How much does the typical Rotherham Millennial spend on rent by the age of 35?

How much does the typical Rotherham Millennial spend on rent by the age of 35?

There are many names for the people born between the mid-1980s and late-1990s. Whether you prefer Millennials or Gen Y or (more appropriate for this blog) Generation Rent, there are certain characteristics that broadly define them. They are the imaginative, artistic youngsters who grew up with the newest technology and computers. They’re aficionados of music festivals, gourmet pizzas, emojis, selfies and old-school nostalgia.

Millennials have also discovered that renting is a good choice for their shelter and accommodation needs without the hassle that comes from buying a home. Nonetheless, that is not the only reason they don’t buy property. When they should be concentrating on their profession, putting down roots and starting a family, Millennials are still going through the pressure and strain of student loan liabilities whilst, at the same time, finding it tough to pay rent.

The hot topic at the moment is the cost of renting, as both political sides of the political divide have seen mileage in wooing these Generation Renters. The average rent in Rotherham is currently £547 per month making this a big-ticket item on the monthly budget. I was therefore very interested to find out exactly how much Rotherham Millennials will spend on rent by the time they reach their mid 30s if things stay the same.

How much does a typical Rotherham Millenial spend on rent?

The average age people leave home in the UK is 22. Therefore, looking at a typical Rotherham Millennial who left home in 2005, between 2005 and now, that person will have shelled out £78,803 in rent!

It’s no wonder local Millennials can’t afford to buy a Rotherham home given their tremendous debt. This means younger Rotherham Millennials will probably carry on renting for the foreseeable future, simply because the prospect of buying a home is not yet achievable…

…that is until you look more deeply at the numbers!

A graph depicting the monthly rents paid by tenants in Rotherham

Looking at the chart above, the average rent of a Rotherham property in 2005 was £458 per month. If this figure had risen by inflation than today that would be £645 each month. As I have already mentioned in the article, today it only stands at £547 per month. Looking over the last 12 years, adding up all the differences between what the average actual rent was compared to what it should have been if rent had gone up by inflation, the average Millennial tenant in Rotherham would have paid £86,628.

Bar chart depicting the average rent paid by an average tenant in Rotherham since 2005

This means that an average 35-year-old tenant, who has been renting since 2005, is better off by £7,825 when comparing the actual rent paid compared to what it would have been if it had risen by inflation. In a nutshell, tenants have done well due to the sub-inflation growth in rents.

In fact, if you recall I mentioned in an article a few weeks ago, the older Rotherham Millennials are starting to use those savings and are gradually shifting towards home ownership. They are finally catching up with the British homeownership dream as Bank of Mum and Dad help with the deposit. Also, as the scrapping of Stamp Duty from the Government starts to kick in, together with the realisation that if the 5% mortgage deposit can be scrapped together (yes, 95% first time buyer mortgages have been available since 2009), it is still a lot cheaper to buy than rent. This will unquestionably drive demand for Rotherham homes for sale – good news for Rotherham homeowners.

… and what does this mean for Rotherham landlords?

Well the vast majority of younger Millennials are still renters and I foresee this to be the case for at least the next ten to fifteen years. Landlords will need to keep improving their properties to ensure they get the best tenants – but this will see a much higher rent achieved. Millennials will pay top dollar for a top dollar property. It is important to do things correctly as making money won’t be as easy as it has been over the last twenty years.  With a greater number of properties on the market comes greater choice. Don’t buy the first thing you see, buy with your head as well as your heart… because, as I promised a few weeks ago, the first rule of buy-to-let investment is: “You are not going to live in the property yourself”

Why have Rotherham asking prices risen by 2.5% in the last 12 months?

Why have Rotherham asking prices risen by 2.5% in the last 12 months?

The average asking price of property in Rotherham increased by 2.5% compared to a year ago, with particularly good demand from landlords and home-movers in the first few months of the year. This amounts to a £3,292 increase, taking the current average asking price to £132,839, compared with £129,547 this time last year.

The rise in asking prices is being aggravated by buyers jumping into action looking to benefit from potential stamp duty savings (especially first-time buyers) or beat impending mortgage interest rate rises later in 2018. Of the numerous Rotherham buyers starting their property hunting in the usually active spring market this year, many face paying even more than ever for the property of their dreams, and as I mentioned a few weeks ago, there are less properties for sale in Rotherham compared to 12 months ago.

Looking at the different sectors of the Rotherham property market, splitting it down into property types, one can see what is happening to each sector of the market with regard to their average asking prices now compared to a year ago. Firstly, let’s examine the price people are asking for:

Interestingly, when one looks at the percentages, the most upward average asking price pressure is in the detached property type sector.

Does this mean the value of Rotherham property has increased?

Now, I must stress this growth in the asking prices of Rotherham property doesn’t mean the value of Rotherham property is going up by the same amount… nothing could be further from the truth.

Only time will tell if the current levels of Rotherham asking prices is a catch-up abnormality after a couple of months of restrained asking price rises in the first few months of 2018, or whether it is an initial sign that we are in for a better 2018 property market than all of us were expecting at the start of the year?

I believe these asking prices must be viewed with a pinch of salt, as it will be fascinating to see whether Rotherham properties actually sell at these higher asking prices. Just because house sellers (be they owner-occupiers or landlords liquidating their assets) are asking for more money it doesn’t mean buyers will be enthusiastic to part with their hard earned cash. Like my parents used to say to me all those years ago, “You can ask … but you might not get”.

Also, Rotherham homeowners and landlords wanting to sell their property need to be aware of progressively strained buyer mortgage affordability and the more those sellers increase asking prices, the more buyers will hit their maximum on the amount they are able borrow on a mortgage.

However, those Rotherham buyers who need a mortgage (be they owner-occupier or landlord), will paradoxically benefit from lower mortgage payments before interest rates rise… perhaps another reason for the uplift in the number first time buyers and landlords buying? Only time will tell!

How much would it cost to buy every property in Rotherham?

How much would it cost to buy every property in Rotherham?

The value of all the homes in Rotherham has risen by more than 231% in the past two decades to £5.662bn… meaning it’s worth more than the stock listed company Royal Mail Group, which is worth £5.636bn.

Those Rotherham homeowners and buy-to-let landlords who bought their homes twenty or more years ago have come out on top, adding thousands and thousands of pounds to the value of their own Rotherham homes as the younger generation in Rotherham continue to be priced out of the market.

This is even more remarkable because, in those twenty years, we have had the global financial crisis in 2008, where we saw a short term drop in Rotherham house prices of between 15% and 20% (depending on the type of property). And although there have been a number of consecutive years of growth in property values recently in Rotherham, it hasn’t been anywhere near the levels seen in the early 2000s.

How the value of property in Rotherham has increased over the last 20 years

Twenty years ago the total value of Rotherham property was £1.708bn.

Over those twenty years, total property values have increased by £3.954bn, meaning that today the total value of all the properties in Rotherham is worth £5.662bn. Even more remarkable, when you consider the FTSE100 has only risen by 40.84% in the same time frame. Also, when I compared it with inflation, i.e. the UK Retail Price Index, inflation had risen by 72.2% during the same twenty years.

What does this mean for Rotherham?

So, what does this all mean for Rotherham?

Well, as we enter the unchartered waters of 2018 and beyond, even though property values are already declining in certain parts of the previously overcooked central London property market, the outlook in Rotherham remains relatively good. This is because over the last five years, the local property market has been a lot more sensible than the market in central London.

Rotherham house values will remain resilient for several reasons:

  1. Demand for rental property remains strong with persistent immigration and population growth.
  2. With 0.25% interest rates, borrowing has never been so cheap.
  3. A simple lack of new house building in Rotherham.

Ignoring years and years of under investment in Rotherham housebuilding, we’re not even keeping up with current demand! So although it might be a bumpy ride over the next 12 to 24 months, in the medium term, property ownership and property investment in Rotherham has and always will, ride out the storm.

In the coming weeks, I will look in greater detail at my thoughts for the 2018 Rotherham Property Market. As always, all my articles can be found here! Don’t forget to visit Facebook and Twitter for my more thoughts on the property market here and further afield!

Rotherham Council Tax Payers Hit by 10.7% above Inflation Rise

Rotherham Council Tax Payers Hit by 10.7% above Inflation Rise

“Does the Council Tax band make a difference to a property’s appeal?” That’s the question that a Rotherham landlord asked me recently – Council Tax increases are obviously very topical at the moment. The landlord was also interested in whether extensions or home improvements made a difference to the tax banding.

It’s important to be aware of what Council Tax Band your new house or apartment falls under. Being aware of this before you buy/move will help when planning month by month for life in your home (or investment).

But what exactly are Council Tax Bands, and how do they affect landlords/tenants/homebuyers?

How much Council Tax you pay depends on two variables.

The first is which Council Tax Band your property is in. A property is placed into a specific band depending upon what the value of the property was in April 1991 – the date when the tax band system was applied. In a nutshell, what your property is worth today has no relevance whatsoever to your banding.

Council Tax Bands have a letter of the alphabet and range from bands A-H.

The Council Tax Band values are:

Band A – up to £40,000
Band B – £40,001 to £52,000
Band C – £52,001 to £68,000
Band D – £68,001 to  £88,000
Band E – £88,001 to £120,000
Band F – £120,001 to £160,000
Band G – £160,001 to £320,000
Band H – more than £320,000

So, for example, if a property sold for £110,000 in April 1991 but is now worth £350,000 it will remain in Band E (NOT Band H), as this was the value when the bands were set in 1991.

For new homes, the same thing applies: they are valued based on the 1991 market value. This safeguards that all homes and all buyers are treated equally and consistently. The second factor that determines how much Council Tax you pay is what each individual local authority decides each band will pay in Council Tax. (So for example, a householder/tenant in Leeds in a Band E property will pay a different amount in Council Tax each year to someone in Swindon or North London in Band E).

Interestingly, the average current level of Council tax paid by Rotherham people stands at £983 per annum, up from £467 in 1993 (although if it had risen by inflation in those 25 years .. today that should only be £888). This means that Council Tax has outstripped inflation by 10.7%.

So unless the local authority changes the rates, the only way you can change the amount you pay in Council Tax is your banding i.e. you physically move to a higher or lower band.

What about extensions and improvements?

Contrary to what most people think, extensions and improvements do not change the Council Tax Band and existing householders/tenants only have to pay the same Council Tax as they would have without any extensions and improvements. However, the Valuation Office (The Government’s Property Valuers) do reserve the right to re-value the extended property if the property gets sold.

If you are a potential buyer, you should be aware of this review as it could change the amount of Council Tax you pay after the purchase. If a higher band is necessary, the new band will be based on what the extended property would have been expected to sell for in 1991. However, this does not necessarily mean that the banding will jump one band, as this is contingent on the extent of the changes and whether the property falls towards the top or bottom of its existing band. More often than not – it isn’t an issue and the banding stays the same.

In terms of which band the property is in, this can be challenged. In my experience in the Rotherham property market the only issue is one where there is an anomaly with the banding, when one property is in a different band to all the others in the street. This is much rarer than it used to be, as most anomalies have been found and rectified.

Anyone can check the banding of any property by clicking here.

I do need to mention a thoughtful warning though. Challenging your Council Tax Band is not something to do on a whim for one simple fact – you cannot request your band to be lowered, only ‘reassessed’, which means your band could be moved up as well as down. I have even heard of neighbouring properties band’s being increased by someone appealing, although this is the exception.

If you have any questions don’t hesitate to drop me a line.

How Many First Time Buyers Bought Their First Home in Rotherham in 2017?

How Many First Time Buyers Bought Their First Home in Rotherham in 2017?

A little bit of good news this week for the Rotherham Property Market as recently released data shows that the number of first time buyers taking out their first mortgage in 2017 increased more than in any other year since the global financial crisis in 2009. In total there were 660 first time buyers in Rotherham, the largest number since 2006.

What will happen in 2018?

I expect in 2018 that this increase of first time buyers will level out and maybe dip slightly as, nationally, figures demonstrate that first time buyer’s average household income was £40,691 and this represented 17.3% of their take home pay.

However, it might surprise readers that it is actually cheaper to buy than it is to rent at the ‘starter home’ end of the housing market.

Many of you will remember mortgage rates at 12%… even 15%.

At the time of writing this article, I found on the open market, 189 first time buyer mortgages at 95% (meaning only a 5% deposit was required) with 3 year fixed rates from a reputable High Street bank at 2.49%… they even did a 3 year fixed rate 100% mortgage for 2.89%!

What about buy-to-let?

Interestingly, looking at the other end of the market, the buy-to-let investment in Rotherham was subdued. There were only 135 buy-to-let properties being purchased with a mortgage.

However, I must stress, whilst there is no hard and fast data on the total numbers of landlords buying buy-to-let, HM Treasury believes only 30% to 40% of buy-to-let property is bought with a mortgage. This means there could have been further cash only buy-to-let purchases in Rotherham – it’s just that the data isn’t available at such a granular level.

What’s the level of mortgage debt in Rotherham?

In terms of the level of mortgage debt in Rotherham, looking specifically at the S60, S61 and S65 postcodes, you can see there has been a steady rise in borrowing over the last few years.

This is pleasing to see, as new mortgage debt is created by first time buyers, buy-to-let landlords and home movers themselves, that is being roughly equalled by the amount being paid off with mature mortgaged homeowners in their 50’s and 60’s finally paying off their mortgage.

What does all this mean for the Rotherham Property Market?

Well, the stats paint a picture, but they don’t inform us of the whole story.

The upper end of the Rotherham property market has been weighed down by the indecision around the Brexit negotiations and rise in stamp duty in 2014, when made it considerably more expensive to buy a home costing more than £1m.

The middle part of the Rotherham property market has been affected by issues of mortgage affordability and lack of good properties to buy, as selling prices have reached the limit of what buyers can afford under existing mortgage regulations. The lower-to-middle Rotherham property market was hit by tax changes for buy-to-let landlords, although this has been offset by the increase in first time buyers.

If you are in the market and selling now and want to ensure you get your Rotherham property sold, the bottom line is you have to be 100% realistic with your pricing from day one and you might not get as much as you did say a year ago (but the one you want to buy will be less – swings and roundabouts?).

I know it’s not comfortable hearing that your Rotherham home isn’t worth as much as you thought, but Rotherham buyers are now unbelievably discerning.

So, if you are thinking of selling your Rotherham property in the coming months, don’t ask the agent out a few days before you want to put the property on the market… get them out now and ask them what you need to do to ensure you get maximum value in the shortest possible time!

I, like most Rotherham agents, will freely give that advice to you at no cost or commitment to you. Please get in touch if I can help.

An extension could add £32,000 to the value of your Rotherham home

An extension could add £32,000 to the value of your Rotherham home

As our families grow bigger the need for more space, whether that’s bedrooms or reception rooms, has grown with it. Furthermore, as our older generation lives longer and nursing home bills continue to rise quicker than a rocket on the 5th of November (the average nursing home bill in our area is £534.58 per week) many families are bringing two households into one larger one.

So, should you move somewhere larger or extend your Rotherham property to make it large enough for you and your family?

In some circumstances the choice has been made for you. If you live in an apartment with no garden, there isn’t much of an opportunity of making it larger.

But if you have a house with a garden or an attic with sufficient headroom, extending your home becomes a real prospect.

Even if it makes more sense to extend or move, the choice hangs on a number of different dynamics:

  • your future plans
  • money (both saved and access to finance)
  • emotional attachments to your home
  • the area of Rotherham that you live in
  • the type/style of house you prefer.

How big is the typical British home?

Interestingly, the average British home is 968 sq.ft, which as you can see from the table below, is in the middle of developed nations when it comes to the size of a property.

Of the 1.11m homes sold in 2016 in England and Wales, the average floor area of the houses was 1,119 sq.ft – that’s about an eighth the size of an Olympic sized swimming pool.

Apartments averaged 530 sq.ft that’s just over ten times bigger than an average garden shed!

Looking at apartments and houses together, the average size of properties sold in England and Wales 968 sq.ft. This means they are slightly smaller than the European average, and much smaller than households in the US.

Should I extend my house? What will it mean for the house value?

So back to the question in hand…

Extending does mean you will have a lot of inconvenience whilst the work is being carried out.

The location of your Rotherham property, the quality of construction, what type of room(s) you want to add, your plot, neighbouring building lines, planning regulations and the overall demand for your type of Rotherham home, will make a vast difference to the financial repercussions of extending versus moving.

A medium-sized 270 sq.ft single storey extension (say around 17ft x 16ft) will add on average £32,000 to the value of a property in Rotherham

It’s important to note the end result of the extension needs to be a sensible and realistic home.

A two bed semi-detached house extended to a four bedrooms with no lawn or driveway, or a home with outsized reception rooms downstairs and miniscule bedrooms upstairs, could be problematic if and when you come to sell your home in the future.

Irrespective of whether your strategy is to live in your extended home for a long time, you will want to side-step outlaying a lot of money on costly building work that will make it tougher to sell.

In terms of what it would cost to build an extension, you can expect to pay on average between £140 to £200 per sq.ft, depending whether the extension is a single or double storey extension and other factors including finish and type of extension (note: I have seen it cost a lot more than these figures – so please speak with a builder).

So taking a mid line figure, that same 270 sq.ft extension on your Rotherham home would cost on average £55,080.

However, moving means there are substantial costs incurred – Estate Agency fees, Removal Van, Survey Fees, Legal fees and Stamp Duty on the property you are buying. Neither option is the obvious choice and comparing the costs of extending your Rotherham home to that of moving is not a stress-free undertaking.

Is it financially possible for me to extend my house?

How realistic each option is will probably come down to one thing… your mortgage provider.

You will need a considerable sum of equity in your Rotherham home before you can think of increasing your mortgage more, because most lenders will require you to have at least 10% to 20% equity left in your property after the extension or move has been done.

The best advice I can give is this: don’t assume anything

Get good advice and opinion from builders, mortgage brokers, architects, mortgage people and of course… an agent. Look at your options and make an educated decision with all the superficial and objective facts in front of you.

If you have any further questions, please don’t hesitate to contact me.

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