In late May 2016 George Osbourne was clear. He published an official HM Treasury analysis stating UK house prices would be lower by at least 10% (and up to 18%) by the middle of 2018 if we left the European Union, compared with what was expected if the UK voted to remain.
So, eight months on from the referendum, are we beginning to show signs of that prophecy?
The simple answer is yes and no.
Good barometers of the housing market are the share prices of the big UK builders. Much was made of Barratt’s share price dropping by 42.5% in the two weeks after Brexit. Alongside this Taylor Wimpey had an equally eye-watering drop of 37.9% during those two weeks.
Looking at the most recent set of data from the Land Registry, property values in Rotherham are 2.01% down month on month (and two months previously, they had a decrease of 0.69%) – so is this the time to panic and run for the hills?
Doom and Gloom then? Well, let me consider the other side of the coin.
As I have spoken about many times in my blog, it is dangerous to look at short term.
I have mentioned in several recent articles, the heady days of the Rotherham property prices rising quicker than a thermometer in the desert sun between the years 2011 and late 2016 are long gone – and good riddance!
It might surprise you during those impressive years of house price growth, the growth wasn’t smooth and all upward.
Rotherham property values dropped by 0.94% in July 2012 and 2.04% in January 2015 – and no one batted an eyelid then.
You see, property values in Rotherham are still 2.5% higher than a year ago, meaning the average value of a Rotherham property today is £143,100.
Even the shares of those new home builders Barratt have increased by 43.3% since early July and Taylor Wimpey’s have increased by 37.3%. The Office for Budget Responsibility, the Government Spending Watchdog, recently revised down its forecast for house-price growth in the coming years – but only slightly.
The Rotherham housing market has been steadfast.
The Rotherham housing market has been steadfast partly because, so far at least, the wider economy has performed better than expected since Brexit.
There is a robust link between the unemployment rate and property prices, and a flimsier one with wage growth.
Unemployment in the Rotherham Metropolitan Borough Council area stands at 7,700 people (6.4%), which is considerably better than a few years ago in 2013 when there were 13,900 people unemployed (11.4%) in the same council area.
Inflation is the only thing that does worry me.
However, inflation is the only thing that does worry me. Looking at all the pundits, it will get to at least 3% (if not more) in the latter part of 2017 as the drop in Sterling in late 2016 renders our imports with higher prices. If that transpires then the Bank of England, whose target for inflation is 2%, may raise interest rates from 0.25% to 2%+. Despite this, that won’t be so much of an issue as 81.6% of new mortgages in the UK in the last two years have been fixed-rate and who amongst us can remember 1992 with interest rates of 15%!
Forget Brexit and the inflationary thorn in the side – the greatest risk to the Rotherham (and British) property market is that there are simply not enough properties being built thus keeping house prices artificially high.
Good news for those on the property ladder, but not for those first-time buyers that aren’t! In the coming weeks in my articles on this blog, I will discuss this matter further. In the meantime please follow me on Facebook and Twitter. I would love to hear from you.
People aged over 65 in Rotherham currently hold more housing wealth in their homes than the annual GDP of the whole of the Isle of Anglesey… this is a problem for everyone in our area.
Many of the retired want to move but cannot, as there is a shortage of such homes for mature people to downsize into. Due to the shortage, bungalows command a 10% to 20% premium per square foot over houses of the same size with stairs.
In 2014 just 1% of new builds in the UK were bungalows – down from 7% in 1996 (National House Building Council).
My research has found that there are 10,852 households in Rotherham owned outright (i.e. no mortgage) by over 65 year olds. Taking into account the average value of a property in Rotherham, this means £1.59 billion of equity is locked up in these Rotherham homes (the annual GDP of the whole of the Isle of Anglesey is £797 million).
36% of people aged 65+ are looking to downsize into a smaller home.
A recent survey by YouGov, found that 36% of people aged over 65 in the UK are looking to downsize into a smaller home. However, the Government seems to focus all its attention on first-time buyers with strategies such as Starter Homes to ensure the youngsters of the UK don’t become permanent members of ‘Generation Rent’. Conversely, this overlooks the chronic under-supply of appropriate retirement housing essential to the needs of the rapidly ageing population.
Regrettably, the Rotherham’s housing stock is woefully unprepared for this demographic shift to the ‘stretched middle age’ – this has created a new ‘Generation Trapped’ dilemma where older people cannot move.
Some OAP’s who are finding it difficult to live on their own, are unable to leave their bungalow because of a lack of sheltered housing and ‘affordable’ care home places. So, older retirees can’t leave bungalows, younger retirees can’t buy bungalows and younger people can’t buy family houses.
Adding insult to injury, the problem will only get worse.
In the 50 year old to 64 year old homeownership age range there are an additional 8,110 Rotherham households that are mortgage free and a further 6,664 Rotherham households who will be completing their mortgage responsibility.
With Government projections showing the proportion of over 65s will rise by over a third from the current 17.7% to 24.3% of the population in the next 20 years… this can only add greater pressure to the Rotherham property market.
House prices have rocketed over the last 40 years because the supply of property has not kept up with demand. With migration, people living longer and high divorce rates (meaning one family becomes two) we need, as a country, to build 240,000 properties a year to just stand still.
In the 1990’s and early 2000’s, the Country was building on average 180,000 to 190,000 households a year, but since the 2009, that has only been between 130,000 and 145,000 households a year.
What’s the solution?
More land needs to be released for starter homes, bungalows and sheltered accommodation. Land prices are killing the housing market as the large firms dominating the construction industry are more likely to focus on traditional houses and apartments.
My opinion: until the Government change the planning rules and allow more land to be built on bungalows could be a decent bet for future investment as they continue to attract ever growing premiums…
Feel free to follow me on Twitter or like my Facebook page for up-to-date information about the property market in Rotherham.
“How much would it cost to buy all the properties in Rotherham?”
This fascinating question was posed by the 14-year-old son of one of my Rotherham landlords when they both popped into my offices before the Christmas break (doesn’t that seem an age away now!)
Over the Christmas break I decided to sit down and calculate the total value of all the properties in our town are worth. Just for fun I worked out how much they had gone up in value since this teenager was born in the autumn of 2002.
In the last 14 years, the total value of Rotherham property has increased by 93% (which is about £2.82 billion). This is a total of £5.85 billion!
This is interesting when consider the FTSE100 has only risen by 68.9% and inflation (i.e. the UK Retail Price Index) rose by 38.7% during the same 14 years.
When I delved deeper into the numbers, the average price currently being paid by Rotherham households stands at £121,118. but you know me, I wasn’t going to stop there. When I split the property market down into individual property types in Rotherham, the average numbers come out like this:
But it got even more fascinating when I multiplied the total number of each type of property by the average value!
Even though detached houses are so expensive, when you compare them with the much cheaper semi-detached houses, you can quite clearly see detached properties are no match in terms of total value of the semi-detached houses.
So, what does this all mean for Rotherham?
Well, as we enter the unchartered waters of 2017 and beyond, even though property values are already declining in certain parts of the previously overcooked London property market, the outlook in Rotherham remains relatively good. This is because over the last five years, the local property market was a lot more sensible than the market in central London.
Rotherham house values will remain resilient for several reasons.
- Demand for rental property remains strong with continued immigration and population growth.
- With 0.25% interest rates, borrowing has never been so cheap
- The simple lack of new house building – we have not kept up with current demand and there have been years and years of under investment
This all means only one thing – yes it might be a bumpy ride over the next 12 to 24 months but, in the medium term, property ownership and property investment in Rotherham has always, and will always, ride out the storm.
In the coming weeks, I will look in greater detail at my thoughts for the 2017 Rotherham Property Market. Stay up to date by following me on Twitter or Facebook.
Well, wasn’t 2016 eventful…?
The ups and downs of Brexit, the Queen’s 90th, the now Sir Andy Murray winning Wimbledon and reaching the number one ranking, Leicester City’s unlikely Premier League triumph, Trump’s election in the US and Bake Off moving to Channel 4.
Most importantly and something very close to the hearts of every buy-to-let landlord and homeowner in Rotherham… the Rotherham property market.
So, let’s look at the headlines for the Rotherham property market…
In the last month, Rotherham property values rose by 1.01%, leaving them, year on year 5.1% higher. Interestingly, at the same time, Rotherham asking prices are down 1.1% month on month.
All three statistics go to show the Rotherham property market has recovered well after the summer lull, which was worsened by the uncertainty surrounding the EU vote back in June.
Irrespective of all the issues, the average value of a Rotherham home now stands at £146,200.
Generally, Rotherham asking prices continue to hold up well, as asking prices are 4.1% higher year on year. At this time of year, asking prices tend to drop on the run up to Christmas and locally, they dropped by 1.1% in November 2016, although this compares well with last year’s drop in Rotherham asking prices, as we saw asking prices drop by 2.2% in November 2015.
Now it’s true to say, after chatting with fellow property professionals in Rotherham, all of us have seen the number of property sales fall slightly, suggesting a slowing market, but it is very early days and it could be the time of year. Also, the numbers are limited, so it’s interesting to take note from a recent survey by the Royal Institution of Chartered Surveyors, stating new buyer enquiries and new instructions are falling at the same rate, suggesting that there will not be a downward pressure on property values.
Looking at the figures for the UK (as we can’t just look at Rotherham in isolation), property values are generally rising slower than a few years ago, but on a positive note, there’s still growth across the UK.
You see, slowing property value growth isn’t solely Brexit related, but after a number years of double digit rises in property values, affordability has weakened and cooling price growth is widely seen to be a natural correction of the market.
On the other hand, interest rates being at a record low of 0.25% are helping the property market. The cut in interest rates in the late summer was the medicine for the post-Brexit worry and will, as a consequence, ensure that the UK economy continues to be underpinned by buoyant property prices.
So, what will happen in 2017 in the Rotherham property market?
Some say until we know what type of exit the UK will make from the EU it is hard to evaluate the outcome. Although, I believe, the whole Brexit issue is a sideshow to the main issue in the UK (and Rotherham) housing market as a whole.
As I have mentioned time and time again over the last few months, the biggest issue is demand outstripping supply – too many households are required to house us all.
Rotherham itself has an ever-growing population due to immigration (it will be at least two years before the free movement of labour across EU countries is curbed by Brexit), people living longer and divorce rates (there are 115,000 divorces a year meaning we need thousands of additional households as one household becomes two households).
These are certainly interesting times ahead!
Whatever 2017 has in store for the Rotherham property market, you can find the latest news and insights on this blog as well as my Facebook and Twitter sites. Follow the Rotherham Property Blog today!
Well, it doesn’t seem like two minutes ago that it was Christmas – and now it’s all over! The New Year is just around the corner but I would like to look back at the Rotherham market during the Autumn.
One cold December morning, after arranging the office Christmas cards I went out for a coffee and a mince pie. I met an old client of mine in the coffee shop and we got talking about the property market here in Rotherham. I would like to share with you some of that conversation.
He asked me what my thoughts were about the last half of the year and if there were any great buy-to-let deals around.
In reply, I said that in my view, I have seen an increase in supply and a rise in the number of properties selling at the lower to middle end of the market. We have shrugged off the uncertainty of the initial post-Brexit vote and this has meant that both first time buyers and buy-to-let landlords have been returning in the last few months – proof the market is beginning to bounce back.
So let’s look at the numbers…
In November 2016, according to the three main property portals (Rightmove, Zoopla and OnTheMarket) there were a total of 249 properties for sale in S61. In November 2015, there were only 226 properties for sale. This is a rise of 10%.
When I split it down into bedrooms (please note things like building plots and part commercial/part residential etc won’t be in these figures so the numbers below wont exactly match up to those in the above paragraph).
||# Properties on the market in Nov 2015
||# Properties on the market in Nov 2016
…and when I looked at type of properties it got even more interesting!
|Type of Property
||# Properties on the market in Nov 2015
||# Properties on the market in Nov 2016
||Per cent Change
As the number of S61 properties put up for sale has risen, homeowners have become more realistic about how much their homes are worth. This increase in homeowners wanting to sell suggests there is renewed confidence in the property market and there are also signs that people are being more realistic about pricing their property.
As you can see, there has been a significant uplift in terraced properties and a good uplift in flats, which means there is greater choice for first time buyers and landlords.
So with a combination of realistic pricing and more properties on the market – both first time buyers and landlords alike might be able to pick up a few bargains!
One place for great Rotherham buy-to-let deals is this blog. Irrespective of which agent is selling the property, I publish what I consider is the very best deals in Rotherham. It’s also worth following me on Twitter and Facebook for the latest news and updates about Rotherham and the property market here.
While Brexit has not yet had a sizeable impact on the Rotherham housing market, my analysis is pointing to the fact that the economy still remains uncertain and Rotherham property price growth is likely to be more subdued in 2017. Let me explain why this isn’t a bad thing.
Since the summer, apart from a little wobble of uncertainty a few weeks after the EU Referendum vote, property values (and the economy), on the whole has outperformed what most people were predicting.
In fact, when I looked at the property prices for our area, these were the results…
October 2016: drop of 2.01%
September 2016: rise of 1.31%
August 2016: drop of 0.69%
July 2016: rise of 2.37%
June 2016: rise of 2.16%
The UK property market continues to perform robustly (because we can’t just look at Rotherham as if in its own little bubble):
Annual price growth is set to end 2016 at 6.91% and most of the Yorkshire and Humber region property market will end around 4.21%.
Talking to fellow agents in London, the significant tidal wave of growth seen from 2013 through to 2015 in the capital has subdued over the last six months.
However, as that central London house price wave has started to ripple out, agents are starting to see stronger property growth values in East Anglia and the South East regions outside of London, than what is being seen within the M25.
So, fellow Rotherham landlords and homeowners, is this the time to get your surfboards ready for the London wave?
Well, we in Rotherham haven’t really been affected by what is happening in the central London property mega bubble (i.e. Kensington, Chelsea, Marylebone, Mayfair etc.). The property market locally is more driven by sentiment, especially the ‘C’ word… confidence. The main forces for a weaker Rotherham property market relate to economic uncertainty surrounding the Brexit process, which I believe will impact unhelpfully on consumer confidence in the run up to and just after the serving of the Section 50 Notice by the end of Q1 2017.
In addition, the influence of reforms to the taxation of landlords is expected to result in a reduced demand from buy-to-let landlords, which will limit upward pressure on property values. However, on the other side of the coin, demand from tenants has been strong, but this has been counterbalanced by a strong supply of rental properties.
In my opinion, there is a slight risk of rents not growing as much in 2017 as they have in 2016, but by 2018 they will rise again to counteract Philip Hammond’s changes to tenant fees.
The broader Rotherham rental market looks relatively positive.
Modest rental growth is expected and rents might rise further if landlords begin to sell properties in an effort to offset to the impact of tax rises.
So what do I predict will happen to the Rotherham housing market in 2017? In Rotherham the growth of 2.5% for 2016 is set to fall to just 0.2% next year, then up 2.1% in 2018, 3.1% in 2018, 2.4% in 2019, 3.3% in in 2020 and finally 3.4% in 2021.
But these predictions do not take into account any effect of a possible snap General Election or further referendum on ratifying any Brexit deal (if that comes to pass in the future).
I’ll be staying alert and attentive to all movement in the property (and political spheres) – feel free to follow me on Twitter or Facebook for all the latest news and updates.
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