I HAVE MOVED!

I HAVE UPGRADED MY BLOG TO A MUCH MORE INFORMATIVE, USER FRIENDLY VERSION WHICH CAN BE FOUND AT:

www.burtonpropertyblog.co.uk

UNFORTUNATELY, YOU WILL HAVE TO RE-REGISTER TO RECEIVE THE BLOG POSTS BY EMAIL - BUT IT WILL BE WORTH IT!

MANY THANKS

David

Do you need to Extend your Burton Investment Property?

Last week, a landlord from Burton e-mailed me to ask, after reading the Burton Property Blog, if he should extend his terraced house by making an extra bedroom in the loft. He had a builder friend who owed  him a  favour, and thought it would be a good way to get an ‘inexpensive’ extension.

Having more useable space is generally thought to be consistent with better quality accommodation and home owners and tenants are prepared to pay for it. If you added a bedroom to a two bed terraced to make a three bed terrace, it will add, on average, around 10% to the value of the property. Turn a three bed terraced into four bed terraced, and 9% will be added to the value. Looking at semi detached properties, if a two bed is turned into a three bed then 12% will be added to the value, whilst making a three bed semi into four bed will add 9%.

However, before you rush off to the planning department or contact ‘Loft Conversions R Us’ there are some important considerations, whether you are a home owner or landlord.  What would be the cost of making that extra bedroom? You have to seriously consider whether the outlay is worth the potential benefit.

The average value of a terraced house in Burton is currently £104,600 whilst the average value of a semi detached house is £151,900, meaning to make money the cost of the extension would need to be less than £9,965 on the terraced property and £15,949 on the semi detached house. Talking to a number of trade’s people in the town, most are booking up into the New Year. Also, no matter how good a friend he was, I know of no builders that would charge as little as that. Maybe the builder was just thinking of a bit pointing work on the chimney!

Well, that got me thinking about how bedrooms affect rental prices and rentability as well.   Interestingly below, you will see that whilst bedrooms do have an effect on the rent that can be achieved and the rentability of the property – the difference does not warrant the expense, hassle and trouble of extending.

·        45.1% of the one bed properties on the market to rent in Burton have a tenant with an average rent of £399 per month

·        47.6% of the two bed properties have a tenant with an average rent of £520 per month

·        52.1% of the three bed properties on the market to rent in Burton have an average rent of £584 per month

·        35.7% of the four bed properties, an average rent of £742 per month

Now, if you do want to increase the value of your property, be you a Burton landlord or homeowner, there are things that cost a lot less than building extra bedrooms. Spruce up the exterior, decorate all the rooms, install fresh carpets and curtains. For homeowners, a matter of a few hundred pounds will add thousands whilst for landlords, these things can add an extra 10% to the rent that you can achieve.

Simple Economics in the Burton Property Market

I penned a recent article about the state of the Burton Property market and in particular what had happened to rents in Burton since 2008. If you recall, I said rents in Burton are still 4.68% lower than they were in 2008. However, following a chat with a Burton landlord who then rang me after reading the Burton Property Blog wanting to know more of the story of what was happening to rents in the City. The reason he asked was that his current agent hadn’t increased his rent for a number of years and was concerned if he was getting the best return from his buy to let investment.

The Burton rental market is all about supply and demand - isn’t it so in all parts of the economy! On the supply side, 149 rental properties have come up for let in the last 31 days in Burton. It sounds a lot until you consider there are 5,453 rental properties in Burton, meaning only 2.73% of the rental stock of properties in Burton is coming onto the market - it is normally is around 5%.  One reason for this lack of new rental properties coming on the market is the fact that tenants seem to be staying in properties longer.

With this lack of supply, newer tenants have to pay more to secure the property they want. This is the crux of the matter.. properties they want. Older properties in Burton, that haven’t been maintained, still retain their wood chip wallpaper from the 1970’s and thread bare carpets have seen their rents drop. Tenants now want either modern properties with all the mod cons or older style properties that have been presented to an exceptional standard – and they are prepared to pay for the privilege. Rents for top quality properties in Burton have risen by 0.4% in the last month Any properties, old or modern, put on the market in good or excellent condition normally rent within a matter of days.

   

Interestingly, looking at Burton property values, the Land Registry have just released their latest set of data on property values. Throughout April 2015, the latest set of data, property values remained static in Burton, with 0.2% growth, meaning they are now 2.5% higher than they were a year ago.  When one looks at the regional picture, the average property values in our area rose by 0.2% in the last month.

Looking forward, after considering all the statistics and talking to other property professionals, I expect property values in Burton to rise by 3% to 5% over the coming 12 months, following the Conservative Election victory.   In a forthcoming article, I will discuss how the number of properties changing hands each month has dropped considerably in the last 10 to 15 years in the town.

 

..and so back to our landlord. Each property is unique and, as his tenancy agreement allows him to inspect the property with notice to the tenant, we will be visiting the property next week with a fresh pair of eyes! 

For more in depth thoughts and opinions like this, on the Burton Property market.. visit the Burton Property Blog.

Surely there are better places for buy-to-let than Burton?

Whilst attending a recent business networking event in Burton recently, a landlord, who it transpired had a couple of buy to let properties, bent my ear on where the next hot spot town or city is to invest his money in and where the best rental returns are.

Now it can be tempting to just look at Burton 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.

Regular readers of my articles in the Burton Property Blog know of my love of the ‘buy to let seesaw’. On one side of the seesaw is the rental return and the other side, capital growth. Landlords should be looking for a high return 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 the Waterside area in Burton, see the return side of the seesaw go up, will suffer from low capital growth and so the other side of the seesaw goes down. The relationship works in reverse as well, so in areas such as Rolleston, properties offer good capital growth, but at the expense of a higher yield.

  

The North East and North West of the UK are landlord magnets for great yields. The average yield in Burton today is 4.02%, 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 Burton landlords are achieving 6% to 7% on some of their Burton properties, however, sometimes at the expense of capital growth. Anyway, after wasting a tank full of petrol up the A1 to Teeside or the M1 to Stanley Park, that high yielding Liverpool property would have dropped in value by 2.2% in the last 12 months and the Hartlepool property, by 1.4%.

When you compare the long term house price growth, it gets even worse! Looking at the graph, since 1995, property values in Burton have risen by 133.79%, compared with Hartlepool at just 21.02% and Liverpool at 90.11% – it just shows that you shouldn’t always chase the returns. As I always like to explain to landlords when they either email me, pick up the phone or pop into my offices for a coffee, 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 Burton 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. Finally, do you know Hartlepool and Liverpool as well you know Burton? Do you know where the good and bad areas are in both those places? Are you happy that it would require you to take a day out of work if there was an issue with your property in the North? If you can’t answer yes to all three questions, then maybe you should be considering a closer to home?

Call me on 07973 666229 or pop into our offices on the High Street in Burton!

Landlords and Tenants both win in the Burton rental market

With the election now a distant memory and the stability of Downing Street secure, Burton, as in the rest of the UK, is starting to see that average wages are beginning to grow faster than inflation. This is good news for the Burton 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 properties 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 Burton, thus giving buyers some extra negotiating power.

At the last election in May 2010, there were 460 properties for sale in Burton and by October 2010, this had risen to 784, an impressive rise of 70% 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 run up to the election, it is important to consider what the uncertainty in April did to the Burton Property market. I mentioned a few weeks ago that property values - what properties were actually selling for, not what they are marketed at - had dropped by 0.4% in March 2015. Data has been released from Rightmove about April’s asking prices of property in Burton. 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 0.7% - bear in mind that April is normally one of the best months of the year for house price growth!

I am sure our local MP, Andrew Griffiths, would agree that the biggest issue is the lack of new properties being built in Burton. The Conservative manifesto pledged to build 200,000 discounted starter homes for first-time buyers in the next five years. For Burton to gets its share, that would mean only 93 such properties being built in Burton each year for the next five years, not much when you consider there are 51,277 properties in Burton! We need around 610 per year!

On the face of it, housing didn’t seem to be 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, so will it remain on the ‘to do list’ but won’t get 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 4.68% lower than they were in 2008 - good news for tenants.. with renting in Burton everyone wins!

A slight drop in property values in Burton…

Property values in Burton fell by 0.4% in March. This follows several months of sluggish activity in the Burton property market in the run up to the Election, putting the average price of a property in Burton at £170,500, 2.7% higher than in March 2014. Despite the not so insignificant fall in March, the figures showed prices were still slightly higher in the first quarter of 2015 than in the last quarter of 2014.

Also, reports from Council of Mortgage Lenders and Estate Agent trade bodies over the last few months have seen a fall in mortgage lending and enquiries from prospective homebuyers. This is important because it comes amid an overall fall in housing market activity in Burton. Data from Land Registry said completed house sales in Burton in the three months to January 2015 - the most up to date figures available - fell by 13.35% compared to the same three month period up to January 2014.

However, I believe that the slowdown in property sales in Burton is supporting Burton property values, as there is a shortage of houses coming onto the market. Even though in the whole of the first Quarter of 2015, Burton property value increases may seem subdued when compared to 2014, let us remember, property values are still rising well above the level of inflation.

As I have said many times before, the population in Burton is growing at much higher rate than the number properties being built. This surplus in demand, which is outpacing the supply of new houses being built in Burton, has created a long term imbalance in the Burton (in fact the whole of UK’s) housing market, thus making home ownership a more distant dream for many Burton potential first time buyers.

In fact, I still maintain the view that house prices are likely to rise by around 3% in Burton in 2015, even after taking into account this blip at start of the year. The reason being is that rise reflects both a strong economic conditions and steady market conditions, with - and this is the most important factor - very low numbers of properties on the market.

Many buy to let landlords know that investing in the Burton property market is a long term strategy of 10, 20 even 30 years. Governments come and go, but unless East Staffordshire Borough Council start to build hundreds of properties a year to make up for the lack of supply, Burton people will always want a roof over their head, and irrespective of which party is in power, if there aren’t any council houses and they can’t or are unable to buy, there will always be a demand for rental properties.

As my existing Burton landlords clients will testify, whether you manage your property yourself, or another Burton agent manages your properties, everyone is always made to feel welcome when they pop in for a coffee to discuss anything to do with the Burton property market, how Burton compares with its closest rivals 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.

You can email me;

davidm@professionalproperties.co.uk

Or you can call me on 07973 666229!

Could you get a 868% return in Burton by saving your money?

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 Passbooks, 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 small business.

One thing the landlords I speak to say is the fact that they prefer buy to let because it is both an investment as well as a business. It is this factor that attracts many of my Burton 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 Burton 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 has been strong in recent times in Burton, but the value of property does go up as well as down, just like shares do, however, it very rarely decreases below the initial purchase price. The rental income that the tenant pays you will, hopefully, grow over time. If you divide the annual rent into the value, or purchase price, of the property, this is your yield, or your annual return.

So, let’s look at an example; I was talking to a landlord who bought a terraced house in the Belvedere Road area of Burton. He bought a very pleasant 4 bed terraced house in 1999 for £41,000. It sold again in December 2014 for £130,000; a rise of 217.07% in just over 15 years – a compound annual return of 8%.

However, the real returns are for those Burton 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 £41,000 purchase price of the Belvedere Road terraced house on an interest only 75% mortgage, he would have only needed to invest £10,250 based on a 25% deposit and borrowing the remaining £30,750. However, his £10,250 would be worth £99,250 today; £130,000 less the £30,750 interest only mortgage, a rise of 868.29% representing a compound annual return of 16.34%.. and I haven’t even mentioned the rent he would of received in those 15 years! This demonstrates how the Burton buy to let market has not only provided very strong returns for average investors since 1999 but how it has allowed many motivated buy to let Burton landlords to become particularly wealthy. In fact, if this landlord had continued to remortgage 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 with greater future potential.

As my article mentioned a few weeks ago, more and more Burton 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, or would not, make a decent property to buy in Burton for buy to let, then one place for such information would be the Burton Property Blog.

Just who are Burton’s tenants?

Speaking to a Bank Manager the other day in Burton, we got talking about the state of the Burton 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 job etc.

Even though a recent report by the Halifax stated homeownership 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.

Many people think that the UK should lose its fixation with homeownership and that people would be happier as a result. If this pattern were to continue, then this would suggest that the people entering the housing market are less likely to want to own a home, and are more likely to remain  ‘Renters for Life’, irrespective of changing market conditions, leading to a longer term shift in the home ownership make-up of the country.

The biggest barrier often mentioned to buying a house is the claim that they are not buying property at the moment because of a lack of sufficient wages and by the high level of deposits but like we said a few weeks ago, in Burton, a single person on the average Burton salary of £25,487p.a., assuming they had a ‘reasonable’ credit history, they would be showered with lenders offering them a 95% mortgage - a ‘reasonable’ credit history means no loan defaults, and no County Court Judgements. Just because you missed just one credit card payment won’t mean you have messed up your credit score and your ability to get a mortgage -  and they would only need to find £5,500 as a deposit to buy a decent two bed semi detached house in Stapenhill. It comes down to the perceived capability of the youngsters in Burton to buy nowadays.

Interestingly, when I looked at the Burton figures, the average Burton tenant has an older profile than the England and Welsh average, as can be seen from the graph below. 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! - good news for landlords as they make excellent tenants!

So what does all this mean for Burton landlords and future Burton landlords? I honestly believe there is a difference between the hope and perceived capability of the younger generation to buy a home. Although homeownership 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 Burton, people still need to live somewhere, and that is why, as I mentioned a few weeks ago in the Burton Property Blog, the demand for rental properties will only continue to steadily rise in the coming decade.

If want to know where the Burton Property market is heading and where you should or shouldn’t buy, maybe the one place you should visit is the Burton Property Blog or you can call into our offices on the High Street for a chat.

What will happen to the Burton Property Market after the shock Election result?

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 Burton property market.  Talking to other Burton agents, surveyors and solicitors in the area over the last few days, there are signs this has started a new impetus the Burton property market after a subdued six months, when an amalgamation of tougher lending conditions, a natural correction after the strong recovery in Burton 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 Burton 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 Burton 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, Burton landlords have benefitted from a booming Burton job market. Unemployment in the town has dropped to 1.8%, as a year ago,1,451 people were claiming unemployment benefit compared to today’s 940. 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 Burton properties.

Some landlords might be nervous about Tory’s plans for the housing market in 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 kind of 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 106 Burton properties since April 2013. Considering 1,220 properties have changed hands in the last year alone in Burton, 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 - not any more! In Burton, 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 Burton or thinking of becoming one (or as we like to call you .. a FTL .. a ‘first time landlord’), then I must suggest you out seek specialist advice and opinion. Like many agents in Burton, we will happily give you our opinion on the current state of the market and the advantages/disadvantages to investing in the Burton property market if you pop into our offices. However, if time is at a premium, another source of information on the Burton Property Market is the Burton Property Market Blog!

Is Burton following the London housing trends?

I had an interesting conversation with a local Burton solicitor the other day. He is quite an observant chap but, I suppose you have to be if you are a solicitor! Anyway, he mentioned a few things he had noticed recently in Burton, one that Burton property prices had gone up in the last few years but nowhere near the growth levels that were being achieved in central London, and secondly, that he thought the number of for sale boards in Burton, and more importantly ones with sold slips on them, had increased over the last couple of years.

The rate of house price inflation in Burton continues to slow with growth of 3.5% in the 12 months to February compared to 5% just over six months ago, according to the latest Land Registry data. However, there is considerable local variation with house price growth ranging from 1.6% in Leicester  to 4.6% in Derby over the last 12 months.

Whilst Burton hasn’t seen the 20%+ per year in house price growth of London over the last couple of years, Burton has seen a sharp uplift in the number of properties sold throughout 2014 as base line demand for housing grows, which suggests there is substance to the recent pick-up in house price growth in the City. Since the Second World War in the UK, when the number of properties sold has grown, property values grew soon after. The 18.1% uplift in property transactions in Burton in 2014, compared to 2013, indicates the most significant recovery in house market activity in Burton (outside London) since 2007.

When you compare Burton with London, you could be looking at two different countries! In London, its mid/late teens house price to earnings ratios are impacting demand. The average property value is often 15 or 17 times the average wage in London.. in fact in Knightsbridge the ratio can be 30 to 1. However, the number of people wanting to sell has dropped considerably, meaning that falling sales volumes combined with a general slowdown in activity in the run up to the General Election are resulting in lower mortgage approvals for home purchase.

Transactions are a great indicator for house prices. The acceleration in house price growth in London in the last two years was preceded by three years of rising transactions. A similar pattern is being registered in the Burton area, as pent up demand returns to the market supported by low mortgage rates and an improving economic outlook.

But before you get the Champagne out, while the uplift in activity is welcome news, the number of Burton property sales in 2014 is still 22.3% lower than the level seen in 2007 and property values are 8.9% below the 2007 levels. The ongoing housing recovery is far from broad based and remains focused on middle to higher value areas within Burton where households have equity and find it easier to access mortgage finance.

If you want to know more about the Burton Property Market, please pop into our offices on the High Street.

Which Government party will resolve the Burton property market problems?

With the General Election almost upon us, all the parties are trying to woo voters with policies that will attract those important votes come the 7^th May 2015. There are 12512 tenants of voting age in Derby living in private rented accommodation. In a tight election, their votes could be crucial.

Labour’s motivation to keep the private rental sector rents in line with inflation is pretty straightforward; cap rents and extend tenancy terms whilst the Conservatives are focussing on a ‘Right to Buy’ solution.

Since the turn of the Millennium, in Burton, there has been a significant change in the proportion of people who own their own home. In 2001, 75.57% of homes in Burton were owner occupied, today the figure is 69.58%, 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 the ‘Bank of Mum and Dad’ …but wasn’t that the way how most people got on to the property ladder; 10, 20 even 30 years ago or you just got on and went without and saved up?

In Burton, only 41.33% of 25 to 34 year olds have a mortgage. When you compare Burton 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 that if you 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. 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 142% since 1996 in Burton, 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 Burton are renting instead of buying. Yet at the same time, don’t blame the landlords for this. For every mortgage approved for a landlord last year, three were approved for first time buyers!

The issue quite simply comes back down to a lack of new homes being built. In Burton and the immediate villages, only 453 properties a year are being built whilst the population is rising by 985 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 nimbyism (Not in my back yard!). In fact, I read the Lyons Housing Review Report a few months ago, and in it, it said that at least 243,000 properties a year need to build to keep up with the number of new households being formed in the UK. In 2014, the whole country only built 109,000!  

With a rising population and net migration, especially from the EU, the mismatch between demand and supply is why we have the problem. Until politician’s have the backbone to realise 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 ......fact.

There are two property markets in Burton..

With the General Election on the horizon, property values in Burton are 0.34% lower 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 Burton landlord’s point of view, which I always do, the Burton 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 Burton.  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 homeowners (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 semi-detached properties in Burton.

As I mentioned a few weeks back, the pension rules are changing 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 (see the article from a couple of weeks ago), 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’ Burton people wanting to become landlords for the first time. In Burton, the highest returns for the lowest investment are at the lower end of the market e.g. the classic Victorian terraced house. Unfortunately Victorian terraced houses, with two bedrooms are coming to the market in smaller numbers than the larger four bedroom ones in the top end sectors of the Burton property market.

When looking at the actual numbers, in the later part of the summer of 2014 in Burton, in one month alone 188 two bed houses were on the market in Burton. However, in January this year, a notoriously excellent bumper month for properties coming on to the market, there were only 153 two bed houses on the market in Burton to choose from. Today, that figure stands at only 102 In the same period, the number of four and five beds has increased significantly... interesting don’t you think?

At that lower end of the property market in Burton, 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 (although we will need to look at figures later in the Spring once we have the data from The Land Registry), we are beginning to see a polarised Burton 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 Burton, thus narrowing the gap for people looking to move up market!

I am always available for a chat about the local property market, so please don’t hesitate to give me a call or call in at the office on the High Street.

Burton rents are on the rise... for a few!

With the passing of the Easter bank holiday, we are a quarter of the way through 2015. I was talking to a landlord from Branston the other day about what is happening to the level of rents that are being achieved in the Burton property market.

In terms of rents in Burton, it appears that rents being achieved for new rentals - when the tenant moves out and new tenant moves in - have risen by 4.5% in the last 12 months on top of the range modern semi-detached properties, yet have remained static for older Victorian terraced houses. 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 and pays the rent thus reducing the risk of a potential void period.

It must be remembered rents dropped by 7.8% over 2008/9, due to oversupply in the rental market. A lot of the people who couldn’t sell their property in Burton 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 Burton dropped by 62.4% between March 2008 and April 2010, a lot of which came on to the rental market in Burton. However, looking at the longer term though, 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% rental growth over this period.

I told the Branston landlord that there is a lack of new rental properties in Burton coming on the market, in fact according to the Office of National Statistics, there are only 29.5 new rental properties are coming to the market each month in Burton but the population of Burton is rising by 82 people a month – something will have to give soon! 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 Burton has improved. This is then 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 Burton, 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 Burton has eased off recently, rising by only 1.3% in the last 12 months, taking average salaries in Burton to £25,487p.a., 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 Burton property market, pop in for a coffee or email me using the link below!

Invest in Burton property with your piggy bank pension pot!

In a recent article, I mentioned that pension rules are changing this April and that time has now arrived! It certainly created a few emails from people asking questions about it. Therefore, this week, I want to look a little deeper into the subject of your pension and the Burton property market. George Osborne, in last years’ Budget, announced pension reforms that come into effect this 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 6^th of April, anyone aged over 55 will be 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, 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% and the payment would go up with inflation. The sort of rates, or yields in the property investing game, being achieved in Burton are in the order of 4% to 7%, and they tend to rise in line with wages.

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 Burton is 18 years 3 months – it’s 18 years and 6 months in Lichfield but they are posh!

If we roll the clock back 18 years 3 months to December 1996, property values in Burton have risen by 142.12% from then, to now.. 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 Protection League home if your family 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 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 but low capital growth. 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 Burton property market, what to buy, what not to buy and where to buy.

My thoughts on the Burton Property market can always be found on the Burton Property Blog! 

Rent Guarantee. It's a No-Brainer!

When a landlord invests in property, insurance is an area some end up neglecting. The kind of cover that a standard home policy deals with is often inadequate for the requirements of landlords. This is because they need a policy that deals with all sorts of potential issues to do with tenancies, third party damage and so on.

Landlords are aware that the usual landlord insurance policies will provide them with protection against such events as damage caused by a tenant as well as rent lost when a property is inhabitable following a valid insurance claim. However, these policies will not stretch as far as actually covering the rent when a tenant simply fails to pay up.

It is very realistic that there are occasions when a tenant simply fails to pay, be it out of malevolence, financial incompetence or a sudden change for the worse in their financial circumstances that they might not even tell the landlord about. Landlords without a rent guarantee insurance policy may be in for a shock. Those who do have such cover can rest easy. It is at this point where a landlord can make a claim on their rent guarantee policy and ensure their rental income is safe. The insurer can then chase up the tenant for the shortfall. For those landlords who don't, the implications can be awful, especially if there is a mortgage on the property and the rent is relied upon to help make the necessary loan repayments.

One of the great benefits of having Rent Guarantee insurance in place is that the policies often include Legal Expenses cover necessary for potential evictions. Lengthy court cases take up  time, energy and can stifle cash flow. However, your Rent Guarantee insurance can cover the legal costs and help reduce the process.

Indeed, with disputes often ending up in court, it is not just the repayment of the missing rental money that becomes an issue. Legal costs can be prohibitive for landlords if they are unable to get the money without recourse to such measures, so it will be reassuring to know that rent guarantee insurance can also take care of this, particularly as legal fees will be much harder to pay for those whose budgets are hit by non-payment.

There is always a chance landlords will be hit by non-payment. How much better it would be to have a policy in place that will help mitigate losses, as well as ensuring legal costs are covered to prevent a catch-22 situation occurring where an investor is too cash-strapped by the loss of income to pay for the legal action needed to recover unpaid rent.

Professional Properties offer two types of Rent Guarantee protection. Firstly, we offer the a policy that will recover rent if the tenant fails to pay. The policy includes such benefits as Nil Excess; Payable until vacant possession; Cover limit of £2,500; Total claims limit of £50,000; Full legal expense cover.

An alternative is our RentOnTime product which guarantees to pay your rent, on time, every month, whether your tenant pays on time. The great advantage of this is that the payment of rent is not retrospective, it is immediate.

If you wish to discuss either of the products in more detail, then please do not hesitate to contact me directly on 07973 666229 or our lettings office on 01283 517444,

Are we destined to own a home in Burton?

“You have to rent where you want to live, or buy where you don’t want to live.”

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 we are destined to own our own property, but we aren’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 Burton 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 Burton, in 1930, the average Burton property was worth £372. It took 16 years for Burton property values to double, rising to £919 by 1946. Another 15 years and the average Burton property doubled again to £1,745 in 1961. The next doubling only took 10 years, as by 1971 the average Burton property had reached £3,547 in value.

It was, as mentioned above, the 1970’s when things really took off, as by 1975 (i.e. only four years) they had doubled to £7,424 and they doubled again to £14,861 by 1980. It took another eight years for values to double again, as an average Burton property reached £31,085 in 1988. Twelve years had to pass until the doubled again in 2000 (£63,958) and just six years to double again by 2006, when they reached £128,995. Where are we today? The average property value in Burton currently stands at £177,400.

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 Burton first time buyer would only need to save £5,000 for a deposit and fees and they could buy a very decent Victorian two up two down in Shobnall Street in Burton, and it would be over £100 cheaper a 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 lovely three bed semi in Branston  for £700 per month, but the bank will only lend you enough to buy a terraced house Shobnall Street, and don’t get me wrong, Shobnall Street has really pulled its socks up over the last ten years, but it isn’t Branston, is it? What would you do? Look again at the title of the post ... “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 Burton. With the new rules on pensions and the ability to use them to buy residential rental properties from 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 Burton) and you must take advice from people who know what to buy (and not to buy) in Burton to ensure you get the best from your investment. One place for such advice is the Burton Property Blog!