Wednesday, 30 December 2015

Values of Grantham Terraced Houses smash through the £140/sqft barrier

The Council of Mortgage Lenders (CML) latest snapshot of the buy to let mortgage market shows us that buy to let landlords haven’t been put off by the Chancellors announcements on the way buy to let’s are taxed. 

Last month, the CML stated £1.4billion was borrowed by UK landlords to purchase 10,500 buy to let properties, up 26.5% from the same month in 2014, when only 8,300 properties were bought with a buy to let mortgage. Go back two years and the number of buy to let mortgages used for purchasing (again not re-mortgaging) is 36.4% higher! Even more interesting has been the fact that the average amount borrowed has risen as well. The average buy to let mortgage last month was £133,330, up from £128,480 a year ago.

In Grantham, I am speaking to more and more landlords, be they seasoned professional landlords or FTL’s (first time landlords), as they read reports that the Grantham rental market is doing reasonably well, with rents and property values rising.  Interestingly, one landlord recently asked how much he should be paying per square foot (more of that in a second).

The first thing you have to decide is whether you want great capital growth or great rental yield, as every knowledgeable landlord knows, you can’t have both. Over the last twenty years, property values in Grantham have risen by 137.2%, compared to Greater London’s 436.2%. This has proved that capital growth increases faster in the more expensive South, but your investment money doesn’t go very far, meaning there won’t be as much rental yield from a 1 bed flat in Chelsea (2% per year at best with a fair wind) as a 2 bed semi in Grantham. However, whilst the figure of 137.2% is an average for the area, certain areas of Grantham have seen capital growth much higher than that and others areas much worse (we have talked about those in previous articles).

If you recall in an earlier article, my research reveals that Grantham apartments tend to generate a better yield than houses, probably because several sharers can afford to pay more than a single family. But houses tend to appreciate in value more rapidly and may well be easier to sell, simply because there are fewer being built.

So what should you be buying in Grantham, and more importantly, how much?

·         The average apartments in the town are currently selling for approximately £148 per square foot.
·         Terraced houses in Grantham are currently obtaining, on average, £118,800 or £144 per square foot,
·         An average semi in Grantham is selling for £146,100 (and achieving £167 per square foot).  

Now these are of course averages, but it gives you a good place to start from. In the coming weeks, I will look at rents being achieved on Grantham houses and apartments, and the yields that can be obtained, depending how many bedrooms there are. In the meantime, if you would like to read more articles like this, then can I suggest you visit the Grantham Property Blog? 

Wednesday, 23 December 2015

Grantham Tenants Pay 23.2% of their Salary in rent

 I had the most interesting chat with a local Grantham landlord the other day about my thoughts on the Grantham property market. The subject of the affordability of renting in Grantham came up in conversation and how that would affect tenant demand. Everyone wants a roof over their head, and since the Second World War, owning one’s home has been an aspiration of many Brits.  However, with rents at record highs, many are struggling to save enough for a house deposit.

Let’s be honest, it’s easy to get stuck in a cycle of paying the rent and bills and not saving, but even saving just a small amount each month will sooner or later add up.  George Osborne announced such schemes as the upcoming Help to Buy ISA, where the Government will top up a first time buyers deposit. 

Therefore, I thought I would do some research into the Grantham property market and share with you my findings.  Grantham tenants spend on average just under a third of their salary to have a roof over their head.  According to my latest monthly research, the average cost of renting a home in Grantham is £508 per month.  When the average annual salary of a Grantham worker stands at £26,201 per year, that means the average Grantham tenant is paying 23.2% of their salary in rent.  I doubt there is much left to save for a deposit towards a house after that, and that my Grantham Property Blog reading friends is such a shame for the youngsters of Grantham.

You see one the reasons for rents being so high is property prices being high.  As I have mentioned before, there is a severe lack of new properties being built in Grantham.  It’s the classic demand vs supply scenario, where demand has increased, but the number of houses being built hasn’t increased at the same level.  Also, Grantham people aren’t moving home as often as they did in the 80’s and 90’s, meaning there are fewer properties on the market to buy.  If you recall, a few weeks ago I said back in Spring 2010, there were over 920 properties for sale in Grantham and since then this has steadily declined year on year, so now there are only 311 for sale in the town. 

So, the planners in Grantham haven’t allowed enough properties to be built in the town and existing Grantham homeowners are not moving home as much as they used to, thus creating a double hit on the number of properties to buy.  This is a long term thing and the continuing diminishing supply of housing has been happening for a number of decades and there simply aren’t enough properties in Grantham to match demand, these are the reasons houses prices in Grantham have remained quite buoyant, even though economically, over the last 5 years, it was one of the worst on record for the country and the East Midlands region as a whole.

However, things might not be all doom and gloom as originally thought, as a recent Halifax Survey  (their Generation Rent 2015 Survey) suggested  more and more people may be long term, if not lifelong tenants. In fact there is evidence in the report to suggest that the perception of how difficult it is to get on the housing ladder is vastly different between parents and people aged 20 to 45.  It seems from this survey that the state of the UK economy has shifted priorities quite significantly in quite a short space of time.  With fewer people able to save up the deposit required by mortgage lenders, more and more people are continuing to rent.  This delay in moving up the property ladder has driven rents across the UK up as more people were seeking rental properties .

 It is often said that more people in central Europe rent for longer or never own their own property. The last two census in 2001 and 2011 show that proportionally the percentage of people who own their own home in Britain is slowly reducing and, as a country, we are becoming more and more like Germany.   That isn’t a bad thing as Germany is considered to have a more successful economy, one of the main stays, often quoted,  is because they have a much more flexible and mobile workforce, (which renting certainly gives) and from that, they have a higher personal income than in the UK.      
Therefore, if we are turning into a more European model and the youngsters of Grantham and the Country have changed their attitudes, demand for rental properties will only and can only go from strength to strength, good news for Grantham tenants as wages will start to rise and good news for Grantham landlords, especially as property values in Grantham are now 3.8% higher than year ago!

Wednesday, 16 December 2015

How EU Migration has changed the Grantham Property Market

 The argument of migration and what it does, or doesn’t do, for the country’s economic wellbeing is something that has been hotly contested over the last few years. In my article today, I want to talk about what it has done for the Grantham Property market.

Before we look at Grantham though, let us look at some interesting figures for the country as a whole. Between 2001 and 2011, 971,144 EU citizens came to the UK to live and of those, 171,164 of them (17.68%) have bought their own home. It might surprise people that only 5.07% of EU migrants managed to secure a council house. However, 676,091 (69.62%) of them went into the private rental sector.  This increase in population from the EU has, no doubt, added great stress to the UK housing market.

Looking at the figures, the housing market as a whole is undoubtedly affected by migration but it has been the private rented housing sector, especially in those areas where migrants come together, that is affected the most.  Indeed, I have seen that many EU migrants often compete for such housing not with UK tenants but with other EU migrants. In 2001, 3.68 million rented a property from a landlord in the UK.  Ten years later in 2011, whilst EU migration added an additional 676,091 people renting a property from a landlord, there were actually an additional 4.14 million people who became tenants and were not EU migrants, but predominately British!

As a landlord, it is really important to gauge the potential demand for your rental property, especially if you are a landlord who buys property in areas popular with the Eastern European EU migrants.  To gauge the level of EU migration (and thus demand), one of the best ways to calculate the growth of migrants is to calculate the number of people who ask for a National Insurance number (which EU members are able to obtain). 

Interestingly, in South Kesteven, migration has fallen significantly over the last few years. For example, in 2006 there were 1,090 migrant National Insurance Cards (NIC) issued and the year after, in 2007, 1,108 NIC cards were issued. However, in 2014, this had slipped to only 789 NIC’s. However, if the pattern of other migrations since WW2 continues, over time there will be an increasing demand for owner occupied property, which may affect the market in certain areas of high migrant concentration. On the other hand, over time some households move into the larger housing market, reducing concentrations and pressures.

In essence, migration has affected the Grantham property market; it couldn’t fail to because of the additional 7,369 working age migrants that have moved into the Grantham area since 2005. However, it has not been the main influence on the market. Property values in Grantham today are only 0.8% higher than they were in 2005. According to the Office of National Statistics, rents for tenants in the East Midlands have only grown on average by 0.66% a year since 2005 .... I would say if it wasn’t for the migrants, we would be in a far worse position when it came to the Grantham property market. This was backed up by the then Home Secretary Theresa May back in 2012 - more than a third of all new housing demand in Britain is caused by inward migration and there is evidence that without the demand caused by such immigration, house prices would be 10% lower over a 20 year period.

If you want to know more about the Grantham property market, then for more articles like this, please visit the Grantham Property Blog

Thursday, 10 December 2015

Grantham Property Market Crisis as New House Building slumps by 55.67%

One of the key factors that determine the price of anything is the demand and supply of the item that is being bought and sold. When it comes to property, demand can change overnight, but it takes years and years to build new properties, thus increasing the supply.

The Conservatives have pledged to build over 1 million homes by 2020. I am of the opinion that as a country, irrespective of which party, we have not built enough homes for decades, and if the gap between the number of households forming and the number of new homes being built continues to grow, we are in danger of not being able to house our children or grand children. I believe the country is past the time for another grand statement of ambition by another Housing Minister. Surely it’s right to give normal Grantham families back the hope of a secure home, be that rented or owned? As a town, we need to exert pressure on our local MP Nick Boles, so they can make sure Westminster is held accountable, to ensure there is a comprehensive plan, with enough investment, that can actually get these homes built.

To give you an idea of the sorts of numbers we are talking about, in the Lincolnshire County Council area in 2005, 3,910 properties were built. In 2006 that rose to 4,410 and a year later in 2007, it peaked at 4,760. By 2014, that figure had dropped by a massive 55.67% to 2,110 properties built. 

The outcome of too few homes being built in Grantham means the working people of the town are being priced out of buying their first home and renters are not getting the quality they deserve for their money. The local authority isn’t building the estates they were after the war and housing associations are having their budgets tightened year on year, meaning they have less money to spend on building new properties. I know of many Grantham youngsters, who are living with their parents for longer because they cannot afford to get onto the housing ladder and growing families are unable to buy the bigger homes they need.

I talk to many Grantham business people and they tell me they need a flexible and mobile workforce, but the high cost of moving home and lack of decent and affordable housing are barriers to attracting and retaining employees. Furthermore, building new homes is a powerful source of growth, creating jobs across the county and supporting hundreds of Grantham businesses. It is true that landlords have taken up the mantle and over the last 15 years have bought a large number of properties. The Government need to be thankful to all those Grantham landlords, who own the 3,325 rental properties in the town. Most local landlords only have a handful of rented properties (to aid their retirement), and without them, I honestly don’t know who would house all the extra people in Grantham!

Moving forward, those Grantham landlords have many pitfalls, both in the short term and medium term. For instance, were you aware that the rules of changes for new tenancies from the 1st October 2015 (with some imposing penalties including loosing the right to require the tenant to vacate, if they are done incorrectly) or in the medium term, the planned change in the way buy to let’s are taxed? 

More than ever, the days of buying any old property in Grantham and you would be set for life are gone. Now, it’s all about ensuring you stay the right side of the law, buying the right property (and that might mean even selling some to buy others), so you build the right portfolio for you as a landlord. One source of info on all of these issues, where you will find other articles similar to this on the Grantham property market, is the Grantham Property Blog

Sunday, 6 December 2015

Grantham House owners desert the housing market with an 8 year low

Even though the housing market is in an upbeat state in many parts of the UK, getting on the property ladder is still challenging for many and regarded as unattainable by some.  However, that goal has become even worse recently in Grantham as the number of houses available to buy is at an 8 year all time low.

Back in Spring 2010, there were over 920 properties for sale in Grantham and since then this has steadily declined year on year, so now there are only 311 for sale in the town.  This continuing diminishing supply of housing has been happening over those years for a while and there simply aren’t enough properties in Grantham to match demand.

According to a recent report by the National Association of Estate Agents, that said, “There are now 11 house hunters fighting after every available house which isn’t sustainable.   What that means is Grantham youngsters, who are looking to buy their first home, are finding themselves being squeezed out by the competition.  However, in the meantime, nobody wants to live with parents until they are in their 30’s, so that in turn creates demand for more rental properties, which means landlords have a greater demand for more rental properties so are buying more, resulting in even less smaller properties for the youngsters to buy, it’s a vicious circle.   

Talking to fellow agents, mortgage arrangers, surveyors and solicitors in the town, all of whom have extensive dealings in the Grantham property market like myself, most of us agree the movement in the Grantham market is taking place in the middle to upper market, higher up the property ladder and it’s second and third steppers pushing through the properties that are being bought and sold.
That has meant as people tend to move less in the middle to upper market, the number of the properties actually selling has drastically reduced over the last couple of years.

When we look at the individual areas of the town, it paints an interesting picture. 

  • NG31 - Grantham 69 properties sold in May 2015 (with a average value of £153,851), whilst over the Summer months of 2014, the number of properties selling in this postcode reached into the mid/late 90’s.
  • NG32 - Croxton Kerrial, Sedgebrook  13 properties sold in May 2015 (the most recent set of figures from the HM Land Registry), whilst over the Autumn months of 2014, the number of properties selling in this postcode was always between 18 and 21 per month. (Interestingly the average value of those properties was £344,838).
  • NG33 - Castle Bytham, Corby Glen 13 properties sold in May 2015 (with an average value of £ 220,365), whilst over the Summer months of 2014, the number of properties selling in this postcode reached into the early 20’s.
So what does this all mean for homeowners and landlords alike in Grantham?  Demand for Grantham property is good, especially at the lower end of the market.  However, with fewer properties coming up for sale, it means property prices are proving reasonably stable too.

You see I believe a more stable, consistent Grantham property market, with less people seeing property as an easy way to make a quick buck (as many did in the early 2000’s when prices were rising at nearly 20% a year so people were buying and selling every other minute), but a property market that has a steady growth of property values in Grantham, year on year, without the massive peaks and troughs we saw in the late 1980’s and mid/late 2000’s might just be the thing that the Grantham property market needs in the long term.

For more insights, comments and facts on the Grantham Property market please visit the Grantham Property Blog where you will find many similar articles to this.