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. 

Where will Gloucester Property Prices be by 2021?

Property prices are both a British national obsession and a key driver of the British consumer economy.  So what will happen next in the property market?

Before I can predict what will happen over the next five years to Gloucester house prices, firstly I need to look at what has happen over the last five years.  One of the key drivers of the housing market and property values is unemployment (or lack of it), as that drives confidence and wage growth – key factors to whether people buy their first house, existing homeowners move up the property ladder and even buy to let landlords have an appetite to continue purchasing buy to let property.

When the Tory’s came to power in May 2010, the total number of people who were unemployed in City stood at 2,860 (or 4.9% of the working age population in Gloucester parliamentary constituency’s).  Last month, this had dropped to 1,237 people (or 2.1% of the working age population).

As the Gloucester job market has improved with better job prospects, salaries are rising too, growing at their highest level since 2009, at 3.4% per year in the private sector (as recently reported by the ONS).  That is why, even with the turbulence of the last few years, property values in the Gloucester area are 10.9% higher today than they were five years ago.

Many home occupiers have held back moving house over the past seven to eight years following the Credit Crunch but with the outlook more optimistic, I expect at least some to seize the opportunity to move home, releasing pent up demand as well as putting more stock onto the market. With a more stable economy in the City, this will, I believe, drive a slow but clearly defined five year wave of activity in home sales and continued house price growth in Gloucester.

I forecast that the value of the average home

in Gloucester will increase by 19.5% by 2021

19.5% might sound optimistic to some, but according to Land Registry, values are currently rising in Gloucester at 3.3% year on year, I believe my forecast to be fair, reasonable and a reflection of both positive (and negative) aspects of the local property market and wider UK economy as whole.

However, it wouldn’t be correct not to mention those potential negative issues as I do have some slight concerns about the future of Gloucester housing market.  The number of properties for sale in Gloucester is lower than it was five years ago, restricting choice for buyers (yet the other side of the coin is that that keeps prices higher). Interest rates were being predicted to rise around Easter 2016, but now I think it will be nearer Christmas 2016 and finally the new buy to let taxation rules which are being introduced between 2017 and 2021 (although choosing the right sort of property / portfolio mix in Gloucester will, I believe, mitigate those issues with the next taxation rules).

I am telling the landlords I speak to, that with interest rates at their current level 0.5%, the cash in your Building Society is going to grow so slowly that it might as well be kept under their bed. Property prices, by contrast, have rocketed over the years, even after the property crashes, far outstripping bank accounts and inflation.

So my final thought ...  property is a long term investment, it has its’ up and downs, but it has always outperformed, in the long term, most investments. Those in their 40’s and 50’s in Gloucester would be mad not to include property in their long term financial calculations. Just make sure you buy the right property, at the price in the right location.