Thursday, 6 November 2014

Who owns what property in Amber Valley?


 

Last week, a couple from Belper, came in to discuss with me about them potentially investing in the Heanor or Belper property market for Buy to Let for the first time. As my regular readers will note, the most important consideration you will make before investing in property is the balance between annual return/yield and the annual value increase/capital growth. However, what affects those two things (yield and capital growth) in Amber Valley are very varied and complex. The quantity of property and whether property is owner occupied, social housing (posh words for council housing) or private renting has a big difference on yield and capital growth.

 
The growth in home ownership in Amber Valley, which started in the 1950’s, continued through the 1960s and, by 1971, the proportion of owner occupiers was equal to those renting. By 1981, 56% of Amber Valley households were owner occupied and, for the first time, the proportion of rentals was less than home owners but by 1991, it reached 75.9%. Roll into the 21st Century and in 2001, there was hardly any change in the tenure structure in Amber Valley, as owner occupation stayed relatively unchanged at 77.16%. The significant change over the decade (1991 to 2001) was within the rental sector, where the proportion of households privately renting increased for the first time since 1918. 5.81% of households were privately renting in 2001, while those socially renting had decreased to 13.31%.

Between 2001 and 2011, the number of households in Amber Valley rose from 49,129 to 52,596, an increase of 7%, but the percentage of households that were owner occupiers in Amber Valley dropped significantly to 74.1% (from the previously quoted 77.1% in 2001). However, that doesn’t tell the full story, because whilst there was a significant drop in the percentages (77.1% to 74.1%), the actual numbers tell a completely different tale. In 2001, 37,911 households in Amber Valley were owner occupied but by 2011 that figure had actually increased to 38,978 households .. so why the drop in percentages when the actual numbers increased?

In 2001, 2,854 houses were privately rented (5.81%) in Amber Valley but roll on another ten years and there are 5,618 households in Amber Valley that are privately rented (10.7%). The rapid increase in the number of households privately renting in Amber Valley could be linked to the decline in the number of households getting on the housing ladder, usually by way of a mortgage.

This is mainly because of the increasing difficulty for first time buyers being able to raise deposits for a mortgage, which haven’t been helped by high property prices. The average Amber Valley house price for those who were first time buyers increased by 91.3% between 2001 and 2011. This meant larger deposits which are linked to the house price, were required. Also tighter lending requirements, especially in the wake of the recent credit crunch meant a larger percentage of the house value was required as a deposit, as 100% mortgages became a thing of the past.

Finally, declining wage growth and rising inflation over the period exerted pressure on household spending and eroded the value of savings. While in 2001 the average house price in Amber Valley was four and half times the average gross wage, by 2011 the average Amber Valley house price was seven times larger than the average wage. This meant households needed to save for a longer period in order to provide a deposit.

Having this knowledge of the Amber Valley property market to hand enables me to give to my landlords the best advice on what (or not) to buy for buy to let. Irrespective of you are a landlord with another agent or someone who is thinking of dipping their toe in the water for the first time as a buy to let landlord, if you want to pick my brains on any matter to do with the Amber Valley or Erewash  property market’s, please feel free to email me at jeremy.bullock@sprucetree.co.uk

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