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. 

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. 

Cheltenham House Price Monopoly: How do Prices vary?

Over the festive period, you and your family may play the board game Monopoly. The buying and renting of property, it’s like a busman’s holiday for me! Interestingly, the game was originally invented at the turn of the 20^th Century (in 1903) and the game was initially called ‘The Landlord’s Game’!  Anyway, after a few years in the wilderness, the current owners of the game renamed it in 1935 and so began Monopoly as we know it today.

So whether you are a homeowner or landlord in Cheltenham, what would a Monopoly board look like today in the town? Property prices over the last 80 years have certainly increased beyond all recognition, so looking at the original board, I have substituted some of the original streets with the most expensive and least expensive locations in Cheltenham today.

Initially, I have focused on the GL50 postcode only, looking at the Brown Squares on the board, the ‘new’ Old Kent Road in Cheltenham today would be Knapp Road, with an average value £100,000 (per property) and Whitechapel Road would be Manser Street, which would be worth £119,100. What about the posh dark blue squares of Park Lane and Mayfair? Again, looking at GL50, Park Lane would be Montpellier Drive at £708,100 and Mayfair would be Imperial Square at £1,096,100. However, look a little further afield from the GL50 postcode, and such roads as Charlton Park Gate would claim the Mayfair card at £1,840,000! Also, I can’t forget the train stations (my favourite squares), and over the last 6 months, the average price that property within a quarter mile of the station sold for was £307,500.

So that got me thinking what you would have had to have paid for a property in Cheltenham back in 1935, when the game originally came out?

·     The average Cheltenham detached house today is worth £503,570 would have set you back 911 Pounds 2 shillings and 2 old pence.

·    The average Cheltenham semi detached house today is worth £290,370 would have set you back 525 Pounds 7 shillings and 4 old pence.

·   The average Cheltenham terraced / town house today is worth £254,500 would have set you back 460 Pounds 9 shillings and 4 old pence.

·     The average Cheltenham apartment today is worth £200,570 would have set you back 362 Pounds 17 shillings and 10 old pence.

If that sounds like another currency, you must be in your 20’s or 30’s, because it was back in February 1971, that Britain went decimal and hundreds of years of everyday currency was turned into history overnight. On 14th of February of that year, there were 12 pennies to the shilling and 20 shillings to the pound. The following day all that was history and the pound was made up of 100 new pence.

Anyway, I hope you enjoyed this bit of fun, but underlying all this is one important fact. Property investing is a long game, which has seen impressive rises over the last 80 years. In my previous articles I have talked about what is happening on a month by month or year by year basis and if you are going to invest in the Cheltenham property market, you should consider the Cheltenham property you buy a medium to long term investment, because Buy to let is pretty much what it sounds like – you buy a property in order to rent it out to tenants.

As I reminded a soon to be first time landlord from Leckhampton the other week, Buy to let in Cheltenham (as in other parts of the Country) is very different from owning your own home. When you become a landlord, you are in essence running a small business – one with important legal responsibilities. On that note, I want to remind landlords of the recent and future changes in legislation when it comes to buy to let. This year, rules have changed about tenant deposits, smoke alarms and early in the New Year, landlords will have responsibilities to do immigration checks on all their tenants. Failure to adhere to them will mean a minimum of heavy fines in the thousands or in some cases, prison ... it’s a mine field!  

If I can help you in the new year, then please do contact me at neil.west@belvoir.co.uk 

Seasons Greetings to you and your families.

The Gloucester Property Market and £1,300,000,000,000,000,000 in loose change

The 5^th of March 2009 was the date Mervyn King, the then Bank of England Governor, slashed UK interest rates to the unparalleled figure of 0.5%. In just under five months, starting on 8^th October 2008, the rate had come down from 4.5% to that low figure, all in an attempt to ensure the British economy survived the worldwide credit crunch. Now as we deck the halls with bows of holly nobody expected that, over six years later, rates would still be at that low level.

I am not some City Whiz kid with a hotline to Mr Carney at Threadneedle Street, but merely a humble letting agent, so I can not profess to know what will happen to interest rates. However, what I do know, is that these low interest rates have hit savers really hard.

If you added up everyone’s bank and building society savings in the UK, they would add up to £1,300,000,000,000,000,000 (that’s £1.3 trillion), most of which is earning a pittance in interest.  That is why more and more 40 and 50 year olds have been investing some of that cash into  bricks and mortar, as they search for a low risk investment opportunity.

Buying a buy to let property isn’t risk free, but there are certainly things you can do to mitigate and lower one’s exposure to risk. You see by buying a rental property, it potentially offers an enigmatically decent proposition in terms of being able to obtain attractive returns that beat inflation and savings accounts, yet without taking the levels of risk associated with stock markets.

The UK residential property market has long been the safest form of collateral for lenders of all varieties. Against a backdrop of a greatly changing economic environment, Gloucester  house prices have been extraordinarily robust, increasing by over 2113.5% between 1974 and today. Some will say there have been significant property price falls, namely in 1975, 1988 and 2008, yet each time after this has been followed by an upturn in property values. For the record, the stock markets in the same time frame only rose by 432.5%!

.. and that is the best thing about buy to let property. Unlike the stock market, with its unfathomable equities, shares and bonds, that nobody really understands (as they are controlled by some faceless whizzkid in Canary Wharf!) with a buy to let property, landlords can take control and understand their investment .. in fact you can touch and feel the bricks and mortar investment.

But before you go out and buy any old Gloucester property, plenty of landlords still get it wrong. You have to be aware of your legal responsibilities when it comes to tenant safety, tenants deposits, energy certificates and in the new year, landlords will have the added responsibility of checking the immigration status of prospective tenants. Get it wrong and big fines and even prison is an option – but that’s why many agents use a letting agent to manage their property for them.

Next, you have to buy the right property at the right price. Recently I have seen some really heart breaking situations in Gloucester and the immediate area, of people paying way too much for a property, only to lose out when they came to sell. One example that comes to mind is that of a property owner in one of those apartments in Bayswater House on the popular Harescombe Drive, close to Gloucester Royal Hospital .. a decent, well presented, top floor, one bed apartment, 43 sq metres inside (462 sq ft in old money) sold in October 2008 for £135,000. In the autumn, it only obtained £85,000, a drop of 37.04% or 5.05% a year - a very disappointing result.

I cannot stress enough the importance of doing your homework and I can help you. If you would like some advice please contact me on neil.west@belvoir.co.uk 

Has George Osborne killed buy to let in Cheltenham and Gloucester?

George Osborne, in his Autumn statement last week, caused Cheltenham and Gloucester landlords to ask whether buy to let is still a viable investment option, when he announced that landlords, when buying another buy to let property from April 2016 will have to pay an additional 3% stamp duty on top of the standard rate. So for example, It means that the stamp duty bill for a £285,000 buy to let home will rise from the current £4,250 to £12,800 from April next year.

Some say property in Cheltenham and Gloucester will be worth less because potential landlords will not be willing to pay as much for them, and if house builders or existing home-owners don't feel they are going to get as much for them , then there is less motivation to build / sell them?... and the person we can blame for this is George himself. Back in 2012, he choose to utilise the British housing market to kick start the UK economy, with subsidies, Funding for Lending and Help to Buy. However, whilst that helped the Tory’s get back into power in 2015, some say this impressive growth in the UK property market has been at the expense of pricing out youngsters wanting to buy their first home.

Others say this is the straw that breaks the camel’s back as over the next four years Landlords will slowly lose the ability to offset all their mortgage interest against tax on rental income, after changes announced in the Summer Budget. At the moment, landlords can claim tax relief on buy to let mortgage monthly interest repayments at the top level of tax they pay (i.e. 40% or 45%). However, over the next four years this will reduced slowly to the basic rate of tax – currently 20%.

Surely this is the end of Buy to Let in Cheltenham and Gloucester? Before we all run to hills panicking .. let me give you another though......

Stamp Duty rules were changed in December 2014. Before then, landlords were eagerly buying up properties under the ‘old slab style Stamp Duty’ system. For example, the stamp duty bill on that £285,000 property was lower  at £8,550, yet it isn't a million miles away from new £12,800 stamp duty bill. 

I believe that total returns from buy to let will continue to outpace other investments, such as the stock market, gilts, bonds and even pensions. Also, the best part about investing in property is that it is bricks and mortar. You can touch it, you can feel it, and it isn't controlled by some City whiz kid in Canary Wharf .. the British understand property and that goes a long way!

Buy to let has enough impetus behind it that prospective landlords will continue to buy even with a larger stamp duty bill. Cheltenham and Gloucester landlords will need to be savvy with what property they buy to ensure the extra stamp duty costs are mitigated. Buying buy to let property is a long term venture. In the past, it didn't matter what property you bought in Cheltenham and Gloucester or at what price – you would always make money. Now with these extra taxes, the adage of ‘any old Cheltenham and Gloucester house will make money’ has gone out the window. You wouldn't dream of investing in the stock market without at least looking in the newspapers or taking advice and opinion from others, so why would you take the same advice and opinion about buying a buy to let property in Cheltenham and Gloucester? 

Laxton Walk, Cheltenham 6% Yield

I've just spotted this 3 bed property on the market for offers over £140,000. You should be able to rent this for around £750 PCM to a family. 

                            http://www.zoopla.co.uk/for-sale/details/38591170

On the market with The Property Centre. I bet its sold by this time next week. This is an ideal rental property as will let to a family who tend to stay longer than couples without children . 

Give Property Centre  a call if you are interested in this or give me a call or drop me an email if you need any advice. 

neil.west@belvoir.co.uk   01242 221188 

Values of Gloucester Terraced Houses smash through the £190/sqft barrier

    Values of Gloucester Terraced Houses smash through the £190/sqft barrier

The Council of Mortgage Lenders (CML) latest snapshot of the buy to let mortgage market shows us that buy to let landlords haven’t been put off by the Chancellors announcements on the way buy to let’s are taxed.

Last month, the CML stated £1.4billion was borrowed by UK landlords to purchase 10,500 buy to let properties, up 26.5% from the same month in 2014, when only 8,300 properties were bought with a buy to let mortgage. Go back two years and the number of buy to let mortgages used for purchasing (again not re-mortgaging) is 36.4% higher! Even more interesting has been the fact that the average amount borrowed has risen as well. The average buy to let mortgage last month was £133,330, up from £128,480 a year ago.

In Gloucester, I am speaking to more and more landlords, be they seasoned professional landlords or first time landlords, as they read reports that the Gloucester rental market is doing reasonably well, with rents and property values rising. Interestingly, one landlord recently asked how much he should be paying per square foot (more of that in a second).

The first thing you have to decide is whether you want great capital growth or great rental yield, as every knowledgeable landlord knows, you can’t have both. Over the last twenty years, property values in Gloucester have risen by 205.42%, compared to Greater London’s 436.2%. This has proved that capital growth increases faster in the more expensive Capital, but your investment money doesn’t go very far, meaning there won’t be as much rental yield from a 1 bed flat in Chelsea (2% per year at best with a fair wind) as a 2 bed semi in Gloucester. However, whilst the figure of 205.42% is an average for the area, certain areas of Gloucester have seen capital growth much higher than that and others areas much worse.

If you recall in an earlier article, my research reveals that Gloucester apartments tend to generate a better yield than houses, probably because several sharers can afford to pay more than a single family. But houses tend to appreciate in value more rapidly and may well be easier to sell, simply because there are fewer being built.

So what should you be buying in Gloucester, and more importantly, for how much?

• The average apartments in the city are currently selling for approximately £205 per square foot.
• Terraced houses in Gloucester are currently obtaining, on average, £150,200 or £191 per square foot,
• An average semi in Gloucester is selling for £191,300 (and achieving £200 per square foot).

Now these are of course averages, but it gives you a good place to start from. In the coming weeks, I will look at rents being achieved on Gloucester houses and apartments, and the yields that can be obtained, depending how many bedrooms there are.  

Cheltenham Buy To let –Freehold or Leasehold

            Do I buy a freehold house or a leasehold flat in Cheltenham?

Most people will say freehold every time, because you own the land. However, it’s not as simple as that (it never would be would it!). The definitive answer though is to research what Cheltenham tenants want in the area of Cheltenham they want! The tenant is ultimately your customer, and, if they don't want to rent what you decide is best to buy, then you are not going to have a successful BTL investment.

So starting with the tenant in mind and working backwards from there, you won’t go far wrong. In a nutshell, find the demand before you think about creating the supply Leasehold flats and apartments in Cheltenham are excellent in some respects as they offer the landlord certain advantages, including the fact a flat can be initially cheaper to buy. Yields can be quite good, offering better cash flow. The building will already be insured and yes there is a service charge, but it’s still for a service at the end of the day and that cost is spread between many others (i.e. when your freehold house roof goes, its falls 100% on your shoulders) and one of my favourites there is often no garden to maintain or blown down fences to replace! 

However, some Cheltenham leasehold flats can suffer from poor capital growth. Some leasehold properties have no cap on the level of the service charge and it may get out of control. The length of the lease will significantly affect value if not renewed before it gets too short. Thankfully there’s not many, but some Cheltenham apartments/flats have burdensome clauses. Finally, with leases, there can be sub-letting issues – which means you can’t let them out.

So what do the numbers look like? Well since 2003, the average freehold property in Cheltenham (detached, semis and terraced) has risen from £190,299 to £334,564, a rise of 76% whilst the average Cheltenham leasehold property (flats and apartments) has gone up in value from £121,795 to £183,610, a more mediocre rise of 51%. 

I was really interested to note that of the 10,260 rental properties in the Cheltenham Borough Council area that the Office of National Statistics believe are either let privately or through a letting agency, 5,790 of them (or 56.4%) are apartments. However, there are only 13,832 apartments in the whole council area (be they owned, council rented or privately rented), which represents 27.2% of the whole housing stock in the area. This really intrigued me that, quite obviously, there is a high proportion of Cheltenham’s leasehold apartments/flats rented to tenants compared to detached, semi’s or terraced. Fascinating don’t you think?

Every Cheltenham apartment block, every terraced house or semi is different. Like I said at the start, the definitive answer though is to research what Cheltenham tenants want in the area of Cheltenham they want. Demand for town centre apartments, near the nightlife and transport links can be popular and can offer the Cheltenham landlord very good yields with minimal voids. However, Cheltenham terraced houses and semis, whilst not always offering the best yields (although sometimes they can), they do offer the Cheltenham landlord decent capital growth.

My advice to the prospective landlord as it is to you is do your homework. A great source of info many Cheltenham landlords use is me! What many Cheltenham landlords do, irrespective of whether you are a landlord of ours, a landlord with another agent or a DIY landlord, if you see any property in Cheltenham, that catches your eye as a potential buy to let property, be it a terraced house, semi or flat ... email me and I will email you back with my thoughts . I will tell you what you need to hear .. not want to hear.

email me on neil.west@belvoir.co.uk

Gloucester Tenants Pay 29.5% of their Salary in rent

I had the most interesting chat with a local Gloucester landlord the other day about my thoughts on the Gloucester property market. The subject of the affordability of renting in Gloucester came up in conversation and how that would affect tenant demand. Everyone wants a roof over their head, and since the Second World War, owning one’s home has been an aspiration of many Brits.  However, with rents at record highs, many are struggling to save enough for a house deposit.

Let’s be honest, it’s easy to get stuck in a cycle of paying the rent and bills and not saving, but even saving just a small amount each month will sooner or later add up.  George Osborne announced such schemes as the upcoming Help to Buy ISA, where the Government will top up a first time buyers deposit.

Therefore, I thought I would do some research into the Gloucester property market and share with you my findings.  Gloucester tenants spend on average just under a third of their salary to have a roof over their head.  According to my latest monthly research, the average cost of renting a home in Gloucester is £611 per month.  When the average annual salary of a Gloucester worker stands at £24,782 per year, that means the average Gloucester tenant is paying 29.5% of their salary in rent.  I doubt there is much left to save for a deposit towards a house after that.

You see one of the reasons for rents being so high is property prices being high.  As I have mentioned before, there is a severe lack of new properties being built in Gloucester.  It’s the classic demand vs supply scenario, where demand has increased, but the number of houses being built hasn’t increased at the same level.  Also, Gloucester people aren’t moving home as often as they did in the 80’s and 90’s, meaning there are fewer properties on the market to buy.  If you recall, a few weeks ago I said back in Spring 2008, there were over 1,700 properties for sale in Gloucester and since then this has steadily declined year on year, so now there are only 596 for sale in the city.

So, the planners in Gloucester haven’t allowed enough properties to be built in the city and existing Gloucester homeowners are not moving home as much as they used to, thus creating a double hit on the number of properties to buy.  This is a long term thing and the continuing diminishing supply of housing has been happening for a number of decades and there simply aren’t enough properties in Gloucester to match demand, these are the reasons houses prices in Gloucester have remained quite buoyant, even though economically, over the last 5 years, it was one of the worst on record for the country and the South West region as a whole.

However, things might not be all doom and gloom as originally thought, as a recent Halifax Survey  (their Generation Rent 2015 Survey) suggested  more and more people may be long term, if not lifelong tenants. In fact there is evidence in the report to suggest that the perception of how difficult it is to get on the housing ladder is vastly different between parents and people aged 20 to 45.  It seems from this survey that the state of the UK economy has shifted priorities quite significantly in quite a short space of time.  With fewer people able to save up the deposit required by mortgage lenders, more and more people are continuing to rent.  This delay in moving up the property ladder has driven rents across the UK up as more people were seeking rental properties .

It is often said that more people in central Europe rent for longer or never own their own property. The last two census in 2001 and 2011 show that proportionally the percentage of people who own their own home in Britain is slowly reducing and, as a country, we are becoming more and more like Germany.   That isn’t a bad thing as Germany is considered to have a more successful economy, one of the main stays, often quoted,  is because they have a much more flexible and mobile workforce, (which renting certainly gives) and from that, they have a higher personal income than in the UK.      

Therefore, if we are turning into a more European model and the youngsters of Gloucester and the Country have changed their attitudes, demand for rental properties will only and can only go from strength to strength, good news for Gloucester tenants as wages will start to rise and good news for Gloucester landlords, especially as property values in Gloucester are now 7.7% higher than year ago! 

How EU Migration has changed the Cheltenham Property Market

The argument of migration and what it does, or doesn’t do, for the country’s economic well being is something that has been hotly contested over the last few years. In my article today, I want to talk about what it has done for the Cheltenham Property market.

Before we look at Cheltenham though, let us look at some interesting figures for the country as a whole. Between 2001 and 2011, 971,144 EU citizens came to the UK to live and of those, 171,164 of them (17.68%) have bought their own home. It might surprise people that only 5.07% of EU migrants managed to secure a council house. However, 676,091 (69.62%) of them went into the private rental sector.  This increase in population from the EU has, no doubt, added great stress to the UK housing market.

Looking at the figures, the housing market as a whole is undoubtedly affected by migration but it has been the private rented housing sector, especially in those areas where migrants come together, that is affected the most.  Indeed, I have seen that many EU migrants often compete for such housing not with UK tenants but with other EU migrants. 

In 2001, 3.68 million people rented a property from a landlord in the UK.  Ten years later in 2011, whilst EU migration added an additional 676,091 people renting a property from a landlord, there were actually an additional 4.14 million people who became tenants and were not EU migrants, but predominately British!

As a landlord, it is really important to gauge the potential demand for your rental property, especially if you are a landlord who buys property in areas popular with EU migrants.  To gauge the level of EU migration (and thus demand), one of the best ways to calculate the growth of migrants is to calculate the number of people who ask for a National Insurance number (which EU members are able to obtain).

In Cheltenham, migration has risen over the last few years. For example, in 2009 there were 714 migrant national Insurance cards (NIC) issued and the year after in 2010, 875 NIC cards were issued. However, in 2014, this had increased to 1,169 NIC’s. However, if the pattern of other migrations since WW2 continues, over time there will be an increasing demand for owner occupied property, which may affect the market in certain areas of high migrant concentration. On the other hand, over time some households move into the larger housing market, reducing concentrations and pressures.

In essence, migration has affected the Cheltenham property market; it couldn’t fail to because of the additional working age migrants that have moved into the Cheltenham area since 2005. However, it has not been the main influence on the market. Property values in Cheltenham today are only 0.96% higher than they were in 2005. According to the Office of National Statistics, rents for tenants in the South West have only grown on average by 0.96% a year since 2005 .... I would say if it wasn’t for the migrants, we would be in a far worse position when it came to the Cheltenham property market. This was backed up by the then Home Secretary Theresa May back in 2012 - more than a third of all new housing demand in Britain is caused by inward migration and there is evidence that without the demand caused by such immigration, house prices would be 10% lower over a 20 year period.