Every so often I like to have a lazy Saturday morning reading through the newspapers at my favourite coffee shop in Rotherham. Naturally, I find the most interesting bits are their commentaries on the British housing market.
There’s been a lot of talk about property price, quite a bit of discussion about the younger generation grappling to get a foot-hold on the property ladder with difficulties of saving up for the deposit and feature articles about the severe lack of new homes being built (which is especially true in Rotherham!)
However, a few days ago as I was reading I realised that a group of people that don’t often get any column inches are those existing homeowners who can’t move!
The people who can’t move
Back in the early 2000s between 1m and 1.3m people moved each year in England and Wales, peaking at 1,349,306 home-moves (i.e. house sales) in 2002.
However, after the ‘credit crunch’ hit in 2007 the number of house sales fell to 624,994 in 2009.
Since then it has steadily recovered, albeit to a more ‘respectable’ 899,708 properties by 2016. This means there are around 450,000 fewer house sales (house-moves) each year compared to the previous decade .
The question is… why are there fewer house sales?
To answer this question we need to go back 40/50 years.
Inflation was high in the late 1960s, 70s and early 80s. To combat this the Government raised set interest rates to a high level in a bid high to try to lower inflation. Higher interest rates meant the householders monthly mortgage payments were higher, meaning mortgages took a large proportion of the homeowner’s household budget. Despite this, it wasn’t all bad news as the high inflation eroded the mortgage debt in ‘real spending power terms’. As wages grew (to keep up with inflation), home owners could get bigger and even higher mortgages. This therefore allowed people to move up the property ladder more quickly.
Things changed in the late 1990s and early 2000s.
UK interest rates tumbled as UK inflation dropped. Lower interest rates and low inflation, especially in the five years 2000 to 2005, meant we saw double digit growth in the value of UK property. This inevitably meant all the home owner’s equity grew significantly, meaning people could continue to move up the property ladder (even without the effects of inflation).
This snowball effect (of significant numbers moving house) continued into the 2000s (2004 to 2007), as banks slackened their lending criteria.
Home movers could borrow even more to move up the property ladder – you may remember the 125% loan to value Northern Rock Mortgages that could be obtained very easily!
How have things changed in 2017?
It’s now 2017 and a decade has passed since the credit crunch began. Things have changed yet again!
You would think that with ultra-low interest rates at 0.25% that the number of people moving would be booming. However, this has not been the case. Less people are moving due to:
- low wage growth of 1.1% per annum,
- the tougher mortgage rules since 2014
- sporadic property price growth in the last few years
- high property values comparative to salaries (I talked about this a couple of months ago)
What does this mean for Rotherham?
All of these points have come together to mean less people are moving… but by how many?
In 2007, 4,821 properties sold in our area but by last year (2016) only 3,598 properties sold. This is a drop of 25.37%.
Therefore, we have just over 1,220 less households moving in the Rotherham and the surrounding council area each year.
Now of that number, it is recognised throughout the property industry around 80% of them are homeowners with a mortgage. That means there are around 1,003 mortgaged households a year (80% of the figure of 1,220) in the Rotherham and surrounding council area that would have moved 10 years ago, but won’t this year.
The reason they can’t/won’t move can be split down into different categories, explained in a recent report by the Council of Mortgage Lenders (CML). So, based on this report, of those estimated 1,003 annual Rotherham non-movers:
- There are around 361 households a year that aren’t moving due to a fall in the number of mortgaged owner occupiers (i.e. demographics).
- There are around 140 households a year are of the older generation mortgaged owner occupiers. As they are increasingly getting older, older people don’t tend to move, regardless of what is happening to the property market (i.e. lifestyle).
- An estimated 60 households of our annual non-movers will mirror the rising number of high equity owner occupiers, who previously would have moved with a mortgage but now move as cash buyers (i.e. high house price growth).
- Finally, I believe there are 441 Rotherham mortgaged homeowners that are unable to move because of the financing of the new mortgage or keeping within the new rules of mortgage affordability that came into play in 2014 (i.e. mortgage). This is the majority group.
What can we do about it?
Undoubtedly, the first three points above (demographics, lifestyle and high price growth) is something beyond the Government or Bank of England control.
However, could there be some influence exerted to help the people and households in that final 4th point? There are so many mortgaged homeowners who are unable to move due to their inability to finance a new mortgage or keep within the affordability rules – can something be done?
If Rotherham property values were lower, this would decrease the size of each step up the property ladder. This would mean the opportunity cost of increasing their mortgage would reduce (i.e. opportunity cost = the step up in their mortgage payments between their existing and future new mortgage) and they would be able to move to more upmarket properties.
In regards to the mortgage rules, before we all start demanding a relaxation in lending criteria for the banks… do we really want to return to free and easy 125% Northern Rock mortgages?
We all know what happened with Northern Rock…
These are difficult times. Your thoughts would be welcome on this topic.
If you need any advice I am happy to give it. Please get in touch via the contacts page – I’ve got years of experience in the Rotherham property market. It’s also a good idea to follow me on Twitter and Facebook for the latest info!
Michael Bennett, 36-year-old father of two from Rotherham, was out house hunting.
It was a pleasant September Saturday afternoon, and our man cycles along on his bike. He cycles up a street of suburban semis, where he spots a few retired neighbours, chatting to each other over the garden fence. He leans his bicycle against a lamppost and launches softly into his property search.
“Anyone on the road contemplating moving?” Michael asks, “I am not a landlord or developer, I’m just a Rotherham bloke trying to get out of renting, buy a house, do it up and live in it with my wife and two children”
“The only way I will leave here is in a box”, answers an 80-something lady, wearing her fading Paisley patterned housecoat from the 1970’s.
“I‘ve lived here since before you were born, it’s lovely up here… we aren’t moving, are we Doris?” (as her neighbour sagely shook his head at his wife).
Forgive my story telling but Michael, like many Rotherham people born in the late 1970s to the early 1990s, is keen to get a slice of prime Rotherham real estate. Yet people like Michael in Generation Y (or the Millennials as some people call them i.e. born between 1977 and 1994 and needing family housing now) are discovering, as each year passes by, they are becoming more neglected and ignored when it comes to moving up the property ladder.
Looking at the graph for the UK as whole…
Over 75 percent of Brits aged 65 and above (the baby boomers) are owner-occupiers, the biggest share since records began and a proportional rise of over 48.3% since the early 1980s. Looking at those Baby Boomers (the current 65+year olds)… and roll the clock back 36 years (to when they were in their 30s and 40s) and two thirds (65.6%) of them owned their own home.
In stark contrast, just under half of 25 to 49 year olds (47.3%) own their own home today.
However, the biggest drop has been in the 18 to 24-year old’s, where homeownership has dropped from a third (32%) in the 1980s to less than one in ten (8.9%) today.
What’s the situation in Rotherham?
Looking at the Rotherham statistics, the numbers make more interesting reading:
18 to 24 year olds are still significantly less likely to own a house compared to the older generations.
Why is this happening? Why are younger generations being left out?
Government policy contributes to the generational stalemate.
Stamp Duty rules prevent older Brits from moving as the price of land and planning rules make it harder to build affordable bungalows that are attractive to members of the older generation who want to move.
The average value of an acre of prime building land in the UK is between £750,000 and £800,000 per acre.
Bungalows are the favoured option for the older generation, but the problem is bungalows take up too much land to make them profitable for new homes builders. The housing market is gridlocked with youngsters wanting to get on (then move up) the property ladder whilst the older generation, who want to move from their larger houses to smaller, more modern bungalows, can’t.
The problem is there simply aren’t enough bungalows being built and the high price of land, means that they are prohibitive to build.
So, what is my point?
Well, all I would say to the homeowners of Rotherham is that one solution could be to start to talk to your local councillors, so they can mould the planners’ thoughts and the local authority thinking in setting land aside for bungalows instead of two up two down starter homes? That would free the impasse at the top of the property ladder (i.e. mature people living in big houses but unable to move anywhere), releasing the middle aged gridlocked people in the ladder to move up, thus releasing more existing starter homes for the younger generation.
…and to Michael, the wandering new home searcher… if things are going to change, it will be years before they do… so keep going out and spreading the word of your search for a new home for your family.
If you need any advice I am happy to give it. Please get in touch via the contacts page – I’ve got years of experience in the Rotherham property market. It’s also a good idea to follow me on Twitter and Facebook for the latest info!
Landlords and homeowners here in Rotherham will be eager to hear if the property market is slowing down.
The Landlord’s Tightrope
The tightrope of being a Rotherham buy-to-let landlord is a balancing act many do well at.
Government figures show that ‘real pay’ has dropped 1% in the last six months and talking to several Rotherham landlords, they are very conscious of the capacity and ability of their tenants to pay the rent versus their own need to raise rents on their rental properties.
Evidence does suggest many landlords feel more assured now than they were a few months ago about pursuing higher rents on their properties.
One of the reasons may be due to the summer months – historic evidence suggests that the rents new tenants have had to pay once they’ve move in have increased during the summer. June-August is a time when renters like to move, which means that demand surges and, thanks to the normal supply/demand seesaw, tenants are usually prepared to pay more to secure the property in the place they want to be.
This is particularly good news for Rotherham landlords as average Rotherham rents have been on a downward trend recently.
Look at the figures:
Rents in Rotherham on average for new tenants moving in have risen 1.6% for the month, taking overall annual Rotherham rents 1.1% higher for the year
Several Rotherham landlords have expressed their apprehensions about a slowing of the housing market in Rotherham. I think this negativity may be exaggerated.
Trying to find an equilibrium
The other side of the coin to property investing is capital values (which will also be of interest to all the homeowners in Rotherham as well as the Rotherham buy-to-let landlords). I believe the Rotherham property market has been trying to find some level of equilibrium since the New Year.
According to the Land Registry…
Property Values in Rotherham are 0.47% higher than they were 12 months ago.
However, they’ve actually risen by 1.34% last month!
The reality is the number of properties that are on the market in Rotherham today has dropped by 8.05% since the turn of the year – this fact will have an interesting effect on short-term Rotherham property values. As tenants have had less choice, buyers now have less choice.
Are you selling? Realistically price your property
Whether you are a homeowner or landlord, if you are planning to sell your Rotherham property in the short-term, it is crucial that whilst you allow room for negotiation, you must still realistically price your property when you bring it to the market.
Given that everyone now has access to property details, including historic stats for how much property has sold for, buyers will be more astute during the offer and negotiation stages of a purchase.
Property prices will remain strong medium to long term
Even with this short-term decrease in the number of properties for sale in Rotherham, property prices will remain stable and strong in the medium to long term. This is because the number of properties on the market today is still way below the peak of summer of 2008, when there were 1,260 properties for sale compared to the current level of 765 (if you recall, prices dropped by nearly 20% in Credit Crunch years of ‘08 and ‘09).
Compared to 2008, today’s lower supply of Rotherham properties for sale will keep prices relatively high… and they will continue to stay at these levels for the medium to long term.
Less people are moving than a few years ago, meaning less property is for sale. Fewer properties for sale mean property prices remain relatively high and this is because of a number of underlying reasons:
- Buy-to-let landlords tend not sell their properties as often than owner-occupiers, consequently removing the property out of the housing market selling cycle.
- Stamp Duty is much higher compared to 10 years ago (meaning it costs more to move).
- There is a dearth of local authority rental housing so demand for private rented housing remains high.
- The UK’s maturing owner occupier population – older people are less likely to move (compared to when they were younger).
- The lack of new homes being built in the country (we need 240k houses a year to be built in the UK and we are currently only building 145k a year!)
- Mortgage rules introduced in 2014 about how much a person can borrow on a mortgage has curtailed demand
Some final thought’s before I go…
To all the Rotherham homeowners that aren’t planning to sell – this talk of price changes is only on paper profit or loss.
To those that are moving… most people that sell are buyers as well, so even though you might not get as much for your house, the one you want to buy shouldn’t be as much either. Swings and roundabouts.
To all the Rotherham landlords – keep your eyes peeled – I have a feeling there may be some decent buy-to-let deals to be had in the coming months. One place for such deals, irrespective of which agent is selling it, is the featured property section on this blog – I post recommendations there.
If you have any questions feel free to get in touch – I’m happy to share advice with you. You can also follow me on Facebook or Twitter for the latest insights about property in our area.
“What’s happening to the Rotherham Property Market?” is a question I am asked repeatedly. Well, you may be surprised to hear that my own research suggests that there isn’t just one big Rotherham property market but many small micro-property markets?
According to recent data released by the Office of National Statistics (ONS), I have discovered that at least three of these micro-property markets have emerged over the last 20+ years in the town.
For ease, I have named them as follows:
- ‘lower’ Rotherham Property Market.
- ‘lower to middle’ Rotherham Property Market.
- ‘middle’ Rotherham Property Market.
Some of you may be interested to know how I have classified the three sectors:
- ‘lower’ – the bottom 10% (in terms of value) of properties sold
- ‘lower to middle’ – lower Quartile (or lowest 25% in terms of value) of properties sold
- ‘middle’ – which is the median in terms of value
Who is buying in the ‘lower’ and ‘lower to middle’ sectors in Rotherham?
The ‘lower’ and ‘lower to middle’ sectors of the Rotherham property market have been fuelled over the last few years by two sets of buyers.
The first set make up the clear majority of those buyers – they are cash rich landlord investors who are throwing themselves into the Rotherham property market to take advantage of alluringly low prices and even lower interest rates. The other set of buyers are the first-time buyers (FTB), although the FTB market is in a state of unparalleled deadlock. This market has been trampled into near-immobility and incapacity by the new 2014 stricter mortgage affordability regulations and also fewer mortgages with low deposits.
How is each micro sector doing?
I’ve been examining the three different micro sectors that I have identified and the figures show that they have all performed quite differently:
You can quite clearly see that it is the ‘middle’ market that has performed the best.
What do all these figures mean to homeowners and landlords?
There’s quite a lot of significance. Let me explain.
The worst performing sector (with the lowest percentage uplift) was the ‘lower’ housing market. Therefore, if we applied the best percentage uplift figure (i.e. from the ‘middle’ market percentage uplift), to the ‘lower’ 1995 housing market figure, the 2017 figure of £62,500, would have been £68,189 instead. That’s a notable difference, I’m sure you would agree.
Why haven’t you mentioned the upper housing market in Rotherham?
I’m aware I’ve not specifically mentioned the upper reaches of the Rotherham housing market. This is for several reasons.
Firstly, the lower or middle market is where most of the buy-to-let investment landlords buy their property and where the majority of property transactions take place.
Secondly, due to the unique and distinctive nature of Rotherham’s up-market property scene (because every property is different and they don’t tend to sell as often as the lower to middle market), it is much more difficult to calculate what changes have occurred to property prices in that part of the Rotherham property market – looking at the stats for the up-market Rotherham property market from Land Registry, only 9 properties in Rotherham (and a 3 mile radius around it) have sold for £1,000,000 or more since 1997.
How will this information help me?
Homeowners and buy-to-let landlords can benefit from this infromation. When you realise that there isn’t just one property market in our area, but several micro property markets, you can spot trends and bag yourself some potential bargains. Even in this market, I have spotted a number of great opportunities over the last few months which I have shared on this blog, especially in the ‘lower’ and ‘lower/middle’ market.
If you want to be kept informed of those buy-to-let bargains as I post them you may want to follow me on Twitter or like my Facebook page. Of course, you can keep checking back to the Rotherham Property Blog for all the latest property news for our area.
I would also love to know if you have spotted any micro-property markets in Rotherham. Please get in touch if you have!
The most recent set of data from the Land Registry has stated that property values in Rotherham and the surrounding area were 1.58% higher than 12 months ago and 9.12% higher than January 2015.
Despite the uncertainty over Brexit, the property values in Rotherham (and most of the UK) continue their medium and long-term upward trajectory.
As economics is about supply and demand, the story behind the Rotherham property market can also be seen from those two sides of the story.
Looking at the supply issues of the Rotherham property market and putting aside the short-term dearth of property on the market, one of the main reasons of this sustained house price growth has been down to of the lack of building new homes.
The draconian planning laws over the last 70 years (starting with The Town and Country Planning Act 1947) have meant the amount of land built on in the UK today still stands at an unbelievably small 1.8%.
That figure is made up of 1.1% with residential property and 0.7% for commercial property.
The following pie chart shows how land in the UK is actually used:
I am not advocating building modern ugly carbuncles and high-rise flats in the Cotswolds, nor blotting the landscape with the building of massive out of place ugly 1,000 home housing estates around the beautiful countryside of such villages as Wickersley and Tickhill.
However, the facts are that restrictive planning regulations are meaning that homes that the youngsters of Rotherham badly need aren’t being built. Adding fuel to that fire, landowners have deliberately sat on land, which has kept land values high and from that keeps house prices high.
Looking at the demand side of the equation, one might have thought property values would drop because of Brexit and buyers uncertainty. However, certain commenters now believe property values might rise because of Brexit.
Many people are risk adverse, especially with their hard-earned savings. The stock market is at an all-time high (ready to pop again?) and many people don’t trust the money markets. The thing about property is its tangible, bricks and mortar, you can touch it and you can easily understand it.
The Brits have historically put their faith in bricks and mortar, which they expect to rise in value, in numerical terms, at least.
Nationally, the value of property has risen by 635.4% since 1984 whilst the stock market has risen by a very similar 593.1%. However, the stock market has had a roller coaster of a ride to get to those figures. For example, in the dot com bubble of the early 2000s, the FTSE100 dropped 126.3% in two years and it dropped again by 44.6% in 9 months in 2007… the worst drop Rotherham saw in property values was just 16.94% in the 2008/9 credit crunch.
Despite the slowdown in the rate of annual property value growth in Rotherham to the current 1.58%, from the heady days of 4.88% annual increases seen in mid 2010, it can be argued the headline rate of Rotherham property price inflation is holding up well, especially with the squeeze on real incomes, new taxation rules for landlords and the slight ambiguity around Brexit.
With mortgage rates at an all-time low and tumbling unemployment, all these factors are largely continuing to help support property values in Rotherham (and the UK).
For all the latest news about the Rotherham property market please visit and follow me on Twitter and Facebook.
Over the last 12 months, the UK has decided to leave the EU and have a General Election with a result that didn’t go to plan for Mrs May. To add insult to injury, our American friends elected Donald Trump as the 45th President of the United States. It could be said this should have caused some unnecessary unpredictability into the UK property market.
The reality is that the housing and mortgage market (for the time being) has shown a noteworthy resilience.
Indeed on the back of the Monetary Policy pursued by the Bank of England there has been a notable improvement of macro-economic conditions!
- In July it was announced that we are witness to the lowest levels of unemployment for nearly 50 years.
- UK construction industry built 21% more properties than same time the previous year but there has still been a disproportionate increase in demand for housing, particularly in the most thriving areas of the country.
- Repossessions are also at an all-time low at 3,985 for the last Quarter (Q1 2017). This has fallen from a high of 29,145 in Q1 2009.
All these things combined has led to the following result…
Property values in Rotherham are
1.58% higher than a year ago
This is according to the Land Registry.
So, what does all this mean for the homeowners and landlords of Rotherham, especially in relation to property prices moving forward?
One vital bellwether of the property market (and property values) is the mortgage market.
The UK mortgage market is worth £961bn which represents over 13.3 million mortgages (interestingly, the UK’s mortgage market is the largest in Europe in terms of amount lent per year and the total value of outstanding loans). Uncertainty causes banks to stop lending – look what happened in the credit crunch and that seriously affects property prices.
Roll the clock back to 2007, and nobody had heard of the term ‘credit crunch’, but now the expression has entered our everyday language. It took a few months throughout the autumn of 2007, before the crunch started to hit the Rotherham property market, but in late 2007, and for the following year and half, Rotherham property values dropped each month like the notorious heavy lead balloon. In fact…
The credit crunch caused Rotherham
property values to drop by 16.9%
Under the sustained pressure of the Credit Crunch, the Bank of England realised that the UK economy was stalling in the early autumn of 2008. Loan book lending (sub-prime phenomenon) in the US and across the world was the trigger for this pressure. In a bid to stimulate the British economy there were six successive interest rates drops between October 2008 and March 2009 – this resulted in interest rates falling from 5% to 0.5%!
(Data from Denton House Property Research and HM Land Registry)
Thankfully, after a period of stagnation, the Rotherham property market started to recover slowly in 2011 as certainty returned to the economy as a whole and Rotherham property values really took off in 2013 as the economy sped upwards. Fortunately, the ‘fire’ was taken out of the property market in early 2015 (otherwise we could have had another boom and bust scenario like we had in the 1960s, 70s and 80s), with new mortgage lending rules. Throughout 2016, we saw a return to more realistic and stable medium term property price growth. Interestingly, property prices recovered in Rotherham from the post Credit Crunch 2009 dip and are now 12.2% higher than they were in 2009.
Good news for Rotherham homeowners and landlords.
Now in the summer of 2017, with the Conservatives having been re-elected on their slender majority, the Rotherham property market has recouped its composure. In fact, there has been some aggressive competition among mortgage lenders, which has driven mortgage rates down to record lows.
This is good news for Rotherham homeowners and landlords.
Over the last few months a mortgage price war has broken out between lenders, with many slashing the rates on their deals to the lowest they have ever offered. For example, last month, HSBC launched a 1.69% five-year fixed mortgage!
Interestingly, according to the Council of Mortgage Lenders, the level of mortgage lending had soared to an all-time high in the UK.
In the Rotherham postcodes of SO60 to SO63, SO65 & SO66, if you added up everyone’s mortgage, it would total £1,907,848,696!
Since 1977, the average Bank of England interest rate has been 6.65%, making the current 323 year all time low rate of 0.25% very low indeed. Thankfully, the proportion of borrowers fixing their mortgage rate has gone from 31.52% in the autumn of 2012 to the current 59.3%. If you haven’t fixed – maybe you should follow the majority?
In my modest opinion, especially if things do get a little rocky and uncertainty seeps back in the coming years (and nobody knows what will happen on that front), one thing I know is for certain, interest rates can only go one way from their 300 year ultra 0.25% low level … and that is why I consider it important to highlight this to all the homeowners and landlords of Rotherham.
Maybe, just maybe, you might want to consider taking some advice from a qualified mortgage adviser? There are plenty of them in Rotherham.
I hope you have found this article useful. Please follow me on Twitter and Facebook for the latest information about the Rotherham property market. If you do have any questions or need some advice, please don’t hesitate to get in touch with me!
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