Modern 2 bed apartment in Burley with nearly 9% return

This attractive and modern 2 bed flat located in Burley Wood Court is in a prime location for professionals. Located on Kirkstall Road it's just set back off the main road with a bus stop straight outside making it ideal for commuters with Leeds City Centre less than 10 minutes away. It's also just a stones throw away from Cardigan Fields which is home to a cinema complex, gym, bowling alley & bars and restaurants so location wise this property has fantastic appeal and would easily rent out.

It's currently only being rented out as a 1 bed but as the ad correctly states, if the living room was utilised as a second bedroom you'd create a spacious second bedroom so you could easily achieve a monthly rent of £750pcm without the hassle of having to knock down walls etc. The current kitchen and dining room could easily be used as an open plan living room and kitchen and it still not lose any of it's appeal. 

The rest of the property doesn't need any work doing to it as it's already been finished to a great standard. 

If you were able to buy the property for around £105,000 you would be able to achieve a solid return of nearly 9%.

http://www.rightmove.co.uk/property-for-sale/property-40028799.html

Headingley Buy To let – Freehold House or Leasehold Flat?

Well my Headingley Property Blog reading friends, as seems to be all the rage with Jeremy Corben asking the PM questions emailed in to him at Prime Minster Question Times, I too wish to answer a question emailed into me from a potential Headingley landlord last week. Nice chap, lives near Hyde Park, and it turns out, after speaking to him, he works in IT, has a spare bit of cash (now the kids have flown the nest) and wanted to buy his first buy to let property.

His main question was ... Do I buy a freehold house or a leasehold flat in Headingley?

Most people will say freehold every time, because you own the land. However, it’s not as simple as that (it never would be would it!). The definitive answer though is to research what Headingley tenants want in the area of Headingley they want! The tenant is ultimately your customer, and, if they don't want to rent what you decide is best to buy, then you are not going to have a successful BTL investment. So starting with the tenant in mind and working backwards from there, you won’t go far wrong. In a nutshell, find the demand before you think about creating the supply.

Leasehold flats and apartments in Headingley are excellent in some respects as they offer the landlord certain advantages, including the fact a flat can be initially cheaper to buy. Yields can be quite good, offering better cash flow. The building will already be insured and yes there is a service charge, but it’s still for a service at the end of the day and that cost is spread between many others (i.e. when your freehold house roof goes, its falls 100% on your shoulders) and one of my favourites is that there is often no garden to maintain or blown down fences to replace!

However, some Headingley leasehold flats can suffer from poor capital growth. Some leasehold properties have no cap on the level of the service charge and it may get out of control. The length of the lease will significantly affect value if not renewed before it gets too short. Thankfully there’s not many, but some Headingley apartments/flats have burdensome clauses. Finally, with leases, there can be sub-letting issues – which means you can’t let them out.

So what do the numbers look like? Well since 2003, the average freehold property in Headingley (detached, semis and terraced) has risen from £158,849 to £238,231, a rise of 50% whilst the average Headingley leasehold property (flats and apartments) has dropped in value from £135,407 to £122,700, a decrease of 9%. 

I was really interested to note that of the 53,599 rental properties in the Leeds City Council area that the Office of National Statistics believe are either let privately or through a letting agency, 23,934 of them (or 44.7%) are apartments. However, there are only 68,171 apartments in the whole council area (be they owned, council rented or privately rented), which represents 21.3% of the whole housing stock in the area. This really intrigued me that, quite obviously, there is a high proportion of Headingley’s leasehold apartments/flats rented to tenants compared to detached, semi’s or terraced. Fascinating don’t you think?

Every Headingley apartment block, every terraced house or semi is different. Like I said at the start, the definitive answer though is to research what Headingley tenants want in the area of Headingley they want. Demand for town centre apartments, near the nightlife and transport links can be popular and can offer the Headingley landlord very good yields with minimal voids. However, Headingley terraced houses and semis, whilst not always offering the best yields (although sometimes they can), they do offer the Headingley landlord decent capital growth.

My advice to the prospective landlord as it is to you is do your homework. What many Headingley landlords do, irrespective of whether you are a landlord of ours, a landlord with another agent or a DIY landlord, if you see any property in Headingley that catches your eye as a potential buy to let property, be it a terraced house, semi or flat ... email me and I will email you back with my thoughts (although I will tell you what you need to hear .. not want to hear!)

The Burley Property Market and £1,300,000,000,000,000,000 in loose change

The 5^th of March 2009 was the date Mervyn King, the then Bank of England Governor, slashed UK interest rates to the unparalleled figure of 0.5%. In just under five months, starting on 8^th October 2008, the rate had come down from 4.5% to that low figure, all in an attempt to ensure the British economy survived the worldwide credit crunch. Now nobody expected that, over seven years later, rates would still be at that low level.

In the summer, people were predicting a rise in the New Year, yet now, some forecast it may remain the same for years to come the due to the issues in China. Now, I am not some City Whiz kid with a hotline to Mr Carney at Threadneedle Street, but merely a humble letting agent from Burley, so I can not profess to know what will happen to interest rates. However, what I do know, speaking to my Burley friends and Burley landlords is that these low interest rates have hit savers really hard.

If you added up everyone’s bank and building society savings in the UK, they would add up to £1,300,000,000,000,000,000 (that’s £1.3 trillion), most of which is earning a pittance in interest.  That is why more and more 40 and 50 year old Burley landlords have been investing some of that cash into Burley bricks and mortar, as they search for a low risk investment opportunity.

Buying a Burley buy to let property isn’t risk free, but there are certainly things you can do to mitigate and lower one’s exposure to risk. You see by buying a rental property, it potentially offers an enigmatically decent proposition in terms of being able to obtain attractive returns that beat inflation and savings accounts, yet without taking the levels of risk associated with stock markets.

The UK residential property market has long been the safest form of collateral for lenders of all varieties. Against a backdrop of a greatly changing economic environment, Burley house prices have been extraordinarily robust, increasing by over 1413.7% between 1974 and today. Some will say there have been significant property price falls, namely in 1975, 1988 and 2008, yet each time after this has been followed by an upturn in property values. For the record, the stock markets in the same time frame only rose by 432.5%!

... and that is the best thing about buy to let property. Unlike the stock market, with its unfathomable equities, shares and bonds, that nobody really understands (as they are controlled by some faceless whizzkid in Canary Wharf!) with a buy to let property, landlords can take control and understand their investment .. .in fact you can touch and feel the bricks and mortar investment...  but before you go out and buy any old Burley property, be are that plenty of landlords still get it wrong. You have to be aware of your legal responsibilities when it comes to tenant safety, tenants deposits, energy certificates and now landlords have the added responsibility of checking the immigration status of prospective tenants. Get it wrong and big fines and even prison is an option – but that’s why many agents use a letting agent to manage their property for them.

Next, you have to buy the right property at the right price. Recently I have seen some really heart breaking situations in Burley and the immediate area, of people paying way too much for a property, only to lose out when they came to sell. One example that comes to mind is that of a property owner in one of those apartments in the quiet, modern Abbots Mews complex, close to colleges and universities and with plenty of local amenities within walking distance ... a decent two bed apartment, 69 sq metres inside (742 sq ft in old money) sold in November 2007 for £153,500. In the summer, it only obtained £136,000, a drop of 11.4% or 1.58% a year - a very disappointing result.

I cannot stress enough the importance of doing your homework. One source of information and advice is this blog where I have similar articles to this about the Burley property market and what I consider to be the best buy to let deals around at any one time in the suburb, irrespective of which agent it is on the market with.

Fantastic terraced house in Burley with potential 12.6% yield

This 5 bed house on Knowle Terrace in Burley is an ideal property for a landlord to looking to add value and make a great investment. It's situated just next to the Stanmore's giving really easy access to both Headingley and just off Burley Road which is perfect for either students or professionals. 

From a glance at the floorplan it does seem to suffer from having one too many bedrooms squeezed in to it. Whilst trying to maximise the rent with getting in as many tenants as possible is understandable, from my experience what it ends up doing is putting potential tenants off. Very few these days are willing to take the smaller room even with the seemingly enticing option of a cheaper rent. 

My advise would be to spend some money on utilising the space better and making it more desirable thus easier to rent. I would do this by using the current small bedroom on the first floor and creating an en-suite for the larger bedroom on that floor. There's already a bathroom on the top floor so by just moving the door you can make that top floor bedroom en-suite also. Down in the basement, I would create a jack-and-jill bathroom which the two bedrooms down there could share. 

By creating a house with more even sized bedrooms and finishing it off to a high spec you're likely to achieve an annual rent of £17,056 which if you're overall spend for the property and the work came to around £135,000 you'd be looking at a cracking return of nearly 13%!

https://www.onthemarket.com/details/2334066/

Headingley vs Bradford – Clash of the Property Market Titans

Many landlords have been asking me my thoughts on the Headingley property market recently, and in particular, what is happening to property values. My calculations show property values in Headingley quite interestingly grew in the month of September by 0.1%. When one looks at the annual growth, Headingley values are 3.8% higher (when comparing Sept 14 to Sept 15).  However, there are signs that the fundamental growth of property values in Headingley has now peaked, despite those average property values being below levels recorded in 2007 (just before the 2008 crash).

Even though prices are higher this month, this impressive rise of Headingley property values masks the underlying truth in what is really happening to local property values in the Suburb. Throughout 2015, property values have been yo-yo like on a month by month basis, being quite volatile in nature.  For example,

 ·          September 2015                   0.1% rise

·         August 2015                        1.0% rise

·         July 2015                             1.3% rise

·         June 2015                            0.9% rise

·         May 2015                            0.6% rise

·         April 2015                           0.1% rise

  ·         March 2015                         0.2% drop

This is in part due to seasonal factors, as well as mortgage approvals increasing over June and July and then falling by over 15% in August, according to the Council of Mortgage Lenders (CML).

The outlook for the Headingley property market remains positive against the foundations of low mortgage rates and growing consumer confidence. However, I do have to question the recent CML mortgage data and whether that raises issues over whether the rate of growth since the Tory’s were re-elected in the early summer can continue? However, on a positive note, Headingley property values are still running ahead of salaries and average property values are 9.2% below the levels recorded in 2007.

Talking to fellow property professionals in the suburb, demand for property has been showing signs of moderating in the final few months of 2015. You see, it is really important not to read too much into one month’s (September’s) headline figures.

Readers might be interested to note that before the 2008 property crash, all the UK region’s housing markets tended to move up and down in tandem like the Headingley Synchronised Swimming team at the Leeds Beckett University Swimming Pool!  Since then though, the Greater London property market took off like a rocket in 2009/10, whilst the rest of the UK only really started to grow in 2012/13, and even then that growth was a lot more modest than the Capital’s.  Looking closer to home, it can even be different in neighbouring towns, areas and cities, so whilst Headingley property values are 3.8% higher than a year ago (as mentioned above), Bradford property values are 1.2% lower than a year ago.

I cannot stress enough the importance of doing your homework.  One source of information and advice is this property blog where I consider the best buy to let deals around at any one time in the suburb, irrespective of which agent it is on the market with so you're always able to get an unbiased opinion and viewpoint. 

Great 3 bed end terraced property with 10% yield

This three bed end terraced on Lumley Avenue in Burley is in a prime location which is ideal for professionals. It's only a short walk away from Burley Park train station and plenty of main bus routes going straight into Leeds City centre in around 10 minutes. 

From the looks of things, it's pretty much ready to go and rent out so you wouldn't need to spend a great deal other than a few cosmetic things. 

A property of this type in this area would usually rent out at around £370pcm per person which would give you a healthy return of 10% if you managed to get the property for around £135,000.

https://www.onthemarket.com/details/2413669/

Values of Headingley Terraced Houses smash through the £200/sqft barrier

The Council of Mortgage Lenders (CML) latest snapshot of the buy to let mortgage market shows us that buy to let landlords haven’t been put off by the Chancellors announcements on the way buy to let’s are taxed.

Last month, the CML stated £1.4billion was borrowed by UK landlords to purchase 10,500 buy to let properties, up 26.5% from the same month in 2014, when only 8,300 properties were bought with a buy to let mortgage. Go back two years and the number of buy to let mortgages used for purchasing (again not re-mortgaging) is 36.4% higher! Even more interesting has been the fact that the average amount borrowed has risen as well. The average buy to let mortgage last month was £133,330, up from £128,480 a year ago.

In Headingley, I am speaking to more and more landlords, be they seasoned professional landlords or FTL’s (first time landlords), as they read reports that the Headingley rental market is doing reasonably well, with rents and property values rising.  Interestingly, one landlord recently asked how much he should be paying per square foot (more of that in a second).

The first thing you have to decide is whether you want great capital growth or great rental yield, as every knowledgeable landlord knows, you can’t have both. Over the last twenty years, property values in Headingley have risen by 134.98%, compared to Greater London’s 436.2%. This has proved that capital growth increases faster in the more expensive South, but your investment money doesn’t go very far, meaning there won’t be as much rental yield from a 1 bed flat in Chelsea (2% per year at best with a fair wind) as a 2 bed semi in Headingley. However, whilst the figure of 134.98% is an average for the area, certain areas of Headingley have seen capital growth much higher than that and others areas much worse (we have talked about those in previous articles).

If you recall in an earlier article, my research reveals that Headingley apartments tend to generate a better yield than houses, probably because several sharers can afford to pay more than a single family. But houses tend to appreciate in value more rapidly and may well be easier to sell, simply because there are fewer being built.

So what should you be buying in Headingley, and more importantly, how much?

• The average apartments in the suburb are currently selling for approximately £210 per square foot.
• Terraced houses in Headingley are currently obtaining, on average, £231,100 or £204 per square foot, 
• An average semi in Headingley is selling for £246,800 (and achieving £211 per square foot). 

Now these are of course averages, but it gives you a good place to start from. In the coming weeks, I will look at rents being achieved on Headingley houses and apartments, and the yields that can be obtained, depending how many bedrooms there are. 

Very high spec 1 & 2 bed terraced property in Burley with 9% yield

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%.

http://www.rightmove.co.uk/property-for-sale/property-56846780.html

Burley Landlord’s mortgages top £3 million!

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”. 

Burley Property Market Update

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/

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.

Has Osborne killed buy to let in Leeds?

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. 

Fantastic 'ready to go' 4 bed house in Burley with 9.7% yield

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. 

http://www.rightmove.co.uk/property-for-sale/property-37083135.html

Are 'would be' Headingley homeowners warming to the idea of renting?

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.

House in Burley with potential 10% return

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. 

http://www.rightmove.co.uk/property-for-sale/property-51720025.html

Headingley and Burley Buy To Let Yields at 7.63% - but should you look further afield?

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.

Is the Burley Property Market in crisis?

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!!