Bricks and Mortar

The Land Registry have released their latest set of figures for the Cheltenham Property market. It makes interesting reading, as average property values in Cheltenham rose by 0.4% in May. This leaves average property values 4.5% higher than 12 months ago, meaning the annual rate of growth in the town fell to its lowest level since April 2014. When we compare Cheltenham against the regional picture, South West property values fell by 0.6%, leaving them 1.1% higher than a year ago. Obviously this is a far cry from the price rises we were experiencing in Cheltenham throughout 2014. At one point (December 2014 to be exact) property values were rising by 6.7% a year. All the same, even with the tempering of the Cheltenham property values in 2015, property values are still higher. This is good news for local homeowners who had been affected by the downturn after 2007 and still find themselves in negative equity. 

However, the thing that concerns me is that the average number of properties changing hands (ie selling) has dropped substantially over the last 12 months in the town. In April 2014, 233 properties sold in Cheltenham but in April 2015, that figure dropped to 126.  I have been in the Cheltenham property market for quite a while now and the one thing I have noticed over the last few years has been the subtle change in the traditional seasonality of the Cheltenham property market. It has been particularly noticeable this year in that the normal post Easter flood of properties coming onto the market was not seen. This has made an imbalance between supply and demand, with less houses coming onto the market there is simply not as much choice of properties to buy in Cheltenham and with the population of Cheltenham ever increasing, this will generally strengthen house price growth for the foreseeable future.

So what does all this mean for Cheltenham landlords or those considering dipping their toe into the buy to let market for the first time? For many people, buy to let looks a good investment, providing landlords with a decent income at a time of low interest rates and stock market unpredictability. However, if you are thinking of investing in bricks and mortar in Cheltenham, it is important to do things correctly. As an investment to provide you with income, for those with enough savings to raise a big deposit, buy to let looks particularly good, especially compared to low savings rates and stock market yo-yo’s. I must also remind readers, landlords have two opportunities to make money from property, not only is there the rent (income), but with the property market bouncing back over the last few years, property value increases has spurred on more investors to buy property in the hope of its value continuing to rise.

Savvy landlords with decent deposits can fix their mortgages at just over 3% for five years, making many deals stack up. Nevertheless, low rates cannot stay low forever, because one day they must rise and you need to know your property can stand that test. I saw some landlords struggling in the mid noughties, when interest rates rose from 3.5% in July 2003 to 5.75% in July 2007. That might not sound a lot, but that was the difference of making a £100 a month profit in 2003 to having to make up a shortfall in the mortgage payments of £100 per month in 2007.

Its true many landlords were thrown a life raft when the base rate dropped to 0.5% in March 2009. Whilst interest rates have remained there since, mark my words, they will rise again in the future. However, even with the potential for costs to rise, demand for decent rental properties remains high as there are ever more tenants in the market, driving up demand and thus rents. The British love of bricks and mortar plus improving mortgage deals also add up to fuel the buoyant Cheltenham property market.

If you are planning on investing in the Cheltenham property market, or just want to know more, you can contact me on 01242 221188 or neil.west@belvoir.co.uk 

Are ‘would be’ Gloucester homeowners warming to the idea of renting?

I was reading a report the other day produced by the Halifax, about the UK property market and why more and more of the younger generation seem to be renting rather than buying. I find it fascinating that over the last ten years, the British obsession of buying a house almost as soon as you left school, and the fact that if you rented you were seen as a second class citizen, has turned on its head to a point where the hopes and dreams to own a nice home will be replaced by the ambition simply to live in one.

In the latter half of the 20th Century, you left school, got a job, bought a small house and kept buying and selling property, constantly upgrading until eventually they carried you out in a box. However, the perceived shame and stigma of renting is no longer the case, as it seems that the British are now beginning to accept a lifetime of renting. This is a very important consideration for both Gloucester homeowners and Gloucester landlords as it will transform the way the Gloucester property ladder looks in the future and I might ask whether or not it will exist at all for some people? The make up of households is one important factor, especially in the Gloucester property market. The normal stereotypical married couple, two kids and dog of the 1970’s and 80’s has changed. More and more we have the need for larger houses where two families come together after divorces (+ kids) and need a property to house everyone through to an increase in the number of one person households.

Looking at the data for Gloucester, of the 8,012 private rental properties in the Gloucester City Council area, 31.95% of those rented properties are one person households (2,560 properties). However, when we compare the number of one person Gloucester households who have bought their own property with a mortgage (ie therefore they are still in work), of the 33,858 owner occupied households in the area, only 3,324 of those properties are a one person household (ie 9.82%). Compared to a decade ago, this explosion in demand for decent high quality rental properties that one person households require has not been met with an increase in supply of such properties. More and more I believe Gloucester landlords need to consider this change in the make up of Gloucester households, as I believe this could be an opportunity. As an aside, another interesting stat that raised an eyebrow was that 16.1% of those 8,012 rental properties (1,289 properties) are lone parents households as well. Again, another possible opportunity that Gloucester landlords might want to consider in their future investment plans.

It is true that the Governments introduction in 2013 of the Help to Buy scheme, where first time buyers only needed a 5% deposit, changed the perception of peoples’ ability to buy without having to save ten’s of thousands of pounds for a deposit. However, it might surprise you, 95% mortgages were re-introduced within six months of the Credit Crunch in late 2009, so again it comes down to people’s own perception. Many youngsters think they won’t get a mortgage, so don’t even bother trying.

Coming back to the deposit, it’s still a fact that once you start renting it becomes that much harder to save for a deposit, regardless of the size. Interestingly, 7 out of 8 renters polled by the Halifax (86% to be exact) refuse to sacrifice the quality of accommodation they currently live in to reduce the amount of rent they pay in order to save for a deposit. This is the crux and the real reason why people aren’t buying but renting... and why demand for renting will continue to grow in the future (ie good news for landlords). 

Gloucester tenants can upgrade the quality and size of the property they live in for a minimal rent increase. The average rent of a two bed property in Gloucester is £569pm, a three bed £184pm more at £753pm,  If you had to make that jump when buying, the monthly mortgage payments would be stratospherically more than that! Without any social pressure and better quality rental properties compared to a decade ago, we will become a nation of renters within the next generation, as the UK is becoming more like Europe, where renting is ‘the norm’.

Who is going to supply all these properties to rent? Landlords! Whether you are an existing landlord looking to grow your portfolio or looking to become a ‘first time landlord’, my thoughts are take advice from as many people as possible. However, as the majority of landlords buy their buy to let properties in the same town they live, you will need specific advice about Gloucester. I can help you with this and can be contacted on 01452 387334 or neil.west@belvoir.co.uk.

Why are less Cheltenham people moving house?

During my school years, my parents seemed to move every other year (or it seemed that way). In reality, looking back at the house moves, we actually moved three times before I left home. From research I have carried out it shows things have changed considerably in Cheltenham over the last few decades, and interestingly, the trend is getting worse ... for the removal van people at any rate!

In Cheltenham, there are 51,251 properties. However, after we remove the 6,261 council houses, 10,990 privately rented houses and 543 houses where the occupants live rent free, that leaves us with 33,457 owned properties (be that 100% outright, with a mortgage or shared ownership). This means 65.3% of the properties in Cheltenham are occupied by the owner (the national average is interestingly 64.2%) but the number of people who have sold and moved house in Cheltenham, over the last 12 months, has only been 2,787. This means on these figures, the homeowners of Cheltenham are only moving on average every 12 years.

These are the reasons. Firstly, the cost of moving house has risen over the last twenty years. Secondly, with many remortgaging their properties in the mid 2000’s before the price crash of 2008, there is a reluctance or inability in a small minority of homeowners to finance a home sale/purchase, due to lack of equity. These are both factors driving fewer moves by existing homeowners.

However, the big effect has been the change in house price inflation. Back in the 1970’s and 1980’s, house prices were doubling every 5 to 7 years. Even in Greater London, with its stratospheric property price increases over the last few years, it has taken 13 years (August 2002 to be exact) for property values to double to today’s levels.

This change to a relatively low inflation Cheltenham property market (i.e. Cheltenham property values not rising quickly) is significant because the long term consequences of sustained low house price growth is that it eats into mortgage debt more slowly than when property price inflation is higher. Cheltenham homeowners cannot rely on inflation to shrink their debt in real terms as much as they did in say the 1970’s and 1980’s.

So what does this all mean for Cheltenham buy to let landlords? Well for the same reasons existing Cheltenham homeowners aren't moving, less ‘twenty something’s’ are buying their first home as well. Cheltenham youngsters may aspire to own their own home, but without the social pressure from their peers and parents to buy their first property as soon people reach their early 20’s, the memory of the 2008 housing crisis and the belief the hard times either aren't over or the worst is yet to come, current and would-be homeowners are warming to the idea of renting. 

I also believe UK society has changed, with the youngster’s wanting prosperity and happiness; but wanting it all now... instantly... today... without the sacrifice, work and patience that these things take. As a society, we expect things instantly, and if it doesn’t come easy, doesn’t come quick, some youngsters ask if it is really worth the effort to save for the deposit? Why go without holidays, the newest iPhone, socialising four times a week and the fancy satellite package for a couple of years, to save for that 5% deposit if there is no longer a social stigma in renting or pressure to buy as there was... say... a generation ago?

Even though, in real terms, property prices are 5% cheaper than they were ten years ago (when adjusted by inflation), 21.4% of Cheltenham properties are privately rented (nearly double it was twenty years ago). As a result, the demand for rental properties continues to grow from tenants, meaning those wishing to invest in the buy to let market, over the long term, might be on to a good thing? For advice and opinion on the Cheltenham Buy To let property market, please contact me on neil.west@belvoir.co.uk or 01242 221188 

To Let on Lease - 25 apartments / mews houses

Belvoir are delighted to offer to let as a whole 25 residential units in Gloucester . A stone's throw from the docks  and recently refurbished . 

They would be ideal  as serviced apartments or to let on individual ASTs .

       http://www.rightmove.co.uk/commercial-property-to-let/property-53091968.html

Long lease - 10 years plus, FRI Lease , The rent for the whole 25 is negotiable but would be around £90,000 to £100,000 PA , depending on the agreed terms of the lease . 

I think that let on ASTs , should bring in around £140,000 pa ( less voids and costs). If you want to find out more , get in touch with me on 01452 387334 or neil.west@belvoir.co.uk 

Affordability of housing in Gloucester

Talking to an elderly relative recently, he reminded me that in his day, you could have bought a property for the same price of what a decent second hand car would sell for today and that his father was buying property for the same price as a decent 50 inch LCD TV!  

Now of course, these are only headline prices and we have had wage growth and inflation.  Interestingly, since the Second World War, property values in Gloucester doubled in 1961, 1971, 1975, 1980, 1988, 2000 and 2006.

Looking at more recent times, since the start of the Millennium, these increases in property values have generated large increases in equity for many homeowners but on the other side of the coin also making housing unaffordable for other people.  It might interest readers to note that most of Europe experienced sharp increases in property values in the early years of 2000’s, with only Spain beating  us (although we know what has happened to the Spanish property market over the last few years!).  In the 2000’s, the British situation was different in two regards.  First the property value boom started earlier and saw more sustained increases, second, the regional pattern was fairly uniform.

However, since 2010, the regional pattern has been completely different in the UK.  Compared with  2007 (the last property boom), average property values today in England and Wales are 1.2% higher, whilst in Greater London, they are 35.7% higher, whereas in Gloucester they are 3.17% lower. The London property market has been like a different country.  Looking specifically at Gloucester though, it has continued to be difficult for first time buyers to get on the housing ladder.  The best measure of the affordability of housing is the ratio of Gloucester Property Prices to Gloucester Average Wages, (the higher the ratio, the less affordable properties are). 

·         1997       3.06 to 1   (i.e. the average value of a Gloucester property was 3.06 times higher than the average annual wage in Gloucester)

·         2000       3.40 to 1

·         2002       4.46 to 1

·         2003       5.49 to 1

·         2007       6.48 to 1

·         2009       5.45 to 1

·         2012       5.34 to 1

·         Today     5.96 to 1

You  can see quite clearly, even though we had an improvement just after the 2007 property crash (i.e. the ratio dropped), in following subsequent years with Gloucester house price’s rising but wages not keeping up with them,  the ratio started rise.  This has meant there has been a deterioration in affordability of property in Gloucester over the last couple of years.  This is one of the (many) reasons why the younger generation is deciding more and more to rent instead of buy their own house.

With fewer people able to save up the deposit required by mortgage lenders, more and more people are looking to rent, this has also resulted in a change in attitudes towards renting over the last decade.  This delay in moving up the property ladder has driven rents up in Gloucester over the last few years, as more people are seeking properties to rent.  All these things have combined to make the demand for rental property in Gloucester rise.  If you are an existing landlord or someone thinking of become a first time landlord looking for advice and opinion and what (or not to buy in Gloucester), please contact me on neil.west@belvoir.co.uk

Fewer people are moving house in Cheltenham

Now the dust has settled and the General Election seems a distant memory, we can get back to a more normal property market, or that is what the London based ‘Fleet Street’ journalists would lead you to believe. You see I have been talking to many fellow property professionals in Cheltenham (solicitors, conveyancers and one the best sources of info – the chap who puts all the estate agent and letting boards up in Cheltenham, and all of them, every last one of them told me they didn’t see any change over April in business, compared to any other month on the lead up to the Election itself.

I am now of the opinion that maybe in the upmarket areas of Mayfair and Chelsea, the market went into spasm with the prospect of a Labour/SNP pact with their Mansion Tax for properties over £2,000,000, but in Cheltenham, there has only been eight properties sold above £2,000,000 mark in the last 5 years.

In a nutshell, the General Election in Cheltenham didn't really have any impact on people’s confidence to buy property. I think that things are starting to change in the way people in Cheltenham (in fact the whole of the country as I talk to other agents around the UK) buy and sell property. Back in the 1970’s, 80’s and 90’s, the norm was to buy a terraced house as soon as you left home and do it up. Meanwhile, property prices had gone up, so you traded up to a 2 bed semi, then a 3 bed semi and repeated the process, until you found yourself in a large 4 bed detached house with a large mortgage.

Looking into this a little deeper like I have said in previous articles Cheltenham people’s attitude to home ownership itself has changed over the last ten years. The pressure for youngsters to buy when young has gone as renting, not buying, is considered the norm for 20 something’s. This isn’t just a Cheltenham thing, but, a national thing, as I have noticed that people buy property by trading up (or down) because they need to, not because ‘it’s what people do’. This does means there are a lot less properties on the market compared to the last decade.

A by-product of less people moving is less people selling their property. My research shows there are a lot fewer properties each month selling in Cheltenham compared to the last decade. For example, in February 2015, only 129 properties were sold in Cheltenham. Compare this to February 2002, and 190 properties sold and the same month in 2003, 167 properties. I repeated the exercise on different sets of years, (comparing the same month to allow for seasonal variations) and the results were identical if not greater. 

So what does this all mean? Demand for Cheltenham property isn’t flying away, but with fewer properties for sale, it means property prices are proving reasonably stable too. Stable, consistent and steady growth of property values in Cheltenham, year on year, without the massive peaks and troughs we saw in the late 1980’s and mid/late2000’s might just be the thing that the Cheltenham property market needs in the long term.

Cheltenham Buy To Let – Should you look further afield?

The other day a  landlord asked me where the next hot spot town or city is to invest his money in and where the best rental yields are. Now it can be tempting to just look at Cheltenham when growing a buy to let property portfolio, but there can be big differences in the amount of rental income you receive and how much your property will appreciate by considering other locations in the country.

Now regular readers of my articles of the Cheltenham and Gloucester Property Blog know of my love of the ‘buy to let see-saw’. On one side of the see-saw is yield and the other capital growth. Landlords should be looking for a high rental yield so that they can comfortably cover any mortgage payments and make some profit from the income return, but you also want the property to rise in value over time so you can get some capital growth when you come to sell. However, high yielding property in say such areas as Hesters Way, Springbank, Whaddon and Wymans Brook in Cheltenham, (so the see-saw arm with yield on it goes up on one side), will suffer from low capital growth (so the other arm with capital growth on the seesaw goes down). The relationship works in reverse as well, so in such upmarket areas as Leckhampton and Charlton Kings, properties offer good capital growth, but at the expense of a decent yield.

The North East and North West of the UK are landlord magnets for great yields. The average yield in Cheltenham today is 4.68%, which when you compare with say Hartlepool in the North East, which achieves 7.73% or 9.43% in the Anfield area of Liverpool, doesn't look too healthy. Now of course, these are only averages and some of my Cheltenham landlords are achieving 6% to 7% on some of their Cheltenham properties, but at the expense of capital growth. Anyway, after wasting a tank full of petrol up the A1 to Teeside or the M1 to Home of the ‘The Reds’, that Liverpool property, would have dropped in value by 2.2% in the last 12 months and the Hartlepool property would have dropped by 1.4%.

When you compare the long term house price growth, it gets even worse. Looking at the graph below you can see that since 1995, property values in Cheltenham have risen by 199.36%,compared with Hartlepool at 21.02% and Liverpool at 90.11% – it just shows you shouldn't always chase the yield because of the poor increases in property values in those two places. As I always like to explain to landlords , a decent yield is important, but when you come to sell your buy to let property it would also be nice to make a decent profit.

 At the end of the day, as a Cheltenham landlord, you want to be making gains from both your rent and house price growth, particularly when you want to sell, because when combined, the rental yield and capital growth, that gives you the real return on your investment.  

Bungalow - Cheltenham Great rental property

I've just spotted this 2 bed bungalow for sale with Mack Residential. Its on the market for £165,000 and should let for around £ 725 . That's a yield of  5.2 % . Not great I hear you say. Well not bad I say. Bungalows come up for rent very rarely and let very quickly, There are 7 availble to rent in Cheltenham as I type and all are on the market for more than £725

                            http://www.zoopla.co.uk/for-sale/details/37227405

If you want a relative safe rental, then this could be the one for you. Contact Mack Residential for a viewing. If you would like any advice regarding the buy to let market in Cheltenham or Gloucester, please get in touch . neil.west@belvoir.co.uk 

Cheltenham Property Market – Post Election Blues?

With the election now over, average wages are beginning to grow faster than inflation. This is good news for the Cheltenham housing market, as some buyers may be willing or able to pay higher prices given the more certain political outlook and attractive inexpensive mortgage rates. However, sellers who think they have the upper hand due to the lack of property for sale should be aware that we should start to see an increase in the number of people putting their properties on to the market in Cheltenham giving buyers some extra negotiating power. 

At the last election in May 2010, there were 1,108 properties for sale in Cheltenham and by October 2010, this had risen to 1,377, an impressive rise of 24% in five months. An increase in the supply of properties coming on to the market could tip the balance in the demand and supply economics seesaw, thus potentially denting prices. However, as most sellers are buyers and confidence is high, this means there will be good levels of property and buyers, well into the summer, as demand will continue to slightly outstrip supply.

Just before we leave the election, it is important to consider what the uncertainty in April did to the Cheltenham property market. I mentioned a few weeks ago that property values (ie what properties were actually selling for) had remained static in March 2015. Now new data has been released from Rightmove about April’s asking prices of property in Cheltenham. It shows that pre-election nerves finally came home to roost in the final weeks of electioneering, with the average price of property coming to market only increasing by a very modest 1% (April is normally one of the best months of the year for house price growth). 

I am sure our local MP, Alex Chalk, would agree that the biggest issue is the lack of new properties being built in Cheltenham. The Conservative manifesto pledged to build 200,000 discounted starter homes for first-time buyers in the next five years. For Cheltenham to gets its share, that would mean around 100 such properties being built in Cheltenham each year for the next five years, not much when you consider there are 50,929 properties in Cheltenham.

Housing is not a big issue for Conservative voters and because London is an increasingly Labour city where the biggest housing issues are found by a country mile, it remain on the ‘to do list’ but won’t get the recognition it deserves. Until another political party gets back into power, nothing will seismically change in the property market, thus demand for housing will continue to outstrip supply, meaning property values will increase (good news for landlords). However, as rents tend to go up and down with tenant wages, in the long term, rents are still only 1.56% higher than they were in 2008 (good news for tenants)... with renting everyone wins! 

Is the Gloucester Property Market in crisis?

Since the 1960’s more people have owned their own home than rented but for many young Gloucester people, the dream of buying their own home is dying...or is it? Since the turn of the Millennium, in Gloucester (as in the rest of the country) there has been a significant change in the proportion of people who own their own home in Gloucester. In 2001, 74.6% of homes in Gloucester were owner occupied, today the figure is 67.2%, a significant decline in such a short time. Buy to let landlords can find tenants because young people say they cannot afford a deposit to buy unless they inherit money or are given a loan from their relatives.

In Gloucester, only 46.5% of 25 to 34 year olds have a mortgage. When you compare Gloucester against the national average of 35.93%, it just shows how different parts of the country have different housing markets. However, the really interesting fact is this ...Roll the clock back to 1991 and nationally, 67% of 25 to 34 year olds had a mortgage. After WW2, the supply of properties being built kept up with demand as millions of council homes were built (the most being built in 1950s, surprisingly under Tory Governments!). Also private house building increased in the 1950’s, but especially in the 1960’s and 1970’s, and as the country got more prosperous it meant that by 1971, there were more home owners than renters.

However, since the 1970’s, the population has grown but the number of new properties being built hasn’t kept up at the same rate, the result is that there have been huge rises of property prices in the early ‘70s, the late 80s and more recently between 1999 and 2004. Interestingly, since the early 1970’s, out of the 34 richest countries in the world, the UK has seen highest property prices rises.

95% mortgages have been available to first time buyers since late 2009, but with property prices rising by 199.36% since the early Spring of 1995 in Gloucester, as property prices have been rising and first time buyers have been saving, the amount they have to save is continually rising at the same time. The stress on saving even for that kind of deposit, coupled with the new stricter mortgage rules introduced in 2014, means that most 20/30 something’s in Gloucester are renting instead of buying.

The issue quite simply comes back down to a lack of new homes being built. In Gloucester, only 459 properties a year are being built whilst the population is rising by 1,176 a year. The supply of new homes has been limited by planning laws, local councils not having the money to build council houses, hard hitting green belt limitations, and our old friend NIMBY’ism. With a rising population and net migration, especially from the EU, the mismatch between demand and supply is why we have the problem. Until politicians have the backbone to realise that the country needs a lot more decent homes built, the problem will just get worse. In the meantime, demand for rental property will continue to grow because people need a roof over their head at the end of the day.

574% Return for Cheltenham Buy To Let

      574% Return for Cheltenham Buy To Let landlords since 2000

Buy to let is essentially different from investing in stocks and shares or putting money in the Building Society. Whilst these other investments (Building Society , Stocks and Shares etc) are passive i.e. once the money has been invested it you leave it alone, with buy to let, things are more hands on, in fact it’s almost a business. One thing the landlords I speak to say is the fact that they like buy to let because it is both an investment as well as a business. It is this factor that attracts many of my landlords – they are making their own decisions rather than entrusting them to others (such as City Whiz Kids in London playing roulette with their Pension Pot).

So if you are investing in the Cheltenham property market, you can earn from your investment in two ways. When a property increases in value over time, it is known as 'capital growth'. Capital growth, also known as capital appreciation, this has been strong in recent times in Cheltenham, but the value of property can go down as well as up just like shares. Rental income is what the tenant pays you - hopefully this will grow over time. If you divide the annual rent into the value (or purchase price) of the property, this is your yield, or annual return.

I was talking to a landlord who bought a flat in the Tewkesbury Road area of Cheltenham. He bought a very pleasant studio flat in 2000 for £27,500. It sold again in February just gone for £67,000, a rise of 143.63% in just over 14 years – a compound annual return of 6.57%.

However, the real returns are for those Cheltenham landlords who borrowed money to purchase their buy to let property. They have made significantly higher returns than those who paid 100% cash. If the landlord had borrowed 75% of the £27,500 purchase price of the Tewkesbury Road studio flat on an interest only 75% mortgage, he would have only needed to invest £6,875 (as his 25% deposit... borrowing the remaining £20,625), but his £6,875 would be worth today, £46,375 (£67,000 less £20,625 interest only mortgage)... a rise of 574.54% - a compound annual return of 14.61%... and I haven’t even mentioned the rent he would have received in those 14 years!

This demonstrates how the Cheltenham buy to let market has not only provided very strong returns for average investors since 2000 but how it has permitted a group of motivated buy to let Cheltenham landlords to become particularly wealthy. In fact, if this landlord had continued to re-mortgage the property as it went up in value, he could by our reckoning have had an additional two or three properties (albeit with larger mortgages but greater future potential).

As my article mentioned a few weeks ago, more and more Cheltenham people may be giving up on owning their own home and are instead accepting long term renting whilst buy to let lending continues to grow from strength to strength. If you want to know what (and would not) make a decent property to buy in Cheltenham for buy to let, then please contact me on neil.west@belvoir.co.uk.

2 Bed Gloucester 6.0% Yield

We are marketing this recently redecorated 2 bed flat for sale. It is currently tenanted and managed by us. Its on the market for £105,000 and lets for £525.00 PCM . Thats a yield of 6% ( exl. service charges) . 

                              http://www.zoopla.co.uk/for-sale/details/36969788

The property is in  great location with easy access to the rail station, hospital and city centre.
If you are interested in discussing this or any other propeties you may have seen, please do contact me on neil.west@belvoir.co.uk

General Election - Shock Majority!

What will General Election result do to the Cheltenham and Gloucester Property Market’s?

After the shock of the Conservatives returning to power with a majority at Westminster, all the potential issues and possible uncertainties of a hung parliament has lifted the cloud from the Cheltenham and Gloucester property market. Talking to other agents, surveyors and solicitors in the area over the last few days, there are signs this has started a new impetus in the Cheltenham and Gloucester property market after a subdued six months, when an amalgamation of tougher lending conditions, a natural correction after the strong recovery in property prices in 2014, and political uncertainty ahead of the General Election, slowed demand.

Against the back drop of Labour’s election promises of rent controls and three year tenancies, some Cheltenham and Gloucester buy to let landlords were waiting to see how these new policies would be implemented before they committed themselves to buying more property for their buy to let portfolio. Now that uncertainty has been removed, the long term picture is very positive.

So, with all that uncertainty now removed, where next for the Cheltenham and Gloucester property market? Well with inflation at zero and with the Money markets happy David Cameron is still at No.10, the Bank of England have no reason to raise interest rates until 2016 at the earliest. As mortgage rates are at their lowest levels since 2010, landlords with large deposits will now be wooed by the mortgage companies in the coming months with low rates.

You see over the past couple of years, Cheltenham and Gloucester landlords have benefited from a booming Cheltenham and Gloucester job market. Unemployment in Cheltenham has dropped to 3.15% and 2.7% in Gloucester, as a year ago,1,599 people in Cheltenham and 2,341 people in Gloucester were claiming unemployment benefit compared to today’s 891 in Cheltenham and 1638 in Gloucester . With more jobs and better pay, as the level of rents is directly linked to tenant’s wages, there has been an increase in the rental prices tenants are willing to pay for good quality Cheltenham and Gloucester properties.

Some landlords might be nervous about Tory plans for the housing market over the next five years in terms of tenant demand for their rental properties. One plan is for Housing Association tenants to have the right to buy their property. These tenants were never in the private rented sector and will actually increase the supply of properties in the housing stock in decades to come. The Government ‘Help to Buy Scheme’ has only helped to buy 50 Cheltenham properties and 318 Gloucester properties since April 2013. Considering 2,899 properties have changed hands in the last year alone in Cheltenham and 2,830 in Gloucester, I don’t think it has made a huge difference to our local property market.

The biggest matter, when it comes to tenant demand of rental property going forward, comes from the shift in the mindset and attitudes towards renting itself. Twenty years ago you were seen as a second class citizen if you rented a property. In Cheltenham and Gloucester, as in the rest of the UK (apart from Central London), renting continues to offer good value for money for tenants. If you are an existing landlord in Cheltenham and Gloucester or thinking of becoming one (or as we like to call you .. a FTL .. a ‘first time landlord’), then I suggest you seek out specialist advice and opinion. We will happily give you our opinion on the current state of the market and the advantages/disadvantages to investing in the Cheltenham and Gloucester property market if you pop into our offices. However, if time is at a premium, you can email me at neil.west@belvoir.co.uk

Are Attitudes to Home Ownership changing in Cheltenham?

Speaking to a Bank Manager the other day in Cheltenham, we got talking about the state of the Cheltenham property market and whether we, as a country, are turning more and more to the European style of property ownership, where it is the norm to rent as a opposed to automatically buying once you have a good job.

Even though a recent report by the Halifax stated home ownership remains a goal for 85% of twenty to forty five year olds, there is information emerging that attitudes in the UK towards renting your own home as opposed to owning it have softened, showing more and more, that renting is being seen as a life style choice. In fact it is recognised in learned circles that the cycle of renting is also repeated by the fact that people who grow up primarily in rented accommodation are themselves more likely to rent than buy.

The biggest barrier often mentioned to buying a house is the lack of sufficient wages and the high level of deposits. However in Cheltenham, if a couple, one on the average Cheltenham salary of £30,089 pa and the other on the minimum wage, assuming they had a reasonable credit history they would be showered with lenders offering them a 95% mortgage (a reasonable credit history means they haven’t defaulted on loans, paid all their bills on time nor got any County Court Judgements. Just because you missed just one credit card payment wont mean you have messed up your credit score and your ability to get a mortgage) and they would only need to find £7,300 as a deposit to buy a top of the range one bed apartment in central Cheltenham or a good honest 3 bed ex local authority semi in Whaddon. ..it comes down to the perceived capability to buy nowadays.

Interestingly, when I looked at the Cheltenham figures, the average Cheltenham tenant has a younger profile (especially the sub 24 year olds) than the English and Welsh average, as can be seen from the graph below. What interested me as well was the relatively large number of people renting over the age of 50! I know we have a large number of mature tenants at our agency, but I always thought that was the exception to the rule. Obviously not! (And that is good news for landlords as they make excellent tenants)

So what does all this mean for Cheltenham landlords and future Cheltenham landlords? I honestly believe there is a difference between the hope and perceived capability of the younger generation to buy a home. Although home ownership is seen as advantageous by a majority, many tenants admitted in the Halifax report they are not taking the steps they need to purchase their own home.

As the local authority aren’t building any properties in Cheltenham, people still need a roof over the head, and that is why, as I mentioned a few weeks ago that the demand for rental properties will only continue to steadily rise in the coming decade. If you want to know where the Cheltenham Property market is heading and where you should (and shouldn’t) buy, please send me an email to neil.west@belvoirlettings.com

Two Speed Cheltenham Property Market

With the General Election upon us , property values in Cheltenham are still 0.6% higher than they were 3 months ago, the diversion and ambiguity of an election typically makes house sellers who need to sell, price their property more realistically (although this only lasts a couple of months). Looking specifically at it from a Cheltenham landlord’s point of view, the Cheltenham properties favoured by investors are in short supply in many parts of the town because of a number of factors. One of the factors has been that we seen the number of first time buyers coming to buy their first home increase over the last 12 months in Cheltenham.  Another factor has been the fact that the banks have been pushing ‘let to buy’ (yes ‘let to buy’ is different to ’buy to let’) to home-owners (more of ‘let to buy’ in an up and coming article). Next, because of the banks, who are chasing low risk landlords with high deposits with very low mortgage rates- and the low risk landlords with high deposits tend to be attracted to the safer modern two and three bed town houses and semis in Cheltenham.

As I mentioned a few weeks back, the pension rules have changed  which means buy to let landlords can use some, or all, of their pension pot to buy a property.  It shouldn't be forgotten there are tax implications taking more than a quarter of your pension pot out  , so whilst many pension pots may not be able fund a suitably big enough tax free lump sum to buy the property outright, for most it will provide enough for the 25% deposit (required by most BTL mortgage providers). It shouldn't be forgotten landlords that the interest paid on the mortgage is tax deductible against the rent, thus lowering your income tax paid.

In the last 12 months, I have noticed a particular uplift in interest from ‘50 something’ Cheltenham people wanting to become landlords for the first time. In Cheltenham, the highest returns for the lowest investment are at the lower end of the market eg the classic apartment . Unfortunately apartments , with two bedrooms are coming to the market in smaller numbers than the larger four bed’s  in  top end sectors of the Cheltenham property market. When looking at the actual numbers, in the later part of the Summer of 2014 in Cheltenham, in one month alone 338 two bed properties were on the market in Cheltenham. However, in January this year, a notoriously excellent bumper month for properties coming on to the market, there were only 286 two bed properties on the market in Cheltenham to choose from. Today, that figure stands at only 282..whilst the number of four and five beds has increased significantly ...  interesting don’t you think?

At that lower end of the property market in Cheltenham, (ie where first time buyers and landlord investors compete with each other to buy those smaller properties), I believe throughout 2015, there will be a slow and steady tipping of the scales between supply and demand. In fact, from what i am seeing and hearing, early anecdotal evidence has suggested over the last few months, we are beginning to see a polarised property market, where we have high demand but low supply at the bottom end of the property market, yet high supply but lower demand at the top of market .. and that can only mean one thing ... prices will go up quicker on the smaller properties than the larger ones in Cheltenham, thus narrowing the gap for people looking to move up market!

“The way it works in Gloucester is this, you have to rent where you want to live, or buy where you don’t want to live”

I had this really interesting chat with some my tenants the other day, on renewal of their tenancy agreement. They are a great couple in their early thirties and I know they have decent jobs in Gloucester. They have been tenants of ours for quite a while, so I know them quite well. We got talking and I enquired if they ever thought of buying a property for themselves, to which they replied back with the title of this article. It made me think and so I did some more research into the subject which I want to share with you.

After the end of the Second World War, just over a quarter of the UK population owned their own home, the rest rented from private landlords or the local Council. If someone told you in the 1970’s and 1980’s that they rented, they were considered a second class citizen. Everyone wanted to own their own home .. it was the done thing. We think that home ownership will inevitably happen, but it won't.

It all changed in the 1970’s, when two things happened. Firstly, the number of people who owned their own home broke through the 50% barrier in 1971 and by 1981 it was at 57%. Tied in with that, the average house prices in Gloucester were doubling at one point every four years in the 1970’s so property and profit started to feed off each other.

To put that growth in context, if we were to look at the last 85 years in Gloucester, in 1930, the average Gloucester property was worth £397. It took 16 years for Gloucester property values to double, rising to £982 by 1946. Another 15 years and the average Gloucester property doubled again to £1,864 in 1961. The next doubling only took 10 years, as by 1971 the average Gloucester property had reached £3,789 in value.

It was (as mentioned above) the 1970’s when things really took off, as by 1975 (ie only four years) they had doubled to £7,930 and they doubled again to £15,875 by 1980. It took another eight years for values to double again, as an average Gloucester property reached £33,206 in 1988. Twelve years had to pass until the doubled again in 2000 (£68,323) and just six years to double again by 2006, when they reached £137,799. Where are we today? The average property value in Gloucester currently stands at £203,600.

We could blame Maggie Thatcher for making home ownership the ultimate goal, but what we now need to consider is that the country is turning on its head and we need to, as a country, love renting again. Some blame the banks, but obtaining a 95% mortgage is hard work, but nowhere near impossible. A typical Gloucester first time buyer would only need to save £7,500 for a deposit and fees and they could buy a decent property. For example, you could buy a property in Innsworth near Gloucester, and it would be cheaper each month in mortgage payments than renting.

People might say on surveys that they want to buy. If you have been living in a top of the range large property in Churchdown , but the bank will only lend you enough to buy a smaller property in Innsworth, what would you do? Don’t get me wrong, Innsworth has really pulled its socks up over the last ten years, but it isn’t Churchdown, is it? Again, if you were a twenty something, what would you do? Look again at the title of the post ... “The way it works is, you have to rent where you want to live, or buy where you don’t want to live,” - With tenant demand only going in one direction, that is probably why more and more people are getting into buy to let in Gloucester. With the new rules on pensions and the ability to use them to buy residential rental properties this could be the time for you to buy a rental property. You must take advice on your pension from a Independent Financial Advisor (there are plenty in Gloucester) and you must take advice from people who know what to buy (and not to buy) in Gloucester to ensure you get the best from your investment. One place for such advice is me and you can contact me neil.west@belvoir.co.uk

2 Bed flat 6.6% Yield !

This lovely, modern 2 bed apartment is on the market for £99,999 and lets for £550.00 PCM, giving a 6.6% yield. It is actually rented out through us and on the market for sale with us.

          http://www.belvoir.co.uk/flat-2-41-tolsey-gardens-tuffley-gloucester/91932

We have great tenants in there who are looking after the property as you will see from the pictures. This would make a great low maintenance investment. Please contact me if you would like more details on neil.west@belvoir.co.uk

Cheltenham Property Market : Number of Rental properties set to jump to 15,000 by 2021

At the time of the last census in 2011, 3,401,675 properties in England were privately rented, of which it is estimated, over 1.25 million were owned by private landlords. The rapid growth of buy-to-let is hugely controversial, especially as only ten years before that, there were only 1,798,864 properties under private renting in England. Buy to let landlords have been held responsible for forcing up property prices and preventing the younger generations from being able to buy. There is also growing resentment toward the billions of pounds in tax relief (estimated to be nearly £10 billion) landlords claim on their mortgage interest -tax relief which is not available to homeowners.

They may be asset rich thanks to recently rising property values, but let us not make the landlords the bogiemen .Despite all these benefits enjoyed by private landlords, let us not forget the good they have done, especially in Cheltenham.

Property values today in Cheltenham are now back to around the 2007 property boom levels (2007 being the peak of last property boom before everything dropped in 2008/9), yet inflation has risen by 26% in the same time frame, so in real terms, properties today are 26% CHEAPER than they were in 2007. Just think how low they would be without landlords buying all those rental properties in the town. Interest rates are at an all time low and first time buyers only need to save a £8,000 deposit to secure a 2 bed semi in Wymans Brook with a 95% mortgage. Forget what the papers say, first time buyers can borrow money relatively easily on a 95% mortgage and nine times out of ten, it’s cheaper to buy than rent. So why aren’t people buying?

The number of people choosing to rent, either for lifestyle or economic reasons, has grown over the last 15 years. I also believe they will continue to grow for some time to come (as does every report on the subject). In fact I would go as far to predict the number of rental properties in Cheltenham will have risen from the 10,260 properties recorded in 2011 to 15,000 by 2021. Sounds fanciful? Well in 2001, there were only 5,811 privately rented properties in Cheltenham.

It is a fact that we as a country are more and more turning into a European model when it comes to homeownership, where the norm is renting for the first ten years, as opposed to the norm from the 1960’s to 1990’s, where first time buyers were encouraged to buy as soon as they got a job.

Tenants, in particular, will also feel the benefit from potential changes in the market. The likelihood of interest rate increases in late 2015, existing economic conditions, combined with the uncertainty of new Government manifestos following the General Election in May will result in low demand for people to buy yet also put a dampening effect on increases in rent. As long as landlords buy the right sort of property, that allows for a reasonable yield, decent capital growth, everyone will be a winner. If you want a chat about what would make the best sort a property that would offer that in Cheltenham, then please email me on neil.west@belvoir.co.uk.

7.3% Yield ! Dont Hang Around

This 3 bedroom terrace is on the market with The Property Centre. They say that it needs some updating. It is on the market for offers over £90k. Say you got it for £95K , spent £20k , thats a total investment of £115K. Not bad for a 3 bed house! 

                            http://www.zoopla.co.uk/for-sale/details/36438851

I agree with the Property Centre that you could let this for £700 PCM , which on an investment of £115K is a yield of 7.3 % . Thats pretty good in anybodys book. Get on to the agent now and check it out as this will not be around long. If you would like advice in this or any other property please do ask me. 

Gloucester Landlords invest £822 million in the Gloucester Property market

South West property asking prices jumped by more than £950 to £268,500 in February according to Rightmove, an increase of 0.4% from January and 5.6% higher than a year ago. After the traditionally quiet months of January and February, the property market has started to warm up, but talking to some Gloucester Estate Agents, they are reporting their lowest ever stocks of quality property for sale. However, asking prices have no relation to what property sells for (ie their REAL value). Is the issue a lack of supply?

Putting aside Gloucester’s continual housing supply shortage, (we only built 4,598 properties in the last decade but the population of Gloucester grew by 11,803), this is now, according to some people, being exaggerated by an increase in homes being owned by buy to let investors, who tend to be buying a property as part of a long term pension plan and are more likely to keep it for longer than an owner occupier would. I have also seen unwillingness among homeowners looking to move, to put their own property on the market as they can't find few suitable properties to make it worth their while going through the whole moving process.

Talking to some Gloucester landlords only last week, I said that I believe this is the new norm in the Gloucester property market, and is the consequence of over 35 years of not enough homes being built to meet the escalating growth in household numbers, resulting in a lack of quality homes for sale in many popular areas of Gloucester.

When one looks at the historic data, in June 2008, there were 1,758 properties on the market in Gloucester compared to today’s 728. Should we be worried? Well in February 2010 there were only 803 properties for sale in Gloucester but seven months later in September 2010, this had jumped to 1352 properties, for it to drop to 602 properties in December 2013. The number of properties on the market is a cyclical thing in Gloucester, it always has been and always will be. As we go into the Spring of 2015, the number of new properties coming onto the market will increase .

So are landlords to blame? Well, on one side of the coin, yes they are. If they buy a property to rent out, that means someone can’t buy it to live in. However, it doesn’t matter if someone wants to live in a property if they can’t afford the deposit and upkeep .. and the youngsters of Gloucester still need a roof over their head. So on the other side of the coin, if the Council aren’t building any properties and people can’t afford the large deposit for the mortgage, then Gloucester landlords have stepped in and bought property to rent out to them. Gloucester landlords have bought 4,041 properties over the last decade (investing approximately £822million buying those Gloucester rental properties), meaning there were at the last count, 8,012 Gloucester properties being privately rented out to tenants. Gloucester tenants are in fact getting a good deal as well, as average rents in Gloucester are only 4.6% above where they were seven years ago. That sounds like a win-win situation for everyone to me. Stop blaming landlords and start building more properties in Gloucester .. that is the only answer.

In the meantime, the demand from Gloucester tenants for Gloucester property is only set to rise over the coming years. If you want some advice and opinion on where (or not) to buy, please email me on neil.west@belvoir.co.uk or call me on 01452 387334

Massive drop in Homeownership in Gloucester

An Englishman’s home is his castle and when it comes to the UK we are still a nation of homeowners ‘(although wasn’t it Napoleon who thought we were all shop keepers!). It is interesting to note that up until the mid to late 1960’s, more people rented their home than owned their own. In fact, I was surprised to read that in 1921, over 75% of homes in England and Wales were privately rented with the remaining 25% being owner occupied.

It was only after the Second World War, that people started to buy instead of rent .. but instead of owning our property outright, we borrowed money from banks and building society’s to buy them and the roots of the growth of the private rental sector can be drawn back to the late 1970’s early 1980’s, when the council houses began to be sold off under the right to buy scheme.

In 2001, 74.6% of households were owner occupied in Gloucester, but ten years later, that percentage dropped massively to 67.2%. But here is the interesting part, when you look at the actual numbers of households, 34,177 households in Gloucester were owner occupied in 2001. Ten years later, in 2011, that number (who owned their own home) had actually only decreased to 33,858 households.

So why big drop in percentages but not in actual properties? An additional 4,598 properties were built in Gloucester between 2001 and 2011, but a lot of them were bought as buy to let investments, thus more than doubling the number of private rental properties in Gloucester. In fact, the number of properties in Gloucester, which were privately rented, jumped from 3,971 in 2001 to 8,012 in 2011!

With the council housing waiting lists being in the 5 to 10 year range for a decent property in a decent location and with no more council houses being built and an increasing number of people looking for a roof over their head, private renting is the only option.

With every report stating the rental market will continue to grow throughout the rest of this decade and beyond, linked with high demand and limited supply in the Gloucester, then it is still a good time to consider buying a property for buy to let investment in Gloucester. I am always happy to give you my considered opinion on which property to buy (or not as the case may be).. If you are a landlord, new or old, I am certainly more than happy for you to pick up the phone or visit the Gloucester Property Blog where you will find the best buy to let deals on a day by day basis from all the agents in Gloucester .