428 First Timer Buyers in Harrogate Bought Their First Home in 2017

A little bit of good news this week on the Harrogate Property Market as recently released data shows that the number of first time buyers taking out their first mortgage in 2017 increased more than in any other year since the global financial crisis in 2009. The data shows there were 428 first time buyers in Harrogate, the largest number since 2006.

I expect in 2018 that this increase of first time buyers will level out and maybe dip slightly as, nationally, figures demonstrate that first time buyer’s average household income was £40,691 and this represented 17.3% of their take home pay. Although, it might surprise readers that it is actually cheaper to buy than it is to rent at the ‘starter home’ end of the housing market. Many of you can remember mortgage rates at 12% … even 15%. Today, at the time of writing this article, I found on the open market, 189 first time buyer mortgages at 95% (meaning only a 5% deposit was required) with 3 year fixed rates from a reputable High Street bank at 2.49% … they even did a 3 year fixed rate 100% mortgage for 2.89%!

Interestingly, looking at the other end of the market, the buy-to-let investment in Harrogate was subdued, with only 88 buy-to-let properties being purchased with a mortgage. However, I must stress, whilst there is no hard and fast data on the total numbers of landlords buying buy-to-let, as HM Treasury believes only 30% to 40% of buy-to-let property is bought with a mortgage. This means there would have been further cash only buy-to-let purchases in Harrogate – it’s just that the data isn’t available at such a granular level.

In terms of the level of mortgage debt in Harrogate, looking specifically at the HG1 to HG3 postcodes, there has been a slow rise in borrowing again over the last couple of years.

Total outstanding mortgages in Harrogate over the last five years

 

This is pleasing to see, as new mortgage debt is created by first time buyers, buy-to-let landlords and home movers themselves, that is being roughly equalled by the amount being paid off with mature mortgaged homeowners in their 50’s and 60’s finally paying off their mortgage.

So, what does all this mean for the Harrogate Property Market?  Well, the stats paint a picture, but they don’t inform us of the whole story. The upper end of the Harrogate property market has been weighed down by the indecision around the Brexit negotiations and rise in stamp duty in 2014, when made it considerably more expensive to buy a home costing more than £1m. The middle part of the Harrogate property market has been affected by issues of mortgage affordability and lack of good properties to buy, as selling prices have reached the limit of what buyers can afford under existing mortgage regulations. The lower to middle Harrogate property market was hit by tax changes for buy-to-let landlords, although this has been offset by the increase in first time buyers.

If you are in the market and selling now and want to ensure you get your Harrogate property sold, the bottom line is you have to be 100% realistic with your pricing from day one and you might not get as much as you did say a year ago (but the one you want to buy will be less – swings and roundabouts?). I know it’s not comfortable hearing that your Harrogate home isn’t worth as much as you thought, but Harrogate buyers are now unbelievably discerning.

So, if you are thinking of selling your Harrogate property in the coming months, don’t ask the agent out a few days before you want to put the property on the market, get them out now and ask them what you need to do to ensure you get maximum value in the shortest possible time. I, like most Harrogate agents, will freely give that advice to you at no cost or commitment to you.

Notes

  • Stats are from the Bank of England
  • Sales figures from Land Registry cross referenced against the proportion of FTB’s. Some assumptions made – although feel its very safe. As always – any queries on stats from you or 3rd party’s … bang them my way

 

An extension could add £63,175 to the value of your Harrogate home

As our families grow bigger the need for more space, be that bedrooms or reception rooms, has grown with it. Also, as our older generation lives longer and nursing home bills continue to rise quicker than a rocket on the 5th of November  (the average nursing home bill in the area being £631.45 per week) many families are bringing two households into one larger one.

So, should you move somewhere larger, or extend your Harrogate property to make it large enough for you and your family? In some circumstances the choice has been made for you. If you live in an apartment with no garden, there isn’t much of an opportunity of making it larger. But if you have a house with a garden or an attic with sufficient headroom, extending your home becomes a real prospect.

Even if it makes more sense to extend or move, the choice hangs on a number of different dynamics – your future plans, money (both saved and access to finance), in what way you are emotionally attached to your home, the particular area of Harrogate you live in and finally, the type/style of house you prefer.

Interestingly, the average British home is 968 sq.ft, which as you can see from the table, is in the middle of developed nations when it comes to the size of a property. Of the 1.11m homes sold in 2016 in England and Wales, the average floor area of the houses was 1,119 sq.ft – that’s about an eighth the size of an Olympic sized swimming pool. Apartments averaged 530 sq.ft that’s just over ten times bigger than an average garden shed. Looking at apartments and houses together, the average size of properties sold in England and Wales 968 sq.ft  – are slightly smaller than the European average, and much smaller than households in the US.

Avergae size of homes in selecte EU countries and USA in sq. ft.

 

So back to the question in hand.. extending does mean you will have a lot of inconvenience whilst the work is being carried out. The location of your Harrogate property, the quality of construction, what type of room(s) you want to add, your plot, neighbouring building lines, planning regulations and the overall demand for your type of Harrogate home, will make a vast difference to the financial repercussions of extending versus moving.

A medium-sized 270 sq.ft single storey extension (say around 17ft x 16ft) will add on average £63,175 to the value of a property in Harrogate.

It’s important to note the end result of the extension needs to be a sensible and realistic home. A two bed semi-detached house extended to a four bedrooms with no lawn or driveway, or a home with outsized reception rooms downstairs and miniscule bedrooms upstairs, could be problematic if  and when you come to sell your home in the future. Irrespective of whether your strategy is to live in your extended home for a long time, you will want to side-step outlaying a lot of money on costly building work that will make it tougher to sell.

In terms of what it would cost to build an extension, you can expect to pay on average between £140 to £200 per sq.ft, depending whether the extension is a single or double storey extension and other factors including finish and type of extension (note – I have seen it cost a lot more than these figures – so please speak with a builder) … So taking a mid line figure, that same 270 sq.ft extension on your Harrogate home would cost on average £55,080.

However, moving means there are substantial costs incurred – Estate Agency fees, Removal Van, Survey Fees, Legal fees and Stamp Duty on the property you are buying. Neither option is the obvious choice and comparing the costs of extending your Harrogate home to that of moving is not a stress-free undertaking.

How realistic each option is will probably come down to one thing .. your mortgage provider. You will need a considerable sum of equity in your Harrogate home before you can think of increasing your mortgage more, because most lenders will require you to have at least 10% to 20% equity left in your property after the extension or move has been done.

The best advice I can give .. don’t assume anything …. get advice and opinion from builders, mortgage brokers, architects, mortgage people and of course… an agent. Look at your options and make an educated decision with all the superficial and objective facts in front of you.

Notes

All the figures have come from the Office of National Stats.

Nursing Home fees from Trustedcare website for our County

Harrogate Property Market – The 18.4% ‘New Build Premium’

According to the National House Building Council (NHBC), more than 9,300 new homes were registered to be built in Yorkshire and Humber last year, a decrease of 3.25% on 2016 levels of nearly 9,700 dwellings. Still great news when you consider it is one of the highest number of new builds in the region since the pre-recession levels of the Credit Crunch and the uncertainty of Brexit and the General Election.

So, when a landlord recently asked me why the brand-new property she was considering buying was a lot more expensive compared to a second-hand/existing property of similar type, accommodation, location and structure I thought this would make a fascinating topic to do some homework on … homework I want to share with the homeowners and landlords of Harrogate.

You might believe that the difference between purchasing a new build home against purchasing a second-hand/existing home is just individual preference. Some buyers/tenants like the ostentatious trendy modern feel of a new home, whilst others like a home that has stood the test of time.

So, what is the right answer? Well, I am going to be looking at some statistics that shows there is a real difference in the Harrogate Borough Council area’s property market when in to comes to new vs existing homes and the price paid. Looking at the average price paid for existing (second-hand) versus a brand new home since 1996, one can see from the graph it makes interesting reading.

New build premium Harrogate house prices

On this second graph, one can see the percentage difference in average price paid between new and existing…

New build premium Harrogate house prices

Yet possibly nothing is ever that easy, as there are issues with these statistics.

Whilst, the overall average for the whole Harrogate Borough Council area for the ‘new build premium’ (new build premium being the additional price a buyer pays for buying a new property compared to a second-hand one) over the last 21 years has been 18.4%. These statistics actually show that it is problematic to compare like with like because it is impossible to completely separate all the different factors of type, accommodation, location and structure etc.

One would have to have a mirror image second-hand Harrogate home and a duplicate new build right next door to each other, then calculate out which Harrogate house buyers or Harrogate buy to let landlords would pay more for? Perhaps if everything was the same (all things being equal), there might not be any difference in what buyers would be prepared to pay… but then again, it’s like new cars versus cars that have a few hundred miles on the clock … there is always a difference on the forecourt … because things are never wholly equal.

What I do know is that my statistics of the Harrogate property market show that new build Harrogate apartments are worth more to people than their second-hand equivalents, whilst the difference is negligible between new build Harrogate detached houses and second-hand Harrogate detached houses.

However, I believe the really important lesson in all these statistics is the fact that ‘new build premium’ for new-build versus buying a second-hand property increases in a buoyant market and reduces in a tougher market.  So, if you want to buy new and the only consideration is money … try buying in a tougher challenging property market.

Notes

Stats are from the Office of National Stats for your local Council

Harrogate’s ‘Millennials’ set to inherit £626,468 each in property!

 That got your attention … didn’t it!

But before we start, what is Generation X, let alone Generation Z, Millennials, Baby Boomers  … these are phrases banded around about the different life stages (or subcomponents) of our society. But when terminologies like this are used as often and habitually as these phrases (i.e. Gen X this, Millennial that etc.), it appears particularly vital we have some practical idea of what these terms actually mean. The fact is that everyone uses these phrases, but often, like myself, they are not exactly sure where the lines are drawn …until now…

So, for clarity …

Generation Z:              Born after 1996

Millennials:                 Born 1977 to 1995

Generation X:              Born 1965 to 1976

Baby Boomers:            Born 1946 to 1964

Silent Generation:       Born 1945 and before

My research shows there are 10,662 households in Harrogate owned by Harrogate Baby Boomers (born 1946 to 1964) and Harrogate’s Silent Generation (born 1945 and before). It also shows there are 15,606 Generation X’s of Harrogate (Harrogate people born between 1965 to 1976). Looking at demographics, homeownership statistics and current life expectancy, around two-thirds of those Harrogate 15,606 Generation X’s have parents and grandparents who own those 10,662 Harrogate properties.

… and they will profit from one of the biggest inheritance explosions of any post-war generation to the tune of £3.887bn of Harrogate property or £373,402 each but they will have to wait until their early 60’s to get it!

However, it’s the Millennials that are in line for an even bigger inheritance windfall.

There are 9,889 Millennials in Harrogate and my research shows around two thirds of them are set to inherit the 11,335 Harrogate Generation X’s properties. Those Generation X’s Harrogate homes are worth £4.132bn meaning, on average, each Millennial will inherit £626,468; but not until at least 2040 to 2060!

Inheritance windfall for Harrogate youngsters?

While the Harrogate Millennials have done far less well in amassing their own savings and assets, they are more likely to take advantage of an inheritance boom in the years to come. This will probably be very welcome news for those Harrogate Millennials, including some from poorer upbringings who in the past would have been unlikely to receive gifts and legacies.

However, inheritance is not the magic weapon that will get the Millennials on to the Harrogate housing ladder or tackle growing wealth cracks in UK society, as the inheritance is unlikely to be made available when they are trying to buy their first home…but before all you Harrogate Millennials start running up debts, over 50% of females and around 35% of men are going to have to pay for nursing home care. Interestingly, I read recently that a quarter of people who have to pay for their care, run out of money.

So, if you are a Harrogate Millennial there potentially will be nothing left for you.

Of course, most parents want to give their children an inheritance, the consideration that what you have worked genuinely hard for over your working life won’t go to your children to help them through their lives is a really awful one … maybe that is why I am seeing a lot of Harrogate grandparents doing something meaningful, and helping their grandchildren, the Millennials, with the deposit for their first house.

One solution to the housing crisis in Harrogate (and the UK as a whole) is if grandparents, where they are able to, help financially with the deposit for a house. Buying is cheaper than renting – we have proved it many times in these articles … so, it’s not a case of not affording the mortgage, the issue is raising the 5% to 10% mortgage deposit for these Millennials.

Maybe families should be distributing a part of the family wealth now (in the form of helping with house deposits) as opposed to waiting to the end… it will make so much more of a difference to everyone in the long run.

Just a thought?

Notes

  • Definition of Age Bands – Various Academic Institutions around the World define these bands
  • Census was used for the Age bands
  • Academics say between 60% and 70% of people will inherit property from their parents – so taken a midway point.
  • Average value of property taken from ZPG for your location – the total value and average inheritance per person calculated from those figures

Harrogate’s £169,691,760 “Rentirement” Property Market Time Bomb

Yes, I said ‘rentirement’, not retirement … rentirement and it relates to the 903 (and growing) Harrogate people, who don’t own their own Harrogate home but rent their home, privately from a buy to let landlord and who are currently in their 50’s and early to mid-60’s.

The truth is that these Harrogate people are prospectively soon to retire with little more than their state pension of £155.95 per week, probably with a small private pension of a couple of hundred pounds a month, meaning the average Harrogate retiree can expect to retire on about £200 a week once they retire at 67.

The average rent in Harrogate is £783 a month, so a lot of the retirement “income” will be taken up in rent, meaning the remainder will have to be paid for out their savings or the taxpayer will have to stump up the bill (and with life expectancy currently in the mid to late 80’s, that is quite a big bill …  a total of £169,691,760 over the next 20 years to be paid from the tenant’s savings or the taxpayers coffers to be precise!

You might say it’s not fair for Harrogate tax payers to pick up the bill and that these mature Harrogate renters should start saving thousands of pounds a year now to be able to afford their rent in retirement.  However, in many circumstances, the reason these people are privately renting in the first place is that they were never able to find the money for a mortgage deposit on their home in the first place, or didn’t earn enough to qualify for a mortgage …and now as they approach retirement with hope of a nice council bungalow, that hope is diminishing because of the council house sell off in the 1980’s!

For a change, the Harrogate 30 to 40 somethings will be better off, as their parents are more likely to be homeowners and cascade their equity down the line when their parents pass away.  For example, that is what is happening in Europe where renting is common, the majority of people rent in their 20’s, 30’s and 40’s, but by the time they hit 50’s and 60’s (and retirement), they will invest the money they have inherited from their parents passing away and buy their own home.

So, what does this all mean for buy to let landlords in Harrogate?

Have you noticed how the new homes builders don’t build bungalows anymore … in fact some would said the ‘bungalow storey’ is over.  The waning in the number of bungalows being built has more to do with supply than demand.  The fact is that for new homes builders there is more money in constructing houses than there is in constructing bungalows.  Bungalows are voracious when it comes to land they need as because bungalow has a larger footprint for the same amount of square metrage as a two/three storey house due to the fact they are on one level instead of two or three.

That means, as demand will continue to rise for bungalows supply will remain the same.  We all know what happens when demand outs strips supply … prices (i.e. rents) for bungalows will inevitably go up.

Notes

Data for number of renters from Office of National Stats and N.omis

Rent from ZPG

Big Pound note figure – combination of both

Harrogate Private Rents Hit £9.54 per sq. foot

As I am sure you are aware, one the best things about my job as an agent is helping Harrogate landlords with their strategic portfolio management. Gone are the days of making money by buying any old Harrogate property to rent out or sell on. Nowadays, property investment is both an art and science. The art is your gut reaction to a property, but with the power of the internet and the way the Harrogate property market has gone in the last 11 years, science must also play its part on a property’s future viability for investment.

Many metrics most property professionals (including myself) use when deciding the viability of a rental property is what properties are selling for, the average rent, the yield and an average value per square foot.

However, another metric I like to use is the average rent per square foot. The reason being is that is a great way to judge a property from the point of view of the tenant … what space they get for their money. Now of course, location (location, location in a Phil and Kirstie style) has a huge influencing factor when it comes to rents (and hence rent per square foot). Like people buying a property, tenants also have that balancing act between better/worse location, more vs. less money and size of accommodation (bigger and more rooms equalling more money) and where they live (location) verses making ends meet.

Interestingly, I know there are a lot of you in Harrogate who like to see my statistics on the Harrogate property market, so before I talk about the rental figures per square foot, I wanted to share the £ per square foot on the values. In Harrogate, the current AVERAGE figures are being achieved (and I must stress, these are average figures, so there will an enormous range in these figures), but on average, properties in Harrogate, split down by type are achieving …

  • Harrogate Detached Property – £332 / sq ft
  • Harrogate Semi Detached Property – £303 / sq ft
  • Harrogate Terraced Property – £282 / sq ft
  • Harrogate Apartments – £315 / sq ft

So, the rental figures:

The extent of space you get for your rent is replicated in the space you get for your money when buying a property. The average size of rental property in the Harrogate area is 958.9 sq ft (interesting when compared to the national average of 792.1 sq ft)

This means the average rent per square foot currently being achieved on a Harrogate rental property is £9.54 per sq ft per annum

So, what we can deduce from this?  Well the devil is always in detail!

Whilst I was able to quote the average overall figure and the fact my research showed it was quite clear from data that there is relationship between the average £ per sq ft figures on property values and average £ per sq ft on rental figures as a property grows in size. However, something quite intriguing happens to those figures, in terms of what the property will sell for and what it will rent for, when we change and increase the size of the property.

My research showed that doubling the size of any Harrogate property doesn’t mean you will double the value of it … in either value or rent. This is because the marginal value increases diminish as the size of the property increases. In layman’s terms … Subject to a few assumptions, double the size of the house doesn’t mean double the value … what really happens is a doubling of the size gives only an approximately 40% to 65% uplift in value, but here comes the even more fascinating part … when it came to the rental figures, double the size of the house meant only 20% to 45% in increase in rent.

In a future article, I will be discussing the actual added value an extension can bring … but in the meantime, in an overall and sweeping statement, most of the time it makes sense to extend if you are going to live in the property as long as the extension is proportionate to the property, but if you are going to rent it out … possibly not.

Notes

  • Average size of property found using EPC data from Office of National Stats
  • Average £ / sq ft value from ZP

 

£904.01pm The Profit made by every Harrogate Property Owner over the last 20 years

As we go headlong into 2018, I believe UK interest rates will stay low, even with the additional 0.25% increase that is expected in May or June. That rise will add just over £20 to the typical £160,000 tracker mortgage, although with 57.1% of all borrowers on fixed rates, it will probably go undetected by most buy-to-let landlords and homeowners. I forecast that we won’t see any more interest rate rises due to the fragile nature of the British economy and the Brexit challenge. Even though mortgages will remain inexpensive, with retail price inflation outstripping salary rises, it will still very much feel like a heavy weight to some Harrogate households.

Now it’s certain the Harrogate housing market in 2017 was a little more subdued than 2016 and that will continue into 2018. Property ownership is a medium to long-term investment so looking at that long-term time frame; the average Harrogate homeowner who bought their property 20 years ago has seen its value rise by more than 232%.

This is important, as house prices are a national obsession and tied into the health of the UK economy as a whole. The majority of that historic gain in Harrogate property values has come from property market growth, although some of that will have been added by homeowners modernising, extending or developing their Harrogate home.

Taking a look at the different property types in Harrogate and the profit made by each type, it makes interesting reading..

Average Price
Paid in 1998 in Harrogate
Average Price
Paid in 2018 in Harrogate
Average Total Profit
in last 20 years in Harrogate
Average Profit
per Month in Harrogate over the last 20 years
Detached £151,778 £479,588 £327,810 £1,365.88
Semi £80,556 £284,736 £204,180 £850.75
Terraced £71,312 £252,291 £180,979 £754.08
Apartments £61,957 £235,693 £173,736 £723.90
Overall Harrogate Average £93,957 £310,919 £216,962 £904.01

 

However, I want to put aside all that historic growth and profit and looking forward to what will happen in the future. I want to look at the factors that could affect future Harrogate (and the Country’s) house price growth/profit; one important factor has to be the building of new homes both locally and in the country as a whole. This has picked up in 2017 with 217,350 homes coming on to the UK housing ladder in the last year (a 15% increase on the previous year’s figures of 189,690. However, Philip Hammond has set a target of 300,000 a year, so still plenty to go!

Another factor that will affect property prices is my prediction that the balance of power between Harrogate buy-to-let landlords and Harrogate first-time buyers should tip more towards the local first-time buyers in 2018.

The Council of Mortgage Lenders expects the number of buy to let mortgages to drop by 34% from levels seen in 2015. This is because of taxes being increased recently on buy-to-let and harder lending criteria for buy to let mortgages, which means I foresee a gradual move in the balance of power in favour of first-time buyers rather than buy-to-let landlords. First time buyers will also be helped by The Chancellor eradicating Stamp Duty for all properties up to £300,000 bought by first-time buyers in the recent budget.

This means Harrogate buy-to-let landlords will have to work smarter in the future to continue to make decent returns (profits) from their Harrogate buy-to-let investment. Even with the tempering of house price inflation in Harrogate in 2017, most Harrogate buy to let landlords (and homeowners) are still sitting on a copious amount of growth from previous years.

The question is, how do you, as a Harrogate buy to let landlord ensure that continues?

Since the 1990’s, making money from investing in buy-to-let property was as easy as falling off a log. Looking forward though, with all the changes in the tax regime and balance of power, making those similar levels of return in the future won’t be as easy. Over the last ten years, I have seen the role of the forward thinking letting agents evolve from a ‘rent collector’ and basic property management to a more holistic role, or as I call it, ‘landlord portfolio strategic leadership’. Thankfully, along with myself, there are a handful of letting agents in Harrogate whom I would consider exemplary at this landlord portfolio strategy where they can give you a balanced structured overview of your short, medium and long-term goals, in relation to your required return on investment, yield and capital growth requirements. If you would like such advice, speak with your current agent – or whether you are a landlord of ours or not – without any cost or commitment, feel free to drop me a line.

With Harrogate Annual Property Values 6.7% Higher, This is My 2018 Forecast

Looking at the newspapers between Christmas and New Year, it seemed that this year’s sport in the column inches was to predict the future of the British housing market. So to go along with that these are my thoughts on the Harrogate property market.

With the average 5-year fixed rate mortgage at 1.98% (down from 3.47% in 2014) and 2-year fixed rate at 1.47% (down from 2.37% in 2014), mortgage interest rates offered by lenders are at an all-time low (even with the slight increase on the Bank of England base rate a few months ago). Added to this, there has been a low unemployment rate of 3.5% in Harrogate, which has contributed to maintain a decent level demand for property in Harrogate in 2017 (interestingly – an impressive 1,449 Harrogate properties were sold in last 12 months), whilst finally, the number of properties for sale in the town has remained limited, thus providing support for Harrogate house prices, meaning …

Harrogate Property Values are 6.7% higher than a year ago

However, moving into 2018, there will be greater pressures on people’s incomes as inflation starts to eat into real wage packet growth, which will wield a snowballing strain on consumer confidence. Interestingly though, information from the website Rightmove suggested over a third of property it had on its books in October and November had their asking prices reduced, the highest percentage of asking price reductions in the same time frame, over five years. Still, a lot of that could have been house-sellers being overly optimistic with their initial pricing.

In terms of what will happen to Harrogate property values in the next 12 months, a lot will be contingent on the type of Brexit we have and the impact on the whole of the UK economy. A lot of people will talk about the Central London property market in the coming year, and if the banking and finance sectors are negatively affected with a poor Brexit deal, then the London market is likely to see more of an impact.

Nevertheless, the bottom line is Harrogate homeowners and Harrogate landlords should be aware of what happens in the rollercoaster housing market of Central London, but not panic if prices do drop suddenly there in 2018. Over the last 8 years, the Central London property market has been in a world of its own (Central London house prices have grown by 89.6% in those last 8 years, whilst in Harrogate, they have only risen by 28.9%). So we might see a heavy correction in the Capital, whilst more locally, something a little more subdued.

Hindsight is always better than foresight and predicting anything economic is all well and good when you know what is around the corner. At least we have the Brexit divorce settlement sorted and, as the UK economy and the UK housing market are intertwined, it all depends on how we deal as a Country with the Brexit issue. However, we have been through the global financial crisis reasonably intact … I am sure we can get through this together as well?

Oh, and house prices in Harrogate over the next 12 months? I believe they will end up between 0.2% higher and 1.5% higher, although it will probably be a bumpy ride to get to those sorts of figures.

If you would like to read more articles on my thoughts on the Harrogate property Market – please visit the Harrogate Property Market Blog www.harrogatehomes.property.

NOTES

  • Unemployment rate for your local Council from Dept. of Work and Pensions
  • 2017 House Price Growth from Land Registry
  • House Price growth over last 8 years – Land Registry
  • Prediction – I have looked at all the data, all the predictions and taken ball park figures from their estimates and what has happened in Harrogate

My thoughts on the future of the Harrogate Buy-To-Let Market

I was recently reading a report by the Home website which suggested that hordes of landlords are selling their buy to let investments due to increasing burdens on them in the buy-to-let market. Their findings suggest the number of new properties that came onto the market nationally (for sale) jumped by 11% across the UK as a result.

Those increasing burdens include new tax rules coming in over the next 3 to 4 years and the announcement that all self-managing landlords (i.e. landlords that don’t use a letting agent to look after their buy-to-let property) will soon need to register with a compulsory redress scheme to resolve tenant arguments and disputes; as Westminster wants to heighten standards in the Private Rented Sector.

Interestingly I was chatting with a self-managed landlord from Scotton, when I was out socially over the festive period, who didn’t realise the other recent legislations that have hit the Private Rented sector, including the ‘Right to Rent’ regulations which came in to operation last year. Landlords have to certify their tenants have the legal right to live in the UK. This includes checking and taking copies of their tenant’s passport or visa before the tenancy is signed. Of course, if you use a letting agent to manage your property, they will usually sort this for you (as they will with the redress scheme when that is implemented).

If you are a self-managed landlord though, the consequences are severe because if you let a property to a tenant who is living in the UK illegally, you will be fined up to £3,000. That same Scotton landlord popped into my offices in the New Year, and I checked all his paperwork and ensured he was on the right side of the law going forward – and I offer the same to any landlord in the Harrogate area if you want me to cast my eye over your buy to let matters and at no cost…..

But what of all these extra properties being dumped onto the market in Harrogate? When I looked at the records the number of properties on the market in Harrogate now, as opposed to a year ago, the numbers tell an interesting story …

 

1st Jan 2017

1st Jan 2018
Detached 94 93 -1%
Semi 77 109 42%
Terraced 57 73 28%
Flat 174 207 19%
Plots +
Other
7 18 157%
Total 409 500 22%

 


Overall, Harrogate doesn’t match the national trend, with the number of properties on the market actually rising by 22% in the last year.  It was particularly interesting to see the number of semis increase by 42%, yet the number of detached on the market drop by 1%.

However, speaking with my team and other property professionals in the town, the majority of that movement in the number of properties and the types of properties on the market isn’t down to landlords dumping their properties on the market. The whole property market has changed in the last 12 months, with the majority of the change in the number and type of properties for sale due to the owner-occupier market, not landlords (a subject I will write about soon in my Harrogate Property Market blog later this Spring?). You see, for the last ten years, each month there has always been a small number of Harrogate landlords who have been releasing their monies from their Harrogate buy to let properties – as is the nature of all investments!

Nationally, the number of rental properties coming on to the market to rent fell by 16% in Q4 2017 compared to Q4 2016 .. but that isn’t because there are 16% less rental properties to rent – it’s because tenants are staying in their rental properties longer meaning less are coming on the market to be RE-LET.

Nevertheless, some Harrogate landlords will want to release the equity held in their Harrogate buy to let properties in 2018. All I suggest is that you speak with your letting agent first, as putting a rental property on the open market often spooks the tenants to hand in their notice days after you put it on the market (because they don’t like the uncertainty and also believe they will become homeless!). This means you have an empty property, costing you money with no rent coming in.  However, some letting agents who specialise in portfolio management have select lists of landlords that will buy with sitting tenants in. If you have a portfolio in the Harrogate area and are considering selling some or all of them – drop me a line as I might have a portfolio landlord for you (with the peace of mind that you won’t have any rental voids).

Notes

Figures from the home website for Harrogate

Youngsters unable to buy their first home in Harrogate?

Are the Baby Boomers and Landlords to Blame

Talk to many Harrogate 20-something’s, where home ownership has looked but a vague dream, many of them have been vexatious towards the Baby Boomer generation and their pushover ‘easy go lucky’ walk through life; jealous of their free university education with grants, their eye watering property windfalls, their golden final salary pensions and their free bus passes.

If you had bought a property in Harrogate for say £30,000 in first quarter of 1977, today it would be worth £354,895, a windfall increase of 1082.98%.

But to blame the 60 and 70 year olds of Harrogate for that sort of rise seems a little unfair, with the value of the homes rising like rocket, I don’t believe they can be censured or made liable for that. A few weeks ago, I discussed in my blog the number of people in the Harrogate area who have two or more spare bedrooms (meaning they are under-occupying the house). I see many mature members of Harrogate society, rattling around in large 4/5 bed houses where the kids have flown the nest years ago … but should they be blamed?

We are all just human, and the mature members of UK society have just reacted to the inducements of our property and tax system. The mature generations who joined the property market party in the 1970’s and 1980’s were able to take out huge mortgages, protected in the knowledge that inflation would corrode the real value of the mortgage, while wage gains would boost their ability to repay.

Neither do I directly blame the multitude of Harrogate buy to let landlords, buying up their 10th or 11th property to add to their buy to let empire. They too, are humbly reacting to the peculiar historic inducements of the UK property market.

So, who is to blame?

Well, hyperinflation in the 1970’s meant the real value of people’s mortgages was whipped out (as mentioned above). Margaret Thatcher and Nigel Lawson are also good people to blame with Maggie selling off millions of council houses and Nigel Lawson’s delayed ending of the MIRAS tax relief in 1987; meaning he too can get his share of indignation. The Blair/Brown combo doubled stamp duty in 1997 and again in 2000, which, as a tax on property transactions, precludes a more efficient distribution of the current housing stock. The Government has had plenty of opportunity to change the draconian stamp duty rules to incentivise those mature Harrogate house movers to downsize.

However, I have started to see over the last few years a change in Government policy towards housing. The new breed of Harrogate buy to let landlords that have come about since the Millennium, have had their wings clipped over the last couple of years, with the introduction of new tax rules (meaning it is slightly more difficult to make money out of property unless you have all the national information and Harrogate property trends to hand).

It’s easy to think the only reason that hundreds of first time buyers have been priced out of the Harrogate housing market is because of these landlords. Yet, I believe landlords have been undervalued with the Harrogate homes they provide for Harrogate people. With first time buyers struggling to save for a deposit, if it weren’t for those landlords buying up those homes over the last 10/15 years, we would have a bigger housing crisis than we have today. Since the global financial crisis of 2008/9, local councils have had to cut services, so certainly didn’t have enough money to build new homes … homes that were provided to Harrogate by these buy to let landlords.

Number of private rebted properties in Harrogate

One side of the argument is that 516 homes are being bought up by buy to let landlords each year in the Harrogate Borough Council area when otherwise they might have become available to other buyers, the other side of the argument is the current national average deposit is £51,800, which is, by far, the greatest barrier to those wanting to buy their first home. Those homes bought by local buy to let landlords are not left idle, as they equate to 3,609 of new homes for local people, most of whom who see renting as a better option because of the choice, the simplicity and the flexibility which renting brings.

In the 60’s/70’/80’s, the traditional thoughts that you were a failure unless you owned your own home have now all but disappeared, because if you ask many young people, they would probably say renting was the perfect option for them at certain times of their life.

Notes

Numbers from Nationwide House price index for 1970’s valuation

Numbers for rental from ONS and then I calculated the growth using the uplift using various reports on the uplift since the census (mainly the EHSurvey)