The election and the private rental sector. Good news for landlords...

As the election approaches, I spotted an article on the comments of Dorian Gonsalves, director of commercial and franchising for Belvoir, regarding the consequences of Labour gaining power and implementing proposals for rent capping and outlawing agents’ fees.

Gonsalves said that Labour’s proposals were “flawed” and likely to result in landlords quitting the private rental sector en masse, making thousands of tenants homeless.

He said: “The Labour party is blatantly targeting the private rented sector to try and win votes from the UK’s nine million tenants.

“However, in my opinion their proposals are not only anti-letting agents, they are also anti-business and will in fact harm tenants – the very people that Labour say they want to help.

“The most recent figures released by the Office of National Statistics estimate that for the year ending September 2014, net long-term migration to the UK was 298,000 and yet the number of new homes built last year was only 118,760.

“A combination of high migration figures, low new-builds, plus the difficulties that people face in obtaining mortgages and changes in lifestyle choices, such as increasing numbers of single parent families, means that many more rental homes are needed in this country.”

He went on: “The majority of letting agents work extremely hard on behalf of tenants as well as landlords and it is completely appropriate that tenants bear the cost of this work rather than landlords.

“Outlawing tenant fees will simply mean that tenants will suffer, with letting agents unable to provide them with the standards of service and levels of protection they deserve.

“Tenants could easily become vulnerable to rogue private landlords who may try to take advantage of them by illegally charging for maintenance issues, failing to carry out regular property checks and leaving them without redress to an ombudsman.

“If landlords are forced to bear the brunt of increasing costs, but are unable to increase rents to help cover them, many are likely to sell up or put their property to different use, further reducing the level of good-quality rental properties in this country. As a result, thousands of tenants could become homeless, because there will be nowhere for them to go.

“I am encouraging all Belvoir franchise owners to write to their tenant and landlord clients to make it very clear to them that if Labour get into power they will implement proposals that will result in increased landlord fees.

“This will either force landlords to increase rents to help cover their costs or cause them to sell up, which could put thousands of tenants at risk of losing their homes.”

As an extension to Gonsalves' thoughts, I have also included the findings of a survey from Rentify who state:

Support for Labour among Britain’s 2 million landlords is at just 19% ahead of the General Election. Polling of the general population has Labour and the Conservatives neck-and-neck, with YouGov currently predicting 35% of the vote for Labour and 33% for the Tories.

But Rentify’s survey of more than 1,200 British landlords across all ages and locations shows that nearly half of are planning to back the Tories, with a whopping 45% pledging their support to David Cameron’s party – more than double Labour’s share – and 51% expressing their support for Cameron personally.

Rentify’s survey results suggest that landlords who previously voted for Labour and the Lib Dems are switching to Ukip, with one survey respondent referring to Miliband as “kryptonite.” While the Conservative vote share has remained steady, Labour’s drop in supporters has been almost entirely hoovered up by the insurgent Ukip.

I did write a blog about the subject a while ago which makes my thoughts clear!:

Rent Controls in Burton? - That’s one way to destroy a city says economist.

Are Burton landlords worse than politicians and traffic wardens?

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 out the landlords to be the bad guys here and compare them to politicians or traffic wardens! Despite all these benefits enjoyed by private landlords, let us not forget the good they have done, especially in Burton.

Property values today in Burton are still 9.2% 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 time frame, so in real terms, properties today are 35.2% 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 £6,400 deposit to secure a lovely 2 bed semi in Branston 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 Burton (and the East Staffs area) will have risen from the 6,519 properties recorded in 2011 to 9,800 by 2021. Sound fanciful? Well in 2001, there were only 2,968 privately rented properties in Burton.

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 Burton, then please email me via the link below!

Are landlords to blame for Burton's problematic property market?

East Midlands property asking prices jumped by more than £4,000 to £177,100 in February according to Rightmove, an increase of 2.3% from January and 4.7% higher than a year ago. After the traditionally quiet months of January and February, the property market starts to heat up, but talking to some Burton Estate Agents, they are reporting their lowest ever stocks of quality property for sale. However, asking prices have no relation to what property sells for (ie their REAL value), is the issue a lack of supply?

Putting aside Burton’s continual housing supply shortage; we only built 4,505 properties in the last decade in East Staffs BC but the population grew by 9,813, this is now, according to some people, being exaggerated by an increase in homes being owned by buy to let investors, who tend to be buying a property as part of a long term pension plan and are more likely to keep it for longer than an owner occupier would. I have also seen unwillingness among homeowners looking to move, to put their own property on the market as they can find few suitable properties to make it worth their while going through the whole moving process.

What I would say to that is that I believe this is the new norm in the Burton property market, and is the consequence of over 35 years of not enough homes being built to meet the escalating growth in household numbers, resulting in a lack of quality homes for sale in many popular areas of Burton.

When one looks at the historic data, in March 2008, there were 1014 properties on the market in Burton compared to today’s 507. Should we be worried?  Well in April 2010, there were only 381 properties for sale in Burton but eight months later in November 2010, this had jumped to 783 properties, for it to drop to 464 properties in December 2013. The number of properties on the market is a cyclical thing in Burton, it always has been and always will be. As we go into the Spring of 2015, the number of new properties coming onto the market will increase ... just as the daffodils will flower.

So are landlords to blame? Well, on one side of the coin, yes they are. If they buy a property to rent out, that means someone can’t buy it to live in. However, it doesn’t matter if someone wants to live in a property if they can’t afford the deposit and upkeep.. and the youngsters of Burton still need a roof over their head. So, on the other side of the coin, if the Council aren’t building any properties and people can’t afford the large deposit for the mortgage, then Burton landlords have stepped in and bought property to rent out to them. East Staffs and Burton landlords have bought 3,551 properties over the last decade (investing approximately £630m buying those Burton an East Staffs rental properties) and now house 14,962 Burton and East Staffs people in 6,519 Burton properties. Burton tenants are in fact getting a good deal as well, as average rents in Burton are 4.5% below they were seven years ago. That sounds like a win-win situation for everyone to me. Stop blaming landlords and start building more properties in Burton.. that is the only answer.

In the meantime, the demand from Burton tenants for Burton property is only set to rise over the coming years. If you want some advice and opinion on where to buy or not to buy, please visit our Burton office where we can discuss such matters in greater depth.

A Burton’s man’s home is his detached.. or his terraced... or his bungalow!

Ok, a slight turn of phrase there on the classic, an Englishman’s home is his castle but when it comes to the UK the ‘Brit’s are still a nation of homeowners - although wasn’t it Napoleon who thought we were all shop keepers?!

It is interesting to note that up until the mid to late 1960’s, more people rented their home, albeit mostly from the local council, than owned their own. In fact, I was surprised to read that in 1921, over 75% of homes in England and Wales were privately rented with the remaining 25% being owner occupied.

 

It was only after the Second World War, when the Beatles were rocking, that people started to buy instead of rent.. but instead of owning our property outright, we borrowed money from banks and building society’s to buy them and the roots of the growth of the private rental sector can be drawn back to the late 1970’s early 1980’s, when the council houses began to be sold off under the right to buy scheme. Even though 32,363 households in East Staffordshire were owner occupied in 2001 and that number had actually increased to 32,879 households by 2011, the percentage of homeowner properties in area dropped drastically from 75.57% to 69.58%.

Why, because whilst an additional 4,534 properties were built in East Staffs Council area between 2001 and 2011, a lot of them were bought as buy to let investments, thus more than doubling the number of private rental properties in area. In fact, the number of properties in East Staffs, which are privately rented jumped from 3,471 in 2001 to 7,152 in 2011!

With stagnation in the number of people who own their home in Burton and no more council houses being built, this is increasing the number of people looking to renting, as everyone needs a roof over their head. With the East Staffs Council house waiting lists being in the 5 to 10 year range for a decent property in a decent location, it shouldn’t be forgotten that it is Burton landlords who house tenants waiting for a council house. Burton landlords do not receive any subsidies from HMRC and income tax is paid on rent paid by the tenant combined these reduce the cost on the tax payer.

However, it’s not all doom and gloom in Burton, as we have noticed more and more of the younger generation are renting because they can‘t afford to buy - raising a deposit being the sticking point for most - and a high percentage of the expansion in private renting actually from those who need and want temporary accommodation. There are even a few landlords who rent their own Burton property out for the short term, for ease, and not necessarily purely for profit.

Therefore, with every report stating the rental market will continue to grow throughout the rest of this decade, with high demand and limited supply in the Burton, if you are considering buying a property for investment in the near future in Burton, I am always happy to give you my considered opinion on which property to buy (or not as the case may be) to give you what you want from your investment. If you are a landlord, new or old, I am certainly more than happy for you to pick up the phone and call me on 07973 666229.

Is this a good time to get into the Burton Buy to let market?

The buy to let sector in Burton, in fact the whole of the East Midlands buy to let sector is doing very well at the moment, but it can be a minefield.

I could regale you with many stories where investors have got it tremendously wrong in Burton, like, for example, some modern apartments on the corner of Horninglow Road North and Wyggeston Street, that were sold for an eye watering £133,000 in 2008, only to be selling today for £75,500, a drop of over 43%.

It is interesting to note that at that time in 2008 for £133,000, you could have bought a lovely 3 bed semi in Stretton or a three bed detached house in Tutbury. A two bed apartment for the same price as a decent semi or nice modern detached house, doesn’t, in hindsight, quite stack up.  The thing is, I still see mistakes being made on a daily basis in Burton. With property, if you make even a small mistake, it could still prove to be very costly.

So what should you buy in Burton?

One option is Houses of Multiple Occupation (HMO’s). While they can be profitable, chiefly in the student market with Burton and South Derbyshire College's students, they can make things much more complex and costly, with the need for HMO licences etc. Mortgage rates on buy to let are really low at the moment and for the right property and person you can get rates below 3.9% if you put down a decent deposit of 25%, but the best rates are for deposits of 40% deposit and,  as I type this, you can get a 5 year fixed rate buy to let mortgage from the Post Office for 3.65%. Also, the deposit will ensure you have plenty of equity in the property, if the property market stagnates in the future.

The important thing to remember is the amount you can borrow is driven by the rental income, so it is vital you can identify a property with a decent yield that lets easily. This is where I can help!

Finally though, if are investing so much time and money in building wealth for you and your family, it is equally important for you to identify ways to protect it. Do not forget, if you spend years building a successful property empire in Burton, when you pop your clogs, your family could face an inheritance tax bill of 40%, which they would have to pay within six months of the death. In a buoyant market, selling in six months is not an issue, but what if the market was like it was in Burton between 2008 and 2012, when things took seasons to sell, not weeks. Quite apart from losing nearly half of the assets you built for your family to the tax man, if they had to sell some of your portfolio, possibly at a discount because the taxman wanted his money so quick, it might be wise to consider some life insurance that will offer protection against inheritance tax.

There are plenty of good advisors in Burton that can help you with the mortgages and life insurance. We aren’t one, because we are a letting agent and we stick to what we are great at, but what we can help with is choosing the right Burton property to buy. It’s in our interest to do so, because if we offer the best advice and opinion, without any conflict of trying to sell you anything, you might consider trusting us to manage the property.

Which property price band is actually selling in Burton?

House Prices up, house prices down, house prices stable.. the newspapers are full of good news, bad news and indifferent news about the Brit’s favourite subject after the weather.. the property market.

The thing is, the UK does not have one housing market. Instead, it is a patchwork of mini property markets all performing in different ways in different areas.  At one end of scale is London, which has seen average prices grow in the last twelve months by a shade under 19% - and again that is an average because some Borough’s in London have risen by 26% - whilst in the land of Daffodils, by contrast, Wales only saw a 2% increase in property values, although in the Merthyr Valleys, they dropped by over 11%.

Well we can’t ignore the rest of the UK, and we can’t forget that the Chancellor’s Stamp Duty reforms have polarised the London property markets above £1,000,000 because at the top end of the market, punitive Stamp Duty charges will dampen demand further. While the Bank of England warned of the growing London property price bubble in the Spring of 2014, even talk of a recovery in some areas was premature. In 2015, irrespective of where you are in the UK, one story will unite the patchwork quilt of markets - really slow property value growth.

But what about Burton?

Well, we haven’t had the December figures from the Land Registry yet but the last few months’ activity and prices achieved would suggest neither house price growth nor drops.  In fact, most sellers are buyers anyway, so if you need to take less for yours, you won’t have to pay as much for the one you want to buy... and that is good news for everyone as most move up market when they move. This is even better for landlord investors, as they can bag a bargain as well.

The question you should be asking though is not only is what happening to property prices, but which price band exactly is selling? I like to keep an eye on the property market in Burton on a daily basis because it enables me to give the best advice and opinion on what, or not, to buy in Burton.

 

Over the last two months (62 days to be precise), 62 properties with asking prices under £100k have come onto the market in Burton and 32.2% of them (20 properties) have a buyer and are sold stc.

Between £100k and £150k, of the 88 properties that come on to the market, 25% of them (22 properties) have a buyer. The £150k to £200k price range has seen 71 properties come on to the market, and an unimpressive 11.2% have a buyer (8 properties). The more expensive £200k to £300k range has seen 6 of the 47 properties that came on to the market find buyers (12.7%) but the £300k+ range has been even slower, with only 7.1% (1 property) of the 14 that have come on to the market, find buyers.

The next three months’ activity will be crucial in understanding which way the market will go this year and I honestly believe we will not see any house price growth or drops this side of the election. Election or no election, people will always need a roof over their head and that is why the property market has rode the storms of Oil crisis in the 1970’s, the 1980’s depression, Black Monday in the 1990’s, and latterly the Credit Crunch together with the various house price crashes of 1973, 1987 and 2008.

Why? Because of Britain’s chronic lack of housing will prop up house prices and prevent a post spike crash... there is always a silver lining when it comes to the property market!

Is there a reluctance to sell property in Burton?

Apathy has hit the Burton housing market as sellers await the outcome of the general election and stricter mortgage regulation suppresses buyer demand. This is mirrored around the UK as Rightmove reported the number of homes registered for sale per estate agent fell to its lowest level for five years in December, with available stock 10 per cent lower than in the same month a year earlier.

Looking at Burton, in the summer of 2014, each estate agent in Burton had on average 45.7 properties on its books (as there were a total of 777 properties up for sale in Burton at the peak in the Summer just gone). Our research shows that number has plummeted to 38.5 per agent in December and looking at first three weeks of January, this number will lower by the month’s end.  While the lack of new properties coming onto the market in the later months of 2014 in Burton pushed asking prices up slightly from November to December, traditionally a quiet season for the housing market, property sellers will need to work hard in 2015 to complete a sale.

The length of time a property takes to sell has increased over the last few months. Two bedroom properties in Burton are now taking 94 days to sell, three bedroom 72 days, four bedrooms 97 days, but here an interesting figure, one beds are taking on average 137 days to find a buyer

2015 will be the year of the selective mover. With only 315 brand new properties a year being built in Burton since the turn of the Millennium (we should be building 610 per year if we took our equal share from around the UK), this woefully low and insufficient number of new buildings in the City over the past few decades and a systemic change in the type of properties homeowners want (with families splitting etc so we have too many larger houses and not enough smaller ones), buyers are becoming dissatisfied with, and therefore dismissive of what is up for sale.

I would confirm the heat has gone out of the Burton property market and I anticipate a moderate reduction from the high transaction volumes seen in 2014. That might mean Burton landlords could bag a bargain during this period of uncertainty, especially if the financial markets do not like the election outcome. Markets and buyers do not like uncertainty, but savvy Buy to let landlords know buy to let is a long term game, and irrespective of short term apathy, reduction in the quality and quantity of stock for homeowners to buy  or the election, if people don’t buy property they rent. Burton City Council are building anymore properties, the council house waiting list is decades, not years for the better type of property.. the only other place to get a roof over your head.. rent a property! Good old Bricks and Mortar!

Therefore, if you are considering buying a property for investment in the near future, as I don't sell property, I am always happy to give you my considered opinion on which property to buy (or not as the case may be) to give you what you want from your investment.