Jan 27, 2016
One of my landlords rang me last week from Hallam Road, after he had spoken to a friend of his. Over Christmas, they were discussing the Rotherham property market and neither of them could make their mind up if it was time to either sell or buy property.
If you read the newspapers and the landlord forums on the internet, there is a good slice of doom and gloom, especially with changes in the taxation towards landlords, new legislation on checking tenants and the general uncertainty in the world economic situation.
I would admit, there are certain landlords in Rotherham who have over exposed themselves in the last few years with high percentage loan to value mortgages. Those mortgages, with their current (yet artificially low) interest rates, will start to suffer, as their modest monthly positive cash flow/profit, i.e. income (rent) less costs (mortgage, fees, tax), will become negative when the tax and mortgage rates rise throughout 2017 and beyond.
It appears to me these landlords seem to have treated the Rotherham Buy to Let market as a sure bet and have not approached this as a business and, as a result, they will suffer as they thought “Buy a house – rent it out so it covers the mortgage and make a few quid on top”. These are the people who will be thinking twice. I see opportunity everywhere and won’t be stopping, I’m here to stay. It’s going to be an exciting new year.
Gone are the days when you could buy any old house in Rotherham and it would make money. Yes, in the past, anything in Rotherham that had four walls and a roof would make you money because since WW2, property prices doubled every seven years … it was like printing money – but not anymore.
True, since January 1997, the average price paid for a Rotherham flat/apartment has risen from £25,000 to today’s current average of £113,500 in the town, an impressive rise of 354% and terraced/town house have risen in the same time frame, from £27,188 to £68,140, a rise of 151%. However, look back to 2005, and in that year, the average flat was selling for £91,500, meaning our Rotherham landlord would have seen a modest rise of 24% and the terraced owner would have seen an increase of only 1%, as they were selling for on average £67,588 … which isn’t good for people who bought in 2005, but it gets worse when you take into account inflation.
Since 2005, then inflation, i.e. the cost of living, has increased by 33.4%. That means to retain its value, Rotherham terraced property bought for £67,588 in 2005 needs to be worth £90,141 today. Therefore, our landlord has seen the ‘real’ value of his property decrease by 32.4% (i.e. 1% less 33.4% inflation).
The reality is, since around the early 2000’s we haven’t seen anything like the capital growth in property we have seen in the past and it’s not predicted to grow at the rates it has previously done either. So it is high time anyone considering investing in property stopped believing the hype and did some serious research using independent investment expertise. You can still make money by buying the right Rotherham property at the right price and finding the right tenant. Think about it, properties in real terms are 32.4% lower than ten years ago, so investing in Rotherham property is not only about capital growth, but also about the yield (the return from the rent). It’s also about having a balanced property portfolio that will match what you want from your investment – and what is a ‘balanced property portfolio’? Well we discuss such matters on the Rotherham Property Blog
Jan 27, 2016
“What does the ideal Rotherham tenant look like?”
This was asked by one of my landlords from Moorgate the other day, to which he carried on before I could reply, “Let me guess, a professional couple, both in their 30’s, flawlessly tidy, pays their rent early, doesn’t complain or fuss, who has no plans to move and cheerfully accepts annual rent rises”.
Before I can answer that question properly, I have always believed all a landlord wants (and expects) of their tenants is to pay their rent on time and look after the property as if it were their own. In return, the landlord should provide a property that is warm, clean, modern and damp free and sort any issues (such as repairs) quickly and without fuss.
Back to the tenants – tenants tend to fall into several groups … 20 something professionals; young and middle aged families; corporate tenants (ie their employer finds their employee a house to live in); students; older singles/couples and housing benefit claimants – and they come with different needs and wants. So choosing who best suits your Rotherham property – and steering clear of bad tenants – is a big factor in making property investment a success.
One topic that I am often asked is should they, as a landlord, accept tenants on housing benefit?
It might interest the landlords of Rotherham that of the 11,153 private rented properties in the local council area, 54.7% of the tenants of those properties are on some form of housing benefit.
(6,109 properties to be exact). I know many landlords have suffered late rent payments with tenants on benefit, especially since 2008, when local authorities started paying housing benefit to tenants rather than directly to the landlords, but you can’t ignore the fact that housing benefit tenants make up a significant proportion of the Rotherham rental population. My opinion is that the final choice of accepting such tenants has to be the landlords but you can’t tar every tenant with the same brush (I will always give you a balanced opinion if ever asked).
Interestingly, it might surprise some readers of the Rotherham Property Blog, when we compare Rotherham to the national picture, Rotherham’s Housing benefit claimants are higher, as nationally a lower proportion of private tenants claim the benefit. Nationally, 39.2% of the tenants of the 3,891,467 rental properties in Great Britain claim some form of housing benefit (ie 1,526,915 properties).
Now, let us look at the occupations of Rotherham tenants, which makes even more fascinating reading. Of the 11,153 privately rented properties in the Rotherham area, 7,279 head tenants (the head tenant being classified as the head of the household) are in employment (the other 3,874 rental property head tenants either being retired, long term sick, students or job seekers).
Splitting those 7,279 head tenants down into their relevant professions, 1,930 of them are Managers, Directors, Senior Officials, Professional or Technical Professions, 584 in Administrative and secretarial occupations, 971 in Skilled Trades, 788 in the Caring, Leisure and other service occupations, 830 Sales and Customer Service Occupations, 1,010 Process, Plant and Machine Operatives and finally, 1,166 in Elementary Occupations.
The one thing I have always known anecdotally, but until I did my research, never had anything to back it up with, was the high proportion of professionals and skilled trades renting property in Rotherham – intriguing! Maybe in future articles, I will look deeper into the corporate tenant market, young and middle aged families, students and older persons rental markets…. but in the meantime, if you want more news, views and commentary about the Rotherham property market, there are many similar articles like this on the Rotherham Property Blog .
Jan 9, 2016
You find me in a reflective mood today as I want to talk about the future of investing in property in Rotherham.
The truth is that we have got fat and lethargic, with many people having mistaken the ever rising Rotherham (and in fact the whole of the UK) property market since the 1960’s as the eternal gift that kept giving as property prices constantly rose and doubled every five to seven years.
The days of making money from property as easy as falling off a log, like taking candy from a baby are sadly over my Rotherham Property Blog reading friends
Whilst George Osborne has decided now is the time to milk the ‘Golden Cow’ of UK’s private landlords, with changes in taxation for buy to let property, many pundits are predicting the end of buy to let as we know it. However, it is still possible to make a reasonable, profitable and safe return on property with these changes. You see, I have always seen investing in the Rotherham buy to let market (as I would anywhere in the UK), as I might see mother nature, creating some truly wonderful stunning warm weather but at the same time, she will bite, creating catastrophic situations such as snowstorms and hurricanes. You need to study the market, take advice and opinions from many people and then decide what the proverbial property weather will be … remember, tenants will always want a roof over their head and I don’t see the HM Government building the millions of houses required to house them?
Nobody knows the future, and yes people can predict but I wouldn’t be afraid of this change .. because as a famous French proverb says, (I told you I was a reflective mood today), ‘the more things change, the more they stay the same’. I mean, no one could have predicted how the property market has changed in Rotherham over the last couple of decades? Looking specifically at the Rotherham Parliamentary Constituency, twenty years ago, 17,242 households (meaning 53.01% of property) was owned and only 2,011 households were privately rented (meaning 6.18% of property was rented out by private landlords). Roll the clocks on twenty years and the change shows that 20,928 of properties in the Constituency are home-owners (a slight increase to 56.02% being owner occupied) and the jump in private renting has doubled, as 4,561 properties are now privately rented proportionally 12.21%). (NB Neighbouring Constituencies show similar changes as well).
Who would have predicted in 1995 the private rental sector in Rotherham would have grown by 97.57% in the proceeding 20 years?
Also, if you had asked someone in 1995 to predict what would happen to property values over the proceeding 20 years (ie between 1995 and 2015), they might have predicted similar growth to the growth experienced over the previous 20 years (ie between 1975 and 1995), which was a very impressive 351.55%. Yes, property values in Rotherham have increased over the last 20 years (between 1995 and 2015), but by a very modest 81.82% (and most of that can be attributed to house price growth between 2000 and 2006.)
The property market is constantly changing and buy to let for too long has been heavily dependent solely on house price growth, where yield has been almost forgotten. I see the changes in tax and landlord and tenant law in a different perspective to the doom-mongers and see it as bringing many opportunities. You might need to change your buy to let benchmarks, your approach to financing or even consider places other than Rotherham in which to invest your money, but this will shine a light on investing in properties with healthier yields and create more realistic long term buy to let opportunities, instead of short term growth bets and wagers.
The advice I give to my landlords, and you my blog reading friends is this; these changes will make some landlords panic, meaning competition for decent Rotherham buy to let bargains will reduce as fear of change kicks in and amateur investors flee the market. These opportunities will provide a more stable platform for knowledgeable and wise Rotherham buy to let landlords to thrive in. If you want to learn more about the Rotherham Property Market, feel free to pop in for a coffee at our office for a chat with me, or failing that, visit the Rotherham Property Blog, where you will find many more articles like this ..solely on the one topic of the Property Market in Rotherham
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
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