Wednesday 29 August 2018

Will the Royal Tunbridge Wells Property Market Crash?

And if it does ... who will be the winners and losers?

Those Royal Tunbridge Wells people wanting property values to dropwould be those 30 or 40 something’s, sitting on a sizeable amount of equity and hoping to trade up (because the percentage drop of your current ‘cheaper’ property will be much less than the same percentage drop of the more expensive property– and trading up is all about the difference). If you have children planning to buy their first home or you are a 20 something wanting to buy your first home – you want them to drop. Also, landlords looking to add to their portfolio will want to bag a bargain (or two) and they would love a drop!

Yet, if you have recently bought a Royal Tunbridge Wells property with a gigantic mortgage, you’ll want Royal Tunbridge Wells’ property values to rise. If you are retired and are preparing to downsize, you will also want Royal Tunbridge Wells’ property values to rise (because you will have more cash left over after the move). Also, if you, a landlord looking to sell your portfolio or a Royal Tunbridge Wells home owner, who has remortgaged to raise money for other projects (meaning you have very little equity), you will want Royal Tunbridge Wells property values to rise to enable you to put a bigger deposit down on the next purchase.

So, before I discuss my thoughts on the future, it’s important to look at the past…

The last property crash, caused by the Global Financial Crisis, was between Q3 2007 and Q3 2009 … when property values in Tunbridge Wells dropped 9.12%

...taking an average property from £272,331 in September 2007 to £247,500 by September 2009 … and since then – property values have over the medium-term risen (as can be seen on the graph).  






So ... what is happening now?

The simple fact is people in the UK are moving less (and hence buying and selling less). Estate agents up anddown the land are blaming “Brexit” for this but the reality is that the problems in the British housing market are a lot greater than measly old Brexit!

There is a direct link between how people feel about the property market (sentiment) and the actual performance of the property market. However, the question of whether people’s sentiment moves as a result of changes in the property market, or whether changes in the property market drive sentiment is a question that baffles most economists – you see if someone feels assured about their financial situation (job, money etc.) and the future of property, they are more likely to feel assured to spend their hard-earned earnings on property and buy and if you think about it … vice versa. So, I believe Brexit isn’t the issue  - it’s just the “go to” excuse people are using. Humans don’t like uncertainty, and Brexit itself is causing uncertainty – it is, after all, the great unknown. 
So, is it the flux of global politics?Politics are causing hesitation in the posh £5m+ markets of Mayfair and other high value Monopoly board pieces – but certainly not in sleepy old Royal Tunbridge Wells (I don’t think Royal Tunbridge Wells is too high up on the house buying list of all these Saudi Prince’s and Russian Oligarchs) ... no the issues are much closer to home.

So, coming back to reality, one the biggest driving factors in the current state of play in housing market has been the part Buy To let landlordshave played in the last 15 years. Making money as buy to let landlord in these golden years was as easy as falling off a log – but not anymore! Landlords had been getting off quite lightly when it came to their tax position, but with Osborne changing the taxation rules on buy to let ... things have become a little more difficult for landlords.

Landlords have been hit with a supplementary rate of stamp duty, meaning they pay 3% more stamp duty than first time buyers. High rate taxpayers in the past have been able to offset the interest payments from their buy to let mortgages against their self-assessment tax bills – at their marginal rate. Between now and 2020 ... this is being reduced in small steps, so they will only be able to claim back relief at the basic rate of tax. The bottom line is that it will be much tougher for investors to make money on buy to let. Tied in with this, the mortgage rules were changed a few years ago, meaning it’s also become slightly tougher to obtain buy to let mortgages (although if I’m being honest – they need too). 

And what of Royal Tunbridge Wells first time buyers? Well, a few weeks ago in my blog on the Royal Tunbridge Wells Property Market, if you recall, I mentioned that last year was the best year for over decade for first time buyers. For the last 30 years, buy to let investors have constantly had more purchasing power than first time buyers, as they were older and more established, together with their tax breaks. Yet, now as many amateur landlords are having second thoughts in staying in buy to let, this has given first time buyers a chance to get on to the property ladder.

What will happen to Royal Tunbridge Wells’ property values?The simple fact is we don’t have the conditions that caused the crash in 2007 (i.e. sub-prime lending in the US, causing banks not to lend to each other, thus stalling the global economy as a whole).Assuming everyone is sensible on the Brexit negotiations, the biggest issue is interest rates.  As long as interest rates remain comparatively low (and don’t get me wrong – I think we could stand Bank of England base interest rates at 1.5% to 2.5% and still be OK, then the thought of a massive property market crash still looks improbable.

Yet correspondingly, I cannot see Royal Tunbridge Wells property values rising quickly either.

The double-digit growth years in property values between 1999 and 2004 are well gone. A lot of that growth was caused by an explosion of buy to let landlords buying property to accommodate the influx of EU migrants in those years. Mark Carney at the Bank of England can’t make interest rates any lower, so it’s difficult to envisage how credit conditions can get any easier!

Balance of probabilities ... Royal Tunbridge Wells property values will hover either side of inflation over the next five years, but if we did have another crash, what exactly would that mean to Royal Tunbridge Wells homeowners - if they dropped by the same percentage amount, as they did in the last crash?

If Royal Tunbridge Wells’ property prices dropped todayby the same percentage as they did locally in the Global Financial Crisis back in 2007/9 … we would only be returning to the property values being achieved in April 2016 … and nobody was complaining about those!

Therefore, looking at the number of people who have bought homes in the area since April 2016, that would affect approximately only 17% of local home owners and landlords ... and only a small percentage would actually lose - because you only lose money if they decide to move (and come to think of it, some of those sellers would fall into the category mentioned above that would relish a price drop!). So, really not many people would lose out.


Interesting don’t you think?

Tuesday 21 August 2018

39% Drop in Properties For Sale Today in Royal Tunbridge Wells Compared to 10 Years Ago


There is good news for Royal Tunbridge Wells buy to let landlords as ‘top of the range’ well-presented properties are getting really decent rents compared to a year ago however, this rise in rents is thwarting many potential first time buyers from saving for both a deposit and money for a rainy day. On top of this, there is also a shortage of Royal Tunbridge Wells homes coming on the market thus adding fuel to the slowdown and affecting not just Royal Tunbridge Wells first time buyers but also those going up the housing ladder.

Whilst it is true that the Government’s initiatives, targeted at improving the supply of homes built and helping first time buyers obtaining necessary funding, are starting to work (albeit slowly), I also believe that to boost more existing home-owners and their properties onto the market, we as a Country, need to see a better focus placed on those looking to downsize (i.e. the mature generation).

If we took away some hurdles to home owners downsizing, such as removing stamp duty for those downsizers (as was done for first time buyers last year), together with encouraging even more first-time buyers with 100% mortgages to buy the smaller properties, this would in turn release more mid-range properties onto the market, which subsequently would encourage more mature homeowners to downsize from their bigger properties to buy those mid-range properties - thus completing the circle.
Looking at the most recent set of data from the Land Registry for Royal Tunbridge Wells (the TN2 postcode in particular), the figures show the indifferent nature of the current Royal Tunbridge Wells property market. 

Only 231 Royal Tunbridge Wells (TN2) Homes changed hands in the last 6 months

Royal Tunbridge Wells property values and transactions continue to be sluggish, and the monthly peaks and troughs of house prices and properties changing hands doesn’t mask the deficiency of suitable realistically priced property coming onto the Royal Tunbridge Wells property market, meaning the housing market is slowly becoming inaccessible to some would-be home owners.

Looking at what each property type is selling for in TN2 (note the data from the Land Registry is always 4/5 months behind) makes interesting reading ….





One must remember these are the average prices paid, so it only takes a run of a few expensive or cheaper property types (as can be seen with the variance in the Apartments and Terraced in the table) to affect the figures.. 

Looking at the numbers of properties for sale … I looked at my research for early Summer 2008, and at that time, 1,197 properties were on the market for sale in Royal Tunbridge Wells.. and when I did my research on this article today, just 730 properties for sale.. a drop of 39%.

The Government needs to seriously consider the supply and demand of the UK property market as a whole to ensure it doesn’t seize up. It needs to do that with bold and forward-thinking plans but, in the meantime, people still need a roof over their head, so as local authorities don’t have the cash to build new houses anymore, it’s the job of Royal Tunbridge Wells landlords to take up the slack. I must stress though, I have noticed a distinct ‘flight to quality’ by Royal Tunbridge Wells tenants, who are prepared to pay top dollar for an exceptional home to rent.  If you want to know what tenants are looking for and what type of things you as a Royal Tunbridge Wells landlord need to do to maximise your rental returns – drop me a line.

Sunday 12 August 2018

Royal Tunbridge Wells’ Property Values 5.5% higher than year ago – What’s the PLAN to fix the Royal Tunbridge Wells Property Market?

It’s been nearly 18 months since Sajid Javid, the Tory Government’s exHousing Minister published the White Paper “Fixing the Broken UK Housing Market”, meanwhile Royal Tunbridge Wells property values continue to rise at 5.5% (year on year for the council area) and the number of new homes being constructed locally bumps along at a snail’s pace, creating a potential perfect storm for those looking to buy and sell.

The White Paper is important for the UK and Royal Tunbridge Wells people, as it will ensure we have long-term stability and longevity in property market as whole. Royal Tunbridge Wells homeowners landlords need to be aware of these issues in the report to ensure they don’t lose out and ensure the local housing market is fit for purpose. The White Paper wanted more homes to be built in the next couple of decades, so it might seem counter-intuitive for existing home-owners and landlords to encourage more homes to be built and a change in the direction of housing provision – as this would appear to have a negative effect on their own property.

Yet the country needs a diversified and fluid property market to allow the economy as whole to grow and flourish ... which in turn will be a greater influence on whether prices go up or down in the long term. I am sure every homeowner or landlord in Royal Tunbridge Wells doesn’t want another housing crisis like we had in 1974, 1988 and most recently in 2008.

Now, as Sajid Javid has moved on to the Home Secretary role, the 17th Housing Minister in 20 years (poisoned chalice or journeyman’s cabinet post) James Brokenshire has been given the task of making this White Paper come alive. The White Paper had a well-defined notion of what the issues were. 

The first of the four points brought up was to give local authorities powers to speed up house building and ensure developers complete new homes on time. Secondly, statutory methods demanding local authorities and builders build at higher densities (i.e. more houses per hectare) where appropriate. The other two points were incentives for smaller builders to take a larger share of the new homes market and help for people renting.

However, lets go back to the two initial points of planning and density.

(1) Planning

For planning to work, we need a robust Planning Dept. Looking at data from the Local Government’s Association, in Tunbridge Wells, the council is well above the regional average, spending £71.41 per person for the Planning Authority, compared the regional average of £38.14 per head – which will mean the planning department should have no problems meeting those targets.



Also, 97% of planning applications are decided within the statutory 8-week initial period, above the regional average of 71% (see the graph below).  I am pleased with the numbers for our local authority when it comes to the planning and the budget allowed by our Politician to this vital service. 


(2) Density of Population

3.5 people live in every hectare (or 2.471 acres) in Tunbridge Wells

It won’t surprise you that 68,910 of 115,049 Tunbridge Wells residents live in the urban conurbations of the authority, giving a density of 21.5 people per hectare (again – much lower than I initially thought), whilst the villages have a density of 1.5 people per hectare.

I would agree with the Governments’ ambition to make more efficient use of land and avoid building homes at low densities where there is a shortage of land for meeting identified housing needs, ensuring that the density and form of development reflect the character, accessibility and infrastructure.

It’s all very good building lots of houses – but we need the infrastructure to go with it.

Talking to a lot of residents from Royal Tunbridge Wells, their biggest fear of all this building is a lack of infrastructure for those extra houses (the extra roads, doctors surgeries, schools etc.). I know most Royal Tunbridge Wells homeowners and landlords want more houses to be built to house their family and friends ... but irrespective of the density ... it’s the infrastructure that goes with the housing that is just as important ... and this is where I think the White Paper failed to go as far as I feel it should have done.

Interesting times ahead I believe!

Monday 6 August 2018

More Than Seventeen Babies Born for Every New Home Built in the Past Five Years in Tunbridge Wells

More than 17 babies have been born for every new home that has been built in Tunbridge Wells since 2012, deepening the Royal Tunbridge Wells housing shortage.

This discovery is an important foundation for my concerns about the future of the Royal Tunbridge Wells property market - when you consider the battle that todays twenty and thirty somethings face in order to buy their first home and get on the Royal Tunbridge Wells property ladder. This is particularly ironic as these Royal Tunbridge Wells youngsters’ are being born in an age when the number of new babies born to new homes was far lower.

Thiswill mean the babies being born now, who will become the next generation’s first-time buyers will come up against even bigger competition from a greater number of their peers unless we move to long term fixes to the housing market, instead of the short term fixes that successive Governments have done since the 1980’s.

Looking at the most up to date data for the area covered by Tunbridge Wells Council, the numbers of properties-built versus the number of babies born together with the corresponding ratio of the two metrics …






It can be seen that in 2016, 6.27 babies had been born in Tunbridge Wells for every home that had been built in the five years to the end of 2016 (the most up to date data). Interestingly, that ratio nationally was 2.9 babies to every home built in the ‘50s and 2.4 in the ‘70s. I have seen the unaudited 2017 statistics and the picture isn’t any better! (I will share those when they are released later in the year).

Our children, and their children, will be placed in an unprecedented and unbelievably difficult position when wanting to buy their first home unless decisive action is taken. You see it doesn’t help that with life expectancy growing year on year, this too is also placing excessive pressure on homes to live in availability, with normal population growth nationally (the number of babies born less the number of people passing away) accumulative by two people for every one home that was built since the start of this decade.

Owning one’s home is a measure many Brits to aspire to. The only long-term measure that will help is the building of more new homes on a scale not seen since the 50’s and 60’s, which means we would need to aim to at least double the number of homes we build annually.

In the meantime, what does this mean for Royal Tunbridge Wells landlords and homeowners? Well the demand for rental properties in Royal Tunbridge Wells in the short term will remain high and until the rate of building grows substantially, this means rents will remain strong and correspondingly, property values will remain robust.