2014 – a funny year for the Ilkeston property market?

 

A number of landlords, who own property in Ilkeston, have made contact with me recently asking for my thoughts on the future of the buy to let market in Ilkeston. In previous articles, we have talked about Ilkeston’s history of rents, property values, tenant demand and yields; all important matters for a landlord, but we haven’t discussed the future.

Property values rose by 4.5% (Oct 13 to Oct 14) in Ilkeston over the same time frame. Good news all round, but when you consider property values have previously dropped by 17% between September 2007 and June 2009, this is not as good as the media would have you believe.  It should be no great surprise to hear that Ilkeston property values are starting slow up as we head in to the New Year.  Whilst property values in Ilkeston were growing by nearly 1% a month in the Summer months, on the run up to Christmas, they have slowed and now actually dropped last month by 0.1%. 

The reality is we have had a year and a half of decent market conditions in Ilkeston, but now all that pent up demand is starting to fade. The big question moving forward is whether the Ilkeston market will now be held back by affordability and restricted mortgage lending, and what long term impact this will have on the Ilkeston property market.

Looking at the UK as a whole, because we can’t look at Ilkeston in just its little own bubble, the recent rapid rise in house values in some parts of the UK in the early part of the year (especially in London), along with earnings growth that remain below inflation and the possibility of an interest rate rise over the coming months, appear to have tempered housing demand. This weakening in demand has led to a modest easing in both property price growth and sales. A moderation in growth looks likely into next year as supply and demand become increasingly better balanced.

Now with the General Election on the horizon, whichever Government takes power, they, along with the Bank of England, have a thorny job to do in balancing the expected rise in interest rates with the continued resurgence of the housing market, to ensure the property market doesn’t drop and drag down the economic recovery forcing people into selling their property at a loss.

However, back to Ilkeston, long term property values which track peaks and troughs are more helpful to landlord investors. The questions I seem to be asked on an almost daily basis by landlords are:-

“Should I sell my property in Ilkeston, or even buy another?”

“Is the time right to buy another buy to let property in Ilkeston and if not Ilkeston, where?”

“Are there any property bargains out there in Ilkeston?”

Many other Ilkeston landlords, both who are with us and many who are with other  Ilkeston letting agents, like to pop in for a coffee to  discuss the Ilkeston property market, how Ilkeston compares with its closest rivals; Eastwood Belper and Heanor, and hopefully answer the three questions above. I don’t bite, I don’t do hard sell, I will just give you my honest and straight talking opinion.

In the meantime may I take this opportunity to wish you all a very Merry Christmas and a prosperous 2015.

Are less properties for sale in Amber Valley and Erewash?

 

My friends often call me an estate agent, but then I remind them that whilst a lot of estate agents do both sales of property and letting of property, we are a letting agent only and always plan to be. One landlord who emailed me (which followed on with a telephone conversation) about the Amber Valley and Erewash property market got talking to me about how he thought there were less for sale boards in Amber Valley and Erewash than there were ten, even fifteen years ago.

All the newspapers talk about is a crisis of a lack of properties. Building new property is not like the Mars bar factory that can keep the machines going an extra couple of hours to make more Mars bars. The Government says 200,000 properties need to be built each year for the next ten years. For Erewash to take its share of that 200,000, that would mean 441 properties would have to be built in the area each year for the next ten years, whilst in Amber Valley, they would need to build 476 properties in the same time period... yet in the last ten years in Erewash we have only build 119 properties a year on average and in Amber Valley 158 per year.

People in popular areas, such as our own in Amber Valley and Erewash, say they want more properties for their children and are usually in favour of more homes being built, as long as they are not in their local area. Increasing supply of houses leads to more congestion, crowded amenities and loss of greenbelt. Then, and here is the big reason, those homeowners have a vested interest to keep the building low because an increased supply reduces the value of their existing home.

Therefore, existing local homeowners have a vested interest in keeping the supply as low as possible in their area. Finally, a lack of council houses since Mrs T. encouraged the sale of council housing after she was elected in 1979, the number of new social housing to replace them (a euphemism for council housing) has been very low.

However, getting back to the point, it’s a simple fact that since the 2007 crash, the number of properties that are selling in  Derbyshire has dramatically reduced. In the late 1990’s  around 1,256 properties a month were selling each month in Derbyshire. In the first half of the 2000’s decade, when we had a rising market, around 1,640 properties were changing hands each month in Derbyshire. In 2008, the year of the property crash that dropped to 470 per month and didnt grow that much until the back end of last year, whilst in 2014 (throughout the Spring and Summer of 2014) on average 1,100 properties in Derbyshire have sold.

If you would like to discuss my thoughts on the rental markets in Ilkeston, Eastwood, Heanor and Belper, please pick up the phone on 01332 910499 or pop into our offices in Denby House Busyness Centre, Tailor Lane, Heanor DE75 17A or email me at jeremybullock@sprucetree.co.uk

What sort of property is selling in Heanor?

 

Heanor attracts property hunters seeking a home in our town that strikes a wonderful balance between old and new. Luckily, just about every accommodation preference can be catered for here, from highly desirable detached houses in Heanor and the rest of the Amber Valley, which are perfect for families, popular 1930’s bay front semis houses, imposing late Victorian terraced houses and modern luxury apartments dotted around the Town. But with newspapers giving mixed messages on what is exactly happening in the town, let us have a look at what has happened over the last 12 months, in particular, what type of property is actually selling.

Between August 2013 and August 2014, 323 of the 7,221 properties sold and changed hands in Heanor. The best performing type of property was terraced houses, with an average sale price of £92,642; representing 34.8% of the property sold in Heanor (which when you consider only 27.1% of Heanor property is terraced, this means terraced houses have done well). Next are semi detached houses. They represented 32.5% of the sales but semi detached properties only make up 38.3% of the property in Heanor.

Detached houses in Heanor represented 32.5% of the house sales in the last 12 months, but they make up only 28.6% of the housing stock in the town, again this is great news for owners of detached houses showing that this type of property has sold well in the last 12 months. 

However, the anomaly seems to be apartments because, according to the Land Registry, no flats or apartments have sold in the town during the last 12 months even though there are 422 in Heanor.

What does this mean for the property owners of Heanor? It means that there is a two tone property market place in Heanor. Most homeowners start with a terraced, aspire to move to semi detached houses, then as finances allow, they move to a detached property. The majority of apartments, especially in the Town Centre, were purchased by landlords to rent out to tenants, so they have no need/want to trade up on the property ladder.  There are a small number of homeowners who are still in negative equity, which in some cases, property values of some Heanor apartments sold at the height of the boom are still 20% to 25% lower than what was paid for them in that 2007 boom.

However, on average general Heanor property values are only 11% off those 2007 property boom, we are seeing some good sales and if you look hard enough, you may chance upon a "hidden property gem" in the most unlikely of places.

What is really happening in the Derbyshire property market?

 

In Derbyshire (excluding the city itself), property prices are still 11% below the level that was achieved in the 2007 property boom (before it went pop in early 2008 with the credit crunch).  If Derbyshire people sold their properties today, the cost of living has increased by 19% over the last seven years too, so the money they would get from the property would actually be, in real terms, 30%  lower ( 19% inflation/cost of living  + 11% below the 2007 boom)  than if they’d sold in 2007.

Average Derbyshire house prices are in a constant state of microflux. Over the last nineteen months, the trend has been in an upward direction. The price of a typical Derbyshire home increased by just 0.2% in September, whilst in August they rose by 0.6% and in July 0.8% (but in May they remained stagnant at 0%).  Looking at monthly figures can be dangerous, so looking at the Land Registry figures, the annual rate of Derbyshire house price growth moderated in September to 5.3% from 5.7% in August.

The slowdown was not entirely unexpected, given mounting evidence of a moderation in activity in recent months.  Mortgage approvals declined by almost a fifth between January and May, and there has also been some softening in forward looking indicators, such as new buyer enquiries. But on the other side, with the labour market strengthening, landlords are looking for a home for their savings, mortgage rates are expected to remain low and with consumer confidence rising activity is likely to recover in the months ahead.

Rightmove have recently released some data on Derbyshire and the immediate area, and they make fascinating reading. The peak of the property market last decade in Derbyshire is recognised as November/ December 2007.  Whilst property values are still 11% lower than that boom, homeowner’s asking prices are 0.3% higher than the 2007 boom.  Therefore, there is an argument to say, some (not all) Derbyshire asking prices are a little high but the price the properties are actually selling for, is a decent and reasonable figure. .. there you should always make a decent and realistic offer!

It all comes down to doing your homework, asking questions of the agent and the owners. Find out their motivation for selling and see if you can ‘bag that bargain’. Trust me they are still out there. As we don’t sell property, I can look at the whole of the market and give you an honest opinion on its investment potential. In fact very soon, I will be starting to put on what I consider the best buy to let deals there are on to the ‘Spruce Property Blog’.