As we dive further into 2018 I believe that the UK interest rates will stay low, even with the predicted additional 0.25% increase that is expected in May or June. That rise will add just over £20 to the typical £160,000 tracker mortgage, although with 57.1% of all borrowers on fixed rates, it will probably go undetected by most buy-to-let landlords and homeowners.
I forecast that we won’t see any more interest rate rises due to the fragile nature of the British economy and the Brexit challenge. Even though mortgages will remain inexpensive, with retail price inflation outstripping salary rises, it will still very much feel like a heavy weight to some Rotherham households.
A subdued local market – remembering that property ownership is a medium to long-term investment
Now it’s certain the Rotherham housing market in 2017 was a little more subdued than 2016 and that will continue into 2018.
Property ownership is a medium to long-term investment so looking at that long-term time frame; the average Rotherham homeowner who bought their property 20 years ago has seen its value rise by more than 203%.
This is important, as house prices are a national obsession and tied into the health of the UK economy as a whole.
The majority of that historic gain in Rotherham property values has come from property market growth, although some of that will have been added by homeowners modernising, extending or developing their Rotherham home.
Taking a look at the different property types in Rotherham and the profit made by each type, it makes interesting reading.
Looking to the future…
However, I want to put aside all that historic growth and profit and looking forward to what will happen in the future.
I want to look at the factors that could affect future Rotherham (and the country’s) house price growth/profit.
One important factor has to be the building of new homes both locally and in the country as a whole. This has picked up in 2017 with 217,350 homes coming on to the UK housing ladder in the last year (a 15% increase on the previous year’s figures of 189,690. However, Philip Hammond has set a target of 300,000 a year, so there is still plenty to go!
Another factor that will affect property prices is my prediction that the balance of power between Rotherham buy-to-let landlords and Rotherham first-time buyers should tip more towards the local first-time buyers in 2018.
The Council of Mortgage Lenders expects the number of buy-to-let mortgages to drop by 34% from levels seen in 2015.
This is because of taxes being increased recently on buy-to-let and harder lending criteria for buy-to-let mortgages, which means I foresee a gradual move in the balance of power in favour of first-time buyers rather than buy-to-let landlords. First-time buyers will also be helped by the Chancellor eradicating Stamp Duty for all properties up to £300,000 bought by first-time buyers in the recent budget.
This means Rotherham buy-to-let landlords will have to be smarter in the future to continue to make decent returns (profits) from their Rotherham buy-to-let investment.
Even with the tempering of house price inflation in Rotherham in 2017, most Rotherham buy-to-let landlords (and homeowners) are still sitting on a copious amount of growth from previous years.
How do Rotherham buy-to-let landlords ensure that growth continues?
That is the question for buy-to-let landlords in our area.
Since the 1990s, making money from investing in buy-to-let property was as easy as falling off a log.
Looking forward though, with all the changes in the tax regime and balance of power, making those similar levels of return in the future won’t be as easy. Over the last ten years, I have seen the role of the forward thinking letting agents evolve from a ‘rent collector’ and basic property management to a more holistic role – or as I call it, ‘landlord portfolio strategic leadership’.
Thankfully, along with myself, there are a handful of letting agents in Rotherham whom I would consider exemplary at this landlord portfolio strategy. These landlords can give you a balanced structured overview of your short, medium and long-term goals, in relation to your required return on investment, yield and capital growth requirements.
If you would like such advice, speak with your current agent – or whether you are a landlord of ours or not – without any cost or commitment, feel free to drop me a line.
Looking at the newspapers between Christmas and New Year, it seemed that this year’s sport in the column inches was to predict the future of the British housing market. So to go along with that these are my thoughts on the Rotherham property market.
With the average 5-year fixed rate mortgage at 1.98% (down from 3.47% in 2014) and 2-year fixed rate at 1.47% (down from 2.37% in 2014), mortgage interest rates offered by lenders are at an all-time low (even with the slight increase on the Bank of England base rate a few months ago).
Added to this, there has been a low unemployment rate of 5.6% in Rotherham, which has contributed to maintain a decent level demand for property in our area during 2017 – interestingly, an impressive 2,210 Rotherham properties were sold in last 12 months.
Finally, the number of properties for sale in the town has remained limited, thus providing support for Rotherham house prices.
As a result…
Rotherham property values are 4.2% higher than a year ago
However, moving into 2018, there will be greater pressures on people’s incomes as inflation starts to eat into real wage packet growth. This will wield a snowballing strain on consumer confidence. Information from Rightmove suggested over a third of property it had on its books in October and November had their asking prices reduced – this is the highest percentage of asking price reductions in the same time frame for over five years.
Still, a lot of that could have been house-sellers being overly optimistic with their initial pricing.
What will happen in Rotherham?
In terms of what will happen to Rotherham property values in the next 12 months, a lot will be contingent on the type of Brexit we have and the impact on the whole of the UK economy.
A lot of people will talk about the London property market in the coming year, and if the banking and finance sectors are negatively affected with a poor Brexit deal, then the London market is likely to see more of an impact.
Nevertheless, the bottom line is Rotherham homeowners and landlords should be aware of what happens in the rollercoaster housing market of Central London, but not panic if prices do drop suddenly there in 2018.
Over the last 8 years, the Central London property market has been in a world of its own (Central London house prices have grown by 89.6% in those last 8 years, whilst in Rotherham, they have only risen by 10.2%).
So we might see a heavy correction in London, whilst experiencing something a little more subdued more locally.
Brexit will play a major role
Hindsight is always better than foresight and predicting anything economic is all well and good when you know what is around the corner. At least we now have the Brexit divorce settlement sorted. As the UK economy and the housing market are intertwined, it all depends on how we deal with the Brexit issue as a whole country.
However, we have been through the global financial crisis reasonably intact… I am sure we can get through this together as well?
Oh, and house prices in Rotherham over the next 12 months?
I believe they will end up between 0.5% lower and 1.2% higher, although it will probably be a bumpy ride to get to those sorts of figures.
What do you think?
I would love to hear your thoughts.
I was recently reading a report by the Home website which suggested that hordes of landlords are selling their buy-to-let investments due to increasing burdens on them in the buy-to-let market. Their findings suggest the number of new properties that came onto the market nationally (for sale) jumped by 11% across the UK as a result.
Those increasing burdens include new tax rules coming in over the next 3 to 4 years and the announcement that all self-managing landlords (i.e. landlords that don’t use a letting agent to look after their buy-to-let property) will soon need to register with a compulsory redress scheme to resolve tenant arguments and disputes as Westminster attempts to heighten standards in the Private Rented Sector.
Interestingly, I was chatting with a self-managed landlord from Braithwell, when I was out socially over the festive period, who didn’t realise the other recent legislations that have hit the sector, including the ‘Right to Rent’ regulations which came in to operation last year. Landlords have to certify their tenants have the legal right to live in the UK. This includes checking and taking copies of their tenant’s passport or visa before the tenancy is signed. Of course, if you use a letting agent to manage your property, they will usually sort this for you (as they will with the redress scheme when that is implemented).
If you are a self-managed landlord though, the consequences are severe because if you let a property to a tenant who is living in the UK illegally, you will be fined up to £3,000.
That same Braithwell landlord popped into my offices in the New Year and I checked all his paperwork and ensured he was on the right side of the law going forward – and I offer the same to any landlord in the Rotherham area if you want me to cast my eye over your buy-to-let matters (and at no cost – ok just bring in some chocolates for those in the office!)
But what of all these extra properties being dumped onto the market in Rotherham?
When I looked at the records the number of properties on the market in Rotherham now, as opposed to a year ago, the numbers tell an interesting story …
Overall, Rotherham doesn’t match the national trend, with the number of properties on the market actually dropping by 14% in the last year. It was particularly interesting to see the number of terraced drop by 16% and the number of detached on the market drop by 27%.
However, speaking with my team and other property professionals in the town, the majority of that movement in the number of properties and the types of properties on the market isn’t down to landlords dumping their properties on the market.
The whole property market has changed in the last 12 months, with the majority of the change in the number and type of properties for sale due to the owner-occupier market, not landlords.
You see, for the last ten years, each month there has always been a small number of Rotherham landlords who have been releasing their monies from their Rotherham buy-to-let properties – as is the nature of all investments!
Nationally, the number of rental properties coming on to the market to rent fell by 16% in Q4 2017 compared to Q4 2016 .. but that isn’t because there are 16% less rental properties to rent – it’s because tenants are staying in their rental properties longer meaning less are coming on the market to be RE-LET.
What could 2018 look like?
Nevertheless, some Rotherham landlords will want to release the equity held in their Rotherham buy to let properties in 2018.
All I suggest is that you speak with your letting agent first, as putting a rental property on the open market often spooks the tenants to hand in their notice days after you put it on the market (because they don’t like the uncertainty and also believe they will become homeless!)
This means you have an empty property, costing you money with no rent coming in.
However, some letting agents who specialise in portfolio management have select lists of landlords that will buy with sitting tenants in. If you have a portfolio in the Rotherham area and are considering selling some or all of them – drop me a line as I might have a portfolio landlord for you (with the peace of mind that you won’t have any rental voids).
Please get in touch if you need my help or advice this year. You can also follow the blog on Facebook and Twitter for the latest information!
Towards the end of 2017, on a wet and blustery day in the Lake District, we announced our brand new feature. In 2018 we will be visiting the most sellable streets in Rotherham, giving tips about where is best to own property in our area.
We’ve been looking at Land Registry documents and are pleased to announce that our first video is now live!
Watch it here:
Be sure to visit our Facebook page to get the latest videos and posts directly to your newsfeed.
Next stop… S63!
Home ownership for those aged 20-30 in Rotherham has seemed a vague dream. Talk to many of this generation and they have been vexatious towards the Baby Boomer generation and their pushover ‘easy go lucky’ walk through life. They’re jealous of their free university education with grants, their eye watering property windfalls, their golden final salary pensions and their free bus passes.
If you had bought a property in Rotherham for say £15,000 in first quarter of 1977, today it would be worth £177,447, a windfall increase of 1082.9%.
But to blame the 60 and 70 year olds of Rotherham for that sort of rise seems a little unfair, with the value of the homes rising like rocket, I don’t believe they can be censured or made liable for that.
A few weeks ago, I discussed in my blog the number of people in the Rotherham area who have two or more spare bedrooms (meaning they are under-occupying the house). I see many mature members in our area rattling around in large 4/5 bed houses where the kids have flown the nest years ago… but should they be blamed?
We are all just human, and the mature members of UK society have just reacted to the inducements of our property and tax system. The mature generations who joined the property market party in the 1970s and 1980s were able to take out huge mortgages, protected in the knowledge that inflation would corrode the real value of the mortgage, while wage gains would boost their ability to repay.
So… who is to blame?
Hyperinflation in the 1970s meant the real value of people’s mortgages was whipped out (as mentioned above).
In the 1980s Margaret Thatcher sold off millions of council houses and Nigel Lawson delayed ending the MIRAS tax relief in 1987. During the New Labour years, the Blair/Brown combination doubled stamp duty in 1997 and again in 2000. As a tax off property transactions, this precludes a more efficient distributions of the current housing stock – the government has had plenty of opportunity to change the draconian stamp duty rules to incentivise those mature Rotherham house movers to downsize.
However, I have started to see over the last few years a change in Government policy towards housing.
Are landlords to blame?
I don’t directly blame the multitude of Rotherham buy-to-let landlords, buying up their 10th or 11th property to add to their buy-to-let empire. They too, are humbly reacting to the peculiar historic inducements of the UK property market.
The new breed of Rotherham buy-to-let landlords that have come about since the Millennium, have had their wings clipped over the last couple of years, with the introduction of new tax rules (meaning it is slightly more difficult to make money out of property unless you have all the national information and Rotherham property trends to hand).
It’s easy to think the only reason that hundreds of first time buyers have been priced out of the Rotherham housing market is because of these landlords. Yet I believe landlords have been undervalued with the Rotherham homes they provide for Rotherham people.
With first time buyers struggling to save for a deposit, if it weren’t for those landlords buying up those homes over the last 10/15 years, we would have a bigger housing crisis than we have today. Since the global financial crisis of 2008/9, local councils have had to cut services, so certainly didn’t have enough money to build new homes … homes that were provided to Rotherham by these buy-to-let landlords.
Providing 5,000 new homes for local people
In the Rotherham area there are 714 homes being bought up by buy-to-let landlords each year. One side of the argument is that these houses might otherwise have become available to other buyers. However, the other side of the argument is that the current national average rage deposit in £51,800 – by far the greatest barrier to those wanting to buy their first home. Those homes bought by local buy-to-let landlords are not left idle – they equate to 4,997 of new homes for local people, most of whom who see renting as a better option because of the choice, the simplicity and the flexibility which renting brings.
In the 60s/70s/80s, people thought that you were a failure unless you owned your own home. This traditional perspective has now all but disappeared. If you ask many young people they would probably say renting was the perfect option for them at certain times of their life.
My research shows that certain types of Rotherham property are more affordable today than before the 2007 credit crunch.
Roll the clock back to 2007 just before the credit crunch hit which saw Rotherham property values plummet like a lead balloon… the property market had reached a peak with prices for property in Rotherham hitting their highest ever level. Between 2008 and 2010, Rotherham property values lay in the doldrums and only started to rise in 2011, albeit quite slowly to begin with.
Nevertheless, even though property values have now passed those 2007 peaks, my research indicates that Rotherham property, especially flats/apartments, are now more affordable than they were before the 2008 credit crunch.
Back in 2007, the average value of a Rotherham flat/apartment stood at £99,623. Today, it has risen to £106,971 – this rise of £7,348 amounts to 7.4%.
However, between 2007 and today, we have experienced total price inflation of 25.97% (according to the Government’s Consumer Price Index). This means that in real spending power terms, our apartments are actually 18.6% more affordable than 10 years before. Looking at it another way, if the average Rotherham apartment (valued at £99,623 in 2007) had risen by 25.97% inflation over those 10 years, today it would be worth £125,495 (instead of the current £106,971).
Rotherham property is more affordable than many people think
The point I’m trying to get across is that Rotherham property is more affordable than many people think. Rotherham first time buyers can get on the ladder as 95% mortgages have been readily available to first-time buyers since 2010.
It really comes down to a choice and if Rotherham first-time buyers can get over the hurdle of saving the 5% deposit for the mortgage on the property they will be on to a winner. This is especially true with these ultralow mortgage interest rates – a mortgage can be between 10% and 30% cheaper per month than the rental payments on the same house.
So why aren’t Rotherham 20 somethings buying their own home?
Back in the 1960s and 1970s, renting was considered the poor man’s choice in Rotherham (and the rest of the UK). A huge stigma was attached to renting. However, over the last 10 years as a country, we have done a complete U-turn in our attitude towards renting – meaning that many people find renting a better option and a lifestyle choice.
Saving the 5% deposit means going without many luxuries in life (such as holidays, every satellite movie and sports channel, socialising or the latest mobile phone – even if only in the short term) therefore instead of saving every last pound to put towards a mortgage deposit those in their twenties are choosing to rent.
There is no denying the simple fact that over the next 10 to 15 years, the people who choose to rent instead of buy in Rotherham will continue to rise.
Therefore, everyone in Rotherham has a responsibility to ensure that an adequate number of quality Rotherham rental properties are safeguarded to meet those future demands.
Interestingly, what I have noticed over the last few years are the expectations of tenants on the finish and specification of their Rotherham rental property.
I have perceived that in the past, what a tenant wanted from their Rotherham rental property was moderately unassuming because renting a property was only a short-term choice to fill the gap before jumping on the property ladder. Before the millennium, wood chip wall paper and twenty-year-old kitchen and bathroom suites were considered the norm.
However, the expectations of tenants in Rotherham are becoming more discerning as each year goes by.
I have also noticed the length of time a tenant remains in their Rotherham property is becoming longer (and this was backed up recently by stats from a Government Report), although I have noticed a tendency for many Rotherham landlords not to keep the rental payments at the going market rates – maybe a topic for a future article for my blog?
The bottom line is this… Rotherham landlords will need to be more conscious of the needs and wants of tenants and consider their financial planning for future enhancements to their rental properties over the next five, ten and twenty years (e.g. decorating, kitchen and bathroom suites etc.)
The present-day and future situation of the private rental property market is important, and I frequently liaise with Rotherham buy-to-let investors looking to spread their Rotherham rental-portfolios.
I also enjoy meeting and working alongside Rotherham first time landlords, to ensure they can navigate through the minefield of rental voids, the important balance of capital growth and yield and ensuring the property is returned back to you in the future in the best possible condition. If I can help, please get in touch!
This will be my final post of 2017 – I hope you have a great Christmas and New Year. I’ll see you in 2018 for more insights into the Rotherham property market. In the meantime, I’ll be fairly active on social media over the Christmas break so please do follow me if you are interested in keeping up with the latest local news.