Friday, 29 May 2015

480% Return for Royal Tunbridge Wells Buy To Let landlords since 2000

Buy to let is essentially different from investing in stocks and shares or putting money in the Building Society. Whilst these other investments (Building Society Passbooks, Stocks and Shares etc) are passive  ie once the  money has been invested it you leave it alone, with buy to let, things are more hands on, in fact it’s almost a business. One thing the landlords I speak to say is the fact that they like buy to let because it is both an investment as well as a business. It is this factor that attracts many of my Royal Tunbridge Wells landlords – they are making their own decisions rather than entrusting them to others (such as City Whiz Kidzs in London playing roulette with their Pension Pot).

So if you are investing in the Royal Tunbridge Wells property market, you can earn from your investment in two ways. When a property increases in value over time, it is known as 'capital growth'. Capital growth, also known as capital appreciation, this has been strong in recent times in Royal Tunbridge Wells, but the value of property does go up as well as down just like shares do but the initial purchase price rarely decreases.  Rental income is what the tenant pays you - hopefully this will grow over time. If you divide the annual rent into the value (or purchase price) of the property, this is your yield, or annual return.

I was talking to a landlord who bought an apartment in the Lansdowne Road area of Royal Tunbridge Wells. He bought a very pleasant studio apartment in 2000 for £50,000. It sold again in February just gone for £110,000, a rise of 120% in 15 years – a compound annual return of 5.40%.

However, the real returns are for those Royal Tunbridge Wells landlords who borrowed money to purchase their buy to let property. They have made significantly higher returns than those who paid 100% cash. If the landlord had borrowed 75% of the £50,000 purchase price of the Lansdowne Road studio apartment on an interest only 75% mortgage, he would have only needed to invest £12,500 (as his 25% deposit... borrowing the remaining £37,500), but his £12,500 would be worth today, £72,500  (£110,000 less £37,500 interest only mortgage)... a rise of 480%) - a compound annual return of 12.43%... and I haven’t even mentioned the rent he would have received in those 15 years!

This demonstrates how the Royal Tunbridge Wells buy to let market has not only provided very strong returns for average investors since 2000 but how it has permitted a group of motivated buy to let Royal Tunbridge Wells landlords to become particularly wealthy. In fact, if this landlord had continued to remortgage the property as it went up in value, he could by our reckoning have had an additional two or three properties (albeit with larger mortgages but greater future potential).

As my article mentioned a few weeks ago, more and more Royal Tunbridge Wells people may be giving up on owning their own home and are instead accepting long term renting whilst buy to let lending continues to grow from strength to strength. If you want to know what (and would not) make a decent property to buy in Royal Tunbridge Wells for buy to let, then one place for such information would be the Royal Tunbridge Wells Property Blog.

Friday, 22 May 2015

Is the Royal Tunbridge Wells Property Market in crisis?

Since the 1960’s more people have owned their own home than rented but, for many young Royal Tunbridge Wells  people, the dream of buying their own home is dying...or is it? Since the turn of the Millennium, in Royal Tunbridge Wells  (as in the rest of the Country) there has been a significant change in the proportion of people who own their own home in Royal Tunbridge Wells . In 2001, 71.7% of homes in Royal Tunbridge Wells  were owner occupied, today the figure is 65.7%, a significant decline in such a short time.  Buy to let landlords can find tenants because young people say they cannot afford a deposit to buy unless they inherit money or are given a loan from the Bank of Mum and Dad

In Royal Tunbridge Wells , only 39.15% of 25 to 34 year olds have a mortgage. When you compare Royal Tunbridge Wells  against the national average of 35.93%, it just shows how different parts of the country have different housing markets. However, the really interesting fact is this  ...Roll the clock back to 1991 and nationally, 67% of 25 to 34 year olds had a mortgage. After WW2, the supply of properties being built kept up with demand as millions of council homes were built (the most being built in 1950s, surprisingly under Tory Governments!). Also private house building increased in the 1950’s, but especially in the 1960’s and 1970’s, and as the Country  got more prosperous it meant that by 1971, there were more home owners than renters.

However, since the 1970’s, the population has grown but the number of new properties being built hasn’t kept up at the same rate, the result is that there have been huge rises of property prices in the early ‘70s, the late 80s and more recently between 1999 and 2004. Interestingly, since the early 1970’s, out of the 34 richest countries in the world, the UK has seen highest property prices rises.

95% mortgages have been available to first time buyers since late 2009, but with property prices rising by 261% since the Winter of 1995 in Royal Tunbridge Wells , as property prices have been rising and first time buyers have been saving, the amount they have to save is continually rising at the same time. The stress on saving even for that kind of deposit, coupled with the new stricter mortgage rules introduced in 2014, means that most 20/30 something’s in Royal Tunbridge Wells  are renting instead of buying.

The issue quite simply comes back down to a lack of new homes being built. In Royal Tunbridge Wells,  only 447  properties a year are being built whilst the population is rising by 1,092 a year. The supply of new homes has been limited by planning laws, local councils not having the money to build council houses, hard hitting green belt limitations, and our old friend NIMBY’ism.  With a rising population and net migration, especially from the EU, the mismatch between demand and supply is why we have the problem. Until Politian’s have the backbone to realise the Country needs a lot more decent homes built, the problem will just get worse.

In the meantime, demand for rental property will continue to grow because people need a roof over their head at the end of the day ......fact.

Friday, 15 May 2015

Are Attitudes to Home Ownership changing in Royal Tunbridge Wells?

Speaking to a Bank Manager the other day in Royal Tunbridge Wells, we got talking about the state of the Royal Tunbridge Wells property market and whether we, as a Country, are turning more and more to the European style of property ownership, where it is the norm to rent as a opposed to automatically buying once you have a good job etc.

Even though a recent report by the Halifax stated homeownership remains a goal for 85% of twenty to forty five year olds, there is information emerging that attitudes in the UK towards renting your own home as opposed to owning it have softened, showing more and more, that renting is being seen as a life style choice.  In fact it is recognised in learned circles that the cycle of renting is also repeated by the fact that people who grow up primarily in rented accommodation are themselves more likely to rent than buy.

The biggest barrier often mentioned to buying a house is the claim that they are not buying property at the moment because of a lack of sufficient wages and by the high level of deposits but like we said a few weeks ago, in Royal Tunbridge Wells, if a couple, one  on the average Royal Tunbridge Wells salary of £35,338 pa and the other on the Minimum wage, assuming they had a reasonable credit history they would be showered with lenders offering them a 95% mortgage (a reasonable credit history means they haven’t defaulted on loans, paid all their bills on time nor got any County Court Judgements. Just because you missed just one credit card payment wont mean you have messed up your credit score and your ability to get a mortgage) and they would only need to find £7,700 as a deposit to buy a top of the range one bed apartment in an up market area of Royal Tunbridge Wells or a good honest utilitarian, yet very well built, ex local authority 3 bed semi in Rusthall comes down to the perceived capability of the youngsters in Royal Tunbridge  Wells to buy nowadays.

Interestingly, when I looked at the Royal Tunbridge Wells figures, the average Royal Tunbridge  Wells tenant has a older profile (especially the 35 to 49 year olds) than the English and Welsh average, as can be seen from the graph below. What interested me as well was the relatively large number of people renting over the age of 50! I know we have a large number of mature tenants at our agency, but I always thought that was the exception to the rule. Obviously not!  (And that is good news for landlords as they make excellent tenants)

So what does all this mean for Royal Tunbridge Wells landlords and future Royal Tunbridge  Wells landlords? I honestly believe there is a difference between the hope and perceived capability of the younger generation to buy a home. Although homeownership is seen as advantageous by a majority, many tenants admitted in the Halifax report they are not taking the steps they need to purchase their own home.

As the local authority aren’t building any properties in Royal Tunbridge  Wells, people still need a roof over the head, and that is why, as I mentioned a few weeks ago in the Royal Tunbridge  Wells Property Blog, the demand for rental properties will only continue to steadily rise in the coming decade. If want to know where the Royal Tunbridge  Wells Property market is heading and where you should (and shouldn’t buy), maybe the one place you should visit is the Royal Tunbridge  Wells Property Blog 

Friday, 8 May 2015

Two Speed Royal Tunbridge Wells Property Market?

Property values in Royal Tunbridge Wells are still 1.27%  higher than they were 3 months ago, the diversion and ambiguity of an election typically makes house sellers who need to sell, price their property more realistically (although this only lasts a couple of months). Looking specifically at it from a Royal Tunbridge Wells landlord’s point of view, the Royal Tunbridge Wells properties favoured by investors are in short supply in many parts of the town because of a number of factors. One of the factors has been that we seen the number of first time buyers coming to buy their first home increase over the last 12 months in Royal Tunbridge Wells.  

Another factor has been the fact that the banks have been pushing ‘let to buy’ (yes ‘let to buy’ is different to ’buy to let’) to homeowners (more of ‘let to buy’ in an up and coming article). Next, because of the banks, who are chasing low risk landlords with high deposits with very low mortgage rates- and the low risk landlords with high deposits tend to be attracted to the safer modern two and three bed town houses and semis in Royal Tunbridge Wells.

As I mentioned a few weeks back, the pension rules are changing which means buy to let landlords can use some, or all, of their pension pot to buy a property.  It shouldn’t be forgotten there are tax implications taking more than a quarter of your pension pot out (see the article from a couple of weeks ago) , so whilst many pension pots may not be able fund a suitably big enough tax free lump sum to buy the property outright, for most it will provide enough for the 25% deposit (required by most BTL mortgage providers). It shouldn’t be forgotten landlords that the interest paid on the mortgage is tax deductible against the rent, thus lowering your income tax paid.

In the last 12 months, I have noticed a particular uplift in interest from ‘50 something’ Royal Tunbridge Wells people wanting to become landlords for the first time. In Royal Tunbridge Wells, the highest returns for the lowest investment are at the lower end of the market eg the classic apartment. Unfortunately apartments , with two bedrooms are coming to the market in smaller numbers than the larger four bed’s  in  top end sectors of the Royal Tunbridge Wells property market. When looking at the actual numbers, in the later part of the Summer of 2014 in Royal Tunbridge Wells, in one month alone 78 one bed apartments were on the market in Royal Tunbridge Wells. However, in January this year, a notoriously excellent bumper month for properties coming on to the market, there were only 51 one bed apartments on the market in Royal Tunbridge Wells to choose from. Today, that figure stands at only 46 ..whilst the number of four and five beds has increased significantly ...  interesting don’t you think?

At that lower end of the property market in Royal Tunbridge Wells, (ie where first time buyers and landlord investors compete with each other to buy those smaller properties), I believe throughout 2015, there will be a slow and steady tipping of the scales between supply and demand. In fact, from what i am seeing and hearing, early anecdotal evidence has suggested over the last few months (although we will need to look at figures later in the Spring once we have the data from The Land Registry), we are beginning to see a polarised Royal Tunbridge Wells property market, where we have high demand but low supply at the bottom end of the property market, yet high supply but lower demand at the top of market .. and that can only mean one thing ... prices will go up quicker on the smaller properties than the larger ones in Royal Tunbridge Wells, thus narrowing the gap for people looking to move up market!

Friday, 1 May 2015

Royal Tunbridge Wells Property Market – What is really happening?

I had an interesting conversation with a local Royal Tunbridge Wells accountant the other day. He is quite an observant chap (I know this because I have known him for a few years .. but I suppose you have to be to be an accountant!). Anyway, he mentioned a few things he had noticed recently in Royal Tunbridge Wells, one that Royal Tunbridge Wells property prices had gone up in the last few years but nowhere near the growth levels that were being achieved in central London, and secondly, that he thought the number of for sale boards in Royal Tunbridge Wells (and more importantly ones with sold slips on them)  had increased over the last couple of years.

The rate of house price inflation in Royal Tunbridge Wells continues to slow with growth of 10.4% in the 12 months to February compared to 11% just under six months ago, according to the latest Land Registry data. However, there is considerable local variation with house price growth ranging from 7.7%  in East Sussex  to 12%  in Medway over the last 12 months.

Whilst Royal Tunbridge Wells hasn’t seen the 20%+ per year in house price growth of London over the last couple of years,  Royal Tunbridge Wells has seen  a sharp uplift in the number of properties sold throughout  2014 as base line demand for housing grows, which suggests there is substance to the recent pick-up in house price growth in the town.  Since the Second World War in the UK, when the number of properties sold has grown, property values grew soon after. The 16.9% uplift in property transactions in Royal Tunbridge Wells in 2014, compared to 2013, indicates the most significant recovery in house market activity in Royal Tunbridge Wells (outside London) since 2007.
When you compare Royal Tunbridge Wells with London, you could be looking at two different countries. 

In London, its mid/late teens house price to earnings ratios are impacting demand (ie the average property value is often 15 or 17 times the average wage in London .. in fact in Knightsbridge the ratio can be 30 to 1).  However, the number of people wanting to sell has dropped considerably, meaning that falling sales volumes combined with a general slowdown in activity in the run up to the General Election are resulting in lower mortgage approvals for home purchase.

Transactions are a great indicator for house prices. The acceleration in house price growth in London in the last two years was preceded by three years of rising transactions. A similar pattern is being registered in the Royal Tunbridge Wells area, as pent up demand returns to the market supported by low mortgage rates and an improving economic outlook.

But before you get the Champagne out, while the uplift in activity is welcome news, the number of Royal Tunbridge Wells property sales in 2014 are still 23.1% lower than the level seen in 2007 and property values are 3.2% above  the 2007 levels. The ongoing housing recovery is far from broad based and remains focused on middle to higher value areas within Royal Tunbridge Wells where households have equity and find it easier to access mortgage finance.