As 42.3% of Tamworth Property on the Market is Sold Are there any bargains because of Brexit?

Bargains – well yes and no – and let me explain why. To find a bargain you need to know the ‘market’, yet there is not one ‘property market’ in the UK. In fact, the British property market is like a fly’s eye, it looks one whole but in fact it is split into lots of fragmented pieces and the same goes for the Tamworth property market as that too is split into different patches… in fact it can even come down to two streets adjacent to each other, one street selling like hot cakes for top dollar whilst the next street can stick and at comparatively lower prices (i.e. if there is a school catchment boundary or differing postcode).

According to Coutts, property values in ‘Prime London’ have dropped by 14.7% in the last 5 years … yet look closely at those stats and Prime London is considered anything within a 1,500m radius of Kensington High Street above £4.6m – a totally different world to the average property in Tamworth, which is worth just under £230,000 and has risen in value over those same 5 years by 31.5%  .. a different world!

I have noticed that the top end of the market above £500,000 in Tamworth and the surrounding areas is proving a little tougher to shift than a few years ago, yet this can’t all be blamed on Brexit, as buyers have long been flinching at overestimated asking prices and excessive stamp duty rates.

In Tamworth, 25.3% of properties for sale have reduced their asking price in the last 3 months by an average of 4.5%

A lot less than the reductions that are being seen in central London. In fact, the property market in Tamworth is looking reasonably good with

42.3% of properties on the market in Tamworth being shown as under offer and Sold subject to contract

…Interesting when compared with the aforementioned London Prime market where only 5.86% of the properties for sale are sold .. some bargains to be had there!

So, where are the bargains in Tamworth? Well, to start with, it’s all about knowing the local Tamworth market. It’s all about comparing and contrasting property, so to start with, check out the property web-portals such as Zoopla and Rightmove to see what’s for sale. The art here is to click on the ‘include Sold stc’ in the filters .. then arrange them in price order. Then you will get a feel for what properties are roughly selling for. Also look at recent sales, so in Rightmove click on ‘House Prices’ on the main menu, on the proceeding drop down menu click on ‘Find Sold House prices’ and now you can type in a street, or even a street plus 0.25miles/0.5miles .. click on ‘List View’ and they are in date order. There is a similar function in Zoopla (feel free to contact me if you need a hand with that).

Then once you have found what you think is a bargain .. view it. Ask the agent why the sellers are moving.  By doing your research on the seller, seeing how long it has been on the market, whether they have reduced the asking price (if you ask an agent they have to tell you and by how much)  — you could cut a better deal if they are compelled to sell. Push home your advantage i.e. if you are a first-time buyer, don’t have a property to sell, chain free or cash purchaser it can all make a difference.

Looking at the numbers above, some savvy Tamworth landlords and home buyers are taking advantage of the doom and gloom newspaper headlines as property owners’ expectations are probably at the lowest they have ever been since the Credit Crunch, especially if they are in the ‘got to sell’ category instead of the ‘would like to sell’ category.

Like anything in life .. buying a property bargain comes down to putting the hard-work in, doing your homework and jumping at opportunities.

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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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How do Transport links effect the Tamworth Property Market?

It might surprise you that it isn’t always the poshest villages around Tamworth or the swankiest Tamworth streets where properties sell and let the quickest. Quite often, it’s the ones that have the best transport links. I mean, there is a reason why one of the most popular property programmes on television is called Location, Location, Location!

How do transport links effect the Tamworth property marketAs an agent in Tamworth, I am frequently confronted with queries about the Tamworth property market, and most days I am asked, “What is the best part of Tamworth and its villages to live in these days?”, chiefly from new-comers.  Now the answer is different for each person – a lot depends on the demographics of their family, their age, schooling requirements and interests etc. Nonetheless, one of the principal necessities for most tenants and buyers is ease of access to transport links, including public transport – of which the railways are very important.

Official figures recently released state that, in total, 1,578 people jump on a train each and every day from Tamworth Train station. Of those, 454 are season ticket holders. That’s a lot of money being spent when a season ticket, standard class, to London is £6,520 a year.

So, if up to £2.96m is being spent on rail season tickets each year from Tamworth, those commuters must have some impressive jobs and incomes to allow them to afford that season ticket in the first place. That means demand for middle to upper market properties remains strong in Tamworth and the surrounding area and so, in turn, these are the type of people whom are happy to invest in the Tamworth buy to let market – providing homes for the tenants of Tamworth…

The bottom line is that property values in Tamworth would be much lower, by at least 3% to 4%, if it wasn’t for the proximity of the railway station and the people it serves in the town

And this isn’t a flash in the pan. Rail is becoming increasingly important as the costs associated with car travel continue to rise and roads are becoming more and more congested. This has resulted in a huge surge in rail travel.

Overall usage of the station at Tamworth has increased over the last 20 years. In 1997, a total of 398,197 people went through the barriers or connected with another train at the station in that 12-month period. However, in 2016, that figure had risen to 1,148,686 people using the station (that’s 3,156 people a day).

How transport links effect the Tamworth property market

How transport links effect the Tamworth property market

The juxtaposition of the property and the train station has an important effect on the value and saleability of a Tamworth property. It is also significant for tenants – so if you are a Tamworth buy to let investor looking for a property – the distance to and from the railway station can be extremely significant.

One of the first things house buyers and tenants do when surfing the web for somewhere to live is find out the proximity of a property to the train station. That is why Rightmove displays the distance to the railway station alongside each and every property on their website.

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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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How The Rented Sector Has Transformed The Property Market In Tamworth

The Tamworth housing market has gone through a sea change in the past  decades with the Buy-to-Let (B-T-L) sector evolving as a key trend, for both Tamworth tenants and Tamworth landlords.

A few weeks ago, the Government released a White Paper on housing. I have had a chance now to digest the report and wish to offer my thoughts on the topic. It was interesting that the private rental sector played a major part in the future plans for housing. This is especially important for our growing Tamworth population

In 1981, the population of Tamworth stood at 65,200 and today it stands at 77,100.

Currently, the private rented (B-T-L) sector accounts for 10.9% of households in the town.  The Government want to assist people living in the houses and help the economy by encouraging the provision of quality homes, in a housing sector that has grown due to worldwide economic forces, pushing home ownership out of the reach of more and more people. Interestingly, when we look at the 1981 figures for homeownership, a different story is told.

55.5% Tamworth people owned their own home in 1981

41.24% Tamworth people rented from the Council or Housing Association in 1981

and 3.27% Tamworth rented from a Private Landlord

The significance of a suitable housing policy is vital to ensure suitable economic activity and create a vibrant place people want to live in. With the population of Tamworth set to grow to 80,000 by 2037 – it is imperative that Tamworth Borough Council and Central Government all work actively together to ensure the residential property market doesn’t hold the area back, by encouraging the building and provision of quality homes for its inhabitants.

Population of Tamworth

Population of Tamworth 1981 – 2037

One idea the Government has proclaimed is a variety of measures aimed at encouraging the Build-to-Rent (B-T-R) sector (instead of the B-T-L sector). These include allowing local authorities to proactively plan for B-T-R schemes, and making it simpler for B-T-R developers to offer inexpensive private rented homes.

To do this, the government will invent a distinct affordable housing class for B-T-R, called ‘Affordable Private Rent’, which will oblige new homes builders to at least 1 in 5 of a new home developments at a 20% discount on open-market rents and three year tenancies for tenants. In return, the new home builders will get better planning assurances.

Private landlords will not be expected to offer discounts, nor offer 3-year tenancies – but it is something Tamworth landlords need to be aware of as there will be greater competition for tenants.

Over the last ten years, home ownership has not been a primary goal for young adults as the world has changed. These youngsters expect ‘on demand’ services from click and collect, Amazon, Dating Apps and TV with the likes of Netflix. Many Tamworth youngsters see that renting more than meets their accommodation needs, as it combines the freedom from a lifetime of property maintenance and financial obligations, making it an attractive lifestyle option.

Private rented housing in Tamworth, be it B-T-L or B-T-R, has the prospective to play a very positive role.

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! lorraine@hallandthompson.co.uk  or 07531484956

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Tamworth First Time Buyers borrow £55.9m in the last 12 months

Starting with the bigger picture, over the last 12 months in the UK, 1,061,557 properties were sold with a total value of £223.74 bn. To give that some context, ten years ago 1,581,727 properties sold with a total value of £405.56bn, so it can be seen the number of people moving house has dropped by over a third over the last decade.

Whether you are a landlord, homeowner or tenant, it’s always important to keep an eye on the Tamworth property market, not just from your point of view, but also from every player’s point of view. Over the last 12 months, 1,165 properties have sold (and completed) in Tamworth, worth £223.8m. Interestingly the number of properties changing hands in Tamworth has also dropped when compared to a decade ago.

It might surprise you that first time buyers in 2017 will benefit from a slight decline in Tamworth buy-to-let investors.

Those looking to buy a home in the spring and summer of 2017 will face a far less competitive Tamworth property market than the same time of year in 2016, when the urgency to beat the buy-to-let stamp duty hike was in full swing.

Many landlords brought forward their purchases to beat the tax, and since then, the number of buy-to-let purchases has dropped slightly. First time buyers have taken advantage of that and have increased their buying. In fact, looking at the Bank of England figures, this is what UK lenders have lent on buy-to-let properties versus first time buyers over the last 12 months  …

Q4 2015 – £1bn buy-to-let mortgages vs £1.31bn for first time buyers

Q1 2016 – £1.35bn buy-to-let mortgages vs £1.08bn for first time buyers

Q2 2016 – £760m buy-to-let mortgages vs £1.28bn for first time buyers

Q3 2016 – £827m buy-to-let mortgages vs £1.42bn for first time buyers

When looking at the figures for Tamworth itself, first time buyers have borrowed more than £55.9m in the last 12 months to buy their first home. This is a ringing endorsement of their confidence in their jobs and the local Tamworth economy. Those 20 and 30 something’s who are considering being first time buyers in 2017 will find that the number of properties on the market has never been as good as it has for quite a while, meaning you have more choice of properties and less competition from so many buy-to-let landlords than a year ago.

Rightmove announced nationally that new seller enquiries are 26% up on the same time last year giving the stoutest indication that we may see a slight ease in the lack of properties on the market. When I look at the Tamworth market, at this moment in time there are an impressive 300 properties for sale, so lots of choice. All this will be welcome news amongst Tamworth first-time buyers with a combination of a proportional reduction in new investors and landlords.

2017 will be an interesting year for all homeowners, be they buy-to-let landlords, existing homeowners or future homeowners.  For more thoughts on the Tamworth property market like this, you might want to visit the Tamworth Property Market Property Blog www.tamworthpropertyblog.co.uk

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With 7,711 people in Private Rented Properties in Tamworth – Should you still be investing in Tamworth Buy To Let?

If I were a buy to let landlord in Tamworth today, I might feel a little bruised by the assault made on my wallet after being (and continuing to be) ransacked over the last 12 months by HM Treasury’s tax changes on buy to let. To add insult to injury, Brexit has caused a tempering of the Tamworth property market with property prices not increasing by the levels we have seen in the last few years. I think we might even see a very slight drop in property prices this year and, if Tamworth property prices do drop, the downside to that is that first time buyers could be attracted back into the Tamworth property market; meaning less demand for renting (meaning rents will go down). Yet, before we all run for the hills, all these things could be serendipitous to every Tamworth landlord, almost a blessing in disguise.

Tamworth has a population of 73,572, so when I looked at the number of people who lived in private rented accommodation, the numbers astounded me …

Tamworth – Accommodation Type and the Number of Occupiers
Owned outright – Tamworth Owned with a mortgage – Tamworth Shared ownership (part owned and part rented) – Tamworth Social rented (aka Council Housing) –  Tamworth Private rented – Tamworth Living rent free – Tamworth
16,678 34,977 315 13,432 7,711 459
22.7% 47.5% 0.4% 18.3% 10.5% 0.6%

Yields will rise if Tamworth property prices fall, which will also make it easier to obtain a buy to let mortgage, as the income would cover more of the interest cost. If property values were to level off or come down that could help Tamworth landlords add to their portfolio. Rental demand in Tamworth is expected to stay solid and may even see an improvement if uncertainty is protracted. However, there is something even more important that Tamworth landlords should be aware of: the change in the anthropological nature of these 20 something potential first time buyers.

I have just come back from a visit to my husbands relations after a family get together. I got chatting with my husbands nephew and his partner.  Both are in their mid/late twenties, both have decent jobs in Tamworth and they rent. Yet, here was the bombshell, they were planning to rent for the foreseeable future with no plans to even save for a deposit, let alone buy a property. I enquired why they weren’t planning to buy? The answers surprised me as a 50 something, and it will you. Firstly, they don’t want to put cash into property, they would rather spend it on living and socialising by going on nice holidays and buying the latest tech and gadgets. They want the flexibility to live where they choose and finally, they don’t like the idea of paying for repairs. All their friends feel the same. I was quite taken aback that buying a house is just not top of the list for these youngsters.

So, as 10.5% of Tamworth people are in rented accommodation and as that figure is set to grow over the next decade, now might just be a good time to buy property in Tamworth – because what else are you going to invest in?  Give your money to the stock market run by sharp suited city whizz kids – because at least with property – it’s something you can touch – there is nothing like bricks and mortar!

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