Yes, I said ‘rentirement’, not retirement… rentirement, and it relates to the 397 (and growing) Locks Heath people, who don’t own their own Locks Heath home but rent their home, privately from a buy to let Landlord and who are currently in their 50’s and early to mid-60’s.

The truth is that these Locks Heath people are prospectively soon to retire with little more than their state pension of £155.95 per week, probably with a small private pension of a couple of hundred pounds a month, meaning the average Locks Heath retiree can expect to retire on about £200 a week once they retire at 67.

The average rent in Locks Heath is £886 a month, so a lot of the retirement “income” will be taken up in rent, meaning the remainder will have to be paid for out their savings or the taxpayer will have to stump up the bill – and with life expectancy currently in the mid to late 80’s, that is quite a big bill…  a total of £84,418,080 over the next 20 years to be paid from the tenant’s savings or the taxpayers coffers to be precise!

You might say it’s not fair for Locks Heath tax payers to pick up the bill and that these mature Locks Heath renters should start saving thousands of pounds a year now to be able to afford their rent in retirement.  However, in many circumstances, the reason these people are privately renting in the first place is that they were never able to find the money for a mortgage deposit on their home in the first place, or didn’t earn enough to qualify for a mortgage… and now as they approach retirement with hope of a nice council bungalow, that hope is diminishing because of the council house sell off in the 1980’s!

For a change, the Locks Heath 30 to 40 somethings will be better off, as their parents are more likely to be homeowners and cascade their equity down the line when their parents pass away.  For example, that is what is happening in Europe where renting is common, the majority of people rent in their 20’s, 30’s and 40’s, but by the time they hit 50’s and 60’s (and retirement), they will invest the money they have inherited from their parents passing away and buy their own home.

So, what does this all mean for buy to let Landlords in Locks Heath?

Have you noticed how the new homes builders don’t build bungalows anymore?  In fact some would said the ‘bungalow storey’ is over!  The waning in the number of bungalows being built has more to do with supply than demand.  The fact is that for new homes builders there is more money in constructing houses than there is in constructing bungalows.  Bungalows are voracious when it comes to land they need as a bungalow has a larger footprint for the same amount of square meterage as a two/three storey house due to the fact they are on one level instead of two or three.

That means, as demand will continue to rise for bungalows supply will remain the same.  We all know what happens when demand outs strips supply… prices (i.e. rents) for bungalows will inevitably go up.

As I am sure you are aware, one the best things about my job as an agent is helping Locks Heath Landlords with their strategic portfolio management.  Gone are the days of making money by buying any old Locks Heath property to rent out or sell on.  Nowadays, property investment is both an art and science.  The art is your gut reaction to a property, but with the power of the internet and the way the Locks Heath property market has gone in the last 11 years, science must also play its part on a property’s future viability for investment.

Many metrics most property professionals (including myself) use when deciding the viability of a rental property is what properties are selling for, the average rent, the yield and an average value per square foot.

However, another metric I like to use is the average rent per square foot.  The reason being is that it is a great way to judge a property from the point of view of the Tenant… what space they get for their money.  Now of course, location has a huge influencing factor when it comes to rents (and hence rent per square foot).  Like people buying a property, Tenants also have that balancing act between better/worse location, more vs. less money and size of accommodation (bigger and more rooms equalling more money) and where they live (location) verses making ends meet.

Interestingly, I know there are a lot of you in Locks Heath who like to see my statistics on the Locks Heath property market, so before I talk about the rental figures per square foot, I wanted to share the £ per square foot on the values.  In Locks Heath, the current AVERAGE figures are being achieved (and I must stress, these are average figures, so there will an enormous range in these figures), but on average, properties in Locks Heath, split down by type are achieving:

• Locks Heath Detached Property – £312 / sq ft
• Locks Heath Semi Detached Property – £302 / sq ft
• Locks Heath Terraced Property – £308 / sq ft
• Locks Heath Apartments – £301 / sq ft

So, the rental figures:

The extent of space you get for your rent is replicated in the space you get for your money when buying a property.  The average size of rental property in the Locks Heath area is 810.3 sq ft (interesting when compared to the national average of 792.1 sq ft).

This means the average rent per square foot currently being achieved on a Locks Heath rental property is £12.94 per sq ft per annum

So, what we can deduce from this?  Well the devil is always in the detail!

Whilst I was able to quote the average overall figure and the fact my research showed it was quite clear from the data that there is relationship between the average £ per sq ft figures on property values and average £ per sq ft on rental figures as a property grows in size.  However, something quite intriguing happens to those figures, in terms of what the property will sell for and what it will rent for, when we change and increase the size of the property.

My research showed that doubling the size of any Locks Heath property doesn’t mean you will double the value of it in either value or rent.  This is because the marginal value increases diminish as the size of the property increases.  In layman’s terms… Subject to a few assumptions, double the size of the house doesn’t mean double the value… what really happens is a doubling of the size gives only an approximately 40% to 65% uplift in value, but here comes the even more fascinating part… when it came to the rental figures, double the size of the house meant only 20% to 45% in increase in rent.

In a future article, I will be discussing the actual added value an extension can bring… but in the meantime, in an overall and sweeping statement, most of the time it makes sense to extend if you are going to live in the property as long as the extension is proportionate to the property, but if you are going to rent it out… possibly not.

As head in to the second month of 2018 I believe UK interest rates will stay low, even with the additional 0.25% increase that is expected in May or June.  That rise will add just over £20 to the typical £160,000 tracker mortgage, although with 57.1% of all borrowers on fixed rates, it will probably go undetected by most buy-to-let Landlords and homeowners.  I forecast that we won’t see any more interest rate rises due to the fragile nature of the British economy and the Brexit challenge.  Even though mortgages will remain inexpensive, with retail price inflation outstripping salary rises, it will still very much feel like a heavy weight to some Locks Heath households.

Now it’s certain the Locks Heath housing market in 2017 was a little more subdued than 2016 and that will continue into 2018.  Property ownership is a medium to long-term investment so looking at that long-term time frame; the average Locks Heath homeowner who bought their property 20 years ago has seen its value rise by more than 280%.

This is important, as house prices are a national obsession and tied into the health of the UK economy as a whole.  The majority of that historic gain in Locks Heath property values has come from property market growth, although some of that will have been added by homeowners modernising, extending or developing their Locks Heath home.

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

However, I want to put aside all that historic growth and profit and looking forward to what will happen in the future. I want to look at the factors that could affect future Locks Heath (and the Country’s) house price growth/profit; one important factor has to be the building of new homes both locally and in the country as a whole.  This has picked up in 2017 with 217,350 homes coming on to the UK housing ladder in the last year (a 15% increase on the previous year’s figures of 189,690).  However, Philip Hammond has set a target of 300,000 a year, so still plenty to go!

Another factor that will affect property prices is my prediction that the balance of power between Locks Heath buy-to-let Landlords and Locks Heath first-time buyers should tip more towards the local first-time buyers in 2018.

The Council of Mortgage Lenders expects the number of buy to let mortgages to drop by 34% from levels seen in 2015.  This is because of taxes being increased recently on buy-to-let and harder lending criteria for buy to let mortgages, which means I foresee a gradual move in the balance of power in favour of first-time buyers rather than buy-to-let Landlords.  First time buyers will also be helped by The Chancellor eradicating Stamp Duty for all properties up to £300,000 bought by first-time buyers in the recent budget.

This means Locks Heath buy-to-let Landlords will have to work smarter in the future to continue to make decent returns (profits) from their Locks Heath buy-to-let investment.  Even with the tempering of house price inflation in Locks Heath in 2017, most Locks Heath buy to let Landlords (and homeowners) are still sitting on a copious amount of growth from previous years.

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

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

I was recently reading a report by the Home website which suggested that hordes of Landlords are selling their buy-to-let investments due to increasing burdens on them in the buy-to-let market. Their findings suggest the number of new properties that came onto the market nationally (for sale) jumped by 11% across the UK as a result.

Those increasing burdens include new tax rules coming in over the next 3 to 4 years and the announcement that all self-managing Landlords (i.e. Landlords that don’t use a letting agent to look after their buy-to-let property) will soon need to register with a compulsory redress scheme to resolve Tenant arguments and disputes; as Westminster wants to heighten standards in the Private Rented Sector.

Interestingly I was chatting with a self-managed Landlord from Sarisbury Green, when I was out socially over the festive period, who didn’t realise the other recent legislation  that has hit the Private Rented sector, including the ‘Right to Rent’ regulations which came in to operation last year. Landlords have to certify their Tenants have the legal right to live in the UK. This includes checking and taking copies of their Tenant’s passport or visa before the tenancy is signed. Of course, if you use a letting agent to manage your property, they will usually sort this for you (as they will with the redress scheme when that is implemented).

If you are a self-managed Landlord though, the consequences are severe because if you let a property to a Tenant who is living in the UK illegally, you will be fined up to £3,000. That same Sarisbury Green Landlord popped into my offices in the New Year, and I checked all his paperwork and ensured he was on the right side of the law going forward – and I offer the same to any Landlord in the Locks Heath area if you want me to cast my eye over your buy to let matters (and at no cost – ok just bring in some chocolates for the Directors in the office!)

But what of all these extra properties being dumped onto the market in Locks Heath? When I looked at the records the number of properties on the market in Locks Heath now, as opposed to a year ago, the numbers tell an interesting story…

Overall, Locks Heath doesn’t match the national trend, with the number of properties on the market actually rising by 22% in the last year.  It was particularly interesting to see the number of semis increase by 93%, yet the number of detached on the market only rise by 2%.

However, speaking with my team and other property professionals in the suburb, the majority of that movement in the number of properties and the types of properties on the market isn’t down to Landlords dumping their properties on the market. The whole property market has changed in the last 12 months, with the majority of the change in the number and type of properties for sale due to the owner-occupier market, not Landlords (a subject I will write about soon in my Locks Heath Property Blog later this Spring(?)). You see, for the last ten years, each month there has always been a small number of Locks Heath Landlords who have been releasing their monies from their Locks Heath buy to let properties – as is the nature of all investments!

Nationally, the number of rental properties coming on to the market to rent fell by 16% in Q4 2017 compared to Q4 2016… but that isn’t because there are 16% less rental properties to rent – it’s because Tenants are staying in their rental properties longer meaning less are coming on the market to be RE-LET.

Nevertheless, some Locks Heath Landlords will want to release the equity held in their Locks Heath buy to let properties in 2018.  All I suggest is that you speak with your letting agent first, as putting a rental property on the open market often spooks the Tenants to hand in their notice days after you put it on the market (because they don’t like the uncertainty and also believe they will become homeless!). This means you have an empty property, costing you money with no rent coming in.  However, some letting agents who specialise in portfolio management have select lists of Landlords that will buy with sitting Tenants in.  If you have a portfolio in the Locks Heath area and are considering selling some or all of them – drop me a line as I might have a portfolio Landlord for you (with the peace of mind that you won’t have any rental voids).