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.