Thursday, 30 April 2015
Considering we are a quarter of the way through 2015 and Easter under our belt, I was talking to landlord from West Hallam the other day about what is happening to the level of rents that are being achieved in the Ilkeston property market.
In terms of rents in Ilkeston, it appears that rents being achieved for new rentals (ie when the tenant moves out and new tenant moves in) have risen in the order of 3% in the last 12 months on top of the range modern properties, yet remained static for older Victorian terraced houses and converted apartments. However, landlords with existing sitting tenants, irrespective of age are not increasing their rents, as most landlords prefer to keep their existing tenant paying the same rent and have the peace of mind that their tenant remains, paying the rent (thus reducing the risk of a void period).
It must be remembered rents dropped by 7.7% over 2008/9, due to oversupply in the rental market in 2009. A lot of the people who couldn’t sell their property in Ilkeston in 2008/9 when the Credit Crunch hit in 2008, decided to let their house out instead of selling at a loss. In fact, the number of houses on the market in Ilkeston dropped by 63.1% between April 2007 and March 2009, a lot of which came on to the rental market in Ilkeston. However, looking at the longer term, tenants have had it good because since the turn of the Millennium, average wages have grown by 46%, but rents outside London have only grown by 36% over this period.
I told the landlord that there is a lack of new rental properties in Ilkeston coming on the market, in fact according to the Office of National Statistics, only 241 new rental properties are coming to the market each year in Ilkeston, a figure which can’t keep up with the increase of population that Ilkeston and the surrounding area has seen since the turn of the Millennium. This is compounded by the fact a number of landlords are looking to sell their rental properties in the coming months, as the property market in Ilkeston has improved. This further compounded as tenants in existing rental properties appear to be staying in properties for longer periods of time.
Looking at the rents charged in Ilkeston, historic evidence in the UK suggests private market rents have moved in line with general inflation. Government figures only go back as far as the year 2000, but looking at other countries with similar housing markets (America, Australia, Ireland and Holland) the fact is rents paid by tenants tend to rise in line or just ahead of inflation.
As short term wage growth in Ilkeston has eased off recently, rising by only 1.3% in the last 12 months, taking average salaries in Ilkeston to £27,167pa, with the tax breaks announced by The Chancellor in the Budget, I believe, even though rents have kept pace with inflation in the past, renting as an option has become more affordable, and is increasingly seen as a lifestyle choice. With returning economic growth and expected increases in the rate of growth of wages, above inflation rental growth could rise.
If you want a chat about the local Ilkeston property market, pop in for a coffee or email me on firstname.lastname@example.org
Wednesday, 22 April 2015
I was having an interesting chat the other day with a couple of solicitors at an Erewash business networking event, when the subject of a lack of property for first time buyers came into the conversation. I followed the chat up with an email with my findings, findings which I would like to share with you today.
At the time of the last census in 2011, there are 3,401,675 properties in England that were privately rented, of which it is estimated, were owned by over 1.25 million 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 our 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 not available to homeowners.
They may be asset rich thanks to recently rising property values, but let us not make the landlords the bogeymen they could easily be called. Despite all these benefits enjoyed by private landlords, let us not forget the good they have done, especially in Erewash.
Property values today in Erewash are still 10.1% below 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 timeframe, so in real terms, properties today are 36.1% CHEAPER than they were in 2007. Just think how low they would be without landlords buying all those rental properties in the city. Interest rates are at an all time low and first time buyers only need to save a £3,000 deposit to secure a lovely 2 bed terraced in Ilkeston 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 Erewash will have risen from the 5,762 properties recorded in 2011 to 8,300 by 2021. Sound fanciful? Well in 2001, there were only 2,705 privately rented properties in Erewash.
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 left school and 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 want a chat about what would make the best sort a property that would offer that in Erewash, then please email me on email@example.com or visit my Erewash Property Blog: www.ilkestonpropertyblog.co.uk
Tuesday, 14 April 2015
“The way it works in Belper 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 one on my tenants the other day, on renewal of their tenancy agreement. They are a lovely couple, early thirties and I know they have decent jobs in Belper. 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 Belper 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 Belper, in 1930, the average Belper property was worth £454. It took 16 years for Belper property values to double, rising to £1,124 by 1946. Another 15 years and the average Belper property doubled again to £2,134 in 1961. The next doubling only took 10 years, as by 1971 the average Belper property had reached £4,338 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 £9,079 and they doubled again to £18,175 by 1980. It took another eight years for values to double again, as an average Belper property reached £38,015 in 1988. Twelve years had to pass until the doubled again in 2000 (£78,218) and just six years to double again by 2006, when they reached £157,756 Where are we today? The average property value in Belper currently stands at £207,700.
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 Belper first time buyer would only need to save £3,000 for a deposit and fees and they could buy a very decent property. For example, you could buy a property in the Alder Road area in Belper, and it would be cheaper each month in mortgage payments than renting.
People might say on the surveys they want to buy, when it comes down to it. If you have been living in a top of the range large property in the Broadway area , but the bank will only lend you enough to buy a smaller property in the Alder Road area, what would you do? Don’t get me wrong, the Alder Road area has really pulled its socks up over the last ten years, but it isn’t the Broadway area, 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 Belper. With the new rules on pensions and the ability to use them to buy residential rental properties from this month (APRIL) onwards, 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 Belper) and you must take advice from people who know what to buy (and not to buy) in Belper to ensure you get the best from your investment. One place for such advice is the Belper Property Blog www.belperpropertyblog.co.uk
Monday, 6 April 2015
In a recent article, I mentioned that pension rules are changing this month (April). It certainly created a few emails, with people asking questions about it. Therefore, this week, I want to look a little deeper into the subject of your pension and the Amber Valley property market. George Osbourne, in last years’ Budget, announced pension reforms that come into effect this month (April), which will give people with pensions unprecedented access to their pension pot and the freedom to look for alternatives. In a nutshell, after the 6th of April, anyone aged over 55 is allowed to withdraw all or part of their pension pot and spend it as they wish. Until now, you were allowed to take out a quarter of it and were forced to buy an annuity policy with the rest.
However, my readers always know that I like to tell it ‘as it is’. There are always two sides to a story, good and bad. Let me tell you the bad news first. There are some hefty tax implications by taking money from your pension pot. As before, as per the old rules, the first 25% can still be withdrawn from the pension pot tax free but, here is the sting in the tail, if you take more than a quarter of your pot (25%), anything above that initial 25% level will be taxed as income. So if you took the whole lot out, the first 25% will be tax free but the remaining 75% will be taxed at your income tax rate of 20%, 40% (or even 45% if you earn over £150,000 a year)
.. and now the good news!
Under the old scheme, if you bought an annuity, when you died your annuity normally died as well. You would have no asset to pass on to your family. Also, the returns from pensions are awful at the moment. The best rates according to Hargreaves and Lansdown (big wigs in the City) state if you were 55 years old, the best rate you would get on your annuity pension would be 4.4% fixed for life (so it would never go up) or 2.2% but the payment would go up with inflation. The sort of rates (also known as yields in the property investing game) being achieved in Amber Valley are in the order of 4% to 7%.
The other aspect of property investment is how the fact property values have risen consistently over the last 50 years. According to the Office of National Statistics, the life expectancy of a 65 year old male in Amber Valley is 18 years and 2 months (its only 17years 1 months in Bolsover). If we roll the clock back 18 years 2 months to February 1997, property values in Amber Valley have risen by 145.4% to today .. you wouldn’t have had that with your pension! But this is the biggest win, even by taking a hit in income tax now, by buying a property, you buy an asset that you can pass on to your family when you die.... (or the cats home if they aren’t nice to you!).
So where next? It totally depends which strategy you are going to look at, one strategy is to look to achieve relatively small rental returns (ie low yields) in an up market area which has decent capital growth or, alternatively, another strategy is to buy properties in not so good areas known to produce a high returns (ie high yields) but low capital growth (ie how much the value of the property goes up). Now, I am not financial advisor, so cannot offer financial advice on what the best thing for you with your pension is. However, I can share my knowledge and experience of the Amber Valley property market, what to buy, what not to buy and where to buy etc etc. My thoughts on the Amber Valley Property market can always be found on my Property Blog www.heanorpropertyblog.co.uk
Wednesday, 1 April 2015
See it here http://www.rightmove.co.uk/property-for-sale/property-34121820.html and feel free to let me know what you think!