Royal Tunbridge Wells Council Tax Payers Stung by 58.7% above Inflation Rise

Buying and selling a home in Royal Tunbridge Wells isn’t the easiest or cheapest thing you will ever do. Estate Agent fees, Solicitors fees, Survey fees, Mortgage fees, Removal Van … the costs just mount up throughout every step of the move. Last week, a Royal Tunbridge Wells landlord asked me whether the Council Tax Band made a difference to a property’s appeal, be it tenanted or to owner occupiers, when it comes to being sold on the open market and whether extensions or improvements made a difference to the tax banding?

Well, like I said, the first point you should always be aware of is what Council Tax Band your new house or apartment will fall under. Being aware of this before you buy/move will help when planning month by month for life in your home (or investment). But what exactly are Council Tax Bands, and how do they affect landlords/tenants/homebuyers?

How much Council Tax you pay depends on two variables. The first is which Council Tax Band your property is in. A property is placed into a specific band depending upon what the value of the property was in April 1991– the date when the tax band system was applied. In a nutshell, what your property is worth today has no relevance whatsoever to your banding.

Council Tax Bands have a letter of the alphabet and range from bands A-H.

The Council Tax Band values are:

Band A – up to £40,000

Band B – £40,001 to £52,000

Band C – £52,001 to £68,000

Band D – £68,001 to  £88,000

Band E – £88,001 to £120,000

Band F – £120,001 to £160,000

Band G – £160,001 to £320,000

Band H – more than £320,000

So, for example, if a property sold for £110,000 in April 1991 but is now worth £350,000 it will remain in Band E – NOTBand H), as this was the value when the bands were set in 1991. For new homes, the same thing applies: they are valued based on the 1991 market value. This safeguards that all homes and all buyers are treated equally and consistently. The second factor that determines how much Council Tax you pay is what each individual local authority decides each band will pay in Council Tax. (So for example, a householder/tenant in Leeds in a Band E property will pay a different amount in Council Tax each year to someone in Swindon or North London in Band E).

Interestingly, the average current level of Council tax paid by Royal Tunbridge Wells people stands at £1,509 per annum, up from £500 in 1993 (although if it had risen by inflation in those 25 years .. today that should only be £951) … meaning Council Tax has outstripped inflation by 58.70%. So unless the local authority changes its majority political party, the only way you can change the amount you pay in Council Tax is your banding i.e. you physically move to a higher or lower band. 

Contrary to what most people think, extensions and improvements do not change the Council Tax Band and existing householders/tenants only have to pay the same Council Tax as they would have without any extensions and improvements. However, the Valuation Office (The Government’s Property Valuers) do reserve the right to re-value the extended property if the property gets sold.  If you are a potential buyer, you should be aware of this review as it could change the amount of Council Tax you pay after the purchase. If a higher band is necessary, the new band will be based on what the extendedproperty would have been expected to sell for in 1991. However, this does not necessarily mean that the banding will jump one band, as this is contingent on the extent of the changes and whether the property falls towards the top or bottom of its existing band. More often than not – it isn’t an issue and the banding stays the same.

In terms of which band the property is in, this can be challenged. In my experience in the Royal Tunbridge Wells property market the only issue is one where there is an anomaly with the banding, when one property is in a different band to all the others in the street. This is much rarer than it used to be, as most such anomalies have been found and rectified. Anyone can check the banding of any property by going to Google and typing in “Check My Council Tax Banding”. I do need to mention a thoughtful warning though. Challenging your Council Tax Band is not something to do on a whim for one simple fact - you cannot request your band to be lowered, only 'reassessed', which means your band could be moved up as well as down. I have even heard of neighbouring properties band’s being increased by someone appealing, although this is the exception. If you have any questions don’t hesitate to drop me a line.

Homeownership Amongst Royal Tunbridge Wells’ Young Adults Slumps to 46.42%

The degree to which young Royal Tunbridge Wells’ people are locked out of the Royal Tunbridge Wells housing market has been revealed in new statistics. 

A Royal Tunbridge Wells landlord was asking me the other week to what effect homeownership rates in Royal Tunbridge Wells in the early to middle aged adult age range had affected the demand for rental property in Royal Tunbridge Wells since the Millennium. I knew anecdotally that it affected the Royal Tunbridge Wells rental market, but I wanted some cold hard numbers to back it up. As you know, I like a challenge when it comes to the stats.. so this is what I found out for the landlord, and I’d like to share them with you as well.

As anyone in Royal Tunbridge Wells, and most would say those born more recently, are drastically less likely to own their own home at a given age than those born a decade earlier, let’s roll the clock back to the Millennium and compare the figures from then to today. 

In the year 2000, 47% of Royal Tunbridge Wells 28-year olds (born in 1972) owned their own home, whilst a 28 year old today born in 1990) would have a 25.1% chance of owning their own home. Next, let’s look at someone born ten years before that. So, going back to the Millennium, a 38 year Royal Tunbridge Wells person (therefore born in 1962) would have a 69.4% chance of owning his or her own home and a 38 year today in Royal Tunbridge Wells (born in 1980) would only have a 54.0% chance of owning their own home. 

Since the Millennium, overall general homeownership in the 25 to 44 year old age range in Royal Tunbridge Wells has reduced from 64.19% to 46.42%

If you look at the graph below, split into the four age ranges of 25 year olds (yo) to 29yo, 30yo to 34yo, 35yo to 39yo and finally 40yo to 44 yo, you will quite clearly see the changes since the Millennium in Royal Tunbridge Wells. The fact is the figures in Royal Tunbridge Wells show the homeownership rate has proportionally fallen the most for the youngest (25yo to 29yo) age range compared to the other age ranges.

The landlord suggested this deterioration in homeownership in Royal Tunbridge Wells across the age groups could be down to the fact that more of those born in the 1980’s and 1990’s (over those born in the 60’s and 70’) are going to University and hence entering the job market at an older age or those young adults are living with their parents longer.

I read some national homeownership statistics of different age groups with the same number of years after they left education (rather than at the same age) and that gave an identical dip to the graph above.  Neither are these drops in homeownership related with a significant increase in the number of young adults living with their parents. Again, nationally, that has hardly changed over the last 20 years as the percentage of 30-year-olds living with Mum and Dad only increased from 22% of those born in the early ‘70s to 23% of those born in the early ‘80s. 

So, what does this mean for the rental market in Royal Tunbridge Wells?

Only one thing .. with the local authority not building Council houses, Housing Associations strapped for cash to build new properties and the younger generation not buying, there is only one way these youngsters can obtain a roof over their head and have a home of their own .. through the private landlord sector. Now with the new tax rules and up and coming licensing rules, Royal Tunbridge Wells landlords will have to work smarter to ensure they make the investment returns they have in the past. If you ever want to pick my brains on the future direction of the Royal Tunbridge Wells rental market .. drop me line or pop in next time you are passing my office.

324 First Timer Buyers in Royal Tunbridge Wells Bought Their First Home in 2017

A little bit of good news this week on the Royal Tunbridge Wells Property Market as recently released data shows that the number of first time buyers taking out their first mortgage in 2017 increased more than in any other year since the global financial crisis in 2009. The data shows there were 324 first time buyers in Royal Tunbridge Wells, the largest number since 2006.

I expect in 2018 that this increase of first time buyers will level out and maybe dip slightly as, nationally, figures demonstrate that first time buyer’s average household income was £40,691 and this represented 17.3% of their take home pay. Although, it might surprise readers that it is actually cheaper to buy than it is to rent at the ‘starter home’ end of the housing market. Many of you can remember mortgage rates at 12% ... even 15%. Today, at the time of writing this article, I found on the open market, 189 first time buyer mortgages at 95% (meaning only a 5% deposit was required) with 3 year fixed rates from a reputable High Street bank at 2.49% ... they even did a 3 year fixed rate 100% mortgage for 2.89%!

Interestingly, looking at the other end of the market, the buy-to-let investment in Royal Tunbridge Wells was subdued, with only 66 buy-to-let properties being purchased with a mortgage. However, I must stress, whilst there is no hard and fast data on the total numbers of landlords buying buy-to-let, as HM Treasury believes only 30% to 40% of buy-to-let property is bought with a mortgage. This means there would have been further cash only buy-to-let purchases in Royal Tunbridge Wells – it’s just that the data isn’t available at such a granular level.

In terms of the level of mortgage debt in Royal Tunbridge Wells, looking specifically at the TN1 to TN4 postcodes, you can see there has been a steady rise in borrowing over the last few years.

This is pleasing to see, as new mortgage debt is created by first time buyers, buy-to-let landlords and home movers themselves, that is being roughly equalled by the amount being paid off with mature mortgaged homeowners in their 50’s and 60’s finally paying off their mortgage.

So, what does all this mean for the Royal Tunbridge Wells Property Market?  Well, the stats paint a picture, but they don’t inform us of the whole story. The upper end of the Royal Tunbridge Wells property market has been weighed down by the indecision around the Brexit negotiations and rise in stamp duty in 2014, when made it considerably more expensive to buy a home costing more than £1m. The middle part of the Royal Tunbridge Wells property market has been affected by issues of mortgage affordability and lack of good properties to buy, as selling prices have reached the limit of what buyers can afford under existing mortgage regulations. The lower to middle Royal Tunbridge Wells property market was hit by tax changes for buy-to-let landlords, although this has been offset by the increase in first time buyers.

If you are in the market and selling now and want to ensure you get your Royal Tunbridge Wells property sold, the bottom line is you have to be 100% realistic with your pricing from day one and you might not get as much as you did say a year ago (but the one you want to buy will be less – swings and roundabouts?). I know it’s not comfortable hearing that your Royal Tunbridge Wells home isn’t worth as much as you thought, but Royal Tunbridge Wells buyers are now unbelievably discerning. 

So, if you are thinking of selling your Royal Tunbridge Wells property in the coming months, don’t ask the agent out a few days before you want to put the property on the market, get them out now and ask them what you need to do to ensure you get maximum value in the shortest possible time. I, like most Royal Tunbridge Wells agents, will freely give that advice to you at no cost or commitment to you.

My thoughts on the future of the Royal Tunbridge Wells Buy-To-Let Market

I was recently reading a report by the Home website which suggested that hordes of landlords are selling their buy-to-let investments due to increasing burdens on them in the buy-to-let market. Their findings suggest the number of new properties that came onto the market nationally (for sale) jumped by 11% across the UK as a result.

Those increasing burdens include new tax rules coming in over the next 3 to 4 years and the announcement that all self-managing landlords (i.e. landlords that don’t use a letting agent to look after their buy-to-let property) will soon need to register with a compulsory redress scheme to resolve tenant arguments and disputes; as Westminster wants to heighten standards in the Private Rented Sector. 

Interestingly I was chatting with a self-managed landlord from Southborough, when I was out socially over the festive period, who didn’t realise the other recent legislations that have hit the Private Rented sector, including the ‘Right to Rent’ regulations which came in to operation last year. Landlords have to certify their tenants have the legal right to live in the UK. This includes checking and taking copies of their tenant’s passport or visa before the tenancy is signed. Of course, if you use a letting agent to manage your property, they will usually sort this for you (as they will with the redress scheme when that is implemented).

If you are a self-managed landlord though, the consequences are severe because if you let a property to a tenant who is living in the UK illegally, you will be fined up to £3,000. That same Southborough landlord popped into my offices in the New Year, and I checked all his paperwork and ensured he was on the right side of the law going forward – and I offer the same to any landlord in the Royal Tunbridge Wells area if you want me to cast my eye over your buy to let matters (and at no cost – ok just bring in some chocolates for the girls in the office!)

But what of all these extra properties being dumped onto the market in Royal Tunbridge Wells? When I looked at the records the number of properties on the market in Royal Tunbridge Wells now, as opposed to a year ago, the numbers tell an interesting story …

	1st Jan 2017	1st Jan 2018
Detached	126	140	11%
Semi	97	124	28%
Terraced	36	64	78%
Flat	154	217	41%
Plots + Other	25	21	-16%
Total	438	566	29%

Overall, Royal Tunbridge Wells doesn’t match the national trend, with the number of properties on the market actually rising by 29% in the last year.  It was particularly interesting to see the number of terraced increase by 78%, yet the number of detached on the market only rise by 11%.

However, speaking with my team and other property professionals in the town, the majority of that movement in the number of properties and the types of properties on the market isn’t down to landlords dumping their properties on the market. The whole property market has changed in the last 12 months, with the majority of the change in the number and type of properties for sale due to the owner-occupier market, not landlords (a subject I will write about soon in my Royal Tunbridge Wells Property Market blog later this Spring?). You see, for the last ten years, each month there has always been a small number of Royal Tunbridge Wells landlords who have been releasing their monies from their Royal Tunbridge Wells buy to let properties - as is the nature of all investments!

Nationally, the number of rental properties coming on to the market to rent fell by 16% in Q4 2017 compared to Q4 2016 .. but that isn’t because there are 16% less rental properties to rent – it’s because tenants are staying in their rental properties longer meaning less are coming on the market to be RE-LET.

Nevertheless, some Royal Tunbridge Wells landlords will want to release the equity held in their Royal Tunbridge Wells buy to let properties in 2018. All I suggest is that you speak with your letting agent first, as putting a rental property on the open market often spooks the tenants to hand in their notice days after you put it on the market (because they don’t like the uncertainty and also believe they will become homeless!). This means you have an empty property, costing you money with no rent coming in.  However, some letting agents who specialise in portfolio management have select lists of landlords that will buy with sitting tenants in. If you have a portfolio in the Royal Tunbridge Wells area and are considering selling some or all of them – drop me a line as I might have a portfolio landlord for you (with the peace of mind that you won’t have any rental voids).

Youngsters unable to buy their first home in Royal Tunbridge Wells – Are the Baby Boomers and Landlords to Blame?

Talk to many Royal Tunbridge Wells 20 something’s, where home ownership has looked but a vague dream, many of them have been vexatious towards the Baby Boomer generation and their pushover ‘easy go lucky’ walk through life; jealous of their free university education with grants, their eye watering property windfalls, their golden final salary pensions and their free bus passes.

If you had bought a property in Royal Tunbridge Wells for say £25,000 in first quarter of 1977, today it would be worth £549,429, a windfall increase of 2097.7%.

But to blame the 60 and 70 year olds of Royal Tunbridge Wells for that sort of rise seems a little unfair, with the value of the homes rising like rocket, I don't believe they can be censured or made liable for that. A few weeks ago, I discussed in my blog the number of people in the Royal Tunbridge Wells area who have two or more spare bedrooms (meaning they are under-occupying the house). I see many mature members of Royal Tunbridge Wells society, rattling around in large 4/5 bed houses where the kids have flown the nest years ago ... but should they be blamed?

We are all just human, and the mature members of UK society have just reacted to the inducements of our property and tax system. The mature generations who joined the property market party in the 1970’s and 1980’s were able to take out huge mortgages, protected in the knowledge that inflation would corrode the real value of the mortgage, while wage gains would boost their ability to repay.

Neither do I directly blame the multitude of Royal Tunbridge Wells buy to let landlords, buying up their 10th or 11th property to add to their buy to let empire. They too, are humbly reacting to the peculiar historic inducements of the UK property market.

So, who is to blame?

Well, hyperinflation in the 1970’s meant the real value of people’s mortgages was whipped out (as mentioned above). Margaret Thatcher and Nigel Lawson are also good people to blame with Maggie selling off millions of council houses and Nigel Lawson’s delayed ending of the MIRAS tax relief in 1987; meaning he too can get his share of indignation. The Blair/Brown combo doubled stamp duty in 1997 and again in 2000, which, as a tax on property transactions, precludes a more efficient distribution of the current housing stock. The Government has had plenty of opportunity to change the draconian stamp duty rules to incentivise those mature Royal Tunbridge Wells house movers to downsize.

However, I have started to see over the last few years a change in Government policy towards housing. The new breed of Royal Tunbridge Wells buy to let landlords that have come about since the Millennium, have had their wings clipped over the last couple of years, with the introduction of new tax rules (meaning it is slightly more difficult to make money out of property unless you have all the national information and Royal Tunbridge Wells property trends to hand).

It’s easy to think the only reason that hundreds of first time buyers have been priced out of the Royal Tunbridge Wells housing market is because of these landlords. Yet, I believe landlords have been undervalued with the Royal Tunbridge Wells homes they provide for Royal Tunbridge Wells people. With first time buyers struggling to save for a deposit, if it weren’t for those landlords buying up those homes over the last 10/15 years, we would have a bigger housing crisis than we have today. Since the global financial crisis of 2008/9, local councils have had to cut services, so certainly didn’t have enough money to build new homes ... homes that were provided to Royal Tunbridge Wells by these buy to let landlords.

One side of the argument is that 390 homes are being bought up by buy to let landlords each year in the Tunbridge Wells Borough Council area when otherwise they might have become available to other buyers, the other side of the argument is the current national average deposit is £51,800, which is, by far, the greatest barrier to those wanting to buy their first home. Those homes bought by local buy to let landlords are not left idle, as they equate to 2,732 of new homes for local people, most of whom who see renting as a better option because of the choice, the simplicity and the flexibility which renting brings.

In the 60’s/70’/80’s, the traditional thoughts that you were a failure unless you owned your own home have now all but disappeared, because if you ask many young people, they would probably say renting was the perfect option for them at certain times of their life.