Over the last 5 years we have seen some interesting subtle changes to the Locks Heath property market as buying patterns of Landlords have changed ever so slightly.

The background to this story was the recently published set of buy-to-let (BTL) lending statistics. Roll the clock back 12 months and 6,700 BTL mortgages were granted (in the same month) for £900m, meaning the average BTL mortgage was £134,200. Looking at last month’s figures, and as one might expect with the Brexit issue overhanging the property market, the lending figures were down, yet not by the amount I originally thought. Last month, just over 6,100 new buy-to-let mortgages were granted for a total sum of £800m (meaning the average Landlord mortgage was a respectable £131,100). Yet, when I looked back to the boom year of the 2014 property market, in the corresponding same month, only £1,030 million was borrowed on 8,300 buy-to-let properties (meaning the average buy-to-let mortgage was £124,100). It seems Brexit is having no effect on Landlords buying habits.

Looking closer to home in Locks Heath, throughout 2019 I have been regularly chatting to more and more Landlords, be they seasoned professional Locks Heath BTL Landlords or FTL’s (first time Landlords) and their attitude is mostly positive. Instead of reading the scare-papers (oops sorry, newspapers), those Locks Heath Landlords that look with their eyes, will see the Locks Heath property market is doing reasonably well, with medium term rents and property values rising; as quite obviously from the mortgage figures… Landlords are still buying.

The question I get asked all the time is “What type of buy-to-let property should I buy?”. You can make money from property through both the rent (expressed as a yield when compared to the value of the property) and how the actual value of the home itself changes.

Since 2014, property values in Locks Heath have risen by 26.6%.

We have records of what each type of property (i.e. Detached/Semi/Terraced/Apartments) has achieved per square metre going back 20 years, and looking back over the last 5 years, these are the numbers:

They all look to have similar percentage uplifts, however as you can see from the table, there is in fact some variation throughout and although only slight this can equate to thousands of pounds in monetary terms.

This has proved that semis and terraced houses have performed the best, although like the £/Sq.M figures, these are just averages. When investing, whilst Locks Heath apartments haven’t been the best performers in terms of capital growth, they do tend to generate a slightly better yield than houses, probably because several sharers can afford to pay more than a single family. But houses tend to appreciate in value more rapidly and may well be easier to sell, simply because there are fewer being built.

Now these are of course averages, but it gives you a good place to start from. The bigger picture here though is this – irrespective of what is happening in the world, be it Brexit/no Brexit, China, Trump, whatever, Locks Heath people still need a roof over their heads and we as a Country haven’t built enough homes to keep up with the demand since the late 1980’s. This means even if we have a short term wobble in 2019 when it comes to property values, in the medium term, demand will always outstrip supply and prices and rents will increase – because, I doubt the local authority, let alone Westminster, have the billions of pounds required to build the one hundred thousand Council houses per year nationally for the next decade to fix this issue.  This means as the population increases, the only people who can fulfil the demand for accommodation in the medium term is the private BTL Landlord.

Before I go, on average, housing associations and local authorities have built around 26,500 houses each year since 2010. The Labour government had a lower average, building about 19,000 homes per year, yet in the 1960’s, under both administrations, 180,000 councils were built per year!

With the Government preparing to control Tenants’ deposits at five weeks rent, Locks Heath Landlords will soon only be protected in the event of a single month of unpaid rental-arrears, at a time when Universal Credit has seen some rent arrears quadrupling and that’s before you consider damage to the property or solicitor costs.

It can’t be disputed that the deposits Locks Heath Tenants have to save for, certainly raises the cost of renting, putting another nail in the coffin of the dream of home ownership for many Locks Heath renters.  Whilst at the same time, those same deposits being unable to provide Locks Heath Landlords with a decent level of protection against unpaid rent or damage to the property.

In fact, the total of all the Tenants’ deposits in Locks Heath, deposited or protected, is £2,080,595

When you consider the value of all the privately rented properties in Locks Heath total £872,704,998, the need for decent Landlord insurance to ensure you are adequately covered as a Locks Heath Landlord is vital.

However, I want to consider the point of view of the Locks Heath Tenant.  Several housing charities believe spending more than a third of someone’s salary on rent as exorbitant, yet for the Tenants they find themselves in that very position.  I feel especially sorry for the Locks Heath youngsters in their 20’s who want to rent a place for themselves, as they face having to pay out the rent and try and save for a deposit for a home.

The average 22 to 29-year-old in Locks Heath spends 37% of their typical salary on a one bed rental property

….and 46% of their salary for a 2-bed home in Locks Heath.

40 years ago, British people who rented spent an average of 10% of their salary on rent, and only 14% in London.  Looking in even greater detail, according to the ONS, over the past 60 years the proportion of total spending on all housing (renting and mortgages) has doubled from 9% in the late 1950’s to 18% today.  Whilst on the other hand, the proportion of total expenditure on food has halved (33% to 16%), as has the proportion of total spending on clothing (10% to 5%)… it’s a case of swings and roundabouts!

Yet Landlords also face costs that need to be covered from rents including mortgages, Landlord insurance (especially the need for the often-inadequate deposits to cover the loss of rent and damage), maintenance and licensing.  In fact rents in the last 10 years have failed to keep up with UK inflation, so in real terms, Landlords are worse off when it comes to their rental returns (although they have gained on the increase in Locks Heath property values – but that is only realised when a property sells).

There are a small handful of Locks Heath Landlords selling some/or all of their rental portfolio as their portfolios become less economically viable with the recent tax changes for buy to let Landlords, which will result in fewer properties available to rent.

However, this will reduce the supply and availability of Locks Heath rental properties, meaning rents will rise (classic textbook supply and demand), thus Landlords return and yields will rise.  Yet, because Tenants still can’t afford to save the deposit for a home (as we discussed above) and we are all living longer, the demand for rental properties across Locks Heath will continue to grow in the next twenty to thirty years as we turn to more European ways where the norm is to rent rather than buy in the 20’s and 30’s age range. This will mean new buy-to-let Landlords will be attracted into the market, buy properties for the rental market in Locks Heath and enjoy those higher yields and returns… isn’t it interesting that things mostly always go full circle?

We have reached number 16 on our countdown of The Top 30 Most Saleable Streets in SO31, PO14 & PO15.

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