Stamford’s housing affordability hits a ratio of 8:1

Further to a recent article posted on my Stamford property blog, a Stamford homeowner emailed me regarding the change in attitude to renting by the youngsters of Stamford and how they thought it was too expensive for first time buyers to buy in the area, there can be no doubt that buy-to-let landlords have played their part in driving up property and from that made housing a lot less affordable for the 20-30 somethings.
 

The concerned homeowner asked if the Bank of England (BoE) should be tasked to control house price inflation in the same way they control inflation.  The BoE has a target for the annual inflation rate of the Consumer Prices Index of 2%, whilst it is also required to support the government’s economic policy, including its’ objectives for growth and employment.  Perhaps the BoE should be charged with containing the buy-to-let housing market by possibly changing the rules on the loan-to-value (LTV) ratios?

So, how affordable is Stamford? 

The best measure of the affordability of housing is the ratio of Stamford property prices to Stamford average wages, (the higher the ratio, the less affordable properties are). 

Referring to the table below, for example in 2014, the average value of a Stamford property was 7.48 times higher than the average annual wage in Stamford.

1998	2000	2002	2004	2006	2008	2010	2012	2014	2016 (EST)
3.86	4.38	5.33	7.66	7.67	7.24	6.97	7.26	7.48	8.38

This deterioration in affordability of property in Stamford over the last couple of years has been one of the reasons why the younger generation is deciding more and more to rent instead of buy their own house. 

However, it’s not the only reason.

A quick look on ‘Money Supermarket’ today found 169 lenders prepared to offer 75% LTV Buy-to-let mortgages and none at 85% LTV.  Lenders have self-imposed a high level of entry for buy-to-let landlords (i.e. putting down at least 25% of the purchase price in cash).  The BoE don’t need to meddle there!

Also, the Tories have certainly done lots to level the playing field in favour of first time buyers.  For nearly a year now, landlords have had to pay an additional 3% in stamp duty on any buy-to-let purchase and over the coming 4 years, tax rules on landlords claiming mortgage interest relief will affect their pocket.  Likewise, it doesn’t help that local authorities sold off council houses in the Thatcher years and so for many on low incomes or with little capital, owning a home has simply never been an option (today or historically).  

It’s easy to look at the headlines and blame landlords.  First time buyers have been able to access 95% LTV mortgages since 2010, meaning even today, a first-time buyer could purchase a 3 bed semi in Stamford for around £180,000 and only need to find £9,000 deposit.  Agreed, it’s a lot of money, but first time buyers need to decide on their priorities.

Renting is returning to be the norm.  Landlords have it tough, but let’s not blame them for the ‘perceived’ woes of the nation, and remember that we haven’t always been a country of homeowners.  Nationally, in 1964, 30% of people rented their home from a private landlord, and today it’s only 15.3%.

If you are an existing landlord or someone thinking of becoming a first-time landlord , and looking for advice and opinion and what (or what not to buy in Stamford), please contact me.  I don't bite and am here to help.


David Crooke  -  01780 484 554
david@upp-property.co.uk

Owner and managing director
Understanding People & Property

SALES & LETTING AGENTS 

Stamford: 01780 484 554  
Rutland:   01572 725 825

  

3 Best Buy-To-Let Deals on this week's property market, with incomes of £6k-£8k pa

Property 1

2 bed end of terrace house for sale  - Price: £189,995

Gas Lane, Stamford.  On the market with Purple Bricks

 

A superb rental investment is offered to the market by Purple Bricks , presented in excellent order and located in what might get a few heads scratching! Gas Lane is located off St Leonards Street, which is literally at the top of Stamford's popular High Street. I would expect an income £8,100 per annum (£675pcm) which would bring the yield in at 4.3%.

Price: £189,955
Annual Income: £8,100 / Rent: £675pcm / Yield: 4.3%

Click this link for more details on this property:

http://www.rightmove.co.uk/property-for-sale/property-65808590.html

Property 2
2 bed terrace house for sale - Guide Price £169,950
Martingale Mews, Oakham.  On the market with UPP Property Agents

This property is wonderful little gem. It is a Larkfleet build and is only 2 years old, so you would benefit from the 8 years of building/construction piece of mind.

 

We have successfully sold and subsequently let an identical property on the next close (Bridle Close) at £625pcm which is an annual income of £7,500 and a yield of 4.5% (based on £165,000 purchase price).

Guide Price: £169,950
Annual Income: £7,500 / Rent £625pcm / Yield 4.5%

Click this link to see more details on this property:

http://www.rightmove.co.uk/property-for-sale/property-47817684.html

Property 3
1 bed apartment for sale - Guide Price £119,950
Stud Road, Barleythorpe Nr Oakham.  On the market with UPP Property Agents

Another Larkfleet build and another opportunity to acquire 8 years' NHBC guarantee. Again, we manage a few properties within this block and I can honestly say they have been excellent maintenance free lets. This particular property backs onto to open allotments and would be a wonderful let to a young professional.  With an annual return of £6,600 (£550pcm), the net yield would be in the region of 5.5%

 

  

Guide Price: £119,950

Annual Income: £6,600 / Rent: £550pcm / Yield 5.5%

 

Click this link for more details on this property:

http://www.rightmove.co.uk/property-for-sale/property-47882373.html


If you would like to discuss any of the above in more detail with me, or if you are considering investing in a different property, just email me the details and we can discuss further.

David Crooke, Owner
david@upp-property.co.uk / 01780 484 554

Twitter: @UPPproperty

Understanding People & Property

Sales & Lettings

 

Stamford Rents Rise By 14.5% Since 2005

The local property market has been particularly fascinating over the last 12 years when we consider what has happened to rents and house prices.

There’s currently much talk of what will happen to the rental property market following Brexit. 
To judge that, I believe we must look what happened in the 2008/9 credit crunch (and what has happened since) to judge rationale and methodically, the possible ramifications for long-term investors in the property market.


An important yet overlooked measure is the performance of ‘rental income verses house prices’ (i.e. the resultant yields over time). 

Notwithstanding a slight drop in 2008 and 2009, the income from property rentals has been progressively increasing over the last 12 years.  Today, they are 14.5% higher than they were at the beginning of 2005.  In fact, over the last 5 years, the average growth has been 1.6%pa.  From a landlord’s point of view, increase in average rental income is not to be sneered at.  However, the observant readers will be noting that we are ignoring an important factor – inflation.

Looking back to 2005, and we have a property being rented for approximately £900pcm, and that is still being rented at £900pcm today.  While the landlord is not getting any less income, this £900 is no longer worth as much.  Let me explain, in 2005, £900 may have bought a two-week 4* holiday in Italy.  Yet, holidays have increased in line with inflation (which has been 38.5% since 2005), so our holiday would cost today £1,246 (£900 + 38.5% inflation = £1,246). Therefore, the landlord could no longer afford the same holiday, even though having the same amount in pound notes from their rental property.

This means when we compare rents in Stamford to inflation since 2005, Stamford landlords are worse off today when they receive their monthly rental income, than they were in 2005 by 24% in real terms (rents increased by 14.5% since 2005, less the 38.5% inflation since 2005 – net affect 24% drop).

However, rental income is not the only way to generate money from property, as property values can increase.  Although in the short term, cash flows are diminishing, many landlords may be content to accept that for a colossal increase in capital value.

Stamford Property Values have risen by 27.8% since 2005

This equates to a reasonably salubrious 2.31%pa increase over the last 12 years.  Even more interesting, is that this includes the 2008/9 property crash, this will make those Stamford landlords and investors feel a little better about the information regarding rents after inflation.

Moving forward, the prospects of making easy money on buy-to-let have diminished, when compared to 2005.  Last decade, making money from buy-to-let was as easy as falling off a log – but not anymore. 

It would be true to say, my ‘rental income verses property prices’ study does lead to noteworthy thoughts.  I am often asked to look at my landlords’ rental portfolios, to ascertain the spread of their investment across their multiple properties.  It’s all about judging whether what you have will meet your needs of the investment in the future.  It’s the balance of capital growth and yield, whilst diversifying this risk.

If you are investing in the Stamford and Rutland property market, do your homework and do it well.  While some yields may look attractive, there are properties in many areas that do not have the solid rudiments in place to sustain them.  If you are looking for capital growth, you might be surprised where the hidden gems really are.  Take advice, even ask your agent for a portfolio analysis, just like I offer my landlords.  The majority of agents in Stamford and Rutland will be able to give a detailed analysis of past and anticipated investment opportunity (especially the awful effect of inflation) on your portfolio.  However, if they can’t help – well, you know where I am, and the kettle is always on!

 

David Crooke  -  01780 484 554
david@upp-property.co.uk

Owner and managing director
Understanding People & Property

SALES & LETTING AGENTS 

Stamford: 01780 484 554  
Rutland:   01572 725 825

 

This week's 3 Best Buy-To-Let Deals on the Rutland & Stamford property market (£7k-£10k incomes)

Property 1
3 Bed End Terrace House For Sale.  Guide Price £165,000
Drift Gardens, Stamford.  Marketed by Newton Fallowell

A very popular location for potential tenants, especially those with younger children, being located so close to good schools. The property appears in excellent order and would bring in an income of £7,800 per annum (£650pcm rent). Yield return of 4.7% but, expected to improve over the course of the year.

Guide Price: £165,000 -> Income: £7,800pa (£650pcm) = Yield 4.7%

 

Click this link for more details on this property:

http://www.rightmove.co.uk/property-for-sale/property-65341997.html 

 

Property 2

2 Bed End Terrace House For Sale.  Guide Price £189,950

Cornflower Crescent, Oakham.  Marketed by UPP Property Agents 

 

A fantastic modern home built by Charles Church 2 years ago and has been rented out to the same tenant every since.  Currently achieving £600pcm and with a expected rent increase to £650pcm, this would give you a return of £7,800 per annum. The expected sale of this property would go in excess of £180,000  - giving a yield of 4.1%

Guide Price: £189,950 -> Income: £7,800pa (£650pcm) = Yield 4.1%

Click this link for more details on this property:

http://www.rightmove.co.uk/property-for-sale/property-47712831.html

 

Property 3

3 Bed Cottage For Sale.  Guide Price £229,950

Pond Lane, Greetham.  Marketed by UPP Property Agents

 

Lastly, this is a wonderful little investment for many reasons.  Firstly, the rental return per annum would be £10,200 (£850pcm), secondly, it would be a fantastic holiday let as Greetham is a very popular village for Rutland holiday seekers. Thirdly, the yield return of 4.4% is excellent for a village property and one that will prove to be popular.

 

 

Guide Price: £229,950-> Income: £10,200pa (£850pcm) = Yield 4.4%

 

Click this link for more details on this property:
http://www.rightmove.co.uk/property-for-sale/property-47706639.html 

If you would like to discuss any of the above in more detail with me, or if you are considering investing in a different property, just email me the details and we can discuss the property further.

David Crooke, Owner
david@upp-property.co.uk / 01780 484 554

Twitter: @UPPproperty

Understanding People & Property

Sales & Lettings




Stamford: 01780 484 554   Oakham:  01572 725 825

Stamford Rents To Rise Quicker Than Property Prices In Next 5 Years

The next 5 years will see an interesting change in the Rutland and Stamford property market. 

 

My recent research has concluded that the rent private tenants pay will rise faster than property prices, creating further issues to the growing multitude of renters in our area.  In fact, my examination of statistics forecasts that…

By 2022, Stamford rents will increase by 23%, whereas Stamford property values will only grow by 17%.

Over the last 5 years, property values in Stamford have risen by 22.6%, whilst rents have only risen by 9.9%.

Throughout the last few years, and compounded in 2016, tenant demand for rental properties continued to rise whilst the press predicted some landlords might sell and reduce their portfolios, creating less choice and pushing rents higher.

 

In fact, talking to fellow property professionals in Stamford, there appears to be deprivation and shortage of new rental properties coming on to the lettings market.

Landlords have some intriguing challenges ahead of them in the coming years, most notably in that the Tories have changed the taxation rules for landlords in the way buy-to-let properties are to be taxed.  On top of that, there is the ban on letting agent fees which is still to come into force (probably in 2018).  When that happened in Scotland in 2012, Scottish letting agents passed on those fees to their landlords, who in turn increased the rent they charged to their tenants.  (For more on this topic, see my previous article: 'What does the tenant fee banning order mean?' http://rutland-stamford-property.blogspot.co.uk/2016/12/what-does-tenant-fee-banning-order-mean.html )

All I would say to Theresa May and Philip Hammond is that they must be wary about indicating both red and green lights at the same time to the private rented sector.  They can’t expect the armies of small private landlords to continue to house around a fifth of the population and then tax the hell out of them.  They didn’t invest in buy-to-let as a charity or to satisfy any philanthropic urges.  Something has to give – and that will be significant rent rises over the coming few years (and before anyone gives me any derogatory comments about landlords … if it wasn’t for landlords buying all these buy-to-let properties over the last 15 years, I am not sure where everyone would be living today – because most of the council houses were sold off in the 1980’s).

With the challenges ahead (including the budget), house price inflation will be tempered over the coming 5 years.  The number of properties on Stamford’s property market remains close to historic lows, which is both good and bad; it keeps houses prices relatively stable, and yet it impedes choice for buyers… and hence why I believe property values in Stamford will only be 17% higher in 5 years’ time.

In addition, the significant shortage of new homes being built adds further pressure as people still need somewhere to live. If those people aren’t buying houses and the local authority aren’t building council houses (because they have no money), with the average rent for a Stamford rental property currently standing at £749 per month, over the next 5 years, I predict the average rent in Stamford will rise to £921pcm.

These are interesting times. There is still money to be made in buy-to-let in Stamford and Rutland, but landlords will just need to be smarter and savvier with their investments.

If you are looking for such advice and opinion to help you meet those investment goals, please pick up the phone and call me.  I don't bite and I'm here to help.


David Crooke  -  01780 484 554
david@upp-property.co.uk

Owner and managing director
Understanding People & Property

SALES & LETTING AGENTS 

Stamford: 01780 484 554  
Rutland:   01572 725 825