Locks Heath property values are currently 0.7% higher than at the end of 2017, notwithstanding the uncertainty and threats over the potential impact of Brexit in 2019. This has exceeded all the predictions (aka guesses) of all the City of London economists, in an astonishing sign of strength for the local Locks Heath and wider national economy.

Nevertheless, the statistics from the Land Registry come after a lethargic year for the number of properties in Locks Heath compared to the actual prices achieved for those properties.  All this against a framework of amplified political ambiguity and ensuing years of rising Locks Heath property values that have reduced the affordability of homes in the locality.

The average value of a Locks Heath property today currently stands at £346,300

Looking in finer detail, it isn’t a surprise that 166 property sales in Locks Heath over the last 12 months is somewhat lower than the long-term average over the last 20 years of 245 property sales per year in Locks Heath as the long-term trend of people moving less has meant a decline in the number of property transactions.

I believe locally, Locks Heath property value growth will be more reserved in 2019 after two decades of weaker wage rises. One of main drivers in the demand (and thus the price people are prepared to pay for a home) is the growth of peoples wage packets. Interestingly, wage inflation over the last six months has risen from 2.4% in the late summer to its current level of 3.3% (which is higher than the average since the Millennium, which has been a modest 2.1%). One of the reasons why wages are growing in the short term is the unemployment rate in the country currently only stands at 4.1%, continuing to stay close to its lowest level since the 1970’s.

However, even though Locks Heath salaries and wages are rising comparatively higher than they were last year, looking over the long term, Locks Heath property values are 122.55% higher than they were in January 2002, yet average salaries are only 76.1% higher over the same time frame. This means over the last few years, with average property values so high comparative to salary/wages, many Locks Heath potential buyers have been priced out of being able to purchase their first home.

At first glance, these stats are actually rather positive during this reported time of political uncertainty and the height of Brexit commotion… because I genuinely believe that to be the case. The press have always looked for the bad news (well they do say it is that that sells newspapers), and whilst I am not entering into the pros and cons of Brexit itself, the numbers do stack up quite well since the Brexit vote took place nearly 3 years ago.

Moving forward, when taken with the recent reduction in short to medium term number of property transactions (i.e. the number of Locks Heath properties sold), it should be noted that a lot of the buoyant house price increase has a lot more to do with a shortage of properties on the market rather than an uplift in the Locks Heath housing market generally.

And we can’t forget that Locks Heath isn’t in its own little bubble, as there are noteworthy differences across the UK in property value inflation. House prices in London and the South East have hardly risen or even fallen in some places, whilst in the Midlands, North and other parts of the country they have generally increased.

Looking forward, I would say to the homeowners and buy to let Landlords of the locality that I expect Locks Heath house price growth to remain stable between -0.2% and 0.8% by the end of this year (although they could dip slightly during the summer) … as long as nothing unexpected happens in the world economically or politically of course.

We’ve reached number 17 on our countdown of the Top 30 Most Saleable Streets in SO31, PO14 & PO15.

Are we in your street?

The conventional way of categorising property in Britain is to look at the number of bedrooms rather than its size in square metres (square feet for those of you over 50!).  My intuition tells me that homeowners and Tenants are happy to pay for more space.  It’s quite obvious, the more bedrooms a house or apartment has, the bigger the property is likely to be.  And it’s not only the tangible additional bedrooms, but those properties with those additional bedrooms tend to have larger (and more) reception (living) rooms.  However, if you think about it, this isn’t so surprising given that properties with more bedrooms would typically accommodate more people and therefore require larger reception rooms.

In todays Locks Heath property market, the Locks Heath homeowners and Locks Heath Landlords I talk to are always asking me which attributes and features are likely to make their property comparatively more attractive and which ones may detract from the price.  Over time buyers’ and Tenants’ wants and needs have changed.

In Locks Heath location is still the No. 1 factor affecting the value of property, and a property in the best neighbourhoods can achieve a price almost 50% higher than a similar house in an ‘average’ area. Nevertheless, after location, the next characteristic that has a significant influence on the desirability, and therefore price, of property is the number of bedrooms and the type (i.e. Detached/Semi/Terraced/Flat).

The number of bedrooms for owner-occupiers very much depends on the size of the family and the budget, whilst Locks Heath Landlords have to consider the investment opportunity.  In this article, I have analysed Locks Heath’s housing stock into bedrooms and tenure.  Initially looking at Locks Heath homeowners..

And now the Private rented sector …

It can quite clearly be seen that Locks Heath owner-occupiers tend to occupy the larger properties with more bedrooms. This would be expected due to the demographic of homeowners and people that privately rent.

However, this shows there could be opportunities for Locks Heath buy to let Landlords to purchase larger properties with more bedrooms to attract Tenants requiring properties with more bedrooms.  However, before you all go buying larger 4 bed and 5 bed mansions to rent them out, a lot of bigger properties in Locks Heath don’t make financial sense when it comes to buy to let.

For numerous years Locks Heath buy to let Landlords have been the lone buyers at the smaller one and two bed starter homes of the market, as they have been lured by elevated Tenant demand and eye-catching returns.  Some Locks Heath Landlords believe their window of opportunity has started to close with the new tax regime for Landlords, whilst it already appears to be opening wider for first time buyers.  This is great news for first time buyers but one final note for Locks Heath Landlords…. all is not lost….. you can still pick up bargains, you just need to be a lot more savvy and do your homework.  One source of such information with articles like this is the Locks Heath Property Blog.

For most Locks Heath people, a mortgage is the only way to buy a property. However, for some, especially Locks Heath homeowners who have paid off their mortgage or Locks Heath buy to let landlords, many have the choice to pay exclusively with cash. So the question is, should you use all your cash, or could a mortgage be a more suitable option?

Well, looking at the numbers locally…

4,316 of the 13,753 property sales in the last 7 years in Fareham were made without a mortgage (i.e. 31.4%)

Interesting when compared with the national average of 31.9% cash purchases over the last seven years. Next, I wanted to see that cash percentage figure split down by years. As you can see from the graph, this level of cash purchases vs mortgage purchases has remained reasonably constant over those seven years…

Next, if you are going to go for a mortgage, the next question has to be whether you should fix the rate or have a variable rate mortgage. In the last Quarter, 90.57% of people that took out a mortgage, had a fixed rate mortgage at an average interest rate of 2.27%. Although what did surprise me was only 65.79% of the £1.429 trillion mortgages outstanding in the whole of the UK were on a fixed rate. The level of mortgage debt compared to the value of the home itself (referred to as the Loan to Value rate – LTV) was interesting, as 61.9% of people with a mortgage have a LTV of less than 75%. Although, one number that did jump out at me was only 4.33% of mortgages are 90% and higher LTV – meaning if we do have another property slump, the number of people in negative equity will be relatively small.

Next, looking at the actual number of properties sold, it can be clearly seen the number of house sales has dipped slightly in 2018…

So those are the numbers… let us have a look at the pros and cons of taking a mortgage, with specific focus on Locks Heath buy to let Landlords.

Taking a mortgage will help a landlord increase their investment across more properties to maximise the return, rather than putting everything into one Locks Heath buy to let property. This will enable the Landlord to ensure if there is a void in the tenancy, there should still be rent coming from the other properties. The flip side of the coin is that there is a mortgage to pay for, whether or not the property is let.

The other great motivation of taking a mortgage is that landlords can set the mortgage interest against the rental income, although that will only be at the basic rate of tax by 2021 due the recent tax changes. Banks and Building Societies will characteristically want at least a 25% deposit (meaning Locks Heath Landlords can only borrow up to 75%) and will assess the borrowing level based on the rental income covering the mortgage interest by a definite margin of 125%.

A lot will depend on what you, as a Locks Heath Landlord, hope to attain from your buy to let investment and how relaxed you would feel in making the mortgage payments when there is a void (interestingly, Direct Line calculated a few months ago that voids cost UK Landlords around £3bn a year or an average of £1000 per property per year). You also have to consider that interest rates could also increase, which would eat into your profit… although that can be mitigated with fixing your interest rate (as discussed above).

So, with everything that is happening in the world, does it make sense to buy rental properties? Now we help many newbie and existing Landlords work out their budgets, taking into account other costs such as agent’s fees, finance, maintenance and voids
in tenancy. The bottom line is we as a country aren’t building enough property, so demand will always outstrip supply in the medium to long term, meaning property values will keep rising in the medium to long term. That’s not to say property values might fall back in the short term, like they did in 2009 Credit Crunch, the 1988 Dual MIRAS crash, the recession of the early 1980’s, the 1974 Oil Crisis, the early 1930’s Great Depression… yet every time they have bounced back with vigour. Therefore, it makes sense to focus on getting the best property that will have continuing appeal and strong Tenant demand. And to conclude, buy to let should be tackled as a medium to long term investment because the wisest Landlords see buy to let investment in terms of decades – not years.

I have reached number 18 on my countdown of the Top 30 Most Saleable Streets in SO31, PO14 & PO15.

Is it your street?