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