Is this the end for buy to let in Nottingham?

Well George Osborne, in his autumn statement last week, caused Nottingham landlords to ask whether buy to let is still a viable investment option, when he announced that landlords, when buying another buy to let property from April 2016 will have to pay an additional 3% stamp duty on top of the current rate. So this means for example, the stamp duty bill for a £285,000 buy to let home will rise from the current £4,250 to £12,800 from April next year. 

Will property in Nottingham be worth less because potential landlords will not be willing to pay as much for them? If house builders or existing homeowners don't feel they are going to get as much for them, then there will be less motivation to build / sell them... and the person we can blame for this is George himself. Back in 2012, he chose to utilise the British housing market to kick start the UK economy, with subsidies, funding for lending and ‘Help to Buy’. However, whilst that helped the Tory’s get back into power in 2015, some say this impressive growth in the UK property market has been at the expense of pricing out youngsters wanting to buy their first home.

This, some say, may be the straw that breaks the camel’s back, as over the next four years landlords will also slowly lose the ability to offset all their mortgage interest against tax on rental income, after changes announced in the summer budget.  At the moment, landlords can claim tax relief on buy to let mortgage monthly interest repayments at the top level of tax they pay (ie 40% or 45%). However, over the next four years this will reduced slowly to the basic rate of tax – currently 20%.

Surely this is the end of Buy to Let in Nottingham? Possibly… however before we all run to hills panicking, let me remind of the situation a year ago.

Stamp Duty rules were changed in December 2014. Prior to this, landlords were eagerly buying up properties under the ‘old slab style Stamp Duty’ system. For example, the stamp duty bill on that £285,000 property was lower on the old slab style duty (pre Dec 2014), at £8,550, yet this wasn’t a million miles away from the £12,800 stamp duty under this new ruling. Interestingly though, George Osborne has left a legal loophole in the new rules, because when it comes to selling up, they can offset purchase costs against any eventual capital gains tax, including stamp duty.

I believe that total returns from buy to let will continue to outpace other investments, such as the stock market, gilts, bonds and even pensions. Also, the best part about investing in property is that it is bricks and mortar. You can touch it, you can feel it, and it isn't controlled by some City whiz kid in Canary Wharf... the British understand property and that says it all!

Buy to let has enough impetus behind it so prospective landlords will continue to buy even with an increased stamp duty bill. Nottingham landlords will need to be savvy about the type of property they buy to ensure the extra stamp duty costs are mitigated. Buying a buy to let property is a long term venture. In the past, it didn't matter what property you bought in Nottingham or at what price – you would always make money. Now with these extra taxes, the adage of ‘any old Nottingham house will make money’ has gone out the window. People wouldn't dream of investing in the stock market without at least looking in the newspapers or asking for advice and opinion from experts in their field, the same should apply when investing in a buy to let property in Nottingham?

If you want to know more about the Nottingham property market, please pop into our property lounge for a drink or chat or email me on jaclyn.bartlett@centrickproperty.co.uk

How EU Migration has changed the Nottingham Property Market...

The argument of migration and what it does, or doesn’t do, for the country’s economic wellbeing is something that has been hotly contested over the last few years and more so recently. In my article today, I want to talk about what it has done for the Nottingham Property market.

Before we look at Nottingham though, let us look at some interesting figures for the country as a whole. Between 2001 and 2011 971,144 EU citizens came to the UK to live and of those, 171,164 of them (17.68%) have bought their own home. It might surprise people that only 5.07% of EU migrants managed to secure a council house. However, 676,091 (69.62%) of them went into the private rental sector.  This increase in population from the EU has no doubt added great stress to the UK housing market.

Looking at the figures, the housing market as a whole is undoubtedly affected by migration but it has been the private rented housing sector, especially in those areas where migrants come together that is affected the most.  Indeed I have seen that many EU migrants often compete for such housing not with UK tenants but with other EU migrants. In 2001, 3.68 million rented a property from a landlord in the UK.  Ten years later in 2011, whilst EU migration added an additional 676,091 people renting a property from a landlord, there were actually an additional 4.14 million people who became tenants and were not EU migrants, but predominately British!

As a landlord it is really important to gauge the potential demand for your rental property, especially if you are a landlord who buys property in areas popular with the Eastern European EU migrants.  To gauge the level of EU migration (and thus demand), one of the best ways to calculate the growth of migrants is to calculate the number of people who ask for a National Insurance number (which EU members are able to obtain).

Interestingly in Nottingham, migration has risen over the last few years. For example, in 2005 there were 4,692 migrant National Insurance Cards (NIC) issued. However, in 2014 this increased to 6,175 NIC’s. If the pattern of other migrations since WW2 continues, over time there will be an increasing demand for owner occupied property, which may affect the market in certain areas of high migrant concentration. On the other hand over time some households move into the larger housing market, reducing concentrations and pressures.

In essence, migration has affected the Nottingham property market; it couldn’t fail to because of the additional 27,804 working age migrants that have moved into the Nottingham area since 2005. However, it has not been the main influence on the market. Property values in Nottingham today are 11.2% lower than they were in 2005. According to the Office of National Statistics, rents for tenants in the East Midlands have only grown on average by 0.66% a year since 2005.... I would say if it wasn’t for the migrants, we would be in a far worse position when it came to the Nottingham property market. This was backed up by the then Home Secretary Theresa May back in 2012 - more than a third of all new housing demand in Britain is caused by inward migration and there is evidence that without the demand caused by such immigration, house prices would be 10% lower over a 20 year period.

If you want to know more about the Nottingham property market, please pop into our property lounge for a drink or chat or email me on jaclyn.bartlett@centrickproperty.co.uk

Nottingham – The 10 year Time Bomb on Home Ownership

Many people think the British obsession with owning your own home started with Thatcher in the early 1980s, when she allowed council tenants to buy their council houses under the right to buy scheme. However, the growth actually started just after the Second World War. Looking at the country as a whole in 1951 30% of residential property was owner occupied then, every ten years that rose incrementally to 39% by 1961; 51% by 1971; 58% by 1981 and 68.07% by 2001, by 2013/14 the figures dropped to 63% and continue to drop today.

Young adults tend to start to think about settling down and moving out of the family home in their early-mid twenties.  After a couple of years, they will have a choice of either buying their first house (albeit with a mortgage) or decide to privately rent for the long term (the Council House waiting list is measured in decades at the moment!). The ratio of people owning a house with a mortgage verses privately renting is an extremely important guide as to the behaviour of people in respect of their housing needs and what their attitude to renting vs buying is.  With that in mind, within the next ten years, I predict that more people will privately rent in Nottingham compared to those who purchase a property with a mortgage, meaning that the British love affair of property ownership will wane as the decades roll on.

This is a really important change in attitude to the way we live.  Understanding where the demand of tenants is going to come from in the coming decade is just as important as understanding the supply side of the buy to let equation, such as the number of properties built in the town, Nottingham property prices and Nottingham rental prices.

In the Nottingham City Council area as a whole there are 27,300 households that are privately rented via a landlord or letting agency and there are 32,501 households that are owned with a mortgage, so my prediction appears to be outrageous. However, when we look deeper 15,109 of those 32,501 households are 35 to 49 year olds and 8,328 are households of 50 to 64 year olds. I would expect all the 50+ years to be paying their mortgage off as they enter retirement as I would with some of the people in their mid/late 40’s. 

Meanwhile in the 25 to 34 age range (the age group most people bought their first home in the 1970s/80s/90s) only 6,600 of the 16,542 households occupied by those 25 to 34 year olds are owner occupiers with mortgages, 9,942 households are privately rented. This means only 39.8% of 25 to 34 year olds have bought their house (with a mortgage). Twenty years ago, that would have a much higher percentage of between 75% and 85%.

It can be concluded therefore that as the older generation approach retirement and pay their mortgages off, the younger generation; aren’t jumping on the property ladder like they were 20 or 30 years ago. The private rental sector will take up the slack as more and more people need a roof over their head and will rent rather than buy a property. With the new build by local authorities and housing associations nowhere near the number of houses they were building in the 1950s, 60s and 70s, the private landlord appears to have good demand for their rental properties for many decades to come.

This will create a polarisation in the housing market between those, mostly older householders, who own outright and those, mostly younger householders, who rent. Our housing market is very much turning into the European model. However, all is not lost the younger generation will inherit their parents properties, which in turn will enable them to buy albeit later on in life.

If you are a landlord or thinking of become a landlord, and would like advice please email me, Jaclyn.bartlett@centrickproperty.co.uk

Nottingham Landlord’s mortgages top £1.5 billion!

The Brits can’t stop talking about property. The hot topic of discussion at dinner parties of Nottingham’s movers and shakers is the subject of the Nottingham property market but in particular, buy to let. These people are snapping up buy to let properties quicker than an ace Monopoly player ... or so it would seem if you read the Sunday papers. So is the buy to let market a sure fire way to make money?  Is it something everyone should be jumping into? Is it a sure fire way to make money? The answer is ‘Yes’ and ‘No’ to all those questions!

A landlord has to flick through Rightmove or Zoopla, pick the property of their choice and agree a price. Then find a modest deposit of 25% (often by remortgaging their own home) which for an average Nottingham terraced house, would mean finding £26,825 for the deposit (as the average Nottingham terraced house is currently worth £107,301) and borrow the rest with a low interest rate buy to let mortgage.  Then the final step, rent out the property in a matter of hours for a high price, sit back and live comfortably. The rent will cover the mortgage payments, with an amount of money to spare and come retirement have a portfolio of property that would have quadrupled in value in fifteen years. Sounds wonderful – doesn’t it? Or does it?

Let us not forgot that the half of one per cent Bank of England base rate is artificially low. The international money markets can be fickle and if interest rates do rise quicker and higher than expected because of some unforeseen global economic situation, that monthly profit will soon turn into a loss as the mortgage will be more than the rent. Even though tenants are staying longer in their rental property, tenants still come and go and my guidance to landlords is they should allow for void periods, plus the maintenance costs of a rental property and of course agents fees... all things that eat into that profit.

Interestingly by my calculations, there are approximately 8,532 landlords owing in excess of £1.5 billion in mortgages on those Nottingham buy to let properties.  An impressive amount when you consider Nottingham only has 0.799% of all the rental properties in the country. It really does come down to a number of important factors going forward to ensure you are water tight for the future. A lot of my existing landlords are fixing their mortgage rates. One told me that the Metro Bank are currently offering a five year fixed BTL remortgage rate at 3.79% for 5 years (based on a 75% loan). I don’t give financial advice, so you must speak with a qualified mortgage advisor… but that sounds very fair!

However, one thing I do know, is that buy to let is a long term investment it’s a ten, fifteen, twenty year plan and property prices will go down as well as up. You wouldn’t dream of investing in the stock market without advice, so why invest in the Nottingham Property Market without advice? We give bespoke detailed advice to our landlords to enable them to spot trends in the Nottingham Property Market before others, enabling them to buy better properties at better prices. For example, did you know that semidetached houses are selling for around 16% lower than 12 months ago in Nottingham yet detached properties are selling for 3% more (with every other type in between). This means we can advise on which properties will go up in value better (or lose less if property prices drop), we can also advise which have lower voids and which properties have higher maintenance issues.  

Information on the local property market and ability to process it is the strongest asset we can give you. As Lois Horowitz, the famous author says, “Not having the information you need when you need it leaves you wanting. Not knowing where to look for that information leaves you powerless. In a society where information is king, none of us can afford that”.

If you are planning on investing in the Nottingham property market, or just want to know more, things to consider for a successful buy to let investment, please email me on Jaclyn.bartlett@centrickproperty.co.uk

The ‘Liquorice Allsorts’ Nottingham Property market

Despite the UK economy heading in the right direction, with record low mortgage rates and unemployment  figures dropping,  the rate at which property prices are rising in Nottingham has tempered since the start of the year. This slow but sure downward trend in the rate of growth has been evident since mid-2014.  Property value increases continue to outpace the growth in salaries; however the gap is now closing, helped by a lift in salaries over the last 6 months.  Property values in the East Midlands region as a whole are 2.9% higher than a year ago.  Compare this to the neighbouring regions of the West Midlands at 3.5% higher and Yorkshire at 1.1%, the majority of the country continue to see annual house price gains - the exception being Wales which recorded a slight decline of -0.6%.

Even with the tempering in house price inflation, it does not necessarily change my outlook that property prices are likely to be firmer over the second half of 2015 amid heightening activity in the Nottingham property market.  As I’ve mentioned before, there is a current shortage of properties on the market, restricting supply, which in turn will provide stability and support to property prices. My overall opinion, therefore, is that Nottingham prices will rise by 5% over 2015 and roughly the same in 2016.

Property investment is a long term business, buying the right sort of property is vital. I have recently been speaking with a number of Nottingham landlords about the importance of a balanced portfolio, when buying and renting out property. The balance between buying properties that offer good monthly returns but quite often offer poor capital growth; versus properties that increase in value at a faster rate, but often offer a lower yield.  So, what type of properties have performed best over the last few years in Nottingham, especially in terms of their capital growth?

When comparing what the average price that detached, semi-detached, terraced and apartments were selling for back at the start of the Millennium to the present in Nottingham, the results are quite remarkably different. Almost like a bag of Liquorice Allsorts, as the different types of property have performed poles apart over the last 15 years:

• ·         Detached Houses were selling on average for £111,875 in 2000, but so far in 2015, they have been selling for approximately £237,579 showing a rise of 112%.
• ·         Semi-detached Houses were selling for an average of £58,940 in 2000, however in 2015 figures suggest that they have been selling for close to £144,791 with a rise of 146%.
• ·         Terraced Houses were selling on average for £43,784 in 2000, currently in 2015 they have been selling on average for £107,301 suggesting a rise of 145%.
• ·         Flats and Apartments were selling on average for £60,926 in 2000 however, at this present time they are selling on an average of £98,937 giving a rise of 62%.

Moving forwards, what should new and existing buy to let landlords do with this information?  Well, the questions I seem to be asked on an almost daily basis by landlords are:

·         “Should I sell my property in Nottingham?”

·         “Is the time right to purchase another buy to let property in Nottingham; and if not Nottingham, where?”

·         “Are there any property bargains out there to be had in Nottingham?”

Many landlords like to pop in for a coffee, pick up the phone or email me to discuss the local property market, how it compares with its closest rivals (Derby, Leicester and Birmingham) and hopefully answer the three questions above. I don’t bite, I don’t do hard sell and I will just give you my honest and straight talking opinion and look forward to hearing from you.

Nottingham Property Market – Bricks and Mortar!

The Land Registry has just released the latest set of figures for the Nottingham Property market. It makes interesting reading, as average property values in Nottingham dropped by just 1% in May. The average property values are 3.9% higher than 12 months ago, meaning the annual rate of growth in the town fell to its lowest level since April 2014. However looking at the regional picture, East Midlands’ property values only rose by 0.2% which means they are 2.9% higher than a year ago.

This is a far cry from the price rises we were experiencing in Nottingham throughout 2014. In November 2014 property values were rising by 9.6% a year. All the same, even with the tempering of the Nottingham property values in 2015, they are still higher. This is good news for local homeowners who had been affected by the downturn after 2007 and still find themselves in negative equity.

However, the thing that concerns me is that the average number of properties selling has dropped substantially over the last 12 months in the City. In April 2014, 643 properties sold in Nottingham but in April 2015, that figure dropped to 485.  I have been in the Nottingham property market for quite a while now and the one thing I have noticed over the last few years has been the subtle change in the traditional seasonality of the Nottingham property market. It has been particularly noticeable by its absence this year, the normal post Easter flood of properties coming onto the market did not happen. This has made an imbalance between supply and demand, with less houses coming onto the market there is simply not as much choice of properties to buy in Nottingham and with the population of Nottingham ever increasing, this will generally strengthen growth for the foreseeable and have a positive impact future house prices.

So what does all this mean for Nottingham landlords or those considering dipping their toe into the buy to let market for the first time? For many people, buy to let looks appear to be a good investment, providing landlords with a decent income at a time of low interest rate as the stock market remains unpredictable.

However if you are thinking of investing in bricks and mortar in Nottingham, it is important to do things correctly; buy property as an investment to provide you with income.   For those with enough savings to raise a big deposit, buy to let looks particularly good, especially compared to low savings rates and stock market yo-yo’s. I must also remind readers, landlords have two opportunities to make money from property, not only is there the rental income; with the property market bouncing back over the last few years, property value increases have spurred on more investors to buy property in the hope of its value continuing to rise.

Savvy landlords with decent deposits can fix their mortgages at just over 3% for five years, making many deals stack up. Nevertheless low rates cannot stay ‘low’ forever, at some point in the future they must rise and you need to know your property can stand that test. Some Nottingham landlords struggled, when interest rates rose from 3.5% in July 2003 to 5.75% in July 2007. These figures may not sound a lot, but this was the difference of making a £100 a month profit in 2003 to having to make up a shortfall in the mortgage payments of £100 per month in 2007.

It’s true that many landlords were thrown a life raft when the base rate dropped to 0.5% in March 2009. Although interest rates have remained there since, I believe they will rise again in the future. However, even with the potential for costs to rise, demand for decent rental properties remains high as there are ever more tenants in the market, driving up demand and thus rents. The British love of bricks and mortar plus improving mortgage deals also helps to fuel the buoyant Nottingham property market.

If you are planning on investing in the Nottingham property market, or just want to know more, things to consider for a successful buy to let investment, please email me on Jaclyn.bartlett@centrickproperty.co.uk

Are ‘would be’ Nottingham homeowners warming to the idea of renting?

When reading a report produced by Halifax regarding the UK property market and why more and more of the younger generation seem to be renting rather than buying. I find it fascinating that over the last ten years, the British obsession of buying a house almost as soon as you have left school, has turned on its head to the point where the hopes and dreams of owning a nice home have been replaced by the ambition to simply living in one.

In the not so distant past the 'done thing' was to leave school, get a job, buy a small affordable house allowing one to slowly move up the property ladder until retirement. However the property market has changed and there is no longer a stigma associated with renting in the UK -indeed people are beginning to accept a lifetime of renting. This is a very important consideration for both Nottingham homeowners and landlords as it will transform the way the Nottingham property ladder looks in the future and whether or not it will exist at all for some people. The make up of households is an important factor, especially in the Nottingham property market. The normal stereotypical married couple, two children and dog of the 1970s and 1980s has changed. More and more we have the need for larger houses where two families come together as a result of an increase in the number of divorces as well as an increase in the number of one person households.

Looking at the data for Nottingham, of the 7,795 private rental properties in the Nottingham City Council area, 29.16% of those rented properties are one person households. However when we compare the number of one person Nottingham households who have bought their own property with a mortgage, of the 56,867 owner occupied households in the area, only 7,266 of those properties are a one person household (i.e. 12.7%).  This recent explosion in demand for decent high quality rental properties for one person households has not been met with an increase in supply of such properties.  More and more I believe Nottingham landlords need to consider this change in the makeup of Nottingham households, as I believe this could be an opportunity.  Another interesting statistic that raised an eyebrow is 8.71% of those 27,300 rental properties (2,377 properties) are lone parent households.

It is true that the Governments introduction in 2013 of the Help to Buy scheme, where first time buyers only needed a 5% deposit, changed the perception of peoples’ ability to buy without having to save ten’s of thousands of pounds for a deposit. However, it might surprise you that 95% mortgages were re-introduced within six months of the credit crunch in late 2009, so again it comes down to people’s own perception. Many of the younger generation think they won’t get a mortgage, so don’t even bother trying.

It’s still a fact that once you start renting it becomes that much harder to save for a deposit regardless of the size; interestingly seven out of eight renters polled by Halifax refuse to sacrifice the quality of accommodation they currently live in to reduce the amount of rent they pay in order to save for a deposit.  This is the crux and the real reason why people aren’t buying but renting and why demand for renting will continue to grow in the future, which is great news for landlords. Nottingham tenants can upgrade the quality and size of the property they live in for a minimal rent increase. If you had to make that jump when buying, the monthly mortgage payment increase would be considerable more.  Without any social pressure and better quality rental properties compared to a decade ago, the next UK generation will become a nation of renters , as the UK becomes more like Europe where renting is ‘the norm’. Who is going to supply all these properties to rent? Landlords!

Whether you are an existing landlord looking to grow your portfolio or looking to become a ‘first time landlord’, my thoughts are take advice from as many people as possible. However, as the majority of landlords buy their buy to let properties in the area they live, you will need specific advice about Nottingham itself. For such advice and opinion please email me on Jaclyn.bartlett@centrickproperty.co.uk

George Osborne – The Nottingham landlord’s friend?

Well the last few weeks have been rather hectic, Nottingham landlords have been sending emails or picking up the phone to me regarding the new rules on buy to let taxation announced in the recent budget. George Osborne confirmed in the recent summer budget that the tax relief given to landlords on mortgage interest payments for their buy to let properties would be reduced over the coming years for higher rate income tax payers. The Chancellor said the current 40%-45% tax relief that private buy to let landlords (who pay the higher rate of income tax) now get would change in 2017 and would steadily reduce over the following four years to 20% by 2020.

With 24% of residential property in Nottingham being privately rented (28,492 rental properties in total), these changes are potentially something that will not only affect most Nottingham landlords, but also the tenants and the wider property market as a whole. The choice of rental properties could decrease, especially at the top end of the market, which could increase rents.

However, Nottingham landlords could protect themselves by reassigning one or more rental properties into a company structure (e.g. a Limited Company, Partnership or Sole Trader) and by doing so, the total tax paid is greatly reduced because a company only pays tax on the profit. Nonetheless before everyone goes off setting up companies for their buy to let portfolios, it must also be noted if a sole trader firm is started stamp duty needs to be paid, yet if the owner is in business with a partner they could enjoy some stamp duty relief.  The biggest tax variation is Capital Gains Tax where the tax bill will be much higher when you come to sell your portfolio. In essence by going into business with your buy to let properties, you will potentially have a modest stamp duty to pay when you start but you will have a lot less monthly tax to pay. Irrespective of the interest rate, the Capital Gains Tax bill will be much higher when you come to sell ... as you can see, it is not a ‘get out of jail card’. Now it must be remembered, I am not a tax advisor, so you must take advice from a qualified person.

Those planning to purchase a Buy to let property will have to factor these new rules into their calculations and this could affect the offers they are willing to make. However, I am not that concerned, as the scaremonger reports fail to see the fact that two out of three Buy to let properties that have been bought since 2007 have been purchased without the support of a Buy to let mortgage. With those two thirds of landlords paying cash for the purchase of their rental properties, this means two thirds of landlords will be totally unaffected by the changes.

So what will happen in the future? The British love their Bricks and Mortar, it’s an asset that they can touch and feel and has a 70 year track record of capital growth that has out stripped inflation. Buy to let will still be attractive to Nottingham investors and let me explain why. If you invested £30,000 into Nottingham property in September 1987, today it would be worth £132,979. If you had invested the same £30,000 into the London Stock Market, it would be only be worth £85,879 today. Whilst inflation would have taken the original £30,000 and pushed it up to £62,345.

It’s true that some central London landlords rely solely on the tax breaks rather than high yields and may be forced out of the market, but even those landlords could seek to recoup any losses by increasing rents. However, those landlords may leave the market, constricting the availability of rented houses even more than it is already, increasing rents and thus pushing yields even higher for landlords and BTL investors still in the market... thus attracting new landlords into the market because of those higher yields.

The reality is that there is too much demand and not enough supply of homes, for people to live in in the city. This sets up the Nottingham and UK property market to continue creating strong and steady returns, irrespective of any tax loophole being there (or not as the case maybe).

For further information and advice on the Nottingham property market, feel free to pop into our property lounge or email me on jaclyn.bartlett@centrickproperty.co.uk

Why are less Nottingham people moving house?

Recently I have been looking at the number of times the average Nottingham resident moves house in their lifetime, and how this has affected the housing market. From the research I have carried out it shows that things have changed considerably in Nottingham over the last few decades and interestingly the trend is getting worse.

There are 118,820 properties in Nottingham, however after we remove the 34,651 council houses; 28,492 privately rented houses: and 1,762 houses where the occupants are living rent free, this leaves 53,915 properties owned by Nottingham residents (with a mortgage or shared ownership). This means 45.4% of the properties in Nottingham are owner occupied (the national average is interestingly is 64.2%), however the number of people who have sold and moved house in Nottingham over the last 12 months has only been 9,750. These figures suggest that homeowners of Nottingham are only moving on average every 5.52 years.

Influencing factors for this change in behaviour include the cost of moving house, which has risen over the last twenty years. Additionally with many re-mortgaging their properties in the mid 2000’s before the price crash of 2008, there is a reluctance or inability amongst a minority of homeowners to finance a home sale/purchase due to the lack of remaining equity.

However the biggest influence has been the change in house price inflation. Back in the 1970’s and 1980’s house prices were doubling every 5 to 7 years. Even in Greater London with its stratospheric property price increases over the last few years, it has taken 13 years (since August 2002 to be exact) for property values to double to today’s levels.

This change in moving trend, in a relatively low inflation property market such as we are experiencing in Nottingham , is significant because the long term consequences of sustained low house price growth is the lack of ability to reduce mortgage debt (as opposed to when property price inflation is higher and the ratio of equity to debt is greater). Nottingham homeowners cannot currently rely on inflation to reduce their debt in real terms as they did in say the 1970’s and 1980’s.

So what does this all mean for Nottingham buy to let landlords? Well, for the same reasons existing Nottingham homeowners aren’t moving and the appeal to rent is increasing.  Fewer ‘twenty somethings’ are buying their first home. Nottingham youngsters may aspire to own their own home, but there isn’t the social pressure today from their peers and parents to get onto the housing ladder as soon as they reach their early 20’s.  Additionally, fresh in people’s minds is the memory of the 2008 housing crisis and the belief the hard times aren't completely over. There is also the opinion that the culture of the UK society is changing, with the younger generation looking for prosperity and happiness, but without the sacrifice, hard work and patience required to achieve this. As a society we expect things instantly, and if it doesn’t come easily or quickly enough, is it really worth the effort to save for the deposit? Why go without holidays, the newest iPhone, socialising four times a week and the fancy satellite package whilst saving for that 5% deposit if there is no longer a social stigma in renting or pressure to buy as there was a generation ago?

Even though in real terms property prices are 5% cheaper than they were ten years ago (when adjusted by inflation), 24% of Nottingham properties are privately rented, nearly double compared to twenty years ago. As a result, the demand for rental properties continues to grow, which can only mean those wishing to invest in the buy to let market over the long term are on to a good thing. For advice and opinion on the Nottingham Buy to Let property market, please email me at Jaclyn.Bartlett@centrickproperty.co.uk

  

Affordability of housing in Nottingham

Talking to an elderly relative recently, he reminded me that back in his day, you could have bought a property for the same price as a decent second hand car would sell for today and that his father was buying property for the same price as a decent 50 inch LCD TV!  Now of course, these are only headline prices and we have had wage growth and inflation.  Interestingly, since the Second World War, figures suggest that property values in Nottingham have doubled every 5 to 10 years. This boom lasted from the years of 1961 to 2006.

Looking at more recent times, since the start of the Millennium, increases in property values have generated large increases in the equity for many homeowners whilst on the flip side, making housing unaffordable for other people.  It might interest readers to note that most of Europe experienced sharp increases in property values in the early 2000’s, with only Spain ahead of us (although we know what has happened to the Spanish property market over recent years!).  As we entered the early 2000’s, the British situation differed in two regards.  Firstly the property value boom started and saw more sustained increases; secondly, the regional pattern was fairly uniform.

However, since 2010, the regional pattern has varied across the UK.  Since 2007 (the last property boom), today on average property values in England and Wales have increased by 1.2% higher, whilst in Greater London, they are 35.7% higher, whereas in Nottingham they are 12.08% lower. Although we have known for many years that the London property market seems to be in a ‘world’ of its own.  Looking specifically at Nottingham, however first time buyers have continued to climb on to the property ladder despite the fact that affordability has risen and fallen since 1997 (see below).  The best measure of affordability of housing is the ratio of Nottingham Property prices to Nottingham average wages, (the higher the ratio, the less affordable properties are).  

·         1997       2.65to 1   (i.e. the average value of a Nottingham property was 2.65 times higher than the average annual wage in Nottingham)

·         2000       2.60 to 1

·         2002       3.24 to 1

·         2003       4.00 to 1

·         2007       4.84 to 1

·         2009       3.78 to 1

·         2012       3.98 to 1

·         Today    4.44 to 1

The figures clearly illustrate, that although we saw an improvement just after the 2007 property crash when the property prices fell in subsequent years (i.e. the ratio dropped), Nottingham wages have failed to keep up with the increase in house prices. As such the ratio started to rise.  This has meant there has been a deterioration in affordability of Nottingham properties over the last couple of years.  This is one of the (many) reasons why the younger generation are deciding more and more to rent instead of buying their own house.  With fewer people in a position to be able to save the significant deposit required by mortgage lenders, more people are looking to rent; this has resulted in the change of attitudes to renting over the last decade.

The delay in individuals moving up the property ladder has driven rents up in Nottingham over the last few years, with price elasticity of demand influencing, as more people seek properties to rent.  All these factors have combined causing the demand for rental property in Nottingham rise.  If you are an existing landlord or thinking of becoming a landlord looking for advice and opinion and what (or not) to buy in Nottingham please get in touch with me at jaclyn.bartlett@centrickproperty.co.uk

Are fewer people moving house in Nottingham?

I have recently been looking at the Nottingham property market for annual comparisons on property purchases and how the property market has changed from the same period a year ago. Looking at the figures I haven’t seen any change in recent months and the Nottingham market as a whole seems pretty stable. 

In the early part of the year the top end of the market did have a bit of a spasm in places such as Mayfair and Chelsea with the prospect of a Labour/SNP pact and a possible Mansion Tax for properties over £2 million, but in Nottingham we've not really been affected particularly since only two properties have sold above the £2,000,000 mark in the last 7 years.  

Looking at the numbers for Buy to Let properties in the area current figures suggest that of the 876 properties that have come on to the market in Nottingham since the 2^nd of April, 107 of them have been brought and are sold subject to contract which is just over one in eight (12.21%).

Things are starting to change in the way people in Nottingham buy and sell property.  Back in the 1970’s, 1980’s and 1990’s the tradition was to buy a terraced house as soon as you left home and refurb it.  Meanwhile property prices had gone up, so you could trade up to a 2 bed semi after a while and repeated the process, until you found yourself in a large 4 bedroom detached house with a large mortgage. 

Looking into this a little deeper and as mentioned in my previous articles, the public’s attitude to home-ownership itself has changed over the last ten years.  The pressure for youngsters to buy has disappeared as renting, not buying is considered the norm for the younger generation. This isn't just a trend in Nottingham but a national occurrence as I have noticed that people buy property by upsizing or downsizing because they need to, not because ‘it’s what people do’.  This does means there are a lot less properties on the market compared to the last decade.

A by-product of less people moving, is less people selling their property. My research shows there are a lot fewer properties each month selling in Nottingham compared to the last 10 years.  For example, in February 2015 only 472 properties were sold in Solihull. Compare this to February 2002 were 761 properties sold and February 2003, were 835 properties sold.  I repeated this comparison to more recent years and the results were identical if not greater.  So what does this all mean?  Demand for Nottingham property isn’t decreasing but with fewer properties for sale, it means property prices are proving reasonably stable too. Consistent and steady growth of property values in Nottingham year on year, without the large peaks and troughs we saw in the late 1980’s and mid/late 2000’s might just be the thing that the Nottingham property market needs in the long term.

For further information and opinions like this on the Nottingham Property market please email me on jaclyn.bartlett@centrickproperty.co.uk  

Should I extend my Nottingham buy-to-let?

There’s been a lot of press recently regarding the rise of buy-to-lets and particularly how to maximise the income from property investments. Clearly, if you are considering getting into the game, it’s going to be vital that there’s enough profit in it to make the commitment worthwhile. This led me to wonder whether extending your property investment would affect the rental income enough in the long term to achieve a decent return.

Having more available space is generally thought to be consistent with better quality accommodation, which homeowners and tenants are usually prepared to pay for. On average, the figures suggest that if you added an additional bedroom to a two bed terraced, it will add 10% to the value of the property. Likewise, adding a further bedroom to a three bed terraced will add 9% to the value.

However, before you rush off to the planning department, there are some important considerations to think about.  What would be the cost of making that extra bedroom? The average value of a terraced house in Nottingham is currently £105,100 whilst the average value of a semi detached house is £139,700, therefore to make any money, you would need to keep the costs of your extension between £14,668 and £19,984.

This led me to wonder how much the number of bedrooms affected rental prices and “rent-ability”. I.e. would the construction of an extra bedroom be worth the hassle and expense? Interestingly below, you will see that whilst bedrooms do have an obvious effect on the rent, it’s generally not worth getting excited and calling your local builder.

• ·        19.6% of the one bed properties on the market to rent in Nottingham have a tenant with an average rent of £488 per month.
• ·         28.9% of the two bed properties on the market to rent in Nottingham have a tenant with an average rent of £626 per month.
• ·         32.2% of the three bed properties on the market to rent in Nottingham have a tenant with an average rent of £714 per month.
• ·         10% of the four bed properties on the market to rent in Nottingham have a tenant with an average rent of £840 per month.

So, let’s say you did spend £19k on extending your 2 bed terraced to achieve a third bedroom - and you found a tenant to rent it straight away. Hypothetically, If house prices stayed roughly in line with inflation, you would on average, achieve an extra £134 per month -  meaning that it would take roughly 85 years to make the money back again from the rent alone. Of course, the capital value of the house is likely to rise, but there are never any guarantees in the property market.

If you are a Nottingham landlord and are wondering how to achieve the most from your investment, there is one great tip that will cost a lot less than adding additional bedrooms.  Try sprucing up the exterior, emulsion in all the rooms and install some fresh carpets and curtains. The property will rent faster and your tenants will be happier, meaning you’ll hopefully achieve a long and happy tenancy.

For more advice on the Nottingham Property Market, email me on jaclyn.bartlett @centrickproperty.co.uk 

When should i start thinking about raising the rent?

Following on from my recent article about rental values since the recession, (where I’d found that rental values in the city are around 4.8% lower than they were in 2008) I’ve now looked into the forecasts for the next 12-24 months, to decipher when landlords should consider price increases on their rental portfolios.

As with all parts of the economy, the rental market is all about supply and demand. On the supply side, 1,550 rental properties have come up for let in the last 31 days in Nottingham. This sounds like a lot - until you consider there are around 28,500 rental properties in the area. Therefore, around 5.4% of the rental stock is coming onto the market each month (the UK average is about 5%). However, when you strip out the student properties, which account for around 15% to 20% (since the same student properties are rented out to a new batch of undergrads each year), of the remaining rentals, the percentage of stock available each month is much lower than the norm.  

So, could it be that the reason for this lack of new rental properties coming on the market is that professional tenants seem to be staying in their properties longer?

With a lack of supply, newer tenants have to pay more to secure the property they want. Poorly maintained homes, which may still retain 70’s décor and green bathroom suites have seen their rents drop. However, swish apartments with all the mod cons and refurbished Victorian terraces are still being snapped up – and tenants are willing to pay for the privilege. In fact, these types of homes have seen rents rise by 0.4% in a month, which just goes to show that good quality property will always rent the fastest.

Interestingly, looking at property values, the Land Registry has just released their latest set of data. For the most current figures, property values rose in Nottingham by 0.9% in the month, meaning they are now 6.5% higher than they were a year ago.  When one looks at the regional picture, the East Midlands average rose by 1.4% for the same period.

Looking forward, after considering all the statistics, I expect sale prices in Nottingham to rise by 3% to 5% over the coming 12 months.  Similarly, unless something drastic happens in the economy, the demand for rental property is unlikely to fall any time soon and therefore rental prices will follow suit.

Therefore, if you are a landlord, or are considering becoming one, it would be my advice to spend a little money on redecorating your buy-to-let and / or buying some new furniture to beat the competition. If you’re property is already in good nick, now might be the time to consider a rent rise – although I’d think carefully before doing so if you’ve got reliable tenants! An extra £25 per month isn’t worth the hassle if you’re replacing great tenants for poor ones.

If you would like further information on investing please email me on jaclyn.bartlett@centrickproperty.co.uk 

Are fewer people are moving house in Nottinghamshire?

As the dust has now settled and the General Election seems a distant memory, we should be getting back to a ‘normal’ property market. However, I’m not quite so sure. Many of my fellow property professionals in Nottingham (solicitors, conveyancers and one the best sources of info – the board company, who puts up all the estate agency sales and lettings boards across the county) are all saying they haven’t seen much of an upturn in business compared to the months leading up to the election.

I am largely thinking that, other than the upmarket areas of London (where the market went into spasm with the prospect of Labour/SNP introducing Mansion Tax for properties over £2,000,000), most places, including Nottingham, (where there has only been two properties sold above £2,000,000 mark in the last 7 years) didn’t really see an impact in terms of buyer’s confidence. 

As I write this article, of the 876 properties that have come on to the market in Nottingham  since the 2^nd of April, only 107 of them have a buyer and are sold subject to contract. That’s around one in eight – or just 12%!

There seems to be a real change across the country regarding how the population are buying houses.  Back in the 1970’s, 80’s and 90’s; the norm was to buy a terraced house as soon as you left home and do it up.  Over time, as property prices generally went north, you could make your way up the ladder until you found yourself in a 4-bed detached house with a large mortgage.

Looking into this a little deeper; the pressure for youngsters to buy when young has gone, since renting, and not buying, is considered the norm for ’20 somethings’. This isn’t just a Nottingham thing, but, a national thing, as I’ve noticed that people are more often going up and down the property ladder because they need to - not because “it’s what people do”.  All this means that there are a lot less properties on the market compared to the last decade.

A by-product of less people moving is that less people are selling their property. My research shows there are a lot fewer properties each month selling in Nottingham compared to the last decade.  For example, in February 2015, only 472 properties were sold. Compare this to February 2002, where 761 properties sold, and in Feb 2003, 835 properties.  I repeated the exercise on different sets of years, (comparing the same month to allow for seasonal variations) and the results were identical if not greater.  So what does this all mean?  Demand for property isn’t flying away, but with fewer properties for sale, it means property prices are proving reasonably stable too. Slow and steady growth of property values in Nottingham, year on year, without the massive peaks and troughs we saw in the late 1980’s and mid/late2000’s might just be the thing that the Nottingham property market needs in the long term.

If you’d like to know more, please give drop me an email on jaclyn.bartlett@centrickproperty.co.uk 

Sherwood property market outperforms West Bridgford by almost 50%!

I've recently been doing a bit of research for an investor client of mine, who wanted some advice on where to buy his next buy-to-let property in Nottingham (he wanted to stay within the city), so I did a comparison between two very popular, but rather different areas.

The most interesting point I found, when I compared the area of West Bridgford (where the client lived) to the Sherwood area (where he already had a buy-to-let property) was that the property market in the Sherwood area had outperformed the West Bridgford area of Nottingham by 47.8%!

Let me explain why. The average price of a property in Sherwood is £144,500, so when you consider the rents that are achieved in the Sherwood area are an average of £564 per month, this gives us a yield of 4.79% per year. So is Sherwood the best investment? Well, in the West Bridgford area, where the average value of property in the area is £270,700 and the average rent is £745 per month, this gives a much lower yield of 3.24% per year. That makes the yield/ return in Sherwood 47.8% proportionality more than property in the West Bridgford area, so surely it is the best place to invest?

However, this is a great example of annual yield/return not being the only factor when choosing an investment property, as you should also consider how much the value of the property goes up in the long term. In the last 16 years, property values have risen on average by 100.84% in Sherwood (rising from £71, 980 to the £144,500 mentioned above), which is very impressive considering there was the 2008 property crash. However, property values for property in West Bridgford have risen on average by much more impressive 143.87% in the same time frame.

So, if you are investing in Nottingham property, do you want capital value or yield or both? Other areas, such as St. Ann’s, which offer impressive yields of 6% to 8% have only gone up in value by 66.4% since 2000. Sherwood has decent yields and decent capital growth. Demand is good as well, as in the last 31 days, 54 properties have come up for rent in Sherwood, 13 of them (an impressive 24%) have already have secured a tenant. Great demand with a balance of capital growth and yield means the landlord can have their cake and eat it.

If you would like some advice about buy to let or you are a landlord with a portfolio, please come and see me at our office on Queens Road (right next to the new train station entrance). 

Nottingham Buy To Let – Should you look further afield?

I was at a recent business networking event in Nottingham, when a landlord (who it transpired had a couple of Buy to let properties) bent my ear on where the next hot spot town or city is to invest his money in and where the best rental yields are. Now it can be tempting to just look at Nottingham when growing a buy to let property portfolio, but there can be big differences in the amount of rental income you receive and how much your property will appreciate by considering other locations in the country.

Now regular readers of my articles of the Nottingham Property Blog know of my love of the ‘buy to let seesaw’. On one side of the seesaw is yield and the other capital growth. Landlords should be looking for a high rental yield so that they can comfortably cover any mortgage payments and make some profit from the income return, but you also want the property to rise in value over time so you can get some capital growth when you come to sell. However, high yielding property in say such areas as St.Ann’s in Nottingham, (so the seesaw arm with yield on it goes up on one side), will suffer from low capital growth (so the other arm with capital growth on the seesaw goes down).  The relationship works in reverse as well, so in such upmarket areas as West Bridgford, properties offer good capital growth, but at the expense of a decent yield.  

The North East and North West of the UK are landlord magnets for great yields. The average yield in Nottingham today is 4.85%, which when you compare with say Hartlepool in the North East, which achieves 7.73%, doesn’t look too healthy. Now of course, these are only averages and some of my Nottingham landlords are achieving 6% to 8% on some of their Nottingham properties, but at the expense of capital growth. Anyway, after wasting a tank full of petrol up the A1 to Teeside or the M1 to Home of the ‘The Reds’,  that Liverpool property, would have dropped in value by 2.2% in the last 12 months and the Hartlepool property would have dropped by 1.4%.

When you compare the long term house price growth, it gets even worse. Looking at the graph, Since 1995, property values in Nottingham have risen by 86.41%, compared with Hartlepool at 21.02% – it just shows you shouldn’t always chase the yield because of the poor increases in property values in those two places. As I always like to explain to landlords when they either email me, pick up the phone or pop into my offices for a coffee (both my own and even landlords who use other agents (you are all welcome at ours), together with soon to be FTL’s (first time landlords)), a decent yield is important, but when you come to sell your buy to let property it would also be nice to make a decent profit. Any profit you can make when you come to sell it, on a buy to let property is known as the ‘capital gain’ ie capital growth.

At the end of the day, as a Nottingham landlord, you want to be making gains from both your rent and house price growth, particularly when you want to sell, because when combined, the rental yield and capital growth, that gives you the real return on your investment. Finally though, do you know Hartlepool and Liverpool as well you know Nottingham? Do you know where the good and bad areas are in both those places? Are you happy that it would require you to take a day out of work if there was an issue with your property in the North?  If you can’ t answer yes to all three questions, then maybe you should be considering a closer to home? 

How much of a minefield is the Nottingham buy-to-let market?

The buy to let sector in Nottingham (and in fact the whole of East Midlands) is doing very well at the moment, but, we warned, it can be a minefield. I could regale you with many stories where investors have got it tremendously wrong, like some modern apartments in the North West development near the city centre, that were sold for around £176,000 in 2008, only to be selling today for £143,500, a drop of over 18%. It is interesting to note that at that time in 2008 for £176,000, you could have bought a lovely 4 bed, bay-fronted detached in Woodthorpe or a three bed semi-detached house in Wilford. In hindsight, an apartment for the same price as a decent semi, or nice modern detached house doesn’t quite stack up.  So, if you make even if you were to make a small mistake, it could still prove to be very costly.

So what should you buy in our part of the world? One option is Houses of Multiple Occupation (HMOs). Whilst they can be profitable, chiefly in the student market with Nottingham University students, they can make things much more complex and costly, especially with the need for HMO licences etc. Mortgage rates on buy-to-let are really low at the moment and for the right property and person you can get rates below 3.9% if you put down a decent deposit of 25% (although, the best rates are saved for deposits of 40% and higher). As I type this, you can get a 5-year fixed rate buy to let mortgage from the Post Office for 3.65%. It’s also worth remembering that a higher deposit will also ensure you have plenty of equity in the property if the property market stagnates in the future. The important thing to remember is the amount you can borrow is driven by the rental income, so it is vital you can identify a property with a decent yield that lets easily.

Finally though, if are investing so much time and money in building wealth for you and your family, it is equally important for you to identify ways to protect it. Do not forget, if you spend years building a successful property empire in Nottingham, when you pop your clogs, your family could face an inheritance tax bill of 40%, which they would have to pay within six months of the death. In a buoyant market, selling in six months is not an issue, but what if the market was like it was in Nottingham between 2008 and 2012, when things took seasons to sell, not weeks?! Quite apart from losing nearly half of the assets you built for your family to the tax man, if they had to sell some of your portfolio - possibly at a discount because the taxman wanted his money so quick - it might be wise to consider some life insurance that will offer protection against inheritance tax.

Whilst there are plenty of good advisors in Nottingham that can help you with mortgage brokering and life insurance (we aren’t exactly one of those, since our specialty is property), what we can help with is choosing the right property to buy. It’s in our interest to do so, because if we offer the best advice and opinion and you make a decent profit, you might consider (although there is no obligation) to trust us to manage the property too. If you fancy hearing more, email me at jaclyn.bartlett@centrickproperty.co.uk .

A perfect potential rental in Nottingham

Apartments are popping up everywhere at the moment in Nottingham at the minute,  a great sign for landlords, tenants and the Nottingham property market. I came across this little gem this morning and what a apartment it is. Take a look at the property for yourself here: http://www.rightmove.co.uk/property-for-sale/property-36100647.html

Located a short walk from Nottingham City Centre the apartment offers two  bedrooms, en-suite, master bathroom. allocated parking and kitchen appliances. This is a perfect property for any investors looking to for a rental property close to the city centre.

The property is currently on the market with Centrick Property with an asking price of £150,000. A property of this standard in Nottingham City Centre would achieve a rental income of approximately £800pcm, this would achieve an approximate yield of 7%.

This property is one not to be missed, the perfect investment property, in the centre of Nottingham with no upward chain and ready for tenants to move it to... what are you waiting for?

If you would like any information or advice on the Buy to Let market please email me on jaclyn.bartlett@centrickproperty.co.uk