‘Taxing’ Time for the 3,054 Royal Tunbridge Wells Buy To Let Landlords

Over the last twenty years, there has been a shift in the way the Royal Tunbridge Wells (and the UK’s) property market works. In the 1960’s, 70’s, 80’s and 90’s, a large majority of twenty somethings saved up their 5% deposit, went without life’s luxuries of going out and holidays etc., for a couple of years and then bought their first home with their hard earned savings. 

By 2000, 47% of Royal Tunbridge Wells 25 to 29 years owned their own home (compared to 46% Nationally (and 65.7% of Royal Tunbridge Wells 30 to 34 year olds in 2000 owned their own home – again compared to 64.2% nationally) whilst the remaining youngsters mostly rented from the Council and in some rare cases, privately rented. 

Now it’s 2018, and those levels of homeownership have slipped dramatically and now only 25.1% of Royal Tunbridge Wells 25 to 29 year olds own their own home and 44.2% of Royal Tunbridge Wells 30 to 34 year olds own their own home (interestingly mirroring the National picture of 24.5% for the younger age cohort and 64.2% for the older 30 to 34 year cohort).

There was concern in Government since the late Noughties that this shift from homeownership to private renting wasn’t good for the well-being of the Country and things needed to change, to make it a more level playing field for first time buyers. House prices needed to be more realistic and there needed to be a carrot and stick for both landlords and first time buyers.

In the 1980’s and 1990’s, interest rates were the weapon of choice of Government to cool or heat up the UK housing market – and it did work – up to a point. It’s just interest rates also affected so many other sectors of the UK economy (and not always a in good way). The policy of interest rates to control the economy is called ‘Monetary Policy’. Monetary policy is primarily concerned with the management of interest rates (and the supply of money) and is carried out by the Bank of England (under direction from the Government).

It’s just in this post Credit Crunch, Brexit environment, the use of higher interest rates wouldn’t directly affect landlords (as around two thirds of buy to let properties are bought without a mortgage). Therefore, an increase in interest rates would have hardly any effect on landlords and hit the first time buyers - the people the Government would be trying to help!

Also, given muted growth of real income (i.e. real income being the growth salaries after inflation) in the past few years, an uplift in interest rates (from their ultra-low 0.5% current levels) would have a massive effect on Brit’s household disposable income. Yet, over 90% of new mortgages in 2018 being taken are fixed rate and with such low rates, it has made buying a property comparatively attractive.

Instead, over the last 8 years, the Government has encouraged first time buyers and clipped the wings of landlords with another type of economic policy – Fiscal Policy (Fiscal Policy is the collective term for the taxing (and spending) actions of the Government).  First time buyers have had the Help to Buy Scheme, Stamp Duty Exemption and contributions to their deposit by HMRC. On the other side the coin, landlords have had the way they are able to offset the tax relief of their mortgage payments against income change (for the worse), an increase in Stamp Duty (for the worse) and they will be hit with additional costs as the Government will be phasing out fees to tenants in the next 12 to 18 months.

So, what does this all mean for the 3,054 Royal Tunbridge Wells landlords?

The days of making money in Royal Tunbridge Wells buy to let with your eyes closed are long gone. There are going to be testing times for Royal Tunbridge Wells landlords, yet there is still a defined opportunity for those Royal Tunbridge Wells landlords who are willing to do their homework and take guidance from specialists and experts.

It’s all about looking at your Royal Tunbridge Wells portfolio (or getting a property professional to do so) and ascertaining if your current portfolio, mortgage and gearing are designed to hit what you want from the investment (because that is what it is – an investment) in terms of income now and income in the future, capital growth and when you plan to dispose of your assets.

I have seen many Royal Tunbridge Wells landlords (both who use me and my competitors) to manage their rental property or find them tenants – and on many occasions recently, I have told them to SELL – yes sell some of their portfolio to either reduce mortgage debt or buy other types of property that match what they want in the short and long-term from their investments. I know that sounds strange – but my role isn’t just to collect the rent  .. it’s also to give strategic advice and opinion on the landlord’s portfolio to help them meet their current and future investment goals.

The opportunities will appear in the Royal Tunbridge Wells property market for Royal Tunbridge Wells landlords from gentler growth in property values linked with a restrained Royal Tunbridge Wells property market, meaning if you put in the time, there will be deals and great bargains to have. Many landlords in Royal Tunbridge Wells (both clients and non-clients) send me Rightmove links each week, asking my opinion on the suitability of the investment. Some are exceptional – whilst others are duds. The bottom line is, private renting will continue to outgrow first time buyers in the next 5 to 10 years and as we aren’t building enough homes in the UK, which means rents can only go in one direction – upwards!

New Home Building in Royal Tunbridge Wells over the last 10 years

Should you, as a landlord for buy to let or for personal occupation, buy a brand-new home?

Well, let’s start by looking at the numbers …

Over the last 10 years, 1,044 new homes have been built in the Tunbridge Wells area

That is a lot of bricks and mortar! Roll the clock back twenty years in the Royal Tunbridge Wells property market, and there were two distinct camps of property buyers - folks who would only contemplate living in period character properties with their original fireplaces and beams, and those people who preferred the low maintenance of a new home. Old period homes were ridiculed as money pits by new-home aficionados, while new-home owners were accused of buying boring boxes, all vanilla, all the same, homogenous and bland.

However, it’s not as black and white as that anymore – or not as I see it in Royal Tunbridge Wells. New homebuilders are now trying to change their cookie-cutter uniform rows of suburban boxes into developments that are as individual as the families that love in them, thus increasing their appeal. Nonetheless, whether you choose a stone cottage, archetypal Victorian semi or terrace, 1970’s/80’s functional home or a untouched new home, whatever home you buy, it can result in supplementary costs that are often not taken into math’s when buying by potential homeowners or buy to let landlords.

So looking at the numbers in greater detail, let’s see what type of new homes people have been buying in the Royal Tunbridge Wells area ..

	Number of New Homes Built in Our Local Authority in the last Decade	New Homes Built in Our Local Authority in the last Decade as a Percentage	New Homes Built Nationally in the last Decade as a Percentage
Detached	108	10.3%	29.2%
Semi	154	14.8%	21.9%
Terraced	192	18.4%	26.6%
Flat	590	56.5%	22.3%

I thought the mix of what was built/bought locally over the last 10 years when compared to the national figures was fascinating … it’s interesting (but not surprising) to see a greater proportion of flats built locally and fewer detached homes being built, when compared to the national averages. This is because of the nature of the Royal Tunbridge Wells area, its position in the country, the availability of building land, planning restrictions by Tunbridge Wells Borough Council and the price of building land.

So, should you buy a new home (because a lot of people locally have over the last ten years)?

Well if you are considering new, take care when buying one, as often the show home isn’t the actual property you end up buying. It’s like visiting the car showroom and falling in love with the model in the showroom (which is spec’d up to an inch of its life) – only to get the base model when handed the keys. Look out for things like curtain rails, tv aerials (or lack of them), kitchen appliances, carpets and curtains … and outside – make sure you aren’t unwittingly buying a square piece of earth instead of the manicured landscaped gardens. 

New homes are a lot more efficient on energy consumption compared to the old drafty, high fuel bill Victorian semis, as their owners can testify. Older properties will have maintenance issues, with 100yo brickwork and roofs that might need replacement and extra insulation, rotten wooden windows and a dodgy central heating boiler (all sounding rather a strain on your bank balance if you weren’t aware). The point I am trying to get across is open your eyes and don’t assume .. ask questions and get a surveyor to make a detailed inspection of the property so you know what you are getting yourself into. 

Next, I also wanted to break down the new home stats to each individual year in our local area to see if there was a pattern to when people bought a new home. As you can see, there has been no real pattern for sales of new homes since 2008, but the general trend has been much better since 2015! Looking at the much larger second hand housing market in Royal Tunbridge Wells over the same 10 years, the coloration between the new homes market and second market has been quite strong – which shows the new home builders don’t make (or break) the Royal Tunbridge Wells housing market – just follow it (although with the planned building locally in the next 10/20 years – who knows if that will continue to be the case?).

So, should you buy brand-new or second hand? If price is your sole motivator, then new homes are always CHEAPER when the economy is bad. However, in normal and good housing market conditions, you will pay a ‘new build premium’. The Royal Institute of Chartered Surveyors admits that this can be as high as 10% extra, when compared to a similar second hand property – so be aware of that (it’s like paying extra for a new car and losing a bit (or a lot) of money as soon as you drive off the forecourt). Although, it’s not always about pure pound notes.

Older houses are bigger (more room) yet take more money to heat. Older houses have bigger gardens (to enjoy) – but you will spend more time tending to them. Older houses are in more established areas (with more facilities), whilst everyone is starting afresh on new homes. It all comes down to personal opinion. One final thought though, at least with new homes there is no gazumping or no upward chain to ruin any sale completion dates … 

The choice as they say … is yours!

What Will Happen to Royal Tunbridge Wells Property Values if Interest Rates Rise?

The current average value of a property in Royal Tunbridge Wells currently stands at £498,550 and the base rates at 0.5%. In many of my articles, I talk about what is happening to property values over the short term (i.e. the last 12 months or the last 5 years), but to answer this question we need to go back over 40 years, to 1975. 

The average value of a Royal Tunbridge Wells property in 1975 was £24,135

However, since 1975, we have experienced in the UK, inflation of 807.5%.

Back in 1975, the average salary was £2,291 and average car was £1,840. A loaf of bread was 16p, milk was 28p a pint and a 2lb bag of sugar was 30p. Inflation has increased prices, so comparing like for like, we need to change these prices into today’s money. In real spending power terms, an average value of a Royal Tunbridge Wells house in 1975, expressed in terms of today’s prices is £219,059. 

That means in real terms, property costs a lot more today, than in the mid 1970’s, but has it always been that way? Looking at the important dates of the UK property market, you can see from this table, the last two property boom years of 1989 and 2007, show that there was a significant uplift in the cost/value of property (when calculated in today’s prices).

Royal Tunbridge Wells House Prices Adjusted for Retail Prices.
1975	1979	1982	1989	1997	2007	2009	Today
£202,647	£237,768	£198,659	£352,995	£221,813	£579,348	£472,212	£498,550
Office for National Statistics Retail Price Index was applied to convert nominal property values to current values

Before we move on, hold onto the thought that you can quite clearly see from the table, in real terms, properties are cheaper today in Royal Tunbridge Wells than they were in 2007!

So, it made me wonder if there was a link between house prices, inflation and other external economic factors, such as interest rates? Interest rates have a strong influence on inflation and property values, principally because changes in the interest rate affect the cost of mortgage payments for homeowners and they affect the flow of foreign currency in (or out) of an economy, thus changing the exchange rate and prices we can sell our goods and services abroad and prices we pay on imports.

So how exactly do interest rates affect property values?

When interest rates rise, it has a substantial effect on increasing the monthly cost of mortgages. Higher mortgage payments will discourage prospective homebuyers or people looking to move up market (meaning their mortgage payments go up) – thus making it comparatively cheaper to rent.

Furthermore, the high cost of mortgage payments sometimes also pushes some existing home owners to sell, meaning there is an increase in house sellers and a decline in house purchasers, and as the law of economics state, when supply is increased and demand falls, (house) prices fall. Another fallout of a rise in mortgage payments is a rise in repossessions. Interestingly, repossessions in the UK rose from 15,000 per annum in the late 1980’s to over 75,000 per annum in the early 1990’s, meaning even more properties came onto the market, exasperating the issue of over supply – pushing property values even lower. 

High interest rates caused property values to fall in mid 1970’s, early 1980’s and most recently, the early 1990’s (who can remember the 15% mortgage rate!) Conversely though, the drop in property values in 2008/2009 – was not due to interest rates, but due to the credit crunch and global recession.

So, what will happen ifwhen interest rates rise?

It is vital to remember that interest rates are not the only factor affecting property values. It is also possible that when interest rates increase (which they will from the current 0.5%), property values can also continue to rise (it happened throughout the mid to late 1980’s and again between the boom years of 2002 and 2007). When confidence in the economy is good, and we as a Country experience a period of rising real incomes (i.e. after inflation), then the British in the past have continued to buy bricks and mortar, notwithstanding the rise in interest rates. 

Another important factor on property values is the supply of housing. A big reason in the current level of Royal Tunbridge Wells house prices is due to the shortage of supply, which has kept property values higher than I would have expected. An additional factor is whether homeowners have a variable or fixed rate mortgage. 90.6% of new mortgages taken in the last Quarter were at a fixed rate, and 66.2% of all mortgaged homeowners are on fixed-rate mortgages, therefore, they will not notice the effects of higher interest rate payments until they re-mortgage in a few year’s time, meaning there is frequently a time-lag between higher interest rates and the effect on property values. Another factor on mortgages is the ability to get one in the first place. Back in 2014, mortgage providers were told to be stricter on their lending criteria when arranging mortgages following the footloose days of 125% loan to value mortgages with the Northern Rock.  These new rules are a lot more rigorous on borrowers' ability to repay the payments (although it makes me laugh, when with starter homes it nearer is always cheaper to buy then rent!).

I think the final point is this … affordability is the key. Look at the graph (the red bars) and you will see in REAL HOUSE PRICE terms – it’s cheaper to buy a home today than it was in 2007, yet why aren’t we seeing people buying property at the levels we were seeing in the 2000’s before the credit crunch? Again, looking at the reasons why, I will talk about in future articles.

In conclusion, interest rates are important – but nowhere near as important on the Royal Tunbridge Wells (and British) property market than they were 15 or 20 years ago.

So, before I go, one final thought - how do we measure the success of the Royal Tunbridge Wells property market? Well I believe one measure that is a good bellwether is the number of property transactions, as that could show a more truthful picture of the health of the property market than property values. Maybe I should talk about that in an up and coming article?

The Royal Tunbridge Wells Bank of Mum and Dad Lent £6.58m Last Year

My analysis has shown that up to the end of the last quarter, Royal Tunbridge Wells’ first time buyers purchased 331 Royal Tunbridge Wells properties.  With wages rising at 2.8%, unemployment at a low rate of 4.2% (down from 4.6% from a year earlier and the joint lowest since 1975), national GDP rising at 1.87% and inflation at 2.3%, tied in with indifferent house price growth (compared to a few years ago), this has given first time buyers a chance to get a foot hold on the Royal Tunbridge Wells property market.

Over the last year, the average purchase price of a Royal Tunbridge Wells first time buyer property has been £280,800 and the average deposit was £45,490. Furthermore, my calculations show the average Royal Tunbridge Wells parents contributed £19,902 of that £45,490 figure.

You see “The Bank of Mum and Dad (Royal Tunbridge Wells Branch)” is for countless Royal Tunbridge Wells twenty something’s, perceivedto be the only way they will ever be able to afford their first home. In fact, Royal Tunbridge Wells’ parents put up a substantial£6.58m in the last 12 months to help their nearest and dearest progeny onto the property ladder. This assistance towards the deposit makes a huge difference, enabling Royal Tunbridge Wells’ youngsters who thought they couldn’t get on the housing ladder more able to do so.

With mortgage rates at all-time lows, few Royal Tunbridge Wells twenty something’s would struggle to make mortgage repayments, but it is the requirement of the deposit which is the issue, although as parents (and grandparents) are helping out where they can, it does little to address the real problems of the housing market, whether for people renting or buying their first home.

If you think about it, as a Country we have been fortunate that the older generation who control the biggest share of the nation’s wealth are so plentiful to those following after. We need to remember, though, that this generosity is
 a sign of the issues of the British housing shortage, not its solution. 

But before I leave this article … note I used the word PERCEIVEDin a previous paragraph. Yes, the average first time buyer deposit is 16.1%, but that is an average. Did you know 95% mortgages returned to first time buyers in late 2009 and have been available ever since? Also, lenders like Barclays and many local Building Society’s now offer 100% mortgages (i.e. no deposit) at 2.75% fixed for three years.

The perception is you need 15%, 20% even a 25% deposit to be a first-time buyer – you don’t! You don’t need any deposit, but (there is always a but!)...

Over the last decade, many renters have upgraded themselves into homes that they (or any generation before them) could never have ever afforded as a first time buyer in the past. You see the British housing market started to change with the dawn of the new Millennium and I am seeing a slow but steady attitude change when it comes to renting. Those tenants have found the price difference of upgrading from the typical 1970’s TV show Rigsby “Rising Damp” style rental property to plush terraced house or even semi-detached home, with all the mod cons, comparatively inexpensive (when compared to the increase in mortgage payments if they had to make the move as buyers).

Renting isn’t seen as the poor man’s choice, as many young (and increasing older) people are becoming more at ease and comfortable with the flexibility offered by private renting a property rather than jumping ‘lemming like’ into home ownership. Royal Tunbridge Wells landlords will continue to see growth in sector, and like Germany, todays renters will become homeowners in 20 years’ time – when they will inherit the wealth of their parent’s home.

£449,823 – The Typical Profit Each Royal Tunbridge Wells Landlord Could Make in The Next 25 Years

I am of the opinion that buy to let investment in Royal Tunbridge Wells, in the long-term, will bring substantial returns for landlords, irrespective of latest regulation and tax changes. 

Taking a very conservative (with a small ‘c’) view, I believe landlords will see a projected net profit of £763,707per property over the next 25 years through capital gains and rental. When inflation is taken into account that works out at £449,823 (in today’s money) or around £17,993 per year. The breakdown applies to a basic tax-paying landlord placing a characteristic 25% deposit on a £382,200 terraced/town house property.

Capital gains make up a substantial part of a landlord’s returns. Again, being conservative, I have assumed that Royal Tunbridge Wells house prices over the next quarter century (between 2018 and 2043) will rise at half the ratethey did between 1993 and 2018 (the preceding 25 years), therefore the example Royal Tunbridge Wells property in the previous paragraph would grow in value to £1,163,990, providing gross capital gains of £781,790.

A typical Royal Tunbridge Wells landlord receives, on average, rent of £11,700 per annum per terraced/town house property and so, over a 25-year period, that example property would generate a total rental income of £447,233 (again – very conservatively assuming a compound annual growth rate in the rent of 1.71% per annum).

Nevertheless, there are costs to running a buy to let property (mortgages, void periods, repairs, agents fees etc) .. and over those same 25 years, I have estimated that to be £465,316  .. giving the net profit levels mentioned in the second paragraph.

Now of course I have had to make assumptions to reach these figures, yet I hope you would agree, I have been very unadventurous with my assumptions.

The Royal Tunbridge Wells (and UK as a whole) buy to let property market is experiencing a massive sea of change. Regulation and tax changes have altered the dynamic in the property market, diminishing its appeal to inexperienced and amateur landlords, and these new tax changes mean higher tax bills for higher rate tax landlords. Yet, despite these rising costs, there are still healthy returns to be found in Royal Tunbridge Wells buy to let investment for knowledgeable and steadfast landlords. Nonetheless, the days of anything making money and idle speculation are long gone. 

Buy to let is a long-term business undertaking, necessitating commitment and expertise. Don’t put your head in the sand and think it doesn’t affect you. Royal Tunbridge Wells buy to let landlords must be equipped to start business and tax planning, take portfolio management advice to ensure their investments will meet their investment goals, appreciate the risks as well as the rewards, and, most crucially, the obligations they have towards their tenants.

If you are a Royal Tunbridge Wells landlord, irrespective of whether you are a client of mine or another agent in Royal Tunbridge Wells (or even you do it yourself), feel free to drop me a line or pop into the office for an informal chat on the future direction of the Royal Tunbridge Wells rental market and where opportunities may lie.  

Additional 2,294 Royal Tunbridge Wells Rented Homes Required by 2027

I have been doing some research, looking both at National and Regional reports on the demand and supply of property and people together with future projections on the economy, population and family demographics with some interesting results.  According to the Office of National Statistics, in the last financial year nationally, private renting grew by 74,000 households, whilst the owner occupied dwelling stock increased by 101,000 and social (aka council and housing association) stock increased by 12,000 dwellings. 

It was the private rental figures that caught my eye.  With eight or nine years of recovery since the Credit Crunch, economic recovery and continuing low interest rates have done little to setback the mounting need for rented housing.  In fact, with house price inflation pushing upwards much quicker than wage growth, this has meant to make owning one’s home even more out of reach for many Millennials, all at a time when the number of council/social housing has shrunk by just over 2.5% since 2003, making more households move into private renting.

There are 10,874 people living in 5,353 privately rented 

properties in Royal Tunbridge Wells.

In the next nine years, looking at the future population growth statistics for the Royal Tunbridge Wells area and making careful and moderate calculations of what proportion of those extra people due to live in Royal Tunbridge Wells will rent as opposed to buy, in the next ten years, 4,660 people (adults and children combined) will require a private rented property to live in. 

Therefore, the number of Private Rented homes in Royal Tunbridge Wells will need to rise by 2,294 households over the next nine years,

That’s 255 additional Royal Tunbridge Wells properties per year that will need to be bought by Royal Tunbridge Wells landlords, for the next nine years to meet that demand.

… and remember, I am being conservative (with a small ‘c’) with those calculations, as demand for privately rented homes in Royal Tunbridge Wells could still rise more abruptly than I have predicted as I would ask if Theresa May’s policies of building 400,000 affordable homes (which would syphon in this 5-year Parliamentary term is rather optimistic, if not fanciful?

So, one has to ask wonder if it was wise to introduce a buy to let stamp duty surcharge of 3% and the constraint on mortgage tax relief could curtail and hold back the ability of private landlords to expand their portfolios?

Well a lot of landlords are taking on these new hurdles to buy to let and working smarter.  Buying the property at the right price and using an agent to negotiate on your behalf (we do this all the time) ... and the 3% stamp duty level isn’t an issue.  Incorporating your property portfolio into a Limited Company is also a way to circumnavigate the issues of mortgage tax relief (although there are other hurdles that need to be navigated on that tack), but just look at the growth of proportion of Buy to Let properties in the Country since the Summer of 2016 ... something tells me smart Landlords are seeing these challenges as just that ... challenges which can be overcome by working smarter.

I have a steady stream of Royal Tunbridge Wells landlords every week asking me my opinion on the future of the Royal Tunbridge Wells property market and their individual future strategy and, whether you are a landlord of mine or not, if you ever want to send me an email or pop into my office to chat on how you could navigate these new Buy to Let waters ... it will be good to speak to you (because you wouldn’t want other landlords to have an advantage over you – would you?).

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?

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.