Rotherham Landlords count the cost of a Tory Election win

Rotherham Landlords count the cost of a Tory Election win

Can you remember 10.05pm on Thursday, 7th May 2015 … with the shock news that BBC Exit Polls suggested the Conservatives would be returned with majority?

The middle classes in Wickersley and Bramley exhaled a huge sigh of relief, as Rotherham landlords, faced with rent controls from Red Ed and the Labour Party, now had something to cheer about as the Tory’s were always considered to be a political party that accepted the importance of the rental market, supported its development while properly targeting the lawbreaker landlords renting out below standard rental accommodation.

Since May though, George Osborne announced future rises in stamp duty for buy to let landlords and a change in the interest relief on buy to let mortgages, some people have started to question that loyalty. However, things could have been a lot worse for Rotherham landlords as previous ideas of making landlord’s pay more tax was the idea (which was seriously considered) of increasing Capital Gains Tax rates to the landlord’s own income tax levels. If Landlords would have had to pay capital gains tax of 40% to 45% on any uplift in value, I can tell you here and now, that would have made investing in property a non starter for almost everyone.

However, I will admit the loss of mortgage higher rate tax relief will make a number of properties not stack up financially. The new rules are likely to slow demand in the Rotherham housing market, which is in fact good news for the other landlords, as there is less competition from ‘amateur’ landlords offering too much.

Just a thought, but making Rotherham landlords think twice and

run their numbers more cautiously is not such a bad thing.

So looking at the numbers, the November figures have just been released and they show a slight drop of property values in Rotherham of 0.3% over the month of November. That figure doesn’t surprise me due to the time of year. It’s quite dangerous to look at one month in isolation, so looking at a more medium term view, over the last 12 months, property values in Rotherham have risen by 1.3%, not bad when you consider inflation is running at -0.1%.

However, regular readers of the Rotherham Property Blog know my passion for looking deeper into the stats. The really interesting information is the value growth, but what types of property are actually selling in Rotherham? Looking at all the properties sold, as recorded by the Land Registry, within 3 miles of the centre of Rotherham in September 2015 (this data always runs a couple of months behind the house price data) compared to September 2007 (a couple of months before the credit crunch started to bite and the subsequent property crash).

Sept 2007 Sept 2015 Difference
Detached in Rotherham 21 16 -24%
Semis in Rotherham 75 60 -20%
Terraced Houses in Rotherham 49 45 -8%
Apartments / Flats in Rotherham 5 7 +40%

 

Now I have mentioned in previous articles that the numbers of properties selling in the town has certainly dropped post 2008, but what amazed me were the drop in the number of detached, semis and terraces selling in Rotherham compared to the sales of apartments.

Less properties are selling than last decade in Rotherham and the types of properties selling have changed …interesting times ahead for the Rotherham Property market!

Therefore, all I can say to the landlords of Rotherham is do your homework, make sure the numbers do stack up, take advice and opinion from professionals and above all, for those of you planning to add to your portfolio, buy the right property at the right price

Where will Rotherham Property Prices be by 2021?

Where will Rotherham Property Prices be by 2021?

I was having lunch the other day at the Kings Head on Rockingham Road in Rotherham, with a local Rotherham solicitor friend of mine, when the subject of property came up. He asked me my thoughts on the Rotherham property market for the next five years.

Property prices are both a British national obsession and a key driver of the British consumer economy. So what will happen next in the property market? So here is what I told him, and now wish, my blog reading friends, to share with you.

Before I can predict what will happen over the next five years to Rotherham house prices, firstly I need to look at what has happen over the last five years. One of the key drivers of the housing market and property values is unemployment (or lack of it), as that drives confidence and wage growth – key factors to whether people buy their first house, existing homeowners move up the property ladder and even buy to let landlords have an appetite to continue purchasing buy to let property.

When the Tory’s came to power in May 2010, the total number of people who were unemployed in town stood at 3,517 (or 8.4% of the working age population in Rotherham parliamentary constituency). Last month, this had dropped to 1,968 people (or 2.9% of the working age population).

As the Rotherham job market has improved with better job prospects, salaries are rising too, growing at their highest level since 2009, at 3.4% per year in the private sector (as recently reported by the ONS). That is why, even with the colossal turbulence of the last few years, property values in the Rotherham area are only 4.32% lower today than they were five years ago.

Many home occupiers have held back moving house over the past seven to eight years following the Credit Crunch but with the outlook more optimistic, I expect at least some to seize the opportunity to move home, releasing pent up demand as well as putting more stock onto the market. With a more stable economy in the town, this will, I believe, drive a slow but clearly defined five year wave of activity in home sales and continued house price growth in Rotherham.

I forecast that the value of the average home in Rotherham will increase by 18.6% by 2021

18.6% might sound optimistic to some, but according to Land Registry, values are currently rising in Rotherham at 1.0% year on year, I believe my forecast to be fair, reasonable and a reflection of both positive (and negative) aspects of the local property market and wider UK economy as whole.

However, it wouldn’t be correct not to mention those potential negative issues as I do have some slight concerns about the future of Rotherham housing market. The number of properties for sale in Rotherham is lower than it was five years ago, restricting choice for buyers (yet the other side of the coin is that that keeps prices higher). Interest rates were being predicted to rise around Easter 2016, but now I think it will be nearer Christmas 2016 and finally the new buy to let taxation rules which are being introduced between 2017 and 2021 (although choosing the right sort of property / portfolio mix in Rotherham will, I believe, mitigate those issues with the next taxation rules).

I am telling the landlords I speak to, that with interest rates at their current level 0.5%, the cash in your Building Society Passbook is going to grow so slowly that it might as well be kept under their bed. Property prices, by contrast, have rocketed over the years, even after the property crashes, far outstripping bank accounts and inflation.

So my final thought … property is a long term investment, it has its’ up and downs, but it has always outperformed, in the long term, most investments. Those in their 40’s and 50’s in Rotherham would be mad not to include property in their long term financial calculations. Just make sure you buy the right property, at the price in the right location. One source of information on such matters would be the Rotherham Property Blog

What does 2016 have in store for the Rotherham Property Market?

What does 2016 have in store for the Rotherham Property Market?

Rotherham house prices up or Rotherham house prices down? … and if so, by how much?

Those of you who regularly read this blog will know I am not the sort of person who pulls punches nor someone who ever fails to give a forthright and straight talking opinion – so here are my thoughts for the 27,445 Rotherham homeowners and landlords.

The average Rotherham property is 1% higher today than it was a year ago, which doesn’t sound a lot, but when you consider inflation is currently running at -0.1% (ie consumer/retail prices are dropping) and average salary growth is only around 2.5% pa, this is bad news for first time buyers as property affordability continues to decrease (although I was reading in The Times the other day that wage inflation (ie salary growth) is showing signs of weakening).

Some commentators have said the higher stamp duty taxes announced a few weeks ago in the Autumn Statement for buy to let landlords, concerns over first time buyer affordability and the outlook of UK interest rate rises in 2016 will really dampen the property market. I hope you all read my previous article about what the new stamp duty rule changes would REALLY mean for Rotherham landlords in my blog, but I believe the real issue in the Rotherham property market is the shortage of property to buy, as people either worry there will be no suitable house to move to, or cannot afford to upgrade. However, on the supply side, Mr Osborne said in his Autumn Statement that he will change the planning laws to ensure the government meets the pledge made at the General Election (back in May) of 200,000 new homes a year. All I can say is .. good luck George hitting those numbers!

Why? Because houses take years to build .. not months .. so George and his fabled house building aside …. where does that leave us in Rotherham in 2016?

Well, talking of supply … whilst Mr Osborne builds his properties (and let’s be honest – a week doesn’t go by without him being filmed on a building site with a high viz jacket and hard hat building a house here and there!), let us look at the shortage of properties for sale. Back in December 2011, 1,217 properties were for sale in Rotherham .. today that figure is 929. On the face of it, this means there is less choice for Rotherham buyers – but it also means with a restricted supply of properties for sale .. it keeps property prices high for Rotherham house sellers.

Everything isn’t all doom and gloom though … again back in December 2011, the average property in Rotherham took 179 days to find a buyer .. latest figures state this has dropped to 131 days .. a drop of 27% in how long it takes to find a buyer. However, when you delve even deeper, the best performing type of property today in Rotherham is the 3 bed, which takes 124 days to find a buyer (on average) compared to the 1 bed, which takes 187 days. It just goes to show, even though the average has dropped since 2011, how varied that change has been!

So, back to the question everyone is asking …. What will happen to property values in Rotherham in 2016? I am going to suggest they will rise between 0.5% and 1% … nothing out of the ordinary, but unless something cataclysmic happens in the world, 2016 will be like 2015!

Rotherham Landlords could be fined £297,000 per year

Rotherham Landlords could be fined £297,000 per year

“Who would want to move to Rotherham in weather like this?”, was what one landlord said to me as we shook hands outside his property, the other afternoon.

It was windy, cold, it had been raining most of the day and it was the last appointment of the day at 4.45pm. I will admit, as I had been out of the office all day, I was looking forward to getting home, putting the fire on, and watching telly with a big mug of tea.. but this landlord lived in neighbouring Sheffield and this was the earliest he could do.

It turned out he had been self-managing the property himself over the last few years, but was worried with all the new legislation that had been introduced recently. He was particularly concerned about the up and coming ‘Right to Rent’ legislation, so as his tenant had handed in their notice recently, on this new tenancy he called us for our opinion.

For those Rotherham landlords that don’t know, landlords will need to check the immigration status of any new tenants moving into properties from February 2016 or face a £3,000 fine. It is called the ‘Right to Rent’ rules. However, tenants should also be aware that as well as traditional landlords, tenants who sub let rooms and homeowners who take in lodgers, must also check the right of prospective tenants to reside in the UK.

Our landlord from Sheffield wanted to know how much of a real issue was ‘Right to Rent’ in Rotherham. I was able to tell him, the last available figures (from a couple of years ago) show that 99 people (whom were registered as Non-UK Born Short-term Residents) moved into private rented accommodation in the Rotherham Metropolitan Borough Council area in one year alone. If all of those people weren’t supposed to be in the UK, that would be a fine of £297,000 to the landlords of the town.

It doesn’t sound a lot when you think there are 109,691 residents in Rotherham Metropolitan Borough Council area, and of those, 100,349 people (or 91.48%) were born in the UK. But Rotherham is a cosmopolitan town as the country of birth of the residents in the Rotherham Metropolitan Borough Council area can be split down as follows:

  • UK                                                            48%
  • Ireland                                                     30%
  • Europe                                                     66%
  • Africa                                                       13%
  • Middle East and Asia                             22%
  • Americas and Caribbean                      16%
  • Australia and Pacific region                 04%

 

However, it must also be recognised that landlords, by checking up on tenants, could potentially be accused of discrimination under the Equality Act. This is a real minefield for landlords, especially when you consider that not all of the 2,921 Europeans in the area necessarily have the right to live in the UK either.

In a nutshell, Rotherham landlords will need to check and retain copies of certain documents that show a potential tenant has the right to live in the UK. These include ….

  • UK Passport
  • EEA Passport/Identity card
  • Travel document or Permanent Residence Card showing indefinite leave to remain
  • Paperwork from Home Office stating their Immigration status
  • Certificate of registration or naturalisation as a British citizen.

I hope the new law will target dishonest landlords who repeatedly fail to carry out Right to Rent checks by making it a criminal offence. This means they could face imprisonment for failing to check on their tenants. That is why more and more landlords are asking agents to manage their properties, so they can stay the right side of the law.

So what did our landlord do?

Well after our chat, he asked us to find a tenant and manage the property for him – he had been reading the Rotherham Property Blog for a while and because of the knowledge we impart to the landlords of Rotherham, we obviously know what we are talking about. Even better news for him, even though this would cost him agency fees, I was able to get him an additional £35 per month for his property (when we found him a tenant one week later). Now, together with the peace of mind we will keep him the right side of the law and put a stop to midnight phone calls complaining about dripping taps, it was a win-win situation for everyone.

Will the young people of Rotherham ever own their own home?

Will the young people of Rotherham ever own their own home?

I had the most interesting chat with a mature couple (in their early/mid 50’s) from near Moorgate Road the other day, whilst viewing one of our rental properties. The property wasn’t for them, but their son, who wanted a second viewing with his parents to get the parental blessing.

Now I know that isn’t the norm, but in this case the parents were going to act as guarantor. We got chatting about the Rotherham property market and how they had bought their first property in the town just after they got married in the late 1980’s when they were in their early/mid 20’s. Anyway, we got chatting about how the youngsters of the UK seem to rent more than buy nowadays and from that the conversation covered a number of similar topics. I want to share the highlights of that conversation with you today.

Their son, like many 20 to 30 year olds in Rotherham, desperately wants to own his own property and the parents said he had read in the Telegraph recently, when you compare house prices to earnings, the current 20 to 30 something’s generation have to spend more of their salary in mortgage payments than any previous generation. The demand for private rental sector accommodation in Rotherham is huge. There are in fact 5,416 private rental properties in Rotherham at the last count, impressive when you consider there are 9,803 council houses in the town. However, let us not forget 27,445 properties are owner occupied (14,482 with a mortgage).

Let us all be honest, private renting doesn’t have the stigma it had a few decades ago and it might surprise people that even though us Brit’s class ourselves as a nation of homeowners, roll the clock back 100 years and over 75% of people rented their own home (and it was all from private landlords as council housing only started to come in with the ‘homes for hero’s’ after the first World War). It might also surprise you to learn that at the time of the 1971 census, still more people rented than owned their own home.

Looking at the affordability issue, I have proved time and time again, it is in fact cheaper to buy a property than rent, when one looks at starter homes for first time buyers. 95% mortgages have been available to first time buyers for over four years and whilst you could certainly find better properties in better condition in better areas, terraced houses can be bought for as little as the mid £20,000’s in the Eastwood area of Rotherham (meaning a modest deposit of £1,500 would be required).

When it came to affordability, I was able to tell them that when they bought their first house in Rotherham in 1988, the ratio of house prices to salary was 3.56 to 1 in Rotherham … and here was the surprise for both of us, today’s ratio is still only 4.44 to 1!

I said I believed there had been a cultural attitude change towards renting property in Britain and that this quiet revolution was likely to be permanent. In the 60’s, 70’s and 80’s, saving for the deposit was everything and buying a house was everything. Youngsters today have far much more disposal income today than people had in the Callaghan and Thatcher years, but choose to spend it upgrading their mobile phones every 12 months, the newest tablet or PC, a newest 50” plasma LCD TV and two sun drenched holidays a year, than go without and save for a deposit.

Yes, there are horror stories of tenants living in rat infested properties with landlords who charge massive rents and don’t repair their properties. But that is very much the exception as most tenants rent homes of a quality they couldn’t ever to afford to buy. Twenty years ago, if you said you rented a property, you were considered the lowest of the low … but now it’s the norm.

So with mortgage affordability being well within the bounds of most first time buyers, the level of deposit required for a 95% being surprisingly modest (starting off at c.£1,500 in Rotherham as mentioned above) until we change our attitudes, the UK housing market is slowly but surely turning into a more European model, where people rent for long periods of their life, then eventually inherit their parents properties and subsequently become homeowners themselves, albeit later in life.

Hence, I cannot see the demand for decent, high quality rental properties ever dropping in the next 10 to 20 years, but only ever increasing as the population continues to soar. Just make sure you by the right property, at the price, in the right location.

Rotherham House Price Monopoly: How do Prices vary?

Rotherham House Price Monopoly: How do Prices vary?

Well as the nights draw in, if there is nothing on the telly, the significant other and myself like to play the board game Monopoly. The buying and renting of property, it’s like a busman’s holiday for me!

Interestingly, the game was originally invented at the turn of the 20th Century (in 1903) and the game was initially called ‘The Landlord’s Game’! Anyway, after a few years in the wilderness, the current owners of the game renamed it in 1935 and so began Monopoly as we know it today.

So whether you are a homeowner or landlord in Rotherham, what would a Monopoly board look like today in the town? Property prices over the last 80 years have certainly increased beyond all recognition, so looking at the original board, I have substituted some of the original streets with the most expensive and least expensive locations in Rotherham today.

Initially, I have focused on the S60 postcode only, looking at the Brown Squares on the board, the ‘new’ Old Kent Road in Rotherham today would be Winifred Street, with an average value £53,400 (per property) and Whitechapel Road would be Duncan Street, which would be worth £55,100. What about the posh dark blue squares of Park Lane and Mayfair? Again, looking at S60, Park Lane would be Queensway at £368,700 and Mayfair would be Guiltwaite Hill at £505,400. Also, I can’t forget the train stations (my favourite squares), and over the last 12 months, the average price that property within a half a mile of the station sold for was £74,780.

So that got me thinking what you would have had to have paid for a property in Rotherham back in 1935, when the game originally came out?

  • The average Rotherham detached house today is worth £223,920 would have set you back 405 Pounds 2 shillings and 9 old pence.
  • The average Rotherham semi detached house today is worth £124,040 would have set you back 224 Pounds 8 shillings and 6 old pence.
  • The average Rotherham terraced / town house today is worth £87,580 would have set you back 158 Pounds 9 shillings and 2 old pence.
  • The average Rotherham apartment today is worth £103,670 would have set you back 187 Pounds 11 shillings and 5 old pence.

If that sounds like another currency, you must be in your 20’s or 30’s, because it was back in February 1971, that Britain went decimal and hundreds of years of everyday currency was turned into history overnight. On 14th of February of that year, there were 12 pennies to the shilling and 20 shillings to the pound. The following day all that was history and the pound was made up of 100 new pence.

Anyway, I hope you enjoyed this bit of fun, but underlying all this is one important fact. Property investing is a long game, which has seen impressive rises over the last 80 years. In my previous articles I have talked about what is happening on a month by month or year by year basis and if you are going to invest in the Rotherham property market, you should consider the Rotherham property you buy a medium to long term investment, because Buy to let is pretty much what it sounds like – you buy a property in order to rent it out to tenants.

As I reminded a soon to be first time landlord from Whiston the other week, Buy to let in Rotherham (as in other parts of the Country) is very different from owning your own home. When you become a Rotherham landlord, you are in essence running a small business – one with important legal responsibilities. On that note, I want to remind landlords of the recent and future changes in legislation when it comes to buy to let. This year, rules have changed about tenant deposits, carbon monoxide detectors and early in the New Year, landlords will have responsibilities to do immigration checks on all their tenants. Failure to adhere to them will mean a minimum of heavy fines in the thousands or in some cases, prison … it’s a mine field! That’s why I write the Rotherham Property Blog, where it has an extensive library of articles like this one, where I talk about what is happening in the Rotherham property market, what to buy (and sometimes not) in Rotherham and everything else that is important to know as a Rotherham landlord. Please visit the Rotherham Property Blog

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