Monday 30 July 2018

How Affordable is Property for Royal Tunbridge Wells’ Average Working Families?

The simple fact is we are not building enough properties. If the supply of new properties is limited and demand continues to soar with heightened divorce rates, i.e. one household becoming two, people living longer and continued immigration, this means the values of those existing properties continues to remain high and out of reach for a lot of people, especially the blue collar working families of Royal Tunbridge Wells.

Looking at some recent statistics released by the Government, the ratio of the lower quartile house prices to lower quartile gross annual salaries in Tunbridge Wells Borough Council has hit 13.21 to 1. 



What does that mean exactly and why does it matter to Royal Tunbridge Wells’ landlords and homeowners?

If we ordered every property in the Tunbridge Wells Borough Council area by the value of those properties, the average value of the lower quartile properties (i.e. lowest 25%) would be £265,500. If we then did the same, and ordered everyone’s salary in the same council area, the average of the lowest quartile (lowest 25%), the average salary of the lowest 25% is £20,097 pa, thus dividing one with the other, we get the ratio of 13.21 to 1.
Assuming there is one wage earner in the house, the chances of a Royal Tunbridge Wells working family being able to afford to buy their own home, when it’s over thirteen times their annual salary, is very slim indeed. The existing affordability crisis of people wanting to buy their own home is the unavoidable outcome of the decade on decade failure to build enough homes to keep up with demand. Nevertheless, improving affordability is not a case of just constructing more homes. Tunbridge Wells Borough Council needs to ensure more properties are not only built, but built in the right locations and of the right type and at the right price to ensure the needs of these lower income working families are met, because at the moment, they presently have few options apart from the private rental sector.

Looking at the historic nature of the ratio, it can clearly be seen in the graph below that this has been an issue since the early to mid 2000’s.

However, if one looks at the historic data, those on the bottom rung of the ladder (those in the lower quartile of wage earners) used to be housed by the local authority instead of buying. However, the vast majority of council houses were sold off in the 1980’s, meaning there are much fewer council houses today to house this generation.

Many of the lower quartile working class families were given a lifeline to buy their own homes in middle 2000’s, with 100% mortgages, but the with the credit crunch in 2009, that rug (of 100% mortgages) was rudely pulled from under their feet. You see it is cheaper to buy than rent ... it’s the finding of the 5% deposit that is the challenging issue for these Royal Tunbridge Wells working class families. 

So unless the Government allow 100% mortgages back, the fact is, demand for rental properties will outstrip supply.

In the long term, to alleviate that, I would suggest the Royal Tunbridge Wells community hold their local politicians at Tunbridge Wells Borough Council to account for the actions they could take to ensure the affordability of housing and the extent to which they work with private developers and housing associations and aggressively use the planning tools at their disposal to safeguard the local community getting the new households we need. Tunbridge Wells Borough Council could make certain parcels of residential building land for private rented development only, eliminating the opportunity of the land being bought to develop large executive homes, which do not solve the current problem. 

Yet in the short term, all this means is demand for rental properties will continue to grow, keeping Royal Tunbridge Wells house prices high and Royal Tunbridge Wells rents high.

Sunday 22 July 2018

858 Royal Tunbridge Wells Landlords Plan to Expand Their Buy To Let Portfolios


A noteworthy number of buy to let landlords in Britain plan to buy more properties over the next year notwithstanding the frustrations, challenges and seismic changes in the private rented sector. According to Aldermore, the specialist Buy To Let lender, their research shows around 41% of portfolio buy to let landlord’s objective is to grow their buy to let portfolio (Portfolio landlords are landlords that own more than one property). 

So, I thought, “Are Royal Tunbridge Wells landlords feeling the same?” If so, if these numbers were applied to the Royal Tunbridge Wells private rental market, what sort effect would it have on the Royal Tunbridge Wells property market as whole?

Talking to the landlords I deal with, most are feeling quite optimistic about the future of the Royal Tunbridge Wells rental market and the prospect it presents notwithstanding the doom and gloom prophecies that the property market will shrink. Many of those landlords who are looking to enlarge their portfolio are doing so because they still see the Royal Tunbridge Wells rental market as a decent investment opportunity. 

With top of the range Bank and Building Society Savings Accounts only reaching 1.5% a year, the rollercoaster ride of Crypto currency and the yo-yoing of the Stock Market, the simple fact is, with rental yields in Royal Tunbridge Wells far outstripping current savings rates, the short term prospect of a minor drop in property prices isn’t putting off Royal Tunbridge Wells landlords.

The art to buying a Royal Tunbridge Wells buy to let investment is to buy the profit on the purchase price, not the anticipation of the future sale price.

No matter what the historical economy has thrown at us, with the global meltdown in 2008/9, dotcom crash of 2000, ERM in 1992, the three day week, oil crisis and hyperinflation in the 1970’s (the list goes on) ... the housing market has always bounced back stronger in the long term. That’s the point ... long term. Investing in buy to let is a long-term strategy. The simple fact is, over the long term with the increasing demand for rental properties, predominantly among Millennials as many cannot afford to get on the property ladder, and with councils not building enough properties of any kind, many youngsters are having to resort the private rental market for their accommodation needs.

So, what of the numbers involved in Royal Tunbridge Wells?

There are 961 landlords that own just one buy to let (BTL) property in Royal Tunbridge Wells and 2,093 Royal Tunbridge Wells’ landlords, who are portfolio landlords. Between those 2,093 Royal Tunbridge Wells portfolio BTL landlords, they own a total of 4,393 Royal Tunbridge Wells BTL properties and they can be split down into the size of landlord portfolio in the graph below….



If I apply the Aldermore figures that means 858 Royal Tunbridge Wells landlords have plans to expand their BTL portfolio in the coming year or so.

However, the Aldermore Research also showed that 8% of private landlords intended to reduce the number of properties they own. They put this down to continuing Government intervention in the housing market (as many landlords mentioned too many limitations and higher taxation) while some believed that tenants are excessively protected to the disadvantage of the landlord.

I would say there is no repudiating that the buy to let market has taken a bit of a beating, thanks to a plethora of Government regulation, new mortgage underwriting rules in 2014 and George Osborne’s tax changes. Yet there still remains an overall consciousness of optimism among the vast majority of Royal Tunbridge Wells’ buy to let landlords. Despite these latest changes, many landlords still view buy to let as a good investment, as long as you buy right and expand your portfolio taking into account the second rule of buy to let … assess your position on the ‘buy to let seesaw’ of capital growth and yield.

If you want to buy right and assess your own portfolio on the yield/capital growth seesaw ... drop me a note. I don’t bite and the opinion I give, whether you are landlord of mine or not as the case may be, is given freely, without obligation or cost. The choice is yours. Thank you for reading this article. To read others, please visit my Royal Tunbridge Wells Property Blog.

Sunday 15 July 2018

Extra Funding Is Required for Affordable Homes in Royal Tunbridge Wells

In my blog about the Royal Tunbridge Wells Property Market I mostly only talk about two of the three main sectors of the local property market, the ‘private rented sector’ and the ‘owner-occupier sector’. However, as I often stress when talking to my clients, one cannot forget the third sector, that being the ‘social housing sector’ (or council housing as some people call it). 

In previous articles, I have spoken at length about the crisis in supply of property in Royal Tunbridge Wells (i.e. not enough property is being built), but in this article I want to talk about the other crisis – that of affordability. It is not just about the pure number of houses being built but also the equilibrium of tenure (ownership vs rented) and therein, the affordability of housing, which needs to be considered carefully for an efficient and effectual housing market.

An efficient and effectual housing market is in everyone’s interests, including Royal Tunbridge Wells homeowners and Royal Tunbridge Wells landlords, so let me explain ..

An average of only 110 Affordable Homes per year have been built by Tunbridge Wells Borough Council in the last 9 years
The requirement for the provision of subsidised housing has been recognised since Victorian times. Even though private rents have not kept up with inflation since 2005 (meaning tenants are better off) it’s still a fact there are substantial numbers of low-income households in Royal Tunbridge Wells devoid of the money to allow them a decent standard of housing.
Usually, property in the social housing sector has had rents set at around half the going market rate and affordable shared home ownership has been the main source of new affordable housing yet, irrespective of the tenure, the local authority is simply not coming up with the numbers required. If the local authority isn’t building or finding these affordable homes, these Royal Tunbridge Wells tenants still need housing, and some tenants at the lower end of the market are falling foul of rogue landlords. Not good news for tenants and the vast majority of law abiding and decent Royal Tunbridge Wells landlords who are tarnished by the actions of those few rogue landlords, especially as I believe everyone has the right to a safe and decent home.
Be it Tory’s, Labour, SNP, Lib Dems, Greens etc, everyone needs to put party politics aside and start building enough homes and ensure that housing is affordable. Even though 2017 was one of the best years for new home building in the last decade (217,000 home built in 2017) overall new home building has been in decline for many years from the heady days of the early 1970s, when an average of 350,000 new homes were being built a year.  As you can see from the graph, we simply aren’t building enough ‘affordable’ homes in the area.


The blame cannot all be placed at the feet of the local authority as Council budgets nationally, according to Full-Fact, are 26% lower than they have been since 2010.  
So, what does this mean for Royal Tunbridge Wells homeowners? Well, an undersupply of affordable homes will artificially keep rents and property prices high. That might sound good in the short term, but a large proportion of my Royal Tunbridge Wells landlords find their children are also priced out of the housing market. Also, whilst your Royal Tunbridge Wells home might be slightly higher in value, due to this lack of supply of homes at the bottom end of the market, as most people move up the market when they do move, the one you want to buy will be priced even higher.

Problems at the lower end of the property market will affect the middle and upper parts. There is no getting away from the fact that the Royal Tunbridge Wells housing market is all interlinked .. it’s not called the Property ‘Ladder’ for nothing!

Sunday 8 July 2018

Royal Tunbridge WellsProperty Market – Asking Prices Down 1.1% in the Last 12 Months

The average asking price of property in Royal Tunbridge Wells dropped by 1.1% or £6,141 compared to a year ago, taking the current average asking price to £535,131 compared with £541,272 this time last year.

The overall drop in asking prices is being put down to sellers being more realistic with their pricing and looking to benefit from the impending mortgage interest rate rises later in 2018. This is great news for first, second and third time buyers in Royal Tunbridge Wells starting their property hunting in the usually active spring market this year facing the opportunity of paying less for the property of their dreams. Even better news is that whilst first time buyers also have to pay less for their property, they also have the bonus of the Chancellor stopping Stamp Duty being paid by first time buyers!

Looking at the different sectors of the Royal Tunbridge Wells property market, splitting it down into property types, one can see what is happening to each sector of the market with regard to their average asking prices now compared to a year ago. Firstly, looking at the Pound note amounts… 




Interestingly, when one looks at the percentages, the biggest drop in average asking price pressure is in the apartments property type sector. 



Now, I must stress this overall drop in the asking prices of Royal Tunbridge Wells property doesn’t necessarily mean the value of Royal Tunbridge Wells’ property is going down by the same amount. 

Only time will tell if the current levels of Royal Tunbridge Wells asking prices is a correction of optimistic house sellers after a couple of months of enthusiastic asking price rises in the lead up to Christmas, or is it an initial sign that property values are slipping. To judge what is really happening to the Royal Tunbridge Wells property market, I believe these asking prices must be viewed in conjunction with both the values achieved and the length of time it takes to sell the property. 

Also, these figures are averages, so it might also mean less expensive types of Royal Tunbridge Wells apartments are on the market now, this dragging the average down, compared to a year ago.

One thought I would like to share with the Royal Tunbridge Wells homeowners and landlords wanting to sell their property, is the fact they need to be aware of the competition of other people selling their homes. One factor that could be contributing to a subdued demand for local property is the progressively strained buyer mortgage affordability (i.e. banks telling people they can only afford so much on a mortgage), meaning more and more buyers are hitting their maximum on the amount they are able to borrow on a mortgage sooner than they thought. 

So, what does this all mean, especially for buy to let landlords in Royal Tunbridge Wells? During these months of flux, there could be some property bargains to be had. Lower asking prices mean you are buying in better yields and potential capital growth at the same time. Many Royal Tunbridge Wells landlords pick the phone up or email me with Rightmove links, asking my opinion on the BTL potential of property. I don’t charge for that service, so if you don’t want to miss out on such opinion, follow what they do and make contact ... I don’t bite!

Sunday 1 July 2018

Royal Tunbridge Wells Millennials Have Spent £155,978 On Rent By The Age of 35

The Millennials were born between the mid 1980’s and late 1990’s thus making them between the age of around 22 to late 30’s. They are the imaginative, artistic youngsters who grew up with the newest tech and computers and who are huge aficionados of music festivals, gourmet pizzas, emoji’s, selfies and old school nostalgia. Also known as Generation Rent, many Millennials have discovered that renting is a good choice for their shelter and accommodation needs without the hassle that comes from buying a home. Nonetheless, that is not the only reason they don’t buy property. When they should be concentrating on their profession, putting down roots and starting a family, Millennials are still going through the pressure and strain of student loan liabilities whilst, at the same time, finding it tough to pay rent.

The hot topic at the moment is the cost of renting, as both political parties have seen mileage in wooing these Millennial Generation Renters. The average rent in Royal Tunbridge Wells is currently £1,092 per month making this a big-ticket item on the monthly budget. I was inquisitive to find out exactly how much Royal Tunbridge Wells Millennials will spend on rent by the time they reach their mid 30’s. The average age people leave home in the UK is 22; so looking at a Royal Tunbridge Wells 22-year-old (or Millennial) who left home in 2005 then between 2005 and today that Royal Tunbridge Wells Millennial will have shelled out £155,978 in rent.

It’s no wonder local Millennials can’t afford to buy a Royal Tunbridge Wells home given their tremendous debt. This means younger Royal Tunbridge Wells Millennials will probably carry on renting for the foreseeable future, simply because the prospect of buying a home is not yet achievable.. that is until you look more deeply at the numbers…

Looking at the chart above, the average rent of a Royal Tunbridge Wells property in 2005 was £898 per month (pm)  … if it had risen by inflation, today, that would be £1,265 pm. As I have already mentioned in the article, today it only stands at £1,092 per month. Looking over the last 12 years, adding up all the differences between what the average actual rent was compared to what it should have been if rent had gone up by inflation, the average Royal Tunbridge Wells Millennial tenant would have paid £169,851.

This means that an average 35-year-old Royal Tunbridge Wells Millennial tenant, who has been renting since 2005, is better off by £13,873 when comparing the actual rent paid compared to what it would have been if it had risen by inflation. In a nutshell, tenants have done well due to the sub-inflation growth in rents. 



In fact, if you recall I mentioned in an article a few weeks ago, the older Royal Tunbridge Wells Millennials are starting to use those savings and are gradually shifting towards home ownership. They are finally catching up with the British homeownership dream as Bank of Mum and Dad help with the deposit. Also, the scrapping of Stamp Duty from the Government starts to kick in together with the realisation that if the 5% mortgage deposit can be scrapped together (yes, 95% first time buyer mortgages have been available since 2009), it is still a lot cheaper to buy than rent, meaning this will unquestionably drive demand for Royal Tunbridge Wells homes for sale – good news for Royal Tunbridge Wells homeowners.


… and what does this mean for Royal Tunbridge Wells landlords? 

Well the vast majority of younger Millennials are still renters and I foresee this to be the case for at least the next ten to fifteen years.Landlords will need to keep improving their properties to ensure they get the best tenants and they will see a much higher rent achieved. Millennials will pay top dollar for a top dollar property. It is important to do things correctly as making money won’t be as easy as it has been over the last twenty years.  

With a greater number of properties on the market .. comes greater choice. Don’t buy the first thing you see, buy with your head as well as your heart … because as I promised a few weeks ago, the first rule of Buy To Let Investment …..“You are not going to live in the property yourself”