Sunday 16 September 2018

The Royal Tunbridge Wells Bank of Mum and Dad Lent £6.58m Last Year

My analysis has shown that up to the end of the last quarter, Royal Tunbridge Wells’ first time buyers purchased 331 Royal Tunbridge Wells properties.  With wages rising at 2.8%, unemployment at a low rate of 4.2% (down from 4.6% from a year earlier and the joint lowest since 1975), national GDP rising at 1.87% and inflation at 2.3%, tied in with indifferent house price growth (compared to a few years ago), this has given first time buyers a chance to get a foot hold on the Royal Tunbridge Wells property market.

Over the last year, the average purchase price of a Royal Tunbridge Wells first time buyer property has been £280,800 and the average deposit was £45,490. Furthermore, my calculations show the average Royal Tunbridge Wells parents contributed £19,902 of that £45,490 figure.

You see “The Bank of Mum and Dad (Royal Tunbridge Wells Branch)” is for countless Royal Tunbridge Wells twenty something’s, perceivedto be the only way they will ever be able to afford their first home. In fact, Royal Tunbridge Wells’ parents put up a substantial£6.58m in the last 12 months to help their nearest and dearest progeny onto the property ladder. This assistance towards the deposit makes a huge difference, enabling Royal Tunbridge Wells’ youngsters who thought they couldn’t get on the housing ladder more able to do so.

With mortgage rates at all-time lows, few Royal Tunbridge Wells twenty something’s would struggle to make mortgage repayments, but it is the requirement of the deposit which is the issue, although as parents (and grandparents) are helping out where they can, it does little to address the real problems of the housing market, whether for people renting or buying their first home.

If you think about it, as a Country we have been fortunate that the older generation who control the biggest share of the nation’s wealth are so plentiful to those following after. We need to remember, though, that this generosity is
 a sign of the issues of the British housing shortage, not its solution. 

But before I leave this article … note I used the word PERCEIVEDin a previous paragraph. Yes, the average first time buyer deposit is 16.1%, but that is an average. Did you know 95% mortgages returned to first time buyers in late 2009 and have been available ever since? Also, lenders like Barclays and many local Building Society’s now offer 100% mortgages (i.e. no deposit) at 2.75% fixed for three years.

The perception is you need 15%, 20% even a 25% deposit to be a first-time buyer – you don’t! You don’t need any deposit, but (there is always a but!)...

Over the last decade, many renters have upgraded themselves into homes that they (or any generation before them) could never have ever afforded as a first time buyer in the past. You see the British housing market started to change with the dawn of the new Millennium and I am seeing a slow but steady attitude change when it comes to renting. Those tenants have found the price difference of upgrading from the typical 1970’s TV show Rigsby “Rising Damp” style rental property to plush terraced house or even semi-detached home, with all the mod cons, comparatively inexpensive (when compared to the increase in mortgage payments if they had to make the move as buyers).

Renting isn’t seen as the poor man’s choice, as many young (and increasing older) people are becoming more at ease and comfortable with the flexibility offered by private renting a property rather than jumping ‘lemming like’ into home ownership. Royal Tunbridge Wells landlords will continue to see growth in sector, and like Germany, todays renters will become homeowners in 20 years’ time – when they will inherit the wealth of their parent’s home.

Monday 10 September 2018

£449,823 – The Typical Profit Each Royal Tunbridge Wells Landlord Could Make in The Next 25 Years

I am of the opinion that buy to let investment in Royal Tunbridge Wells, in the long-term, will bring substantial returns for landlords, irrespective of latest regulation and tax changes. 

Taking a very conservative (with a small ‘c’) view, I believe landlords will see a projected net profit of £763,707per property over the next 25 years through capital gains and rental. When inflation is taken into account that works out at £449,823 (in today’s money) or around £17,993 per year. The breakdown applies to a basic tax-paying landlord placing a characteristic 25% deposit on a £382,200 terraced/town house property.

Capital gains make up a substantial part of a landlord’s returns. Again, being conservative, I have assumed that Royal Tunbridge Wells house prices over the next quarter century (between 2018 and 2043) will rise at half the ratethey did between 1993 and 2018 (the preceding 25 years), therefore the example Royal Tunbridge Wells property in the previous paragraph would grow in value to £1,163,990, providing gross capital gains of £781,790.

A typical Royal Tunbridge Wells landlord receives, on average, rent of £11,700 per annum per terraced/town house property and so, over a 25-year period, that example property would generate a total rental income of £447,233 (again – very conservatively assuming a compound annual growth rate in the rent of 1.71% per annum).

Nevertheless, there are costs to running a buy to let property (mortgages, void periods, repairs, agents fees etc) .. and over those same 25 years, I have estimated that to be £465,316  .. giving the net profit levels mentioned in the second paragraph.


Now of course I have had to make assumptions to reach these figures, yet I hope you would agree, I have been very unadventurous with my assumptions.

The Royal Tunbridge Wells (and UK as a whole) buy to let property market is experiencing a massive sea of change. Regulation and tax changes have altered the dynamic in the property market, diminishing its appeal to inexperienced and amateur landlords, and these new tax changes mean higher tax bills for higher rate tax landlords. Yet, despite these rising costs, there are still healthy returns to be found in Royal Tunbridge Wells buy to let investment for knowledgeable and steadfast landlords. Nonetheless, the days of anything making money and idle speculation are long gone. 

Buy to let is a long-term business undertaking, necessitating commitment and expertise. Don’t put your head in the sand and think it doesn’t affect you. Royal Tunbridge Wells buy to let landlords must be equipped to start business and tax planning, take portfolio management advice to ensure their investments will meet their investment goals, appreciate the risks as well as the rewards, and, most crucially, the obligations they have towards their tenants.

If you are a Royal Tunbridge Wells landlord, irrespective of whether you are a client of mine or another agent in Royal Tunbridge Wells (or even you do it yourself), feel free to drop me a line or pop into the office for an informal chat on the future direction of the Royal Tunbridge Wells rental market and where opportunities may lie.  

Sunday 2 September 2018

Additional 2,294 Royal Tunbridge Wells Rented Homes Required by 2027

I have been doing some research, looking both at National and Regional reports on the demand and supply of property and people together with future projections on the economy, population and family demographics with some interesting results.  According to the Office of National Statistics, in the last financial year nationally, private renting grew by 74,000 households, whilst the owner occupied dwelling stock increased by 101,000 and social (aka council and housing association) stock increased by 12,000 dwellings. 

It was the private rental figures that caught my eye.  With eight or nine years of recovery since the Credit Crunch, economic recovery and continuing low interest rates have done little to setback the mounting need for rented housing.  In fact, with house price inflation pushing upwards much quicker than wage growth, this has meant to make owning one’s home even more out of reach for many Millennials, all at a time when the number of council/social housing has shrunk by just over 2.5% since 2003, making more households move into private renting.

There are 10,874 people living in 5,353 privately rented 
properties in Royal Tunbridge Wells.

In the next nine years, looking at the future population growth statistics for the Royal Tunbridge Wells area and making careful and moderate calculations of what proportion of those extra people due to live in Royal Tunbridge Wells will rent as opposed to buy, in the next ten years, 4,660 people (adults and children combined) will require a private rented property to live in. 

Therefore, the number of Private Rented homes in Royal Tunbridge Wells will need to rise by 2,294 households over the next nine years,

That’s 255 additional Royal Tunbridge Wells properties per year that will need to be bought by Royal Tunbridge Wells landlords, for the next nine years to meet that demand.

… and remember, I am being conservative (with a small ‘c’) with those calculations, as demand for privately rented homes in Royal Tunbridge Wells could still rise more abruptly than I have predicted as I would ask if Theresa May’s policies of building 400,000 affordable homes (which would syphon in this 5-year Parliamentary term is rather optimistic, if not fanciful?

So, one has to ask wonder if it was wise to introduce a buy to let stamp duty surcharge of 3% and the constraint on mortgage tax relief could curtail and hold back the ability of private landlords to expand their portfolios?

Well a lot of landlords are taking on these new hurdles to buy to let and working smarter.  Buying the property at the right price and using an agent to negotiate on your behalf (we do this all the time) ... and the 3% stamp duty level isn’t an issue.  Incorporating your property portfolio into a Limited Company is also a way to circumnavigate the issues of mortgage tax relief (although there are other hurdles that need to be navigated on that tack), but just look at the growth of proportion of Buy to Let properties in the Country since the Summer of 2016 ... something tells me smart Landlords are seeing these challenges as just that ... challenges which can be overcome by working smarter.




I have a steady stream of Royal Tunbridge Wells landlords every week asking me my opinion on the future of the Royal Tunbridge Wells property market and their individual future strategy and, whether you are a landlord of mine or not, if you ever want to send me an email or pop into my office to chat on how you could navigate these new Buy to Let waters ... it will be good to speak to you (because you wouldn’t want other landlords to have an advantage over you – would you?).