Grantham First Time Buyers Are Paying 6.9% More Than 12 Months Ago

Figures just released by the Bank of England, show that for the first half of 2016, £128.73bn was lent by UK banks to buy UK property - impressive when you consider only £106.7bn was lent in the first half of 2015. Even more interesting, was that most of the difference was in Q2, as £68.12bn was lent by UK banks in new mortgages for house purchase, which is the highest it has been for two years. Looking locally, in Grantham last quarter, £487.2m was loaned on NG31 properties alone!

Even though the Bank won’t be releasing the Q3 figures until December 2016, as I discussed a few weeks ago, HMRC have published their own preliminary data to suggest Q3 will be even better, with a massive growth of buy-to-let landlords to the housing market in that time frame. Fascinating, as it seems to fly in the face of the popular narrative – that the uncertainty surrounding Brexit would negatively impact buyer sentiment.

And it’s not just buy-to-let landlords that seem to be flourishing. I am finding that first-time buyers are also a lot more confident too. Low, and now negative, inflation has had a tangible impact on household finances and first-time buyers feel more secure in their jobs. Couple with a low interest rate environment and you have all the ingredients for a strengthening property market. To back that up with numbers, of the £68.12bn of mortgages lent in the Quarter (Q2), £14.9bn was lent to first-time buyers (the highest proportion of that overall lending for over two years at 21.99%).

When I looked at the data for South Kesteven District Council area, the average price paid by first-time buyers (FTB’S) was £156,297, which is a rise of 2.18% from last month and a rise of 6.91% to twelve months ago. The Land Registry then categorise the remaining buyers into cash buyers or those buying with a mortgage. The average price paid by cash buyers was £178,438, a rise of 2.11% from last month and a rise of 6.69% to twelve months ago, whilst buyers with mortgages (but not FTB’s), the average price paid by them was £194,003, a rise of 2.2% from last month and a rise of 6.79% to twelve months ago.

What surprised me with these figures was how close the property prices, values and percentages were to each other. It just goes to show the combination of low mortgage rates and a stable job market will continue to have a positive effect on the Grantham and UK market.  And that is why, while there is undoubtedly more cautiousness in the market at present than a year or so ago (among borrowers and mortgage companies alike) - mortgage rates are so competitive that they are inducing people to commit to a home purchase.

It seems the great Brexit uncertainty was over hyped, and house price growth as well as mortgage approvals, could pick up pace into 2017.

£6m paid in Stamp Duty by Grantham Residents

“A pound saved is worth two pounds earned . . . after taxes” is what my Grandfather used to say. He loved his irony, yet was always a wise man, and it is tax I want to talk about today, in particular, property taxation .. Stamp Duty in fact.

Apart from some minor exemptions, Stamp Duty is paid by anyone buying a property over £125,000 in the UK. It presently raises £10.68bn a year for the HM Treasury (interesting when compared with £27.6bn in fuel duty, £10.69bn in alcohol duty and £9.48bn in tobacco duty).

In the latest set of data from HMRC, in the MP constituency that covers Grantham, property buyers paid £6m stamp duty in one year alone – a lot of money in anyone’s eyes (although not as much as the £245m in income tax that all of us in Grantham paid last year).

However, as you may know, George Osborne introduced an additional tax for landlords and from 1^st April 2016 they had to pay an additional 3% stamp duty surcharge on top of the normal stamp duty rate when purchasing a buy to let property. There were tales of woe and Armageddon with a report by Deutsche Bank suggesting that the new surcharge could see house prices fall by as much as 20%.

HMRC data released in the Summer for Quarter 2 (Q2) of 2016 did seem to back up those fears as they published some worrying figures; only one in seven properties purchased was a second home or buy-to-let (in real numbers, only 30,300 of the 207,900 properties in Q2 were bought by landlords).

In previous articles, I spoke about the slump of property transactions after the 1^st of April (as landlords rushed through their property purchases in March to beat the April deadline). In Q2 of 2016, £1.976bn was raised in Stamp Duty from Residential Property. Of that £1.976bn, £652m was paid by buy to let landlords (£424m in normal stamp duty and £228m in the additional 3% surcharge).

However, looking at Q3, the numbers have improved significantly. Of the 235,000 property sales, nearly one in four of them (56,100 to be precise) were bought by buy to let landlords and of the £2.208bn in stamp duty, £864m was paid in ‘normal’ stamp duty by BTL landlords and an impressive £442m paid by those same landlords in the additional stamp duty surcharge.

The statistics suggest buy to let investors have thankfully not been deterred by the stamp duty surcharge introduced in April this year. The figures also show that 65.4% of "buy to let" purchases cost less than £250,000, 23.7% of properties were in the £250k to £500k range and 10.9% (or 6,100 additional properties) of buy to let properties bought cost over £500k – interestingly nearly one in four (22.2%) of £500k properties purchased in Q3 were buy to let properties.

It just goes to back up what I stated a few weeks ago when I suggested that many investors had rushed to make purchases before 31^st March, making figures in the following months (Q2) artificially low when the 3% supplement was introduced, but in Q3 the number of buy to let properties purchased increased by 85%.

It just goes to show you shouldn’t believe everything you read in the newspapers! I can assure you the Grantham property market is doing just fine. For more thoughts on the Grantham Property Market like this .. visit the Grantham Property Market Blog 

Average Rent Paid by Tenants in Grantham rise to £559 per month

Back in the Spring, there was a surge in Grantham landlords buying buy to let property in Grantham as they tried to beat George Osborne’s new stamp duty changes which kicked in on the 1^st April 2016. To give you an idea of the sort of numbers we are talking about, below are the property statistics for sales either side of the deadline in NG31.

Jan 2016 – 49 properties sold

Feb 2016 – 60 properties sold

March 2016 – 149 properties sold

April 2016 – 43 properties sold

May 2016 – 57 properties sold

Normally, the number of sales in the Spring months is very similar, irrespective of the month. However, as one can see, this year was a completely different picture as landlords moved their purchases forward to beat the stamp duty increase. You would think that even with a basic knowledge of supply and demand economics, rents would be affected in a downwards direction?

However, there appears to be no apparent effect on the levels of rent being asked in Grantham - and more importantly achieved - and this direction of rents is not likely to inverse any time soon, particularly as legislation planned for 2017 might reduce rental stock and push property values ever upward. The decline of buy to let mortgage interest tax relief will make some properties lossmaking, forcing landlords to pass on costs to tenants in the form of higher rents just to stay afloat. Even those who can still operate may be deterred from making further investments, reducing rental stock at a time of severe property shortage.

.. but it’s not all bad news for tenants. Whilst average rents in Grantham since 2005 have increased by 14.5%, inflation has been 38.5% over the same time frame, meaning Grantham tenants are 24% better off in real terms when it comes to their rent (which is a sizeable chunk of most people’s monthly household budgets)

Year	Average Rent in Grantham per month
2005	488
2006	499
2007	509
2008	520
2009	519
2010	515
2011	519
2012	528
2013	533
2014	538
2015	547
2016	559

I found it particularly interesting looking at the rent rises over the last five years in Grantham, as it was five years ago we started to see the very early green shoots of growth of the Grantham economy.  As a whole, following the Credit crunch (2011), rents in Grantham have risen by an average of 1.6% a year – fascinating don’t you think?

The view I am trying to portray is that while renting is often portrayed as the unfavorable alternative to home ownership, many young Grantham professionals like renting as it gives them adaptability with their life. Rents will continue to rise which is good news for landlords as buy to let is an investment but, as can be seen from the statistics, tenants have also had a good deal with below inflation increases in rents in the past. It’s a win-win situation for everyone although on a very personal note, it’s imperative in the future that tenants are not thwarted from saving for a deposit by excessive rental hikes – there has to be a balance.

For more thoughts and opinions on the Grantham Property Market, if you are a Grantham Homeowner or Grantham landlord, please visit the Grantham Property Blog