Jan 9, 2016
Well, as a New Year begins I remembered that a few days before Christmas, I got chatting with one of my out of town landlords who was back in Rotherham visiting his family.
Brought up in Rotherham, he went to Wickersley School and Sports College back in the 1970’s and is now a University Lecturer in central London. To enhance his retirement, he has a small portfolio of four properties in the town and wanted my advice on where to buy the next property in Rotherham (as he lives in a college owned flat and anyway, would never dream of buying where he lives in Kensington (where the average value of a flat is £1.62m and a townhouse £4.1m. Eye-watering to say the least!!).
Before I could advise him, I reminded him that the most important thing when considering investing in property is finding a Rotherham property with decent rental yields for income returns, yet at the same time, it must have the potential for capital growth from rising house prices over time. Going into 2016, Rotherham landlords will be under more pressure to find the best permutation of yields and capital growth, as extra stamp duty charges for buying properties and a squeeze on mortgage interest relief will raise their costs.
However, (you knew there would be a however) before we look at yield and capital growth, one important consideration that often many landlords tend to overlook, is the propensity of how likely the rent will increase. Interestingly, the average rent of a Rotherham property currently stands at £456 per month, which is a rise of 3.1% compared to twelve months ago (although it must be noted this rise in rents is for new tenancies and not existing tenants).
Anyway, back to yield and capital growth, the average value of a Rotherham property currently stands at £136,000, meaning the average yield stands at 4.02% per annum, which on the face of it, many landlords would find disappointing. That is the problem with averages, so if I were to look at say 2 bed houses in Rotherham which are the sort of properties a lot of landlords buy, in Rotherham, the average value of a 2 bed house is £83,600, whilst the average rent for a 2 bed house is £434 per month, giving a yield of 6.03%. However, if that wasn’t high enough, there are landlords in Rotherham who own some specialist properties with specialist tenancies, that are achieving nearly double that yield – again it comes down to your attitude to risk and reward (give me a tinkle if you wanted a chat about those sorts of properties – although they can be fun and games!).
Ultimately investors want to be making gains from both rent and house price growth. When combined, the rental yield and capital growth gives you the return on investment, and that is what I told our University friend from Kensington. Return on investment is everything. So, looking at property values in Rotherham have risen in the last year by 1.0% …. which means the current annual return on investment in Rotherham for a typical 2 bed house is 7.03% a year …. not bad.
Jan 9, 2016
Can you remember 10.05pm on Thursday, 7th May 2015 … with the shock news that BBC Exit Polls suggested the Conservatives would be returned with majority?
The middle classes in Wickersley and Bramley exhaled a huge sigh of relief, as Rotherham landlords, faced with rent controls from Red Ed and the Labour Party, now had something to cheer about as the Tory’s were always considered to be a political party that accepted the importance of the rental market, supported its development while properly targeting the lawbreaker landlords renting out below standard rental accommodation.
Since May though, George Osborne announced future rises in stamp duty for buy to let landlords and a change in the interest relief on buy to let mortgages, some people have started to question that loyalty. However, things could have been a lot worse for Rotherham landlords as previous ideas of making landlord’s pay more tax was the idea (which was seriously considered) of increasing Capital Gains Tax rates to the landlord’s own income tax levels. If Landlords would have had to pay capital gains tax of 40% to 45% on any uplift in value, I can tell you here and now, that would have made investing in property a non starter for almost everyone.
However, I will admit the loss of mortgage higher rate tax relief will make a number of properties not stack up financially. The new rules are likely to slow demand in the Rotherham housing market, which is in fact good news for the other landlords, as there is less competition from ‘amateur’ landlords offering too much.
Just a thought, but making Rotherham landlords think twice and
run their numbers more cautiously is not such a bad thing.
So looking at the numbers, the November figures have just been released and they show a slight drop of property values in Rotherham of 0.3% over the month of November. That figure doesn’t surprise me due to the time of year. It’s quite dangerous to look at one month in isolation, so looking at a more medium term view, over the last 12 months, property values in Rotherham have risen by 1.3%, not bad when you consider inflation is running at -0.1%.
However, regular readers of the Rotherham Property Blog know my passion for looking deeper into the stats. The really interesting information is the value growth, but what types of property are actually selling in Rotherham? Looking at all the properties sold, as recorded by the Land Registry, within 3 miles of the centre of Rotherham in September 2015 (this data always runs a couple of months behind the house price data) compared to September 2007 (a couple of months before the credit crunch started to bite and the subsequent property crash).
| Sept 2007 | Sept 2015 | Difference |
| Detached in Rotherham | 21 | 16 | -24% |
| Semis in Rotherham | 75 | 60 | -20% |
| Terraced Houses in Rotherham | 49 | 45 | -8% |
| Apartments / Flats in Rotherham | 5 | 7 | +40% |
Now I have mentioned in previous articles that the numbers of properties selling in the town has certainly dropped post 2008, but what amazed me were the drop in the number of detached, semis and terraces selling in Rotherham compared to the sales of apartments.
Less properties are selling than last decade in Rotherham and the types of properties selling have changed …interesting times ahead for the Rotherham Property market!
Therefore, all I can say to the landlords of Rotherham is do your homework, make sure the numbers do stack up, take advice and opinion from professionals and above all, for those of you planning to add to your portfolio, buy the right property at the right price
Jan 9, 2016
I was having lunch the other day at the Kings Head on Rockingham Road in Rotherham, with a local Rotherham solicitor friend of mine, when the subject of property came up. He asked me my thoughts on the Rotherham property market for the next five years.
Property prices are both a British national obsession and a key driver of the British consumer economy. So what will happen next in the property market? So here is what I told him, and now wish, my blog reading friends, to share with you.
Before I can predict what will happen over the next five years to Rotherham house prices, firstly I need to look at what has happen over the last five years. One of the key drivers of the housing market and property values is unemployment (or lack of it), as that drives confidence and wage growth – key factors to whether people buy their first house, existing homeowners move up the property ladder and even buy to let landlords have an appetite to continue purchasing buy to let property.
When the Tory’s came to power in May 2010, the total number of people who were unemployed in town stood at 3,517 (or 8.4% of the working age population in Rotherham parliamentary constituency). Last month, this had dropped to 1,968 people (or 2.9% of the working age population).
As the Rotherham job market has improved with better job prospects, salaries are rising too, growing at their highest level since 2009, at 3.4% per year in the private sector (as recently reported by the ONS). That is why, even with the colossal turbulence of the last few years, property values in the Rotherham area are only 4.32% lower today than they were five years ago.
Many home occupiers have held back moving house over the past seven to eight years following the Credit Crunch but with the outlook more optimistic, I expect at least some to seize the opportunity to move home, releasing pent up demand as well as putting more stock onto the market. With a more stable economy in the town, this will, I believe, drive a slow but clearly defined five year wave of activity in home sales and continued house price growth in Rotherham.
I forecast that the value of the average home in Rotherham will increase by 18.6% by 2021
18.6% might sound optimistic to some, but according to Land Registry, values are currently rising in Rotherham at 1.0% year on year, I believe my forecast to be fair, reasonable and a reflection of both positive (and negative) aspects of the local property market and wider UK economy as whole.
However, it wouldn’t be correct not to mention those potential negative issues as I do have some slight concerns about the future of Rotherham housing market. The number of properties for sale in Rotherham is lower than it was five years ago, restricting choice for buyers (yet the other side of the coin is that that keeps prices higher). Interest rates were being predicted to rise around Easter 2016, but now I think it will be nearer Christmas 2016 and finally the new buy to let taxation rules which are being introduced between 2017 and 2021 (although choosing the right sort of property / portfolio mix in Rotherham will, I believe, mitigate those issues with the next taxation rules).
I am telling the landlords I speak to, that with interest rates at their current level 0.5%, the cash in your Building Society Passbook is going to grow so slowly that it might as well be kept under their bed. Property prices, by contrast, have rocketed over the years, even after the property crashes, far outstripping bank accounts and inflation.
So my final thought … property is a long term investment, it has its’ up and downs, but it has always outperformed, in the long term, most investments. Those in their 40’s and 50’s in Rotherham would be mad not to include property in their long term financial calculations. Just make sure you buy the right property, at the price in the right location. One source of information on such matters would be the Rotherham Property Blog
Dec 21, 2015
Rotherham house prices up or Rotherham house prices down? … and if so, by how much?
Those of you who regularly read this blog will know I am not the sort of person who pulls punches nor someone who ever fails to give a forthright and straight talking opinion – so here are my thoughts for the 27,445 Rotherham homeowners and landlords.
The average Rotherham property is 1% higher today than it was a year ago, which doesn’t sound a lot, but when you consider inflation is currently running at -0.1% (ie consumer/retail prices are dropping) and average salary growth is only around 2.5% pa, this is bad news for first time buyers as property affordability continues to decrease (although I was reading in The Times the other day that wage inflation (ie salary growth) is showing signs of weakening).
Some commentators have said the higher stamp duty taxes announced a few weeks ago in the Autumn Statement for buy to let landlords, concerns over first time buyer affordability and the outlook of UK interest rate rises in 2016 will really dampen the property market. I hope you all read my previous article about what the new stamp duty rule changes would REALLY mean for Rotherham landlords in my blog, but I believe the real issue in the Rotherham property market is the shortage of property to buy, as people either worry there will be no suitable house to move to, or cannot afford to upgrade. However, on the supply side, Mr Osborne said in his Autumn Statement that he will change the planning laws to ensure the government meets the pledge made at the General Election (back in May) of 200,000 new homes a year. All I can say is .. good luck George hitting those numbers!
Why? Because houses take years to build .. not months .. so George and his fabled house building aside …. where does that leave us in Rotherham in 2016?
Well, talking of supply … whilst Mr Osborne builds his properties (and let’s be honest – a week doesn’t go by without him being filmed on a building site with a high viz jacket and hard hat building a house here and there!), let us look at the shortage of properties for sale. Back in December 2011, 1,217 properties were for sale in Rotherham .. today that figure is 929. On the face of it, this means there is less choice for Rotherham buyers – but it also means with a restricted supply of properties for sale .. it keeps property prices high for Rotherham house sellers.
Everything isn’t all doom and gloom though … again back in December 2011, the average property in Rotherham took 179 days to find a buyer .. latest figures state this has dropped to 131 days .. a drop of 27% in how long it takes to find a buyer. However, when you delve even deeper, the best performing type of property today in Rotherham is the 3 bed, which takes 124 days to find a buyer (on average) compared to the 1 bed, which takes 187 days. It just goes to show, even though the average has dropped since 2011, how varied that change has been!
So, back to the question everyone is asking …. What will happen to property values in Rotherham in 2016? I am going to suggest they will rise between 0.5% and 1% … nothing out of the ordinary, but unless something cataclysmic happens in the world, 2016 will be like 2015!
Dec 21, 2015
“Who would want to move to Rotherham in weather like this?”, was what one landlord said to me as we shook hands outside his property, the other afternoon.
It was windy, cold, it had been raining most of the day and it was the last appointment of the day at 4.45pm. I will admit, as I had been out of the office all day, I was looking forward to getting home, putting the fire on, and watching telly with a big mug of tea.. but this landlord lived in neighbouring Sheffield and this was the earliest he could do.
It turned out he had been self-managing the property himself over the last few years, but was worried with all the new legislation that had been introduced recently. He was particularly concerned about the up and coming ‘Right to Rent’ legislation, so as his tenant had handed in their notice recently, on this new tenancy he called us for our opinion.
For those Rotherham landlords that don’t know, landlords will need to check the immigration status of any new tenants moving into properties from February 2016 or face a £3,000 fine. It is called the ‘Right to Rent’ rules. However, tenants should also be aware that as well as traditional landlords, tenants who sub let rooms and homeowners who take in lodgers, must also check the right of prospective tenants to reside in the UK.
Our landlord from Sheffield wanted to know how much of a real issue was ‘Right to Rent’ in Rotherham. I was able to tell him, the last available figures (from a couple of years ago) show that 99 people (whom were registered as Non-UK Born Short-term Residents) moved into private rented accommodation in the Rotherham Metropolitan Borough Council area in one year alone. If all of those people weren’t supposed to be in the UK, that would be a fine of £297,000 to the landlords of the town.
It doesn’t sound a lot when you think there are 109,691 residents in Rotherham Metropolitan Borough Council area, and of those, 100,349 people (or 91.48%) were born in the UK. But Rotherham is a cosmopolitan town as the country of birth of the residents in the Rotherham Metropolitan Borough Council area can be split down as follows:
- UK 48%
- Ireland 30%
- Europe 66%
- Africa 13%
- Middle East and Asia 22%
- Americas and Caribbean 16%
- Australia and Pacific region 04%
However, it must also be recognised that landlords, by checking up on tenants, could potentially be accused of discrimination under the Equality Act. This is a real minefield for landlords, especially when you consider that not all of the 2,921 Europeans in the area necessarily have the right to live in the UK either.
In a nutshell, Rotherham landlords will need to check and retain copies of certain documents that show a potential tenant has the right to live in the UK. These include ….
- UK Passport
- EEA Passport/Identity card
- Travel document or Permanent Residence Card showing indefinite leave to remain
- Paperwork from Home Office stating their Immigration status
- Certificate of registration or naturalisation as a British citizen.
I hope the new law will target dishonest landlords who repeatedly fail to carry out Right to Rent checks by making it a criminal offence. This means they could face imprisonment for failing to check on their tenants. That is why more and more landlords are asking agents to manage their properties, so they can stay the right side of the law.
So what did our landlord do?
Well after our chat, he asked us to find a tenant and manage the property for him – he had been reading the Rotherham Property Blog for a while and because of the knowledge we impart to the landlords of Rotherham, we obviously know what we are talking about. Even better news for him, even though this would cost him agency fees, I was able to get him an additional £35 per month for his property (when we found him a tenant one week later). Now, together with the peace of mind we will keep him the right side of the law and put a stop to midnight phone calls complaining about dripping taps, it was a win-win situation for everyone.
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