Falkirk homeowners – what is the 2017 General Election effect?

The best way to tell the future is to look at the past.

So I have looked over the last five general elections and analysed in detail what happened to the property market on the lead up to and after each general election. Some very interesting information has come to light.

Of the last five general elections (1997, 2001, 2005, 2010 and 2015), the two elections that weren’t certain were the last two (2010 with the collation and 2015 with unexpected Tory majority). Therefore, I wanted to compare what happened in 1997, 2001 and 2005 when Tony Blair was guaranteed to be elected/re-elected versus the last knife edge uncertain votes of 2010 and 2015… in terms of the number of houses sold and the prices achieved.

Look at the first graph below comparing the number of properties sold and the dates of the general elections….

It is clear, looking at the number of monthly transactions (the blue line), there is a certain rhythm or seasonality to the housing market. That rhythm/seasonality has never changed since 1995 (seasonality meaning the periodic fluctuations that occur regularly based on a season – ie you can see how the number of properties sold dips around Christmas, rises in Spring and Summer and drops again at the end of the year).

To remove that seasonality, I have introduced the red line. The red line is a 12 month ‘moving average’ trend line which enables us to look at the ‘de-seasonalised’ housing transaction numbers, whilst the yellow arrows denote the times of the general elections. It is clear to see that after the 1997, 2001 and 2005 elections, there was significant uplift in number of households sold, whilst in 2010 and 2015, there was slight drop in house transactions (ie number of properties sold).

Next, I wanted to consider what happened to property prices. In the graph below, I have used that same 12-month average housing transactions numbers (in red) and yellow arrows for the dates of the general elections but this time compared that to what happened to property values (pink line).

It is quite clear none of the general elections had any effect on the property values.  Also, the timescales between the calling of the election and the date itself also means that any property buyer’s indecisiveness and indecision before the election will have less of an impact on the market.

So finally, what does this mean for the landlords of the private rented properties in Falkirk? Well, as I have discussed in previous articles (and just as relevant for homeowners as well), property value growth in Falkirk will be more subdued in the coming few years for reasons other than the general election. But, in the long term, as the younger generation still choose to rent rather than buy … the prospects, even with the changes in taxation, mean investing in buy-to-let still looks a good bet. If you want to read more about the Falkirk property market – then why not visit thefalkirkpropertyblog.co.uk for more information?

www.thekeyplace.co.uk

#falkirk #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning

Generation rent and Falkirk

The good old days of the 1970’s and 1980’s eh … with such highlights lowlights as 24% inflation, 17% interest rates, 3 day working week, 13% unemployment, power cuts … those were the days (not)… but at least people could afford to buy their own home. So why aren’t the 20 and 30 something’s buying in the same numbers as they were 30 or 40 years ago?

Many people blame the credit crunch and global recession of 2008, which had an enormous impact on the Falkirk (Scottish and UK) housing market. Predominantly, the 20 something first-time buyers who, confronting a problematic mortgage market, the perceived need for big deposits, reduced job security and declining disposable income, discovered it challenging to assemble the monetary means to get on to the Falkirk property ladder.

However, I would say there has been something else at play other than the issue of raising a deposit – having sufficient income and rising property prices in Falkirk. Whilst these are important factors and barriers to homeownership, I also believe there has been a generational change in attitudes towards home ownership in Falkirk (and in fact the rest of the Country).

Back in 2011, the Halifax did a survey of thousands of tenants and 19% of tenants said they had no plans to buy a home for themselves. A recent, almost identical survey of tenants, carried out by The Deposit Protection Service revealed, in late 2016, that figure had risen to 38.4%, with many no-longer equating home ownership to success and believing renting to be better suited to their lifestyle.

You see, I believe renting is a fundamental part of the housing sector, and a meaningful proportion of the younger adult members of the Falkirk population choose to be tenants as it better suits their plans and lifestyle. Local Government in Falkirk (including the planners – especially the planners), land owners and landlords need an adaptable Falkirk residential property sector that allows the diverse choices of these Falkirk 20 and 30 year olds to be met.

This means, if we applied the same percentages to the current 14,362 Falkirk tenants in their 5,984 private rental properties, 5,515 tenants have no plans to ever buy a property – good news for the landlords of those 2,297 properties. Interestingly, in the same report, just under two thirds (62%) of tenants said they didn’t expect to buy within the next year.

.. but does that mean the other third will be buying in Falkirk in the next 12 months?

Some will, but most won’t … in fact, The Royal Institution of Chartered Surveyors (RICS) predicts that, by 2025, that the number of people renting will increase, not drop. Yes, many tenants might hope to buy but the reality is different for the reasons set out above.  RICS predicts the number of tenants looking to rent will increase by 1.8 million households by 2025, as rising house prices continue to make home ownership increasingly unaffordable for younger generations.  So, if we applied this rise to Falkirk, we will in fact need an additional 2,564 private rental properties over the next eight years (or 321 a year) … meaning the number of private rented properties in Falkirk is projected to rise to an eye watering 8,548 households.

As an aside, I did some research recently about the average age of first time buyers since 1990.  It you believe the hype that buying properties has recently become out of reach of first time buyers, you would expect that the average age of a first time buyer will have shot up over the last 10 years.  Interestingly, the average of a first time buyer is now just below 32 which is younger than it was in 1990 and younger than the average age of first time buyers during the period since 1990.  More about this in future articles.

www.thekeyplace.co.uk

#falkirk #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning

Is the Falkirk property market being distorted by mortgage rates?

Property had never been cheaper to buy…IF you could save the ever-increasing deposit monies AND get a mortgage.  This is what I told a potential landlord from West Linton the other day when he phone me for a chat about a buy to let property he was thinking about buying.

This was based on the current record low interest rates leading to lower and lower mortgage rates. Santander have recently launched a two year fixed rate mortgage at 0.99%!!!....although you’ll need a 40% deposit to actually get that rate.

Buy to let rates have been somewhat slower to drop as I suspect the government had been leaning on banks to ease the burden primarily to homeowners and first-time buyers rather than ‘well-off’ landlords.

Even so, there are now buy-to-let mortgages (at 65% loan-to-value) that come with a rate of 1.59%; fixed for two years. If you want a little more security, Barclays have just launched a TEN year fixed rate buy-to-let mortgage at 2.99%!

I remember in 2010 when the base rate had been at its, as of then, 0.5% low for 12 months and buy-to-let rates had trickled down from around 8% to 6% that I thought “right, time to lock-in for five years at 5.99%”…..whoops!

During the ‘credit crunch’ it was only the sharp drop in the bank base rate that saved many homeowners and landlords - particularly those buying shiny new-build apartments in far flung places. Their good fortune to be on a ‘base rate tracker mortgage' meant their monthly payments collapsed, saving them from certain financial Armageddon.

This is clear to see from the number of repossessions over the past decade. Repossessed property was big news in 2007-2009 as the TV was awash with sad news stories of families being turfed out of their home. This peaked in 2009 with 48,900 homes being repossessed, whilst in 2016 there were ‘only’ 7,700 who struggled to contend with their mortgage payments in the UK.

And this gets me on to my point…mortgage rates absolutely have distorted both Falkirk’s and the UK’s property market.

As the credit crunch hit, government had a choice - commit career suicide and let the excesses of the past wash us all away, or save those drowning in debt and kick the can down the road a little further.

Of course they took the latter course of action and house prices in Falkirk are now 28% higher than their 2008 low.

And the simple reason this has happened is mortgage rates have dropped in a spectacular fashion. You may not have been able to afford the average property in Falkirk in 2008 at £108,712 when rates were at 6% +, but how about now - when that same property costs £138,231…but rates are under 2%?

I believe mortgage rates are the number one factor that are affecting property prices in Falkirk and the country. Do you think Governments will unwind this situation and revert to mass repossessions and the collection of their own P45s? I certainly don’t.

www.thekeyplace.co.uk

#falkirk #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning

Falkirk letting agents save you £1,910 per year – some mistake surely?

A recent survey by Endsleigh Insurance has found that using a letting agent can save a landlord approximately £1,910 per year.

The research reveals that it is a common misconception by landlords that letting agents do not offer value for money. Whilst not using an agent may result in ‘savings` of around £50-100 per month, when rental income and voids are taken into account it was found that agents actually saved landlords an average of £1,910 per annum. Most of the savings were made through agents minimising void periods, compared to landlords who deal with the rental of their property themselves. The majority of those surveyed stated that costs were reduced as the agent found tenants quickly, and were able to help with legal and financial matters resulting in savings there.

The survey also found that it was important for landlords to have a good relationship with their letting agent, and this relationship was not just to do with finances. 50% of landlords use an agent because of their local knowledge, and 2 in 5 said that excellent service was a deciding factor.

41% of landlords stated that the main benefit of using an agent is peace of mind. In today’s climate of increasing legislation within the Private Rented Sector, unless you know what you are doing, consider using a letting agent. A good agent will be able to do more than just rent out your property for you, they will give you advice as to how to achieve the best rents, how to increase the capital value of your rental property, how to add to your portfolio, and how best to handle your growing portfolio in today’s market.

So what are the benefits of using a letting agent?

Market Appraisal

A local letting agent will be able to give a rental valuation based on their expertise of renting in that area. It is important you get this right in order to maximise the rent achieved whilst minimizing vacant periods. Letting agents have an incentive to negotiate the best rent for you.

Marketing

Most letting agents will have accounts with the big name property portals, such as Zoopla, Citylets, Lettingweb, Prime Location, giving your property the best possible exposure to prospective tenants. They may also advertise locally, including ‘To Let’ boards. Remember letting agents have a vested interest in letting your property, as they are not getting paid as long as it is sitting empty. Letting agents should advertise your property before tenants leave, minimising vacant periods.

Viewings
Letting agents will provide accompanied viewings at times to suit the viewer. This helps find the best tenant in the fastest time, again minimising voids. 

Finding the Best Tenants

Getting the right tenant is essential, as you want someone who will pay their rent, and look after the property. Most letting agents will use a reference checking agency, and as long as the landlord agrees, will take up comprehensive references, including credit checking, to find you a good tenant. The Key Place has local staff who often know tenants in the area, and can therefore advise on who to accept, and who to avoid!

Inventories

It is essential that you have a comprehensive inventory which fully evidences the state, condition and cleanliness of your property at the start and end of every tenancy. If you do not have this, it may not be possible to retain money from the deposit to cover any damage, cleaning etc. The Key Place use bespoke inventory software to provide detailed and accurate inventories embedded with photographs. We would urge all landlords to agree to an inventory being carried out at their property at the start of every tenancy. It is essential that you safeguard your investment, and we will do everything we can to help you.

Legal Requirements

The rental industry is becoming increasingly regulated to ensure properties meet acceptable standards. Landlords have a responsibility to ensure legal requirements are being met. There are large fines for non-compliance. Letting agents will be able to advise on all requirements. They will also have good trades contacts who can carry out necessary safety checks, including landlord gas safety certificates, electrical safety certificates, heat and smoke alarms, and legionella testing. New legislation is being introduced to this industry the whole time, and so it is essential you have somebody who is in the know keeping you updated, and dealing with this for you.

Paperwork

Letting agents will deal with all legal contracts (AT5, lease, tenant information pack) on your behalf. These must be completed correctly in order to protect your investment. 

Rent and Deposit

The letting agent will collect the deposit and submit it to the tenancy deposit scheme for you. They will then deal with the deposit return at the end of the tenancy. They will collect the rent and make monthly rental payments to the landlord, with a statement of account. They will advise on rent increases throughout the tenancy. 

Repairs

Letting agents will deal with all repairs promptly on your behalf. As they can provide a regular stream of work, they have access to the best and most reliable tradesmen. It is important to keep good tenants, and good tenants do expect a reactive repairs service. Letting agents can also advise on repairs and a maintenance schedule to ensure that your property holds its value.

Inspections

A letting agent will carry out regular inspections to make your property is being well maintained, and will take action if it is not. Protecting the value of your asset should be a key consideration, which is why receiving regular inspection reports are necessary. 

Dealing with Tenancy Problems

Tenancies do not always run smoothly. Letting agents are experienced in dealing with all sorts of problems, from anti-social behaviour, to non-payment of rent. If needs be, they know the legal process for getting tenants out and will deal with this for you.

Ending the Tenancy

The letting agent will deal with everything at the end of a tenancy, from check out inspections to deposit returns. They will also source a new tenant for you as quickly as possible. 

Landlord/Tenant Relationships

Letting agents provide a buffer zone between landlord and tenant. Landlords who manage their own properties can run into all sorts of problems if things go wrong with the tenants. You risk having them on the phone to you at 3am, demanding their toilet is fixed. By using a letting agent, the relationship is kept on a business footing, allowing you to relax, knowing your property is in safe hands. Reputable letting agents undoubtedly have experience with almost every issue you may encounter. They will be able to guide you through the vast amount of legislation that landlords must deal with, as well as dealing with the complexities of lettings, and offering solutions to practical issues. Not everyone is suited to being a landlord. Your rental property needs to be managed, and if you don’t have the time or the skill to do this, they you need to find a letting agent who does. Delegating the work to someone who knows what they are doing makes sense, in that it saves times and shifts the responsibility to someone you can trust to do a good job.

Choose a letting agent who is a member of a registered body, such as the Council of Letting Agents, and Landlord Accreditation Scotland. The Key Place is one of Scotland’s leading letting agencies, managing properties throughout Falkirk as well as further afield throughout Midlothian, Edinburgh, East Lothian, Central Scotland and the Scottish Borders. Please contact me if you would like any advice on your rental property or if you are interested in becoming a landlord.

www.thekeyplace.co.uk

#falkirk #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning