‘An Englishman’s Home is his Castle’ is the phrase that was coined in Victorian times as the UK has a reputation for being a country of homeowners .. but the truth could be further from the point, because in a league of the top 46 economic nations of the world, where owning your property is permissible, the UK is only ranked no.37.
As I mentioned a couple of weeks ago, at the end of the First World War, 77% of people rented their home (the vast majority renting from a private landlord as Council Housing was still very much in its infancy). Homeownership rose very slowly in the 1920’s and started to grow as the economy grew after the Great Depression. However, after the Luftwaffe had flattened huge swathes of housing in the early 40’s, the priority was to get people into clean and decent accommodation .. so Local Authority’s (Councils) took up the baton and they built large council estates in the 1950’s and 1960’s.
As the UK economy got back on its feet in the middle part of the 20th Century and wages rose, people decided they wanted to own their own home instead of renting. Throughout the post war decades, it became easier to secure a mortgage. Interestingly, by 1977, 61.6% of 30 to 34 year olds were owner occupiers with a mortgage compared to 8.7% of 30 to 34 year olds being in private rented accommodation (the remaining either being in council housing or living with friends or family). Ten years later, in 1987, we saw some significant growth in homeownership, as 68.2% of 30 to 34 year olds had a mortgage and only 4.6% of people privately rented. A decade later and there wasn’t much change as, in 1997, the homeownership figure was 68.3% but private renting had jumped to 12.1% in the same 30 to 34 year old age group.
Move on another ten years to the 2007 figures, and this showed a slight drop in homeownership to 65.8% but renting had continued to increase to 18.7% (in the 30 to 34 year old age group). The latest set of figures is for 2014, and only 47.2% of 30 to 34 year olds had a mortgage and an eye watering 33.4% of 30 to 34 year olds privately rent.
When we look at the Rotherham figures of homeownership, looking back to 1991, 53.01% of Rotherham households were owned by the homeowner, whilst 6.18% of Rotherham households were privately rented, whilst the 2011 census showed home ownership in Rotherham had risen slightly to 56.02% and private rented had increased to 12.21%. Much of the recent rise in the occurrence of private renting in Rotherham since the turn of the Millennium is not because property has become more expensive, but the fact these 30 somethings haven’t got a council house to move into (because they were all sold off) – so they have to rent. The selling of council housing in the 1980’s (a subject I have talked about in a previous article in the Rotherham Property Market Blog) artificially grew homeownership in the 1980’s, but as these people have got older, the younger generation didn’t have the same opportunity to buy their council house in the 1990’s, 2000’s or 2010’s. That is why, unless the council start building council houses by the acre, and hundreds of acres, private renting will continue to grow in Rotherham.
So if you want blame anyone .. blame the Grocer’s daughter from Grantham – Mrs T …. but before you do – do remember in the 1970s, the UK was called the “sick man of Europe” by critics of the UK government, because of industrial strife and poor economic performance compared to other European countries culminating with the Winter of Discontent of 1978/9 and if it hadn’t been for her we wouldn’t be where we are today.
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The 5th of March 2009 was the date Mervyn King, the then Bank of England Governor, slashed UK interest rates to the unparalleled figure of 0.5%. In just under five months, starting on 8th October 2008, the rate had come down from 4.5% to that low figure, all in an attempt to ensure the British economy survived the worldwide credit crunch. Now as we deck the halls with bows of holly nobody expected that, over six years later, rates would still be at that low level.
In the summer, people were predicting a rise in the New Year, yet now, some forecast it may remain the same for years to come the due to the issues in China. Now, I am not some City Whiz kid with a hotline to Mr Carney at Threadneedle Street, but merely a humble letting agent from Rotherham, so I can not profess to know what will happen to interest rates. However, what I do know, speaking to my Rotherham friends and Rotherham landlords is that these low interest rates have hit savers really hard.
If you added up everyone’s bank and building society savings in the UK, they would add up to £1,300,000,000,000,000,000 (that’s £1.3 trillion), most of which is earning a pittance in interest. That is why more and more 40 and 50 year old Rotherham landlords have been investing some of that cash into Rotherham bricks and mortar, as they search for a low risk investment opportunity.
Buying a Rotherham buy to let property isn’t risk free, but there are certainly things you can do to mitigate and lower one’s exposure to risk. You see by buying a rental property, it potentially offers an enigmatically decent proposition in terms of being able to obtain attractive returns that beat inflation and savings accounts, yet without taking the levels of risk associated with stock markets.
The UK residential property market has long been the safest form of collateral for lenders of all varieties. Against a backdrop of a greatly changing economic environment, Rotherham house prices have been extraordinarily robust, increasing by over 1413.7% between 1974 and today. Some will say there have been significant property price falls, namely in 1975, 1988 and 2008, yet each time after this has been followed by an upturn in property values. For the record, the stock markets in the same time frame only rose by 432.5%!
.. and that is the best thing about buy to let property. Unlike the stock market, with its unfathomable equities, shares and bonds, that nobody really understands (as they are controlled by some faceless whizzkid in Canary Wharf!) with a buy to let property, landlords can take control and understand their investment .. in fact you can touch and feel the bricks and mortar investment.
.. but before you go out and buy any old Rotherham property, plenty of landlords still get it wrong. You have to be aware of your legal responsibilities when it comes to tenant safety, tenants deposits, energy certificates and in the new year, landlords will have the added responsibility of checking the immigration status of prospective tenants. Get it wrong and big fines and even prison is an option – but that’s why many agents use a letting agent to manage their property for them.
Next, you have to buy the right property at the right price. Recently I have seen some really heart breaking situations in Rotherham and the immediate area, of people paying way too much for a property, only to lose out when they came to sell. One example that comes to mind is that of a property owner in a terraced house on Brown Street, close to Rotherham town centre .. a excellent investment this 2 bed mid terraced house has accommodation over 3 floors, 108 sq metres inside (1162 sq ft in old money) sold in January 2007 for £60,000. In the summer, it only obtained £46,500, a drop of 22.5% or 2.95% a year – a very disappointing result.
I cannot stress enough the importance of doing your homework. One source of information and advice is the Rotherham Property Blog where I have similar articles to this about the Rotherham property market and what I consider to be the best buy to let deals around at any one time in the town, irrespective of which agent it is on the market with. If you haven’t visited and you are interested in the local property market in Rotherham .. you are missing out!
Find the latest hot property deals in Rotherham here.
Find the latest hot property deals in Rotherham here.
“The growth of the private rented sector, and the arrival of an investor class of buy to let landlords within it, is an issue that won’t be going away anytime soon, no matter what you read in the Daily Mail”
I said, as I chatted over a coffee with a landlord client of mine at Fitzwilliam and Hughes Coffee Shop on High Street in the town.
Whether you are a landlord of mine (or not as the case maybe), I am always happy to look over any properties you are thinking of buying for buy to let purposes and more so over a coffee!
Some commentators are saying buy to let is about to die, with the new stamp duty changes and how mortgage tax relief will be calculated. Some say 500,000 rental properties will flood the market nationally in the next 12 months as landlords leave the rental market. Have you heard the phrase ‘Bad news sells newspapers’? Let me explain why buy to let in Rotherham is only going in one direction – and not the direction the papers say they are going.
According to Sheffield University, buy to let landlords will continue fuelling the growth of the private rented sector in the coming decades. By their estimates (and they are considered a centre of excellence on the topic), the rate of homeownership nationally will fall to 50% (today it is 60.1% in Rotherham) by 2032, while the rate of private sector renting will increase to 35% (interestingly, in Rotherham it stands at 11.8% today).
Therefore, the demand for rental accommodation in Rotherham will grow by 1,110 households in the next five years … and these are the reasons why, irrespective of the distractions set out in the newspapers
Rotherham property values over the last six years have risen a lot more than average wages/salaries, meaning as homeownership and mortgage availability is dependent on your ability to pay has served to push home ownership further out of reach for many, at a time when the stock of council houses has actually withered. (Nationally, the number of council houses in the last ten years has dropped from 3.16m to 2.18m households – a drop of 31.1%).
Now it’s true the Tory’s efforts to fix the deficiency of affordable housing have focused on those who want to buy a home, ranging from Help to Buy and their much vaunted Help to Buy Isa, and Starter Homes Scheme, an initiative offering a 20% discount for first time buyers … but if you are unable to save for the deposit … none of this means anything to the ‘20 something’s’ of Rotherham … and they still need a roof over their heads!
Currently, 12,877 people live in private rented accommodation in Rotherham
These are big numbers and a sizeable chunk of the electorate. So whilst it appears Rotherham “Generation Rent” youngsters will continue to rent and to not to buy for the reasons set out above, Rotherham buy-to-let landlords will be lifted by the projections of greater rental demand. Rotherham and the area around it still offers the prospect of strong economic growth forecasts and has a reputation as a lively and desirable place to live. You see, with the new rules on tax, more and more landlords will be looking to move away from the previous honeypot of central London, because its higher prices meant lower rental yields. With the new tax rules and central London’s cooling of house price inflation, more and more landlords will look further afield, including Rotherham (interestingly, I have already been chatting to a few central London landlords after they read the Rotherham Property Blog).
So, by 2021, the number of rental properties in Rotherham will rise to 7,637
This prediction in growth of the Rotherham rental market is even on the back of the government clamping down on tax reliefs for landlords. The point is this, gone are the days of making guaranteed returns on BTL property. For the last 20 to 30 years, irrespective of which property you bought, making decent money on buy to let property was like shooting fish in a barrel – anyone could do it – but not now. You must take a more considered approach to your existing and future portfolio, especially in Rotherham. The balance of capital growth and yield, especially in this low interest rate world we live in, means Rotherham landlords need to do more homework to ensure the investment in property gives the desired returns. One place for Rotherham landlords and homeowners to visit for such information is the Rotherham Property Market Blog.
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I was reading the Sunday Papers, as is my want and, when reading the financial pages, it was announced UK inflation had increased to its highest level in a year.
Inflation, as calculated by the Government’s Consumer Prices Index, rose by 0.3% over the last 12 months. The report said it had risen to the those ‘heady’ levels by smaller falls in supermarket and petrol prices than a year ago. If you recall, in early 2015, we had deflation where prices were dropping!
So what does this mean for the Rotherham property market … especially the tenants?
Back in November, the Office of National Statistics stated average wages only rose by 1.8% year on year, so when adjusted for inflation, Rotherham people are 1.5% better off in ‘real’ terms. Great news for homeowners, as their mortgage rates are at their lowest ever levels and their spending power is increasing, but the news is not so good for tenants.
The average rent that Rotherham tenants have to pay for their Private Rental Properties in Rotherham (i.e. not housing association or council tenants) rose by 1.3% throughout 2015, eating into most of the growth. 2015 wasn’t a one off either. In 2014, rents in Rotherham rose by 0.4% (where salaries only rose by only 0.2%) However, it’s not all bad news for Rotherham tenants, because in 2013 rents rose by 0.6%, (but salaries rose by 2.2%).
… and it must be noted that the private rents Rotherham tenants have had to pay for Rotherham property since 2005 are only 18.6% higher, not even keeping up with inflation, which over the same time frame, rose at 27.8% (although salaries were only 22.3% higher over the same time period)
More and more, talking to 20 and 30 somethings who rent – it’s a choice. Gone are the days where owning your own property was a guaranteed path to wealth, affluence and prosperity. I know keep mentioning Europe, but some of the highest levels of home ownership are in Romania at 96.1%, Hungary at 88.2% and Latvia at 80.9% (none of them European economic dynamos) and even West European countries like Spain at 78.8% and Greece at 74% (and we know both of those countries are on their knees, riddled with national debt and massive youth unemployment).
At the other end of the scale, whilst we in the UK stand at 64.8% homeownership, in Europe’s powerhouses, only 52.5% of Germans own a home and only 44% of Swiss people are homeowners. Looks like eating chocolate, sauerkraut, renting and good economic performance go hand in hand. Yet, joking aside, home ownership has not always been the rule in the UK. In 1918, only 23% of people were homeowners, with no council housing, meaning in fact, 77% were tenants.
Tenants have choice, flexibility to move, they don’t have massive bills when the boiler blows up, it’s a choice. Rotherham rents are growing, but not as much as incomes. To buy or not to buy is an enormously difficult decision. For while buying a Rotherham home is a dream for the majority of the 20 and 30 something’s of Rotherham have, it might not leave them better off in the long run and it isn’t necessarily the best option for everyone. That is why, demand for renting is only going in one direction – upwards.
Renting used to be a dirty word in the 60’s and 70’s. You either lived in a ‘Rigsby Rising Damp’ style bedsit with wood chip on the wall and a coin operated electric meter (that buzzed in the night) or you lived in a council house.
In the latter part of the 20th Century, the British were persuaded that rent payments were ‘wasted money’. However, owning often makes less financial sense than renting and as the rate of homeownership is starting to drop substantially, as we roll the clock forward to today, there is no stigma at all to renting .. everyone is doing it. In fact, of the 108,754 residents of Rotherham, 37,616 of you rent your house from either the local authority/social provider (ie council house or housing association) or private landlords – meaning 34.58% of Rotherham people are tenants.
The idea of homeownership is deeply embedded in the British soul, in fact 69,269 Rotherham people live in an owner occupied property (or 63.69%). Housing is at the heart of Government policy, as George Osborne has promised 200,000 new properties a year so first time buyers can buy their first home whilst recently changing the tax laws for buy to let landlords. To get votes, Thatcher (and everyone since) ran election campaigns promising everybody their own home, and as a country, we seem to equate homeownership the goal of British life.
So as more and more people are renting nowadays, are we turning to a more European way of living? Well, I believe, as a country, we are. In fact, homeownership could be affecting your health! The UK, according to Bloomberg, is only the 21st most healthy country in the world. Germany is at No.10 and Switzerland at No.4 and homeownership is at 52.5% and 44% respectively in those countries (in the UK it is 64.8%).
In the Rotherham Metropolitan Borough Council area, 66.91% of homeowners who own their house outright said they were in ‘very good’ or ‘good’ health whilst, at the other end of the scale, 9.5% said their health was ‘bad’ or ‘very bad’. Looking at renting, the census splits tenants into two types – 62.43% of Rotherham local authority/social tenants said they were in ‘very good’ or ‘good’ health and 15.72% were in ‘bad’ or ‘very bad’ health …
… whilst ‘private rented tenants’ in Rotherham, were the healthiest, as 81.44% of them described themselves in ‘very good’ or ‘good’ health and only 6.11% were in ‘bad’ or ‘very bad’ health
I am not suggesting that low homeownership rates in Switzerland and Germany are directly linked to health, nor, do I expect Brits to all go to Berlin, Interlaken or Düsseldorf and realise how happy people are when they don’t need to worry about all the stresses which accompany homeownership. The numbers for Rotherham do go some way to back up the argument (and they are the same across the whole of the UK). Nonetheless I do think that substantially all of the upside to homeownership in recent years has been a function of monumental rising house prices. Now that’s come to an end, it’s hard to see why anybody would want to buy?
Renting is here to stay in Rotherham and it’s growing incrementally each year. Even with the new tax rules for landlords, buy to let is still a viable investment option for most people in the Town. There has never been a better time to buy buy to let property in Rotherham, but buy wisely. Gone are the days that you would make profit on anything with four walls and a roof. Take advice, take opinion, do your homework. Keep an eye on this blog place to read more articles on the Rotherham Property market.
I don’t know about you, but I find if you read the Daily Mail, there are only three topics that make the blood boil of ‘Middle England’.
Bureaucracy from Brussels, House Prices and the late Princess of Wales. Ignoring the late Princess if I can for this article, but if we as a country were to unshackle ourselves from chains of Brussels (the first topic), could we inadvertently effect the second topic and make UK house values drop?
If you read all the newspapers, the Brexit debate seems to be focused solely on central London. Many commentators have said Brexit would mean central London would have a lower standing in the world, meaning less people would be employed in Central London, with the implication of lower wages, fewer jobs etc., in Central London … but we are in Rotherham, not Marylebone, Mayfair or any part of Zone 1 London.
Now on the run up to the vote on the 23rd of June, I predict the ‘in’ camp will start to scare homeowners with forecasts of negative equity, and the ‘out’ camp will appeal the 20 somethings, who have been priced out of the property market with the prospect of a new era of inexpensive housing, should the fears of central London estate agents and developers, who believe the bottom will fall out of the market if we do leave, become real. The only reason the Mayfair’s, Knightsbridge’s, and Kensington’s of central London are attractive to foreign buyers are political and economic steadiness, an open and honest legal system and a lively cultural life. None of that is threatened by Brexit.
… But again, we are in Rotherham and central London is 186 miles away. We are hometown to Rotherham United FC, David Seaman and the Right Honourable William Hague, and whilst the central London property market exploded after 2009, that explosion really and honestly didn’t affect the Rotherham property market. So, putting central London aside, what would an ‘in’ or ‘out’ vote really mean for the 27,400 property owners of Rotherham?
Initially, over the coming months, on the run up to referendum, I believe it will be like the run up to last year’s General Election. With the short-term uncertainty in the country, quite often, big decisions are put on ice and people are less likely to make big money purchases i.e. buy a property. However, in the four months up to last year’s Election, property values in Rotherham increased by 0.16%, not bad for a country that thought it would get a hung parliament! So that argument doesn’t hold much weight with me.
Post vote, should the UK opt to leave Brussels, there would be a much more noteworthy impact. I believe that a vote to stay in the EU would see the Rotherham property market return to a status quo very quickly, but the contrasting result could lead to some changes. The principal menace to the Rotherham (and UK) housing market could be variation (in an upwards direction) in interest rates as a result of a Brexit, which could theoretically see the cost of mortgages grow swiftly, pricing many out of the market … but then two thirds of landlords buy without a mortgage, so that won’t affect them. Also, according to the Bank of England, 80.33% of all new mortgages taken out in 2015 were fixed rate. Looking at all mortgages as a whole, according to the Bank of England, 44% of all UK mortgagees have a fixed rate mortgage, but 56% don’t, so if you aren’t on a fixed rate … talk to your mortgage broker now, because they can only go in one direction!
So in reality, if I really knew what will happen, I wouldn’t be a letting / estate agent in Rotherham, but a City Whiz Kid in London earning millions. However, I suspect whatever decision the electorate of Rotherham and the country as a whole makes, over the long term it won’t have a major effect on the Rotherham property market. We have seen off ‘the end of the world’ credit crunch of 2008/9 and subsequent property crash, the 1988 Nigel Lawson induced post dual-MIRAS property crash, the 1979 Winter of Discontent property crash, the 1974 oil crisis that stimulated another property crash … hell, we can even go back nearly a century with the 1926 post General Strike slump in property prices…
Today, property prices are 83.46% higher than 21 years ago in Rotherham and are 3.1% higher than 12 months ago. So, make your own decision on 23rd of June 2016 safe in knowledge that whatever the result, there might be some short term volatility in the Rotherham property market, but in the long term (and property investment is a long term strategy) there aren’t enough houses in Rotherham to live in either to buy or rent … and until the Government allow more properties to be built – the Rotherham property market, will be just fine … even if it has a little blip in the summer, there could be some property bargains on the run up to Christmas to be had!
For more advice and opinion on the Rotherham property market, even where those buy to let bargains could be found now … keep visiting the Rotherham Property Blog