Sunday, 30 October 2016

The 5,473 Royal Tunbridge Wells Savers batten down the hatches with low interest rates set to continue into the 2020’s

You might ask, what has the plight of the Royal Tunbridge Wells savers to do with the Royal Tunbridge Wells Property Market … everything in fact.  Read the newspapers, and every financial wizard is stating that with the decision of the Bank of England’s Monetary Policy Committee in early August to cut the Bank of England base rate to an all time low of 0.25 per cent, savers should prepare themselves for interest rates to stay low well into the early 2020’s.

... And this isn’t some made up story to capture the headlines of newspaper editors. The yield (posh word for interest rate or return) on 10-year Government bonds is currently 0.61 per cent. This indicates that the money markets believe that the Bank of England’s base rate will, on average over the next ten years, be below the 0.61% rate they are buying the 10 year bonds at (because they would loose money if the average was over 0.61%). UK Interest rates are going to be low for a long time.

For those who have saved throughout their working lives and are looking for ways to maximise their savings, tying their money into property could prove advantageous. You see as a saver, I did a search of the internet and the best savings rate I could find was a 5 year fixed rate at 2.5% a year with Weatherbys Bank. Your £200,000 nest egg would earn you £5,000 a year – not much. However, on the other side of the fence, growth in Royal Tunbridge Wells house prices and princely buy to let yields have made property investment in Royal Tunbridge Wells an appealing option for many. According to my research, the...

Average Yield over the last five years for
Royal Tunbridge Wells Buy to let property has been 4.2% a year

… and average Property Values in over the same period have risen by 25.2%.

Using these averages, the Royal Tunbridge Wells landlord’s property would be worth £250,400 and they would have received a total of £42,000 in rent – making the total return £292,400. Meanwhile, whilst our 5,473 Royal Tunbridge Wells Saver’s, using the average savings rates for the last 5 years, even if they had reinvested the interest, their £200,000 would only be £221,184.

There are risks as well as benefits to buy to let though. As my blog readers know, I tell it like it is and investing in buy to let means locking up capital in a property that may fall in value. Another option would be stock market income based investment funds, which are paying around 5%, especially if put your nest egg into a tax free Stocks and Shares ISA. Although you can only add £15,240 a year into an ISA, but you would also have the ability to sell up quickly if you want ... but one last thought…

The other side of the coin is that you cannot buy an unloved ‘stock market income based investment fund’ and set about renovating it and adding value yourself. The investment fund isn’t something that you can touch and feel, isn’t something tangible, isn’t something physical, isn’t something concrete, it isn’t bricks and mortar ... and that is why my fellow Royal Tunbridge Wells homeowners and Royal Tunbridge Wells landlords is why the love affair of the British and Property will continue.

Tuesday, 25 October 2016

New House Building in Royal Tunbridge Wells slumps by 64.7% in the last year

Let me speak frankly, even with Brexit and the fact immigration numbers will now be reduced in the coming years, there is an unending and severe shortage of new housing being built in the Royal Tunbridge Wells area (and the UK as a whole).  Even if there are short term confidence trembles fuelled by newspapers hungry for bad news, the ever growing population of Royal Tunbridge Wells with its high demand for property versus curtailed supply of properties being built, this imbalance of supply/demand and the possibility of even lower interest rates will underpin the property market.

When the Tories were elected in 2015, Mr. Cameron vowed to build 1,000,000 new homes by 2020.  If we as a Country hit those levels of building, most academics stated the UK Housing market would balance itself as the increased supply of property would give a chance for the younger generation to buy their own home as opposed to rent.  However, the up-to-date building figures show that in the first three months of 2016 building starts were down.  Nationally, there were 35,530 house building starts in the first quarter, a long way off the 50,000 a quarter required to hit those ambitious targets.

Looking closer to home, over the last 12 months, new building in the Tunbridge Wells Council area has slumped.  In 2014/15, for every one thousand existing households in the area, an additional 8.59 homes were built.  For 2015/16, that figure is now only 3.03 homes built per thousand existing households.  Nationally, to meet that 1,000,000 new homes target, we need to be at 7.12 new homes per thousand.

To put those numbers into real chimney pots, over the last 12 months, in the Tunbridge Wells Council area,
  • ·       130 Private Builders (e.g. New Homes Builders)
  • ·       30 Housing Association
  • ·       Nil Local Authority
These new house building numbers are down to the fact that not enough is being done to fix the broken Royal Tunbridge Wells housing market.  We are still only seeing 160 new homes being built per year in the Tunbridge Wells Council area, when we need 376 a year to even stand still!

I am of the opinion Messer’s Cameron and Osborne focused their attention too much on the demand side of the housing equation, using the Help to Buy scheme and low deposit mortgages to convert the ‘Generation Rent’ i.e. Royal Tunbridge Wells ‘20 somethings’ who are set to rent for the rest of their lives to ‘Generation Buy’.  On the other side of the coin, I would strongly recommend the new Housing Minster, Gavin Barwell, should concentrate the Government’s efforts on the supply side of the equation.  There needs to be transformations to planning laws, massive scale releases of public land and more investment, as more inventive solutions are needed.

However, ultimately, responsibility has to rest on the shoulders of Theresa May.  Whilst our new PM has many plates to spin, evading on the housing crisis will only come at greater cost later on.  What a legacy it would be if it was Mrs. May who finally got to grips with the persistent and enduring shortage of homes to live in.  The PM has already referenced the ‘need to do far more to get more houses built’ and stop the decline of home ownership.  However, she has also ruled out any changes to the green belt policy – something I will talk about in a future up and coming article.  Hopefully these statistics will raise the alarm bells again and persuade both residents and Councilor’s in the Tunbridge Wells Council area that housing needs to be higher on its agenda.

Friday, 21 October 2016

942% - Rise in Royal Tunbridge Wells Property Prices since 1981

Roll the clock back 35 years to 1981, and Mrs. T was in power, we had a Royal Wedding, Britain won the Ashes and Bucks Fizz won Eurovision with ‘Making your Mind up’.   Haven’t things changed.  The number of homeowners and property investors who said they wish they had hindsight and bought up every house in Royal Tunbridge Wells all those years ago, especially when you consider what has happened to Royal Tunbridge Wells property values, as…

Royal Tunbridge Wells Property Values since 1981 have risen by 942%.

Not bad when you consider inflation over the same time period has been 271.9%, meaning in real terms (i.e. after inflation), property values in Royal Tunbridge Wells are 670.1% higher.   It’s no wonder people can’t afford to buy property anymore and landlords are attracted by bricks and mortar. Yet the changes to the Royal Tunbridge Wells Property market run much deeper than property value changes as no one could have predicted how the property market has changed in Royal Tunbridge Wells over the last 30 years.

Looking at the Local Authority data for Royal Tunbridge Wells Council in 1981, 23.5% of Royal Tunbridge Wells people lived in a Council House, whilst today its 15.2% ... a massive drop which can mostly be attributed to Margaret Thatcher allowing Council tenants the right to buy their Council House.  The private rental sector since 1981 has, as one would have expected, also changed. 

Nationally they’ve almost doubled, however, for the proportion of properties privately rented in the Royal Tunbridge Wells area (i.e. through a private landlord or a letting agency) there has been little change, rising from 16.5% to 16.9% of property.

So, let us consider those people who own their own home, surely that has had a massive drop?  In 1981, the proportion of people who lived in the Royal Tunbridge Wells Council area who owned their own home was 59.9% … and today its … 65.7%. Not the seismic change most of you were expecting (including myself!).

Homeownership in the 1980’s and 1990’s in Royal Tunbridge Wells did in fact rise, but as I have discussed in previous articles in the ‘Royal Tunbridge Wells Property Market Blog’, that was because nearly every Council tenant was buying their council house. Now there are hardly any Council houses for the younger generation to move into (because of the right to buy scheme) so they have no choice but to privately rent.

.. and this is why the buy to let market in Royal Tunbridge Wells is an investment sector that will continue to grow as councils aren’t building council houses in their thousands each year (like they were in the 1950’s/60’s and 70’s).  The Royal Tunbridge Wells property market is constantly changing and buy to let for too long has been heavily dependent on house price growth, where yield has been almost forgotten.  I see the changes in tax and landlord and tenant law in a different perspective to the sooth-sayers and see it as bringing many opportunities where yield will become more important.  You might need to change your buy to let targets, your methodology to financing or even consider places other than Royal Tunbridge Wells in which to invest your money, but this will shine a light on investing in properties with healthier yields and create more realistic long term buy to let opportunities, instead of short term growth bets and wagers.

Like Bucks Fizz said in their song, it’s time to make your mind up. The advice I give to my landlords, and also to you my blog reading friends is this; these changes will make some landlords panic, meaning competition for decent Royal Tunbridge Wells buy to let bargains will reduce as fear of change kicks in and amateur investors flee the market.  These opportunities will provide a more stable platform for knowledgeable and wise Royal Tunbridge Wells buy to let landlords to thrive in.  If you want to learn more about the Royal Tunbridge Wells Property Market, feel free to pop in for a coffee at our office for a chat with me, or failing that, visit the Royal Tunbridge Wells Property Blog, where you will find many more articles like this solely on the one topic of the Property Market in Royal Tunbridge Wells 

Sunday, 16 October 2016

What will the 0.25% Interest Rate do to the Royal Tunbridge Wells Property Market?

I had an interesting chat with a Langton Green landlord who owns a few properties in the town. He popped his head in to my office as his wife was shopping in the area (and let’s be honest talking about the Royal Tunbridge Wells Property Market is a lot more interesting than clothes shopping!). We had never spoken before (because he uses another agent in the town to manage his Royal Tunbridge Wells properties) yet after reading my blog on the Royal Tunbridge Wells Property Market for awhile, the landlord wanted to know my thoughts on how the recent interest rate cut would affect the Royal Tunbridge Wells property market and I would also like to share these thoughts with you……

Well it’s been a few weeks now since interest rates were cut to 0.25% by the Bank of England as the Bank believed Brexit could lead to a materially lower path of growth for the UK, especially for the manufacturing and construction industries. You see for the country as a whole, the manufacturing and construction industries are still performing well below the pre credit crunch levels of 2008/09, so the British economy remains highly susceptible to an economic shock. This is especially important in Royal Tunbridge Wells, because even though we have had a number of local success stories in manufacturing and construction, a large number of people are employed in these sectors. In Royal Tunbridge Wells, of the 29,884 people who have a job, 1,309 are in the manufacturing industry and 1,985 in Construction meaning
4.4% of Royal Tunbridge Wells workers are employed in the Manufacturing sector and 6.6% of workers are in Construction

The other sector of the economy the Bank is worried about, and an equally important one to the Royal Tunbridge Wells economy, is the Financial Services industry. Financial Services in Royal Tunbridge Wells employ 3,176 people, making up 10.6%of the Royal Tunbridge Wells working population.

Together with a cut in interest rates, the Bank also announced an increase in the quantity of money via a new programme of Quantitative Easing to buy £70bn of Government and Private bonds. Now that won’t do much to the Royal Tunbridge Wells property market directly, but another measure also included in the recent announcement was £100bn of new funding to banks. This extra £100bn will help the High St banks pass on the base rate cut to people and businesses, meaning the banks will have lots of cheap money to lend for mortgages .. which will have a huge effect on the Royal Tunbridge Wells property market (as that £100bn would be enough to buy half a million homes in the UK).

It will take until early in the New Year to find out the real direction of the Royal Tunbridge Wells property market and the effects of Brexit on the economy as a whole, the subsequent recent interest rate cuts and the availability of cheap mortgages. However, something bigger than Brexit and interest rates is the inherent undersupply of housing (something I have spoken about many times in my blog and the specific affect on Royal Tunbridge Wells). The severe undersupply means that Royal Tunbridge Wells property prices are likely to increase further in the medium to long term, even if there is a dip in the short term. This only confirms what every homeowner and landlord has known for decades .. investing in property is a long term project and as an investment vehicle, it will continue to outstrip other forms of investment due to the high demand for a roof over people’s heads and the low supply of new properties being built.