“What’s happening to the Rotherham Property Market?” is a question I am asked repeatedly. Well, you may be surprised to hear that my own research suggests that there isn’t just one big Rotherham property market but many small micro-property markets?
According to recent data released by the Office of National Statistics (ONS), I have discovered that at least three of these micro-property markets have emerged over the last 20+ years in the town.
For ease, I have named them as follows:
- ‘lower’ Rotherham Property Market.
- ‘lower to middle’ Rotherham Property Market.
- ‘middle’ Rotherham Property Market.
Some of you may be interested to know how I have classified the three sectors:
- ‘lower’ – the bottom 10% (in terms of value) of properties sold
- ‘lower to middle’ – lower Quartile (or lowest 25% in terms of value) of properties sold
- ‘middle’ – which is the median in terms of value
Who is buying in the ‘lower’ and ‘lower to middle’ sectors in Rotherham?
The ‘lower’ and ‘lower to middle’ sectors of the Rotherham property market have been fuelled over the last few years by two sets of buyers.
The first set make up the clear majority of those buyers – they are cash rich landlord investors who are throwing themselves into the Rotherham property market to take advantage of alluringly low prices and even lower interest rates. The other set of buyers are the first-time buyers (FTB), although the FTB market is in a state of unparalleled deadlock. This market has been trampled into near-immobility and incapacity by the new 2014 stricter mortgage affordability regulations and also fewer mortgages with low deposits.
How is each micro sector doing?
I’ve been examining the three different micro sectors that I have identified and the figures show that they have all performed quite differently:
You can quite clearly see that it is the ‘middle’ market that has performed the best.
What do all these figures mean to homeowners and landlords?
There’s quite a lot of significance. Let me explain.
The worst performing sector (with the lowest percentage uplift) was the ‘lower’ housing market. Therefore, if we applied the best percentage uplift figure (i.e. from the ‘middle’ market percentage uplift), to the ‘lower’ 1995 housing market figure, the 2017 figure of £62,500, would have been £68,189 instead. That’s a notable difference, I’m sure you would agree.
Why haven’t you mentioned the upper housing market in Rotherham?
I’m aware I’ve not specifically mentioned the upper reaches of the Rotherham housing market. This is for several reasons.
Firstly, the lower or middle market is where most of the buy-to-let investment landlords buy their property and where the majority of property transactions take place.
Secondly, due to the unique and distinctive nature of Rotherham’s up-market property scene (because every property is different and they don’t tend to sell as often as the lower to middle market), it is much more difficult to calculate what changes have occurred to property prices in that part of the Rotherham property market – looking at the stats for the up-market Rotherham property market from Land Registry, only 9 properties in Rotherham (and a 3 mile radius around it) have sold for £1,000,000 or more since 1997.
How will this information help me?
Homeowners and buy-to-let landlords can benefit from this infromation. When you realise that there isn’t just one property market in our area, but several micro property markets, you can spot trends and bag yourself some potential bargains. Even in this market, I have spotted a number of great opportunities over the last few months which I have shared on this blog, especially in the ‘lower’ and ‘lower/middle’ market.
If you want to be kept informed of those buy-to-let bargains as I post them you may want to follow me on Twitter or like my Facebook page. Of course, you can keep checking back to the Rotherham Property Blog for all the latest property news for our area.
I would also love to know if you have spotted any micro-property markets in Rotherham. Please get in touch if you have!
The most recent set of data from the Land Registry has stated that property values in Rotherham and the surrounding area were 1.58% higher than 12 months ago and 9.12% higher than January 2015.
Despite the uncertainty over Brexit, the property values in Rotherham (and most of the UK) continue their medium and long-term upward trajectory.
As economics is about supply and demand, the story behind the Rotherham property market can also be seen from those two sides of the story.
Looking at the supply issues of the Rotherham property market and putting aside the short-term dearth of property on the market, one of the main reasons of this sustained house price growth has been down to of the lack of building new homes.
The draconian planning laws over the last 70 years (starting with The Town and Country Planning Act 1947) have meant the amount of land built on in the UK today still stands at an unbelievably small 1.8%.
That figure is made up of 1.1% with residential property and 0.7% for commercial property.
The following pie chart shows how land in the UK is actually used:
I am not advocating building modern ugly carbuncles and high-rise flats in the Cotswolds, nor blotting the landscape with the building of massive out of place ugly 1,000 home housing estates around the beautiful countryside of such villages as Wickersley and Tickhill.
However, the facts are that restrictive planning regulations are meaning that homes that the youngsters of Rotherham badly need aren’t being built. Adding fuel to that fire, landowners have deliberately sat on land, which has kept land values high and from that keeps house prices high.
Looking at the demand side of the equation, one might have thought property values would drop because of Brexit and buyers uncertainty. However, certain commenters now believe property values might rise because of Brexit.
Many people are risk adverse, especially with their hard-earned savings. The stock market is at an all-time high (ready to pop again?) and many people don’t trust the money markets. The thing about property is its tangible, bricks and mortar, you can touch it and you can easily understand it.
The Brits have historically put their faith in bricks and mortar, which they expect to rise in value, in numerical terms, at least.
Nationally, the value of property has risen by 635.4% since 1984 whilst the stock market has risen by a very similar 593.1%. However, the stock market has had a roller coaster of a ride to get to those figures. For example, in the dot com bubble of the early 2000s, the FTSE100 dropped 126.3% in two years and it dropped again by 44.6% in 9 months in 2007… the worst drop Rotherham saw in property values was just 16.94% in the 2008/9 credit crunch.
Despite the slowdown in the rate of annual property value growth in Rotherham to the current 1.58%, from the heady days of 4.88% annual increases seen in mid 2010, it can be argued the headline rate of Rotherham property price inflation is holding up well, especially with the squeeze on real incomes, new taxation rules for landlords and the slight ambiguity around Brexit.
With mortgage rates at an all-time low and tumbling unemployment, all these factors are largely continuing to help support property values in Rotherham (and the UK).
For all the latest news about the Rotherham property market please visit and follow me on Twitter and Facebook.
Over the last 12 months, the UK has decided to leave the EU and have a General Election with a result that didn’t go to plan for Mrs May. To add insult to injury, our American friends elected Donald Trump as the 45th President of the United States. It could be said this should have caused some unnecessary unpredictability into the UK property market.
The reality is that the housing and mortgage market (for the time being) has shown a noteworthy resilience.
Indeed on the back of the Monetary Policy pursued by the Bank of England there has been a notable improvement of macro-economic conditions!
- In July it was announced that we are witness to the lowest levels of unemployment for nearly 50 years.
- UK construction industry built 21% more properties than same time the previous year but there has still been a disproportionate increase in demand for housing, particularly in the most thriving areas of the country.
- Repossessions are also at an all-time low at 3,985 for the last Quarter (Q1 2017). This has fallen from a high of 29,145 in Q1 2009.
All these things combined has led to the following result…
Property values in Rotherham are
1.58% higher than a year ago
This is according to the Land Registry.
So, what does all this mean for the homeowners and landlords of Rotherham, especially in relation to property prices moving forward?
One vital bellwether of the property market (and property values) is the mortgage market.
The UK mortgage market is worth £961bn which represents over 13.3 million mortgages (interestingly, the UK’s mortgage market is the largest in Europe in terms of amount lent per year and the total value of outstanding loans). Uncertainty causes banks to stop lending – look what happened in the credit crunch and that seriously affects property prices.
Roll the clock back to 2007, and nobody had heard of the term ‘credit crunch’, but now the expression has entered our everyday language. It took a few months throughout the autumn of 2007, before the crunch started to hit the Rotherham property market, but in late 2007, and for the following year and half, Rotherham property values dropped each month like the notorious heavy lead balloon. In fact…
The credit crunch caused Rotherham
property values to drop by 16.9%
Under the sustained pressure of the Credit Crunch, the Bank of England realised that the UK economy was stalling in the early autumn of 2008. Loan book lending (sub-prime phenomenon) in the US and across the world was the trigger for this pressure. In a bid to stimulate the British economy there were six successive interest rates drops between October 2008 and March 2009 – this resulted in interest rates falling from 5% to 0.5%!
(Data from Denton House Property Research and HM Land Registry)
Thankfully, after a period of stagnation, the Rotherham property market started to recover slowly in 2011 as certainty returned to the economy as a whole and Rotherham property values really took off in 2013 as the economy sped upwards. Fortunately, the ‘fire’ was taken out of the property market in early 2015 (otherwise we could have had another boom and bust scenario like we had in the 1960s, 70s and 80s), with new mortgage lending rules. Throughout 2016, we saw a return to more realistic and stable medium term property price growth. Interestingly, property prices recovered in Rotherham from the post Credit Crunch 2009 dip and are now 12.2% higher than they were in 2009.
Good news for Rotherham homeowners and landlords.
Now in the summer of 2017, with the Conservatives having been re-elected on their slender majority, the Rotherham property market has recouped its composure. In fact, there has been some aggressive competition among mortgage lenders, which has driven mortgage rates down to record lows.
This is good news for Rotherham homeowners and landlords.
Over the last few months a mortgage price war has broken out between lenders, with many slashing the rates on their deals to the lowest they have ever offered. For example, last month, HSBC launched a 1.69% five-year fixed mortgage!
Interestingly, according to the Council of Mortgage Lenders, the level of mortgage lending had soared to an all-time high in the UK.
In the Rotherham postcodes of SO60 to SO63, SO65 & SO66, if you added up everyone’s mortgage, it would total £1,907,848,696!
Since 1977, the average Bank of England interest rate has been 6.65%, making the current 323 year all time low rate of 0.25% very low indeed. Thankfully, the proportion of borrowers fixing their mortgage rate has gone from 31.52% in the autumn of 2012 to the current 59.3%. If you haven’t fixed – maybe you should follow the majority?
In my modest opinion, especially if things do get a little rocky and uncertainty seeps back in the coming years (and nobody knows what will happen on that front), one thing I know is for certain, interest rates can only go one way from their 300 year ultra 0.25% low level … and that is why I consider it important to highlight this to all the homeowners and landlords of Rotherham.
Maybe, just maybe, you might want to consider taking some advice from a qualified mortgage adviser? There are plenty of them in Rotherham.
I hope you have found this article useful. Please follow me on Twitter and Facebook for the latest information about the Rotherham property market. If you do have any questions or need some advice, please don’t hesitate to get in touch with me!
Bricknells Rentals are looking for a new part time receptionist.
This is a fantastic opportunity to work with one of South Yorkshire’s leading independent property rental agencies. Bricknells Rentals currently have over 750 properties under their management across Rotherham, Sheffield, Barnsley and Doncaster.
The vacancy is for three days per week from 9.30am-4.30pm. Some Saturdays will be required from 9.30am-12noon.
Please get in touch with Bricknells Rentals for more information.
Write to: HR Manager, Bricknells Rentals, 1st Floor Cotswold House, East Bawtry Road, Wickersley, Rotherham, S66 2BL
Last week’s article really caused a stir. In it we looked at a young family member of mine who was arguing the case that millennials (those born after 1985) were suffering on the back of the older generation in Rotherham.
My family member argued that the older generation had seen the benefit of the cumulative value of Rotherham properties significantly increasing over the last 25/30 years (I calculated as £2.09bn since 1990). In addition many of the older generation (the baby boomers) had fantastic pensions, which meant the younger generation were priced out of the Rotherham housing market.
Make sure you read that article here!
My rebuttal was that should be no surprise though that the older members of our society hold considerably more of our country’s wealth than the younger generation. This wealth is accrued and saved across someone’s life, and reaches it’s peak about the time of retirement. If we are to comprehend differing wealth levels between generations we need to compare ‘apples with apples’. It is much more important to track the wealth held by different generations at the same age – for example, what was ‘real’ wealth of the 30-something couple in the 1960s compared to a 30-something couple say in the 1980s or 2010s?
Looking back over the last 120 years at various economic studies, this growth in wealth from one generation to the next (at the age range), only happened over a 30 year period of between 1960 and late 1980s.
Since the 1990s, wealth has not improved across the generations, in the same age range.
So could it be all about a generation that has saved?
The fact is, in the last 10 years, UK households have saved on average 7.5% to 8% of the household income into savings accounts. Compare this to an average of 6% to 7% in the late 1960s and 1970s.
The baby boomers haven’t been actively squirreling away their cash for the last 30 or 40 years in savings accounts to accumulate their wealth. Most of their gains have been passive, lucky bonuses gained on the back of things out of their control (unanticipated and massive property value rises or people living longer making final salary pensions more valuable) – it’s not their fault!
…and herein lies the issue! It is assumed that these Millennials aren’t buying property in the same numbers like the older generation did in the past (because most of their wealth has come from house price inflation). The millennials have often been described as ‘Generation Rent’, because they rent as opposed to buying property! We are told they simply can’t buy.
Home ownership is an affordable option
However, when Rotherham mortgage payments are measured against monthly income, home ownership is affordable by historic standards because mortgage rates are currently so low. As you can see, the ratio of average house price to average earnings in Rotherham hasn’t vastly changed over the last decade:
- 2008 average house price to average earnings of a single person in Rotherham 5.42 to 1
- 2017 average house price to average earnings of a single person in Rotherham 5.39 to 1
(i.e. in 2008, the average house price in Rotherham was 5.42 times more than the average person’s salary in Rotherham and this has slightly dropped to 5.39 in 2017 – and all this off the property boom of the early 2010s)
95% first-time buyer mortgages
95% first-time buyer mortgages were reintroduced in 2010. The average interest rate charged for those 95% FTB mortgages has slowly dropped from around 5.5% in 2009 to the current 4% rate. Back in the 1980s/1990s mortgage interest rates were between 8% and 10%, and one time in the early 1990s, reached 15%!
The main difference between the two periods was the absolute borrowing relative to income is greater now than in the 1980s. They call this the ‘mortgage to joint household income ratio’. In the 1980s the mortgage was between 1.8x to 2x joint income; today it is 3.4x to 3.6x salary.
The simple fact is, in the majority of cases, it is still cheaper for a first-time buyer to buy a property with a 95% mortgage, than it is rent it. The barrier for these millennials has to be finding the 5% mortgage deposit.
43.2% of Rotherham millennials do own their own home
Millennials make up 17,194 households in our area (or 15.8% of all households). However, behind the doom and gloom, surprisingly, 43.2% did save up the 5% deposit and do in fact own their own home (that surprised you didn’t it!)
Nonetheless, the majority of millennials in the area do still rent from a landlord (5,692 households to be exact).
Yet, they have a choice.
Buckle down and do what their parents did and go without the nice things in life for a couple of years (i.e. the holidays, out on the town two times a week, the annual upgraded mobile phones, the £100 a month Satellite packages) and save for a 5% mortgage deposit… or live in a lovely rented house or apartment (because they are nowadays), without any maintenance bills and live a life with no intention of buying (secretly hoping their parents don’t spend all their inheritance so they can buy a property later in life). It’s much more similar to central Europe – renting doesn’t have a stigma anymore like it did in the 1960s/70s.
Neither decision is right or wrong – although it is still a choice. Until millennials decide to change their choices the country’s private rental sector will continue to grow for the next 30 years. The result? Happy tenants and happy landlords.
I hope you’ve enjoyed my insight into the Rotherham property market = feel free to follow me on Twitter or Facebook for all the latest property news in Rotherham, South Yorkshire and across the UK.
Recently I was having a chat with a second cousin at a big family get-together. The last time I saw them their children were in their early teens. Now their children are all grown up, have partners, dogs and children. Time flies!
Over a glass of lemonade I talked with my cousin and a couple of their children mentioning the times when interest rates were at 15%, there was a three day week, 20% inflation and the threat of nuclear annihilation! Foolishly, I said with all the opportunities that youngsters have today that they have never had it so good!
Trust one of my cousin’s children to have gained some financial/economics qualifications before attending law school. I received some pushback – they debated with me the genuine economic predicament faced by millenials and argued how a combination of student debt, unemployment, global proliferation, EU migration and rising house values is reducing the salaries and outlook of masses of the UK’s younger generation. They claimed that this has caused an unparalleled disparity of wealth between the generations.
So of course I asked why that was.
The argument: it’s millenials who are paying the price!
They said millennials were paying the price for the UK’s most spectacular bookkeeping catastrophe to date (bigger than the Bank bailout after the Credit Crunch).
Back in the 1950s and 1960s nobody predicted us Brit’s would live as long as we do today and in such abundant numbers. The OAP pensions that were promised in the past (be that Government State Pension or Company Final Salary Schemes) which appeared to be nothing fancy at the time, are now burdensomely over-lavish, and that is hurting the millennials of today and will do so for years to come.
Bringing it back to property, this ‘soon-to-be’ lawyer’s argument was that baby boomers born between 1945 and 1965 have been big recipients of the vast rising house prices between the 1970s and early 2000s. Add to that their decent pensions, meaning cumulatively, their wealth has grown exponentially through no skill of their own.
This disparity of wealth between the older and younger generations could have unparalleled consequences for the living standards of younger millennials…
So, do we actually have a problem?
Well Rotherham Property Blog readers, you know that I like a challenge!
I can’t disagree with some of what the younger family member said, but there are always two sides to every story, so I thought I would do some homework on the matter.
Since 1990, the average value of a property in Rotherham has risen from £57,000 to its current level of £138,700. As there are a total of 25,626 homeowners aged over 50 in Rotherham – that means there has been a £2.09bn windfall for those Rotherham homeowners fortunate enough to own their own homes during the property boom of the 1990s and early 2000s.
I must admit that the growth in property values in the 1990s and 2000s has certainly helped many of Rotherham’s baby boomers.
The figures do appear to put into reverse gear the perceived wisdom that each generation gets wealthier than the previous one… and so with all this wealth, the figures do back up the youngsters argument that millennials are being priced out of home ownership.
Or are they?
Are millennials being priced out of home ownership?
Next week I’ll post my next blog carrying on this discussion.
In the meantime, feel free to follow me on Twitter or Facebook for all the latest property news in Rotherham and South Yorkshire.
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