I know how my readers like to keep abreast of planned developments in the local area. Having read the article below on the Daily Echo’s website over the weekend regarding two planned sites in Warsash I thought it was worth sharing.
As always I welcome your thoughts and views on the plans. Feel free to call me on 01489 570011 or email at james.hill@brooklettings.co.uk.
Investing in Locks Heath buy to let property is different from investing in the stock market or depositing your hard-earned cash in the Building Society. When you invest your money in the Building Society, this is considered by many as the ‘safe option’ but the returns you can achieve are awfully low (the best 2-year bond rate from Nationwide is a whopping 0.75% a year!). Another investment is the Stock Market, which can give good returns, but unless you are on the phone every day to your Stockbroker, most people invest in stock market funds, making the investment quite hands-off and one always has the feeling of not being in control.
However, with buy to let, things can be more hands on. One of the things many landlords like is the tactile nature of property – the fact that you can touch the bricks and mortar. It is this factor that attracts many of Locks Heath’s Landlords – they are making their own decisions rather than entrusting them to city whizz kids in Canary Wharf playing roulette with their savings.
I always say investing in property is a long-term game. When you invest in the property market, you can earn from your investment in two ways. When a property increases in value over time, it is known as ‘capital growth’. Capital growth, also known as capital appreciation, has been strong in recent times in Locks Heath, but the value of property does go up as well as down just like shares do but the initial purchase price rarely decreases. Rental income is what the Tenant pays you – hopefully this will also grow over time. If you divide the annual rent into the value (or purchase price) of the property, this is your yield, or annual return. So, over the last 5 years, an average Locks Heath property has risen by £65,600 (equivalent to £35.95 a day), taking it to a current average value of £319,600. Yields can range from 4.5% a year and can reach double digits’ percentages (although to achieve those sorts of returns, the risks are higher).
However, something I haven’t spoken of before is the more specialist area of flipping property to make money (flipping – buying a property, carrying out some minor cosmetics and re selling it quickly). I have seen several investors recently who have made decent returns from this strategy.
This demonstrates how the Locks Heath property market has not only provided very strong returns for the average investor over the last five years but how it has permitted a group of motivated buy to let Locks Heath landlords and investors to become particularly wealthy.
As my article mentioned a few weeks ago, more and more Locks Heath people may be giving up on owning their own home and are instead accepting long term renting whilst buy to let lending continues to grow from strength to strength. If you want to know what (and what would not) make a decent buy to let property in Locks Heath, then one place for such information would be the Locks Heath Property Blog.
Two weeks ago I wrote an article on the plight of the Locks Heath 20 something’s often referred to by the press as ‘Generation Rent’. Attitudes to renting have certainly changed over the last twenty years and as my analysis suggested, this change is likely to be permanent. In the article, whilst a minority of this Generation Rent feel trapped, the majority don’t – making renting a choice not a predicament. The Royal Institution of Chartered Surveyors (RICS) predicted that the private rental sector is likely to grow substantially by 1.8m households across the UK in the next 8 years, with demand for rental property unlikely to slow and newly formed households continuing to choose the rental market as opposed to buying.
However, my real concern for Locks Heath homeowners and Locks Heath landlords alike is our mature members of the population of Locks Heath. The ‘Baby Boomers’, the 50yr to 64yr old Locks Heath people and what their properties are worth – and more importantly, how the current state of affairs could be holding back those younger Generation Renters.
In Locks Heath (SO31), there are 4,236 households whose owners are aged between 50yrs and 64yrs and about to pay their mortgage off. That property is worth, in today’s prices, £1.48bn. There are an additional 3,617 mortgage free Locks Heath households, owned by 50yr to 64yr olds, worth £1.26bn in today’s prices, meaning…
Locks Heath Baby Boomers and Locks Heath OAP’s are sitting on £4.77bn worth of Locks Heath Property
These Locks Heath Baby Boomers and OAP’s are sitting on 13,654 Locks Heath properties and many of them feel trapped in their homes, and hence I have dubbed them ‘Generation Trapped’.
Recently, the English Housing Survey stated 49% of these properties owned by the ‘Generation Trapped’ are ‘under-occupied’ (under-occupied classed as having at least two bedrooms more than needed). These houses could be better utilised by younger families, but research carried out by the Prudential suggest in Britain it’s estimated that only one in ten older people downsize while in the USA for example one in five do so.
The growing numbers of older homeowners who want to downsize their home are often put off by the difficulties of moving. The charity United for all Ages, suggested recently many are put off by the lack of housing options, 19% by the hassle and cost of moving, 14% by having to declutter their possessions and 14% by family reasons such as staying close to children and grandchildren.
Helping mature Locks Heath (and the Country) homeowners to downsize at the right time will also enable younger Locks Heath people to find the homes they need – meaning every generation wins, both young and old. However, to ensure downsizing works, as a Country, we need more choices for these ‘last time buyers’.
Theresa May and Philip Hammond can do their part and consider stamp duty tax breaks for downsizers, our local Council in Locks Heath and the Planning Department should play their part, as should Landlords and property investors to ensure Locks Heath’s ‘Generation Trapped’ can find suitable property locally – close to friends, family and facilities.
The Locks Heath housing market has gone through a sea of change in the past decades with the Buy-to-Let (BTL) sector evolving as a key trend, for both Locks Heath Tenants and Locks Heath Landlords.
A few weeks ago, the Government released a White Paper on housing. I have had a chance now to digest the report and wish to offer my thoughts on the topic. It was interesting that the private rental sector played a major part in the future plans for housing. This is especially important for our growing Locks Heath population.
Currently, the private rented (BTL) sector accounts for 12.1% of households in the town. The Government want to assist people living in the houses and help the economy by encouraging the provision of quality homes, in a housing sector that has grown due to worldwide economic forces, pushing home ownership out of the reach of more and more people. Interestingly, when we look at the 1981 figures for homeownership, a different story is told.
The significance of a suitable housing policy is vital to ensure suitable economic activity and create a vibrant place people want to live in. With the population of Fareham set to grow to 130,000 by 2037 it is imperative that Fareham Borough Council and Central Government all work actively together to ensure the residential property market doesn’t hold the area back, by encouraging the building and provision of quality homes for its inhabitants.
One idea the Government has proclaimed is a variety of measures aimed at encouraging the Build-to-Rent (BTR) sector (instead of the BTL sector). These include allowing local authorities to proactively plan for BTR schemes, and making it simpler for BTR developers to offer inexpensive private rented homes.
To do this, the government will invent a distinct affordable housing class for BTR, called ‘Affordable Private Rent’, which will oblige new homes builders to provide at least 1 in 5 of a new home development at a 20% discount on open-market rents and three year tenancies for Tenants. In return, the new homebuilders will get better planning assurances.
Private Landlords will not be expected to offer discounts, nor offer 3-year tenancies – but it is something Locks Heath Landlords need to be aware of as there will be greater competition for tenants.
Over the last ten years, home ownership has not been a primary goal for young adults as the world has changed. These youngsters expect ‘on demand’ services from Click and Collect, Amazon, Dating Apps and TV with the likes of Netflix. Many Locks Heath youngsters see that renting more than meets their accommodation needs, as it combines the freedom from a lifetime of property maintenance and financial obligations, making it an attractive lifestyle option.
Private rented housing in Locks Heath and Fareham, be it BTL or BTR, has the potential to play a very positive role.
The good old days of the 1980’s eh… with such highlights lowlights as 17% interest rates, 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 Locks Heath (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 Locks Heath 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 Locks Heath. Whilst these are important factors and barriers to home ownership, I also believe there has been a generational change in attitudes towards home ownership in Locks Heath (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 Locks Heath population choose to be Tenants as it better suits their plans and lifestyle. Local Government in Locks Heath (including the planners – especially the planners), land owners and Landlords need an adaptable Locks Heath residential property sector that allows the diverse choices of these Locks Heath 20 and 30 year olds to be met.
This means, if we applied the same percentages to the current 5,151 Locks Heath Tenants in their 2,299 private rental properties, 1,978 tenants have no plans to ever buy a property – good news for the Landlords of those 883 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 that the other third will be buying in Locks Heath 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. The 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 Locks Heath, we will in fact need an additional 985 private rental properties over the next eight years (or 123 a year)… meaning the number of private rented properties in Locks Heath is projected to rise to an eye watering 3,284 households.
For more insight and thoughts like this on the Locks Heath Property Market – please visit The Locks Heath Property Blog.
If I were a buy to let Landlord in Locks Heath today, I might feel a little bruised by the assault made on my wallet after being (and continuing to be) ransacked over the last 12 months by HM Treasury’s tax changes on buy to let. To add insult to injury, Brexit has caused a tempering of the Locks Heath property market with property prices not increasing by the levels we have seen in the last few years. I think we might even see a very slight drop in property prices this year and, if Locks Heath property prices do drop, the downside to that is that first time buyers could be attracted back into the Locks Heath property market; meaning less demand for renting (meaning rents will go down). Yet, before we all run for the hills, all these things could be serendipitous to every Locks Heath Landlord, almost a blessing in disguise.
Locks Heath has a population of 44,109, so when I looked at the number of people who lived in private rented accommodation, the numbers surprised me…
| Locks Heath – Accommodation Type and the Number of Occupiers | |||||
| Owned outright – Locks Heath | Owned with a mortgage – Locks Heath | Shared ownership (part owned and part rented) – Locks Heath | Social rented (aka Council Housing) – Locks Heath | Private rented – Locks Heath | Living rent free – Locks Heath |
| 12,320 | 21,396 | 255 | 4,676 | 5,151 | 311 |
| 27.9% | 48.5% | 0.6% | 10.6% | 11.7% | 0.7% |
Yields will rise if Locks Heath property prices fall, which will also make it easier to obtain a buy to let mortgage, as the income would cover more of the interest cost. If property values were to level off or come down that could help Locks Heath Landlords add to their portfolio. Rental demand in Locks Heath is expected to stay solid and may even see an improvement if uncertainty is prolonged. However, there is something even more important that Locks Heath Landlords should be aware of: the change in the human nature of these 20 something potential first time buyers.
I have recently come back from a family get together. I got chatting with my step mother’s niece and her partner. Both are in their mid/late twenties, both have decent jobs and they rent. Yet, here was the bombshell, they were planning to rent for the foreseeable future with no plans to even save for a deposit, let alone buy a property. I asked why they weren’t planning to buy? The answers surprised me as a 30 something, and it will you. Firstly, they don’t want to put cash into property, they would rather spend it on living and socialising by going on nice holidays and buying the latest tech and gadgets. They want the flexibility to live where they choose and finally, they don’t like the idea of paying for repairs. Most of their friends feel the same. I was quite taken aback that buying a house is just not top of the list for these youngsters anymore.
So, as 11.7% of Locks Heath people are in rented accommodation and as that figure is set to grow over the next decade, now might just be a good time to buy property in Locks Heath – because what else are you going to invest in? Give your money to the stock market run by sharp suited city whizz kids? Because at least with property it is something you can touch – there is nothing like bricks and mortar!
For more views and opinions on the Locks Heath Property Market – visit The Locks Heath Property Blog.
Recent statistics published by the Office of National Statistics show that there are 267,704 private rented households in the Country that are occupied by people aged 65 and older, meaning 4.39% of OAP’s are living in private rented property.
It got me thinking two things. How many of these OAP’s have always rented and how many have sold up and become a Tenant? In retirement, selling up could make financial sense to the mature generation in Locks Heath, potentially allowing them to liquidate the equity of their main home to enhance their retirement income. I wanted to know why these older people rent and whether there was opportunity for the buy to let Landlords of Locks Heath.
The Prudential published a survey recently that said nearly six out of ten OAP renters had never owned a home. Two out of ten OAP renters were required to sell up because of debt, just about one in ten OAP renters sold their property to use the money to fund their retirement and the remaining one out ten OAP renters, rented for other reasons.
Funding retirement is important as the life expectancy of someone from Locks Heath at age 65 (years) is 19.2 years for males and 21.5 years for females (interesting when compared to the National Average of 18.7 years for males and 21.1 years for females). The burdens of financing a long retirement are being felt by many mature people of Locks Heath. The state of play is not helped by rising living costs and ultra-low interest rates reducing returns for savers.
So, what of Locks Heath? Of the 5,518 households in Locks Heath, whose head of the household is 65 or over, not surprisingly 4,855 of households were owned (87.98%) and 461 (8.35%) were in social housing. However, the figure that fascinated me was the 103 (1.87%) households that were in privately rented properties.
More and more Locks Heath OAP’s are selling their large Locks Heath homes and renting something more manageable, allowing them to release all of their equity from their old home. This equity can be gifted to grandchildren (allowing them to get on the property ladder), invested in plans that produce a decent income and while living the life they want to live.
These Locks Heath OAP renters know they have a fixed monthly expenditure and can budget accordingly with the peace of mind that their property maintenance and the upkeep of the buildings are included in the rent. Some Landlords will also include gardening in the rent! Renting is also more adaptable to the trials of being an OAP – the capability to move at short notice can be convenient for those moving into nursing homes, and it doesn’t leave family members panicking to sell the property to fund care home fees.
Locks Heath Landlords should seriously consider low maintenance semi-detached bungalows on decent bus routes and close to doctor’s surgeries as a potential investment strategy to broaden their portfolio. Get it right and you will have a wonderful Tenant who, if the property offers everything a mature Tenant wants and needs, will pay top dollar in rent!
This fascinating question was posed by the 11-year-old son of one of my Locks Heath Landlords when they both popped into my offices before the Christmas break (doesn’t that seem forever ago now!). I thought to myself, that over the Christmas break, I would sit down and calculate what the total value of all the properties in Locks Heath are worth… and just for fun, work out how much they have gone up in value since his son was born back in the autumn of 2005.
In the last 11 years, since the autumn of 2005, the total value of Locks Heath property has increased by 50% or £2.15 billion to a total of £6.45 billion. Interesting, when you consider the FTSE100 has only risen by 30.78% and inflation (i.e. the UK Retail Price Index) rose by 37% during the same 11 years.
When I delved deeper into the numbers, the average price currently being paid by Locks Heath households stands at £337.839.… but you know me, I wasn’t going to stop there, so I split the property market down into individual property types in Locks Heath; the average numbers come out like this:
| Locks Heath Property Market | |||
| Average Value of a Detached Property | Average Value of a Semi-Detached Property | Average Value of a Terraced/Town House Property | Average Value of an Apartment |
| £455,550 | £305,344 | £286,403 | £180,333 |
It got even more fascinating when I multiplied the total number of each type of property by the average value. As detached houses are so expensive, when you compare them with the much cheaper terraced/town houses and apartments, you can quite clearly see how valuable detached properties are in terms of total pound note value, when compared to the value of the terraced/town houses and apartments.
| Total Value of all the Locks Heath Detached Properties | Total Value of all the Locks Heath Semi-Detached Properties | Total Value of all the Locks Heath Terraced/Town House Properties | Total Value of all the Locks Heath Apartments |
| £3,582,445,200 | £1,506,261,952 | £918,208,018 | £438,569,856 |
So, what does this all mean for Locks Heath? Well as we enter the uncharted waters of 2017 and beyond, even though property values are already declining in certain parts of the previously over cooked Central London property market, the outlook in Locks Heath remains relatively good as over the last five years, the local property market was a lot more sensible than central London’s.
Locks Heath house values will remain resilient for several reasons. Firstly, demand for rental property remains strong with continued immigration and population growth. Secondly, with 0.25% interest rates, borrowing has never been so cheap and finally the simple lack of new house building in Locks Heath not keeping up with current demand, let alone eating into years and years of under investment means only one thing – yes it might be a bumpy ride over the next 12 to 24 months but, in the medium term, property ownership and property investment in Locks Heath has always, and will always, ride out the storm.
In the coming weeks, I will look in greater detail at my thoughts for the 2017 Locks Heath Property Market. As always, all my articles can be found at the The Locks Heath Property Blog
An Englishman’s Home is His Castle as Maggie Thatcher lauded – everyone should own their own home. In 1971, around 50% of people owned their own home and, as the baby-boomers got better jobs and pay, that proportion of homeowners rose to 69% by 2001. Homeownership was here to stay as many baby boomers assumed it’s very much a cultural thing here in Britain to own your own home.
But on the back of TV programmes like Homes Under the Hammer, these same baby boomers started to jump on the band wagon of Locks Heath buy to let properties as an investment. Locks Heath first time buyers were in competition with Locks Heath Landlords to buy these smaller starter homes pushing house prices up in the 2000’s (as mentioned in Part One last week) beyond the reach of first time buyers. However, it is not as simple as that. Many factors come into play, such as economics, the banks and government policy. But are Locks Heath Landlords fanning the flames of the Locks Heath housing crisis bonfire?
I believe that the Landlords of the 2,299 Locks Heath rental properties are not exploitative and are, in fact, making many positive contributions to Locks Heath and the people of Locks Heath. Like I have said before, Locks Heath (and the rest of the UK) isn’t building enough properties to keep up the demand; with high birth rate, job mobility, growing population and longer life expectancy.
According to the Barker Review, for the UK to standstill and meet current demand, the country needs to be building 8.7 new households each and every year for every 1,000 households already built. Nationally, we are currently running at 5.07 per thousand and in the early part of this decade were running at 4.1 to 4.3 per thousand.
It doesn’t sound a lot of difference, so let us look at what this means for Locks Heath…
For Locks Heath to meet its obligation on the building of new homes, Locks Heath would need to build 162 households each year. Yet, we are missing that figure by around 67 households a year.
For the Government to buy the land and build those additional 67 households, it would need to spend £23,046,072 a year in Locks Heath alone. Add up all the additional households required over the whole of the UK and the Government would need to spend £23.31bn each year… the Country hasn’t got that sort of money!
With these problems, it is the property developers who are buying the old run-down houses and office blocks which are deemed uninhabitable by the local authority, and turning them into new attractive homes to either be rented privately to Locks Heath families or Locks Heath people who need council housing because the local authority hasn’t got enough properties to go around.
The bottom line is that, as the population grows, there aren’t enough properties being built for everyone to have a roof over their head. Rogue Landlords need to be put out of business, whilst Tenants should expect a more regulated rental market, with greater security for Tenants, where they can rely on good Landlords providing them high standards from their safe and modernised home. As in Europe, where most people rent rather than buy, it doesn’t matter who owns the house – all people want is a clean, decent roof over their head at a reasonable rent.
So only you, the reader, can decide if buy to let is immoral. But first let me ask this question – if the private buy to let Landlords had not taken up the slack and provided a roof over these people’s heads over the last decade where would these Tenants be living now?
Can we blame the 55 to 70-year-old Locks Heath citizens for the current housing crisis in the town?
Also known as the ‘Baby Boomer Generation’, these Locks Heath people were born after the end of the Second World War as the country saw a massive rise in births as they slowly recovered from the economic hardships experienced during wartime.
Throughout the 1970’s and 1980’s, they experienced (whilst in their 20’s, 30’s and 40’s) an unparalleled level of economic growth and prosperity throughout their working lifetime on the back of improved education, government subsidies, escalating property prices and technological developments, they have emerged as a successful and prosperous generation.
…Yet some have suggested these Locks Heath baby boomers have (and are) making too much money to the detriment of their children, creating a ‘generational economic imbalance’, where mature people benefit from house-price growth while their children are forced either to pay massive rents or pay large mortgages.
Between 2001 and today, average earnings rose by 65%, but average Locks Heath house prices rose by 109.6%
The issue of housing is particularly acute with the generation called the Millennials, who are young people born between the mid 1980’s and the late 1990’s. These 18 to 30 years, moulded by the computer and internet revolution, are finding as they enter early adult life, it very hard to buy a property, as these ‘greedy’ landlords are buying up all the property to rent out back to them at exorbitant rents… it’s no wonder these Millennials are lashing out at buy to let landlords, as they are seen as the greedy, immoral, wicked people who are cashing in on a social despair.
Like all things in life, we must look to the past, to appreciate where we are now.
The three biggest influencing factors on the Locks Heath (and UK) property market in the latter half of the 20th Century were, firstly, the mass building of Council Housing in the 1950’s and 60’s. Secondly, for the Tory’s to sell most of those Council Houses off in the 1980’s and finally 15% interest rates in the early 1990’s which resulted in many houses being repossessed. It was these major factors that underpinned the housing crisis we have today in Locks Heath.
To start with, in 1995 the USA relaxed its lending rules by rewriting the Community Reinvestment Act. This Act saw a relaxation on the Bank’s lending criteria as there was pressure on these banks to lend on mortgages in low wage neighbourhoods, as the viewpoint in the USA was that anyone (even someone on the minimum wage) should be able to buy a home. Unsurprisingly, the UK followed suit in the early 2000’s, as Banks and Building Society’s relaxed their lending criteria and brought to the market 100% mortgages, even Northern Rock started lending every man and his dog 125% mortgages.
So when we roll the clock forward to today, and we can observe those very same footloose banks from the early/mid 2000’s (that lent 125% with a just note from your Mum and a couple of breakfast cereal tokens), ironically reciting the Bank of England backed hymn-sheet of responsible-lending. On every first time buyer mortgage application, they are now looking at every line on the 20-something’s banks statements, asking if they are spending too much on socialising and holidays… no wonder these Millennials are afraid to ask for a mortgage (as more often than not after all that – the answer is negative).
So, in Part Two next week, I will continue this emotive article and show you some very interesting findings on why young people aren’t buying property anymore (and it’s not what you think!).
thelocksheathpropertyblog.co.uk 