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