Ashford Landlords’ £6.6m Tax Bill

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I am asking Damian Green the longstanding Conservative MP for Ashford to remind new Chancellor Rishi Sunak and PM Boris Johnson to use their persuasive skills to highlight and take a more holistic approach and attitude to the private rented sector and thus tackle issues affecting Ashford landlords’ ability and capacity to run an effective buy-to-let business:

For some thirty years, the Government have abdicated the responsibility of housing the masses from local (council housing) authorities to the estimated 1.5 million buy-to-let landlords.

However, since 2015/16, Ashford landlords have faced increasing tax burdens as each year goes by, with the removal of mortgage interest rate relief on income tax (Section 24), the introduction of the 3% surcharge on stamp duty, and the reduction of the letting relief on capital gains tax.

My research has calculated the total income tax contribution by 1,748 Ashford private landlords in the tax year 2015/16 was £4,562,481

However, the eradication of higher rate mortgage interest relief (also known as Section 24) announced in 2015 by George Osborne has been estimated to add a further £1.9 billion nationally to landlords’ tax liabilities. Whilst raising money from landlords is an easy target, and the tax receipts are attractive for the Government – such a shortsighted policy is likely to seriously impact the supply of available rental property over the short and medium term – which will be very good news for landlords’ rental yields! 

And by 2021/2, when the full extent of  Section 24 relief kicks in, that income tax liability will rise to £6,661,222.

This doesn’t take into account additional liabilities such as Capital Gains Tax, the additional 3% on top of the prevailing Stamp Duty Land Tax and VAT.

Ambiguity and lack of certainty is the foe of all investment, as has been seen with Brexit. Now, just as things are starting to get rosy in Q1 with pent-up demand being released with the ‘Boris Bounce’, the last thing we need is for the Government to see landlords as a constant cash cow – it is imperative the Government acknowledges the value private landlords offers the UK in housing over of 9.45 million people in the country.

Westminster needs to take a far more balanced approach to the significant issues of landlords’ rights of possession, taxation and energy efficiency, and recognise the service the private rented sector offers to the country in effectively housing over a fifth of households and avoid the unintentional consequences of making renting a property harder for tenants… because, the way things are currently going against landlords, it is not financially attractive to invest in buy-to-let property unless able to do so without a mortgage!

Ashford Property Market … the Rollercoaster of the Last Decade

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Ah the 2010’s, the tens, the teens – What were we supposed to call the decade that has just gone? No matter what it was called, the last decade was a tough one, so does it really matter that we never really got around to giving it a name? Some might say, whatever one calls it, that period coming to an end is the best thing any teen (for people, too) can possibly do!

The last two decades have certainly been tumultuous. At least, for this new decade, we will later be able to say, things like “that style is so ’20s” and fellow humans will essentially know what you are talking about. If you come of age in this decade, you will be a ’20s child and we will discuss ’20s politics and ’20s style and all the things that hadn’t been created on the 31st December 2019; when two nameless decades ended and how finally there was something everyone in the UK could agree on: the name of the decade. Hey – it’s a start!

So, what has happened to the local Ashford property market in the last decade?

The average Ashford property has risen in value from £209,600 to £331,900 in the last 10 years

… meaning each Ashford homeowner has seen a profit of £235.19 per week for those last ten years. Rolling the clock back to the start of the last decade January 2010, and the economy (and housing market) were recovering from the Credit Crunch and the worldwide financial crisis. A decade on and things feel a little different. If you bought an Ashford home over the past 10 years, things have certainly changed.

Ashford property values rose 58.4% on average over the last decade

yet taking inflation into account, they only rose in real terms by 25.3 per cent.

Compare that to a 42.5% rise in the ‘80s, a 13.2% drop in the ‘90s and rise of 62.8% in the 2000s in real terms. So, in real terms after inflation, there has been less of a house price growth in Ashford in the past decade than the previous one.

 

On average, 1.12 million homes were sold each year last decade, although that was 26.4% less than the decade before (the noughties) when an average of 1.52 million properties were sold annually.

 

So, what are the underlying issues in the Ashford (and wider UK) property market when, in real terms, property is 25.3% more expensive than a decade ago?  Whilst the newspapers tell us both that first time buyers can’t get on the housing ladder and that the housing market is in gridlock – what is the problem? Well I am a firm believer in the adage that ‘bad news sells newspapers’ because the truth is something completely different as 32.7% of homes last year were bought by first time buyers compared with only 22.8% in 2009.

 

Yet, there are still issues; mainly a persistent lack of new homes being built which curtails the supply and choice of property; but stagnated wages, stiffer mortgage rules and homeowners not moving as much as previous generations are also contributing to the problem. In the UK, the number of homeowners who moved in 2019 was around 14% higher than in 2009, yet this was still just under 50% lower than the average for the noughties. It’s all up and down like a rollercoaster!

 

My thoughts for the future are based primarily on what will happen to interest rates. Throughout the last decade, the Bank of England base rate was 0.5% at the start and was cut to 0.25% in the Summer of 2016. Even with the increase to its current level of 0.75% in the Summer of 2019, it has made borrowing money on a mortgage extremely cheap.

 

Nonetheless, bank and mortgage rates will rise again eventually and I am concerned about the effect upon the housing market. Now it won’t be as bad as previous times when mortgage rates went up in the 1970’s and 1980’s (with mass repossessions) because the tougher mortgage rules introduced in April 2014 will have ensured borrowers were stress tested on their affordability if interest rates shot up.

 

Most borrowers have been stress tested on their affordability of mortgage rates up to 6% to 6.5%, which would obviously squeeze household disposable incomes yet should avoid people losing their homes due to repossession. Whilst I am not giving advice, just personal opinion: if you are one of the 29.3% of homeowners who is not on a fixed rate mortgage– maybe you should seriously consider doing so?

 

The 2020’s will be an interesting decade – and if you want to be kept up to date with what is happening in the Ashford (and the wider UK) housing market – follow me and this blog to read similar articles.

59 Ashford Landlords are risking £5,000 fines in Spring 2020

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Washing Machine Energy Ratings for Houses was the phrase one Ashford landlord used a few years ago when we were talking about the colour bar charts that every property has had to have for over 10 years now. Now these weren’t brought in just to exhaust the entire palate of ink in people’s printers, but to increase the energy efficiency of the UK’s housing stock.  The vast majority of Ashford landlords are, by now, acquainted with the legislation that came into force on the 1st of April 2018, that means all new and renewed private tenancy agreements must have an Energy Performance Certificate (EPC) rating of E or above, otherwise it would be illegal to rent the property out (EPC ratings have seven bands – A being the best and G the worst).

Yet, from 1st April 2020, those rules will be extended to also cover existing Ashford tenancies, meaning that under the new legislation, properties with an EPC rating of F or G will then be classed as unrentable – meaning it will be illegal to rent the property and the landlord will be liable for a fine of £5,000.

It will be illegal for a landlord to let any Ashford rental property with an EPC rating of F or G from April 2020

Back in 2018, there was a loophole for the Ashford landlords of F & G rated rental homes on new tenancies, where they did not need to upgrade the property for five years if it cost them money (called the ‘no cost to landlord’ exemption rule) – yet last year this exemption was removed – so they too are included in these new rules.

Therefore, this means that Ashford landlords must use their own cash to cover the cost of improving their Ashford property to at least meet EPC band E:

59 Ashford (TN23) properties will be illegal to rent out from the 1st April 2020…as they have energy ratings of F and G.

Now this requirement to upgrade properties is subject to a spending cap of £3,500 (including VAT) for each rental property, as landlords only need to spend what they need to, to improve their Ashford property to EPC rating E.

In cases where an Ashford landlord is unable to improve their Ashford property to EPC rating E within the £3,500 cap, then they still need to spend their hard earned cash and carry out the most appropriate measures which can be installed up to the £3,500 cap, and then register an exemption (with 3 quotes from 3 contractors) for their property on the basis that all relevant improvements have been installed and the property remains below an E.

Ashford properties such as an F rated terraced home on Beaver Road or some G rated flats on Lower Denmark Road will be illegal to rent out by April

If you are a self-managing Ashford landlord or a landlord with another Ashford agent, then feel free to pick up the phone and chat through any concerns with regard to these new regulations, how to read a EPC graph, how to find the EPC rating of your home, in fact anything – call me. The last thing you need is a £5,000 fine on top of the £3,500 improvement bill.

One final thought though – it might be wise for Ashford landlords who have had their rental properties for a while now to get a new EPC carried out on their property (something we can help with irrespective of whether you are a landlord of ours or not) as recent research has also acknowledged that some early EPC’s understated the thermal efficiency of solid walls.  As countless Ashford rental properties are pre 1925, which is when most (not all) new properties were built with cavity walls, the Dept for Business, Energy and Business Strategy have now recalibrated EPC’s to give a truer result. This probably means that some solid wall properties, Victorian and Edwardian terraced houses and converted flats, presently rated F under an EPC will no longer demand any improvement works and certainly less building work may be required in the case of a G rated rental property.

How is the ‘Exodus’ of Eastern Europeans Affecting the Ashford Property Market?

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I was having a thought-provoking conversation with a Landlord a few weeks ago about everything property, Brexit and how the reported voluntary repatriation of Eastern Europeans had affected the property market in Ashford.  One of his tenants, who had been renting his Ashford property for over 10 years was returning to Poland.  He was particularly disappointed as he told me they were some of, if not the best, tenants he had ever had.

In 2004, eight Eastern European countries joined the European Union and by 2015, EU net migration from those Eastern European Accession states (also known as the EU8), there was a net migration of an additional 42,000 EU8 adults per year coming into the UK, which equated for our local area of Ashford an additional 63 adults per year coming into the area in 2015 alone.

Yet by 2018, net migration had reversed and that saw 22 more EU8 citizens leave than arrive to live in Ashford

… and in the last set of figures released for year up to the Summer of 2019, net EU8 migration for Ashford was a net loss of 10 EU8 people for the year.  These are not huge numbers, considering ..

EU8 citizens only make up 1.41% of the Ashford population

Yes, at the last count there were just1,668 EU8 European citizens living in our local area out of a population of 117,956.

Its fascinating that 35.7% of the EU8 citizens that came across to the UK after 2004 were degree level educated compared to the 3.18% of adult UK-born citizens, yet of all the EU8 citizens in the country, 65.9% of are in private rented accommodation, 9.6% in social housing and 24.5% are home owners.

It is certain that migration of Eastern Europeans, especially in the early years of 2004 to 2010, had a huge impact on the Ashford rental property market – yet as time has gone on, families have started to put down roots and bring children into the world.  Ashford landlords buying all the rental properties for this new demand meant house prices for homeowners bounced back particularly well after the global financial crisis / credit crunch of 2008/9.

Again, looking at the figures, a good proportion of EU8 citizens have become homeowners – and even landlords themselves!

Yes, there is small number of Ashford EU8 citizens leaving as they have had the dilemma on whether they should stay or go, and some families, using the wealth that they have built up whilst working in this country have returned to their home country or other EU member states.  Decisions like that are not easily made and often tainted with dejection and disappointment – yet again, looking at the numbers, this is very much the minority.  As an agent, we are seeing European people (not just EU8 countries) come and European people go, and it was like that before 2016 and to answer the question… yet again and once more we believe this is a case of ‘bad news sells newspapers’.

Of course if one of your star tenants leaves your Ashford rental property and you then read an article about mass migration in a red top newspaper or The Daily Mail, it is going to worry you (like it did my Ashford landlord, yet with the information we shared with him it has put his mind at rest (and the best part – we were able to find him a new tenant within the week – who ironically also has come from Europe to live and work in the UK!).

To conclude, hopefully the end is in sight with Brexit, it would be a huge loss for the Country to see its embedded, settled, and largely skilled European residents depart as it must also be quite challenging for our fellow Europeans to even have to deliberate such a life-changing move.

All I can say is I think we are all eagerly anticipating the ‘B-word’ situation stabilising so that all of us, wherever we originate from, can reasonably plan our future.

22,732 People Live in Rented Accommodation in Ashford

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That number surprised you didn’t it? With the General Election done, I thought it time to reflect on renting’s prominence in the party manifestos and political broadcasts and ask why?

Often the best way to predict the future is to look to the past, so looking at the number of people who rented a century ago (1920’s), surprisingly 76% of people rented their home in the UK (as renting then was considered the norm). Yet in the latter part of the 1920’s, builders of the suburban housing estates with their bay fronted semis started to sell the dream of home ownership to smart renters.

Up until the mid 1920’s, the mortgage had been seen as a millstone around your neck. Now, with some clever marketing by those same builders, it started to be seen as a shrewd long-term investment to buy your own home with a mortgage. It fuelled the ambitions and goals of the up and coming well-to-do working class who re-styled themselves as lower-middle class. Meanwhile, the Government (through tax breaks) encouraged people to save in Building Societies whom in turn lent the money to these up and coming new homeowners through mortgages.

Roll the clock forward to the decade of the young Elvis, Chuck Berry, and Bill Haley (1950’s) and still 72% of Brits rented their home. Homeownership had boomed in the preceding 30 years, yet so had council house building. Then, as we entered the 1960’s and 1970’s homeownership started to grow at a higher rate than council housing.

The rate of homeownership started to drop substantially after the mid 1990’s, and now we roll the clock forward to today, there is no stigma at all to renting… everyone is doing it. In fact…

Of the 67,053 residents of Ashford, 22,732 rent their home… 

from either the council, housing association or a private landlord – meaning 33.9% of Ashford people are tenants. Yet read the Daily Mail, and you would think the idea of homeownership is deeply embedded in the British soul?

42,868 Ashford people live in an owner-occupied property (63.9%)

So, a nation of  homeowners – or renters? I noticed on the run up to the Election that housing was used as a way to get votes. This is nothing new, all parties have always used housing to get votes, although previously it was about which party would build more council houses in the 1950’s through to council Right to Buy with Thatcher (and everyone since) – running election campaigns promising everybody their own home in one way or another.

Yet, did you notice at this election something changed? The parties weren’t talking so much about increasing homeownership but about protecting the tenant. It seems the link between homeownership as the main goal of British life is starting to change as we are slowly turning to a more European way of living. Make no mistake – renting is here to stay in Ashford and growing year on year. You see, in Britain there is no property tax based on ownership, which many other western countries have. Instead Council Tax is paid by the occupier of the home (meaning the tenant pays – not the owner).

Both parties wanted to end no-fault evictions (which is a good thing), yet Labour went further and mentioned rent controls in their manifesto. As I have mentioned before in other articles on the Ashford property market, rents since 2008 (even in central London) have not kept up with inflation – so again was that another headline to grab votes/election bribe? The fact is the majority of new British households formed since the Millennium can now expect to rent from a private landlord for life – therefore the parties’ focus on this important demographic.

Yet even with the new mortgage relief tax rules for landlords and the 200+ pieces of legislation that govern the private rental sector, buy to let remains a viable investment option for most investors in Ashford. There has never been a better time to purchase buy to let property in Ashford … but buy wisely. Gone are the days when you would make a profit on anything with four walls and a roof – Most importantly do your homework, take advice and consider your options.

Ashford Buy to Let – Past, Present and Future

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Investing in Ashford buy to let property has become a very different sport over the last few years.

In the glory days of the first five years of the Millennium, where we had double-digit house price growth, mortgage companies (notably Northern Rock and HBOS) desperate to get on the buy to let mortgage bandwagon with rates so low it made the belly of a snake seem high and an open willingness to give loans away with little more than a note from your Mum and with hardly any regulatory intervention… anyone could make money from investing in property – in fact it was easier to make money than falling off a log! Then we had an unexpected flourish in the property market, with a post credit-crunch jump in the property market after 2010, when all still seemed rosy in the garden.

Yet, over the past five years, the thumbscrews on the buy to let market for British (and de facto) Ashford investors have slowly been turned with new barriers and challenges for buy to let investors. With changes in taxation rules on mortgage relief starting to bite plus a swathe of new rules and regulations for landlords and mortgage companies, it cannot be denied some Ashford landlords are leaving the buy to let sector, whilst others are putting a pause on portfolio expansion.

With the London-centric newspapers talking about massive reductions in house prices (mainly in Prime London – not little old Ashford) together with the red-tape that Westminster just keeps adding to the burden on landlords’ profit, it’s no wonder all appears to be doom and gloom for Ashford landlords … or is it?

One shouldn’t always believe what one reads in the newspaper. It’s true, investing in the Ashford buy to let property market has become a different ballgame in the last five years thanks to all the changes and a few are indeed panicking and selling up.

Ashford landlords can no longer presume to buy a property, sit on it and automatically make a profit

Ashford landlords need to see their buy to let investments in these times in a slightly different light. Before landlords kill their fatted calves (sell up) because values are not growing wildly beyond expectations, let’s not forget that a property also produce income in the form of rent. The focus on Ashford buy to let property in these times should be on maximising rent and not simply being preoccupied with house price growth.

Rents in Ashford’s private rental sector increased by 0.19% in the past 12 months

Rents in Ashford since 2008 have not kept up with inflation, it is cheaper today in REAL TERMS than it was 11 years ago and landlords are beginning to realise that fact with our help:

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Looking at the last few years, it can be seen that there is still scope to increase rents to maximise your investment (and landlords are catching on) yet still protect your tenants by keeping the rents below those ‘real spending power terms’ of the 2008 levels.

Buy to let must be seen as a medium to long-term investment….

Rents in Ashford are 4.29% higher than they were 3 years ago, and property values are 20.93% higher than Jan 2016

…and for the long term, even with the barriers and challenges that the Government is putting in your way – the future couldn’t be brighter – if you know what you are doing.

Investment is the key word here… In the old days, anything with a front door and a roof made money – yet now it doesn’t. Tenants will pay top rent for the right property in the right condition.

Do you know where the hot spots are in Ashford, whether demand is greater for 2 beds or 3 beds in Ashford? Whether town centre terraced houses offer better ROI than suburban semis? With all the recent regulation changes many Ashford landlords are employing us to guide them by not only managing their properties – taking on the worries of maintenance, the care of property and managing any wayward tenants’ behaviour – but also advising on the future of their portfolio. We can offer specialist support (with ourselves or selected partners) on the future direction your portfolio needs to meet your investment goals, (judging needs between long term capital growth and regular income), specialist finance, and whether you would benefit from transferring your property empire within a limited company structure.

If you know someone who is an Ashford buy to let landlord, do them a favour and share this article with them – it could save them a lot of worry, heartache, money and time.

Labour’s U-turn on the £303,990,507 Cash-Grab on Ashford Landlords’ Wallets

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Well, with the General Election just over the horizon and having been asked by a number of Ashford homeowners and Ashford buy to let landlords what the different main parties’ policies would do to the local property market, in this week’s article we focus on Labour’s contentious Right to Buy proposal for private tenants. Launched in September, the plan was designed to force landlords to sell their buy to let investments to their tenants who wished to buy them…. at a substantial discount.

Shadow Chancellor John McDonnell told the FT in September that, under a new Labour government, tenants would be given the Right to Buy their tenanted home with a hefty discount – just like the Tory Right to Buy policy for Council house renters that came into force after the 1979 General Election.

Yet it was not certain who would have been expected to pay for discounts on buy to let homes sold to tenants. Four years ago, Jeremy Corbyn advocated using the £14bn of tax allowances that UK landlords had at the time to pay for these discounts, allowing tenants to buy their tenanted home at the same discount as they would a local authority home without leaving the landlord out of pocket.

However, these tax allowances have been substantially reduced with the changes in the way mortgage interest relief on landlords’ mortgages is calculated, meaning that this method of funding would no longer be feasible. In fact, bankrolling a project at a modest 20% discount for the whole of the UK would cost £177.84bn; a lot more than the £14billion quoted by Mr Corbyn. So, what would that policy cost Ashford landlords?

Labours policy of 20% Right to Buy discount could cost Ashford landlords £303,990,507! 

… and if Ashford tenants got the maximum discount of 35% that Council tenants receive with the Right to Buy scheme that would cost Ashford landlords £531,983,387.

However, it appears Mr McDonnell has re-considered the original suggestion and done a (slight) U-turn, stating it should apply only to the richest landlords and not those who only own a couple of rental properties. He was quoted in The Times as saying, “There’s a large number of individuals or families who have bought another property as an asset for the future and we wouldn’t want to endanger that”.

Yet, even this somewhat watered-down account still creates threats to the private rental sector and Ashford’s overall stock of private rented homes. John McDonnell seems to have altered his initial thought to permit all private tenants the right to buy from their landlords to apply only to those with more than a couple of buy to let properties. The shift appears to be aimed at pacifying middle England’s small time landlords who are probably swing voters with smaller property investments and instead, Labour’s focus is on the larger scale buy to let investors. Looking at the stats, and being generous that we are only looking at landlords with 6 or more (not the couple that Mr McConnell suggested) …… 

Of the 4,545 rental properties in Ashford, 1,241 are owned by Ashford landlords with 6 or more properties in their portfolio

If targeted, these larger scale landlords would unquestionably leave the property market in their hordes if their buy to let investments could be so easily destabilised. There would be mass sell offs before the legislation even became law, thus making tenants homeless (and who would then house them?) ..and even if that didn’t happen, it would be very damaging and someone (probably landlords) would have to stump up the £48.54bn national bill (£83,003,789 in Ashford alone).

If Labour really want to fix the property market, it needs long term certainty and confidence, yet their policies would instantly challenge this.

And don’t think I am just Labour bashing here – the Tory 2014 Help to Buy scheme hasn’t really helped either as their scheme, which gave first time buyers (FTB) a 20% interest free loan, if they put down a 5% deposit, has been a cash-cow for home builders.

The Tories announced recently another £10bn of taxpayer’s money will be pumped into a scheme which, quite frankly, wasn’t needed to boost an already decent property market. The banks were already giving 95% first time buyer (FTB) mortgages from 2010 and the Help to Buy scheme was only allowed on new homes purchases, meaning it didn’t help the larger second-hand market.

That £10bn could have been far better spent building Council houses, not helping the large PLC builders line their pockets with Public cash.

Are the Tories Selling Off the Last of the Family Silver? 677 Ashford Housing Association Households & the Right to Buy Their Homes

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In 1979, Margaret Thatcher was voted in on a Tory landslide with the ‘right to buy your own council house’ being a mainstay of Conservative policy. She encouraged people to buy their council flats and houses, although it might interest you to know the council tenant right to buy idea was first proposed in the late 1950s as part of a Labour manifesto.

Maggie’s version was based on massive discounts for tenants and 100% mortgages (no deposit required). However, the real bugbear was that half the monies raised from the council house sales went to central Government coffers with the other half having to be used to reduce local authorities’ debt rather than building new houses – so houses were rapidly being sold but not replaced!

4,752 council homes in the Ashford area have been bought in the last 40 years (an average 119 per year)

Interestingly, in 2012 the Tories relaxed the rules for right to buy and raised the highest discount on a property to £75,000 (it has subsequently been increased further, to £100,000, in some parts of the UK) with 166 council houses sold locally since the rule change, raising £20,946,538 since 2012 alone.

The issue, noted by many existing council house tenants, is that those tenants turned homeowners subsequently sell on their ex-council homes at a huge profit, meaning the demographics of those areas has become ever more transient – more specifically, properties that were once council homes are now owned by buy-to-let landlords renting them out on a short-term basis.

Yet up to this point in time, nothing has been said about the ‘other’ type of social housing – housing association properties. Whilst council houses are properties owned by the local authority providing low cost social housing, housing associations also provide lower-cost social housing for people in need of a home, yet they are private, non-profit making organisations.

The Tories state one of the biggest divides in our British society is between those who can and those who cannot afford their own home, so plan to establish a new national model for shared ownership which allows people in new housing association properties to buy a proportion of their home while paying a lower/subsidised rent on the remaining part – helping thousands of lower income earners get a step onto the housing ladder.

So, what for the tenants of the existing 677 housing association households in Ashford? The Conservatives have said they will work with housing associations on a voluntary basis to determine what right to buy offer could be made to those Ashford tenants, although there are already existing rules which give most housing association tenants the right to buy their home, although with only modest discounts of £9,000 to £16,000 depending on where you live. So, what does all this mean for the current homeowners and landlords of Ashford properties?

The Tories sold off 3,581 council houses in Ashford whilst in power between 1979 and 1997

This really created waves in the 1980s housing market and was a contributary factor to the housing crash of 1987 when Dual-MIRAS tax relief was removed by Nigel Lawson. By selling off council housing in those depressed years they were accused of selling off the family silver cheaply, thus creating the foundations of the buy-to-let boom of the early to mid-2000s because of the major shortage of affordable housing being sold in the previous two decades.

But note this time around, the Tories state it is just for new housing association properties, not existing ones. Also, tenants will only have the right to shared ownership – NOT OUTRIGHT OWNERSHIP. This policy will therefore have hardly any effect … unlike Thatcher’s policies of 1979.

 

Ashford Property Values 0.9% Higher Year-on-Year

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It seems that quite a few Ashford homeowners and Ashford landlords have now become acclimatised to living with the uncertainty of Brexit. Throughout most of 2019,  figures show many of them decided to get on with living life, started reinvesting money into Ashford property and buying and selling their Ashford homes and BTL investments. Land Registry stats confirm this.

Current data shows that…

Ashford property values are 0.9% higher than 12 months ago

Whilst the newspapers were stating prime central London property values were now 17% below the levels being achieved a couple of years, that message seems not to have been heard by certain sectors of the Ashford property market!

Speaking with other property professionals in Ashford, many weren’t expecting the usual autumn rebound after the summer holidays with many anticipating a dormant Ashford property market on the run up to Christmas believing many Ashford home-movers would put off the their home moving activities until the new year, yet in many sectors of the local property market, I have seen (and the stats back this up) that those Ashford property buyers who are able to hold their nerve (whereas others were hesitant) have found themselves in a better negotiating position to get a great property deal. Putting aside the fluff of newspaper headlines, the real foundations of Ashford housing market remain sound with record low unemployment, ultra-low interest rates and low inflation.

Interestingly, there are 20% more homes for sale in Ashford compared to two years ago, meaning more choice for buyers.

However, there are still parts of the Ashford property market that remain stagnant, with some homeowners being slightly unrealistic with their marketing pricing. To them, the property market appears to be slow, as they stare at their ‘for sale’ board for months on end, yet nothing could be further from the truth.

The key to a balanced (and healthy) property market is realistic pricing by  homeowners when they place the property on the market, mortgage affordability for buyers (which was discussed a couple of weeks ago in the Blog) and buy to let landlord activity which creates and maintains forward momentum. One measure of momentum is how long a property remains on the market, and interestingly…

The current average length of time an Ashford property remains on the market is 81 days, up slightly from 59 days two years ago

Now the number of properties that have been sold locally is slightly down year on year (even though we had a burst of property sales in the summer locally) and interestingly, Rightmove reported recently that nationally, the number of properties sold  in the UK was only just over 3% less year on year, so a similar picture nationally.

So, what does all this mean for Ashford’s homeowners and landlords?

We have always had issues that appear at the time to be game changers for the housing market; for the last few years it’s been Brexit, 10 years ago the credit crunch, 18 years ago the dot-com crash, the ERM and 15% interest rates issue 27 years ago, dual MIRAS 32 years ago, hyper-inflation 40 years ago, the 3 day week 45 years ago – the list goes on and on –  Everyone needs a home to live in and the local authority just has not got the money to build council houses, so buy to let will continue to grow for the foreseeable future which in turn creates a stable foundation for all homeowners.

Maybe you should use this time, like many in Ashford to take advantage of the property deals to be had locally…

The Cost of an iPhone11 Represents Over 10% of an Ashford First-Time Buyer’s Deposit

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Many mature readers of this Ashford property market blog may well remember buying their first home as 20 or 30 somethings, perhaps in Ashford and many years ago, and read the newspapers now and feel it is all doom and gloom for todays’ first-time buyers.

So, I wanted
to look at the facts, instead of newspaper headlines.

Back in 1995, the average Ashford first time buyers house cost £38,060,
whilst official figures state today it is £181,000

So, looking at today’s property prices, the perception is that owning a home is beyond the reach of most Ashford first time buyers and that renting is the only way for younger members of Ashford society to have a roof over their head .. or is it?

100% mortgages (so no deposit needed) were rife in the 2000’s with Northern Rock famous for their 125% mortgages (i.e. you borrowed 25% more than what you were paying for the house, again with no deposit). Yet when the credit crunch hit in 2008 such mortgages disappeared overnight – ending the dream of homeownership for many. Yet it might surprise you to hear that 95% mortgages (i.e. the first-time buyer would need to save a 5% deposit) have been available since late 2009 and 100% mortgages (i.e. no deposit) were made available in 2016.

It is £167 per month cheaper to buy a typical Ashford first-time
buyer home than to rent the equivalent property.

Prospective Ashford first-time buyers could make a saving
of £2,006 per year on average if they moved from renting to owning. My calculations
assume that first-time buyers raise a deposit of just 5 per cent and make
mortgage payments over 35 years with the Barclays 95% mortgage with a fixed
interest rate of 2.48 per cent interest. At this level…

Today, the average deposit needed by an Ashford first-time buyer is £9,050

Those able to raise that deposit, would pay £638pcm on average in mortgage payments, while the average rent for the same property would be £805pcm and the household income to support such a mortgage would need to be from £38,211 pa.

Of course, buying your first home is a massive financial commitment
and investment with up-front costs to ponder on, yet long-term the financial
benefits can be substantial. With annual savings of £2,006 a year, this can
really mount up over time and, of course, once the mortgage is paid off, one
will have a valuable asset.

Yet, the elephant in the room is that raising of the 5% deposit

Well most first time buyers, even some of you now in your 50’s and 60’s may have used the Bank of Mum and Dad to help with the deposit, yet it’s only fair that most parents still expect their offspring to contribute to the deposit and this is where it comes down to choice. I have spoken to many of my friends and family to reconfirm my initial thoughts that it largely comes down to priorities and choices in life. To save the deposit mentioned above, some sacrifices are required…

According to a survey in 2018, the average millennial goes out two nights a week and spends on average £63.36 per night out, that’s nearly £6,600 per year – an expensive hobby. Nearly a third of millennials surveyed had broken their mobile phone in the last 12 months. Then there is the obsession of having the latest tech, with the need to constantly be upgrading one’s mobile phone. In fact, the cost of the brand new iPhone11, recently released, is just shy of £900. Even those on contracts can expect to pay upwards of £80 per month for the newest upgrade, yet if they kept their old phone after two years, a sim-only deal with the same minutes and data would set them back no more than £25 per month … it comes down to choices – Save for a deposit and reduce your expenditure on socialising and mobiles etc and have a valuable asset at the end of your mortgage or continue as you are.

I am not here to make judgement – we are all free to make our own choices in life – all I am doing is highlighting the real situation – so you are aware of the full story.

Is This the End of No-Fault Section 21 Evictions for Ashford’s 11,678 Tenants?

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In late spring, the Government announced that they were planning to end no-fault evictions for tenants living in private
rented accommodation.

I have since had a number of Ashford landlords contacting me anxious that removing a tenant from their Ashford buy-to-let property in the future had possibly become a lot more problematic. Yet, at the launch of the consultation on the changes to the piece of legislation relating to no-fault evictions (the Section 21 amendments), the Government wanted to assure British landlords that they would be protected by a bolstering of the existing Section 8 legislation: The current Section 8 already allows landlords grounds for recovery of their properties for reoccupation by the landlord, non-payment of rent and other legitimate factors.

4,545 Ashford landlords are affected by this potential change in the law

Comforting for both Ashford landlords and tenants is the fact that competent letting agents very rarely have to evict a tenant. In the event a tenant needs evicting it is normally because rent hasn’t been paid or because the landlord is either selling their buy-to-let investment or moving back into their property themselves – Looking at the consultation – it has been indicated that those grounds will not be removed from section 8 powers during the government’s consultation and the word is they will be bolstered and improved. To put the removal of Section 21 notices into some context…

Only 22,527
section 21 notices made it to Court last year, out the 4.5million private
rented households

Scotland banned no fault evictions (i.e. their own version of a Section 21) two years ago, and the model suggested by Westminster is similar to that of the new Scottish system. Landlords, tenants and agents have accordingly had to adapt north of the border, and there hasn’t been a mass exodus of landlords from the Scottish market.

The call throughout the lettings and legal profession is simply: if the Government is intent on making these changes, we need well-funded courts which specialise in housing and tenancy matters (as there are for family law).

Especially when the landlord manages the property themselves (without an agent), the issue of eviction often comes about from a breakdown in communication between landlord and tenant. The courts could use their mediation skills to make it simpler and faster for tenants and landlords to obtain quick and accessible justice instead of the existing drawn out procedures under Section 8, which helps no one (not even the tenant). This is important as the demand for Ashford rental properties is growing and growing and people need homes to live in:

Ashford needs an additional 216 buy-to-let properties per year for the next decade to meet the demand from Ashford tenants

As an agent in Ashford, I know most Ashford landlords consider buy-to-let as a long-term investment, with the average landlord looking to retain their buy-to-let property for at least 10 years or beyond. Talking to other agents around the country, over 90% of Section 21 notices are made by the tenant, not the landlord. Removing the Section 21 notice could thus affect tenants far more than landlords.

Replacing Section 21 with a system that requires a landlord to firstly have a good reason, and secondly to go through due process, will likely remove the more unprincipled amongst landlords from the property market. That is great news as those landlords will either sell their properties to new or existing buy-to-let Ashford landlords, or to tenants who want to buy them. So, it could be a small win for people looking for a new Ashford home, and a disappointment for landlords simply looking for a cash cow investment who have no care about their property or tenant!

If you are an Ashford landlord and want to know more, whether you are a client of ours, an Ashford landlord with another agent or a self-managing landlord, feel free to either drop me a line ( robert@taylorslettings.co.uk ) or pick up the phone (01233 663266) to chat about the implications of this and other legislative changes on the horizon.

Mending the Broken Ashford Property Market

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The long-lasting issues of the Ashford property market are laid bare as the final 2018 property transaction figures have just been published and they continue the post credit crunch trend of less people moving.

26.8% less Ashford people are selling their homes annually since the credit crunch compared to the post Millennium years of 2000-05

This is not solely an issue of the Ashford housing market slowing down since the credit crunch – the challenge is to separate shorter-term factors such as Brexit and the upcoming election from longer-term structural issues of the UK society, because when these most recent property transaction figures are seen against longer-term trends for Ashford, they suggest there are more significant issues within the Ashford housing market.

In the late 1990’s, 2,035 properties were sold annually in the Ashford area, then in the same area, the Millennium boom saw transactions rise to 2,886 per annum. Property sales then almost halved to 1,639 per annum in the challenge of the global financial crash and subsequent retrenchment of the mortgage market. Post credit crunch (2012 and beyond) locally, on average, 2,111 properties have sold annually:

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So whilst there was a recovery from 2013 onwards, it was

rather uninspiring when compared to the pre-credit crunch years, with a lacklustre
performance in property transactions since the mid 2010’s.

You might ask why should we be concerned about the number of property transactions and not the change in property values?

The fact is, the number of property transactions are a far more reliable bellwether of the health and potency of the local housing market.

As less people have been selling their homes locally, this is not only bad for the Ashford housing market but also for the local economy, especially when you consider how many allied businesses – builders, decorators, solicitors, removal vans, estate agents, mortgage arrangers and others  lose out as a result.

Some say the deficiency of property supply, mainly in affordable first-time buyer homes, is the chief reason why transaction figures remain stubbornly low. Others suggest an absence of suitable housing stock elsewhere in the property ladder (particularly bungalows for older generations), combined with rising demand, is causing a bottleneck in our local housing market.

I know there has been much talk in Westminster of grand home-building programmes, yet we require actual delivery of these undertakings and, even then, it will be a decades before any seismic change in the Ashford property market is seen as a result.

In the short-term, a quicker improvement may come from changes to stamp duty: First time buyers do not incur Stamp Duty up to a certain level, yet those Stamp Duty concessions could so easily be also extended to mature homeowners looking to downsize. This could liberate a meaningful number of family homes currently occupied principally by retirees and the tax lost through Stamp Duty could be replenished by a restructuring of the Council Tax bands.

The Council Tax bandings were set in 1991 and the highest starts at £320,000 (based on 1991 values). It seems irrational that this upper value band, set in the 1991 revaluations, has not been increased, particularly as house prices in London have soared by over 400 per cent in the last 25 years.

These two changes would mean higher taxes for those who don’t move yet less tax for those that do – a situation that would encourage a far more liquid Ashford property market.

Just a thought of one possible way to mend the local property market – what are your thoughts?

Taylors Residential Lettings Limited, Company no. 6002742, Regd Office: Suite 1, Invicta Business Centre, Monument Way, Ashford TN24 0HB