The most recent set of data from the Land Registry has stated that property values in Locks Heath and the surrounding area were 8.07% higher than 12 months ago and 19.8% higher than January 2015.

Despite the uncertainty over Brexit Locks Heath (and most of the UK’s) property values continue their medium and long-term upward trajectory.  As economics is about supply and demand, the story behind the Locks Heath property market can also be seen from those two sides of the story.

Looking at the supply issues of the Locks Heath property market, putting aside the short-term shortage of property on the market, one of the main reasons of this sustained house price growth has been down to of the lack of building new homes.

The draconian planning laws, that over the last 70 years (starting with The Town and Country Planning Act 1947) has meant the amount of land built on in the UK today, only stands at 1.8% (no, that’s not a typo – it is one point eight percent) and that is made up of 1.1% with residential property and 0.7% for commercial property.  Now I am not advocating building modern ugly carbuncles and high-rise flats in the Cotswolds, nor blot the landscape with the building of massive out of place ugly 1,000 home housing estates around the beautiful countryside of such villages as Botley and Curdridge.

The facts are, with the restrictions on building homes for people to live in, because of these 70-year-old restrictive planning regulations, homes that the youngsters of Locks Heath badly need, aren’t being built.

Looking at the demand side of the equation, one might have thought property values would drop because of Brexit and buyers uncertainty.  However, certain commenters now believe property values might rise because of Brexit.  Many people are risk adverse, especially with their hard-earned savings.  The stock market is at an all-time high (ready to pop again?) and many people don’t trust the money markets.  The thing about property is it is tangible, bricks and mortar, you can touch it and you can easily understand it.

The Brits have historically put their faith in bricks and mortar, which they expect to rise in value, in numerical terms at least.  Nationally, the value of property has risen by 635.4% since 1984 whilst the stock market has risen by a very similar 593.1%.  However, the stock market has had a roller coaster of a ride to get to those figures.  For example, in the dot com bubble of the early 2000’s, the FTSE100 dropped 126.3% in two years and it dropped again by 44.6% in 9 months in 2007… the worst drop Locks Heath saw in property values was just 17.88% in the 2008/9 credit crunch.

Despite the slowdown in the rate of annual property value growth in Locks Heath to the current 8.07%, from the heady days of 12.21% annual increases seen in mid 2010, it can be argued the headline rate of Locks Heath property price inflation is holding up well. Especially with the squeeze on real incomes, new taxation rules for landlords and the slight ambiguity around Brexit. With mortgage rates at an all-time low and tumbling unemployment, all these factors are largely continuing to help support property values in Locks Heath (and the UK).

For more thoughts on the Locks Heath Property Market, please visit The Locks Heath Property Blog.

Over the last 12 months, the UK has decided to leave the EU, have a General Election with a result that didn’t go to plan for Mrs May and to add insult to injury, our American cousins elected Donald Trump as the 45th President of the United States.  It could be said this should have caused some unnecessary unpredictability into the UK property market.

The reality is that the housing and mortgage market (for the time being) has shown a noteworthy resilience.  Indeed on the back of the Monetary Policy pursued by the Bank of England there has been a notable improvement of macro-economic conditions!  In July for example it was announced that we are witness to the lowest levels of unemployment for nearly 50 years.  Furthermore, despite the UK construction industry building 21% more properties than same time the previous year, there has still been a disproportionate increase in demand for housing, particularly in the most thriving areas of the Country.  Repossessions too are also at an all-time low at 3,985 for the last Quarter (Q1 2017) from a high of 29,145 in Q1 2009.  All these things have meant that…

Property values in Locks Heath, according to the Land Registry, are 8.07% higher than a year ago.

So, what does all this mean for the homeowners and Landlords of Locks Heath, especially in relation to property prices moving forward?

One vital bellwether of the property market (and property values) is the mortgage market.  The UK mortgage market is worth £961,653,701,493 (that’s £961bn) and it is representative of 13,314,512 mortgages (interestingly, the UK’s mortgage market is the largest in Europe in terms of amount lent per year and the total value of outstanding loans).  Uncertainty causes banks to stop lending – look what happened in the credit crunch and that seriously affects property prices.

Roll the clock back to 2007 and nobody had heard of the term ‘credit crunch’, but now the expression has entered our everyday language.  It took a few months throughout the autumn of 2007 before the crunch started to hit the Locks Heath property market, but in late 2007, and for the following year and half, Locks Heath property values dropped each month like the notorious heavy lead balloon, meaning…

The credit crunch caused Locks Heath property values to drop by 17.8%

Under the sustained pressure of the Credit Crunch, the Bank of England realised that the UK economy was stalling in the early autumn of 2008.  Loan book lending (sub-prime phenomenon) in the US and across the world was the trigger for this pressure.  In a bid to stimulate the British economy there were six successive interest rates drops between October 2008 and March 2009; this resulted in interest rates falling from 5% to 0.5%!

Thankfully, after a period of stagnation, the Locks Heath property market started to recover slowly in 2011 as certainty returned to the economy as a whole and Locks Heath property values really took off in 2013 as the economy sped upwards. Thankfully, the ‘fire’ was taken out of the property market in Spring 2015 (otherwise we could have had another boom and bust scenario like we had in the 1960’s, 70’s and 80’s), with new mortgage lending rules.  Throughout 2016, we saw a return to more realistic and stable medium term property price growth.  Interestingly, property prices recovered in Locks Heath from the post Credit Crunch 2009 dip and are now 57.5% higher than they were in 2009.

Now, as we enter the summer of 2017, with the Conservatives having been re-elected on their slender majority, the Locks Heath property market has recouped its composure and in fact there has been some aggressive competition among mortgage lenders, which has driven mortgage rates down to record lows.  This is good news for Locks Heath homeowners and Landlords, over the last few months a mortgage price war has broken out between lenders, with many slashing the rates on their deals to the lowest they have ever offered.  For example, last month, HSBC launched a 1.69% five-year fixed mortgage!

Interestingly, according to the Council of Mortgage Lenders, the level of mortgage lending had soared to an all-time high in the UK.

In the Locks Heath postcode of SO31, if you added up everyone’s mortgage, it would total £951,798,605!

Since 1977, the average Bank of England interest rate has been 6.65%, making the current 323 year all time low rate of 0.25% very low indeed.  Thankfully, the proportion of borrowers fixing their mortgage rate has gone from 31.52% in the autumn of 2012 to the current 59.3%.

In my modest opinion, especially if things do get a little rocky and uncertainty seeps back in the coming years (and nobody knows what will happen on that front), one thing I know is for certain, interest rates can only go one way from their 300 year ultra 0.25% low level… and that is why I consider it important to highlight this to all the homeowners and Landlords of Locks Heath.  Maybe, just maybe, you might want to consider taking some advice from a qualified mortgage adviser? There are plenty of them in Locks Heath.

If you are interested in the Locks Heath Property Market visit The Locks Heath Property Blog.

As the dust starts to settle on the various unread General Election party manifestos, with their ‘bran-bucket’ made up numbers, life goes back to normal as political rhetoric on social media is replaced with pictures of cats and people’s lunch.  Joking aside though, all the political parties promised so much on the housing front in their manifestos, should they have been elected at the General Election.  In hindsight, irrespective of which party, they seldom deliver on those promises.

Housing has always been the Cinderella issue at General Elections.  Policing, NHS, Education, Tax and Pensions etc., are always headline grabbing stuff and always seem to go ‘the ball’. However, housing, which affects all our lives, always seems to get left behind and forgotten.

Nonetheless, the way the politicians act on housing can have a fundamental effect on the wellbeing of the UK plc and the nation as a whole.

One policy that comes to mind is Margaret Thatcher’s Council House sell off in the 1980’s, when around 1.4m council houses went from public ownership to private ownership.  It was a great vote winner at the time (it helped her win three General Elections in a row) but it has meant the current generation of 20 somethings in Locks Heath (and elsewhere in the Country) don’t have that option of going into a council house.  This has been a huge contributing factor in the rise of the private renting and buy to let in Locks Heath over the last 15 years.

Nevertheless, looking back to the start of the Millennium, Labour set the national target for new house building at 200,000 new homes a year (and at one point that increased to 240,000 under Gordon Brown for a couple of years).  In terms of what was actually built, the figures did rise in the mid Noughties from 186,000 properties built in 2004 to an impressive 224,000 in 2007 (the highest since the early 1980’s) as the economy grew.

Then the Credit Crunch hit.  It is interesting, that the 2010 Cameron/Clegg government did things a little differently.  The fallout of the Credit Crunch meant a lot less homes were built, so instead of tackling that head on, the coalition side-stepped the target of the number of new homes to build and offered a £400m fund to help kick start the housing market (a figure that was a drop in the ocean when you consider an average UK property was worth around £230,000 in 2010).  The number of new houses being completed dipped from 146,800 in 2011 to 135,500 the subsequent year.

So, one might ask exactly how many new homes do we need to build per year?  It is commonly accepted that not enough new properties are being built to meet the rising need for homes to live in.  A report by the Government in 2016, showed that on average 210,000 net additional households will be formed each year) up to 2039 (through increased birth rates, immigration, people living longer, lifestyle (i.e. divorce) and people living by themselves more than 30 years ago).  In 2016, only 140,600 homes were built… simply not enough!

Looking at the numbers locally in Locks Heath and the surrounding area, contrary to local belief, we as an area, are not pulling our weight either when it comes to building new homes.  In the 12 months up to the end of Q1 2017, only 270 properties were built in the Fareham Borough Council area.  Go back to 2007, that figure was 550, 10 years before that in 1997, 560 new homes and further back to 1988, 1,360 new homes were built.

Who knows if Teresa May’s Government will last the five years?  She will think she has bigger fish to fry with Brexit to get bogged down with housing issues.  But let me leave you with one final thought.

The conceivable rewards in providing a place to live for the public on a massive house building programme can be enormous, as previous Tory PM’s have found out.  Winston Churchill in 1951, asked his Minister for Housing (Harold Macmillan) if he could guarantee the construction of 300,000 new properties a year, he was notoriously told: “It is a gamble—it will make or mar your political career, but every humble home will bless your name if you succeed.”

Isn’t it interesting, that the Tories remained in power until 1964!  Mrs May will have to work out if she wants to be the heiress to Harold Macmillan or David Cameron.

According to my research, of the 18,587 properties in Locks Heath, 8,378 of those properties have mortgages on them.  90.9% of those mortgaged properties are made up of owner-occupiers and the rest are buy to let landlords (with a mortgage).

…but this is the concerning part… 1,810 of those Locks Heath mortgages are Interest Only.  My research also shows that, each year between 2017 and 2022, 22 of those households with interest only mortgages will mature, and of those, 5 households a year will either have a shortfall or no way of paying the mortgage off.  Now that might not sound a lot – but it is still someone’s home that is potentially at risk.

Theoretically this is an enormous problem for anyone in this situation as their home is at risk of repossession if they don’t have some means to repay these mortgages at the end of the term (the typical term being 25 to 35 years).  Banks and Building Societies are under no obligation to lengthen the term of the mortgage and, when deciding whether they are prepared to do so or not, will look at it in the same way as someone coming to them for a new mortgage.

Back in the 1970’s and 1980’s, when endowment mortgages were all the rage, having an endowment meant you were taking out an interest only mortgage and then paying into an endowment policy which would pay the mortgage off (plus hopefully leave some profit) at the end of the 25/35 year term.  There were advantages to that type of mortgage as the monthly repayments were lower than with a traditional Capital Repayment and Interest mortgage.  Only the interest, rather than any capital, is paid to the mortgage company – but the full debt must be cleared at the end of the 25/35 year term.

Historically plenty of Locks Heath homeowners bought an endowment policy to run alongside their Interest Only mortgage.  However, because the endowment policy was a stock market linked investment plan and the stock market poorly performed between 1999 and 2003 (when the FTSE dropped 49.72%), the endowments of many of these homeowners didn’t cover the shortfall.  Indeed, it left them significantly in debt!

Nonetheless, in the mid 2000’s, when the word endowment had become a dirty word, the banks still sold ‘Interest Only’ mortgages, but this time with no savings plan, endowment or investment product to pay the mortgage off at the end of the term.  It was a case of ‘we’ll sort that nearer the time’ as property prices were on the rampage in an upwards direction!

Thankfully the proportion of Interest Only mortgages sold started to decline after the Credit Crunch, as you can see looking at the graph below, from a peak of 43.81% of all mortgages to the current 8.71%.

Increasing the length of the mortgage to obtain more time to raise the money has gradually become more difficult since the introduction of stricter lending criteria in 2014, with many mature borrowers considered too old for a mortgage extension.

Locks Heath people who took out Interest Only mortgages years ago and don’t have a strategy to pay back the mortgage face a ticking time bomb.  It would either be a choice of hastily scraping the money together to pay off their mortgage, selling their property or the possibility of repossession (which to be frank is a disturbing prospect).

I want to stress to all existing and future homeowners who use mortgages to go in to them with your eyes open.  You must understand, whilst the banks and building societies could do more to help, you too have personal responsibility in understanding what you are signing yourself up to.  It’s not just the monthly repayments, but the whole picture in the short and long term.  Many of you reading my blog ask why I say these things.  I want to share my thoughts and opinions on the real issues affecting the Locks Heath property market, warts and all.  If you want fluffy clouds and rose tinted glasses articles – then my articles are not for you.  However, if you want someone to tell you the real story about the Locks Heath property market, be it good, bad or indifferent, then maybe you should start reading my blog regularly.

For more thoughts on the Locks Heath Property Market – visit The Locks Heath Property Blog.

Well last week’s article “The Unfairness of the Locks Heath Baby Boomer’s £3,373,900,000 windfall?” caused a stir.  In it we looked at a young family member of mine who was arguing the case that Millennials (those born after 1985) were suffering on the back of the older generation in Locks Heath.  They claimed the older generation had seen the benefit of the cumulative value of Locks Heath properties significantly increasing over the last 25/30 years (which I calculated at £3.37bn since 1990).  In addition many of the older generation (the baby boomers) had fantastic pensions, which meant the younger generation were priced out of the Locks Heath housing market.

I replied there should be no surprise though that the older members of our society hold considerably more of our country’s wealth than the younger generation.  This wealth is accrued and saved across someone’s life, and reaches it’s peak about the time of retirement.  If we are to comprehend differing wealth levels between generations we need to compare ‘apples with apples’.  It is much more important to track the wealth held by different generations at the same age, i.e. what was ‘real’ wealth of the 30-something couple in the 1960’s compared to a 30-something couple say in the 1980’s or 2010’s?

So could it be all about these people saving?  The fact is, in the last 10 years, UK households have saved on average 7.5% to 8% of the household income into savings accounts, compared to an average of 6% to 7% in the late 1960’s and 1970’s.  The baby boomers haven’t been actively squirreling away their cash for the last 30 or 40 years in savings accounts to accumulate their wealth.  Most of their gains have been passive, lucky bonuses gained on the back of things out of their control (unanticipated and massive property value rises or people living longer making final salary pensions more valuable) – it’s not their fault!

… and herein lies the issue… it is assumed that these Millennials aren’t buying property in the same numbers like the older generation did in the past (because most of their wealth has come from house price inflation).  The Millennials have often been described as ‘Generation Rent’, because they rent as opposed to buying property – because we are told they can’t buy.

However, when Locks Heath mortgage payments are measured against monthly income, home ownership is affordable by historic standards because mortgage rates are currently so low.  As you can see, the ratio of average house price to average earnings in Locks Heath hasn’t vastly changed over the last decade…

• 2008 average house price to average earnings of a single person in Locks Heath 8.48 to 1
• 2017 average house price to average earnings of a single person in Locks Heath 9.28 to 1

(i.e. in 2008, the average house price in Locks Heath was 8.48 times more than the average person’s salary in Locks Heath and this has only risen to 9.28 in 2017 – and all this off the property boom of the early 2010’s)

95% first-time buyer mortgages were reintroduced in 2010.  The average interest rate charged for those 95% FTB mortgages has slowly dropped from around 5.5% in 2009 to the current 4% rate.  Back in the 1980’s/1990’s mortgage interest rates were between 8% and 10%, and one time in the early 1990’s, reached 15%!  The main difference between the two periods was the absolute borrowing relative to income is greater now than in the 1980’s. They call this the ‘mortgage to joint household income ratio’.  In the 1980’s the mortgage was between 1.8x to 2x joint income; today it is 3.4x to 3.6x salary.

The simple fact is, in the majority of cases, it is still cheaper for a first-time buyer to buy a property with a 95% mortgage, than it is rent it.  The barrier for these Millennials, has to be finding the 5% mortgage deposit – instead of being able to afford monthly mortgage outgoings at the current 95% mortgage rates?

Millennials make up 5,279 households in the Fareham Borough Council area (or 11.33% of all households in the area).  However, behind the doom and gloom, surprisingly, 48.2% did save up the 5% deposit and do in fact own their own home (that surprised you didn’t it!)

Nonetheless, the majority of Millennials in the area still do rent from a Landlord (1,910 Millennial households to be exact).  Yet, they have a choice.  Buckle down and do what their parents did and go without the nice things in life for a couple of years (i.e. the holidays, out on the town two times a week, the annual upgraded mobile phones, the £100 a month Satellite packages) and save for a 5% mortgage deposit… or live in a lovely rented house or apartment (because they are nowadays), without any maintenance bills and live a life with no intention of buying (because renting doesn’t have a stigma anymore like it did in the 1960’s/70’s (secretly hoping their parents don’t spend all their inheritance so they can buy a property later in life – like they do in central Europe).

Neither decision is right or wrong although it is still a choice.  Until Millennials decide to change their choices – that is the reason why the country’s private rental sector will continue to grow for the next 30 years – meaning happy Tenants and happy Landlords.

Recently I was having a chat with one of my older relatives at a big family get-together. We and a couple of their children got talking over a drink about the times of 15% interest rates and how the more mature members of our family had to endure the 3 day week, 20% inflation and the threat of nuclear annihilation in 4 minutes.  So, foolishly, my older relative said what with all the opportunities youngsters had today, they had never had it so good!

Trust one of my relative’s children to have gained some financial/economics qualifications before going to Law School, as they debated with us the genuine economic predicament of Millennials and how a combination of student debt, unemployment, global proliferation, EU migration and rising house values is reducing the salaries and outlook of masses of the UK’s younger generation, causing an unparalleled disparity of wealth between the generations. So of course I asked why that was?

They said Millennials were paying the price for the UK’s most spectacular bookkeeping catastrophe to date (bigger than the Bank bailout after the Credit Crunch).  Back in the 1950’s and 1960’s, nobody predicted us Brit’s would live as long as we do today, and in such abundant numbers. The OAP pensions that were promised in the past (be that Government State Pension or Company Final Salary Schemes) which appeared to be nothing fancy at the time, are now burdensomely over-lavish, and that is hurting the Millennials of today and will do so for years to come.

Bringing it back to property, the ‘soon to be’ lawyer stated that baby boomers born between 1945 and 1965 have been big recipients of the vast rising house prices over the 1970’s/80’s/90’s and 2000’s.  Add to that their decent pensions, meaning cumulatively, their wealth has grown exponentially through no skill of their own.

This disparity of wealth between the older and younger generations could have unparalleled consequences for the living standards of younger Millennials…. So Houston Locks Heath – do we have a problem??

Well Locks Heath Property Blog readers, you know I like a challenge.  I can’t disagree with some of what my relative said, but there are always two sides to every story, so I thought I would do some homework on the matter…

Since 1990, the average value of a property in Locks Heath has risen from £89,800 to its current level of £336,900.  As there are a total of 13,654 homeowners aged over 50 in Locks Heath, that means there has been a £3.37bn windfall for those Locks Heath homeowners fortunate enough to own their own homes during the property boom of the 1990s and early 2000’s.

I must admit that the growth in property values in the 1990’s and 2000’s certainly helped many of Locks Heath’s baby boomers.  The figures do appear to put into reverse gear the perceived wisdom that each generation gets wealthier than the previous one… and so with all this wealth, the figures do back up the argument that Millennials are being priced out of home ownership.

Or do they?  Are they?

Next week, I will carry on this discussion where I will give the Baby Boomer’s defence to the prosecution’s case!

On several occasions over the last few months, in my Locks Heath Property Blog, I predicted that the rate of rental inflation (i.e. how much rents are rising by) had eased over the last year.  At the same time I felt that in some parts of the UK rents had actually dropped for the first time in over eight years.  Recent research backs up this prediction.

Rents in Locks Heath for new tenancies fell by 0.4% in the last 12 months (i.e. not existing Tenants experiencing rental increases from their existing landlord).  When we compare that current rate with the historical rental inflation in Locks Heath, an interesting pattern emerges:

2016 – Rental Inflation in Locks Heath was 5.1%

2015 – Rental Inflation in Locks Heath was 9.4%

2014 – Rental Inflation in Locks Heath was 3.2%

The reason behind this change depends on which side of the demand/supply equation you are looking from.  On the demand side (from the Tenants’ point of view) there is the uncertainty of Brexit and the fact that salaries are not keeping up with inflation for the first time in three years. Critically this means Tenants have less disposable income to pay their rent.  As an aside, it is interesting to note that nationally, rent accounts for 29% of a Tenant’s take home pay.

On the supply side of the equation (Landlords’ point of view) Brexit also creates uncertainty. However, the biggest issue was a massive upsurge of new rental properties coming on to the market in late 2016, caused by George Osborne’s new 3% stamp duty tax for landlords in the first part of 2016.  This meant a lot of new rental properties were ‘dropped’ on to the rental market all at the same time.  The greater choice of rental properties for Tenants curtailed rental growth/inflation.  A slight softening of Locks Heath property prices has compounded this.  Figures from The Bank of England suggested that first time buyers rose over the last 12 months as some were more inclined to buy instead of rent.  Together, these factors played a part in the ongoing moderation of rental growth.

The lead up to the General Election in May didn’t help: after all people don’t like doubt and uncertainty.  So now that we have a mandate for going forward over the next 5 years hopefully that has removed any stumbling blocks stopping Tenants making the decision to move home.

Whether it be ‘hard’ or ‘soft’ Brexit negotiations (and with the Election result the Tory’s might have to be ‘softer’ on those negotiations) the simple fact is, we aren’t building enough properties for us to live in.  Both in Locks Heath, the South East and the wider UK, long-term population trends imply that rents will soon be growing faster than inflation again.  Look at the projections by the Office of National Statistics:

Population Estimates for Fareham Borough Council over the next 20 years
2016 (actual)	2021	2026	2031	2036
115,723	119,257	122,881	126,208	129,203

Tenants will still require a vibrant and growing rental sector to deliver them housing options in a timely manner.  As the population grows in Locks Heath, and wider afield, any restriction to the supply of rental properties (brought about by poor returns for Landlords) cannot be in the long-term best interest of Tenants.  Simply put rents must go up!

The fact is that I see this as a short-term blip and rents will continue to grow in the coming years.  With rents only accounting for 29% of a tenants’ disposable income, the ability for most Tenants to absorb a rent increase does exist.

50 years ago, in 1967, the first human heart transplant was performed by Dr Christian Barnard in South Africa.  In the same year Sweden switched from driving on the left-hand side to the right-hand side of the road.  The average value of a Locks Heath property was £4,845, interest rates were at 5.5% and The Beatles released one of my favourite albums – their Sgt Pepper album… but what the hell has that to do with the Locks Heath property market today??  Quite a lot actually… so with my music turned up loud, let me explain my friends!

I have been doing some research on the current attitude of Locks Heath first-time buyers.  First-time buyers are so important for both landlords and homeowners.  If first-time buyers aren’t buying, they still need a roof over their heads, so they rent (good news for Landlords). If they buy, demand for Locks Heath property goes up for starter homes and that enables other Locks Heath homeowners to move up the property ladder.

First-time buyers are the lifeblood of the property market.  They are, however the most susceptible to interest rate rises and the affordability of mortgages.  With that in mind, let us see what is happening to them…

The average value of a property in SO31 is currently standing at £365,348 and UK interest rates at 0.25%.  As each year goes by, it appears the age of the everlasting mortgage has started to emerge, prompted by these first-time buyers eager to get a foot on the housing ladder.  I was reading a report a few days ago where some mortgage companies confessed that the battle to gain big returns from the property market has led to mortgages that will take considerably longer than the customary 25 years to pay off.

Over the last few years, it has been commonplace for first-time buyer mortgages to be 30 and 35 years in length as the ‘Bank of Mum and Dad’ have been helping with the deposit (Beatles Sgt Pepper song – With a Little Help from My Friends).  Now, some high street banks are offering mortgage terms of 40 years.  This means first-time buyers could be paying until their mid 60’s – I can hear that other great track from the same album When I’m Sixty-Four ringing in my ears!  So, a 50-year mortgage does not seem as far-fetched now as it would have been back in the 1970’s.  After all life expectancy for a male then was exactly 69 years and today its 79 years and 5 months!

Over the last ten years, Locks Heath property prices have continued to rise more than wages, therefore, first-time buyers are looking for bigger loans.  If this development continues, the only way repayments can remain reasonable is by increasing the term of the loan.

However, some commenters have said there are worries the mortgage companies are lending money over such a long term, they threaten leaving some first-time buyers with a generation of debt if the house price bubble bursts.  Interestingly, when I looked at what had happened to average property values in Locks Heath over the last 50 years, there have been bubbles.  First-time buyers should take heart, since as a county we have always recovered from it a few years later.

What if interest rates rise?  Well looking at historic UK interest rates, the current rate of 0.25% is at a 300-year low.  Mortgages will never be cheaper.  I would however, seriously consider fixing the rate to cushion any future potential interest rate rises (since they can only go in one direction when they do change).  If Locks Heath first-time buyers see buying a home as a long-term decision, based on the last 50 years, they should be just fine!

Before I go, a final thought for property buyers in Sweden, the land of Volvo and Abba. As Swedish property prices are so high, Swedish Regulators announced last year limits on the length of Swedish mortgage terms.  They don’t bother with 50-year mortgages.

No, our Volvo-loving Swedish friend’s average mortgage length is 140 years (this is not a typo).  Although such mortgages have had their Waterloo (Abba), regulators have significantly reduced the maximum term of a Swedish mortgage to 105 years.  Either way, that’s a lot of Money, Money, Money (Abba again – Sorry!) to pay back!

Now I will leave you in peace as I listen to the 1980’s Madness song ‘Our House’.  My apologies to all the Beatles and Abba fans in Locks Heath – a bit of light hearted fun albeit on a serious topic.

In November 2015 George Osborne disclosed plans to restrain the buy-to-let (BTL) market, implying its growing attractiveness was leaving aspiring first time buyers contesting with Landlords for the restricted number of properties on the market.  One of things he brought in was that tax relief on BTL mortgages would be capped, starting in April 2017.  Before April 2017, a private Landlord could claim tax relief from their interest on their BTL mortgage at the rate they paid income tax – (i.e. 20% basic /40% higher rate and 45% additional rate).

So, for example, let’s say we have a Locks Heath Landlord, a high rate tax payer who has a BTL investment where the rent is £900 a month and the mortgage is £600 per month.  In the tax year just gone (16/17), assuming no other costs or allowable items …

• Annual rental income £10,800.
• Taxable rental income would be £3600 after tax relief from mortgage relief
• Meaning they would pay £1,440 in income tax on the rental income

And assuming no other changes … the Landlord would have income tax liability’s (at the time of writing) in the tax years of …

• (17/18) £1,800
• (18/19) £2,160
• (19/20) £2,520
• (20/21) £2,880

Landlords who are higher rate tax payers are going to have be a lot smarter with their BTL investments and ensure they are maximising their rental properties full rental capability.  However, there is another option for Landlords.

The Locks Heath Landlords who own the 2,299 Rental properties in the town could set up a Limited Company and sell their property personally to that Limited Company

In fact, looking at the Numbers from Companies House – many Landlords are doing this. In the UK, there are 93,262 Buy To Let Limited Companies, and since the announcement in November 2015 – the numbers have seen a massive rise.

• Q2 2015 / Q3 2015 – 4,193 Buy to Let Limited Companies Set Up
• Q4 2015 / Q1 2016 – 5,403 Buy to Let Limited Companies Set Up
• Q2 2016 / Q3 2016 – 3,007 Buy to Let Limited Companies Set Up
• Q4 2016 / Q1 2017 – 7,149 Buy to Let Limited Companies Set Up

So, by selling their buy to let investments to their own limited company, owned 100% by them, these Landlords could then offset the costs of running their BTL’s as an ‘allowable expense’ – effectively writing off the cost of 100% of their mortgage outgoings, wear and tear and upkeep, letting agent’s fees etc.

I am undeniably seeing more Locks Heath Landlords approach me for my thoughts on setting up a BTL limited company, so should you make the change to a limited company?

In fact, I have done some extensive research with companies house in the 15 months 1^st January 2016 to 31^st March 2017 and 145 Buy To Let Limited Companies have been set up in the SO postcode alone.

Well, if you are looking to hold your BTL investments for a long time it could be very favourable to take the short-term pain of putting your BTL’s in a limited company for a long-term gain.  You see, there are huge tax advantages to swapping property ownership into a limited company but there are some big costs that go with the privilege.

As the law sees the new Limited Company as a separate entity to yourself, you are legally selling your BTL property to your Limited Company, just like you would be selling it on the open market. Your Limited company would have to pay Stamp Duty on the purchase and if you (as an individual) made a profit from the original purchase price, there could be a capital gains tax liability of 18% to 28%.  The mortgage might need to be redeemed and renegotiated (with appropriate exit charges).

On a more positive note, what I have seen though by setting up the Limited Company is Landlords can roll up all their little buy to let mortgages into one big loan, often meaning they obtain a lower interest rate and the ability to advance new purchase capital. Finally, if the tax liability is too high to swap to a limited company, some savvy buy to let investors are leaving their existing portfolios in their personal name whilst purchasing any new investment through a limited company?  Just an idea (not advice!).

It’s vital that Landlords get the very best guidance and information from tax consultants with the right qualifications, experience and insurance.  Whatever you do, always get the opinions from these tax consultants in writing and you shouldn’t hurry into making any hasty decisions.  The modifications to BTL tax relief are being progressively eased in over the next three years so there is no need to be unnerved and rush into any decisions before finding out the specifics as they relate precisely to your personal situation, because with decent tax planning (from a tax consultant) and good rental / BTL portfolio management (which I can help you with)… whatever you do – let’s keep you the right side of the line!

Should you buy or rent a house?  Buying your own home can be expensive but could save you money over the years.  Renting a property through a letting agent or private Landlord offers less autonomy to live by your own rules, with more flexibility if you need to move.

There is third way that many people seem to forget, yet it plays an important role in the housing of Locks Heath people.  Collectively known as social housing, it is affordable housing, which is let by either Fareham Borough Council or a housing association to those considered to be in specific need, at rents below those characteristic in the private rental market.

In Locks Heath, there are 1120 social housing households, which represent 6.42% of all the households in Locks Heath.  There are a further 1,134 families in the Fareham Borough Council area on their waiting list, which is similar to the figures in the late 1990’s.  The numbers peaked in 2013, when it stood at 2,450 families, so today’s numbers represent a drop of 53.7%.

Nevertheless, this doesn’t necessarily mean that more families are being supplied with their own council house or housing association property.  Six years ago, Westminster gave local authorities the authority to limit entitlement for social housing, quite conspicuously dismissing those that did not have an association or link to the locality.

Interestingly, the rents in the social rented segment have also been growing at a faster rate than they have for private tenants.  In the Fareham Borough Council area, the average rent in 1998 for a council house/housing association property was £196.21 a month, whilst today it is £402.39, a rise of 105% in 19 years.

When comparing social housing rents against private rents, the stats don’t go back to the late 1990’s for private renting, so to ensure we compare like for like, we can only go back to 2005.  Over the last 12 years, private rents have increased nationally by a net figure of 19.7%, whilst rents for social housing have increased by 59.1%.

So, what does this all mean for the homeowners, Landlords and Tenants of Locks Heath?

Rents in the private rental sector in Locks Heath will increase sharply during the next five years.  Even though the council house waiting list has decreased, the number of new council and housing association properties being built is at a 70 year low.  The government crusade against Buy-to-Let Landlords together with the increased taxation and the banning of Tenant fees to Agents will restrict the supply of private rental property.  Which, in turn, using simple supply and demand economics, will mean private rents will rise – making buy to let investment a good choice of investment again (irrespective of the increased fees and taxation laid at the door of Landlords).  It will also mean property values will remain strong and stable as the number of people moving to a new house (and selling their old property) will continue to remain restricted and hence, due to lack of choice and supply, buyers will have to pay decent money for any property they wish to buy.

Interesting times ahead for the Locks Heath Property Market!