Friday, 23 September 2016

89.3% of Grantham Properties have 3 or more bedrooms – Problem or Opportunity?

The orthodox way of classifying property in the UK is to look at the number of bedrooms rather than its size in square metres (although now we are leaving the EU – I wonder if we can go back to feet and inches?). It seems that homeowners and tenants are happy to pay for more space. It’s quite obvious, the more bedrooms a house or apartment has, the bigger it is likely to be. The reason being not only the actual additional bedroom space, but the properties with more bedrooms tend to have larger / more reception (living) rooms. However, if you think about it, this isn’t so astonishing given that properties with more bedrooms would typically accommodate more people and therefore require larger reception rooms.

In today’s Grantham property market, the Grantham homeowners and Grantham landlords I talk to are always asking me which attributes and features are likely to make their property comparatively more attractive and which ones may detract from the price. Over time, buyers’ and tenants’ wants and needs have changed. In Grantham, location is still the No. 1 factor affecting the value of property, and a property in the best neighbourhoods, say Manthorpe or Great Gonerby can command a price nearly 50% higher than a similar house in an ‘average’ area. However, after location, the next characteristic that has a significant influence on the desirability, and thus price, of property is the number of bedrooms and the type (i.e. Detached/ Semi/Terraced/Flat).

In previous articles, I have analysed the Grantham housing stock into bedrooms and type of property, but never before now have I cross-referenced type against bedrooms. These figures for the South Kesteven District Council area make fascinating reading. It shows 89.3% of all properties in the area have 3 or more bedrooms

Terraced (including end-terrace)
1 bedroom
2 bedrooms
3 bedrooms
4 bedrooms
5 or more bedrooms

I was genuinely surprised at the low numbers of one and two bed properties, especially 2 bed semis detached houses, especially as tenants like the smaller one and two bed properties in Grantham. You see, it might interest the homeowners and landlords of Grantham, that there has been a change in the numbers of properties on the market and the split in bedrooms on the market over the last 12 months

·       12 months ago, 25 one bed properties were for sale in Grantham, today 33, a rise of 32%
·       12 months ago, 91 two bed properties were for sale in Grantham, today 84, a drop of 8%
·       12 months ago, 111 three bed properties were for sale in Grantham, today 132, a rise of 19%
·       12 months ago, 103 four bed properties were for sale in Grantham, today 65, a drop of 37%
·       12 months ago, 28 five + bed properties were for sale in Grantham, today 25, a drop of 11%

For several years Grantham buy-to-let investors have been the only buyers at the lower end (starter
homes) of the market, as they have been enticed by high tenant demand and attractive returns. Some Grantham landlords believe their window of opportunity has started to close with the new tax regime for landlords, whilst it already appears to be opening wider for first-time buyers. This is great news for first time buyers ... but one final note for Grantham landlords ... all is not lost ... you can still pick up bargains, you just need to be a lot more savvy and do your homework 

Tuesday, 20 September 2016

Post Brexit - Grantham Property Prices set to drop £18,100 in the next 12 months?

Even the most sane person in Britain has to admit the Brexit vote will, in one shape or another, affect the UK Property market. Excluding central London which is another world, most commentators are saying prices will be affected by around 10%. So looking at the commentators’ thoughts in more detail, property values in Grantham will be 10% lower than they would have been if we hadn’t voted to leave the EU.

As the average value of a property in the South Kesteven District Council area is £181,000, this means property values are set to drop for the average Grantham property by £18,100 … batten down the hatches .. soup kitchens and mega recession here we come’s going to get rough.

.. but before we all go into panic mode in Grantham .. the devil is always in the detail

Look at the phrase again, and I have highlighted the relevant part “Property values in Grantham will be 10% lower than they would have been if we hadn’t voted to leave the EU”

Property values today, according to the Land Registry are 6.81% higher than a year ago in the South Kesteven District Council area. The 12 months before that they rose by 3.14% and the 12 months before that, they rose by 3.14%. If we hadn’t voted to leave, I believe on these figures, we could have safely assumed Grantham House prices would have been 5% higher by the Summer of 2017.

… and that’s the point, we won’t see a house price crash in Grantham, it’s just that house prices in a years time will be 5% lower than they are now (ie 5% less the 10% lower figure because of Brexit). Let’s look at the historic figures and how that compares to today’s figures for the South Kesteven District Council area and Grantham as a whole.

Average Value of a property 20 years ago                    £  47,800
Average Value of a property 10 years ago                    £157,800
Average Value of a property 2 years ago                      £164,300
Average Value of a property 1 year ago                        £169,500
Average Value of a property today                                £189,000
Projected Value of a property in 12 months’ time         £180,000

Therefore, I believe the average value of a Grantham property will be £9,000 lower in 12 months’ time than today.

That’s not to say Grantham property prices might not dip slightly in the run up to Christmas (in fact they always have done just about every year since the year 2000 and most of those were boom years) .. but in 12 months time this is my considered opinion of where Grantham property values will be.. and looking at the historic prices, even if I (and many other property market commentators) are wrong and they drop 10% from TODAY’S figure .. in the whole scheme of things, we have been through a Credit Crunch, Black Monday and 15% interest rates over the last 20 to 30 years .. and still Grantham house prices have always bounced back.

Whilst the UK's vote for Brexit has created an uncertainty in the Grantham housing market, there is no need to panic and prospective buyers should merely use common sense about their purchases. I always say to people to be prudent and if you are taking out a mortgage, at some stage during the life of that mortgage, circumstances will be difficult. We won’t have a 2008 Credit crunch fire sale of properties because after the Mortgage Market Review which took place in the Spring of 2013, mortgage borrowers are not as highly leveraged this time around.  As a result of this, with any luck there will not be too many distressed sales, which cause widespread price reductions.

.. and Grantham landlords? They have recently been thrashed by Osborne’s tax changes, but yields could rise if Grantham house prices fall/stablise and rents grow, and this might also make it easier to obtain mortgages, as the income would cover more of the interest cost. If prices were to level or come down that could help Grantham landlords add to their portfolio, as rental demand for Grantham property is expected to stay strong as more people find it more and more difficult to obtain mortgages.

Wednesday, 14 September 2016

27.2% Of Grantham Homes Are One Person Households

I was having an interesting chat with a Grantham buy to let landlord the other day when the subject of size of households came up in conversation.  For those of you who read my Brexit article published on the morning after the referendum, one of the reasons on why I thought the Grantham property market would, in the medium to long term, be OK, was the fact that the size of households in the 21st Century was getting smaller – which would create demand for Grantham Property and therefore keep property prices from dropping.

Looking at the stats going back to the early 1960’s, when the average number of people in a home was exactly 3, it has steadily over the years dropped by a fifth to today’s figure of 2.4 people per household. Doesn’t sound a lot, but if the population remained at the same level for the next 50 years and the we had the same 20% drop in household size, the UK would need to build an additional 5.28 million properties ( or 105,769 per year) .. When you consider the Country is only building 139,800 properties a year ... it doesn’t leave much for people living longer and immigration. Looking closer to home...

In the South Kesteven District Council area, the average
number of occupants per household is 2.3 people

When we look at the current picture nationally and split it down into tenure types (i.e. owned, council houses and private renting, a fascinating picture appears.

The vast majority of homeowners who don’t have a mortgage are occupied by one or two people (81% in fact), although this can be explained as residents being older, with some members of the family having moved out, or a pensioner living alone.  People living on their own are more likely to live in a Council house (43%) and the largest households (those with 4 or more people living in them are homeowners with a mortgage – but again, that can be explained as homeowners with families tend to need a mortgage to buy. What surprised me was the even spread of private rented households and how that sector of population are so evenly spread across the occupant range – in fact that sector is the closest to the national average, even though they only represent a sixth of the population.

When we look at the South Kesteven District Council figures for all tenures (Owned, Council and Private Rented) a slightly different picture appears...

1 person households in Grantham
2 person households in Grantham
3 person households In Grantham
4 person households in Grantham
5+ person households in Grantham

But it gets even more interesting when we focus on just private rental properties in Grantham, as it is the rental market in Grantham that really fascinates me. When I analysed those South Kesteven District Council private rental household composition figures, a slightly different picture appears. Of the 7,653 Private rental properties in the South Kesteven District Council area,

·       32.6% of Private Rental Properties are 1 person Households
·       34.4% of Private Rental Properties are 2 person Households
·       18.0% of Private Rental Properties are 3 person Households
·       10.1% of Private Rental Properties are 4 person Households
·       4.7% of Private Rental Properties are 5+ person Households

 As you can see, Grantham is not too dissimilar from the national picture but there is story to tell. If you are considering future buy to let purchases in the coming 12 to 18 months, I would seriously consider looking at 2 bed semi  detached houses. Even with the numbers stated, there are simply not enough 2 bed semis to meet the demand. They have to be in the right part of Grantham and priced realistically, but they will always let and when you need to sell, irrespective of market conditions at the time, will always be the target of buyers. 

Wednesday, 7 September 2016

92.2% of Grantham Homeowners are over 35 - The affect of their Brexit vote on the Grantham Property Market

Well it’s been 11 weeks since the Referendum vote and we have had a chance to reflect on the momentous decision that the British public took. Many of you read the article I wrote on the morning of the results. I had gone to bed the night before with a draft of my Remain article nicely all but finished, to be presented, at just after 5am, with the declaration by the BBC saying we were leaving the EU. I don’t think any of us were expecting that.

If you want to read a copy of that original Post Brexit blog post, please visit my blog INSERT URL here and scroll back to late June to find it. In this article I would like to take my thoughts on from that initial article and now start to see the clearer picture as the dust settles on the UK, but more importantly, the Grantham Property Market.

In case you weren’t aware, the residents of the South Kesteven District Council area went against the National mood and voted as follows ..

South Kesteven District Council          Remain Votes 33,047             (40.1% of the vote)
South Kesteven District Council          Leave Votes    49,424             (59.9% of the vote)
South Kesteven District Council Turnout        78.2%

I have been reading there is some evidence to indicate younger voters were vastly more likely to vote Remain than their parents and grandparents and, whilst the polling industry's techniques may have been widely criticised, following them getting both the 2010 General Election and the recent Brexit vote wrong, anecdotally, many surveys seem to suggest there was a relationship between age and likelihood to support leaving the EU.

Interestingly, the average age of a Grantham resident is 41.8 years old, which is above the national average of 39.3, which might go someway to back up the way Grantham voted? What I do know is that putting aside whether you were a remain or leave voter, the vote to leave has, and will, create uncertainty and the last thing the British property market needs is uncertainty (because as with previous episodes of uncertainty in the UK economy – UK house prices have tended to go down).

Interestingly, when we look at the Homeownership rates in the South Kesteven District Council area, of the 40,311 properties that are owned in the South Kesteven District Council area (Owned being owned outright, owned with a mortgage or shared ownership), the age range paints a noteworthy picture.

Age 16 to 34 homeowners       3,145    or        7.8%  (Nationally 9.6%)
Age 35 to 49 homeowners     11,507    or      28.5%  (Nationally 29.2%)
Age 50 to 64 homeowners     13,166    or      32.7%  (Nationally 30.7%)
Aged 65+ homeowners          12,493    or      31.0%  (Nationally 30.5%)

So, looking at these figures, and the high proportion of older homeowners, you might think all the South Kesteven District Council area homeowners would vote Remain to keep house prices stable and younger people would vote out so house prices come down- so they could afford to buy?

But there's a risk in oversimplifying this. The sample of the polling firms are in the thousands whilst the country voted in its millions. Other demographic influences have been at play in the way people voted, as early evidence is starting to suggest that class, level of education, the levels of immigration and ethnic diversity had an influence on the way the various parts of the UK voted.

So what I suggest is this – Don’t assume everyone over the age of 50 voted ‘Leave’ and don’t assume most 20 somethings backed ‘Remain’; because many didn't!