Jun 21, 2018
Good news for buy-to-let landlords in Rotherham – ‘top of the range’, well-presented properties are getting really decent rents compared to a year ago. However, this rise in rents is thwarting many potential first time buyers from saving for a deposit and for money for a rainy day. On top of this, there is also a shortage of of Rotherham homes coming on the market thus adding fuel to the slowdown and affecting not just first time buyers but also those looking to move up the housing ladder.
Whilst it is true that the Government’s initiatives, targeted at improving the supply of homes built and helping first time buyers obtaining necessary funding, are slowly starting to work, I also believe that to boost more existing home-owners and their properties onto the market, we as a country, need to see a better focus placed on those looking to downsize (i.e. the mature generation).How
If we took away some hurdles to homeowners downsizing, such as removing stamp duty for those downsizers (as was done for first time buyers last year), together with encouraging even more first time buyers with 100% mortgages to buy the smaller properties, this would release more mid-range properties onto the market. Subsequently, this would encourage more mature homeowners to downsize from their bigger properties to buy those mid-range properties – thus completing the circle.
Looking at the most recent set of data from the Land Registry for Rotherham (the S65 postcode in particular), the figures show the indifferent nature of the current Rotherham property market.
Only 168 Rotherham (S65) homes changed hands in the last 6 months
Rotherham property values and transactions continue to be sluggish, and the monthly peaks and troughs of house prices and properties changing hands doesn’t mask the deficiency of suitable realistically priced property coming onto the property market. The housing market is slowly becoming inaccessible to some would-be home owners.
The data from the Land Registry is always about four or five months behind, but looking at what each property type is selling for in S65 makes interesting reading:
There’s quite a bit of variance in terraced and detached properties but we must remember these are the average prices paid, so it only takes a run of a few expensive or cheaper property types to have an impact on the figures.
What about the number of properties for sale?
I directed my research for the numbers from early summer in 2008. At that time, 1,554 properties were on the market for sale in our area, compared to 722 properties for sale when I was researching this article. That’s a drop of 54%.
The importance of landlords
The Government needs to seriously consider the supply and demand of the UK property market as a whole to ensure it doesn’t seize up. It needs to do that with bold and forward-thinking plans.In the meantime, people still need a roof over their head, so as local authorities don’t have the cash to build new houses anymore, it’s the job of Rotherham landlords to take up the slack. I must stress though, I have noticed a distinct ‘flight to quality’ by Rotherham tenants, who are prepared to pay top dollar for an exceptional home to rent.
If you want to know what tenants are looking for and what type of things you as a Rotherham landlord need to do to maximise your rental returns, feel free to drop me a line.
Jun 18, 2018
It’s been nearly 18 months since Sajid Javid, the then Housing Minister published the White Paper “Fixing the Broken UK Housing Market”. In the meantime, Rotherham property values have continued to rise at a rate of 3.1% (year on year for the council area) but the number of new homes being constructed locally bumps along at a snail’s pace, creating a potential perfect storm for those looking to buy and sell.
The White Paper is important for those in Rotherham and the rest of the UK, as it will ensure we have long-term stability and longevity in property market as whole. Rotherham home-owners and landlords need to be aware of the issues in the report to ensure they don’t lose out. The White Paper wanted more homes to be built in the next couple of decades, so it might seem counter-intuitive for existing home-owners and landlords to encourage more homes to be built and a change in the direction of housing provision – as this would appear to have a negative effect on their own property.
Yet the country needs a diversified and fluid property market to allow the economy as whole to grow and flourish, which in turn will be a greater influence on whether prices go up or down in the long term. I am sure every homeowner or landlord in Rotherham doesn’t want another housing crisis like we had in 1974, 1988 and most recently in 2008.
Since it’s publication, Sajid Javid has moved on to the Home Secretary role, so now James Brokenshire (the 17th Housing Minister in 20 years) has been given the task of making this White Paper come alive.
What was the main points in the White Paper?
The first of the four points brought up was a proposal to give local authorities powers to speed up house building and ensure developers complete new homes on time. Secondly, the White Paper suggested statutory methods demanding local authorities and builders build at higher densities (i.e. more houses per hectare) where appropriate. The other two points were incentives for smaller builders to take a larger share of the new homes market and help for people renting.
However, the two initial points of planning and density are what this article is most interested in…
1. Planning
For planning to work, we need a robust Planning Department.
Looking at data from the Local Government’s Association, in Rotherham the council spends below the regional average – only £20.75 per person compared with the regional average of £37.35 per head. This means the planning department will be hard pressed to meet those targets.
However, 100% of planning applications are decided within the statutory 8-week initial period, above the regional average of 87% (see the graph below). I am therefore slightly disappointed and also pleased with the numbers for our local authority when it comes to the planning and the budget allowed by our politicians to this vital service.
2. Density of Population
9 people live in every hectare (or 2.471 acres) in Rotherham
It won’t surprise you that 231,177 of 257,280 Rotherham residents live in the urban conurbations of the authority, giving a density of 16.3 people per hectare (again – much lower than I initially thought), whilst the villages have a density of 1.8 people per hectare.
I would agree with the Government’s ambition to make more efficient use of land and avoid building homes at low densities is good to have. It is important that the form of development reflects the character, accessibility and infrastructure of the area.
It’s all very good building lots of houses – but we need the infrastructure to go with it.
Talking to a lot of Rotherham people, their biggest fear of all this building is a lack of infrastructure for those extra houses (the extra roads, doctors surgeries, schools etc.). I know most Rotherham homeowners and landlords want more houses to be built to house their family and friends… but irrespective of the density, it’s the infrastructure that goes with the housing that is just as important. The White Paper failed to go as far as I feel it should have done.
I believe there are interesting times ahead.
Jun 12, 2018
Five babies have been born for every new home that has been built in Rotherham since 2012, deepening the Rotherham housing shortage.
How did I get to this figure? Let’s take a look at the most up-to-date data for the the Rotherham Council area. There are two graphs below. The first examines the numbers of properties built vs. the number of babies born together. The second shows the corresponding ratio of the two aforementioned metrics:
It can be seen that in 2016, 5.09 babies had been born in Rotherham for every home that had been built in the five years to the end of 2016 (the most up to date data). Interestingly, that ratio nationally was 2.9 babies to every home built in the 50s and 2.4 in the 70s. I have seen the unaudited 2017 statistics and the picture isn’t any better! (I will share those when they are released later in the year).
This discovery is an important foundation for my concerns about the future of the Rotherham property market. When you consider the battle that the twenty and thirty somethings of today are facing in order to buy their first home and get on the Rotherham property ladder, the future becomes all the more alarming. Ultimately, this will mean the babies being born now, who will become the next generation’s first-time buyers will come up against even bigger competition from a greater number of their peers unless we move to long term fixes to the housing market, instead of the short term fixes that successive Governments have done since the 1980s.
An unprecedented and unbelievably difficult position
Our children, and their children, will be placed in an unprecedented and unbelievably difficult position when they want to buy their first home unless decisive action is taken. You see, it doesn’t help that with life expectancy growing year on year, there is also excessive pressure on the availability of homes to live in.
Owning your home is a measure many Brits to aspire to. The only long-term measure that will help is the building of more new homes on a scale not seen since the 50s and 60s. Essentially, we need to aim to at least double the number of homes that are built annually.
In the meantime, what does this mean for Rotherham landlords and homeowners? Well the demand for rental properties in Rotherham in the short term will remain high and until the rate of building grows substantially, rents will remain strong and correspondingly, property values will remain robust.
Jun 5, 2018
We are not building enough new properties. That is the simple fact. And if the supply of new properties is limited and demand continues to soar for a variety of reasons (ie. divorce rates, ageing population, immigration rates), the values of those existing properties will remain high and out of reach for a lot of people… especially the blue collar working families of Rotherham.
Let’s examine how affordable property is for the average working family in Rotherham.
Looking at some recent statistics released by the Government, the ratio of the lower quartile house prices to lower quartile gross annual salaries in the Rotherham Metropolitan Borough Council area has hit exactly 5 to 1.
How did we end up with this ratio?
Essentially, if we ordered every property in the Rotherham Metropolitan Borough Council area by the value of those properties, the average value of the lower quartile properties (i.e. lowest 25%) would be £95,000. If we then did the same with salary, ordering everyone’s salary, the average salary of the lowest quartile (lowest 25%) £19,000 pa. If we divide £95,000 by £19,000 we end up with a ratio of 5 to 1 – put simply, the cost of buying a home is five times the annual salary.
What does this mean for Rotherham families?
Assuming there is one wage earner in the house, the chances of a Rotherham working family being able to afford to buy their own home, when it’s five times their annual salary, is very slim indeed.
The existing affordability crisis is the unavoidable outcome of the decade on decade failure to build enough homes to keep up with demand.
Nevertheless, improving affordability is not a case of just constructing more homes. Our council needs to ensure more properties are not only built, but that they are built in the right locations and of the right type and at the right price to ensure the needs of these lower income working families are met. At the moment, they have few options apart from the private rental sector.
Looking at the historic nature of the ratio, it can clearly be seen in the graph below that this has been an issue since the early to mid 2000s.
Few council houses left – is the reintroduction of 100% mortgages the answer?
However, if you take a look at the historic data, those on the bottom rung of the ladder (those in the lower quartile of wage earners) used to be housed by the local authority instead of buying. Unfortunately, when the vast majority of council houses were sold off in the 1980s it has meant that there are few left to house this generation.
Many of the lower quartile working class families were given a lifeline to buy their own homes in middle 2000s, with 100% mortgages. Sadly, with the credit crunch in 2009, that rug (of 100% mortgages) was rudely pulled from under their feet. On the whole it is much cheaper to buy than rent… but it’s the finding of the 5% deposit that is the challenging issue for many Rotherham working class families. Unless the Government allow 100% mortgages back, there will be no improvement in this situation, which is increasing the demand for rental properties.
What can we do to help?
In the long term, to alleviate these problems, I would suggest the Rotherham community hold their local politicians to account – there are actions that the council could take to ensure the affordability of housing by working with private developers and housing associations and aggressively using the planning tools at their disposal to safeguard the local community getting the new households we need.
In addition, on the renting side of the problem, Rotherham Metropolitan Borough Council could make certain parcels of residential building land for private rented development only, eliminating the opportunity of the land being bought to develop large executive homes, which do not solve the current problem. (Although in the short term this does mean demand for rental properties will continue to grow, keeping Rotherham house prices high and Rotherham rents high.)
It’s a difficult time for those longing to own their own home in Rotherham. Let’s keep up the pressure on our local politicians to work hard to solve these problems.
May 2, 2018
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!
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.
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”
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