Monday, 28 December 2015
You get 2 for 1 with this great terraced property on Woodside Place in Burley. You get a fantastic 2 bed house which has been done out beautifully and below that you get a 1 bed flat that's been finished to just the same high standard.
Both 1 & 2 bed properties are of high demand in this area to professional renters and I would foresee no difficulty at all in both of these properties being rented out. Not only is it done out so well (so no need to have to spend any money on it to get it rented out!), it's located in between Burley Road and Kirkstall Road so it's close to main transport links with buses every few minutes and close to Burley Park train station. It takes less than 10 minutes to get in to Leeds City Centre and is only a walk away from Cardigan Fields which houses a cinema complex, gym, shops, restaurants and bars.
As the add says, you'd more than likely achieve £750pcm for the 2 bed and £450pcm for the 1 bed. You're very unlikely to have any void periods with such high standard properties so you'd be looking at a very solid investment and if you managed to get them for around £160k you'd be looking at a return of 9%.
Friday, 11 December 2015
The Brits can’t stop talking about property. The hot topic of discussion at the posh dinner parties of Bramhope, Roundhay and Alwoodley’s movers and shakers is the subject of the Burley Property market, but in particular, buy to let. These people are buying up buy to let properties quicker than an ace Monopoly player ... or so it would seem if you read the Sunday papers. So is the buy to let market a sure fire way to make money? Is it something everyone should be jumping into? Is it a sure fire way to make money? The answer is Yes and No to all those questions!
Firstly, the government gives tax breaks to landlords, as it allows the mortgage interest payments on a buy to let property to be tax deductible. Also, a landlord only has to flick through Rightmove or Zoopla, pick any property at random and agree a price. Then, find a modest deposit of 25% (often by remortgaging their own home) which for an average Burley terraced house, would mean finding £31,083 for the deposit (as the average Burley terraced house is currently worth £124,332) and borrow the rest with a low interest rate buy to let mortgage. Finally, the landlord would rent out the property in a matter of hours for top dollar and live happily ever after, with the rent then covering the mortgage payments, with loads of money to spare and come retirement have a portfolio of property that would have quadrupled in value in fifteen years. Sounds wonderful – doesn’t it? Or does it???
Let us not forgot that the half of one per cent Bank of England base rate is artificially low. The international money markets can be fickle and if interest rates do rise quicker and higher than expected because of some unforeseen global economic situation, that monthly profit will soon turn into a loss as the mortgage will be more than the rent. Even though tenants are staying longer in their rental property, tenants still come and go and my guidance to landlords is they should allow for void periods, plus the maintenance costs of a rental property and of course, agents fees. .. all things that eat into that profit.
Interestingly, by my calculations, there are approximately 19 Burley landlords owing in excess of £3 million in mortgages on those Burley buy to let properties. An impressive amount when you consider Burley only has 0.002% of all the rental properties in the Country. It really does come down to a number of important factors going forward to ensure you are water tight for the future. A lot of my existing landlords are fixing their mortgage rates. One told me that the Metro Bank are currently offering a 5 year fixed BTL remortgage rate at 3.79% for 5 years (based on a 75% loan). I don’t give financial advice, so you must speak with a qualified mortgage advisor... but that sounds very fair!
However, one thing I do know is that buy to let is a long term investment, it’s a ten, fifteen, twenty year plan and property prices will go down as well as up. You wouldn’t dream of investing in the stock market without advice, so why invest in the Burley Property Market without advice? We give bespoke detailed advice to our landlords to enable them to spot trends in the Burley Property Market before others, enabling them to buy better properties at better prices. For example, did you know that flats are selling for around 2% lower than 12 months ago in Burley yet semis are selling for 7% more (with every other type in between). This means we can advise on which properties will go up in value better (or lose less if property prices drop), we can also advise which have lower voids and which properties have higher maintenance issues.
Information on the local property market and ability to process it is the strongest asset we can give you. As Lois Horowitz, the famous author says, ”Not having the information you need when you need it leaves you wanting. Not knowing where to look for that information leaves you powerless. In a society where information is king, none of us can afford that”.
Friday, 4 December 2015
The Land Registry have recently released their latest set of figures for the NW Leeds Property market. It makes for an interesting read, as average property values in Burley rose by 0.1% last month. This leaves average property values 3.5% higher than 12 months ago, meaning the annual rate of growth in the area fell to its lowest level since May 2014. When we compare Burley against the regional picture, Yorkshire property values fell by 0.6%, leaving them 1.1% higher than a year ago.
Obviously this is a far cry from the price rises we were experiencing in Burley throughout 2014. At one point (October 2014 to be exact) property values were rising by 7.6% a year. All the same, even with the tempering of the Burley property values in 2015, property values are still higher. This is good news for local homeowners who had been affected by the downturn after 2007 and still find themselves in negative equity.
However, the thing that concerns me is that the average number of properties changing hands (i.e. selling) has dropped substantially over the last 12 months in the area. In September 2014, 45 properties sold in Burley but in September 2015, that figure dropped to 31. I have been in the Burley property market for quite a while now and the one thing I have noticed over the last few years has been the subtle change in the traditional seasonality of the Burley property market. It has been particularly noticeable this year in that the normal post Easter flood of properties coming onto the market was not seen. This has made an imbalance between supply and demand, with less houses coming onto the market there is simply not as much choice of properties to buy in Burley and with the population of Burley ever increasing; this will generally strengthen house price growth for the foreseeable future.
So what does all this mean for Burley landlords or those considering dipping their toe into the buy to let market for the first time? For many people, buy to let looks a good investment, providing landlords with a decent income at a time of low interest rates and stock market unpredictability.
However, if you are thinking of investing in bricks and mortar in Burley, it is important to do things correctly. As an investment to provide you with income, for those with enough savings to raise a big deposit, buy to let looks particularly good, especially compared to low savings rates and stock market yo-yo’s. I must also remind readers, landlords have two opportunities to make money from property, not only is there the rent (income), but with the property market bouncing back over the last few years, property value increases has spurred on more investors to buy property in the hope of its value continuing to rise.
Savvy landlords with decent deposits can fix their mortgages at just over 3% for five years, making many deals stack up. Nevertheless, low rates cannot stay low forever, because one day they must rise and you need to know your property can stand that test. I saw some Burley landlords struggling in the mid noughties, when interest rates rose from 3.5% in July 2003 to 5.75% in July 2007. That might not sound a lot, but that was the difference of making a £100 a month profit in 2003 to having to make up a shortfall in the mortgage payments of £100 per month in 2007.
Its true many landlords were thrown a life raft when the base rate dropped to 0.5% in March 2009. Whilst interest rates have remained there since, mark my words, they will rise again in the future.
However, even with the potential for costs to rise, demand for decent rental properties remains high as there are ever more tenants in the market, driving up demand and thus rents. The British love of bricks and mortar plus improving mortgage deals also add up to fuel the buoyant Burley property market.
If you are planning on investing in the Burley property market, or just want to know more, things to consider for a successful buy to let investment, one source of information is the Burley Property Blog http://headingleyburleyproperty.blogspot.co.uk/
Friday, 27 November 2015
Despite the UK economy heading in the right direction with record low mortgage rates and unemployment figures dropping, the rate of property prices rising in Headingley have tempered since the start of the year. This slow but sure downward trend in the rate of growth has been in evidence since mid-2014. Property value increases continue to outpace the growth in salaries; however the gap is closing, helped by a lift in salaries over the last 6 months. Property values in the
as a whole are 1.1% higher than a year ago.
Compare this to the neighbouring regions of the North East at 1.0%
higher and North West at 3.4%, the
majority of the country continue to see annual house price gains - the
exception being Wales which recorded a slight
decline of -0.6%.
Even with the tempering in house price inflation, it does not necessarily change my outlook that property prices are likely to be firmer over 2016 amid heightening activity in the Headingley property market. As stated in a previous article, there is a current shortage of properties on the market, restricting supply, which in turn will provide stability and support to Burley and Headingley property prices. Therefore, my overall opinion is that Burley and Headingley property prices will rise by 3% to 4% over 2016.
Property investment is a long term business. Buying the right sort of property is vital. I have recently been speaking with a number of Headingley landlords about the importance of a balanced portfolio, when buying and renting out property. The balance between buying properties that offer good monthly returns (high yields) but quite often offer poor capital growth (i.e. they don't increase in value that much over the years compared with the average) verses properties that do go up in value quicker but often offer a lower yield. So, what type of properties have performed best over the last few years in Headingley, especially in terms of their capital growth?
When comparing what the average price of detached, semi detached, terraced and flats were selling for back at the start of the Millennium to the present. The results are quite remarkably different, almost like a bag of Liquorice Allsorts, as the different types of property have performed poles apart over the last 15 years:
· Detached Houses in 2000 were selling on average for £114,916 and so far in 2015, they have been selling on average in Headingley for £320,000, a rise of 178%
· Semi -Detached Houses in 2000 were selling on average for £53,264 and so far in 2015, they have been selling on average in Headingley for £151,812, a rise of 185%
· Terraced Houses in 2000 were selling on average for £48,390 and so far in 2015, they have been selling on average in Headingley for £144,997, a rise of 200%
· Flats and Apartments in 2000 were selling on average for £91,475 and so far in 2015, they have been selling on average in Headingley for £112,125 a rise of 23%
Moving forward, what should new and existing buy to let landlords do with this information? Well, the questions I seem to be asked on an almost daily basis by landlords are:
· “Should I sell my property in Burley or Headingley?”
· “Is the time right to buy another buy to let property in Burley or Headingley and if not Headingley/Burley, where?”
· “Are there any property bargains out there in NW Leeds to be had?”
Many other Burley and Headingley landlords, who are with both us and other Headingley letting agents, like to discuss the Burley and Headingley property market and how Headingley or Burley compares with its closest rivals, and hopefully answer the three questions above. If you’d like to chat about this then either give me a call or call in to my Burley office, I don’t bite, I don’t do hard sell, I will just give you my honest and straight talking opinion and I look forward to hearing from you.
Friday, 20 November 2015
I had the most interesting chat with a local Headingley landlord the other day about my thoughts on the Headingley property market. The subject of the affordability of renting in Headingley came up in conversation and how that would affect tenant demand. Everyone wants a roof over their head, and since the Second World War, owning your own home has been an aspiration of many Brits. However, with rents at record highs, many are struggling to save enough for a house deposit.
Let’s be honest, it’s easy to get stuck in a cycle of paying the rent and bills and not saving, but even saving just a small amount each month will sooner or later add up. George Osborne announced such schemes as the upcoming Help to Buy
where the Government will top up a first time buyers deposit.
Therefore, I thought I would do some research into the Headingley property market and share with you my findings. Headingley tenants spend on average just over a third of their salary to have a roof over their head. According to my latest monthly research, the average cost of renting a home in Headingley is £1,030 per month. When the average annual salary of a Headingley worker stands at £35,146 per year, that means the average Headingley tenant is paying 35.1% of their salary in rent. I doubt there is much left to save for a deposit towards a house after that, and that my Headingley and Burley Property Blog reading friends is such a shame for the youngsters of Headingley and Burley.
You see one the reasons for rents being so high is property prices being high. As I have mentioned before, there is a severe lack of new properties being built in Burley and Headingley. It’s the classic demand vs supply scenario, where demand has increased, but the number of houses being built hasn’t increased at the same level. Also, Burley and Headingley people aren’t moving home as often as they did in the 80’s and 90’s, meaning there are fewer properties on the market to buy. If you recall, a few weeks ago I said back in Spring 2008, there were over 9,100 properties for sale in Headingley and since then this has steadily declined year on year, so now there are only 3,275 for sale in the suburb.
So, the planners in NW Leeds haven’t allowed enough properties to be built in the suburb and existing homeowners are not moving home as much as they used to, thus creating a double hit on the number of properties to buy. This is a long term thing and the continuing diminishing supply of housing has been happening for a number of decades and there simply aren’t enough properties in Headingley to match demand. These are the reasons house prices in Headingley have remained quite buoyant, even though economically, over the last 5 years, it was one of the worst on record for the country and the Yorkshire region as a whole.
However, things might not be all doom and gloom as originally thought, as a recent Halifax Survey (their Generation Rent 2015 Survey) suggested more and more people may be long term, if not lifelong tenants. In fact there is evidence in the report to suggest that the perception of how difficult it is to get on the housing ladder is vastly different between parents and people aged 20 to 45. It seems from this survey that the state of the UK economy has shifted priorities quite significantly in quite a short space of time. With fewer people able to save up the deposit required by mortgage lenders, more and more people are continuing to rent. This delay in moving up the property ladder has driven rents across the UK up as more people were seeking rental properties.
It is often said that more people in central Europe rent for longer or never own their own property. The last two census in 2001 and 2011 show that proportionally the percentage of people who own their own home in Britain is slowly reducing and, as a country, we are becoming more and more like Germany. That isn’t a bad thing as Germany is considered to have a more successful economy, one of the main stays, often quoted, is because they have a much more flexible and mobile workforce, (which renting certainly gives) and from that, they have a higher personal income than in the UK.
Therefore, if we are turning into a more European model and the young people of Headingley and the Country have changed their attitudes, demand for rental properties will only and can only go from strength to strength, good news for Headingley tenants as wages will start to rise and good news for NW Leeds landlords, especially as property values in Burley and Headingley are now 4.3% higher than a year ago!
Friday, 13 November 2015
Well the last few weeks have been rather hectic as Headingley landlords, some who use us to manage their properties and other landlords who just read the Headingley and Burley Property Blog, have been sending me emails or picking the phone up to me about the new rules on buy to let taxation announced in the recent budget.
George Osborne confirmed in the recent summer budget that the tax relief given to landlords on mortgage interest payments, on their buy to let (BTL) properties, would be reduced over the coming years for higher rate income tax payers. The Chancellor said the tax relief that private buy to let landlords (who pay the higher rate of income tax) would change in 2017 from the current 45%/40% and would steadily reduce over the following four years to the existing 20% by 2020.
With 67.2% of residential property in the Council Ward of Headingley being privately rented (as there are 4195 privately rented properties in the area), these changes are potentially something that will not only affect most Headingley landlords, but also the tenants and the wider property market as a whole. The choice of rental properties could drop, especially at the top end of the market which could push up rents.
However, Headingley landlords could protect themselves by reassigning one or more rental properties into a company structure (e.g., a Limited Company, Partnership or Sole Trader) and by doing so, the total tax paid is greatly reduced, because a company only pays tax on the profit.
Nonetheless, before everyone goes off setting up companies for their BTL portfolios, it must also be noted, if a sole trader firm is started, stamp duty needs to be paid, yet if the owner is in business with a partner, they could enjoy some stamp duty relief. The biggest tax variation is Capital Gains Tax (CGT) where the tax bill will be much higher when you come to sell your portfolio. In essence, by going into business with your BTL properties, you will potentially have a modest stamp duty to pay when you start, but you will have a lot less monthly tax to pay, irrespective of the interest rate, but the CGT bill will be much higher when you come to sell ... as you can see, it is not a ‘get out of jail card’. Now it must be remembered, I am not a tax advisor, so you must take advice from a qualified person.
Those planning to purchase a BTL property will have to factor these new rules into their calculations, and this could affect the offers they are willing to make. However, I am not that concerned, as the scaremonger reports fail to see the fact that two out of three BTL properties that have been bought since 2007 have been purchased without the support of BTL mortgage. With those two thirds of landlords paying cash for the purchase of their rental properties, that means two thirds of landlords will be totally unaffected by the changes.
So what of the future? The British love their Bricks and Mortar, it’s an asset that they can touch and feel and has a 70 year track record of capital growth that has out stripped inflation. Buy to let will still be attractive to Headingley investors and let me explain why. If you invested £30,000 in Headingley property in September 1987, today it would be worth £111,533. If you had invested the same £30,000 in to the London Stock Market (the FTSE 100 to be exact), it would be only be worth £85,879 today, whilst Inflation would have taken the original £30,000 and pushed it up to £62,345.
It’s true some central London landlords relying solely on the tax breaks rather than high yields may be forced out of the market, but even those landlords could seek to recoup any losses by increasing rents. However, those landlords may leave the market and this could constrict the availability of rented houses even more than it is already, increasing rents and thus pushing yields even higher for landlords and BTL investors still in the market... thus attracting new landlords into the market because of those higher yields.
Friday, 23 October 2015
Well George Osborne, in his Autumn statement, caused Leeds landlords to ask whether buy to let is a viable investment option, when he announced that landlords, when buying another buy to let property from April 2016 will have to pay an additional 3% stamp duty on top of the standard rate. So for example, it means that the stamp duty bill for a £285,000 buy to let home will rise from the current £4,250 to £12,800 from April next year.
Some say property in Leeds will be worth less because potential landlords will not be willing to pay as much for them, and if house builders or existing homeowners don't feel they are going to get as much for them , then there is less motivation to build / sell them?... and the person we can blame for this is George himself. Back in 2012, he choose to utilise the British housing market to kick start the UK economy, with subsidies, Funding for Lending and Help to Buy. However, whilst that helped the Tory’s get back into power in 2015, some say this impressive growth in the UK property market has been at the expense of pricing out young people wanting to buy their first home.
Others say this is the straw that breaks the camels back as over the next four years Landlords will slowly lose the ability to offset all their mortgage interest against tax on rental income, after changes announced in the Summer Budget. At the moment, landlords can claim tax relief on buy to let mortgage monthly interest repayments at the top level of tax they pay (i.e. 40% or 45%). However, over the next four years this will reduced slowly to the basic rate of tax – currently 20%.
But before we all run to the hills panicking .... let me give you another thought.
Stamp Duty rules were changed in December 2014. Before then, landlords were eagerly buying up properties under the ‘old slab style Stamp Duty’ system. For example, the stamp duty bill on that £285,000 property was lower on the old slab style duty (pre Dec 2014), at £8,550, yet it isn't a million miles away from new £12,800 stamp duty bill. Interestingly though, George has left a legal loophole in the new rules, because when it comes to selling up, they can offset purchase costs against any eventual capital gains tax, including stamp duty.
I believe that total returns from buy to let will continue to outpace other investments, such as the stock market, gilts, bonds and even pensions. Also, the best part about investing in property is that it is bricks and mortar. You can touch it, you can feel it, and it isn't controlled by some City whiz kid in Canary Wharf ... the British understand property and that goes a long way!
Buy to let has enough impetus behind it that prospective landlords will continue to buy even with a larger stamp duty bill. Leeds landlords will need to be savvy with what property they buy to ensure the extra stamp duty costs are mitigated. Buying buy to let property is a long term venture. In the past, it didn't matter what property you bought in Leeds or at what price – you would always make money. Now with these extra taxes, the adage of ‘any old Leeds house will make money’ has gone out the window. You wouldn't dream of investing in the stock market without at least looking in the newspapers or taking advice and opinion from others, so why would you take the same advice and opinion about buying a buy to let property in Leeds?
With the right advice and making the right decisions, buy to lets are still a very wise choice.
If you're interested in getting any advice on what what might be a good investment in the Headingley and Burley are then I'm happy to help; just contact me at our Burley office.
This four bed terraced house on Beechwood Mount in Burley is in an ideal location as it will appeal both to professional renters and students so as an investment it offers the chance to broaden your potential market. It's situated just next to Headingley so it's close to all the shops, bars and all things good about Headingley but is just out the way of the 'student noise' that you can come across in the centre of Headingley which often final year students and professionals tend to prefer. It's also situated a stones throw away from Burley Park train station.
From the looks of things it looks to have had a recent refurb and looks ready to rent so there would be no need to spend time and money on it to get it rented out. All the rooms look to be decent sizes and it boasts two bathrooms which for a 4 bed is a often a rarity so that will help it stand out to potential renters.
A house of this standard in this area is likely to achieve around £13,936 so if you managed to get it for around £140,000 you'd then be looking at healthy 9.7% return.
Monday, 12 October 2015
I was reading a report the other day produced by the Halifax, about the UK property market and why more and more of the younger generation seem to be renting rather than buying. I find it fascinating that over the last ten years, the British obsession of buying a house almost as soon as you left school, and the fact that if you rented you were seen as a second class citizen, has turned on its head to a point where the hopes and dreams to own a nice home will be replaced by the ambition simply to live in one.
In the latter half of the 20th Century, you left school, got a job, bought a small house and kept buying and selling property, constantly upgrading until eventually they carried you out in a box. However, the perceived shame and stigma of renting is no longer the case, as it seems that the British are now beginning to accept a lifetime of renting. This is a very important consideration for both Headingley homeowners and Headingley landlords as it will transform the way the Headingley property ladder looks in the future and I might ask whether or not it will exist at all for some people? The make up of households is one important factor, especially in the Headingley property market. The normal stereotypical married couple, two kids and dog of the 1970’s and 80’s has changed. At one end of the spectrum there is a need for larger houses where two families come together after divorces (+ kids) and need a property to house everyone. At the other end there is an increase in the number of one person households.
Looking at the data for Headingley, of the 4,142 private rental properties in the Headingley area, 23.53% of those rented properties are one person households (975 properties). However, when we compare the number of one person Headingley households who have bought their own property with a mortgage (ie therefore they are still in work), of the 1,267 owner occupied households in the area, 180 of those properties are a one person household (ie 14.2%).
Compared to a decade ago, this explosion in demand for decent high quality rental properties that one person households require has not been met with an increase in supply of such properties. More and more I believe Headingley landlords need to consider this change in the make up of Headingley households, as I believe this could be an opportunity. As an aside, another interesting stat that raised an eyebrow was that 1% of those 4,142 rental properties (41 properties) are lone parents households as well. Again, another possible opportunity that Headingley landlords might want to consider in their future investment plans.
It is true that the Governments introduction in 2013 of the Help to Buy scheme, where first time buyers only needed a 5% deposit, changed the perception of peoples’ ability to buy without having to save ten’s of thousands of pounds for a deposit. However, it might surprise you, 95% mortgages were re-introduced within six months of the Credit Crunch in late 2009, so again it comes down to people’s own perception. Many youngsters think they won’t get a mortgage, so don’t even bother trying.
Coming back to the deposit, it’s still a fact that once you start renting it becomes that much harder to save for a deposit, regardless of the size. Interestingly, 7 out of 8 renters polled by the Halifax (86% to be exact) refuse to sacrifice the quality of accommodation they currently live in to reduce the amount of rent they pay in order to save for a deposit. This is the crux and the real reason why people aren’t buying but renting... and why demand for renting will continue to grow in the future (ie good news for landlords). Headingley tenants can upgrade the quality and size of the property they live in for a minimal rent increase. The average rent of a two bed property in Headingley is £629pm, a three bed is £217pm more at £846pm, whilst the average four bed rent is £1,114pm. If you had to make that jump when buying, the monthly mortgage payments would be stratospherically more than that!
Without any social pressure and better quality rental properties compared to a decade ago, we will become a nation of renters within the next generation, as the UK is becoming more like Europe, where renting is ‘the norm’.
And who is going to supply all these properties to rent? Landlords of course!
Whether you are an existing landlord looking to grow your portfolio or looking to become a ‘first time landlord’, my thoughts are take advice from as many people as possible. However, as the majority of landlords buy their buy to let properties in the same town they live, you will need specific advice about Headingley itself. If you fancy a chat, then please either give me a call or pop into our office on Burley Road.
Monday, 28 September 2015
This 5 bed house on Village Street in Burley is in a great spot, especially for professional renters. It’s not far from Burley Park train station and close to plenty of bus routes making commuting into town or nearby areas easy and quick.
The lure of the possibility of having a property that would bring in the rent of 5 tenants is understandably appealing but looking at the ad closer it says to me that you’re unlikely to get that. Not only is this property one of many where too many rooms have been squeezed in to the space, it also only has one bathroom. Obviously you could then use the space better to create another one but this suggests to me that in its current state it wouldn't meet the requirements in order to be granted a HMO licence. If that was the case you wouldn't be able to convert in to a licensable HMO property as the council have put a stop to that.
In any case, this property has only been let to 3 tenants which should probably tell you all you need to know. The floor plan of its current lay out shows how the space isn't being used to its full potential. I would suggest converting it into a 3 bed en-suite property, fitting a new kitchen and re-carpeting & decorating. This way you would be able to achieve a far better rent and if done to a high standard it should bring in around £1,235pcm or £14,820pcm.
The work involved should probably cost around £30k so if you managed to get the property for around £125,000 it should give you a return of nearly 10%, plus with such a high quality property you’d be safe in the knowledge that it would easily let out all year round.
Tuesday, 22 September 2015
I was at a recent business networking event in Headingley and Burley, when a landlord (who it transpired had a couple of Buy to let properties) bent my ear on where the next hot spot town or city is to invest his money in and where the best rental yields are. Now it can be tempting to just look at Headingley and Burley when growing a buy to let property portfolio, but there can be big differences in the amount of rental income you receive and how much your property will appreciate by considering other locations in the country.
Now regular readers of my articles of the Headingley and Burley Property Blog know of my love of the ‘buy to let seesaw’. On one side of the seesaw is yield and the other capital growth. Landlords should be looking for a high rental yield so that they can comfortably cover any mortgage payments and make some profit from the income return, but you also want the property to rise in value over time so you can get some capital growth when you come to sell. However, high yielding property in say such areas as St. Matthias Estate on the edge of Burley or the Granby estate off St. Michaels Road in Headingley, (so the seesaw arm with yield on it goes up on one side), will suffer from low capital growth (so the other arm with capital growth on the seesaw goes down). The relationship works in reverse as well, so in such upmarket areas as Canterbury Drive area, properties offer good capital growth, but at the expense of a decent yield.
The North East and North West of the UK are landlord magnets for great yields. The average yield in Headingley and Burley today is 7.63%, which when you compare with say Hartlepool, the North East’s buy to let hotspot at 7.73% pa, is very good. However, when you compare it with the 9.43% in the Anfield area of Liverpool, doesn’t look as good. But Liverpool property, have dropped in value by 2.2% in the last 12 months and the Hartlepool property market has gone down by 1.4%.
When you compare the long term house price growth, it gets even worse. Looking at the graph, since 1995 property values in Headingley and Burley have risen by 125.84%,compared with Hartlepool at 21.02% and Liverpool at 90.11% – it just shows you shouldn’t always chase the yield because of the poor increases in property values in those two places. As I always like to explain to landlords , a decent yield is important, but when you come to sell your buy to let property it would also be nice to make a decent profit.
At the end of the day, as a Headingley and Burley landlord, you want to be making gains from both your rent and house price growth, particularly when you want to sell, because when combined, the rental yield and capital growth, that gives you the real return on your investment.
Tuesday, 15 September 2015
Since the 1960’s more people have owned their own home than rented but, for many young Burley people, the dream of buying their own home is dying...or is it?
Since the turn of the Millennium, in Burley (as in the rest of the Country) there has been a significant change in the proportion of people who own their own home. In 2001, 42.47% of homes in Burley were owner occupied, today the figure is 29.1%, a significant decline in such a short time. Buy to let landlords can find tenants because young people say they cannot afford a deposit to buy unless they inherit money or are given a loan from the Bank of Mum and Dad.
In Burley, only 39.5% of 25 to 34 year olds have a mortgage. When you compare Burley against the national average of 35.93%, it just shows how different parts of the country have different housing markets. However, the really interesting fact is this - roll the clock back to 1991 and nationally, 67% of 25 to 34 year olds had a mortgage. After the second World War the supply of properties being built kept up with demand as millions of council homes were built (the most being built in 1950s, surprisingly under Tory Governments!). Also private house building increased in the 1950’s, but especially in the 1960’s and 1970’s, and as the Country got more prosperous it meant that by 1971, there were more home owners than renters.
However, since the 1970’s, the population has grown but the number of new properties being built hasn’t kept up at the same rate, the result is that there have been huge rises of property prices in the early ‘70s, the late 80s and more recently between 1999 and 2004.
Interestingly, since the early 1970’s, out of the 34 richest countries in the world, the UK has seen highest property prices rises. 95% mortgages have been available to first time buyers since late 2009, but with property prices rising by 125.84% since the early Spring of 1995 in Burley, as property prices have been rising and first time buyers have been saving, the amount they have to save is continually rising at the same time. The stress on saving even for that kind of deposit, coupled with the new stricter mortgage rules introduced in 2014, means that most 20/30 something’s in Burley are renting instead of buying.
The issue quite simply comes back down to a lack of new homes being built. In Burley, only 16 properties a year are being built. The supply of new homes has been limited by planning laws, local councils not having the money to build council houses, hard hitting green belt limitations, and our old friend NIMBY’ism. With a rising population and net migration, especially from the EU, the mismatch between demand and supply is why we have the problem. Until politician’s have the backbone to realise the country needs a lot more decent homes built, the problem will just get worse.
In the meantime, demand for rental property will continue to grow because people need a roof over their head at the end of the day - and that can only be good news for us landlords!!
Tuesday, 8 September 2015
During my school years, my parents seemed to move every other year (or it seemed that way). In reality, looking back at the house moves, we actually moved four times before I left home. However, whilst my parents kept the removal van people in business whilst I was at school, from research I have carried out it shows things have changed considerably in Burley over the last few decades, and interestingly, the trend is getting worse ... for the removal van people at any rate!
In Burley, there are 3,419 properties. However, after we remove the 820 council houses, 1,556 privately rented houses and 47 houses where the occupants live rent free, that leaves us with 996 owned properties (be that 100% outright, with a mortgage or shared ownership). This means 29.1% of the properties in Burley are occupied by the owner (the national average is interestingly 64.2%) but the number of people who have sold and moved house in Burley, over the last 12 months, has only been 118. This means on these figures, the homeowners of Burley are only moving on average every 8.44 years.
There are a couple of reasons for this. Firstly, the cost of moving house has risen over the last twenty years. Secondly, with many remortgaging their properties in the mid 2000’s before the price crash of 2008, there is a reluctance or inability in a small minority of homeowners to finance a home sale/purchase, due to lack of equity. These are both factors driving fewer moves by existing homeowners.
However, the big effect has been the change in house price inflation. Back in the 1970’s and 1980’s, house prices were doubling every 5 to 7 years. Even in Greater London, with its stratospheric property price increases over the last few years, it has taken 13 years (August 2002 to be exact) for property values to double to today’s levels.
This change to a relatively low inflation Burley property market (i.e. Burley property values not rising quickly) is significant because the long term consequences of sustained low house price growth is that it eats into mortgage debt more slowly than when property price inflation is higher. Burley homeowners cannot rely on inflation to shrink their debt in real terms as much as they did in say the 1970’s and 1980’s.
So what does this all mean for Burley buy to let landlords? Well for the same reasons existing Burley homeowners aren’t moving and less ‘twenty something’s’ are buying their first home as well. Burley youngsters may aspire to own their own home, but without the social pressure from their peers and parents to buy their first property as soon people reach their early 20’s, the memory of the 2008 housing crisis and the belief the hard times either aren't over or the worst is yet to come, current and would-be homeowners are warming to the idea of renting.
I also believe UK society has changed, with the youngster’s wanting prosperity and happiness; but wanting it all now... instantly... today... without the sacrifice, work and patience that these things take. As a society, we expect things instantly, and if it doesn’t come easy, doesn’t come quick, some youngsters ask if it is really worth the effort to save for the deposit? Why go without holidays, the newest iPhone, socialising four times a week and the fancy satellite package for a couple of years, to save for that 5% deposit if there is no longer a social stigma in renting or pressure to buy as there was... say... a generation ago?
Even though, in real terms, property prices are 5% cheaper than they were ten years ago (when adjusted by inflation), 45.5% of Burley properties are privately rented (nearly double it was twenty years ago). As a result, the demand for rental properties continues to grow from tenants, meaning those wishing to invest in the buy to let market, over the long term, might be on to a good thing?