“How’s the Rotherham housing market doing?” asked one of our upbeat Rotherham landlords last week. “Quite strange”, I replied. Our landlord was a bit confused! Let me explain…
Even the Brexit vote has not fully hindered Rotherham’s steady rise in property value – property values in the area went down 0.92% last month but this still leaves Rotherham values 3.81% higher than a year ago and 8.9% higher than 20 months ago.
An increase in demand from buyers and an uninspiring level of supply (i.e. the number of properties on the market) has driven up the value of the Rotherham’s housing.
…and that is where the issue is.
Brexit, the coalition of the 2010-15, a double-dip recession and post-credit crunch fallout… I have been perplexed that the Rotherham property market (and values) has remained strong. That is until you start to look into the real reasons why we find ourselves in such a great place.
The Rotherham (and the UK) housing market is built on the foundations of basic economic rules that any A Level Economics student should understand. However, at a time when, as a country, we seem eager to uncouple ourselves from all manner of proven facts, anything is up for grabs.
Even the wary RICS said that most of its Chartered Surveyors in the UK anticipated house prices to increase in the next six months, which seems contradictory given economic cautions from Mr Hammond and HM Treasury.
- Inflation could rise to around 2% to 3% in 2017 and perhaps a little more in 2018 (due of Sterling’s devaluation)
- There’s a high probability of a decelerating GDP
- A slight rise in unemployment could be seen
So, how can the RICS and most of my landlords be so confident about the value of our homes?
Well, look at from where we are starting. Nationally, there’s a base of low unemployment, low inflation and preposterously low interest rates. In Rotherham, the local economy is doing quite well for itself. Confidence also plays a part. Confidence can supersede basic economic facts for a short time at least, which is why actual property market changes tend to be more exaggerated, as confidence can turn both positive and negative very quickly. The fact is, there is a long-term relationship between property values, wages and unemployment.
For example, looking at the graph below, you can quite clearly see the ratio of property values to earnings is nowhere near as high as it reached in 2008 and currently is in the middle of the range for the last 30 years.
As a country, we are in a good place.
By the end of March 2017, Article 50 will be invoked. This will bring additional political tomfooleries and economic ups and downs. With both purchasers and vendors predisposed by the 24-hour news cycle, which let’s face it, gets more haphazard by the day, it is likely to prove a challenging couple of years … and yes, Rotherham property values might drop slightly in 2017.
However, based on what we know currently, the UK and Rotherham property values are not projected to move that much over 2017 or 2018. Going into the next two years, we are in much better financial shape as a country compared to the last two crashes of 1987 and 2008.
But, on the other side of the coin, what we also know is that we don’t know much about the form of our economic future or indeed many other facets of our lives. Confidence will continue to be the key player in the Rotherham housing market for a while longer – yet this may possibly spur some much needed second-hand market activity.
Now, where is my crystal ball?
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The Rotherham property market continues to disregard the end of the world prophecies of a post Brexit fallout with a return to business as usual since last summer’s break.
The challenge every Rotherham property buyer has faced over the last few years is a lack of choice – there simply hasn’t been much to choose from when buying.
Whether you are buying a property for investment or owner occupation, levels are still well down on what would be considered healthy levels from earlier in this decade. Why? There is still a substantial demand/supply imbalance.
Until we start to see consistent and steady increases in properties coming on to the market in Rotherham, it is likely to see upward pressure on property values continue.
For example, in S62 the average number of houses coming onto the market each month has numbered between 20 and 30.
With the average Rotherham property value hitting a record high, reaching almost £141,450, this shortage of properties on the market over the last two years has contributed to this ‘fuller’ average property figure.
As I write this article,
2.73% of the total Rotherham properties are up for sale.
In terms of actual chimney pots, that equates to 899 properties on the market in Rotherham (within 3 miles of the centre of Rotherham) – which, when compared to only a year ago when that figure stood at 994, is a decrease worth consideration. Split down into the type of property, it makes even more fascinating reading…
- Detached Properties in Rotherham – 221 on the market a year ago compared to 155 on the market now – a decrease of 30%
- Semi Detached Properties in Rotherham – 436 on the market a year ago compared to 387 on the market now – a decrease of 11%
- Terraced Properties in Rotherham – 158 on the market a year ago compared to 232 on the market now – an increase of 47%
- Flats / Apartments Properties in Rotherham – 85 on the market a year ago compared to 92 on the market now – an increase of 8%
Many believed that the Rotherham property market wasn’t going to be strong enough post Brexit. There was a sellers’ market before the Brexit vote and buyers’ market in the early months after it… the market may now be somewhere in between and it might just be coming back into balance.
However, all this will mean property values won’t continue to grow at the same extent they have been over the last 12 to 18 months.
In fact, in some months (especially on the run up to Christmas and early in the New Year), values might dip slightly. This won’t be down to Brexit but a re-balancing of the local market – which is good news for everyone.
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I was having a most interesting chat the other day with a Rotherham landlord when we were looking at a property.
We got talking about the Rotherham property market and this landlord brought up the subject of a report he had read from the Royal Institution of Chartered Surveyors (RICS) and PricewaterhouseCoopers (PwC) that stated almost 1.8m new rental homes are needed by 2025 to keep up with current demand from tenants. He wanted to know what this could mean for Rotherham.
Well my blog reading friends, some commentators said last winter that buy-to-let was about to die due to the new stamp duty changes and how mortgage tax relief will be calculated.
Others even said 500,000 rental properties would flood the market nationally in the 12 months after the new Stamp Duty rules came into force on the 1st April 2016 as landlords left the rental market.
Well, all I can say is, I wish all the landlords of those half a million properties would hurry up and put them on the market – because I have plenty of other potential landlords wanting to buy them!
Back to the matter in hand… if the RICS and PwC are indeed correct, what does this mean for Rotherham? The fact is, as a country, we are facing a precarious rental shortage and need to get Rotherham building in a way that benefits a cross-section of Rotherham society, not just the fortunate few.
I call on the Prime Minister to drop the higher stamp duty tax on buy to let purchases to ease the pressure on the rental market.
Of the nearly 46,000 households in Rotherham, currently 12,900 tenants live in 5,400 private rented properties.
If we apportion those 1.8m households equally around the country, that means in nine years’ time, the number of rental properties in Rotherham needs to rise by 2,300 (i.e. 42.8%), which would take the total number of rented properties in the city to 7,700.
That means Rotherham landlords need to buy around 250 properties a year between now and 2025 to meet that demand – because according to my calculations, an additional 5,500 people will want to live in all those ‘additional’ Rotherham rental properties.
So why is the government penalising landlords?
Thankfully the new housing minister Gavin Barwell detached Teresa May’s new administration from the Cameron/Osborne laser-like focus on just home ownership to solve our housing issues, saying “we need to build more homes of every single type and not focus on one single tenure.”
The private rented sector became a stooge under David Cameron’s watch. With increasingly unaffordable Rotherham house prices, the majority of new Rotherham households will be relying on the rental sector in the future to house them.
I can only say Westminster must put in place the measures that will allow the rental sector to flourish.
Any restrictions on the supply of rental property will push up rents (bad news for tenants), thus side-lining those members of Rotherham society who are already struggling. Let’s hope this new Government continues to see the contribution landlords give to the country as a whole.
Whatever the future 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!
I had an interesting chat the other day with a Rotherham landlord.
He said he had been talking with an architect who said back in the mid-2000’s, the developments he was asked to draw were a balance of one and two bed properties, compared to today where the majority of the buildings he is designing are more towards two and sometimes three bedrooms.
This of course was all anecdotal, but it made me wonder if similar things were happening in the Rotherham property market?
This is a really important point as knowing when and where the demand of tenants is going to come from in the coming decade is just as important as knowing the supply side of the buy-to-let equation, in relation to the number of properties built in Rotherham, Rotherham property prices, Rotherham yields and Rotherham rents.
In 2001, there were 102,300 households with a population of 248,200 in the Rotherham Metropolitan Borough Council area. By 2011, that had grown to 108,300 households and a population of 257,300.
…meaning, between 2001 and 2011, whilst the number of households in the Rotherham Metropolitan Borough Council area grew by 5.88%, the population grew by 3.67%
Nothing surprising there then.
But, as my readers will know, there is always a but!
My analysis of the 2011 Census results, using the most recent in-depth data on household formation (eg ‘one person households’, ‘couples/ family households’ or ‘couple + other adults households and multi-adult households’), has displayed a sudden and unexpected break with the trends of the whole of the 20th Century.
There has been a seismic change in household formation in our area between 2001 and 2011.
Between 2001 and 2011, the population of Rotherham grew, as did the number of Rotherham properties (because of new home building). However, the growth rate of new properties built in Rotherham was much lower than expected, but the population has still grown by the expected rate, meaning the average household size was larger than anticipated. In fact, average household size (ie the number of people in each property) in 2011 was almost exactly the same as in 2001, the first time for at least 100 years it had not fallen between censuses. (Since 1911, household size has decreased by around 20% every decade).
Looking at figures specifically for Rotherham itself:
- One person households – 30.5%
- Couples/family households – 63.7%
- Couple + other adults/multi-adult households – 5.8%
This decline was reflected in large scale shifts in the mix of household types. In particular, there were far more “couple + other adults households and multi -adult households” than expected (5.8% is quite a lot of households).
It can be put down to two things:
- Increased international migration and changes to household formation – a particularly important reason for the difference can probably be attributed to the evidence that migrants initially form fewer households (ie two couples share one property) than those who have lived in the UK all their lives.
- Changes to household formation patterns amongst the rest of the population – this includes adult ‘children’ living longer with their parents and more young adults living in shared accommodation (as can be seen in the growth of Homes of Multiple Occupation properties).
So, what does all this mean for Rotherham Homeowners and Landlords? Quite a lot in fact.
There has been a subtle shift to slightly larger households in the last decade, meaning smart landlords might be tempted to buy slightly larger properties to rent out – again, good news for homeowners who will get top dollar for their home as they sell on.
But now with Brexit, household formation might swing the other way in the next decade? Who knows? Watch this space!
If you want to find out more about the Rotherham Property Market, keep coming back to this blog or follow me on Twitter or Facebook. I would love to get in touch with you!
Over the last month, the Rotherham property market has seen some interesting movement in house prices, as property values in the area rose by 2.8% to leave annual price growth at 5.7%.
These compare well to the national figures where property prices across the UK saw a monthly uplift of 0.42%, meaning the annual property values across the country are 8.3% higher – this is all despite the constraining factors of Stamp Duty changes in the spring and our more recent friend, Brexit.
Looking at the figures for the last 18 months makes even more fascinating reading, whereby house prices are 11.0% higher, again thought provoking when compared to the national average figure of 13.6% higher.
However, it gets more remarkable when we look at how the different sectors of the Rotherham market are performing.
Over the last 18 months, in the Rotherham Metropolitan Borough Council area, the best performing type of property was the detached, which outperformed the area average by 0.68%, whilst the worst performing type was the apartment, which under-performed the area average by 3.05%.
Now that difference doesn’t sound that much, but remember two things:
- This is only over eighteen months
- The gap of 3.73% (the difference between the detached at +0.68% and apartments at -3.05%) converts into a few thousand pounds disparity when you consider the average price paid for a detached property in Rotherham itself over the last 12 months was £217,100 and the average price paid for a Rotherham apartment was £103,700 over the same time frame.
I know all the Rotherham landlords and homeowners will want to know how each of the property types have performed, so this is what has happened to property prices over the last 18 months in the area…
- Overall Average: +11.0%
- Detached: +11.8%
- Semi Detached: +11.2%
- Terraced: +10.3%
- Apartments: +7.6%
So what does all this mean to Rotherham homeowners and landlords and what does the future hold?
When I looked at the month-by-month figures for the area, you can quite clearly see there is a slight tempering of the Rotherham property market over these last few months. I have mentioned in previous articles that the number of properties on the market in Rotherham has increased this summer, something that hasn’t happened since 2008. Greater choice for buyers means, using simple supply and demand economics, that top prices won’t be achieved on every Rotherham property. You see, some of that growth in Rotherham property values throughout early 2016 may have come about because of a surge in house purchase activity, an indirect result of the increase in stamp duty on second homes from April, thus providing a temporary boost to prices.
However, it may be possible the recent pattern of robust employment growth, growing real earnings and low borrowing costs will tilt the demand/supply seesaw in favour of sellers and exert upward pressure on prices once again in the quarters ahead.
Therefore, in twelve months (assuming that Brexit doesn’t throw us too many curveballs) Rotherham property should see values in the order of 2% to 3% higher.
As the trees turn from green to hues of red and brown, the Rotherham property market has a confident feel to it.
With the underlying fundamentals of a continued lack of properties being built, a shortage of properties (both in terms of quantity and quality) coming to the market and the continued low mortgage rate environment, buyer enquiries from first time buyers and buy-to-let landlords are strong and motivation is even stronger, given those inexpensive lending rates and general demand caused by under supply.
Now of course, there are a few potential hurdles coming towards us in the coming months that could affect the Rotherham (and UK) property market.
Mrs. May has yet to get her teeth into Brexit negotiations and we don’t know what the US Presidential elections might do to the money markets around the world, meaning that on the run up to Christmas, some savvy buyers may take advantage of the lack of certainty by making cheeky offers.
However, I don’t believe these will have a huge impact on property values (like the 2008 Credit Crunch).
You see, property ownership, whether it’s for yourself as a homeowner or buy-to-let landlord, is a long term investment.
In fact, focusing on buy-to-let, a number of landlords who own property in Rotherham have made contact with me recently asking for my thoughts on the future of the market in Rotherham. Well, as the Politician Edmund Burke said in the 18th century, “Those who don’t know history are destined to repeat it.”
In other words, to see the future you must look into the past.
Since the Millennium, the housing market has had everything thrown at it. The recent Brexit, last year’s General Election, the near melt down of the World Economy with the Credit Crunch, The Dot Com boom and bust, the housing market crisis in 2008, the housing boom of 2001 to 2004… the list goes on. In fact here is a graph (courtesy of the Land Registry) of average property values since the Millennium in the Rotherham area.
Even though we had the Dot Com bubble burst in 2000, two years later in January 2002, property values in the area had risen from £46,300 (in Jan 2000) to £52,600. They kept rising to August 2007, when they peaked at £136,000. Then we had the Credit Crunch and property prices continued to fall until June 2009, where they averaged £113,000… but look where they are now… £129,000.
The point I am trying to get across is long term future property values are more helpful to landlord investors than the month-by-month headline grabbing micro-movements in the property market. Look at the graph and you will see the growth in property values is an upward trend BUT the average darts about as each month goes by. So don’t watch the property indexes and panic if values drop next month or the month afterwards, because even in the glory days of 2001 to 2004 and 2012 to 2014, without fail, values always dropped slightly around Christmas, but people will always need a roof over their heads, and if they can’t buy and the council aren’t building anymore… only buy-to-let landlords can meet that demand.
Rotherham landlords are being hit in the pocket with the new up and coming taxation rules and yes, we might have the aforementioned bumpy ride on the run up to Christmas, but the trend will be a slow and steady upward momentum of property values, demand for rental properties and yields in the Rotherham property market into 2017 and beyond.
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