Friday, 27 November 2015

Grantham tenants feel the squeeze as rents continue to rise

As my regular readers know, my passion is talking about Grantham property. As a property agent I like to comment on the Grantham property market, which I hope will be of interest to both homeowners and buy to let landlords alike. However, this week, I want to highlight the plight of the tenants of Grantham as more and more of their wages are being taken up by ever increasing rents.

The cost of renting a home in Grantham has broken through the £500 a month barrier as the average rent for a property in the town, now stands at £501 per month, a rise of 1.6% last month, leaving rents for new lets 6.6% higher than they were 12 months ago. 

House price inflation has certainly eased in Grantham from the heady days of 2014, but still with retail price inflation (for goods and services) reducing to 0% any increase in property values, no matter how small, means in real terms property is still getting more expensive. Meanwhile, many tenants have given up saving for a mortgage deposit as rents continue to take more and more of their wage packets leaving nothing to save for a deposit. That means, more and more tenants are deciding to rent for the long term and therefore the desire for decent high quality rental properties continues to exceed the available rental stock. 

I would go as far as to suggest that rents are an ideal barometer to the state of the local economy as a whole and strongly believe that the recent increase in Grantham rents are a sign that the Grantham economy is picking up. 

This means Grantham landlords are continuing to capitalise on the Grantham property market. The most recent Land Registry data suggests the annual property price rises in the town have eased over 2015, leaving property values only 3.6% higher than 12 months ago, so as property price growth is easing off, with the increased rents, rental yields are strengthening for the first time in years to compensate. The mortgage market has become more stable after the mad months of May and June after the Tory’s got back into No.10, and so, everything is set to be good news for landlords; even with the Chancellors change of tax rules in the coming years for buy to let mortgages.
You can get some amazingly low mortgage rate deals at the moment, so with mortgage rates so low and returns still extraordinarily attractive, there’s rarely been a better time to invest in rental properties. 

However, (you knew there would be a however!), it’s all about buying the right property at the right price. Not all property types are seeing equal rises in rents and capital growth.  Different parts of the town, different types of properties are experiencing quite different changes.  For example, the average length of time the 52 Grantham properties up for rent between £250 to £500 per month is 83 days, whilst the average length of time the 35 properties at £500 to £1000 per month is 38 days. 

When you start comparing different parts of Grantham, the numbers are even stranger!  The bottom line is that you must take advice and opinion. One source of advice and opinion is the Grantham Property Blog. In the Grantham Property Blog, you will see many more articles like this, discussions and even what I consider to be the best buy to let deals around, irrespective of which agent is selling it. 

Whether you are a landlord, ‘Homes Under the Hammer’ addict or just a homeowner who is interested in what is happening to the local property market, then please visit the Grantham Property Blog

Tuesday, 24 November 2015

Grantham Property Market - Asking Prices Drop but Values rise

 Those of you who regularly read my weekly articles in the Grantham Property Blog will know I like to keep abreast of the Grantham property market. Something attracted my attention this week about the local property market, something I wanted to share with my many readers.

 Over the last month, there appears to have been an anomaly in the local property market, whereby asking prices in the town have dropped, yet property values have increased.  The average asking price of a Grantham property, according to Rightmove, fell 1.4% this month yet the average value of a Grantham property rose by 0.1%.

So how does this relate in monetary terms?  This anomaly has driven the average asking price of a Grantham property down slightly to £181,100 whilst the average value is now £195,900.
So why the difference? Technically an ‘asking price’ can be any price that a homeowner wants to place his or her property on the market for. Unfortunately, many times this is done without research and can result in overpriced properties that don't sell. As the Summer months are normally slightly quieter those left on the market wanting to sell often temper their asking prices in these months to try and generate interest in their property. 

On the other side of the coin, the property ‘value’ is the price that a willing buyer is prepared to pay and a willing seller is prepared to sell at.   Therefore, in a nutshell, Grantham property values are continuing to rise and those homeowners in Grantham who have properties on the market, last month on average, reduced their asking prices .. great news for property owners and buyers alike!

In previous articles, I have spoken about the continued fundamental shortage of property coming on to the market compared to buyer demand. That is especially true for homeowners wanting to upgrade to a better house/better location.  I can appreciate Grantham home owners are reluctant to put their own property on the market speculatively and wait for the right property to become available and some high demand locations can suffer from a property stalemate.

Most homeowners don’t want to sell and have nothing to buy. 

But that’s the beauty of the much maligned English and Welsh house buying process. You can find a purchaser for your property, then ask them to wait. By agreeing a sale (subject to contract) before you try to buy sounds concerning to many, but with fewer properties for sale you need to have a buyer for your property or you will be treated as a less serious buyer yourself. If you cannot find the right home for you, you can slow the deal with your purchaser until it comes along. If nothing suitable does comes along and you lose your buyer then the worst outcome is that you have to find another purchaser or take your property off the market and stay put for now, and as long as you mention this at the start they must not commit to any costs until you have agreed your onward purchase. 

However, for the landlord/buy to let investors, these potential problems are nothing further from the truth. As I write this article, there are over 60 flats for sale, 72 terraced houses and over 40 semis for sale in Grantham.  Landlord/Buy to let investors can normally pick up some bargains in the Autumn months, as sellers who are selling their homes often have a pressing need to sell by this time. 

The types of houses a Grantham landlord typically buys, are not the same types as the homeowners wanting to move to a posher area of the town as they are attracted by larger semis and detached properties. The best types of properties for buy to let are the smaller flats, terraced and semis (not the big detached ones). There are in fact too many of these smaller properties for sale .. just look at the numbers of properties for sale (mentioned in the previous paragraph). 

If you are a landlord or thinking of become one for the first time, and you want to read more articles like this about the Grantham Property Market together with regular postings on what I consider the best buy to let deals in Grantham, of the many properties on the market,  irrespective of which agent is selling it, then you might like to visit the Grantham Property Blog

Sunday, 22 November 2015

Gonerby Hill Foot School catchment area properties outperform Grantham average by 13.22%

I was having a chat with a Grantham property investor the other day, when he asked if schools, especially primary schools, affected the local property market in terms of demand from buyers and tenants to a property.  Anecdotally, I have always known this to be true, a good school creates good demand and good demand does affect house prices.  So, I asked my colleagues on the front line, who take the phone calls from people putting themselves on our mailing list and they confirmed that most people cite location as their number one factor.

After looking through our mailing list, it confirms there is a close correlation between the high demand areas of Grantham and the close proximity to a good primary school.  Talking to my team in a recent morning meeting, they agreed many people would look to increase their budget quite significantly, whilst others would consider downgrading their property requirements to be close to a good primary school.

Those of you who regularly read this blog will know I like a challenge, so I decided to look at the science behind these assumptions.  One of the more popular primary schools in Grantham is Gonerby Hill Foot Church of England Primary School.  According to the SchoolGuide website, its figures are certainly impressive. Their last Ofsted Report classified it as Good, 77% of 11-year pupils achieving Level 4 or above in maths, reading and writing whilst 25% of them achieved level 5.  Finally, the schools’ KS2 rating was classed as Good. 

Looking at property sales within half a mile of Gonerby Hill Foot, property values have risen in value since 2000 by 124.16%, whilst according to recent figures, the Grantham average as a whole has risen in the same time frame by 109.66%. 

That means the parents of Gonerby Hill Foot have seen the values of their properties rise proportionally 13.22% more than the Grantham average ... interesting don’t you think?

However, whilst a good primary school significantly contributes more to house prices, the same can’t be said for secondary schools. There are two reasons for this, firstly, as secondary schools are much larger, so their catchment areas are correspondingly much larger, meaning parents don’t need to live so close to the school. Secondly, in the UK, whilst the difference between the top 25% and bottom 25% of secondary schools is not insignificant, in the primary school sector, the difference between the top 25% and bottom 25%, according to the London School of Economics, is considerably and significantly more.

Saturday, 14 November 2015

Grantham Buy To let –Freehold House or Leasehold Flat?

Well my Grantham Property Blog reading friends, as seems to be all the rage with Jeremy Corben asking the PM questions emailed in to him at Prime Minster Question Times, I to wish to answer a question emailed into me from a potential Grantham landlord last week. Nice chap, lives in Manthorpe, and it turns out, after having a coffee with him, he works in IT, has a spare bit of cash (now the kids have flown the nest) and wanted to buy his first buy to let property. 

His main question was ... Do I buy a freehold house or a leasehold flat in Grantham?

Most people will say freehold every time, because you own the land. However, it’s not as simple as that (it never would be would it!). The definitive answer though is to research what Grantham tenants want in the area of Grantham they want! The tenant is ultimately your customer, and, if they don't want to rent what you decide is best to buy, then you are not going to have a successful BTL investment. So starting with the tenant in mind and working backwards from there, you won’t go far wrong. In a nutshell, find the demand before you think about creating the supply.

Leasehold flats and apartments in Grantham are excellent in some respects as they offer the landlord certain advantages, including the fact a flat can be initially cheaper to buy. Yields can be quite good, offering better cash flow. The building will already be insured and yes there is a service charge, but it’s still for a service at the end of the day and that cost is spread between many others (i.e. when your freehold house roof goes, its falls 100% on your shoulders) and one of my favourites is that there is often no garden to maintain or blown down fences to replace!
However, some Grantham leasehold flats can suffer from poor capital growth. Some leasehold properties have no cap on the level of the service charge and it may get out of control. The length of the lease will significantly affect value if not renewed before it gets too short. Thankfully there’s not many, but some Grantham apartments/flats have burdensome clauses. Finally, with leases, there can be sub-letting issues – which means you can’t let them out.

So what do the numbers look like? Well since 2003, the average freehold property in Grantham (detached, semis and terraced) has risen from £98,130 to £139,735, a rise of 42% whilst the average Grantham leasehold property (flats and apartments) has gone up in value from £47,920 to £81,728, a greater rise of 71%.  

I was really interested to note that of the 7,653 rental properties in the South Kesteven District Council area that the Office of National Statistics believe are either let privately or through a letting agency, 1,693 of them (or 22.1%) are apartments. However, there are only 5,041 apartments in the whole council area (be they owned, council rented or privately rented), which represents 8.8% of the whole housing stock in the area. This really intrigued me that, quite obviously, there is a high proportion of Grantham’s leasehold apartments/flats rented to tenants compared to detached, semi’s or terraced. Fascinating don’t you think?

Every Grantham apartment block, every terraced house or semi is different. Like I said at the start, the definitive answer though is to research what Grantham tenants want in the area of Grantham they want. Demand for town centre apartments, near good transport links can be popular and can offer the Grantham landlord very good yields with minimal voids. However, Grantham terraced houses and semis, whilst not always offering the best yields (although sometimes they can), they do offer the Grantham landlord decent capital growth. 

My advice to the prospective landlord as it is to you is do your homework.  One such website, which only talks about the Grantham buy to let Property Market, is the Grantham Property Blog. Another source of info many Grantham landlords use is me! What many Grantham landlords do, irrespective of whether you are a landlord of ours, a landlord with another agent or a DIY landlord, if you see any property in Grantham, that catches your eye as a potential buy to let property, be it a terraced house, semi or flat ... email me and I will email you back with my thoughts (although I will tell you what you need to hear .. not want to hear!)