What Will Happen to Tamworth Property Values Now Interest Rates Have Risen?

welcome to Tamworth
welcome to Tamworth

The current average value of a property in Tamworth currently stands at £214,600 and the base rates at 0.5%. In many of my articles, I talk about what is happening to property values over the short term (i.e. the last 12 months or the last 5 years), but to answer this question we need to go back over 40 years, to 1975.

The average value of a Tamworth property in 1975 was £10,389

However, since 1975, we have experienced in the UK, inflation of 807.5%.

Back in 1975, the average salary was £2,291 and average car was £1,840. A loaf of bread was 16p, milk was 28p a pint and a 2lb bag of sugar was 30p. Inflation has increased prices, so comparing like for like, we need to change these prices into today’s money. In real spending power terms, an average value of a Tamworth house in 1975, expressed in terms of today’s prices is £94,294.

That means in real terms, property costs a lot more today, than in the mid 1970’s, but has it always been that way? Looking at the important dates of the UK property market, you can see from this table, the last two property boom years of 1989 and 2007, show that there was a significant uplift in the cost/value of property (when calculated in today’s prices).

Tamworth House Prices Adjusted for Retail Prices.
1975 1979 1982 1989 1997 2007 2009 Today
£87,229 £102,347 £85,512 £151,946 £95,479 £249,379 £203,263 £214,600
Office for National Statistics Retail Price Index was applied to convert nominal property values to current values

Before we move on, hold onto the thought that you can quite clearly see from the table, in real terms, properties are cheaper today in Tamworth than they were in 2007!

So, it made me wonder if there was a link between house prices, inflation and other external economic factors, such as interest rates? Interest rates have a strong influence on inflation and property values, principally because changes in the interest rate affect the cost of mortgage payments for homeowners and they affect the flow of foreign currency in (or out) of an economy, thus changing the exchange rate and prices we can sell our goods and services abroad and prices we pay on imports.

So how exactly do interest rates affect property values?

When interest rates rise, it has a substantial effect on increasing the monthly cost of mortgages. Higher mortgage payments will discourage prospective homebuyers or people looking to move up market (meaning their mortgage payments go up) – thus making it comparatively cheaper to rent.

Furthermore, the high cost of mortgage payments sometimes also pushes some existing home owners to sell, meaning there is an increase in house sellers and a decline in house purchasers, and as the law of economics state, when supply is increased and demand falls, (house) prices fall.

Another fallout of a rise in mortgage payments is a rise in repossessions. Interestingly, repossessions in the UK rose from 15,000 per annum in the late 1980’s to over 75,000 per annum in the early 1990’s, meaning even more properties came onto the market, exasperating the issue of over supply – pushing property values even lower.

 

High interest rates caused property values to fall in mid 1970’s, early 1980’s and most recently, the early 1990’s (who can remember the 15% mortgage rate!) Conversely though, the drop in property values in 2008/2009 – was not due to interest rates, but due to the credit crunch and global recession.

So, what will happen now interest rates have risen?

It is vital to remember that interest rates are not the only factor affecting property values. It is also possible that when interest rates increase (which they will from the current 0.5%), property values can also continue to rise (it happened throughout the mid to late 1980’s and again between the boom years of 2002 and 2007). When confidence in the economy is good, and we as a Country experience a period of rising real incomes (i.e. after inflation), then the British in the past have continued to buy bricks and mortar, notwithstanding the rise in interest rates.

Another important factor on property values is the supply of housing. A big reason in the current level of Tamworth house prices is due to the shortage of supply, which has kept property values higher than I would have expected.

An additional factor is whether homeowners have a variable or fixed rate mortgage. 90.6% of new mortgages taken in the last Quarter were at a fixed rate, and 66.2% of all mortgaged homeowners are on fixed-rate mortgages, therefore, they will not notice the effects of higher interest rate payments until they re-mortgage in a few year’s time, meaning there is frequently a time-lag between higher interest rates and the effect on property values.

Another factor on mortgages is the ability to get one in the first place. Back in 2014, mortgage providers were told to be stricter on their lending criteria when arranging mortgages following the footloose days of 125% loan to value mortgages with the Northern Rock.  These new rules are a lot more rigorous on borrowers’ ability to repay the payments (although it makes me laugh, when with starter homes it nearer is always cheaper to buy then rent!).

I think the final point is this … affordability is the key. Look at the graph (the red bars) and you will see in REAL HOUSE PRICE terms – it’s cheaper to buy a home today than it was in 2007, yet why aren’t we seeing people buying property at the levels we were seeing in the 2000’s before the credit crunch? Again, looking at the reasons why, I will talk about in future articles.

In conclusion, interest rates are important – but nowhere near as important on the Tamworth (and British) property market than they were 15 or 20 years ago.

So, before I go, one final thought – how do we measure the success of the Tamworth property market? Well I believe one measure that is a good bellwether is the number of property transactions, as that could show a more truthful picture of the health of the property market than property values. Maybe I should talk about that in an up and coming article?

If you are thinking of getting into the property rental market and don’t know where to start, speak to us for impartial advice and guidance to get the best return on your investment. For more information about other potential investment properties that we could introduce you to, or to ask about our thoughts on your own investment choices, call us now on 01827 425195, you can always email me on Lorraine@hallandthompson.co.uk

Don’t forget to visit the links below to view back dated deals and Tamworth Property News.

Blog  – https://www.Tamworthpropertyblog.co.uk

Facebook – – https://www.facebook.com/hallandthompsonestateagents

Twitter – https://twitter.com/hallandthompson

Website  –  https://www.hallandthompson.co.uk

Tamworth Property Values 8.5% higher than year ago – What’s the PLAN to fix the Tamworth Property Market?

It’s been nearly 18 months since Sajid Javid, the Tory Government’s Housing Minister published the White Paper “Fixing the Broken UK Housing Market”, meanwhile Tamworth property values continue to rise at 8.5% (year on year for the council area) and the number of new homes being constructed locally bumps along at a snail’s pace, creating a potential perfect storm for those looking to buy and sell.

The White Paper is important for the UK and Tamworth people, as it will ensure we have long-term stability and longevity in property market as whole. Tamworth home-owners and Tamworth landlords need to be aware of these issues in the report to ensure they don’t lose out and ensure the local housing market is fit for purpose. The White Paper wanted more homes to be built in the next couple of decades, so it might seem counter-intuitive for existing home-owners and landlords to encourage more homes to be built and a change in the direction of housing provision – as this would appear to have a negative effect on their own property.

Yet the country needs a diversified and fluid property market to allow the economy as whole to grow and flourish … which in turn will be a greater influence on whether prices go up or down in the long term. I am sure every homeowner or landlord in Tamworth doesn’t want another housing crisis like we had in 1974, 1988 and most recently in 2008.

Now, as Sajid Javid has moved on to the Home Secretary role, the 17th Housing Minister in 20 years (poisoned chalice or journeyman’s cabinet post) James Brokenshire has been given the task of making this White Paper come alive. The White Paper had a well-defined notion of what the issues were.

The first of the four points brought up was to give local authorities powers to speed up house building and ensure developers complete new homes on time. Secondly, statutory methods demanding local authorities and builders build at higher densities (i.e. more houses per hectare) where appropriate. The other two points were incentives for smaller builders to take a larger share of the new homes market and help for people renting.

However, lets go back to the two initial points of planning and density.

(1) Planning

For planning to work, we need a robust Planning Dept. Looking at data from the Local Government’s Association, in Tamworth, the council is below the regional average, only spending £21.99 per person for the Planning Authority, compared the regional average of £30.13 per head – which will mean the planning department will be hard pressed to meet those targets.

However, 90% of planning applications are decided within the statutory 8-week initial period, above the regional average of 83% (see the graph below).  I am slightly disappointed and also pleased with the numbers for our local authority when it comes to the planning and the budget allowed by our Politician to this vital service.

(2) Density of Population

24.9 people live in every hectare (or 2.471 acres) in Tamworth

It won’t surprise you that 76,813 Tamworth residents are living in the urban conurbations of the authority, giving a density of 24.9 people per hectare (again – much lower than I initially thought).

I would agree with the Governments’ ambition to make more efficient use of land and avoid building homes at low densities where there is a shortage of land for meeting identified housing needs, ensuring that the density and form of development reflect the character, accessibility and infrastructure.

It’s all very good building lots of houses – but we need the infrastructure to go with it.

Talking to a lot of Tamworth people, their biggest fear of all this building is a lack of infrastructure for those extra houses (the extra roads, doctors surgeries, schools etc.). I know most Tamworth homeowners and landlords want more houses to be built to house their family and friends … but irrespective of the density … it’s the infrastructure that goes with the housing that is just as important … and this is where I think the White Paper failed to go as far as I feel it should have done.

Interesting times ahead I believe!

If you are thinking of getting into the property rental market and don’t know where to start, speak to us for impartial advice and guidance to get the best return on your investment. For more information about other potential investment properties that we could introduce you to, or to ask about our thoughts on your own investment choices, call us now on 01827 425195, you can always email me on Lorraine@hallandthompson.co.uk

Don’t forget to visit the links below to view back dated deals and Tamworth Property News.

Blog  –

https://www.Tamworthpropertyblog.co.uk

Facebook – – https://www.facebook.com/hallandthompsonestateagents

Twitter – https://twitter.com/hallandthompson

Website  –  https://www.hallandthompson.co.uk

 

Tamworth Homeowners Are Only Moving Every 20 Years (part 2)

In the credit crunch of 2008/9 the rate of home moving plunged to its lowest level ever. In 2009 the rate at which a typical house would change hands slumped to only once every 31.5 years. The biggest reason being that confidence was low and many homeowners didn’t want to sell their home as Tamworth property prices plunged after the onset of the financial crisis in 2008. However, since 2009, the rate of home moving has increased (see the table and graph below), meaning today:

The average period of time between home moves in

Tamworth is now 20 years.

This is an increase of 58.94 per cent between the credit crunch fallout year of 2009 and today, but still it is a 38.27 per cent drop in moves by homeowners, compared to 15 years ago (The Noughties).

Average Length of Time (In Years) between Home Moves in the

Tamworth Borough Council Area

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
17.46 15.89 13.75 13.98 12.72 13.14 13.98 12.29 14.58 13.78 16.21
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
12.94 13.24 25.90 31.63 35.02 30.34 30.13 25.87 20.33 21.51 19.90

So why aren’t Tamworth homeowners moving as much as they did in the Noughties?

The causes of the current state of play are numerous. In last weeks article I talked about how ‘real’ incomes and savings had been dropping. Another issue is the long-term failure in the number of properties being built. Only a few weeks ago in the blog, I was discussing the draconian planning rules meaning house builders struggle to locate building land to actually build on.

Back in the 1960’s and 1970’s, as a country, we were building on average 300,000 and 350,000 households a year. The Barker Review a few years ago said that for the UK to stand still and keep up with housing demand (through immigration, people living longer, a just under 50% increase in the number of households with a single person since the 1980’s and family makeup (i.e. divorce makes one household now two)) we needed to build 240,000 households a year. Over the last few years, we have only been building between 135,000 and 150,000 households a year.

Finally, as the UK Population gets older, there is no getting away from the fact that a maturing population is a less mobile one.

So, what does this mean for Tamworth homeowners and landlords? 

Well, if Tamworth people are less inclined to move or find it hard to sell a property or acquire a new one, they are probably less likely to move to an improved job or a more prosperous part of the UK.

Many of the older generation in Tamworth are stuck in property that is simply too big for their needs. The fact is that, in Tamworth, nearly five out of every ten (or 48.6 per cent) owned houses has two or more spare bedrooms; or to be more exact …

10,571 of the 21,733 owned households in the Tamworth

area have two or more spare bedrooms.

So, as their children and grandchildren struggle to move up the housing ladder, with those young families bursting at the seams in homes too small for them i.e. overcrowding, we have a severe case of under-occupation with the older generation – grandparents staying put in their bigger homes, with a profusion of spare bedrooms.

Regrettably, I cannot see how the rate of properties being sold will rise any time soon. Many commentators have suggested the Government should give tax breaks to allow the older generation to downsize, yet in a recent White Paper on housing published just weeks before the General Election, there was no reference of any thoughtful and detailed policies to inspire or support them to do so.

This means that there could be an opportunity for Tamworth buy to let landlords to secure larger properties to rent out, as the demand for them will surely grow over the coming years. As for homeowners; well those in the lower and middle Tamworth market will find it a balanced sellers/buyers market, but will find it slightly more a buyers market in the upper price bands.

Interesting times ahead!

If you enjoyed reading my article, feel free to take a look my other online resources below:

Hall and Thompson Estate Agents Tamworth Youtube Channelhttps://www.youtube.com/channel/UCyF9OUR3g6E8HywCx7tU4DA

Follow The Buy-To-Let Property Investment Market in Tamworth https://www.tamworthpropertyblog.co.uk

Lorraine’s Tamworth Property Market LinkedIn Page https://www.linkedin.com/in/lorrainethompson2/

Hall and Thompson Estate Agents Tamworth Facebook Page https://www.facebook.com/Hallandthompsonestateagents/

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Tamworth House Prices Outstrip Wage Growth by 15.34% since 2007

I recently read a report by the Yorkshire Building Society that 54% of the country has seen wages (salaries) rise faster than property prices in the last 10 years. The report said that in the Midlands and North, salaries had outperformed property prices since 2007, whilst in other parts of the UK, especially in the South, the opposite has happened and property prices have outperformed salaries quite noticeably.

As regular readers of my blog know, I always like to find out what has actually happened locally in Tamworth. To talk of North and South is not specific enough for me. Therefore, to start, I looked at what has happened to salaries locally since 2007. Looking at the Office of National Statistics (ONS) data for Tamworth Borough Council, some interesting figures came out…

Tamworth West Midlands Nationally
2007  £24,357  £22,417  £23,920
2008  £25,059  £23,390  £24,960
2009  £24,216  £23,754  £25,506
2010  £25,246  £24,398  £26,088
2011  £25,761  £24,190  £26,010
2012  £25,002  £24,404  £26,432
2013  £25,121  £25,116  £26,931
2014  £23,769  £25,022  £27,097
2015  £24,903  £25,589  £27,508
2016  £25,527  £26,406  £28,132

Salaries in Tamworth have risen by 4.8% since 2007 (although it’s been a bit of a rollercoaster ride to get there!) – interesting when you compare that with what has happened to salaries regionally (an increase of 17.79%) and nationally, an increase of 17.61%.

Next, I needed to find what had happened to property prices locally over the same time frame of 2007 and today. Net property values in Tamworth are 20.14% higher than they were in late 2007 (not forgetting they did dip in 2008 and 2009). Therefore…

Property values in the Tamworth area have increased at a higher rate than wages to the tune of 15.34% … meaning, Tamworth is bucking the regional trend

All this is important, as the relationship between salaries and property values is the basis on how affordable property is to first (and second, third etc.) time buyers. It is also vitally relevant for Tamworth landlords as they need to be aware of this when making their buy-to-let plans for the future. If more Tamworth people are buying, then demand for Tamworth rental properties will drop (and vice versa).

As I have discussed in a few articles in my blog recently, this issue of ‘property-affordability’ is a great bellwether to the future direction of the Tamworth property market. Now of course, it isn’t as simple as comparing salaries and property prices, as that measurement disregards issues such as low mortgage rates and the diminishing proportion of disposable income that is spent on mortgage repayments.

On the face of it, the change between 2007 and 2017 in terms of the ‘property-affordability’ hasn’t been that great. However, look back another 10 years to 1997, and that tells a completely different story. Nationally, the affordability of property more than halved between 1997 and today. In 1997, house prices were on average 3.5 times workers’ annual wages, whereas in 2016 workers could typically expect to spend around 7.7 times annual wages on purchasing a home.

The issue of a lack of homeownership has its roots in the 1980’s and 1990’s. It’s quite hard as a tenant to pay your rent and save money for a deposit simultaneously, meaning for many Tamworth people, home ownership isn’t a realistic goal. Earlier in the year, the Tories released proposals to combat the country’s ‘broken’ housing market, setting out plans to make renting more affordable, while increasing the security of rental deals and threatening to bring tougher legal action to cases involving bad landlords.

This is all great news for Tamworth tenants and decent law-abiding Tamworth landlords (and indirectly owner occupier homeowners). Whatever has happened to salaries or property prices in Tamworth in the last 10 (or 20) years … the demand for decent high-quality rental property keeps growing. If you want a chat about where the Tamworth property market is going – please read my other blog posts on www.tamworthpropertyblog.co.uk or drop me note via email, like many Tamworth landlords are doing.

If you enjoyed reading my article, feel free to take a look my other online resources below:

Hall and Thompson Estate Agents Tamworth Youtube Channel https://www.youtube.com/channel/UCyF9OUR3g6E8HywCx7tU4DA

Follow The Buy-To-Let Property Investment Market in Tamworth https://www.tamworthpropertyblog.co.uk

Lorraine’s Tamworth Property Market LinkedIn Page https://www.linkedin.com/in/lorrainethompson2/

Hall and Thompson Estate Agents Tamworth Facebook Page https://www.facebook.com/Hallandthompsonestateagents/

Tamworth Hall and Thompson Estate Agents Twitter Page  https://twitter.com/hallandthompson

33.7% Drop in Tamworth People Moving Home in the Last 10 Years

I was having a lazy Sunday morning, reading through the newspapers at my favourite coffee shop in Tamworth.  I find the most interesting bits are their commentaries on the British Housing Market.  Some talk about property prices, whilst others discuss the younger generation grappling to get a foot-hold on the property ladder with difficulties of saving up for the deposit.  Others feature articles about the severe lack of new homes being built (which is especially true in Tamworth!).  A group of people that don’t often get any column inches however are those existing homeowners who can’t move!

Back in the early 2000’s, between 1m and 1.3m people moved each year in England and Wales, peaking at 1,349,306 home-moves (i.e. house sales) in 2002.  However, the ‘credit crunch’ hit in 2008 and the number of house sales fell to 624,994 in 2009.  Since then this has steadily recovered, albeit to a more ‘respectable’ 899,708 properties by 2016.  This means there are around 450,000 fewer house sales (house-moves) each year compared to the noughties.  The question is … why are there fewer house sales?

No. of house Sales in England & Wales between 1995 & 2016
No. of house Sales in England & Wales between 1995 & 2016

 

To answer that, we need to go back 50 years.  Inflation was high in the late 1960’s, 70’s and early 80’s.  To combat this, the Government raised interest rates to a high level in a bid to lower inflation.  Higher interest rates meant the householders monthly mortgage payments were higher, meaning mortgages took a large proportion of the homeowner’s household budget. However, this wasn’t all bad news since inflation tends to erode mortgage debt in ‘real spending power terms’.  Consequently, as wages grew (to keep up with inflation), this allowed home owners to get even bigger mortgages.  At the same time their mortgage debt was decreasing, therefore allowing them to move up the property ladder quicker.

Roll the clock on to the late 1990’s and the early Noughties, and things had changed.  UK interest rates tumbled as UK inflation dropped.  Lower interest rates and low inflation, especially in the five years 2000 to 2005, meant we saw double digit growth in the value of UK property.  This inevitably meant all the home owner’s equity grew significantly, meaning people could continue to move up the property ladder (even without the effects of inflation).

This snowball effect of significant numbers moving house continued into the mid noughties (2004 to 2007), as Banks and Building Society’s slackened their lending criteria.  [You will probably remember the 125% loan to value Northern Rock Mortgages that could be obtained with just a note from your Mum!!].  This meant home movers could borrow even more to move up the property ladder.

So, now it’s 2017 and things have changed yet again!

Less people are moving home
Less people are moving home

 

You would think that with ultra-low interest rates at 0.25% (a 320-year low) the number of people moving would be booming – wouldn’t you?  However, this has not been the case.  Less people are moving because:

(1) low wage growth of 1.1% per annum

(2) the tougher mortgage rules since 2014

(3) sporadic property price growth in the last few years

(4) high property values comparative to salaries (I talked about this a couple of months ago)

 What does thistranslate to in pure numbers locally?

 In 2007, 1,629 properties sold in the Tamworth District Council area and last year, in 2016 only 1,079 properties sold – a drop of 33.76%.

 

 

 

 

Therefore, we have just over 550 less households moving in the Tamworth and surrounding Council area each year.  Now of that number, it is recognised throughout the property industry around fourth fifths of them are homeowners with a mortgage. That means there are around 451 mortgaged households a year (fourth fifths of the figure of 550) in the Tamworth and surrounding council area that would have moved 10 years ago, but won’t this year.

The reason they can’t/won’t move can be split down into different categories, explained in a recent report by the Council of Mortgage Lenders (CML). So, of those estimated 451 annual Tamworth (and surrounding area) non-movers, based on that CML report –

  1. There are around 162 households a year that aren’t moving due to a fall in the number of mortgaged owner occupiers (i.e. demographics).
  1. Then, I then estimate another 63 households a year are of the older generation mortgaged owner occupiers. As they are increasingly getting older, older people don’t tend to move, regardless of what is happening to the property market (i.e. lifestyle).
  1. Then, I estimate 27 households of our Tamworth (and surrounding area) annual non-movers will mirror the rising number of high equity owner occupiers, who previously would have moved with a mortgage but now move as cash buyers (i.e. high house price growth).
  1. I believe there are 198 Tamworth (and surrounding area) mortgaged homeowners that are unable to move because of the financing of the new mortgage or keeping within the new rules of mortgage affordability that came into play in 2014 (i.e. mortgage).

The first three above are beyond the Government or Bank of England control.  However could there be some influence exerted to help the non-movers because of financing the new mortgage and keeping within the new rules of mortgage affordability? If Tamworth property values were lower, this would decrease the size of each step up the property ladder. This would mean the opportunity cost of increasing their mortgage would reduce (i.e. opportunity cost = the step up in their mortgage payments between their existing and future new mortgage) and they would be able to move to more upmarket properties.

Then there is the mortgage rules, but before we all start demanding a relaxation in lending criteria for the banks, do we want to return to free and easy mortgages 125% Northern Rock footloose and fancy-free mortgage lending that seemed to be available in the mid 2000’s … available at a drop of hat and three tokens from a cereal packet?

We all know what happened with Northern Rock …. Your thoughts would be welcome on this topic.

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Thanks for reading my thoughts on our local property market.

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Tamworth Homeowners and their £1.19 billion Debt

Over the last 12 months, the UK has decided to leave the EU, have a General Election with a result that didn’t go to plan for Mrs May and to add insult to injury, our American cousins elected Donald Trump as the 45th President of the United States. It could be said this should have caused some unnecessary unpredictability into the UK property market.

The reality is that the housing and mortgage market (for the time being) has shown a noteworthy resilience. Indeed on the back of the Monetary Policy pursued by the Bank of England there has been a notable improvement of macro-economic conditions! In July for example it was announced that we are witness to the lowest levels of unemployment for nearly 50 years. Furthermore, despite the UK construction industry building 21% more properties than same time the previous year, there has still been a disproportionate increase in demand for housing, particularly in the most thriving areas of the Country. Repossessions too are also at an all-time low at 3,985 for the last Quarter (Q1 2017) from a high of 29,145 in Q1 2009. All these things have resulted in…

Property values in Tamworth according to the

Land Registry are 7.34% higher than a year ago

So, what does all this mean for the homeowners and landlords of Tamworth, especially in relation to property prices moving forward?

One vital bellwether of the property market (and property values) is the mortgage market. The UK mortgage market is worth £961,653,701,493 (that’s £961bn) and it representative of 13,314,512 mortgages (interestingly, the UK’s mortgage market is the largest in Europe in terms of amount lent per year and the total value of outstanding loans). Uncertainty causes banks to stop lending – look what happened in the credit crunch and that seriously affects property prices.

Roll the clock back to 2007, and nobody had heard of the term ‘credit crunch’, but now the expression has entered our everyday language.  It took a few months throughout the autumn of 2007, before the crunch started to hit the Tamworth property market, but in late 2007, and for the following year and half, Tamworth property values dropped each month like the notorious heavy lead balloon, meaning …

The credit crunch caused Tamworth property values to drop by 16.8%

Under the sustained pressure of the Credit Crunch, the Bank of England realised that the UK economy was stalling in the early autumn of 2008. Loan book lending (sub-prime phenomenon) in the US and across the world was the trigger for this pressure. In a bid to stimulate the British economy there were six successive interest rates drops between October 2008 and March 2009; this resulted in interest rates falling from 5% to 0.5%!

Thankfully, after a period of stagnation, the Tamworth property market started to recover slowly in 2011 as certainty returned to the economy as a whole and Tamworth property values really took off in 2013 as the economy sped upwards. Thankfully, the ‘fire’ was taken out of the property market in Spring 2015 (otherwise we could have had another boom and bust scenario like we had in the 1960’s, 70’s and 80’s), with new mortgage lending rules. Throughout 2016, we saw a return to more realistic and stable medium term property price growth. Interestingly, property prices recovered in Tamworth from the post Credit Crunch 2009 dip and are now 41.9% higher than they were in 2009.

Tamworth property values before & after the credit crunch
Tamworth property values before & after the credit crunch

Now, as we enter the summer of 2017, with the Conservatives having been re-elected on their slender majority, the Tamworth property market has recouped its composure and in fact, there has been some aggressive competition among mortgage lenders, which has driven mortgage rates down to record lows. This is good news for Tamworth homeowners and landlords, over the last few months a mortgage price war has broken out between lenders, with many slashing the rates on their deals to the lowest they have ever offered.  For example, last month, HSBC launched a 1.69% five-year fixed mortgage!

Interestingly, according to the Council of Mortgage Lenders, the level of mortgage lending had soared to an all-time high in the UK.

In the Tamworth postcodes of B77, B78 & B79, if you added up everyone’s mortgage, it would total £1,199,374,481!

Since 1977, the average Bank of England interest rate has been 6.65%, making the current 323 year all time low rate of 0.25% very low indeed. Thankfully, the proportion of borrowers fixing their mortgage rate has gone from 31.52% in the autumn of 2012 to the current 59.3%. If you haven’t fixed – maybe you should follow the majority?

In my modest opinion, especially if things do get a little rocky and uncertainty seeps back in the coming years (and nobody knows what will happen on that front), one thing I know is for certain, interest rates can only go one way from their 300 year ultra 0.25% low level … and that is why I consider it important to highlight this to all the homeowners and landlords of Tamworth. Maybe, just maybe, you might want to consider taking some advice from a qualified mortgage adviser? There are plenty of them in Tamworth.

If you are interested in the Tamworth Property Market, you might learn something by visiting the blog. https://www.tamworthpropertyblog.co.uk

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Supply and Demand Issues mean Tamworth Property Values Rise by 7.34% in the Last 12 Months

The most recent set of data from the Land Registry has stated that property values in Tamworth and the surrounding area were 7.34% higher than 12 months ago and 22.36% higher than January 2015.

Despite the uncertainty over Brexit as Tamworth (and most of the UK’s) property values continue their medium and long-term upward trajectory. As economics is about supply and demand, the story behind the Tamworth property market can also be seen from those two sides of the story.

Looking at the supply issues of the Tamworth property market, putting aside the short-term scarcity of property on the market, one of the main reasons of this sustained house price growth has been down to of the lack of building new homes.

The draconian planning laws, that over the last 70 years (starting with The Town and Country Planning Act 1947) has meant the amount of land built on in the UK today, only stands at 1.8% (no, that’s not a typo – its one point eight percent) and that is made up of 1.1% with residential property and 0.7% for commercial property. Now I am not advocating building modern ugly boxes and high-rise flats in the Yorkshire Dales, nor blot the landscape with the building of massive out of place ugly 1,000 home housing estates around the beautiful countryside of such villages as Elford and  Middleton.

Land usage
Land usage

 

 

 

 

 

 

 

 

 

The facts are, with the restrictions on building homes for people to live in, because of these 70-year-old restrictive planning regulations, homes that the youngsters of Tamworth badly need, aren’t being built. Adding fuel to that fire, there has been a large dose of nimbyism  (the not in my back yard approach) and landowners deliberately sitting on land, which has kept land values high and from that keeps house prices high.

Looking at the demand side of the equation, one might have thought property values would drop because of Brexit and buyers uncertainty. However, certain commenters now believe property values might rise because of Brexit. Many people are risk adverse, especially with their hard-earned savings. The stock market is at an all-time high (ready to pop again?) and many people don’t trust the money markets. The thing about property is its tangible, bricks and mortar, you can touch it and you can easily understand it.

The Brits have historically put their faith in bricks and mortar, which they expect to rise in value, in numerical terms, at least. Nationally, the value of property has risen by 635.4% since 1984 whilst the stock market has risen by a very similar 593.1%. However, the stock market has had a roller coaster of a ride to get to those figures. For example, in the dot com bubble of the early 2000’s, the FTSE100 dropped 126.3% in two years and it dropped again by 44.6% in 9 months in 2007… the worst drop Tamworth saw in property values was just 16.85% in the 2008/9 credit crunch.

Despite the slowdown in the rate of annual property value growth in Tamworth to the current 7.34%, it can be argued the headline rate of Tamworth property price inflation is holding up well, especially with the squeeze on real incomes, new taxation rules for landlords and the slight ambiguity around Brexit. With mortgage rates at an all-time low and tumbling unemployment, all these factors are largely continuing to help support property values in Tamworth (and the UK).

For more thoughts on the Tamworth Property Market, please visit the Tamworth Property Market Blog https://www.tamworthpropertyblog.co.uk

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Tamworth First Time Buyers Mortgages taking 28.6% of their Wages

I received a very interesting letter the other day from a Tamworth resident. He declared he was a Tamworth homeowner, retired and mortgage free. He stated how unaffordable Tamworth’s rising property prices were and that he worried how the younger generation of Tamworth could ever afford to buy? He went on to ask if it was right for landlords to make money on the inability of others to buy property and if, by buying a buy to let property, Tamworth landlords are denying the younger generation the ability to in fact buy their own home.

Whilst doing my research for my many blog posts on the Tamworth Property Market, I know that a third of 25 to 30 year olds still live at home. It’s no wonder people are kicking out against buy to let landlords; as they are the greedy bad people who are cashing in on a social woe. In fact, most people believe the high increases in Tamworth’s (and the rest of the UK’s) house prices are the very reason owning a home is outside the grasp of these younger would-be property owners.

Age Distribution of First Time Buyers in UK since 1990
Age Distribution of First Time Buyers in UK since 1990

 

 

 

 

 

 

 

 

 

However, the numbers tell a different story. Looking of the age of first time buyers since 1990, the statistics could be seen to pour cold water on the idea that younger people are being priced out of the housing market. In 1990, when data was first published, the average age of a first time buyer was 33, today it’s 31.

Nevertheless, the average age doesn’t tell the whole story. In the early 1990’s, 26.7% of first-time buyers were under 25, while in the last five years just 14.9% were. In the early 1990’s, four out of ten first time buyers were 25 to 34 years of age and now its six out of ten first time buyers.

Although, there are also indications of how un-affordable housing is, the house price-to-earnings ratio has almost doubled for first-time buyers in the past 30 years. In 1983, the average Tamworth home cost a first-time buyer (or buyers in the case of joint mortgages) the equivalent of 2.5 times their total annual earnings, whilst today, that has escalated to 4.5 times their income (although let’s not forget, it was at 5.0 times their income for Tamworth first time buyers in 2007).

Again, those figures don’t tell the whole story. Back in 1983, the mortgage payments as percentage of mean take home pay for a Tamworth first time buyer was 25.9%. In 1989, that had risen to 55.5%. Today, it’s 28.6% … and no that’s not a typo .. 28.6% is the correct figure.

Mortgage payments as a percentage
Mortgage payments as a percentage

So, to answer the gentleman’s questions about the younger generation of Tamworth being able to afford to buy and if it was right for landlords to make money on the inability of others to buy property? It isn’t all to do with affordability as the numbers show.

And what of the landlords? Some say the government should sort the housing problem out themselves, but according to my calculations, £18bn a year would need to be spent for the next 20 or so years to meet current demand for households. That would be the equivalent of raising income tax by 4p in the Pound. I don’t think UK tax payers would swallow that.

So, if the Government haven’t got the money… who else will house these people? Private Sector Landlords and thankfully they have taken up the slack over the last 15 years.

Some say there is a tendency to equate property ownership with national prosperity, but this isn’t necessarily the case. The youngsters of Tamworth are buying houses, but buying later in life. Also, many Tamworth youngsters are actively choosing to rent for the long term, as it gives them flexibility – something our 21st Century society craves more than ever.

 

Whatever property type you are thinking of adding to your portfolio this year year I am sure it will let readily as the market remains strong with a lack of supply continuing to feed strong rental prices. If you are in town and would like to discuss any plans you may have, give me a call to meet for coffee on 07531484956 or email me lorraine@hallandthompson.co.uk

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Tamworth’s ‘Generation Trapped’ and the £3.77bn legacy

 

Last week, I wrote an article on the plight of the Tamworth 20 something’s often referred to by the press as ‘Generation Rent’. Attitudes to renting have certainly changed over the last twenty years and as my analysis suggested, this change is likely to be permanent. In the article, whilst a minority of this Generation Rent feel trapped, the majority don’t – making renting a choice not a predicament. The Royal Institution of Chartered Surveyors (RICS) predicted that the private rental sector is likely to grow substantially by 1.8m households across the UK in the next 8 years, with demand for rental property unlikely to slow and newly formed households continuing to choose the rental market as opposed to buying.

However, my real concern for Tamworth homeowners and Tamworth landlords alike, as I discussed a couple of months ago, is our mature members of the population of Tamworth. In that previous article, I stated that the current OAP’s (65+ yrs in age) in Tamworth were sitting on £1.43bn of residential property … however, I didn’t talk in depth about the ‘Baby Boomers’, the 50yr to 64yr old Tamworth people and what their properties are worth – and more importantly, how the current state of affairs could be holding back those younger Generation Renters.

In Tamworth, there are 6,042 households whose owners are aged between 50yrs and 64yrs and about to pay their mortgage off. That property is worth, in today’s prices, £1.21bn. There are an additional 5,570 mortgage free Tamworth households, owned by 50yr to 64yr olds, worth £1.12bn in today’s prices, meaning…

Tamworth Baby Boomers and Tamworth OAP’s are sitting

on £3.77bn worth of Tamworth Property

Tamworth property

Tamworth property  these Tamworth Baby Boomers and OAP’s are sitting on 18,701 Tamworth properties and many of them feel trapped in their homes, and hence I have dubbed them ‘Generation Trapped’.

Recently, the English Housing Survey stated 49% of these properties owned by the Generation Trapped, as I have dubbed them, are ‘under-occupied’ (under-occupied classed as having at least two bedrooms more than needed). These houses could be better utilised by younger families, but research carried out by the Prudential suggest in Britain it’s estimated that only one in ten older people downsize while in the USA for example one in five do so.

The growing numbers of older homeowners who want to downsize their home are often put off by the difficulties of moving. The charity United for all Ages, suggested recently many are put off by the lack of housing options, 19% by the hassle and cost of moving, 14% by having to declutter their possessions and 14% by family reasons such as staying close to children and grandchildren.

Helping mature Tamworth (and the Country) homeowners to downsize at the right time will also enable younger Tamworth people to find the homes they need – meaning every generation wins, both young and old. However, to ensure downsizing works, as a Country, we need more choices for these ‘last time buyers’.

Theresa May and Philip Hammond can do their part and consider stamp duty tax breaks for downsizers, our local Council in Tamworth and the Planning Dept. should play their part, as should landlords and property investors to ensure Tamworth’s ‘Generation Trapped’ can find suitable property locally, close to friends, family and facilities.

If you spot a property and would like a second opinion then feel free to get in touch with me. My only interest is to make sure you get the best outcome from your investment. Rest assured I have no motive to try and sell you a house and I will not be biased towards any one vendor.

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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Tamworth Unemployment Drops to 3.1% and its effect on the Tamworth Property Market

 

It was late May 2016, The Right Hon. Member for Tatton, Mr George Osborne, published an official HM Treasury analysis stating UK house prices would be lower by at least 10% (and up to 18%) by the middle of 2018 compared with what is expected if the UK remained in the European Union. So, eight months on from the Referendum, are we beginning to show signs of that prophecy? The simple answer is yes and no.

Good barometers of the housing market are the share prices of the big UK builders. Much was made of Barratt’s share price dropping by 42.5% in the two weeks after Brexit, along with Taylor Wimpey’s equally eye watering drop in the same two weeks by 37.9%. Looking at the most recent set of data from the Land Registry, property values in Tamworth are 1.19% down month on month (and the month before that, they had grown with a increase of only 1.3%) – so is this the time to panic and run for the hills?

Doom and Gloom then? Well, let me consider the other side of the coin.

Well, as I have spoken about many times in my blog, it is dangerous to look at short term. I have mentioned in several recent articles, the heady days of the Tamworth property prices rising quicker than a thermometer in the desert sun between the years 2011 and late 2016 are long gone – and good riddance. Yet it might surprise you during those impressive years of house price growth, the growth wasn’t smooth and all upward. Tamworth property values dropped by an eye watering 2.39% in April 2013 and 1.39% in January 2015 – and no one batted an eyelid then.

You see, property values in Tamworth are still 7.57% higher than a year ago, meaning the average value of a Tamworth property today is £201,500. Even the shares of those new home builders Barratt have increased by 43.3% since early July and Taylor Wimpey’s have increased by 37.3%. The Office for Budget Responsibility, the Government Spending Watchdog, recently revised down its forecast for house-price growth in the coming years – but only slightly.

The Tamworth housing market has been steadfast partly because, so far at least, the wider economy has performed better than expected since Brexit. There is a robust link between the unemployment rate and property prices, and a flimsier one with wage growth. Unemployment in the Tamworth Borough Council area stands at 1,300 people (3.1%), which is considerably better than a few years ago in 2012 when there were 3,500 people unemployed (9.8%) in the same council area.

unemployment, Tamworth, average house price, inflation, Tamworth housing market

However, inflation is the only thing that does worry me. Looking at all the pundits, it will get to at least 3% (if not more) in the latter part of 2017 as the drop in Sterling in late 2016 renders our imports with higher prices. If that transpires then the Bank of England, whose target for inflation is 2%, may raise interest rates from 0.25% to 2%+. However, that won’t be so much of an issue as 81.6% of new mortgages in the UK in the last two years have been fixed-rate and who amongst us can remember 1992 with Interest rates of 15%!

Forget Brexit and yes inflation will be a thorn in the side – but the greatest risk to the Tamworth (and British) property market is that there are simply not enough properties being built thus keeping house prices artificially high. Good news for those on the property ladder, but not for those first-time buyers that aren’t! In the coming weeks in my articles on the Tamworth Property Market, I will discuss this matter further!

don’t forget you can keep up to date with all our articles on the Tamworth Property Market here….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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