I am genuinely concerned about the Grantham property market,
but in a way that might surprise you.
Rightmove announced that average ‘asking prices’ rose last month by 0.7%
in the East Midlands, leaving them 4.2% higher
than a year ago. Whilst it could be said
that monthly change is very modest, in the same period a year ago, we saw a
monthly fall of 1.9% in the East Midlands, which is more the norm given the
onset of schools breaking up and
everyone going on holiday.
Looking at all the data on the Grantham property market;
putting aside the need for more houses to be built in the next decade to
balance out the increase in population (helped in part by inward European
migration) but not matched by a similar increase in housing being built; my
research shows there is a widening gap between what property buyers want and
what is available to buy. In a nutshell, many more buyers are looking for the
smaller one and two bed properties (the typical semi detached and smaller
terraced houses/apartments), whilst there is an oversupply of the four and five
bed properties, which are the typical large detached properties available.
Demand for smaller properties comes from both first time
buyers and the growing number of buy to let landlords, where it is more cost
effective and efficient to buy smaller properties to let out compared to larger
properties which tend to offer poorer returns.
Also, landlords with larger loans (on those larger more expensive
properties) will also be hit harder with the changes in the way tax is
paid on buy to let investments, which start in 2017.
If you recall, a few weeks ago I did some research on how
different types of properties had performed in Grantham since the year
2000. I revisited those calculations and
it hit me how different types of properties had performed over the last 15
years. In a nutshell, this mismatch of
demand and supply isn’t a new phenomenon, it’s been happening under our noses
for years!
In the last 15 years, the average semi-detached in Grantham has risen in value from £48,844
to £142,994 whilst the detached house has risen in value from £95,957
to £256,717. Nothing seems
amiss until you look at the percentage growth.
The semi-detached has grown in value by 193% whilst the detached by only
168% meaning the gap between the inexpensive semi-detached and expensive
detached properties has in percentage terms narrowed (this isn’t just a
Grantham thing, it has happened all across the Country).
I am concerned because more houses need to be built, not
only in Grantham, but in the East Midlands and
the UK
as a whole. In particular, there is
specific need for more affordable starter homes for the growing demand from
both tenants (and the landlords that will buy them) and first time buyers. The Tories need to face up to the fact that
unless they can get the builders, the planners (to release more building land),
the banks (to finance it) and themselves together, to ensure long term plans
can be made, and implemented, this issue will continue to worsen.
The country needs 200,000 houses a year to be built to keep
up with demand, let alone reverse the imbalance between demand and supply. Last year, only 141,040 properties were
built, the year before 135,510 and 146,850 in the year before that. This means only one thing for Grantham
landlords. Unless David Cameron starts
to rip up huge swathes of the British countryside and build on acres and acres of
green belt, demand will always exceed supply when it comes to property for the
foreseeable future.
Therefore, investment in the local Grantham property market
as a buy to let investment could be the best move to make as the stock market
investments are possibly on the wane.
Everyone is different and trust me, there are many pitfalls in buy to
let. You must take lots of advice and
seek out the best opinion.
