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.

Unemployment – the Secret Driver of the Ashford Property Market?

If you have been reading my articles on the Ashford property market recently, you will see that in the three years since the Brexit referendum we have shown there has been little or no effect on the Ashford property market (or the UK as a whole).

So one might ask, what does affect the property market locally? Well many things on the demand side include wages, job security, interest rates, availability of mortgages, confidence in the economy, inflation, speculative demand … the list goes on. Yet as my blog readers will note, I like to delve deeper into the numbers and I have found an interesting correlation between unemployment and the number of properties sold (i.e. transactions).

Why transaction levels and not house prices? Well just looking at Ashford house prices as a bellwether has flaws. Many property market commentators and economists believe transaction numbers (the number of properties sold) give a more accurate and candid indicator of the health of the property market than just house values alone. The reason is twofold. First most people when they sell also buy, so if property values have dropped by 10% or risen by 10% on the one you are selling, it would have done the same on the one you are buying – meaning to judge the health of a property market is very one dimensional.

Secondly, the act of moving is very much a human thing. Property habitually conveys a robust emotional connection with homeowners – a connection that few would attribute to their other investments like their savings or stock market investments. Moving home could be described as a human enterprise, moving from one chapter of one’s life to another. When people move home, it shows they are moving forward in their lives and so this gives a great indicator of the health of the property market.

Looking at Ashford’s figures on the graph, you can see an inverse relationship between unemployment and housing transaction levels:

Property transactions in Ashford dropped by 42.37%, whilst unemployment in Ashford rose by 53.55% during the 2007 to 2009 Global Financial Crash
There is clearly a relationship between conditions in the Ashford job market and the number of people who move home … interesting don’t you think?

Now I am not saying unemployment is the only factor influencing the Ashford property – but it has to be said there is a link.

As a country (and indeed here in Ashford) over the last 40 years, we have seen a shift in the outlook over the purpose of housing and the development of a religion in following house prices (and I appreciate the irony writing these articles on Ashford may be feeding that habit!) Yet, when did owning a home turn from buying a roof over your head to an out and out investment vehicle? I do wish people would stop fretting about their intrinsic value being associated with their Ashford home. Now of course, I am not dismissing the current levels of Ashford house prices – we just have to take into consideration other metrics alongside them when judging the health of the property market locally.

One final thought, looking on a broader scale in the UK, those towns and cities whose property markets bounced back after the Global Financial Crash had high levels of employment and low unemployment whilst places with high unemployment and relatively low employment have, on the other hand, typically underperformed.

So the next time you are considering a house move or buying a buy to let property in Ashford … don’t make your judgement on house price growth alone.

What Has Happened to the Ashford Property Market Since the Last Property Market Crash?

A handful of Ashford landlords and homeowners have been asking me what might happen if we had another property crash like we did in 2008 -09?

The UK property crash in 2008/9 caused property prices in the UK to drop by an average of 18.37% over a period of 16 months

On the run up to March’s Parliamentary vote on Brexit, a number of people have asked what a no-deal Brexit could do to the property market and if there would be a crash as a result.

I have discussed in a previous article on the chances of that (slim but always a possibility) … but assuming it happens, it is my opinion the outcome of a no-deal Brexit would be no worse than the country’s 2008/9 credit crunch property crash, the late 1988 property crash, the 1974 property crash, 1951 property crash … I could go on. The British economy would bounce back from the shock of a no-deal Brexit with lower property values and a continued low interest rate environment (perhaps with a further round of Quantitative Easing) and that would mean we would see a similar bounce back as savvy buyers saw a fantastic buying opportunity.

So, let me explain the reasons I believe this…

Many said after the Brexit vote in June 2016, we were due a property crash – but we all know what happened afterwards

Initially, let’s see what would happen if we did have a crash, how quickly it would bounce back and then finally discuss how the chances of a crash are actually quite minimal.

Therefore, to start, I have initially split down the types of property in Ashford (Detached/Semi etc.) and in the red column put the average value of that Ashford property type in 2009. Next in the orange column what those average values are today in 2019:

Now, assuming we had a property crash like we did in 2008, when average property values dropped nationally by 18.37%, I applied a similar drop to the current 2019 Ashford figures (i.e. the green column) to see what would happen to property values by the middle 2020 (because the last crash only took 13/14 months).

…and finally, what would subsequently happen to those same property prices if we had a repeat of the 2009 to 2014 property market bounce back:

Of course, these are all just assumptions and we can’t factor in such things as China going pop on all its debt … yet either way, the chance of such a crash coming from internal UK factors alone would seem far slimmer than in any of the four property crashes we have experienced in the last 80 years. Why, you might ask?

The seven reasons I believe are these …

  1. The new Bank of England mortgage rules on lending 2014 to stop reckless lending that fuelled that last crash.
  2. Low inflation.
  3. Low mortgage rates (the average Brit’s fixed rate mortgage is currently 2.26% and the variable rate mortgage of 3.07%).
  4. Wage rises are forecast to continue to outgrow inflation.
  5. Unemployment figures dropping to 4% (down from 8.4% in 2011).
  6. The high percentage (67.7%) of all British mortgages being on a fixed rate.
  7. And notwithstanding the distractions of Brexit over the last few years, it cannot be denied that the British economy has slowly and steadily been heading in the right direction for a number of years, built on some decent foundations of a steady housing market (unlike the 1988 and 2008 crashes when the housing market got overheated very quickly on the run up to the crashes).

So as the circumstances are much different to the last two crashes, the chances of a crash are much slimmer. Yet if we do have a crash, for the very same 7 reasons above why the chances of a crash are unlikely, those 7 reasons would doubtless contribute to making the ensuing slump neither too long nor substantial in scale.

One final thought for the homeowners of Ashford. Most people when they move home, move up market, meaning in a decreasing market you will actually be the winner, as a 10% drop on your current home would be much smaller in £notes than a 10% drop on that bigger property … think about it!

One final thought for new and existing buy to let landlords of Ashford. Well, the questions I seem to be asked on an almost daily basis by landlords are: –
• “Should I sell my property in Ashford?”
• “Is the time right to buy another buy to let property in Ashford and if not Ashford, where?”
• “Are there any property bargains out there in Ashford to be had?”

Many of our Ashford landlords and some others who are with other Ashford agents, like to pop in for a coffee, pick up the phone or email us to discuss the Ashford property market, how Ashford compares with its closest neighbours (Folkestone, Canterbury and Maidstone), and hopefully answer the three questions above. I don’t bite, and don’t do hard sell – I’ll just give you my honest, straight-talking opinion. I look forward to hearing from you.

With 41.1% of Ashford Property on the Market Sold – Are There Any Brexit Bargains?

Bargains – well yes and no – and let me explain why:

To find a bargain you need to know the market, yet there is not just one ‘property market’ in the UK. In fact, the British property market is like a fly’s eye, it looks to be a whole but in fact it is split into lots of fragmented pieces and the same goes for the Ashford property market as that too is split into different patches… in fact it can even come down to two streets adjacent to each other, one street selling like hot cakes for top dollar whilst the next street can stick, even at comparatively lower prices (i.e. if there is a school catchment boundary or differing postcode).

According to Coutts, property values in ‘Prime London’ have dropped by 14.7% in the last 5 years … yet look closely at those stats and you’ll see Prime London is considered anything within a 1,500m radius of Kensington High Street above £4.6m – an entirely different world to the average Ashford property, which is worth just over £328,000 and has risen in value over those same 5 years by 31.0% … truly another world!

I have noticed the top end of the market above £600,000 in Ashford and the surrounding areas however is proving a little tougher to shift than a few years ago, yet this can’t all be blamed on Brexit – buyers have long been flinching at inflated asking prices and excessive stamp duty rates.

In Ashford, 27.1% of properties for sale have
reduced their asking price in the last 3 months by
an average of 5.0%

A lot less than the reductions being seen in central London. In fact, the property market in Ashford is looking reasonably good with 41.1% of properties on the market in Ashford being  shown as under offer or sold subject to contract

…Interesting when compared with the aforementioned London Prime market where only 5.86% of the properties for sale are sold… almost certainly some juicy bargains to be had there!

So, where are the bargains in Ashford? Well to start with, it’s all about knowing the local Ashford market – all about comparing and contrasting property, so to start with, check out the property web-portals such as Zoopla and Rightmove to see what’s for sale. The art here is to tick ‘include Sold STC’ in the filters .. then arrange them in price order. Then you will get a feel for roughly what similar properties are selling for. Also look at recent sales, so in Rightmove click on ‘House Prices’ on the main menu, on the proceeding drop down menu click on ‘Find Sold House prices’ and now you can type in a street, or even a street plus 0.25miles/0.5miles etc .. click on ‘List View’ and they are in date order. Zoopla has a similar function (feel free to contact me if you need a hand with that).

Then once you have found what you think is a bargain .. view it. Ask the agent why the sellers are moving. By doing your research on the seller, seeing how long it has been on the market, whether they have reduced the asking price (if you ask an agent they have to tell you and by how much) — you could cut a better deal if they are compelled to sell. Push home your advantage i.e. if you are a first-time buyer, don’t have a property to sell, chain free or cash purchaser it can all make a difference.

Looking at the numbers above, some savvy Ashford landlords and home buyers are taking advantage of the doom and gloom headlines as property owners’ expectations are probably at the lowest they have been since the Credit Crunch, especially if they are in the ‘got to sell’ instead of the ‘would like to sell’ category.

Like anything in life .. buying a property bargain comes down to putting the hard-work in, doing your homework and jumping at opportunities as they present themselves.

How Did Brexit Affect the Ashford Property Market in 2018 – and its Future for 2019?

A few weeks ago, I suggested property values in Ashford would be between 1.1% and 2.1% different by the end of the year. It might surprise some people that Brexit hasn’t had the effect on the Ashford property market that most feared at the start of 2018.

The basis of this point of view can clearly be seen in the number of property transactions (i.e. the number of property sold) that have taken place locally since 2008. The most recent property recession was the Credit Crunch years of 2008/2009/2010.

In property recessions, the headline most people look at is the average value of property. Yet, as most people that sell also go on to buy, for most home movers, if your property has gone down in value, so has the one you want to buy so you are no better or worse off. Indeed, if you are moving up market – which most people do when moving home – in a repressed market, the gap between what yours is worth and what you will buy gets smaller … meaning you will, in fact, be better off!

Yet, most property commentators, including myself, suggest (and I have mentioned this before in some of my other blog articles) a better measure of the health of the property market are the transaction numbers (i.e. the number of people selling and buying). So, I decided to look at the 2018 statistics, and compare them with the Credit Crunch years (2008 to 2010) and the boom years (2014 to 2017). The results can be seen in the table below:

How Did Brexit Affect the Ashford Property Market in 2018 – and its Future for 2019?

Then, I looked at the average quarterly figures for those chosen date range, and created this graph …

How Did Brexit Affect the Ashford Property Market in 2018 – and its Future for 2019?

In that 2008 to 2010 property Credit Crunch recession, the average number of properties sold in the Ashford area were 133 per month. Interesting when we compare that to the boom years of 2014 to 2017, when an average of 196 properties changed hands monthly … yet in the ‘supposedly’ doom laden year of 2018, an impressive average of 168 properties changed hands monthly … meaning 2018 (compared to the boom years of 2014 to 2017) saw a 14.3% drop – yet still 26.0% higher than the Credit Crunch years of 2008 to 2010.

The simple fact is, the fundamental problem of the Ashford property market is that there haven’t been enough new homes being built since the 1980’s (and I don’t say that lightly with all the new homes sites dotted around the borough). Also, the cost of buying your first home remains relatively high compared to wages and to add insult to injury, all these issues are armor-plated by the tougher mortgage rules, introduced in 2014, and the current mortgage market conditions.

It is these issues which will ultimately determine and form the rather unexciting, yet still vital, long term outlook for the Ashford (and national) housing market, as I feel the Brexit issue over the last few years has been the ‘current passing diversion’ for us to worry about. Assuming something can be sorted with Brexit, in the long term property values in Ashford will be constrained by earnings increases with long term house price rises of no more than 2.5% to 4% a year.

Fundamentally, the question I am asked by many Ashford buy to let landlords and Ashford homebuyers is … “should I wait to buy or not?”

As an Ashford homebuyer, rather than thinking of what is happening in Westminster, Brussels, Irish Backstop, China or Trump give greater consideration to your own personal circumstances – Do you want to move to get your child in ‘that’ school or do you need an extra bedroom for your third child? For lots of people, the response is a resounding ‘yes’ – and in fact, I feel many people have held back, so once we know what is finally happening with Brexit and the future of it, there could a be a release of that pent-up demand to move home as people generally just want to get on with their lives.

There is little to be lost in postponing a house purchase until there is better clarity on the situation. If not Brexit, it will something else – so just get on with your lives and start living. We got through the global financial crisis/Credit Crunch in ‘08/’09, Black Wednesday in ’92 where mortgage interest rates went from 8.5% to 15% in one day, we got through the worst stock market crash with Black Monday in ’87, hyperinflation, power shortages, petrol quadrupling in price in less than a year and a 3 day week in the ‘70’s … need I go on?

Ashford Landlords? Well, where else are you going to invest your money? Like I said earlier in the article, we aren’t building enough homes to keep up with demand … so as demand outstrips supply, house values will continue to grow. Putting the money in the building society will only get you 1% to 2% if you are lucky. In the short term though, there could be some bargains to be had from short-sighted panicking sellers and in the long term … well, the same reasons I gave to homeowners also apply to you.

How Would a Hard Brexit Affect Ashford House Prices?

 

I have been asked a number of times recently what a hard Brexit might mean to the Ashford property market. To be frank, I have been holding off giving my thoughts, as I did not want to add fuel to stories being bandied around in the national press. However, it’s obviously a topic that you as Ashford buy to let landlords and Ashford homeowners are interested in … so I am going to try and give you what I consider a fair and unbiased piece on what would happen if a hard Brexit takes place in March 2019.

After the weather and football, the British obsession with the UK property market is without comparison to any other country in the world. I swear The Daily Mail has the state of the country’s property market on its standard weekly rotation of front-page stories! Like I have said before in my blog, there are better economic indexes and statistics by which to judge the economy and (more importantly) the property market. If you recall, I said the number of transactions was just as important, if not more, as a bellwether of the state of the property market.

Worries that the Brexit referendum would rapidly lead to a crash in Ashford, and national, property values were unfounded, although the growth of property values in Ashford has been reduced since the referendum in the summer of 2016.

Now, it’s true the Ashford property market is seeing less people sell and move and property values are rising at a slower rate in 2018 compared to the heady days of the first half of this decade (2010 to 2015), but before we all start panicking, let’s ask ourselves: What exactly has happened in the last couple of years since the Brexit vote?

Ashford house prices have risen by 8.62% since the
EU Referendum…

…and yes, in 2018 we are on track (and again this is projected) to finish on 2,157 property transactions (i.e. the number of people selling their home) … which is less than 2017 … but still higher than the long term 12-year average of 2,036 transactions in the local council area.

How Would a Hard Brexit Affect Ashford Property Values

So, it appears the referendum vote hasn’t caused too many major issues thus far, however, if there was a large economic jolt, that could be a different game, yet how likely is that?

The property market is mostly influenced by interest rates and salaries

A hard Brexit could subdue wage growth to a degree, yet the level of the change will depend on the yet-to-be-determined type of Brexit deal (or no deal). If trade barriers are imposed following a hard Brexit, imports will become more expensive, inflation will rise and growth will fall although, as we are not in the Euro, this could be tempered by the exchange rate of Sterling against the Euro. In plain language, though, a hard Brexit will be worse for house prices than a deal.

So why did the Governor of the Bank of England suggest a disorderly hard Brexit would affect house prices by up to 35%?

I mean it was only nine years ago we went through the global financial crisis with the credit crunch. Nationally, in most locations including Ashford, property values dropped in value by 16% to 19% over an 18-month period. Look at the graph and if we had a similar percentage drop, it would only take us back to the property value levels we were achieving in 2015.

And let’s not forget that the Bank of England introduced some measures to ensure we didn’t have another bubble in any future property market. One of the biggest factors of the 2009 property crash was the level of irresponsible lending by the banks. The Bank of England Mortgage Market Review of 2014 forced Banks to lend on how much borrowers had left after regular expenditure, rather than on their income. Income multipliers that were 8 or 9 times income pre-credit crunch were significantly curtailed (meaning a Bank could only offer a small number of residential mortgages above 4.5 times income), and that Banks had to assess whether the borrower could afford the mortgage repayments  if interest rates at the time of lending rose by three percentage points over the first five years of the loan … meaning all the major possible stumbling blocks have been mostly weeded out of the system.

So, what next?

A lot of Ashford homeowners seem to be waiting until 2019 to sell, meaning currently less choice for buyers, especially in the desirable areas of Ashford. For Ashford landlords, Ashford tenants are also likely to hang off moving until next year, although I suspect (as we had this on the run up to the 2015 General Election when it was thought Labour might get into Government), during the lull, there could be some Ashford buy to let bargains to be had from people having to move (Brexit or No Brexit) or the usual panic selling at times of uncertainty.

Brexit, No Brexit, Hard Brexit … in the grand scheme of things, Brexit will be just another footnote in history. The UK survived the Oil Crisis, 20%+ Hyperinflation in the 1970’s, Mass Unemployment in the 1980s, Interest Rates of 15% in 1990’s, the Global Financial Crash in 2009 … whatever happens, happens.

People will still need houses and a roof over their heads. If property values drop, it is only a paper loss (and an investment opportunity) … because you only lose when you actually sell. Long term, we just aren’t building enough homes and, as I always say, property is a long game no matter what happens – the property market has always come good.

Growth in UK property values as well as those in Ashford seems fated to slow over the next five to ten years, whatever form Brexit takes.

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