The ‘Right to Buy’ scheme was a policy introduced by Maggie Thatcher in 1980 which gave secure council tenants the legal right to buy the Council home they were living in with huge discounts. The heyday of Council ‘Right To Buys’ was in the 80’s and 90’s, when 1,719,368 homes in the country were sold in this manner between October 1980 and April 1998. However, in 1997, Tony Blair reduced the discount available to Tenants of council houses and the numbers of properties being bought under the Right to Buy declined.

So what does this mean for Locks Heath homeowners and Landlords? Well quite a lot actually!

Looking at the figures for our local authority, whilst the number of ‘Right to Buys’ have dwindled over the last few years to an average of only 29 ‘Right to Buy’ sales per year, one must look further back in time. Looking at the overall figures, 2,049 Council properties were bought by council Tenants in the Fareham Borough Council area between 1980 and 1998. Big numbers by any measure and even more important to the whole Locks Heath property market (i.e. every Locks Heath homeowner, Locks Heath Landlord and even Locks Heath aspiring first time buyers) when you consider these 2,049 properties make up a colossal 14.8% of all the privately owned properties in our area (because in the local authority area, there are only 13,808 privately owned properties).

Locks Heath first time buyers and Landlords can now buy these ex-council properties second hand (or the PC brigade like to call them ‘pre-loved ex–local authority dwellings’) as those original 80’s and 90’s Tenants (now homeowners) have more than passed the time of any claw back of the discount they received (council discount was repayable if the first owner sold within a stipulated time period – usually 5 years).

Now let us all be honest, some (not all), but some ex-council properties lack the vital KSA (Kerb-Side-Appeal) that some Landlords crave. The new homes builders know all about KSA as they dress up the exteriors of their new homes to make them more appealing to buyers.

Yes, the modern stuff being built in Locks Heath is lovely, but too many Landlords purchase buy to let property solely based on where they would choose to live themselves, instead of choosing with a business head and choosing where a tenant would want to live.  As I have mentioned in a previous article, a property attractive to you as a purchaser is likely to be attractive to a potential Tenant but you should always remember the first rule of buy to let property – you aren’t going to live in the property yourself. What an ex-council property lacks in terms of KSA, they more than make up for in other ways. Tenants more worried about how close the property is to a particular school or family members for child care matter to them far more than the look of a property.

Whilst ex-council properties tend to increase in value at a slower rate than more modern properties, that is more than made up for in the much higher yields – and those built between the wars or just after are really well built. Tenant demand for such properties is good since Locks Heath property values are so expensive. A lot of people can’t get mortgages to buy, so they will settle on renting, meaning there is a good demand for that sort of property to rent. Also, the very fact the council were forced to sell these Locks Heath properties in the 80’s and 90’s, means that today’s younger generation who would have normally got a council house to live in themselves, now can’t as many were sold ten or twenty years ago.

So to Locks Heath Landlords I say this… don’t dismiss ex-council houses and apartments – but remember the first rule of buy to let (see above). However, those very same Locks Heath Landlords should go in with their eyes open and take lots of advice. Not all ex-council properties are the same and even though they have good demand and high yields, they can also give you other headaches and issues when it comes to the running of the rental property. One source of advice is the Locks Heath Property Blog http://www.thelocksheathpropertyblog.co.uk

… That just leaves the 1,186 council houses still owned by the local authority to be sold to their tenants in the coming years!

My parents bought their first house in the late 1970’s, they were in their late 20’s. Interestingly, looking at some research by the Post Office from a few years ago, in the 1960’s the average age people bought their first house was 23. By the early 1970s, it had reached 27, rising to 28 in the early 1980’s.

This year alone, 464 people in Locks Heath, Warsash and Whiteley areas will turn 28 and 463 in 2017… and dare I say 393 in 2018… year in year out the conveyor belt carries on… where are the Locks Heath youngsters going to live?

Ask a Locks Heath ‘twenty something’ and most will say they do not expect to buy until they are in their mid thirties – seven years later than the 1980’s. Some people even say they will never be able to buy a property and the newspapers have labelled them ‘Generation Rent’ as they are people born in the 1980s who have no hope of getting on the property ladder. One of the major problems facing young Locks Heath people is the large deposit needed to get a mortgage… or is it?

The average price paid for an apartment in Locks Heath over the last 12 months has been £149,700 meaning our first time buyer would need to save £7,485 as a deposit (as 95% mortgages have been available to first time buyers since 2010) plus a couple of thousand for solicitors and survey costs. A lot of money, but people don’t think anything today of spending a couple of thousand pounds to go on holiday, the latest iPhone upgrade or the latest 4K HD television. That amount could soon be saved if these ‘luxuries’ were withheld over a couple of years but attitudes have changed.

Official figures, from the Office for National Statistics, show the average male in Fareham with a full-time job earns £628.80 per week whilst the average female salary is £476.00 a week, meaning, even if one of them worked part time, they would still comfortably be able to get a mortgage for an apartment.

I was reading a report/survey commissioned by Paragon Mortgages from the autumn of last year. The thing that struck me was that when tenants were asked about their long term housing plans, some 35% of participating tenants intend to remain within the rental sector and 24% intended to buy a house in the future, with the proportion of respondents citing the “unaffordability” of housing as the reason for renting privately increasing from 69% to 74%.

However, time and time again, in the starter home category of property (ie apartments), nine times out of ten the mortgage payments to buy a Locks Heath property are cheaper than having to rent in Locks Heath. It is the Tenant’s perception that they believe they can’t buy, so choose not to. Renting is now a choice. Tenants can upgrade to bigger and better properties and move up the property ladder quicker than their parents or grandparents (albeit they don’t own the property). Over the last decade, culturally in the UK, there has been a change in the attitude to renting so, unless that attitude changes, I expect that the private rental sector in Locks Heath (and the UK as a whole) is likely to remain a popular choice for the next twenty plus years. With demand for Locks Heath rental property unlikely to slow and newly formed households continuing to choose the rental market instead of purchasing a property. I also forecast that renting will continue to offer good value for money for tenants and recommend landlords pursue professional advice and adopt a realistic approach to rental increases to ensure that they are in line with inflation and any void periods are curtailed. One place for advice, comment and opinion is the Locks Heath Property Blog www.thelocksheathpropertyblog.co.uk.

I was speaking to a friend of mine this week who is looking to invest in some properties to let out.  He asked me for my opinion on what to look for when purchasing a Buy-to-Let property.  So I thought that I would pass on my advice to you lovely readers.

Your Return

The first and most obvious place to start is the annual return that you are going to get back from your investment.  A simple calculation dividing the projected annual rental income by the purchase price of the property and then multiplying the answer by 100 will give you a gross yield figure.

However if the property you are looking at is leasehold then you will also need to factor in any ground rent and maintenance charges in to your calculation.  The sum of these charges should be deducted from the projected annual rental income before the rest of the calculation above is carried out.

A quick look at current available stock on Rightmove tells us that the average gross yield on a two bedroom property in the SO31 area is currently 4.3%.  In Locks Heath though the average rental figure is slightly higher than the SO31 average at £900pcm meaning that the average gross yield is also higher at 5.1%.

Another thing for consideration that may have an effect on your yield, especially in the first year, is the condition of the property.  Are you going to have to do any work to get the property ready for the rental market?  Is it just decorative or are you talking new carpets or even bathrooms or kitchens?

What do Tenants want?

The next thing to look at is how in demand your property is going to be once you start offering it to the rental market.  The last thing you want is to start sweating over how easily you will find a new Tenant every time it comes up for re-let.  Currently in SO31 40% of properties listed to let on Rightmove are let agreed compared to 64% in Locks Heath.  Looking at the graph below the most popular size of property are one and two bedroom.

So what style of property do Tenants prefer?  The truth is that there are some people out there who only want a house due to their desire for outside space.  But there are also a lot of people that don’t want the ongoing maintenance of a garden so want an apartment or flat.  Whilst I always advise potential Landlords to emotionally detach themselves from their rental properties there is a lot to be said for choosing a property or even area that you would like to live yourself if you were in the Tenants’ shoes.  In a slower market curb appeal has a lot of say over whether your property fades in to the background on Tenants’ searches online and therefore whether or not to pick up the phone and come and view it.  Proximity to particular schools or bus train routes also plays a part in Tenants’ decisions so also bear this in mind.

Lastly consideration should be made to the future.  A good property should sell easily if you ever need to release some funds.  So if you are considering buying a property to let out you should buy a property that is going to be saleable.

If you are thinking of purchasing a Buy-to-Let property, whether you are an existing Landlord of mine or not feel free to give me a call on 01489 570011 or drop me a line at james.hill@brooklettings.co.uk.  I will always give you my unbiased opinion on any potential purchases.

For more articles like this visit The Locks Heath Property Blog.

Locks Heath’s continuing housing shortage is putting the suburb’s (and the Country’s) repute as a nation of homeowners ‘under threat’, as the number of houses being built continues to be woefully inadequate in meeting the ever demanding needs of the growing population in the suburb.   In fact, I was talking to my in-laws the other day at a family get together; the subject of the Locks Heath Property market came up in the conversation (as I am sure it does at many a get together and family party in Locks Heath) after the weather and politics. My mother-in-law said it used to be that if you went out to work and did the right thing, you would expect that relatively quickly over the course of your career you would be buying a house, you would go on holiday every year, you would save for a pension.   But now things seem to have changed?

Back in the Autumn, George Osborne, used the Autumn Statement to double the housing budget to £2bn a year from April 2018 in an attempt to increase supply and deliver 100,000 new homes each year until 2020.  The Chancellor also introduced a series of initiatives to help get first time buyers on the housing ladder, including the contentious Help to Buy Scheme and extending Right to Buy from not just Council tenants, but to Housing Association tenants as well.

Now that does all sound rather good, but the Country is only building 137,490 properties a year (split down 114,250 built by private builders, 21,560 built by Housing Associations and a paltry 1,680 council houses).    If you look at the graph below (courtesy of ONS), you will see nationally, the last time the country was building 230,000 houses a year was in the 1960’s.

How Mr Osborne is going to almost double house building overnight, I don’t know, because using the analogy of a greengrocers; if people want to buy more apples (i.e. houses) in a greengrocers’ shop, giving them more money (i.e. with the Help to Buy scheme) when there’s not enough apples in the first place doesn’t really help.

Looking at the Locks Heath house building figures, in the local authority area as a whole, only 400 properties were built in the last 12 months, split down into 350 privately built properties and 50 housing association with not one council house being built.   This is simply not enough and the shortage of supply has meant Locks Heath property values have continued to rise, meaning they are 7.5% higher than 12 months ago, rising 0.8% in the last month alone.

It’s all about supply and demand, this economics game.

The demand for Locks Heath property has been particularly strong for properties in the good areas of the suburb and it is my considered opinion that it is likely to continue this year, driven by growing demand among buyers (both Locks Heath homebuyers and Locks Heath landlords alike). You see Locks Heath’s economy is quite varied, meaning activity is expected to remain relatively strong into the early Summer of 2016, especially as some Locks Heath buy to let landlords try to complete purchases ahead of the introduction of new stamp duty rules in April.

.. and of supply, well we have spoken about the lack of new building in the suburb holding things back, but there is another issue relating to supply.   Of the existing properties already built, the concern is the number of properties on the market and for sale.   The number of properties for sale last month in Locks Heath was 90, whilst 12 months ago, that figure was 144 whilst three years ago it stood at 249… a massive drop!

With demand for Locks Heath property rising, minimal new homes being built and less properties coming onto the market, that can only mean one thing … now is a good time to be a homeowner or landlord in Locks Heath.

For more articles like this, please visit the Locks Heath Property Blog www.thelocksheathpropertyblog.co.uk.

Some commentators are saying buy to let is about to die, with the new stamp duty changes and how mortgage tax relief will be calculated. Some say 500,000 rental properties will flood the market nationally in the next 12 months as landlords leave the rental market. Have you heard the phrase ‘Bad news sells newspapers’? Let me explain why buy to let in Locks Heath is only going in one direction – and not the direction the papers say they are going.

According to Sheffield University, buy to let landlords will continue fuelling the growth of the private rented sector in the coming decades. By their estimates (and they are considered a centre of excellence on the topic), the rate of homeownership nationally will fall to 50% (today it is 75.8% in the Locks Heath area) by 2032, while the rate of private sector renting will increase to 35% (interestingly, in Locks Heath area it stands at 12.3% today).

Therefore, the demand for rental accommodation in Locks Heath and SO31 postcode will grow by 471 households in the next five years ... and these are the reasons why, irrespective of the distractions set out in the newspapers.

Locks Heath property values over the last six years have risen a lot more than average wages/salaries, meaning as homeownership and mortgage availability is dependent on your ability to pay has served to push home ownership further out of reach for many, at a time when the stock of council houses has actually withered. (Nationally, the number of council houses in the last ten years has dropped from 3.16m to 2.18m households – a drop of 31.1%).

Now it’s true the Tory’s efforts to fix the deficiency of affordable housing have focused on those who want to buy a home, ranging from Help to Buy and their much vaunted Help to Buy ISA, and Starter Homes Scheme, an initiative offering a 20% discount for first time buyers … but if you are unable to save for the deposit … none of this means anything to the ‘20 something’s’ of Locks Heath … and they still need a roof over their heads!

Currently, 5,151 people live in private rented accommodation in the Locks Heath and SO31 area. 

These are big numbers and a sizeable chunk of the electorate. So whilst it appears Locks heath “Generation Rent” youngsters will continue to rent and to not to buy for the reasons set out above, Locks Heath buy-to-let landlords will be lifted by the projections of greater rental demand. Locks Heath and the area around it still offers the prospect of strong economic growth forecasts and has a reputation as a lively and desirable place to live.

So, by 2021, the number of rental properties in Locks Heath and SO31 area will rise to 3,242.

This prediction in growth of the Locks Heath rental market is on the back of the government clamping down on tax reliefs for landlords. The point is this, gone are the days of making guaranteed returns on buy to let property. For the last 20 to 30 years, irrespective of which property you bought, making decent money on buy to let property was like shooting fish in a barrel – anyone could do it  – but not now. You must take a more considered approach to your existing and future portfolio, especially in Locks Heath. The balance of capital growth and yield, especially in this low interest rate world we live in, means Locks Heath landlords need to do more homework to ensure the investment in property gives the desired returns. One place for Locks Heath landlords and homeowners to visit for such information is the Locks Heath Property Blog www.thelocksheathpropertyblog.co.uk.