The ‘Liquorice Allsorts’ Headingley Property market

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 Yorkshire region 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. 

Headingley and Burley Tenants Pay 35.1% of their Salary in rent

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 ISA, 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!

George Osborne – The Headingley landlord’s friend?

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.