Tamworth House Prices up 31.5% in the last 5 Years

Over the last 5 years, we have seen some interesting subtle changes to the Tamworth property market as buying patterns of landlords have changed ever so slightly.

The background to this story was the recently published set of buy-to-let (BTL) lending statistics. Roll the clock back 12 months and 6,700 BTL mortgages were granted (in the same month) for £900m, meaning the average BTL mortgage was £134,200. Looking at last month’s figures, and as one might expect with the Brexit issue overhanging the property market, the lending figures were down, yet not by the amount I originally thought. Last month, just over 6,100 new buy-to-let mortgages were granted for a total sum of £800m (meaning the average landlord mortgage was a respectable £131,100). Yet, when I looked back to the boom year of the 2014 property market, in the corresponding same month, only £1,030 million was borrowed on 8,300 buy-to-let properties (meaning the average buy-to-let mortgage was £124,100). It seems Brexit is having no effect on landlords buying habits.

Looking closer to home in Tamworth, throughout 2018, I have been regularly chatting to more and more landlords, be they seasoned professional Tamworth BTL landlords or FTL’s (first time landlords) and their attitude is mostly positive. Instead of reading the scare-papers (oops sorry newspapers), those Tamworth landlords that look with their eyes, will see the Tamworth property market is doing reasonably well, with medium term rents and property values rising; as quite obviously from the mortgage figures .. landlords are still buying.

The question I get asked all the time is .. “What type of buy-to-let property should I buy?  You can make money from property through both the rent (expressed as a yield when compared to the value of the property) and how the actual value of the home itself changes.

Since 2014, property values in Tamworth have risen by 31.5%.

We have records of what each type of property (i.e. Detached/Semi/Terraced/Apartments) has achieved per square metre going back 20 years … and looking back over the last 5 years, these are the numbers ..

They all look to have similar percentage uplifts, however as you can see from the table there is in fact some variation throughout and although only slight this can equate to thousands of pounds in monetary terms.

This has proved that semis and terraced houses have performed the best .. although like the £/Sq.M figures, these are just averages. When investing, whilst Tamworth apartments haven’t been the best performers in terms of capital growth, they do tend to generate a slightly 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.

Now these are of course averages, but it gives you a good place to start from. The bigger picture here though is this – irrespective of what is happening in the world, be it Brexit/no Brexit, China, Trump, whatever, Tamworth people still need a roof over their heads and we as a Country haven’t built enough homes to keep up with the demand since the late 1980’s. This means even if we have a short term wobble in 2019 when it comes to property values ..in the medium term, demand will always outstrip supply and prices and rents will increase – because, I doubt the local authority, let alone Westminster, have the billions of pounds required to build the one hundred thousand Council houses per year nationally for the next decade to fix this issue – meaning as the population increases, the only people who can fulfil the demand for accommodation in the medium term is the private BTL landlord.

Before I go …on average, housing associations and local authorities have built around 26,500 houses each year since 2010. The Labour government had a lower average, building about 19,000 homes per year, yet in the 1960’s, under both administrations, 180,000 councils were built per year!

Many of you reading my blog ask why I say these things. I want to share my thoughts and opinions on the real issues affecting the Tamworth property market, warts and all. If you want rose tinted glasses articles – then my articles are not for you. However, if you want someone to tell you the real story about the Tamworth property market, be it good, bad or indifferent, then maybe you should start reading my blog regularly.

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Tamworth Homeowners Have Made an Annual Profit Of £6,781 Since the Millennium

As we go full steam ahead into 2019, it’s certain that the Tamworth housing market in 2018 was a little more restrained than 2016 and 2017 and I believe this will continue into 2019. Property ownership is a medium to long term investment so, looking at the long-term, the average Tamworth homeowner, having owned their property since the Millennium, has seen its value rise by more than 180%.

This is important, as house prices are a national obsession and tied into the health of the UK economy as a whole. The preponderance of that historical gain in Tamworth property values has come from the growth in Tamworth property values, while some of it will have been enhanced by extending, modernising or developing their Tamworth home.

Taking a look at the different property types in Tamworth, and the profit made by each type, makes interesting reading..

However, we can’t forget there has been just over 60% inflation over those 18 years, which eats into the ‘real’ value (or true spending power of that profit) … so if we take into account inflation since 2000, the true spending power of that profit has been lower.

 So the ‘real’ value of the profit, after inflation, in Tamworth has been £4,140 per year.. still nothing to sniff at.

I wanted to show you that even though we had the 2008/09 Credit Crunch property market crash where, depending on the type of Tamworth property, property values dropped between 15% and 20% in 18 months … Tamworth homeowners over the long term are still better off than those renting.

Moving forward, the question I get asked time and again is what will happen in the future to the Tamworth Property market? Irrespective of what is happening in the World, Europe or even Central London, the biggest factor over the medium to long term to ensure that this level of house price growth is maintained in Tamworth is the building of new homes both locally and in the country as a whole. Whilst we haven’t had the 2018 stats yet, Government sources suggest this will be nearer 180,000 to 190,000, a decrease from the 2017 figure of 217,350 new households being created. When you consider that we need to build 240,000 households to equal demand (immigration, people living longer, higher divorce rates and people co-habiting later in life etc) … demand will outstrip supply and unless the Government start to spend billions building council houses .. this trend will continue for years (and decades to come).

Another factor is that whilst Tamworth landlords have been hit with higher taxes to enable them to actually be a landlord most, in every national survey, still intends to increase their portfolio in the medium to long term. The youngsters of Tamworth see renting as a choice, giving them flexibility and options that being tied to a home cannot give… thus meaning demand will continue to grow and landlords will be able to enjoy increased rents and capital growth, although those very same Tamworth buy to let landlords will have to work smarter in the future to continue to make decent returns (profits) from their buy to let investments. Even with the tempering of house price inflation in Tamworth in 2018, most Tamworth buy to let landlords (and homeowners) are still sitting on a copious amount of growth from previous years.

The question is, how do you, as a Tamworth buy to let landlord, ensure that continues?

Since the 1990’s, making money from investing in buy to let property was as easy as falling off a log. Looking forward though, with all the changes in the tax regime and balance of power, making those similar levels of return in the future won’t be so easy. Over the last ten years, I have seen the role of the forward thinking agents evolve from a person collecting the rent to a more all-inclusive role; I call it, ‘strategic portfolio leadership’. Thankfully, along with myself, there are a handful of agents in Tamworth whom I would consider exemplary at this landlord portfolio strategy where they can give you a balanced structured overview of your short, medium and long-term goals, in relation to your required return on investment, yield and capital growth requirements. If you would like such advice, speak with your current agent – whether you are a landlord of ours or not – without any cost or commitment, feel free to drop me a line.

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Tamworth House Prices vs Tamworth Rents since 2006

The Tamworth housing market is a fascinating beast and has been particularly interesting since the Credit Crunch of 2008/9 with the subsequent property market crash. There is currently some talk of a ‘property bubble’ nationally as Brexit seems to be the ‘go-to’ excuse for every issue in the Country. Upon saying that, looking at both what we do as an agent, and chatting with my fellow property professionals in Tamworth, the market has certainly changed for both buyers and sellers alike (be they Tamworth buy to let landlords, Tamworth first time buyers or Tamworth owner occupiers looking to make the move up the Tamworth property ladder).

Tamworth house values are 7.67% higher than a year ago, and the rents Tamworth tenants have to pay are 1.6% higher than a year ago

When we compare little old Tamworth to the national picture, national property values have risen by 0.4% compared to last month and risen by 3.0% compared to a year ago, and this will surprise you even more, as nationally, property values are 19.8% higher than January 2015 (compared to 11.4% higher in the EU in the same time frame).

However, if we look further back…

Since 2006, Tamworth house values are 35.36% higher, yet the rents Tamworth tenants have had to pay for their Tamworth rental property are 17.7% higher

Rent Vs House Prices
Rent Vs House Prices

 

…which sounds a lot, yet UK inflation in those 12 years has been 42%, meaning Tamworth tenants are 24.3% better off in ‘real spending power terms’.

Looking at the graph, the rental changes have been much gentler than the roller coaster ride of property values. I particularly want to bring to your attention the dip in Tamworth house values (in red) in the years of 2008 and 2009 … yet as Tamworth property values started to rise after the summer of 2009, see how Tamworth rents dipped 6/12 months later (the yellow bars)…. Fascinating!

So, we have a win for tenants and a win for the homeowners, as they are also happy due to the increase in the value of their Tamworth property.

However, maybe an even more interesting point is for the long-term Tamworth buy to let landlords. The performance of Tamworth rental income vs Tamworth house values has seen the resultant yields drop over time (if house prices rise quicker than rents – yields drop).

Whilst, it’s true Tamworth landlords have benefited from decent capital growth over the last decade –with the new tax rules for landlords – now more than ever, it’s so important to maximise one’s yields to ensure the long term health of your Tamworth buy to let portfolio. More and more I am sitting down with both Tamworth landlords of mine and landlords of other agents who might not be trained in these skills – to carry out an MOT style check on their Tamworth portfolio, to ensure your investment will meet your future needs of capital growth and income. If you don’t want to miss out on such a MOT check up, drop me a line – what have you got to lose? 30 minutes of time against peace of mind – the choice is yours.

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The Unfairness of the Tamworth Baby Boomer’s £2,573,260,000 Windfall? (Part 1)

Recently I was having a chat with one of my second cousins at a big family get-together. The last time I had seen them their children were in their early teens. Now their children are all grown up, have partners, dogs and children. Gosh – how time flies!

So, I got talking over a glass of wine with my 2nd cousins and a couple of their children, about the times of 15% interest rates and how the more mature members of our family had to endure the 3 day week, 20% inflation and the threat of nuclear annihilation in 4 minutes .. so, foolishly, I said what with all the opportunities youngsters had today, they had never had it so good!

Trust one of my cousin’s children to have gained some financial/economics qualifications before going to Law School, as they debated with me the genuine economic predicament of Millennials and how a combination of student debt, unemployment, global proliferation, EU migration and rising house values is reducing the salaries and outlook of masses of the UK’s younger generation, causing an unparalleled disparity of wealth between the generations. So of course I asked why that was?

Baby Boomers and the Tamworth property market
Baby Boomers and the Tamworth property market

They said Millennials were paying the price for the UK’s most spectacular bookkeeping catastrophe to date (bigger than the Bank bailout after the Credit Crunch). Back in the 1950’s and 1960’s, nobody predicted us Brit’s would live as long as we do today, and in such abundant numbers. The OAP pensions that were promised in the past (be that Government State Pension or Company Final Salary Schemes) which appeared to be nothing fancy at the time, are now burdensome and  over-lavish, and that is hurting the Millennials of today and will do so for years to come.

Bringing it back to property, the young 2nd cousin once removed ‘soon to be’ lawyer, stated that baby boomers born between 1945 and 1965 have been big recipients of the vast rising house prices over the 1970’s/80’s/90’s and 2000’s. Add to that their decent pensions, meaning cumulatively, their wealth has grown exponentially through no skill of their own.

This disparity of wealth between the older and younger generations could have unparalleled consequences for the living standards of younger Millennials…. So Houston Tamworth – do we have a problem??

Well Tamworth Property Blog readers, you know I like a challenge. I can’t disagree with some of what the younger family member said, but there are always two sides to every story, so I thought I would do some homework on the matter ..

Since 1990, the average value of a property in Tamworth has risen from £72,000 to its current level of £209,600. As there are a total of 18,701 homeowners aged over 50 in Tamworth; that means there has been a £2.57bn windfall for those Tamworth homeowners fortunate enough to own their own homes during the property boom of the 1990s and early 2000’s.

Average value of property in Tamworth 1990 - 2017
Average value of property in Tamworth 1990 – 2017

 

 

 

 

 

 

 

 

 

I must admit that the growth in property values in the 1990’s and 2000’s certainly helped many of Tamworth’s baby boomers. The figures do appear to put into reverse gear the perceived wisdom that each generation gets wealthier than the previous one  … and so with all this wealth, the figures do back up the youngsters argument that Millennials are being priced out of home ownership.

Or do they? Are they?

Next week, I will carry on this discussion where I will give the Baby Boomer’s defence to the prosecution’s case!

 

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Tamworth rents rise by 14.8% since 2005

The Tamworth Property Market is a very interesting animal and has been particularly fascinating over the last 12 years when we consider what has happened to Tamworth rents and house prices.

Tamworth rents rise by 14.8% since 2005

Tamworth rents rise by 14.8% since 2005There’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 Tamworth property market. You see, an important, yet overlooked measure is the performance of rental income vs house prices (i.e. the resultant yields over time). In Tamworth (as for the rest of Great Britain), notwithstanding a slight drop in 2008 and 2009, property rentals have been gradually increasing.

The income from rentals has been progressively increasing over the last 12 years. Today, they are 14.8% higher than they were at the beginning of 2005. In fact, over the last five years, the average growth has been 1.4% per annum. 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 – our friend inflation.

Turn the clock back to 2005, and we have a property being rented for say £900 a month and that is still being rented at £900 a month today, in Spring of 2017. 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 Tamworth to inflation since 2005, Tamworth landlords are worse off today, when they receive their monthly rental income, than they were in 2005 by 23.7% in real terms (rents increased by 14.8% since 2005, less the 38.5% inflation since 2005 – net affect 23.7% drop)

Tamworth rents rise by 14.8% since 2005

Tamworth rents rise by 14.8% since 2005

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 Tamworth landlords may be content to accept that for a colossal increase in capital value.

Property values in Tamworth have risen by 23.05% since 2005

This equates to a reasonably salubrious 1.92% per annum increase over the last 12 years. Even more interesting that this includes the 2008/9 property crash, this will make those Tamworth 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 in Tamworth 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 landlord’s 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 Tamworth 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 like I offer my landlords. The clear majority of agents in Tamworth 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, the kettle is on!

For more thoughts on the Tamworth Property market – visit the Tamworth Property Blog https://www.tamworthpropertyblog.co.uk

If you are a landlord or thinking of becoming one for the first time and you want to read more articles like this about the Tamworth Property Market, together with regular postings on what I consider the best buy to let deals in Tamworth (out of the many of properties on the market, irrespective of which agent is selling it) then feel free to get in touch!

Email me on Lorraine@hallandthompson.co.uk or call on 07531484956.

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