Is this the end for first time buyers?

7,004 Cheltenham Homes bought by private landlords in the last 20 years – Is this the end for first time buyers?

People are always going to need a roof over their heads and the need for somewhere to live will never go out of fashion – it’s a necessity for every single person. The 22 to 30 year olds of the town have a choice to what type of roof they have ... they rent from the Council, they can rent from a private landlord or finally they can get a mortgage and buy one. In the 1970’s/80’s and 90’s, the expected thing was to save like mad for two years for the deposit whilst living at home or renting a cheap two up two down, then buy your first house. However, more recently fewer Cheltenham youngsters have been buying, choosing to rent instead – mainly from private landlords (as Councils have been selling off council housing on the Right to Buy Schemes). The numbers are truly staggering ... and I want to share them with you.

Roll the clock back 20 years and Cheltenham was a different place. There were 41,187 households in Cheltenham and 27,611 of those were owner occupied. Move to the present, and with all the building in the town, the total number of households has increased by 24.4% to 51,251 and quite surprising (to me at least), the number of owner-occupiers has increased to 33,078 (although as a proportion, it is only 64.5% compared to 67% twenty years ago).

However, it’s rented sector that is truly fascinating … twenty years ago, only 3,986 properties were privately rented in Cheltenham ... and now its 10,990, a rise of 7,004.

The twentysomethings of Cheltenham housing difficulties haven’t been helped by the local authority selling off council housing, with the number of council houses dropping from 5,823 to 4,102 over the same twenty-year period. Demand for decent rented property remains high, as Cameron’s much vaunted house building program is years away and has decades of under investment to catch up on before it starts to affect demand. Even with the Buy to Let tax rule changes over the coming few years (which will see the maximum tax relief available to landlords drop from 45% to 20%), private landlords still have an important role to play in housing the people of Cheltenham and those who educate themselves and treat it as a business will survive and prosper.

The best way Cheltenham landlords can protect their income from property (and mitigate the affects of the tax rises) is to keep the homes they let out in Grade A condition. I have found, especially over the last three or four years, Cheltenham tenants have ever growing demands from their rental property, but many are prepared to pay ‘top dollar‘ for houses and apartments that meet their high expectations. You must not forget, letting property in is a business, so all private landlords should also seek the advice, opinion and commentary of property professionals.

Private Renting in Gloucester increases by 279.2% in 20 years

You find me in a reflective mood today as I want to talk about the future of investing in property in Gloucester. The truth is that we have got fat and lethargic, with many people having mistaken the ever rising Gloucester (and in fact the whole of the UK) property market since the 1960’s as the eternal gift that kept giving as property prices constantly rose and doubled every five to seven years.

The days when making money from property was as easy

as falling off a log are sadly over.

Whilst George Osborne has decided now is the time to milk the ‘Golden Cow’ of UK’s private landlords, with changes in taxation for buy to let property, many pundits are predicting the end of buy to let as we know it. However, it is still possible to make a reasonable, profitable and safe return on property with these changes. Remember, tenants will always want a roof over their head and I don’t see  HM Government building the millions of houses required to house them?

Nobody knows the future, and yes people can predict but I wouldn’t be afraid of this change .. because as a famous French proverb says,  ‘the more things change, the more they stay the same’. I mean, no one could have predicted how the property market has changed in Gloucester over the last couple of decades? Looking specifically at the Gloucester Parliamentary Constituency, twenty years ago, 30,438 households (meaning 73.36% of property) was owned and only 1,976 households were privately rented (meaning 4.76% of property was rented out by private landlords). Roll the clocks on twenty years and the change has been seismic …. Now only 30,416 of properties in the Constituency are home-owners (a huge drop to only 65.48% being owner occupied) and the jump in private renting has been out of this world, as 8,387properties are now privately rented proportionally 18.05%). (NB Neighbouring Constituencies show similar changes as well)

Who would have predicted in 1995 the private rental sector in

Gloucester would have grown by 279.2% in the following 20 years?

Also, if you had asked someone in 1995 to predict what would happen to property values over the next 20 years (ie between 1995 and 2015), they might have predicted similar growth to the growth experienced over the previous 20 years (ie between 1975 and 1995), which was a very impressive 351.55%. Yes, property values in Gloucester have increased over the last 20 years (between 1995 and 2015), but by a more modest 206.42% (and most of that can be attributed to house price growth between 2000 and 2006.)

The property market is constantly changing and buy to let for too long has been heavily dependent solely on house price growth, where yield has been almost forgotten. I see the changes in tax and landlord and tenant law in a different perspective to the doom-mongers and see it as bringing many opportunities. You might need to change your buy to let benchmarks, your approach to financing or even consider places other than Gloucester in which to invest your money, but this will shine a light on investing in properties with healthier yields and create more realistic long term buy to let opportunities, instead of short term growth bets and wagers.

The advice I give to my landlords is this; these changes will make some landlords panic, meaning competition for decent Gloucester buy to let bargains will reduce as fear of change kicks in and amateur investors flee the market. These opportunities will provide a more stable platform for knowledgeable and wise Gloucester buy to let landlords to thrive in. If you want to learn more about the Gloucester Property Market feel free to get in touch. 

Cheltenham Buy to Let sees returns of 8.73% in 2015

The other day I got chatting with one of my out of town landlords who was back in Cheltenham visiting his family.  Brought up in Cheltenham, he went to the Pate’s Grammar School back in the 1970’s and is now a University Lecturer in central London.  To enhance his retirement, he has a small portfolio of four properties in the town and wanted my advice on where to buy the next property in Cheltenham (as he lives in a college owned flat and anyway, would never dream of buying where he lives in Kensington (where the average value of a flat is £1.62m and a City house £4.1m.  Eye-watering to say the least!!).

Before I could advise him, I reminded him that the most important thing when considering investing in property is finding a Cheltenham property with decent rental yields for income returns, yet at the same time, it must have the potential for capital growth from rising house prices over time.  Going forward, Cheltenham landlords will be under more pressure to find the best permutation of yields and capital growth, as extra stamp duty charges for buying properties and a squeeze on mortgage interest relief will raise their costs.

However, (you knew there would be a however) before we look at yield and capital growth, one important consideration that often many landlords tend to overlook, is the propensity of how likely the rent will increase.  Interestingly, the average rent of a Cheltenham property currently stands at £989 per month, which is a rise of 2.9% compared to twelve months ago (although it must be noted this rise in rents is for new tenancies and not existing tenants). Anyway, back to yield and capital growth, the average value of a Cheltenham property currently stands at £316,700, meaning the average yield stands at 3.75% per annum, which on the face of it, many landlords would find disappointing.  That is the problem with averages, so if I were to look at say 2 bed houses in Cheltenham which are the sort of properties a lot of landlords buy, in Cheltenham, the average value of a 2 bed house is £200,700, whilst the average rent for a 2 bed house is £842 per month, giving a yield of 5.03%.  

Ultimately investors want to be making gains from both rent and house price growth.   When combined, the rental yield and capital growth gives you the return on investment, and that is what I told our University friend from Kensington.   Return on investment is everything.   So, looking at property values in Cheltenham have risen in the last year by 3.7% …. which means the current annual return on investment in Cheltenham for a typical 2 bed house is 8.73% a year .... not bad.

If you would like advice on any potential buy to lets in Cheltenham , please get in touch.

Investment Opportunity

This is a great investment opportunity - Freehold for sale , 25 units that should rent for at least £130,000 PA .

Available for sale at £1,790,000  or Available on a long lease for £72,000 PA .

               http://www.rightmove.co.uk/property-for-sale/property-40355166.html


This should  rent for at least £130,000 PA on  individual ASTs .

I think that this could be of interest to a professional investor !

Call me on 01242 221188 if you want more details.

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. 

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