The Rotherham housing market has gone through a sea change in the past decades. In particular, the Buy-to-Let (B-T-L) sector has been evolving for both Rotherham tenants and landlords.
A few weeks ago, the Government released a White Paper on housing. I have had a chance now to digest the report and wish to offer my thoughts on the topic. It was interesting that the private rental sector played a major part in the future plans for housing. This is especially important for our growing Rotherham population.
In 1981, the population of the Rotherham Council area stood at 253,200 and today it stands at 260,800.
Currently, the private rented (B-T-L) sector accounts for 11.8% of households in the town. The Government want to assist people living in the houses and help the economy by encouraging the provision of quality homes, in a housing sector that has grown due to worldwide economic forces, pushing home ownership out of the reach of more and more people.
Interestingly, when we look at the 1981 figures for homeownership, a different story is told:
- 45.94% Rotherham people owned their own home
- 45.78% Rotherham people rented from the Council or Housing Association
- 8.28% Rotherham rented from a private landlord
The significance of a suitable housing policy is vital to ensure suitable economic activity and create a vibrant place people want to live in.
With the population of the Rotherham area set to grow to 277,000 by 2037, it is imperative that the council and the UK Government all work actively together to ensure the residential property market doesn’t hold the area back, by encouraging the building and provision of quality homes for its inhabitants.
One idea the Government has proclaimed is a variety of measures aimed at encouraging the Build-to-Rent (B-T-R) sector (instead of the B-T-L sector). These include allowing local authorities to proactively plan for B-T-R schemes, and making it simpler for B-T-R developers to offer inexpensive private rented homes.
To do this, the government will invent a distinct affordable housing class for B-T-R, called ‘Affordable Private Rent’, which will oblige new homes builders to provide at least 1 in 5 of a new home developments at a 20% discount on open-market rents and three year tenancies for tenants. In return, the new homebuilders will get better planning assurances.
Private landlords will not be expected to offer discounts, nor offer 3-year tenancies – but it is something Rotherham landlords need to be aware of as there will be greater competition for tenants.
Over the last ten years, home ownership has not been a primary goal for young adults as the world has changed.
These youngsters expect ‘on demand’ services thanks to Amazon, Dating Apps and Netflix.
Many Rotherham youngsters see that renting more than meets their accommodation needs as it combines the freedom from a lifetime of property maintenance and financial obligations. For them, this is an attractive lifestyle option.
Private rented housing in Rotherham, whether that’s through B-T-L or B-T-R, has the prospective to play a very positive role.
You can hear about my latest thoughts on the property market here in Rotherham and across the UK by following me on Facebook or Twitter.
Everyone should own their own home – that was the message of the Margaret Thatcher government.
In 1971, around 50% of people owned their own home. However, as the baby boomers got better jobs and pay, that proportion of homeowners rose to 69% in 2001. Homeownership was here to stay.
Thanks to TV programmes such as Homes Under The Hammer, baby boomers started to jump on the buy-to-let bandwagon – people in Rotherham invested in these properties as an investment. Now Rotherham first time buyers were in competition with the landlords to buy these smaller starter homes. This pushed up house prices in the 2000s (as mentioned in Part One). When combined with economics, banks and government policy, the prices are now beyond the reach of many first time buyers.
But are the Rotherham landlords fanning the flames of the housing crisis bonfire?
My opinion is that the landlords of the 5,416 Rotherham rental properties are not exploitive. In fact, they are making many positive contributions to Rotherham and the people who live here. Like I have said before, Rotherham (and the rest of the UK) isn’t building enough properties to keep up the demand caused by high birth rates, job mobility, growing population and longer life expectancy.
According to the Barker Review, for the UK to standstill and meet current demand, the country needs to be building 8.7 new households each and every year for every 1,000 households already built. Nationally, we are currently running at 5.07 per thousand and in the early part of this decade were running at 4.1 to 4.3 per thousand.
It doesn’t sound a lot of difference, but let us look at what this means for Rotherham …
For Rotherham to meet its obligation on the building of new homes, Rotherham would need to build 399 households each year.
Unfortunately we are missing that figure by around 167 households a year.
For the Government to buy the land and build those additional 167 households, it would need to spend £24,473,638 a year in Rotherham alone. Add up all the additional households required over the whole of the UK and the Government would need to spend £23.31bn each year… I don’t know if you’ve noticed but the country hasn’t got that sort of money
With these problems, it is the property developers who are buying the old run-down houses and office blocks which are deemed uninhabitable by the local authority, and turning them into new attractive homes. These are either rented privately to Rotherham families or to those people who need council housing because the local authority hasn’t got enough properties to go around.
The bottom line is that, as the population grows, there aren’t enough properties being built for everyone to have a roof over their head.
Rogue landlords do need to be put out of business, whilst tenants should expect a more regulated rental market, with greater security for them. The system should ensure that tenants can rely on good landlords providing them high standards in a safe and modernised home.
As in Europe, where most people rent rather than buy, it doesn’t matter who owns the house – all people want is a clean, decent roof over their head at a reasonable rent.
So only you, the reader, can decide if buy-to-let is immoral, but first let me ask this question:
If the private buy to let landlords had not taken up the slack and provided a roof over these people’s heads over the last decade… where would these tenants be living now?
The alternative doesn’t even bear thinking about!
Have you enjoyed my two part blog series on the buy-to-let market? Let me know on Twitter or Facebook.
Recent statistics published by the Office of National Statistics show that there are 267,704 private rented households in the UK that are occupied by people aged 65+ – that’s 4.39% of OAPs living in private rented property.
This got me thinking two things:
1. How many of these OAPs have always rented?
2. How many have sold up and become a tenant?
In retirement, selling up could of course make financial sense to the mature generation in Rotherham. It potentially allows them to liquidate the equity of their main home to enhance their retirement income.
I wanted to know why these older people rent and whether there was opportunity for the buy-to-let landlords of Rotherham?
The Prudential published a survey recently that said nearly six out of ten OAP renters had never owned a home. 20% OAP renters were required to sell up because of debt and only one in ten OAP renters sold their property to use the money to fund their retirement. (The remaining 10% of OAP renters were renting for other reasons.)
Life expectancy is making it important to fund retirement.
For someone living in Rotherham who is aged 65, the current life expectancy is 18 years for a man and 20.1 years for a woman (interesting when compared to the national average of 18.7 years and 21.1 years). Funding retirement is therefore increasingly important.
The burdens of financing a long retirement are being felt by many mature people of Rotherham. The state of play is not helped by rising living costs and ultra-low interest rates reducing returns for savers.
So, what of Rotherham?
Of the 12,660 households in Rotherham, whose head of the household is 65 or over, not surprisingly 7,892 of households were owned (62.34%) and 3,795 (29.98%) were in social housing. However, the figure that fascinated me was the 526 (4.15%) households that were in privately rented properties.
Talking to members of my team at Bricknells Rentals and Fenton Board, as well as other Rotherham property professionals, it seems that this figure is rising. This is only anecdotal evidence but I’m convinced that more and more OAPs are selling their large Rotherham homes and renting something more manageable.
Why is renting a good option for OAPs?
Selling a large home and moving into the rental market allows OAPs to release all of their equity from their old home. This equity can be gifted to grandchildren (allowing them to get on the property ladder), invest in plans that produce a decent income and all the while living the retired life that they want to live.
These Rotherham OAP renters know they have a fixed monthly expenditure and can budget accordingly with the peace of mind that their property maintenance and the upkeep of the buildings are included in the rent. Many landlords will also include gardening in the rent!
Renting is also more adaptable to the trials of being an OAP – the capability to move at short notice can be convenient for those moving into nursing homes, and it doesn’t leave family members panicking to sell the property to fund care-home fees.
Rotherham landlords should seriously consider low maintenance semi-detached bungalows on decent bus routes and close to doctor’s surgeries as a potential investment strategy to broaden their portfolio. Get it right and you will have a wonderful tenant, who if the property offers everything a mature tenant wants and needs, will pay top dollar in rent!
Landlords, do you need more tips? Get in touch with me – I’d be happy to help.
Can we blame the 55 to 70-year-old Rotherham citizens for the current housing crisis in the town?
Known as the ‘Baby Boomers’, these Rotherham people were born after WW2 when the country saw a massive rise in births as they slowly recovered from the economic hardships experienced during wartime.
Throughout the 1970s and 1980s, they experienced (whilst in their 20s, 30s and 40s) an unparalleled level of economic growth and prosperity throughout their working lifetime on the back of improved education, government subsidies, escalating property prices and technological developments. They have emerged as a successful and prosperous generation.
However, some have suggested these baby boomers have (and are) making too much money to the detriment of their children, creating a ‘generational economic imbalance’.
Mature people have benefitted from house-price growth while their children are forced either to pay massive rents or pay large mortgages.
Between 2001 and today, average earnings rose by 65%,
but average Rotherham house prices rose by 143.2%
The issue of housing is particularly acute with ‘Millennials’ – the young people born between the mid-1980s and the late 1990s. They’ve been shaped by the computer and internet revolution. These 18-30 years are finding as they enter early adult life that it is very hard to buy a property. These ‘greedy’ landlords are buying up all the property to rent out back to them at exorbitant rents… it’s no wonder Millennials are lashing out at buy-to-let landlords – they are seen as the greedy, immoral, wicked people who are cashing in on a social despair.
Like all things in life, we must look to the past to appreciate where we are now.
The three biggest influencing factors on the Rotherham (and UK) property market in the later half of the 20th Century were:
- The mass building of Council Housing in the 1950s/60s.
- The Conservative’s decision to sell most of those Council Houses off in the 1980s
- 15% interest rates in the early 1990’s which resulted in many houses being repossessed.
It was these major factors that underpinned the housing crisis we have today in Rotherham.
After the USA relaxed their bank’s lending criteria in 1995 to encourage banks to give mortgages to those in low wage neighbourhoods, Britain unsurprisingly followed suit. The viewpoint in the USA was that anyone (even someone on the minimum wage) should be able to buy a home. Banks and building societies in the UK relaxed their lending criteria and brought to the market 100% mortgages.
Roll the clock forward to today – we can observe those very same footloose banks from the early/mid-2000s now ironically reciting the Bank of England backed hymn-sheet of responsible lending. On every first time buyer mortgage application, they are now look at every single line on a 18-30 year old’s bank statement, asking if they are spending too much on socialising or holidays. No wonder the Millenials seem to be afraid to ask for a mortgage! And if they do ask, more often than not, after all that hassle, the answer is negative.
Conversely, there are unregulated buy-to-let mortgages. As long as you have a 25% deposit, a heartbeat, pass a few very basic yardsticks and have a reasonable job, the banks will literally throw money at you… for example, Virgin Money are offering 2.99% fixed for 3 years – so cheap!
In Part Two next week, I will continue this emotive article and show you some very interesting findings on why young people aren’t buying property anymore.
Here’s a short preview: it’s not what you think!
As always, you can catch up with me on Facebook and Twitter or get in touch via email.
The good old days of the 70s and 80s, eh…?
24% inflation, 17% interest rates, 3 day working week, 13% unemployment, power cuts … those were the days… but at least people could afford to buy their own home. Why aren’t those in their 20s and 30s buying in the same numbers as they were 30 or 40 years ago?
Blaming the credit crunch and global recession in 2008
Many blame the credit crunch and global recession in 2008, which did have an enormous impact on the Rotherham (and UK) housing market. The young first-time buyers discovered it challenging to assemble the monetary means to get on to the Rotherham property ladder – a problematic mortgage market, the perceived need for big deposits, reduced job security and declining disposable income – buying a house did not look like a worthwhile prospect.
However, I would say there has been something else at play other than the issue of raising a deposit – having sufficient income and rising property prices in Rotherham.
Whilst these are important factors and barriers to homeownership, I also believe there has been a generational change in attitudes towards home ownership in Rotherham (and across the UK).
Back in 2011, the Halifax did a survey of thousands of tenants and 19% of tenants said they had no plans to buy a home for themselves. A recent, almost identical survey of tenants, carried out by The Deposit Protection Service revealed that in late 2016 this figure had risen to 38.4% – many no-longer equated home ownership to success and believing renting to be better suited to their lifestyle.
Renting is an important part of the housing sector
I believe renting is a fundamental part of the housing sector, and a meaningful proportion of the younger adult members of the Rotherham population choose to be tenants as it better suits their plans and lifestyle.
Local Government in Rotherham (including the planners – especially the planners), land owners and landlords need an adaptable Rotherham residential property sector that allows the diverse choices of these Rotherham 20 and 30 year olds to be met.
This means, if we applied the same percentages to the current 12,877 Rotherham tenants in their 5,416 private rental properties… 4,945 tenants have no plans to ever buy a property – good news for landlords.
Interestingly, in the same report, just under two thirds (62%) of tenants said they didn’t expect to buy within the next year.
Does that mean the other third will be buying in Rotherham in the next 12 months?
Some will, but most won’t…
In fact, the Royal Institution of Chartered Surveyors (RICS) predicts that, by 2025, that the number of people renting will increase, not drop.
Yes, many tenants might hope to buy but the reality is different for the reasons set out above. The RICS predicts the number of tenants looking to rent will increase by 1.8 million households by 2025, as rising house prices continue to make home ownership increasingly unaffordable for younger generations.
So, if we applied this rise to Rotherham, we will in fact need an additional 2,321 private rental properties over the next eight years (or 290 a year). As a result the number of private rented properties in Rotherham is projected to rise to an eye watering 7,737 households.
It will be fascinating to see how this all plays out over the next few years.
Join me on this journey – as well as this blog I post my latest insights and thoughts on Twitter and Facebook.
This is the big picture: the number of people moving house in the UK has dropped by over a third during the last decade.
Over the last 12 months 1,061,557 properties were sold with a total value of £223.74bn. Compare this with ten years ago when 1,581,727 properties sold with a total value of £405.56bn.
Whether you are a landlord, homeowner or tenant, it’s always important to keep an eye on the Rotherham property market, not just from your point of view, but also from every player’s point of view.
Over the last 12 months, 2,338 properties have sold (and completed) in Rotherham, worth £333m. Interestingly the number of properties changing hands in Rotherham has also dropped when compared to a decade ago.
It might surprise you that first time buyers in 2017 will benefit from a slight decline in Rotherham buy-to-let investors.
Those looking to buy a home in the spring and summer of 2017 will face a far less competitive Rotherham property market than the same time of year in 2016, when the urgency to beat the buy-to-let stamp duty hike was in full swing.
Many landlords brought forward their purchases to beat the tax, and since then, the number of buy-to-let purchases has dropped slightly. First time buyers have taken advantage of that and have increased their buying. In fact, looking at the Bank of England figures, this is what UK lenders have lent on buy-to-let properties versus first time buyers over the last 12 months:
Q4 2015: £1bn buy-to-let mortgages vs £1.31bn for first time buyers
Q1 2016: £1.35bn buy-to-let mortgages vs £1.08bn for first time buyers
Q2 2016: £760m buy-to-let mortgages vs £1.28bn for first time buyers
Q3 2016: £827m buy-to-let mortgages vs £1.42bn for first time buyers
When looking at the figures for Rotherham itself, first time buyers have borrowed more than £112.3m in the last 12 months to buy their first home.
This is a ringing endorsement of their confidence in their jobs and the local Rotherham economy. Those in their 20s and 30s who are considering being first time buyers in 2017 will find that the number of properties on the market has never been as good as it has for quite a while, meaning you have more choice of properties and less competition from so many buy-to-let landlords than a year ago.
Rightmove announced nationally that new seller enquiries are 26% up on the same time last year giving the stoutest indication that we may see a slight ease in the lack of properties on the market. When I look at the Rotherham market, at this moment in time there are an impressive 832 properties for sale, so plenty of choice. All this will be welcome news amongst Rotherham first-time buyers with a combination of a proportional reduction in new investors and landlords.
2017 is proving to be an interesting year for all homeowners, be they buy-to-let landlords, existing homeowners or future homeowners.
Stay up-to-date with all the latest within Rotherham’s property market by following me on Twitter and Facebook.
Page 10 of 21« First«...89101112...20...»Last »