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!