What does 2016 have in store for the Cheltenham Property Market?

Cheltenham house prices up or Cheltenham house prices down? ... and if so, by how much? Here are my thoughts for the 33,078 Cheltenham homeowners and landlords.

The average Cheltenham property is 3.3% higher today than it was a year ago, which doesn’t sound a lot, but when you consider inflation is currently running at -0.1% (ie consumer/retail prices are dropping) and average salary growth is only around 2.5% pa, then this is bad news for first time buyers as property affordability continues to decrease.

Some commentators have said the higher stamp duty taxes announced a few weeks ago in the Autumn Statement for buy to let landlords, concerns over first time buyer affordability and the outlook of UK interest rate rises in 2016 will really dampen the property market. I hope you all read my previous article about what the new stamp duty rule changes would REALLY mean for Cheltenham landlords in my blog, but I believe the real issue in the Cheltenham property market is the shortage of property to buy, as people either worry there will be no suitable house to move to, or cannot afford to upgrade. However, on the supply side, Mr Osborne said in his Autumn Statement that he will change the planning laws to ensure the government meets the pledge made at the General Election (back in May) of 200,000 new homes a year.  All I can say is .. good luck George hitting those numbers!

Well, talking of supply ... whilst Mr Osborne builds his properties (and let’s be honest - a week doesn’t go by without him being filmed on a building site with a high viz jacket and hard hat building a house here and there!), let us look at the shortage of properties for sale. Back in February 2011, 1,312 properties were for sale in Cheltenham .. today that figure is 767. On the face of it, this means there is less choice for Cheltenham buyers – but it also means with a restricted supply of properties for sale .. it keeps property prices high for Cheltenham house sellers.

Everything isn’t all doom and gloom though ... again back in February 2011, the average property in Cheltenham took 115 days to find a buyer .. latest figures state this has dropped to 80 days .. a drop of 30% in how long it takes to find a buyer. However, when you delve even deeper, the best performing type of property today in Cheltenham is the 3 bed, which only takes 63 days to find a buyer (on average) compared to the 1 bed, which takes 94 days. It just goes to show, even though the average has dropped since 2011, how varied that change has been!

So, back to the question everyone is asking .... What will happen to property values in Cheltenham in 2016?  I am going to suggest they will rise between 2% and 3% ... nothing out of the ordinary, but unless something cataclysmic happens in the world, 2016 will be like 2015!  

Landlords Face £3000 Fine !

“Who would want to move to Gloucester in weather like this?, one landlord asked me as we shook hands outside his property, the other afternoon. It was windy, cold, it had been raining most of the day and it was the last appointment of the day. I will admit, as I had been out most of the day, I was looking forward to getting home to the warm.

It turned out he had been self-managing the property himself over the last few years, but was worried with all the new legislation that had been introduced recently. He was particularly concerned about the up and coming ‘Right to Rent’ legislation, so as his tenant had handed in their notice recently, on this new tenancy he called us for our opinion.

For those landlords that don’t know, landlords will need to check the immigration status of any new tenants moving into properties from February 2016 or face a £3,000 fine. It is called the 'Right to Rent' rules. However, tenants should also be aware that as well as traditional landlords, tenants who sub let rooms and homeowners who take in lodgers, must also check the right of prospective tenants to reside in the UK.

There are 136,362 residents in Gloucester City Council area, and of those, 122,664 people (or 89.95%) were born in the UK. Gloucester is a cosmopolitan city and the country of birth of the residents in the Gloucester City Council area can be split down as follows:

·         UK                                                                   89.95%

·         Ireland                                                              0.62%

·         Europe                                                              3.96%

·         Africa                                                               1.49%

·         Middle East and Asia                                          2.66%

·         Americas and Caribbean                                    1.09%

·         Australia and Pacific region                               0.17% 

This is a real minefield for landlords, especially when you consider that not all of the 5,406 Europeans in the area necessarily have the right to live in the UK either.

In a nutshell, landlords will need to check and retain copies of certain documents that show a potential tenant has the right to live in the UK. These include ....

·    UK Passport

·    EEA Passport/Identity card

·    Travel document or Permanent Residence Card showing indefinite leave to remain

·    Paperwork from Home Office stating their Immigration status

·    Certificate of registration or naturalisation as a British citizen.

I hope the new law will target dishonest landlords who repeatedly fail to carry out Right to Rent checks by making it a criminal offence. This means they could face imprisonment for failing to check on their tenants. That is why more and more landlords are asking agents to manage their properties, so they can stay the right side of the law.

So what did our landlord do?

Well after our chat, he asked us to find a tenant and manage the property for him - he had been reading my Property Blog for a while and because of the knowledge we impart to landlords, we obviously know what we are talking about.  Even better news for him, even though this would cost him agency fees, I was able to get him an additional £65 per month for his property (when we found him a tenant one week later). Now, together with the peace of mind we will keep him the right side of the law and put a stop to midnight phone calls complaining about dripping taps, it was a win-win situation for everyone.

Will the young people of Cheltenham ever own their own home ?

I had the most interesting chat with a couple (in their early/mid 50’s) from Charlton Kings the other day, whilst viewing one of our rental properties. The property wasn’t for them, but their son, who wanted a second viewing with his parents to get the parental blessing. Now I know that isn’t the norm, but in this case the parents were going to act as guarantor. 

We got chatting about the Cheltenham property market and how they had bought their first property in the town just after they got married in the late 1980’s when they were in their early/mid 20’s. Anyway, we got chatting about how the youngsters of the UK seem to rent more than buy nowadays and from that the conversation covered a number of similar topics. 

Their son, like many 20 to 30 year olds in Cheltenham, desperately wants to own his own property and the parents said that he had read in the Telegraph recently, when you compare house prices to earnings, the current 20 to 30 something’s generation have to spend more of their salary in mortgage payments than any previous generation. The demand for private rental sector accommodation in Cheltenham is huge. There are in fact 10,990 private rental properties in Cheltenham at the last count, impressive when you consider there are 4,102 council houses in the town. However, let us not forget 33,078 properties are owner occupied (16,665 with a mortgage).

Let us all be honest, private renting doesn’t have the stigma it had a few decades ago and it might surprise people that even though us Brit’s class ourselves as a nation of homeowners, roll the clock back 100 years and over 75% of people rented their own home (and it was all from private landlords as council housing only started to come in with the ‘homes for hero’s’ after the first World War). It might also surprise you to learn that at the time of the 1971 census, still more people rented than owned their own home.

Looking at the affordability issue, I have proved time and time again, it is in fact cheaper to buy a property than rent, when one looks at starter homes for first time buyers. When it came to affordability, I was able to tell them that when they bought their first house in Cheltenham in 1988, the ratio of house prices to salary was 6.72 to 1 in Cheltenham ... and here was the surprise for both of us, today’s ratio is only 6.02 to 1!

So why are more youngsters not buying? I believe there has been a cultural attitude change towards renting property in Britain and that this quiet revolution was likely to be permanent. In the 60’s, 70’s and 80’s, saving for the deposit was everything and buying a house was everything. Youngsters today have much more disposal income than people had in the Callaghan and Thatcher years, but choose to spend it upgrading their mobile phones every 12 months, the newest tablet or PC, a newest 50” plasma LCD TV and two sun drenched holidays a year, than go without and save for a deposit.

Yes, there are horror stories of tenants living in rat infested properties with landlords who charge massive rents and don’t repair their properties. But that is very much the exception as most tenants rent homes of a quality they couldn’t ever to afford to buy. Twenty years ago, if you said you rented a property, you were considered the lowest of the low ... but now it’s the norm.

So with mortgage affordability being well within the bounds of most first time buyers, the level of deposit required for a 95% being surprisingly modest until we change our attitudes, the UK housing market is slowly but surely turning into a more European model, where people rent for long periods of their life, then eventually inherit their parents properties and subsequently become homeowners themselves, albeit later in life.

Hence, I cannot see the demand for decent, high quality rental properties ever dropping in the next 10 to 20 years, but only ever increasing as the population continues to soar. Just make sure you buy the right property, at the price, in the right location.