The Grantham Property Market and The Euro 2016 Football Tournament

With the Referendum on EU membership out of the way, our households can concentrate on something European that doesn’t involve party political broadcasts or politician’s treating us all like children – the Euro 2016 Football Tournament. Grantham is home to all different backgrounds and nationalities so if you're not lucky enough to be jetting off to France for the UEFA Euro 2016 football tournament, have no fear! For a bit of fun (although there is a serious side to this – you know there would be with me!) I have taken a look at which European people live in Grantham so I know who to soak up the best atmosphere with!

During my research some interesting numbers appear. Going into the Euro 2016 tournament, France were 3/1 favourite’s, then Germany 7/2, third Spain 11/2, then England 9/1, Italy 16/1, Poland 50/1, Romania and Wales at 100/1, Ireland at 150/1 and Northern Ireland 500/1 (although Leicester were 5000/1 at the start of last season).

Of the 104,391 residents of the Grantham and Stamford Constituency for Westminster, of the Home Nations going into the competition, 93,170 of them are from England, 978 from Wales, 500 from Northern Ireland and 461 from Ireland, although I do feel sorry for the 1,889 Scots who didn’t get into the finals. Now interestingly, looking at the Mainland Europeans residents in the Grantham and Stamford Constituency, it might not surprise you that they make up 4.06% of the population as a whole in the Westminster area.

However, even more fascinating, of those 4.06% European’s residents, 1.58% are from Western Europe because EU residents from Eastern Europe - i.e. the Accession Countries to the EU between 2003 to 2007 (Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Slovakia, Slovenia, Bulgaria and Romania) - only make up 2.48% of the population of the Grantham and Stamford Constituency.

Broken down into the relevant football teams, there are in the Grantham and Stamford Constituency …  

95 French people

839 Germans

113 Italians

53 Spanish

1,290 Poles

71 Romanians

… I feel sorry for the Spanish and Romanian football supporters in Grantham!

But what does this have to do with the Grantham property market? Quite a lot in fact. Many of these European people were economic migrants, especially those from Eastern Europe. A lot of people’s concerns over migration are exaggerated as this EU migration has acted to fill gaps in skills and labour supply during growth periods of the mid 2000’s and subsequently over the last five years in Grantham, EU migrants have done little to displace native workers but do the jobs us Brits don’t often want to do. There is no preferential treatment for council housing in Grantham, so EU migrants have in fact increased demand for privately rented accommodation in Grantham. 

This has meant, as demand for housing in Grantham has remained strong, Grantham landlords have continued to buy properties to rent out to keep up with this demand. Therefore, the value of every homeowner’s property in Grantham has been kept high because of the demand from these Grantham landlords buying starter homes to rent out, releasing existing homeowners to go up the property ladder – benefiting everyone in the chain.

However, rents have remained relatively subdued, in Grantham rents are only 15.0% higher than they were in 2005, not bad when you consider we have had 38.52% inflation in the UK economy as a whole over the same 11 years.

EU migration has meant existing homeowners, landlords and the economy as a whole in Grantham (and the UK) have benefitted from better economic conditions, property prices not slumping whilst rents have been kept in check by wage inflation. 

£3,400 boost to Grantham First time buyers

There’s a whole legion of wannabe Grantham first-time buyers keen to get on the property ladder and they now have a 3% price advantage over the previously quicker responding army of Grantham landlords with cash at the ready. Since the start of April, buy to let landlords have had to pay an additional 3% stamp duty so whilst demand from some Grantham buy to let landlords has dropped away, in the interim, it offers Grantham first time buyers (FTB’s) a chance to fill the vacuum with less competition from cash rich landlords (over two thirds of BTL properties were purchased without a mortgage in the last 7 years) who could bid more and complete quicker.

Looking at the average value of a terraced house in Grantham currently standing at £115,500, that means if our Grantham FTB went up against a Grantham landlord, the landlord would have to pay an additional £3,465 in stamp duty. Early antidotal evidence from fellow property professionals in the town is suggesting landlords are reducing their offers slightly on Grantham properties to reflect the extra stamp duty.  

Whilst on the face of it, it appears landlords are being punished by No.11 Downing Street, I actually believe this increase in stamp duty for landlords is a good thing for the Grantham property market as a whole.

Since 2011/12, the Grantham property market has performed very well indeed. Over the last 12 months, £193,090,268 has been spent buying 1,028 Grantham properties.  Figures from the Land Registry have just been released and month on month in our council area, property values are 0.5% higher, yet 4.2% higher year on year. These figures are nowhere near the heady days of 2003 (April to be exact), when Grantham property prices rose by 32.5% in 12 months.

So as property values in Grantham (and the UK as whole) start to stablise and come back to some kind of balance, I am beginning to see savvy landlords view the Grantham property market in a different light. Even with the Spring rush, gone are the days where you could make limitless money on anything that had a door, a few windows and roof. This stamp duty change has made more and more landlords, after reading the Grantham Property Market Blog take advice on what or not to buy and what to pay, meaning Grantham landlords are being more calculated with their Grantham BTL purchases. I am also seeing a variance between relatively brisk current price momentum and softer expectations in terms of property value growth in Grantham, this in part reflects amplified uncertainty about the short term economic outlook (eg Brexit, Issues in the Far East etc).

 Now I know a lot of Grantham landlords brought forward their BTL purchases to beat the stamp duty deadline. However, it is probable that hunger from Grantham investors will return for the right Grantham property later in the year, especially if it’s at the right price and offers a decent yield. However, in the meantime, Grantham FTB’s could and should, in the short term, make hay whilst the sun shines plug the gap and grab a bargain!

Grantham Property Market in Crisis : Who is to blame?

‘An Englishman’s Home is his Castle’ is the phrase that was coined in Victorian times as the UK has a reputation for being a country of home owners  .. but the truth could be further from the point, because in a league of the top 46 economic nations of the world, where owning your property is permissible, the UK is only ranked no.37.

As I mentioned a couple of weeks ago, at the end of the First World War, 77% of people rented their home (the vast majority renting from a private landlord as Council Housing was still very much in its infancy). Homeownership rose very slowly in the 1920’s and started to grow as the economy grew after the Great Depression. However, after the Luftwaffe had flattened huge swathes of housing in the early 40’s, the priority was to get people into clean and decent accommodation .. so Local Authority’s (Councils) took up the baton and they built large council estates in the 1950’s and 1960’s.

As the UK economy got back on its feet in the middle part of the 20^th Century and wages rose, people decided they wanted to own their own home instead of renting. Throughout the post war decades, it became easier to secure a mortgage. Interestingly, by 1977, 61.6% of 30 to 34 year olds were owner occupiers with a mortgage compared to 8.7% of 30 to 34 year olds being in private rented accommodation (the remaining either being in council housing or living with friends or family). Ten years later, in 1987, we saw some significant growth in homeownership, as 68.2% of 30 to 34 year olds had a mortgage and only 4.6% of people privately rented. A decade later and there wasn’t much change as, in 1997, the homeownership figure was 68.3% but private renting had jumped to 12.1% in the same 30 to 34 year old age group.

Move on another ten years to the 2007 figures, and this showed a slight drop in homeownership to 65.8% but renting had continued to increase to 18.7% (in the 30 to 34 year old age group). The latest set of figures is for 2014, and only 47.2% of 30 to 34 year olds had a mortgage and an eye watering 33.4% of 30 to 34 year olds privately rent.

When we look at the Grantham figures of homeownership, looking back to 1991, 63.37% of Grantham households were owned by the homeowner, whilst 15.14% of Grantham households were privately rented, whilst the 2011 census showed home ownership in Grantham had risen to 67.13% and private rented had increased to 15.94%. Much of the recent rise in the occurrence of private renting in Grantham since the turn of the Millennium is not because property has become more expensive, but the fact these 30 somethings haven’t got a council house to move into (because they were all sold off) – so they have to rent. The selling of council housing in the 1980’s (a subject I have talked about in a previous article in the Grantham Property Market Blog) artificially grew homeownership in the 1980’s, but as these people have got older, the younger generation didn’t have the same opportunity to buy their council house in the 1990’s, 2000’s or 2010’s. That is why, unless the council start building council houses by the acre, and hundreds of acres, private renting will continue to grow in Grantham.

So if you want blame anyone .. blame the Grocer’s daughter from Grantham – Mrs T …. but before you do – do remember in the 1970s, the UK was called the "sick man of Europe" by critics of the UK government, because of industrial strife and poor economic performance compared to other European countries culminating with the Winter of Discontent of 1978/9 and if it hadn’t been for her we wouldn’t be where we are today.

Rents in Grantham rise by 2.4% in the last year

I was reading the Sunday Papers, as is my want and, when reading the financial pages, it was announced UK inflation had increased to its highest level in a year. Inflation, as calculated by the Government’s Consumer Prices Index, rose by 0.3% over the last 12 months.  The report said it had risen to the those ‘heady’ levels by smaller falls in supermarket and petrol prices than a year ago. If you recall, in early 2015, we had deflation where prices were dropping!

So what does this mean for the Grantham property market ... especially the tenants?

Back in November, the Office of National Statistics stated average wages only rose by 1.8% year on year, so when adjusted for inflation, Grantham people are 1.5% better off in ‘real’ terms.   Great news for homeowners, as their mortgage rates are at their lowest ever levels and their spending power is increasing, but the news is not so good for tenants.

The average rent that Grantham tenants have to pay for their Private Rental Properties in Grantham (i.e. not housing association or council tenants) rose by 2.4% throughout 2015, eating into most of the growth.  2015 wasn’t a one off either.  In 2014, rents in Grantham rose by 1.3% (where salaries only rose by only 0.2%) However, it’s not all bad news for Grantham tenants, because in 2013 rents rose by 1.0%, (but salaries rose by 2.2%).

… and it must be noted that the private rents Grantham tenants have had to pay for Grantham property since 2005 are only 15.0% higher, not even keeping up with inflation, which over the same time frame, rose at 27.8% (although salaries were only 22.3% higher over the same time period)

More and more, talking to 20 and 30 somethings who rent – it’s a choice.  Gone are the days where owning your own property was a guaranteed path to wealth, affluence and prosperity.    I know keep mentioning Europe, but some of the highest levels of home ownership are in Romania at 96.1%, Hungary at 88.2% and Latvia at 80.9% (none of them European economic dynamos) and even West European countries like Spain at 78.8% and Greece at 74% (and we know both of those countries are on their knees, riddled with national debt and massive youth unemployment).

At the other end of the scale, whilst we in the UK stand at 64.8% homeownership, in Europe’s powerhouses, only 52.5% of Germans own a home and only 44% of Swiss people are homeowners.  Looks like eating chocolate, sauerkraut, renting and good economic performance go hand in hand.  Yet, joking aside, home ownership has not always been the rule in the UK.   In 1918, only 23% of people were homeowners, with no council housing, meaning in fact, 77% were tenants.

Tenants have choice, flexibility to move, they don’t have massive bills when the boiler blows up, it’s a choice.  Grantham rents are growing, but not as much as incomes. To buy or not to buy is an enormously difficult decision.   For while buying a Grantham home is a dream for the majority of the 20 and 30 something’s of Grantham have, it might not leave them better off in the long run and it isn’t necessarily the best option for everyone.  That is why, demand for renting is only going in one direction – upwards.