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.