Gloucester Property market came up in the conversation . It used to be that if you went out to work and did the right thing, you would expect that relatively quickly over the course of your career you would be buying a house, you would go on holiday every year, you would save for a pension.   But now things seem to have changed.

Back in the Autumn, George Osborne, used the Autumn Statement to double the housing budget to £2bn a year from April 2018 in an attempt to increase supply and deliver an extra 100,000 new homes each year until 2020.  The Chancellor also introduced a series of initiatives to help get first time buyers on the housing ladder, including the Help to Buy Scheme and extending Right to Buy from not just Council tenants, but to Housing Association tenants as well.

Now that does all sound rather good, but the Country is only building 137,490 properties a year (split down 114,250 built by private builders, 21,560 built by Housing Associations and and a paltry 1,680 council houses).    If you look at the graph (courtesy of ONS), you will see nationally, the last time the country was building 230,000 houses a year was in the 1970’s.

  

Looking at the Gloucester house building figures, in the local authority area as a whole, only 470 properties were built in the last 12 months, split down into 370 privately built properties and 100 housing association with not one council house being built.   This is simply not enough and the shortage of supply has meant Gloucester property values have continued to rise, meaning they are 4.5% higher than 12 months ago.

I was taught at school (all those years ago!), that’s it’s all about supply and demand, this economics game.   The demand for Gloucester property has been particularly strong for properties in the good areas of the City and it is my considered opinion that it is likely to continue this year, driven by growing demand among buyers. You see Gloucester’s economy is quite varied, meaning activity is expected to remain relatively strong into the early Summer of 2016.

.. and of supply, well we have spoken about the lack of new building in the City holding things back, but there is another issue relating to supply.   Of the existing properties already built, the concern is the number of properties on the market and for sale.   The number of properties for sale last month in Gloucester was 455, whilst 12 months ago, that figure was 663 whilst three years ago it stood at 897… a massive drop!

With demand for Gloucester property rising, minimal new homes being built and less properties coming onto the market, that can only mean one thing ... now is a good time to be a homeowner or landlord in Gloucester.  

Info from Office of National Stats for Building Numbers and House price growth from Land Registry and number of properties marketed from THE HOME WEBSITE.

£250,000 inheritance - Is buying Cheltenham Property still the best place for my windfall?

I had an interesting email a few weeks ago that I want to share with you. In a nutshell, the gentleman lives in Cheltenham , he is in his mid 60’s and still working. He has a decent pension, so that when he does retire in a couple of years’ time, it will give him a comfortable life. He had recently inherited £250,000. One option he told me was put it into a savings account. The best he could find was a 2 year bond with the Post Office which paid 1.9%; meaning he would get £4,750 in interest a year. One of his other options was to buy a property in Cheltenham to rent out and he wanted to know my thoughts on what he should buy, but he had concerns as he didn’t want to take a mortgage out at his time of life. He was also worried about all the tax changes he had read about in the papers for landlords.

Notwithstanding the war on Cheltenham landlords being waged by George Osborne, the attraction of bricks and mortar endures for many. As our man is a cash buyer, he would not have to deal with the intricate cut to mortgage interest tax relief. It’s true he would face the extra 3% in stamp duty to buy a second property, but with some good negotiation techniques, that could soon be mitigated.

I told him that buying a Cheltenham buy to let property is all about the total return on investment. True, he could put the money in the Post Office bond and receive his interest of £4,750 a year or, as he rightly suggested, invest in property in Cheltenham. The average yield (yield being the equivalent of the interest rate on the property) at the moment in Cheltenham is 3.58% per annum, meaning our potential F.T.L (First Time Landlord) should be able to, depending on what he bought in the town, earn before costs £8,950 a year.

The bottom line is that the success of investing in Cheltenham buy to let property versus a savings account with the Post Office (or whatever Bank or Building Society is offering the best rate) will depend on the performance of those assets. Unlike with a savings account, with property the capital you invested can also go up (and yes, it can go down as well – more of that in second). Property values in Cheltenham have risen in the last twelve months by 4.5% meaning, that if our chap had bought a year ago, not only would he have received the £8,950 in rent, but also seen an uplift of £11,250 …meaning his overall return for the year would have been £20,200 (not bad when compared to the Post Office!).

..  but the doom mongers amongst you will say, property values can go down, as they did in 2008, and in 1988 and 1979. Yes, but after 1979 prices had bounced back to their ’79 levels by 1984 and went on to grow an additional 58% in the following four years. Then again, they dropped in 1988 and did take 13 years to reach back to those ’88 figures, but the following six years (between 2001 and 2007) they then increased by an additional 66%. Now, according to the Land Registry, average property values in Gloucestershire currently stand 0.14% below the January 2008 level, and anecdotal evidence suggests that in the nicer parts of Cheltenham, we are well above these sorts of levels. Therefore, all this talk of property crashes is unfounded.

… and what would that £250,000 get you in Cheltenham? A very nice 3 bed semi in Hatherley, a stunning 3 bed apartment within Park House or a luxury 2 bed duplex apartment in the heart of Cheltenham  .. in fact, the world is your oyster. But which Oyster? For good, sound advice as what to buy in Cheltenham , please call me (01242 221188 )  or drop me an email neil.west@belvoir.co.uk

Is this the end for first time buyers?

7,004 Cheltenham Homes bought by private landlords in the last 20 years – Is this the end for first time buyers?

People are always going to need a roof over their heads and the need for somewhere to live will never go out of fashion – it’s a necessity for every single person. The 22 to 30 year olds of the town have a choice to what type of roof they have ... they rent from the Council, they can rent from a private landlord or finally they can get a mortgage and buy one. In the 1970’s/80’s and 90’s, the expected thing was to save like mad for two years for the deposit whilst living at home or renting a cheap two up two down, then buy your first house. However, more recently fewer Cheltenham youngsters have been buying, choosing to rent instead – mainly from private landlords (as Councils have been selling off council housing on the Right to Buy Schemes). The numbers are truly staggering ... and I want to share them with you.

Roll the clock back 20 years and Cheltenham was a different place. There were 41,187 households in Cheltenham and 27,611 of those were owner occupied. Move to the present, and with all the building in the town, the total number of households has increased by 24.4% to 51,251 and quite surprising (to me at least), the number of owner-occupiers has increased to 33,078 (although as a proportion, it is only 64.5% compared to 67% twenty years ago).

However, it’s rented sector that is truly fascinating … twenty years ago, only 3,986 properties were privately rented in Cheltenham ... and now its 10,990, a rise of 7,004.

The twentysomethings of Cheltenham housing difficulties haven’t been helped by the local authority selling off council housing, with the number of council houses dropping from 5,823 to 4,102 over the same twenty-year period. Demand for decent rented property remains high, as Cameron’s much vaunted house building program is years away and has decades of under investment to catch up on before it starts to affect demand. Even with the Buy to Let tax rule changes over the coming few years (which will see the maximum tax relief available to landlords drop from 45% to 20%), private landlords still have an important role to play in housing the people of Cheltenham and those who educate themselves and treat it as a business will survive and prosper.

The best way Cheltenham landlords can protect their income from property (and mitigate the affects of the tax rises) is to keep the homes they let out in Grade A condition. I have found, especially over the last three or four years, Cheltenham tenants have ever growing demands from their rental property, but many are prepared to pay ‘top dollar‘ for houses and apartments that meet their high expectations. You must not forget, letting property in is a business, so all private landlords should also seek the advice, opinion and commentary of property professionals.

Private Renting in Gloucester increases by 279.2% in 20 years

You find me in a reflective mood today as I want to talk about the future of investing in property in Gloucester. The truth is that we have got fat and lethargic, with many people having mistaken the ever rising Gloucester (and in fact the whole of the UK) property market since the 1960’s as the eternal gift that kept giving as property prices constantly rose and doubled every five to seven years.

The days when making money from property was as easy

as falling off a log are sadly over.

Whilst George Osborne has decided now is the time to milk the ‘Golden Cow’ of UK’s private landlords, with changes in taxation for buy to let property, many pundits are predicting the end of buy to let as we know it. However, it is still possible to make a reasonable, profitable and safe return on property with these changes. Remember, tenants will always want a roof over their head and I don’t see  HM Government building the millions of houses required to house them?

Nobody knows the future, and yes people can predict but I wouldn’t be afraid of this change .. because as a famous French proverb says,  ‘the more things change, the more they stay the same’. I mean, no one could have predicted how the property market has changed in Gloucester over the last couple of decades? Looking specifically at the Gloucester Parliamentary Constituency, twenty years ago, 30,438 households (meaning 73.36% of property) was owned and only 1,976 households were privately rented (meaning 4.76% of property was rented out by private landlords). Roll the clocks on twenty years and the change has been seismic …. Now only 30,416 of properties in the Constituency are home-owners (a huge drop to only 65.48% being owner occupied) and the jump in private renting has been out of this world, as 8,387properties are now privately rented proportionally 18.05%). (NB Neighbouring Constituencies show similar changes as well)

Who would have predicted in 1995 the private rental sector in

Gloucester would have grown by 279.2% in the following 20 years?

Also, if you had asked someone in 1995 to predict what would happen to property values over the next 20 years (ie between 1995 and 2015), they might have predicted similar growth to the growth experienced over the previous 20 years (ie between 1975 and 1995), which was a very impressive 351.55%. Yes, property values in Gloucester have increased over the last 20 years (between 1995 and 2015), but by a more modest 206.42% (and most of that can be attributed to house price growth between 2000 and 2006.)

The property market is constantly changing and buy to let for too long has been heavily dependent solely on house price growth, where yield has been almost forgotten. I see the changes in tax and landlord and tenant law in a different perspective to the doom-mongers and see it as bringing many opportunities. You might need to change your buy to let benchmarks, your approach to financing or even consider places other than Gloucester in which to invest your money, but this will shine a light on investing in properties with healthier yields and create more realistic long term buy to let opportunities, instead of short term growth bets and wagers.

The advice I give to my landlords is this; these changes will make some landlords panic, meaning competition for decent Gloucester buy to let bargains will reduce as fear of change kicks in and amateur investors flee the market. These opportunities will provide a more stable platform for knowledgeable and wise Gloucester buy to let landlords to thrive in. If you want to learn more about the Gloucester Property Market feel free to get in touch. 

Cheltenham Buy to Let sees returns of 8.73% in 2015

The other day I got chatting with one of my out of town landlords who was back in Cheltenham visiting his family.  Brought up in Cheltenham, he went to the Pate’s Grammar School back in the 1970’s and is now a University Lecturer in central London.  To enhance his retirement, he has a small portfolio of four properties in the town and wanted my advice on where to buy the next property in Cheltenham (as he lives in a college owned flat and anyway, would never dream of buying where he lives in Kensington (where the average value of a flat is £1.62m and a City house £4.1m.  Eye-watering to say the least!!).

Before I could advise him, I reminded him that the most important thing when considering investing in property is finding a Cheltenham property with decent rental yields for income returns, yet at the same time, it must have the potential for capital growth from rising house prices over time.  Going forward, Cheltenham landlords will be under more pressure to find the best permutation of yields and capital growth, as extra stamp duty charges for buying properties and a squeeze on mortgage interest relief will raise their costs.

However, (you knew there would be a however) before we look at yield and capital growth, one important consideration that often many landlords tend to overlook, is the propensity of how likely the rent will increase.  Interestingly, the average rent of a Cheltenham property currently stands at £989 per month, which is a rise of 2.9% compared to twelve months ago (although it must be noted this rise in rents is for new tenancies and not existing tenants). Anyway, back to yield and capital growth, the average value of a Cheltenham property currently stands at £316,700, meaning the average yield stands at 3.75% per annum, which on the face of it, many landlords would find disappointing.  That is the problem with averages, so if I were to look at say 2 bed houses in Cheltenham which are the sort of properties a lot of landlords buy, in Cheltenham, the average value of a 2 bed house is £200,700, whilst the average rent for a 2 bed house is £842 per month, giving a yield of 5.03%.  

Ultimately investors want to be making gains from both rent and house price growth.   When combined, the rental yield and capital growth gives you the return on investment, and that is what I told our University friend from Kensington.   Return on investment is everything.   So, looking at property values in Cheltenham have risen in the last year by 3.7% …. which means the current annual return on investment in Cheltenham for a typical 2 bed house is 8.73% a year .... not bad.

If you would like advice on any potential buy to lets in Cheltenham , please get in touch.

Investment Opportunity

This is a great investment opportunity - Freehold for sale , 25 units that should rent for at least £130,000 PA .

Available for sale at £1,790,000  or Available on a long lease for £72,000 PA .

               http://www.rightmove.co.uk/property-for-sale/property-40355166.html


This should  rent for at least £130,000 PA on  individual ASTs .

I think that this could be of interest to a professional investor !

Call me on 01242 221188 if you want more details.

Over half of Gloucester tenants in the private rented sector are on Housing Benefit.

“What does the ideal Gloucester tenant look like?”, asked one of my landlords from Longlevens the other day, to which he carried on before I could reply, “Let me guess, a professional couple, both in their 30’s, flawlessly tidy, pays their rent early, doesn’t complain or make a fuss, who has no plans to move and cheerfully accepts annual rent rises”.

Before I can answer that question properly, I have always believed all a landlord wants (and expects) of their tenants is to pay their rent on time and look after the property as if it were their own. In return, the landlord should provide a property that is warm, clean, modern and sort any issues (such as repairs) quickly and without fuss. 

Back to the tenants – tenants tend to fall into several groups ... 20 something professionals; young and middle aged families; corporate tenants, (i.e.their employer finds their employee a house to live in); students; older singles/couples and housing benefit claimants – and they come with different needs and wants. So choosing who best suits your Gloucester property – and steering clear of bad tenants – is a big factor in making property investment a success.

One topic that I am often asked is should they, as a landlord, accept tenants on housing benefit?

It might interest the landlords of Gloucester that of the 8,012 private rented properties in the local council area, 50.5% of the tenants of those properties are on some form of housing benefit.

4,053 properties to be exact. I know some landlords have suffered late rent payments with tenants on benefit, especially since 2008, when local authorities started paying housing benefit to tenants rather than directly to the landlords, but you can’t ignore the fact that housing benefit tenants make up a significant proportion of the Gloucester rental population. My opinion is that the final choice of accepting such tenants has to be the landlords but you can’t tar every tenant with the same brush. As a letting agent, we have had numerous long term tenants who claim housing benefit and are excellent tenants. Over the years we have had very few bad tenants and some of those were highly paid professional.  

Interestingly, it might surprise some readers of the Gloucester Property Blog, when we compare Gloucester to the national picture, Gloucester’s Housing benefit claimants are higher, as nationally a lower proportion of private tenants claim the benefit. Nationally, 39.2% of the tenants of the 3,891,467 rental properties in Great Britain claim some form of housing benefit (ie 1,526,915 properties).

Now, let us look at the occupations of Gloucester tenants, which makes even more fascinating reading. Of the 8,012 privately rented properties in the Gloucester area, 6,206 head tenants (the head tenant being classified as the head of the household) are in employment (the other 1,806 rental property head tenants either being retired, long term sick, students or job seekers).

Splitting those 6,206 head tenants down into their relevant professions, 1,880 of them are Managers, Directors, Senior Officials, Professional or Technical Professions, 547 in Administrative and secretarial occupations, 777 in Skilled Trades, 714 in the Caring, Leisure and other service occupations, 539 Sales and Customer Service Occupations, 751 Process, Plant and Machine Operatives and finally, 997 in Elementary Occupations.

The one thing I have always known anecdotally, but until I did my research, never had anything to back it up with, was the high proportion of professionals and skilled trades renting property in Gloucester – intriguing! Maybe in future articles, I will look deeper into the corporate tenant market, young and middle aged families, students and older persons rental markets.... but in the meantime, if you want more news, views and commentary about the Gloucester property market, there are many similar articles like this on the Gloucester Property Blog.

Doom and Gloom for Cheltenham Property Market ?

One of my landlords rang me last week, after he had spoken to a friend of his. Over Christmas, they were discussing the Cheltenham property market and neither of them could make their mind up if it was time to either sell or buy property. If you read the newspapers and the landlord forums on the internet, there is a good slice of doom and gloom, especially with changes in the taxation towards landlords, new legislation on checking tenants and the general uncertainty in the world economic situation.

I would admit, there are certain landlords in Cheltenham who have over exposed themselves in the last few years with high percentage loan to value mortgages. Those mortgages, with their current (yet artificially low) interest rates, will start to suffer, as their modest monthly positive cash flow/profit, i.e. income (rent) less costs (mortgage, fees, tax), may become negative when the tax and mortgage rates rise throughout 2017 and beyond.

It appears to me these landlords seem to have treated the Cheltenham Buy to Let market as a sure bet and have not approached this as a business and, as a result, they will suffer as they thought "Buy a house - rent it out so it covers the mortgage and make a few quid on top".  

Gone are the days when you could buy any old house in Cheltenham and it would make money.  Yes, in the past, anything in Cheltenham that had four walls and a roof would make you money because since WW2, property prices doubled every seven years … it was like printing money – but not anymore.

True, since January 1997, the average price paid for a Cheltenham flat/apartment has risen from £44,787 to today’s current average of £177,352 in the town, an impressive rise of 296% and terraced/town house have risen in the same time frame, from £64,986 to £288,558, an even better rise of 344% However, look back to 2005, and in that year, the average flat was selling for £147,502, meaning our Cheltenham landlord would have seen a modest rise of 20% and the terraced owner would have seen an increase of 43%, as they were selling for on average £201,494 ... not bad until you consider inflation.

Since 2005, then inflation, i.e. the cost of living, has increased by 33.4%. That means to retain its value, Cheltenham terraced property bought for £201,494 in 2005 needs to be worth £268,729 today. Therefore, our landlord has seen the ‘real’ value of his property only increase by 9.6% (i.e. 43% less 33.4% inflation).

The reality is, since around 2004/2005 we haven’t seen anything like the capital growth in property we have seen in the past and it’s not predicted to grow at the rates it has previously done either. So it is high time anyone considering investing in property stopped believing the hype and did some serious research using independent investment expertise. You can still make money by buying the right Cheltenham property at the right price and finding the right tenant. However, remember, investing in Cheltenham property is not only about capital growth, but also about the yield (the return from the rent). It’s also about having a balanced property portfolio that will match what you want from your investment.

Landlords count the cost of a Tory Election win

Can you remember 10.05pm on Thursday, 7^th May 2015 ... with the shock news that BBC Exit Polls suggested the Conservatives would be returned with majority? Landlords and letting agents breathed a  huge sigh of relief, as landlords, faced with rent controls from Red Ed and the Labour Party, now had something to cheer about as the Tory’s were always considered to be a political party that accepted the importance of the rental market, supported its development while properly targeting the lawbreaker landlords renting out below standard rental accommodation.

Since May though, George Osborne announced future rises in stamp duty for buy to let landlords and a change in the interest relief on buy to let mortgages, some people have started to question that loyalty. However, things could have been a lot worse for landlords as previous ideas of making landlord’s pay more tax was the idea (which was seriously considered) of increasing Capital Gains Tax rates to the landlord’s own income tax levels. If Landlords would have had to pay capital gains tax of 40% to 45% on any uplift in value, I can tell you here and now, that would have made investing in property a non starter for almost everyone.

However, I will admit the loss of mortgage higher rate tax relief will make a number of properties not stack up financially. The new rules are likely to slow demand in the housing market, which is in fact good news for the other landlords, as there is less competition from 'amateur' landlords offering too much.

Just a thought,  making landlords think twice and

run their numbers more cautiously is not such a bad thing.

So looking at the numbers, the November figures have just been released and they show a growth of property values in Gloucester of 0.2% over the month of November. That figure doesn’t surprise me due to the time of year. It’s quite dangerous to look at one month in isolation, so looking at a more medium term view, over the last 12 months, property values in Gloucester have risen by 3.7%, not bad when you consider inflation is running at -0.1%.

However, regular readers know my passion for looking deeper into the stats. The really interesting information is the value growth, but what types of property are actually selling in Gloucester?  Looking at all the properties sold, as recorded by the Land Registry, within 3 miles of the centre of Gloucester in September 2015 (this data always runs a couple of months behind the house price data) compared to September 2007 (a couple of months before the credit crunch started to bite and the subsequent property crash).

	Sept 2007	Sept 2015	Difference
Detached in Gloucester	57	55	-4%
Semis in Gloucester	82	72	-12%
Terraced Houses in Gloucester	63	57	-10%
Apartments / Flats in Gloucester	39	23	-41%

Now I have mentioned in previous articles that the numbers of properties selling in the city has certainly dropped post 2008, but what amazed me were the greater drop in the number of apartments selling in Gloucester compared to the drop in semis and terraced properties.

Less properties are selling than last decade in Gloucester

and the types of properties selling have changed ...

interesting times ahead for the Gloucester Property market!

Therefore, all I can say to the landlords of Gloucester is do your homework, make sure the numbers do stack up, take advice and opinion from professionals and above all, for those of you planning to add to your portfolio, buy the right property at the right price.