Thursday 30 November 2017

Royal Tunbridge Wells Home Owners Are Only Moving Every 16 Years (Part 1)

As I mentioned in a previous article, the average house price in Royal Tunbridge Wells is 13.43 times the average annual Royal Tunbridge Wells salary. This is higher than the last peak of 2008, when the ratio was 9.61. A number of City commentators anticipated that in the ambiguity that trailed the Brexit vote, UK (and hence Royal Tunbridge Wells) property prices might drop like a stone. The point is - they haven’t.

Now it’s true the market for Royal Tunbridge Wells’ swankiest and poshest properties looks a little fragile (although they are selling if they are realistically priced) and overall, Royal Tunbridge Wells property price growth has slowed, but the lower to middle Royal Tunbridge Wells property market appears to be quite strong.

Scratch under the surface though, and a different long-term picture is emerging away from what is happening to property prices. Royal Tunbridge Wells people are moving home less often than they once did. Data from the Office of National Statistics shows that the number of properties sold in 2016 is again much lower than it was in the Noughties. My statistics show…

The Total Number of Property Sales Per Annum in Royal Tunbridge Wells
and the Tunbridge Wells Borough Council Area Since 1995
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
1,743
2,153
2,513
2,319
2,421
2,159
2,533
2,828
2,336
2,587
2,227











2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2,981
2,860
1,548
1,479
1,664
1,731
1,624
1,786
2,152
2,144
1,967


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Even though we are not anywhere near the post credit crunch (2008 and 2009) low levels of property sales, the torpor of the Royal Tunbridge Wells housing market following the 2016 Brexit vote has seen the number of property sales in Royal Tunbridge Wells and the surrounding local authority area level off to what appears to be the start of a new long term trend (compared the Noughties).

Interestingly, it was the 1980’s that saw the highest levels of people moving home. Nationally, everyone was moving on average every decade. Even though it was during the Labour administration of the late 1970’s where the right to buy one’s council house started, it was the Housing Act of 1980 that that really got council tenants moving, as Thatcher’s Tory government financially encouraged council tenants to buy their council-rented homes - for which countless then sold them on for a profit and moved elsewhere. The housing market was awash with money as banks were allowed to offer mortgages as well as the existing building societies, meaning it made it simpler for Brits to borrow even more money on mortgages and to climb up the housing ladder.

But coming back to today, looking at the property sales figures in the Royal Tunbridge Wells area since 2010/11, a new trend of number of property sales appears to have started. Interestingly, this has been mirrored nationally. The reasons behind this are complex, but a good place to start is the growth rate of real UK household disposable income, which has fallen from 5.01% a year in 2000 to 1.68% in 2016. Also, things have deteriorated since the country voted to leave the EU as consumer price inflation has risen to 2.7% per annum, meaning inflation has eaten away at the real value of wages (as they have only grown by 1.1% in the same time frame).

With meagre real income growth, it has become more difficult for homeowners to accumulate the savings needed to climb up the housing ladder as the level of saving has also dropped from 4.26% of household income to -1.11% (i.e. people are eating into their savings).


Next week I will be discussing how these (and other issues) has meant the level of Royal Tunbridge Wells people moving home has slumped to once every 16 years.

Wednesday 22 November 2017

Royal Tunbridge Wells House Prices Outstrip Wage Growth by 38.85% since 2007

I recently read a report by the Yorkshire Building Society that 54% of the country has seen wages (salaries) rise faster than property prices in the last 10 years. The report said that in the Midlands and North, salaries had outperformed property prices since 2007, whilst in other parts of the UK, especially in the South, the opposite has happened and property prices have outperformed salaries quite noticeably.

As regular readers of my blog know, I always like to find out what has actually happened locally in Royal Tunbridge Wells. To talk of North and South is not specific enough for me. Therefore, to start, I looked at what has happened to salaries locally since 2007. Looking at the Office of National Statistics (ONS) data for Tunbridge Wells Borough Council, some interesting figures came out...


Tunbridge Wells
South East
Nationally
2007
 £29,042
 £26,120
 £23,920
2008
 £29,838
 £27,290
 £24,960
2009
 £29,853
 £27,903
 £25,506
2010
 £30,805
 £28,486
 £26,088
2011
 £31,897
 £28,839
 £26,010
2012
 £31,892
 £28,902
 £26,432
2013
 £33,540
 £28,995
 £26,931
2014
 £33,296
 £29,494
 £27,097
2015
 £29,229
 £29,895
 £27,508
2016
 £28,688
 £30,264
 £28,132


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Salaries in Tunbridge Wells have actually seen a drop of by 1.22% since 2007 - interesting when you compare that with what has happened to salaries regionally (an increase of 15.87%) and nationally, an increase of 17.61%.

Next, I needed to find what had happened to property prices locally over the same time frame of 2007 and today. Net property values in Tunbridge Wells are 37.63% higher than they were in late 2007 (not forgetting they did dip in 2008 and 2009). Therefore...

Property values in the Royal Tunbridge Wells area have increased at a higher rate than wages to the tune of 38.85% ... meaning, Royal Tunbridge Wells is in line with the regional trend

All this is important, as the relationship between salaries and property values is the basis on how affordable property is to first (and second, third etc.) time buyers. It is also vitally relevant for Royal Tunbridge Wells landlords as they need to be aware of this when making their buy-to-let plans for the future. If more Royal Tunbridge Wells people are buying, then demand for Royal Tunbridge Wells rental properties will drop (and vice versa).

As I have discussed in a few articles in my blog recently, this issue of ‘property-affordability’ is a great bellwether to the future direction of the Royal Tunbridge Wells property market. Now of course, it isn’t as simple as comparing salaries and property prices, as that measurement disregards issues such as low mortgage rates and the diminishing proportion of disposable income that is spent on mortgage repayments.

On the face of it, the change between 2007 and 2017 in terms of the ‘property-affordability’ hasn’t been that great. However, look back another 10 years to 1997, and that tells a completely different story. Nationally, the affordability of property more than halved between 1997 and today. In 1997, house prices were on average 3.5 times workers’ annual wages, whereas in 2016 workers could typically expect to spend around 7.7 times annual wages on purchasing a home.

The issue of a lack of homeownership has its roots in the 1980’s and 1990’s. It’s quite hard as a tenant to pay your rent and save money for a deposit simultaneously, meaning for many Royal Tunbridge Wells people, home ownership isn't a realistic goal. Earlier in the year, the Tories released proposals to combat the country’s 'broken' housing market, setting out plans to make renting more affordable, while increasing the security of rental deals and threatening to bring tougher legal action to cases involving bad landlords.

This is all great news for Royal Tunbridge Wells tenants and decent law-abiding Royal Tunbridge Wells landlords (and indirectly owner occupier homeowners). Whatever has happened to salaries or property prices in Royal Tunbridge Wells in the last 10 (or 20) years ... the demand for decent high-quality rental property keeps growing. If you want a chat about where the Royal Tunbridge Wells property market is going – please read my other blog posts or drop me note via email, like many Royal Tunbridge Wells landlords are doing.