Feb 22, 2021
When William the Conqueror invaded our fair shores in 1066, like all good kings, he needed to buy loyalty and raise cash to build his castles and armies. He did this by feudal law system and granted all the faithful nobles and aristocrats with land. In return, the nobles and aristocrats would give the King money and the promise of men for his army
(this payment of money and men was called a ‘Fief’ in Latin, which when translated into English it becomes the word ‘Fee’… as in ‘to pay’).These nobles and aristocrats would then rent the land to peasants in return for more money
(making sure they made a profit of course) and the promise to enlist themselves and their peasants into the Kings Army
(when requested during times of war). The more entrepreneurial peasants would then ‘sublet’ some of their land to poorer peasants to farm and so on and so forth.The nobles and aristocrats owned the land, which could be passed on to their family
(free from a fee i.e. freehold), while the peasants had the leasehold because, whilst they paid to use the land
(i.e. they ‘leased it’ which is French for ‘paid for it’) they could never own it. Thus, Freehold and Leasehold were born (you will be pleased to know that in 1660 the Tenures Abolition Act removed the need of freeholders to provide Armies for the Crown!).
4.3 million properties in the UK are leasehold …
and 8,160 properties in Rotherham are leasehold. By definition, even when you have the leasehold, you don’t own the property (the freeholder does). Leasehold simply grants the leaseholder the right to live in a property for 99 to 999 years. Apart from a handful of properties in the USA and Australia, England and Wales are the only countries of the world adhering to this feudal system style tenure. In Europe you own your apartment/flat by using a different type of tenure called Commonhold.
The average price paid for leasehold properties in Rotherham over the last year is £131,867.
The two biggest issues about leasehold are firstly, as each year goes by and the length of lease dwindles, so does the value of the property (particularly when it gets below 80 years). The second is the payment of ‘ground rent’ – an annual payment to the freeholder.Looking at the first point of the length of lease, the Government brought in the Leasehold Reform Act 1967, which allowed tenants of such leasehold property to extend their lease by upwards of 50 years. However, this was very expensive and as such only kicked the can down the road for half a century
(when the owner would have to negotiate again to extend another 50 years – costing them more money, time and effort).Ground rents on most older apartments are quite minimal and unobtrusive. The reason it has become an issue recently was the fact some (not all) new homes builders in the last decade started selling houses as leasehold with ground rents. The issue wasn’t the fact the property was sold as leasehold nor that it had a ground rent, it was that the ground rent increased at astronomical rates.
Many Rotherham homeowners of leasehold houses are presently subject to ground rents that double every 10 years.
That’s okay if the ground rent is £200 a year today, yet by 2121, that would be £204,800 a year in ground rent, meaning the value of their property would almost be worthless in 100 years’ time. One might say it allows for inflation, yet to give you an example to compare this against, if a Rotherham leasehold property in 1921 had a ground rent of £200 per annum, and it increased in line with inflation over the last 100 years, today that ground rent would be £9,864 a year.
This is important because the majority of leasehold properties sold in Rotherham during the last 12 months were semi-detached, selling for an average price of £147,254.
So, without reforms, the value of these Rotherham homes will slowly dwindle over the coming decades. That is why the Government reforms announced recently will tackle the problem in two parts.
Firstly, ground rents for new property will effectively stop under new plans to overhaul British Property Law. Under the new regulations, it will be made easier (and cheaper) for leaseholders to buy the freehold of their property and take control by allowing them the right to extend the lease of their property to a maximum term of 990 years with no ground rent.Secondly, in the summer the Government will create a working group to prepare the property market for the transition to a different type of tenure. Last summer the Law Commission urged Westminster to adopt and adapt a better system of leasehold ownership – ‘Commonhold’. Commonhold rules allow residents in a block of apartments to own their apartment, whilst jointly owning the land the block is sitting on plus the communal areas with other apartment owners.
These potential leasehold rule changes will make no difference to those buying and selling second-hand Rotherham leasehold property.
Yet, if you are buying a brand-new leasehold property, most builders are not selling them with ground rent (although do check with your solicitor). The only people that need to take any action on this now are people who are extending their lease. If you are thinking of extending the lease of your Rotherham property before you sell to protect its value, your purchaser may prefer to buy on the existing terms and extend under the new (and better) ones later (meaning you lose out).Like all things – it’s all about talking to your agent and negotiating the best deal for all parties. Should you have any questions or concerns feel free to pick up the phone, message me or email me and let’s chat things through.
Feb 15, 2021
In the last few months, the Rotherham (and UK) property market has resisted and flouted every economist’s prediction. With the economy a shadow of its former self, unemployment set to hit 11.9%, the Government on track to borrow nearly half a trillion pounds to pay for Coronavirus support packages etc., all of this has had no effect on Rotherham homeowner’s enthusiasm or capability to want to move home. It highlights the influence of both the emotional impact of lockdown and the enticing appeal of saving thousands of pounds on your Stamp Duty Tax bill.
For the last few months, the Rotherham property market has been akin to a surfer, riding an unexpectedly large wave. The question is, will the surfer crash down (i.e. the property market) into the rocks or will it calmly arrive at the beach unscathed? Well looking at house prices firstly…
UK house prices are 4.7% higher than they were 12 months ago according to the Land Registry, whilst in Rotherham they are 0.2% higher
Looking at the data over the country, things overall are looking good for property prices. Yet it must be remembered the Land Registry data is on completed house sales and is always a couple of months behind, so this data is for house sales up to September that were agreed in the spring. Also, it does not take into account the prices being paid today on Rotherham homes (as they will only show in statistics the Spring and Summer of 2021 when the sale completes).
Rotherham house prices will inevitably ease in 2021
Anecdotal evidence over the last few months has suggested buyers are using their Stamp Duty savings on the price they are prepared to pay for the Rotherham home of their dreams, so when the Stamp Duty holiday finishes in Spring 2021, we will see a reduction in the price Rotherham properties sell for, as buyers will now have to hold back some of their cash to pay the Stamp Duty Tax.
Mortgage approvals at a 13 year high
A better statistic to judge the property market by are the number of mortgage approvals. As the vast majority of house buyers need a mortgage, that is another good place to look at the numbers as they are much more up to date than the Land Registry figures. The Bank of England recently stated 97,500 mortgages were approved last month, up from the long-term average of just over 65,400 per month. This was the highest number of mortgage approvals since September 2007, and a whole third higher than mortgage approvals in February 2020 when we had the Boris Bounce in the property market.
As a country, we are due to smash through 2019’s 524,000 total number of mortgage approvals this month, despite the fact that the property market was closed for nearly three months in the spring. It’s vital to remember, that mortgage approvals do not equate to people moving home, as many of you reading this can attest to … property sales do fall through.
I do have apprehensions that many Rotherham people, buying and selling their Rotherham homes and in a chain, may not be able to realise the move before the Stamp Duty rules change at the end of March 2021, as there is a massive backlog with mortgage lenders, local authorities’ and the searches, chartered surveyors surveying the property and solicitors with the legal work, all combining to slow down the house selling and buying machine.
If you are in chain at the moment, you must constantly be talking to all the parties involved and ensuring everything is focused on getting the sale complete by the end of March. You have a responsibility to get the information requested back in hours, not weeks… because if you don’t, you might not get your Rotherham home move through before the end of the stamp duty holiday, and without that discount, someone in your chain may pull out of the sale altogether and the chain will break.
The number of people moving home in Rotherham is anticipated to drop sharply after the Stamp Duty holiday ends at the end of March 2021
And that is probably going to be the biggest impact on the Rotherham property market in 2021. Yes, there will be a slight readjustment in the prices paid after March 2021 (as mentioned above), yet a reduction in the number of people selling their Rotherham home does not inevitably lead to a house price crash.
Yes, there will be a number of people who have to sell in 2021 because they have lost their jobs (i.e. ‘forced sales’). In the last two ‘Property Market Crashes’ of 1988 and 2008, there were a large number of forced sales in a short period of time (because business owners had to sell their home as their business had gone bankrupt because of the Credit Crunch, as well as people who had lost their job), increasing the supply of properties coming to the market in 1988 and 2008.
This in turn pushed Rotherham house prices down as the property market was flooded with lots of property to sell in a short period of time. Yet this time, we have had the cushion/parachute of Bounce Back Loans, Furlough, and Mortgage Holidays over the last 9 months.
Also, another important factor about the last property market crashes were the levels of interest rates and the amount borrowed.
Interest Rates are the key to the future of the Rotherham property market
In 1988, mortgage interest rates were an eye-watering 11.5% and 6% in 2008, meaning mortgages were much more expensive compared to the 0.1% rate we have today. Also, with 77.2% of mortgages with fixed-rate mortgages, and only 1 in 21 mortgages owing more than 90% of the value of their home (and 1 in 303 mortgagees owing more than 95% of the value of their home), negative equity should not be so much an issue like it was in 1988.
This means most Rotherham homeowners are in a much better place to weather the storm of 2021, than they were in 1988 and 2008
I foresee many Rotherham sellers will simply wait until activity in the Rotherham property market picks up again before placing their property on to the market. This means fewer properties will be placed onto the market for sale in the later part of 2021, meaning Rotherham house prices will tend to hold up. The people that will be affected by less properties coming onto the market will be estate agents, solicitors, and home removals people.
I also believe there will be ‘interesting investment opportunities’ to be had for Rotherham buy to let in the latter half of 2021 with the potential changes in Capital Gains Tax regulations, although those won’t go on the open market, so do keep your ear to the ground and build relationships with all the letting agents in Rotherham so you get to hear of the property portfolios coming up for sale (as they tend to sell ‘off market’). Again, if that’s something that interests you – do drop me a line.
So, where is the Rotherham property market heading in 2021?
Well, the Rotherham property market (aka our “surfer”) has seen a house price growth of 18.7% since 2009 … and this has been fuelled on the back of…
- Ultra-low interest rates mean money is cheap to borrow and so mortgage payments are low. With the Bank of England pumping £150bn into the economy in November with Quantitative Easing (QE) to add to the £725bn they have already spent on QE since 2009 – interest rates will continue to stay low for some time.
- There has been an increased demand for housing with annual net migration of 214,400 since 2009 (meaning 96,700 additional households per year have been required since 2009 just to house those people – a total of 1,063,700 households).
- The average age of death has risen by 2.1 years since 2008 in the UK. People living longer delays property from being released back onto the property ladder. For every extra year of life the average Brit lives, an extra 290,850 households are required in the UK.
None of these things have changed because of Covid.
As a country, we have only built on average 165,100 homes a year since 2009. Supply and demand shows that whilst we will probably have a turbulent choppy ride on the 2021 wave (because of the economy) our surfer (aka the property market), with long term demand for housing outstripping supply since the 1980s, will continue to ride the wave (probably not as large as it has been in 2020) as the ultimate long-term outlook for the property market in Rotherham looks good.
All this means demand for decent, private rented Rotherham property will be good as long as the property ticks all the boxes of the tenants. If you are a Rotherham landlord, whether you are a client of mine or not, feel free to drop me a line to pick my brain on the future of the buy to let market in Rotherham.
Feb 8, 2021
12 months ago, the unemployment rate in Rotherham stood at 3.5% of the working population, yet with Coronavirus hitting the UK, what impact will this rise in unemployment have on the Rotherham property market?
As I have discussed a number of times in my articles on the Rotherham property market, this summer saw the Rotherham property market do exactly the opposite of what was expected when Covid hit.
The Stamp Duty holiday added fuel to pent up demand for people to move to property with extra rooms (to work from home) and gardens. This prompted a brief hiatus in the number of people selling and buying their home in Rotherham over the last summer and autumn.
Yet, insecurity around rising unemployment, led to many mortgage companies becoming more cautious in the later months of summer, predominantly when lending to the self-employed or first-time buyers borrowing more than 85% of the value of the home (as they wouldn’t want to lend money to someone that could not afford a mortgage due to an insecure income or not having a job.)
Back in the late spring, economists were predicting that UK unemployment would rise to a peak of 6.5% in Q3 2020, returning back to the 2019 levels (3.4%) by 2022.
As we speak (Christmas 2020), nationally the unemployment rate stands at 6.3%. The toll Covid has had on people’s livelihoods has been massive, with an additional 1,434,515 people out of work, although it is important to note this unemployment rate is still lower than the five years following the Credit Crunch years – 2008 to 2013.
So, with such a growth in unemployment will it hold back the enthusiasm of many companies to take on more staff, reducing any rebound in employment. If unemployment remains high, this will influence perceptions of employment and personal/household financial security, which are the ultimate drivers for both house prices and whether people buy and sell.
5,605 Rotherham people were unemployed a year ago, today that stands at 11,490.
Looking at all the study papers on the topic, there is a link between unemployment and house prices, yet it’s not as strong as you would think. The larger factors are the demand and supply of property on the market and interest rates. Interestingly, in the past two recessions, the comparatively richer regions of London and South East house prices have been more sensitive to unemployment and house price changes than the rest of the UK, yet London and the South East also bounced back quicker and higher after the two recessions.
The concept behind this is that more expensive house prices in the South drop more than lower-priced houses in the rest of the UK. Why? Because those more expensive regions have, by definition, more expensive house prices meaning the homeowners have higher mortgages, so if they become unemployed, their homes are more likely to be repossessed (because of the high mortgages), and consequently that reduces house prices in that area quicker because repossessed houses tend to sell much more cheaply compared to normal house sales.
The health of the Rotherham property market in 2021 and beyond really depends on what happens to the economy as a whole and more specifically what is happening in the Rotherham economy.
When we drill down though, unemployment has hit different sectors of the economy to a lesser or greater extent. For example, for office workers, people who work in tech & sciences and the professional services, the impact on jobs has been comparatively mild, with many personnel able to work from home. Yet for others, such as those who work in the hospitality, leisure, retail, entertainment, and catering industry, remote working is simply not an option and these have been hit the hardest.
Unfortunately, the industries mentioned above are the ones that tend to employ the younger generation, who invariably live in private rented accommodation, rather than own their own home. Being made redundant puts their dream of buying their first home back even further as they try and get themselves back on their feet by initially finding a job (let alone save for a deposit).
Housing markets will recover quickest in towns and cities, where jobs are in more resilient employment sectors.
For example, in London, unemployment jumped really quickly (and high) in 2009 with the Credit Crunch, yet came down just as quick in 2011, just as the property market in London started to take off, whilst in Rotherham, it took a lot longer for unemployment to drop and the Rotherham property market didn’t really start to get going until 2013/4.
If we have a determined economic contraction, with a lengthier and leisurely economic recovery, impeded by financial stress, that will lead to much higher unemployment in the 10% to 12% range in the summer of 2021. However, before I get to the initial question, I need to highlight another interesting fact, because …
what is particularly interesting is the increase in unemployment in Rotherham amongst men has been higher than women, with a growth of 4.6 percentage points for men compared to 2.7 percentage points with women.
So, what is the prediction for the Rotherham property market under the cloud of this growth in unemployment?
One massive redeeming factor that could just save the Rotherham property market is low-interest rates. This will keep mortgage payments low, meaning repossessions should be kept to a minimum (therefore there shouldn’t be a flood of cheaply priced Rotherham properties coming onto the market all at the same time and dragging Rotherham house prices down with it, as it did in the previous two recessions of 2009 and 1989).
Yet, irrespective of the ultra-low interest rates, I still consider property prices in Rotherham at Christmas 2021 won’t be much different from today, and in fact could be slightly lower.
This is because people have been paying top dollar in the last six months to secure their dream Rotherham home, quite often spending the money they saved on Stamp Duty on the purchase price. When Stamp Duty Tax returns in April 2021 there will be less money to pay for the property … thus Rotherham property values will be, by implication, lower in a year’s time.
What about Rotherham landlords and the rents?
Nationally, rents fell just over 2.3% between 2008 and 2010, following the Credit Crunch, while national house prices fell 15.9%. I anticipate Rotherham rents will also remain comparatively robust in the coming months and years.
Rents are very much tied to the rise and fall of wage growth and I can’t see why this relationship shouldn’t continue. Rents will rise in Rotherham by between 13% and 15% in the next five years, yet if property prices do rise in 2023/24, that means future rental yields will be marginally lower in 2023/4 compared to today, especially as ultra-low interest rate expectations (according to the money markets) seem to be here to stay for a long time.
Therefore, something tells me there could be some interesting Rotherham buy-to-let investment opportunities for Rotherham investors willing to play the Rotherham buy-to-let market for the long term.
To conclude, these are just my personal opinions. If you are a Rotherham landlord looking for advice and an opinion on what to buy to maximize your returns, please don’t hesitate to contact me. If you are a Rotherham homeowner, looking to buy or sell and need any advice or opinion on where the market is and where your Rotherham home sits in the bigger Rotherham property market picture – again feel free to drop me a line.
Feb 1, 2021
Looking back at the Rotherham property market for 2020, it certainly can be seen as a frenetic game of two halves, albeit with a very long half time in the spring. Between the General Election in mid-December and Christmas, many Rotherham agents saw an unusually higher uplift in activity in the property market just as we were getting ready for Christmas 2019. Yet once the New Year festivities were out of the way, that pre-Christmas uplift in the local property market was nothing when compared to the bang on Monday 6th January 2020 with the fabled ‘Boris Bounce’ of the Rotherham property market. January, February and most of March were amazing months, with pent up demand from people wanting to move following the Brexit uncertainty of 2018/9 being released in the first few months of 2020.
The pandemic hit mid-March, and the Rotherham property market was put on ice for nearly three months (as was almost everyone else’s lives). Yet at the end of spring, the property market was one of the first sectors of the economy to be re-opened. Every economist predicted house price drops in the order of 10% in the best-case scenario and 25% in the worst, yet nothing could be further from the truth.
When the lockdown restrictions were lifted from the property market, those three months allowed Rotherham homeowners to re-evaluate their relationships with their homes. The true worth of an extra bedroom (for an office) became priceless, as people working from home were having to take calls and work from the dining room table. Rotherham properties with gardens and/or close to green spaces all of a sudden became even more desirable. More fuel was put on the fire of the Rotherham property market with the introduction of the Stamp Duty Holiday, meaning buyers could save thousands of pounds in tax if they moved before the end of March 2021. This changed the local property market and now …
Property values in Rotherham are set at 0.2% lower today compared to a year ago.
The fallout of that increased demand for a new home meant those Rotherham properties on the market coming out of lockdown in early summer with those extra rooms and gardens were snapped up in days for ‘full’ price. Rotherham buyers were having to spend their Stamp Duty savings on paying top dollar for the home of their dreams. Yet the increased number of properties coming onto the market in the late summer quenched a lot of that demand and the prices being achieved became a little more reasonable and realistic. This increased the number of properties sold (stc), so much so that nationally, almost two thirds more homes have been sold (stc) than would be expected at this time of year!
However, as we all know, just because a property is sold (stc), it doesn’t mean the property is actually sold. The number of people who have moved home in the last 12 months in Rotherham, is as you would expect, much lower. Over the last 10 years, on average 2,335 Rotherham homes have changed hands per year, compared to only 1,246 Rotherham homes in the last 12 months.
So, what is a Rotherham property worth today? Drilling down to the four types of homes locally, some interesting numbers appear. Looking at the table, you can see what the average property types are worth locally, and within each type, the average price paid in the last 12 months. (So, if the average price paid for the last 12 months is higher than the overall average, that means more higher priced property in that type has sold in the last year compared to the overall average – and vice versa)
| | Average Overall Value Today | Average Price Paid in the Last Year |
| Rotherham Detached | £264,730 | £246,210 |
| Rotherham Semi-Detached | £143,550 | £142,470 |
| Rotherham Town House / Terraced | £96,120 | £95,790 |
| Rotherham Apartments/ Flats | £119,330 | £100,150 |
Of course, these are the overall average values. To give you an idea of what Rotherham properties are selling by their square footage, these are those averages values …
| Average Value per sq. ft (internal) |
Rotherham Detached | £171.27 |
Rotherham Semi-Detached | £140.08 |
Rotherham Town House / Terraced | £107.67 |
Rotherham Apartments/ Flats | £135.85 |
So, what about 2021? Well normally when the Country’s GDP drops like a stone (as it did in the Summer of 2020), the property market follows in unison. Yet as the economy went south, the house price growth and activity in the property market went north. This would appear to be a quite remarkable outcome given that economic framework, but it is gradually becoming clear that, as far as the Rotherham property market is concerned, people’s time in lockdown has been spent reflecting on what they really wanted from their home and has meant that the normal rules of the game simply do not apply… for now.
Aug 14, 2020
There is no doubt that Coronavirus will affect the Rotherham property market, but just how?
The ensuing economic challenges are going to impact the Rotherham (and UK) property market, yet no one knows the real answer. The newspapers eulogise different opinions, but that’s all they are – opinions and everybody’s got a different opinion. The truth of the matter is we don’t know and won’t know for another few months at least, if not more?
There have been some outstanding Government supportive measures both for tenants, landlords, home buyers and sellers (including a pause on evictions for tenants, and for landlords and homeowners, mortgage payment deferments and stamp duty reductions to make buying a home cheaper), and whilst these are only temporary, they have done their job, meaning there is a good level of activity in the Rotherham property market.
A lot of that is pent-up demand from a couple of years of uncertainty because of Brexit. Also, we had the General Election in late 2019, so there have been so many reasons for people to sit on their hands. At the beginning of 2020, it was like a water hose ready to burst with the Boris Bounce in January and February. Then, just as things were beginning to get going in the Rotherham property market, we had everything freeze up for months during lockdown. So, since lockdown has been lifted…
the Rotherham property market is open once again for business and there is unquestionably some impressive activity both in the sales and rental market
So, back to the original question and where are we going? I think what we will see is a subtle change to where people want to live because of the pandemic. People working from home has shown that the need to be in the big cities has reduced and as employees have realised, they can work very efficiently from home, plus they are happier and have a better work/life balance. Their employers are also happy as they get more work out of their staff and can reduce their costly office footprint in the cities. The same goes for Rotherham tenants as they are wanting more from their rental homes. Three trends we have noticed is there is greater demand for properties with gardens, greater demand for Rotherham landlords who will accept pets (as they now can have them as they work from home) and finally, tenants willingness to pay top dollar for ‘top of the range’ properties, whilst more basic and uncared for properties without all the ‘bells and whistles’ need to go for a discount. There certainly has been a flight to quality.
Yet, what worries me is the fundamental future uncertainty in 2021 and beyond. What will things look like say in spring 2021 when the Stamp Duty reductions are phased out? Any property sold needs to have completed by the end of March 2021 to take advantage of the tax holiday, meaning you need to have sold your Rotherham property by November 2020 at the very latest to ensure your property purchase and sale deal goes through in time (as it is taking on average up to 17 weeks between sale agreed and completion). This is where the difference between a great solicitor, brilliant estate agent and awesome mortgage broker compared to average ones will show. Good ones, when all three are working together for you, can get the sale through in 6 to 8 weeks, not the national average of 17 weeks, meaning if you are cutting it fine, you might not be able to take advantage of the tax savings in the Spring. Give me a call if you want to know who the best of the best in Rotherham are to ensure you don’t lose out on those tax savings.
The value of the average Rotherham home currently stands at £141,300
So, what is going to happen to the Rotherham property market? It really depends on the economy as a whole and of course the property market is a large part of that. I know one thing that buy to let landlords and home buyers don’t like is ambiguity and the British housing market has always lived and breathed on emotion and sentiment. People will only buy and sell property (and borrow the money to make those transactions happen) when they feel good. Are all these things like Stamp Duty holidays just putting off the inevitable? Are we heading for the mother of all property crashes?
Well, let me put sentiment and opinion aside for a second and look at the simple facts.
We have an increasing population, yet we don’t build enough houses
Since 1995, we have built on average 150,200 properties per year. The Barker Report said 2004 the country needed 240,000 per year to satisfy annual demand for new homes and whilst the number of new homes built in the UK last year rose 1% to a 13-year high, only 161,000 homes were built. That means over the last 25 years, with the difference between actual homes built and the targets set out in the Barker Report, we have an inbuilt shortage of 2,245,000 fewer homes, meaning.
Since the Millennium, property values in Rotherham have increased by 169.4%
Other factors have contributed to that. The average age of a person leaving their parents’ home in the UK is 24.4 years and that has been dropping for a few years meaning more homes are required. People are also living longer (in 2000 the average person lived until 77.7 years and now it’s 81.1 years – doesn’t sound a lot until one considers for each additional year the average person lives in the UK, we need an additional 356,500 homes). Finally, we have got immigration. In the year ending March 2019, 612,000 people moved to the UK (immigration) and 385,000 people left the UK (emigration) – meaning a net increase of 227,000 people (or a requirement of c.100,000 homes to house them in one year alone). All those factors in themselves mean…
we have more demand for Rotherham property than we have supply and that’s not going to change any time soon.
Property markets are driven (like all markets) by supply and demand so I believe Rotherham property values can only rise in the long term. The question is whether Rotherham people will have the sentiment and confidence to borrow money on a mortgage and invest in Rotherham property, yet at the moment with ultra-low interest rates, borrowing money to buy a home has never been so cheap and if you are in it for the long-term (which you should be with property) then I think it’s good news.
One piece of good news is that mortgage lenders are willing to lend up to 90 per cent loan to value mortgages for first time buyers (and in some rare cases 95 per cent), albeit with a lot of strings attached … yet this is a good sign as the banks and building societies wouldn’t be lending at these levels if they were too scared.
Investing in property, be it for yourself to live in or buy to let is a long-term game. We might see an uplift in prices in the short term because of the demand mentioned above, then again, we might see a dip in 2021 … yet again for the reasons mentioned above – until we start to build new homes to the scale of 300,000+ a year (something that has never been achieved since 1969), the long-term picture appears to be good. Be you a Rotherham landlord, Rotherham house seller or Rotherham buyer, you have to be a lot more strategic and thoughtful about what you are going to do. If you would like to pick my brains, drop me a message on social media or pick up the phone.
So those are my thoughts, tell me your thoughts for the future of the Rotherham property market?
Aug 10, 2020
The British are infatuated with owning their own property and politicians know that. Margaret Thatcher used it as a vote winner in 1979 when she allowed council house tenants to buy their own home. Coming to the present day, Boris Johnson’s Conservative government have anxieties that the Brits have not been buying nearly enough homes lately and, as with all countries in the world, the British property market was put ‘on ice’ for several months to help contain the Coronavirus, exacerbating the problem.
The Chancellor, Rishi Sunak, announced on Wednesday plans to boost the property market by momentarily scrapping Stamp Duty Tax (a tax paid by homebuyers) when they buy a property that costs less than £500,000.
Interestingly, Stamp Duty was originally introduced in 1694 as a way to raise funds for The Nine Years’ War (1688–1697) against Louis XIV of France and applied to property and some legal documents.
Why is this important? Well the Government recognise that when the property market is working well, the economy also tends to work well, yet one of the barriers to people moving home is Stamp Duty. Even before Coronavirus, Brits were moving 40.21% less than they were at the start of the millennium, and now with this dreadful situation, the natural reaction is for people to stay put in their own homes, meaning another potential nail in the coffin for the economy.
Stamp Duty has raised not an insignificant £166.53bn since 1998, impressive when you consider the NHS costs £129bn per annum. Looking at more recent figures, the Government currently raise £1.045bn per month from Stamp Duty Tax and this statement will remove a good chunk of that from the Chancellors coffers each month, yet the Government knows a healthy property market will help the wider economy.
As Stamp Duty is a transaction tax, it restricts labour market mobility, making people who are thinking of switching jobs think twice before moving. Stamp Duty also holds back elderly homeowners from downsizing to smaller homes, which is an issue for the UK, as we don’t have enough homes to meet supply and also curtails first time buyers as it forces them to use some of the savings on the tax, as opposed to using for a deposit.
Before the changes, the Stamp Duty thresholds were as follows:
- Zero percent up to £125,000
- Two percent of the next £125,000 (the portion from £125,001 to £250,000)
- Five percent of the next £675,000 (the portion from £250,001 to £925,000)
- Ten percent of the next £575,000 (the portion from £925,001 to £1.5 million)
- 12% of the remaining amount (the portion above £1.5 million)
and between the 8th July 2020 and 31st March 2021
- Zero percent up to £500,000
- Five percent of the next £425,000 (the portion from £500,001 to £925,000)
- Ten percent of the next £575,000 (the portion from £925,001 to £1.5 million)
- 12% of the remaining amount (the portion above £1.5 million)
Landlords and Buy to Let Landlords will also benefit from these reduced rates, yet will still have to pay their additional premium for second homes (as they have since April 2016).
To give you an idea how significant this is, if these rules had been in place exactly a year ago for Rotherham properties purchased under £500,000 (i.e. between 8th July 2019 and 31st March 2020).
Stamp Duty would not have been paid on 949
Rotherham properties, worth in total £194,512,700
Anyone buying any home in Rotherham over £500,000 are also winners in this, as they will save having to pay the first £15,000 in stamp duty (under the old scheme). This is because during these 9 months, stamp duty is only paid on the difference over £500,000 (so if you buy a property for say £620,000 – one only pays the stamp duty on the difference between £620,000 and £500,000 i.e. £120,000).
I’m all for reducing Stamp Duty, which is imposed progressively at higher rates the higher a property costs (as you can see from the tables above). Yet, short-lived changes to property taxation risk warping the property market and generating a ‘property market hangover’ in Spring 2021. I am part of a group of 2,500 estate and letting agents from the UK, and most of us were running at 150% speed before this announcement, coping with the post Coronavirus explosion in demand.
Now it seems that the ‘feast’ will continue until the end of March 2021 as many more people will move to take advantage of the cut in tax. However, some are suggesting this could lead to ‘famine’ down the line as it will stop people moving into the late spring and summer of 2021.
History tells us different stories on the influence on transaction volumes from changing Stamp Duty rates. In 1991 the Tory’s raised the Stamp Duty threshold at which house buyers started paying and Gordon Brown did so in 2008 when we went into the Credit Crunch. More recently, both George Osborne and Philip Hammond fine-tuned Stamp Duty so that landlords had to pay an additional Stamp Duty Premium after March 2016 whilst first-time buyers pay less Stamp Duty and the purchasers of more expensive homes (over £1.5m) pay more.
The Stamp Duty changes for landlords in 2016 affected the property market only for a short while and by the autumn, transactions levels had returned to normal. However, in 1991, John Major’s Stamp Duty change encouraged home buyers to bring forward home purchases but nevertheless the property market ground to a standstill again once the benefit ended (although the steps up the 1990’s Stamp Duty levels were much harsher as the tax applied to the whole purchase price, not the margin steps as it had in the 1990’s).
So how much money will Rotherham people save when buying a home under £500k?
The average Stamp Duty paid by those Rotherham homebuyers in the 9 months between 8th July 2019 and 31st March 2020 was £1,599
Being objective, I can see why the Chancellor could see this as a suitable way to motivate spending because when people move home, they are more inclined to spend comprehensively on property renovations and the services of solicitors, home removal people, tradesmen and estate agents. So, drastically reducing Stamp Duty will undoubtedly help the UK economy, or at least contain some of the damage from the Coronavirus.
Also, the experience of being in lockdown will have confirmed to many Rotherham people that they need a bigger home or one with a bigger garden. I also suspect other people may be able to work from home on a more long-lasting basis, meaning there could be a shift from the larger cities to outlying towns and even a move to the countryside.
So, these are my thoughts, what are yours?
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