Waiting for the Royal Tunbridge Wells House Market to Crash will Cost you £63,283

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Doom and gloom in the British property market or clickbait doom-mongers?

Newspapers and clickbait 24-7 news websites, desperate for clicks, are peddling a story of a doomsday time for the economy, particularly the property market, as interest rates and inflation create the perfect storm for the UK property market.

So, let us look at what is happening in the British property market and whether house prices will drop.

Yes - Tunbridge Wells house prices will be lower in 24 months.

Yet the reductions in what I believe a property will sell for in the next couple of years compared to the doom-mongers is wildly different.

The doom-mongers are saying the 2022 property market will be like the crash years of 1988 and 2008.

I'm afraid I have to disagree, let me explain what the difference is this time compared to the previous house price crashes.

To start with …

56.25% of homeowners don’t have a mortgage, whilst in 1988, that was 35.8%. These people are shielded from the interest rate rises.

The next point is negative equity.

Yes, negative equity was an issue after 1988 when everyone had an endowment mortgage, so they never paid any of the capital off their mortgage. Therefore, when house prices dropped, negative equity was a massive issue as people owed more than what their house was worth.

By 2008, nobody was taking out endowment mortgages, yet still, 1 in 2 were interest-only mortgages (meaning the capital wasn’t being paid off). Today, 17 out of 20 homeowners are on repayment mortgages - so they have more home equity, so negative equity isn't so much an issue.

The issue is the increasing interest rates. Yes, they are rising … albeit from artificially low rates.

In 1988, nearly everyone was on a variable rate mortgage and an average mortgage interest rate was 10.8%, and they rose to 16.4% by 1990. That hurt, yet most survived.

In 2008, 6 out of 10 homeowners had learned their lesson and were on fixed rates at an average rate of 6.07%. Today 17 out of 20 homeowners have long-term fixed rates with an average of 2.14%.

Also, it must be noted that homebuyers have been stress tested for 6% to 7% mortgage rates since 2014 because of the Bank of England MMR rule changes. It will be challenging, and lifestyle choices will need to be made, yet we should not see the dumping of houses on the market as we did in 2008/9.

The next issue is the number of mortgages being pulled. Yes, around 1,000 mortgage deals have been removed in the last week - yet there are still 3,000+ deals out there … and most are still fixed rates.

Also, let’s not forget that 1 in 5 people rent today and are protected from all this, yet in 1988, only 1 in 14 rented. 

Therefore, the economic conditions surrounding the house price crash in 1988 and 2008 are not there now.

Don’t get me wrong, those homeowners coming off their fixed rates of around 2% in the coming years will have to make tough choices as they will see their monthly mortgage payments rise substantially.

Yet, as I have discussed in other articles, extending your mortgage term can significantly affect your monthly mortgage payments and there are things that homeowners should be doing now to mitigate the issue in the coming few years.

But back to the question, should people wait to move, and what will happen to Tunbridge Wells property prices?

I believe that subject to nothing seismic happening in the world, Tunbridge Wells property values will be broadly neutral and slowly drift downwards over the next 24 months. I believe they will drift because of the issues of inflation and mortgage affordability, yet we won’t have a crash for the points made in the first part of this article. I believe Tunbridge Wells property will be selling for sums of 4% to 6% less in a couple of years compared to today.

This means if we achieve prices of 4% to 6% less, homeowners will still be getting the same prices the property market was getting in the summer of 2021 – again – nobody was complaining about those!

However, let us assume I am wrong with my thoughts, and we see a significant house price crash; what then?

Well, let me look at the last two house price crashes first.

• The housing crash of 1988 saw the average house in the UK drop from £63,784 to £50,167, a drop of 20.09%.

• The housing crash of 2008 saw the average house in the UK drop from £184,132 to £154,065, a drop of 16.33%.

So, let’s assume that Tunbridge Wells house prices fall by 18% - surprisingly, it will not help Tunbridge Wells buyers.

In previous house price crashes, people tend to find their careers are more at risk, and in turn, their wages don't rise as much. It is the younger generation (i.e., first-time buyers age range) that often gets hit the toughest by these recessions.

Let me look at Tunbridge Wells first-time buyers.

If Tunbridge Wells first-time buyers wait until 2024 to buy and Tunbridge Wells property values drop by 18%, that will prove more expensive. Let me explain why …

In the last property crash of 2008, lenders withdrew 5% deposit mortgages. The smallest mortgage that first-time buyers could obtain was with a 10% deposit, and even those were hard to come by.

When writing this article, first-time buyers can obtain a 5% deposit mortgage for a fixed rate of 3.92% for five years.

The typical first-time buyer terraced house in Tunbridge Wells sells for £434,566.

If first-time buyers were to buy now, on this mortgage deal, they would have to find a £21,728 deposit, and their monthly mortgage payments would be £1,808.18 per month.

So, let’s say property values in Tunbridge Wells do drop by 18% in the next 24 months; the terraced house would now be worth £356,344, a significant saving in the purchase price.

Or is it?

Everyone believes the Bank of England will raise interest rates further, so let's assume they go to 5.5% by the autumn of 2024. That will mean the rate for a 10% deposit first-time buyer mortgage will be in the early 7%’s, so let me assume 7.19% (because the lenders have in the past increased the gap between the Bank of England base rate and the mortgage rate in more challenging economic times to allow for the extra risk).

The monthly mortgage payment in two years on the 7.19% mortgage would be £2,091.75 per month, and in those two years, you would have had to have saved an additional £13,906 to make up your 10% deposit of £35,634.

So even if Tunbridge Wells house prices did drop by 18%, the first-time buyer would be £3,403 worse off a year in mortgage payments (and would have to save many thousands extra for their deposit) 

... and then there is the other cost of waiting.

You have two years’ worth of rent to pay. The average rent for a Tunbridge Wells property is £1,632 per month.

If you waited a couple of years for Tunbridge Wells house prices to drop by 18%, you would spend £39,168 in rent plus have higher mortgage payments in 2024/5/6 and with the extra deposit mentioned above it would add up to an additional £63,283 over the next five years.

Yes, the price you paid for your Tunbridge Wells home would be lower if you waited two years. Yet, you would only benefit from that when you sold on versus the economic pain of two years of extra renting, the higher deposit and higher mortgage payments in a couple of years.

This doesn't even consider the emotional cost of putting your life on hold for two years, and there is no guarantee that the mortgage lending criteria in two years would allow you to step onto the property ladder.

So, now I have shown that waiting will cost you financially and emotionally, what are your thoughts on the matter?

Tunbridge Wells house prices will drop, yet did you realise it will cost you more, even if house prices are falling?

Do you believe the doom-mongers, or do you believe in the robust nature of the British economy?

Don’t forget, George Osbourne said house prices would drop by 18% in May 2016 if we voted to leave the European Union, whilst many economists said house prices would fall by 5% to 10% when Covid hit in March 2020.

And we all know what happened to those predictions now.

If you believe you will be better off owning your own Tunbridge Wells home rather than renting one, don't bother to wait for the suggested house price crash that may never happen.

These are my thoughts - what are yours? Let me know in the comments.

What Was the Average Royal Tunbridge Wells House Price in 1952?

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Well, what a weekend the Jubilee was. Street parties, gatherings in the park, the purple bunting, egg and cress sandwiches, union jack flags, cheese and pineapple on cocktail sticks, and let's not forget the trifle – the Platinum Jubilee Party.  And no decent party is worth its salt without a game or a quiz.

So, if you have post-Jubilee blues, let me ask you, how much was the average Tunbridge Wells house worth in 1952?

To start with, let me look at what a property is worth today in Tunbridge Wells.

The average price paid for a property in the Tunbridge Wells area in the last 12 months was £531,440. 

Now, let's go back to 1952. Sir Winston Churchill was the Prime Minister, Newcastle won the FA Cup, London was covered in the Great Smog, free prescriptions on the NHS ended (it cost 1 shilling or 5p in new money), and King George IV, at the age of 56 passed away on the 6th February, meaning Princess Elizabeth became the Queen - as for housing…

The average price of a Tunbridge Wells home in 1952 was £4,339.

This means Tunbridge Wells house prices are 121 times higher since 1952. 

Yet over the last 70 years, the country has been subjected to 4.5% per annum inflation.

The 1952 Tunbridge Wells home is equivalent to £83,448 today when adjusted for inflation.

This means Tunbridge Wells house prices have increased by 504.8% in real terms since 1952.

So, does that mean house prices are more expensive today compared to 1952?

In 1952, the average annual male wage was £452, 8 shillings and 1 pence, meaning the average Tunbridge Wells house was 9.59 times the average wage. Today the average home is 8.85 times the average wage.

Yet let us not forget the average mortgage payment in 1952 was £11 per month. The average Brit earned £34 per month, meaning 32.3% of the household income was going on mortgage payments, whilst nationally today, according to the Nationwide, it stands at 28%. 

It's cheaper, in real terms, to buy a property in 2022 than in 1952.

 And that’s the point, some things in ‘real terms’ (real terms being true spending power of the money after taking into account wages, costs and inflation) were more expensive and some cheaper 70 years ago. For example, in 1952, petrol was equivalent (in today’s inflation-adjusted prices) to £1.02 per litre, a pint of beer £2, half a dozen eggs £2.20, cheddar cheese £2.40 per 500g, a basic radio £430, a Hoover £530 and a 12-inch TV £1,600.

So back to property, the Queen’s reign has seen some amazing house price rises in the UK, yet that growth hasn’t always been in constant upwards direction as we have had a couple of dips along the way.

We had a house price crash in 1990, when the average value of a Tunbridge Wells property dropped from £130,582 to £108,147 in 1996, only for them to start rising again.

 

Tunbridge Wells saw another house price crash between 2008 and 2009, and the average house price dropped from £390,627to £333,015 in a year.

 

So, what else has changed about property and housing since the Queen came onto the throne?

 

In 1952, only 32% of people owned their own home, whilst 50% of people rentedfrom a private landlord and 18% rented a council house.

 

By the time of the Silver Jubilee in 1977, 56% of people owned their own home, with 12% of people privately renting and 32% rented from the council.

 

Come the Golden Jubilee in 2002, 70% of people owned their own home, with 11% of people privately renting and 19% rented from the council.

 

Today, 63% of people own their own home, 20% of people privately rent and 17% rent from the council.

 

So, to conclude, as we look forward into the 21st century, I am sure the property market will be totally different again in 70 years. 

 

I hope you enjoyed reading this article and do share it with your friends if you find it interesting.

 

PS for all you Rightmove fans, the average Tunbridge Wells apartment in 1952 was worth £2,388, and a terraced home in Tunbridge Wells could be bought for on average £3,557.

The 11 Rules to Buying a Tunbridge Wells Property

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My 11 Rules to Buying a Royal Tunbridge Wells Property

 

 

Finding your next Tunbridge Wells property, be that for yourself to live in or as a buy-to-let landlord, can sometimes be a scary task. You are possibly making one of the biggest purchases of your life, and you want to ensure you make the right choice.

 

Buying your next property is all about finding a property with the features that match your requirements. However, what might be important to you as a homebuyer, might not be as important to other Tunbridge Wells homebuyers.

 

Some features will be red line must haves, whilst other features might be more negotiable, yet understanding what your requirements need to be, will make it easier to find the Tunbridge Wells home of your dreams.

 

Let’s look at my top 11 rules you need to consider when buying a property in Tunbridge Wells.

 

1. Location, Location, Location in Tunbridge Wells

 

You can change many things within a property, but location isn’t one. They say you should buy a property for the things you can change. Go and visit the different neighbourhoods of thevv BBC area. Don’t just drive through them, walk through them at different times of the day. Look at weekdays as well as weekends. Think about transport links with access to bus routes, arterial roads. If you have children (or your tenants may have), think about school catchment areas for primary/secondary schools.

 

2. Tunbridge Wells Bedrooms

 

Did you know there are 64,745 bedrooms in Tunbridge Wells?

 

Well, you do now! Anyway, the number of bedrooms is a very significant consideration when buying your new home locally. If you need bedrooms for your children, the location of the bedrooms could be an issue. Depending on the age of any children, you might not want them to be a long way from the master bedroom, or if the children are teenagers, the opposite could be true. Bedroom size is also important. Is there enough space for children to study or have wardrobes? Do you need bedrooms for an office? If office space is required, you might want to consider a property with one less bedroom and one more reception room – and it will probably be a little cheaper. All things to consider.

 

 

 

3. Potential Future House Price Growth in Tunbridge Wells

 

The type of house you buy will determine how it increases in value in the future. Now this shouldn’t be the main consideration, yet it’s important to consider.

 

Since 2001, the different types of property in Tunbridge Wells have risen by different percentages:

 

•  detached properties have risen by 147.0%

•  semi-detached properties have risen by 162.5%

•  town houses/terraced properties have risen by 172.7%

•  apartments/flats have risen by 144.9%

 

On a standalone point for Tunbridge Wells landlords, the level of rent and yield are important considerations for your Return on Investment (ROI). There tends to be an inverse relationship between capital growth and yield (i.e. Tunbridge Wells properties with higher capital growth tend to have lower rental yields). If you are a t local landlord and have any questions on this (or any point), drop me a note.

 

4. The Overall Interior Size Of Your Future Tunbridge Wells Property

 

On average a person only views five houses before they buy a house and only spends around 20 minutes in each on a viewing. Therefore, I would advise that you have a good idea about the size of home you require before you start your search. If you have a big family you are going to need a bigger house obviously, yet you still need the budget to afford to buy a bigger home. A top tip for you, the general rule of thumb is the older the house, the more you get for your money.

 

One great idea to calculate the square metreage of your potential home. Ask to view the full copy of the Energy Performance Certificate, as it has the size of the property in square metres.

 

Bigger houses locally tend to cost more money to run with utility bills and council tax.

 

A final thought on size is the question of whether your family is likely to grow in the next decade? Will you have more children or is a parent coming to live with you?

 

5. The Price You Will Have To Pay For Your Next Tunbridge Wells Home

 

In the last 12 months, the property market locally has remained buoyant as people were forced to spend more time at home. Therefore they looked for more space … butwhat did they have to pay for that privilege? 

 

• 291 Tunbridge Wells detached properties have sold for an average £844,200

• 319 Tunbridge Wells semi-detached properties have sold for an average £489,500

• 231 Tunbridge Wells town house/terraced properties have sold for an average £429,700

• 195 Tunbridge Wells apartments/flats have sold for an average £323,600

 

Look at the property portals (e.g. Rightmove, Boomin, Zoopla and OnTheMarket) and search for Tunbridge Wells property that is both available and sold subject to contract. Get a feel for asking prices of the properties that are sold subject to contract as these will give you a good idea what they roughly sold for. Again, if you are not sure, pick up the phone or drop me a line.

 

6. Bathroom(s)

 

Check the bathroom for water leaks. Do the toilets flush OK, do the taps drip? Is there any mould? And do you need more than one?

 

7. The Lounge/Living Room

 

You will undoubtedly be spending a lot of time in the lounge/living room, so it needs to meet your requirements. Do you need a dining area? Does the design and arrangement of the room suit your lifestyle (or your tenants). Will you need new furniture? Are there enough electrical sockets? What are the carpets like? That goes for all rooms.

 

8. Central Heating For Your Tunbridge WellsProperty

 

What type of central heating system is present, and does it meet the requirements of you and the home? The Energy Performance Certificate (EPC) will tell you how energy efficient the property is and how much it will cost to run. You would be amazed how few buyers ask to see the full copy of the EPC – yet you have the right to view it – always ask the estate agent for a copy or download it for free from the Government website.

 

9. The Outside

 

The outside space of your future home is also something you need to reflect on before you start your search. What sort of back garden do you want? Do you want low maintenance? Do you want a bigger garden? You also need to ensure the outside of your next home is in great condition. Yet, if it’s a ‘do’er-upper’, does the price allow for those works to be done?

 

10. The Loft And Cellar 

 

Another aspect to consider when buying a property is the loft (or even the cellar/basement if it has one). In both, look for water damage that could mean problems in the future whilst in the cellar/basement, a musty smell could be poor ventilation meaning dry damp could be an issue. Also check for insulation in the loft (the Energy Performance Certificate will tell you if it’s up to standard).

 

11. Garage/Off Road Parking Space

 

How many cars do you have in your family? Can you park them all on your drive? Visit the property during the day, the evening, and weekends to see how the parking provision changes. If the property has a garage, can it be used for something else?

 

These are my top 11 rules – yet do you have others I haven’t considered? 

 

Let me know in the comments.