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.

How Many Ashford Homeowners Have Paid Their Mortgage Off?

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The Government’s Annual Housing Survey is 50 years old this year.  It has taken a snap shot of the UK’s property market every year since 1969 and in the recently published report for 2018, it wasn’t a surprise that owner occupation is still the most predominant tenure, yet now more people own their home without a mortgage rather than having a mortgage as the number people buying their first home (more often than not with a mortgage) has declined since the Millennium.  The report also unsurprisingly shows homeowners (mortgaged and owned outright) are on average older than renters and, between the homeowners themselves, those who are mortgage-free are older than those with a mortgage.

Looking at the most recent of data for Ashford, I wanted to see how we compared to the national picture. Therefore, focusing on the main 4 tenures of owned outright, owned with a mortgage, social housing (i.e. Council Housing and Housing Association) and private rented, this is what I found out:

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Looking at the stats, you can see that homeownership in the Ashford council area as a whole (both owned and owned with a mortgage combined) is lower in the 25 to 34 year old age range compared to 35 to 49 year olds, yet roll the clock back to the 1980s and the opposite was the case.

So how many local homeowners have paid off their
mortgage?

45.6% of Ashford homeowners are mortgage free, yet of the 10,275 households that are owned by 50 to 64 year olds in Ashford, 54.3% of those people still have a mortgage.

As most people bought their first house in their early to mid-20’s back in the 1980’s, this shows that a lot of Ashford people must have re-mortgaged in the past and extended their borrowings (otherwise they would have now paid that mortgage off).

The other thing that concerns me is the 6.4% of the Ashford homeowners over 75 years old that have a mortgage.

If you amalgamate the national historic ranges going back to 1977 (see graph below and note the age bands are slightly different to the recent local stats because they were carried out under different government departments), you will see the number of people who own a property with a mortgage has been dropping since the Millennium, yet nationally the number of people who own a property has remained roughly the same, even with the growth of the private rented sector.

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Industry reports suggest in the next ten years that number of retired mortgagees will increase, with nearly 1 in 5 homeowners will be still paying off a mortgage in retirement. One of the reasons behind that will be the legacy of interest-only loans and delayed first-time buying as we become more and more like Germany in our home-ownership model: where people naturally rent a home until their 50’s and then buy when they inherit money from their parents.

In the meantime, demand for Ashford rental properties will only continue to increase … so good news for Ashford Buy to Let landlords and, indirectly, Ashford’s homeowners as well!

Ashford Homeowners Sell Their Home 40% More Than the UK Average

The average homeowner in the UK now moves every 20.2 years.

That average in the 1970’s and 80’s was around every 10 or 11 years; in the 1990’s it increased to the mid-teens (in years) and in the early part of the Millennium, it dropped back again to the low teens. When we had the Credit Crunch years of 2008/09/10, that shot up to every 25.3 years and has been steadily decreasing ever since to the 2018 figure of 18.7 years.

The graph shows that, as the economy improved after the Credit Crunch, British homeowners started to move home more and may have be taking advantage of higher demand and lower supply in the housing market to sell their homes and move on to the next property. Yet, as most Ashford (and British) vendors are usually a buyer as well, that cannot be the real cause. As mentioned already, people in the 70’s and 80’s moved a lot more than today.

So why is the long-term average length of time between moves since 2000 still much higher than it was in the preceding 30 years? For existing homeowners, some people have said their lack of appetite to move home compared to the 1970’s and 1980’s might come down to their mortgages and the need for higher equity to put down on the next house. In general, the number of years you stay in a home determines how much you will pay back on the mortgage you took out when buying it – If you stay longer, you have the prospect to pay back a larger portion of the money you borrowed.

Instead, I think the issue is a lot deeper than that. Firstly, I believe there has been a long-term change in attitude to moving home and this lack of movers (compared to the last 30 years of the 20th Century) is part of a slowdown in the country in social mobility. Interestingly, a million fewer people moved in the noughties (2000 to 2010) than in the 1970’s, after other changes in population have been taken into consideration. You see back in the 1970’s and 80’s, it was expected that people kept moving up the ‘property ladder’ to bigger and better homes (keeping up with the Jones’).

Secondly, there has been a change in attitude to homeownership per se: over the last 15 years, 20 to 30 somethings (Generation Rent) have been weaning themselves off the ‘homeownership drug’ that the baby boomers were so addicted to in the 1970’s and 80’s … meaning there are less buyers at the bottom of the housing ladder to fuel the fire. That is an important factor on the long-term decrease in home moving as buy to let landlords have been tending to buy the smaller starter homes to house Generation Rent … yet landlords don’t tend to move up the housing ladder after a few years like a first time buyer – landlords just buy another property.

So, what is happening in Ashford with regard to people moving home?

I have mentioned a number of times in my articles about the Ashford property market that the number of people who move home (i.e. the number of property transactions) is a more important bellwether to the health of the local property market.

Therefore, I compared the number of people moving home in Ashford to the regional stats of home movers and the country as a whole. I also decided to look at a long-term point of view to judge the Ashford housing market, because as can be seen on the first graph, there is often short-term volatility. Looking at the stats…

Since 1995, Ashford people have moved home 40.79% more often than the national average

Looking at this second graph, 110.8% of the Ashford (TN23 to be precise) privately owned housing stock has been sold since 1995 – interesting when compared to the national figure of 78.7%. Why? Well I am sure this might be the topic of an up and coming further article on the Ashford Property Market Blog.

Home Ownership Among Ashford’s Young People has Nearly Halved in 20 Years

The proportion of 25 to 34-year olds owning their home in Ashford has nearly halved in the last 20 years, so what does this mean for existing Ashford landlords and homeowners together with all those youngsters considering buying their first home?

Well, looking at the numbers in greater detail,Ashford has seen a 43.5% proportional drop in the number of 25 to 34-year olds owning their own home between 1999 and 2019 .. and a corresponding, yet smaller drop of 21.2% of 35 to 44-year olds owning their own home over the same time frame.

So, if you were born in the late 1980’s or early 1990’s, the likelihood of owning a home in Ashford has reduced dramatically over the past 20 years as young adults’ wages and salaries are now much lower in relation to Ashford house prices. Nationally, average property values have grown by 186.9%, whilst average incomes have only risen by 44.8%, yet that doesn’t allow for inflation. However, whilst not over the same 20 years (it’s close enough though), the Institute of Fiscal Studies said recently the average British home was just over 2.5 times higher in 2015/6 than in 1995/6 after allowing for inflation; yet the average household income (after tax) of 25 to 34-year olds grew by only 22% in ‘real-terms’ over those 20 years.

Yet, even though property prices are at record highs, on the other side of the coin, the monthly cost of mortgage payments has actually fallen because interest rates have remained low. In 1999, the average mortgage rate paid by UK homeowners was 6.54% whilst today it’s more than halved to 2.64% – a drop of 59.4%. Many of you reading this will remember the 15% mortgage rates of 1992!

The fact is, mortgage repayments take up a considerably smaller proportion of take home pay, on average, than they did before the Credit Crunch or in the late 1980’s. Although the risk that mortgage rates will increase if the Bank of England put up interest rates might leave some homeowners in a difficult position – hence I might suggest (if you haven’t already) you seriously consider fixing your mortgage rate (remember to take advice from a professional before you do).

Yet look at the data in even greater detail and you will see, going back to the 1960’s, we weren’t always the huge home-owning nation we always thought we were.

Today, 4.5% less 35 to 44-year olds and 33.5% more 45 to 54-year olds own their own home compared to 1969. So as the younger generation in Ashford has seen homeownership drop in the medium term, they will in fact end up inheriting the homes of their parents. We are turning into a more European (especially German) model of homeownership, where people buy their first home in their 50’s instead of their 20’s.

My message to first time buyers of Ashford is go and get some mortgage advice! The cost of renting smaller starter homes is between 20% and 25% more than the mortgage payments would be. 95% mortgages (meaning just a 5% deposit is required) have been available since late 2009 and some banks even do 100% mortgages (i.e. no deposit) .. and don’t just assume you can’t get a mortgage – for the sake of a 45 minute chat with a mortgage adviser – you can get a straight answer and all the information you need.

Therefore, what does this mean for the homeowners and landlords of Ashford? Well, for many tenants, renting is a positive choice and as we aren’t building enough homes to meet current demand, let alone eating into the lack of building over the last 35 years, demand will continue to outstrip supply, home values will, over the medium to long term, rise above inflation – meaning it will be a good overall investment as the demand for rental properties increases. Good news for Ashford landlords and homeowners alike.

The single biggest issue in the Country (and Ashford) today is that we aren’t building enough homes. I know it seems the local area is covered with building sites – yet looking at the actual numbers – we still aren’t building nearly enough homes to live in. Residential property only takes up 1.2% of all the land in the Country – and whilst I’m not suggesting we build housing estates on National Trust land or cut down forests, until we realize that we aren’t building enough .. this issue will only continue to get worse.

Ashford First Time Buyers Need 10.4 Times Annual Salary to Get on Housing Ladder

 

What is it to be British? Our stubbornness, long-suffering stoicism, our vexation at injustice, our obsession with football and rugby, we are a weather obsessed, externally awkward, noncommittal and modest people whilst underneath seething like a volcano because someone jumped the queue….. our No.1 obsession, though, is with the property ladder.

This ‘love affair’ with home ownership has been both good and bad for the UK as a whole; giving people financial freedom in their later years whilst also reducing the quantity (and quality) of housing provision whilst adding the extra pressure of a ‘them and us’ society. Strong words I know; but let me explain more.

I honestly believe that Governments since the end of the 1970’s, both Conservative and Labour, have nourished our addiction to home ownership (to keep the housing market on track) with the Council House Right to Buy sell off in the 1980’s, tax relief of mortgages, relaxation of the mortgage rules in the late 1990’s/early 2000’s and most recently, the Help to Buy scheme.

But the British haven’t always had this obsession with home ownership…

Roll the clock back 100 years and, in 1918, just under a quarter of all Brits owned their own homes and the other 77% rented. Go back just 50 years to 1968, and still only 46% of people owned their own home, the rest rented. This home ownership thing is quite a recent phenomenon.

According to my research, anyone looking to get a foot onto the property ladder AS A SINGLE PERSON first time buyer in Ashford today,  would need to spend 10.4 times their earnings on an Ashford first time buyer property.

ashford first time buyer home ownership affordability

Using the numbers from the Office of National Statistics (ONS), the average value of a first time buyer property in Ashford today is £205,000, compared to £150,000 in 2007. If we divide those property values by the average annual earnings of first time buyers – in 2007, that was £15,840 pa and that has risen to £19,755 pa .. giving us the ratio of 10.4 to 1.

However, what must be remembered is that these are raw statistics from the ONS and don’t take into account other factors, such as most people buy their first home as a couple. Also, mortgage rates are at an all-time low (remember the mortgage rates of 15%+ in the 1990’s?); meaning borrowing today is relatively cheap. Also, 95% Loan to Value first time buyer mortgages have been available since the end of 2009 (i.e. you only need to save a 5% deposit) and first time buyer rates of 2.19% fixed for 5 years can be obtained (correct at time of writing this article)… it is cheaper to buy than rent .. fact!

I believe there has rather been a change in mind-set  to home ownership

Home ownership was the goal of youngsters in the latter half of the 20th century. Britain is changing to a more European model of homeownership, where people rent in early to mid-life, inherit money from their parents when in their 50’s and then buy…thus continuing the circle – albeit in a different way to the last Century.

This means the demand for privately rented accommodation will only continue to grow, in the long term

If you would like to know more about where the hot spots are for that growth in Ashford drop me an email or telephone call, feel free to pick my brain on the best places to buy (and where not to buy) in Ashford to ensure your rental investment works for you.

The choice is yours!

‘Taxing’ Times Ahead for the 2,593 Ashford Buy To Let Landlords

 

Over the last twenty years, there has been a shift in the way the Ashford (and the UK’s) property market works. In the 1960’s to 1990’s, the majority of twenty-somethings saved up their 5% deposit by foregoing some of life’s luxuries, such as going out and holidays etc, for a couple of years and then bought their first home with their hard-earned savings.

By 2000, 52% of Ashford 25 to 29 years owned their own home (46% nationally) and 72.6% of Ashford 30 to 34 year olds in 2000 owned their own home (64.2% nationally) whilst the remaining youngsters mostly rented from the Council and in, rare cases, privately rented.

Now in 2018 those levels of homeownership have slipped dramatically and only 27.7% of Ashford 25 to 29 year olds and 48.9% of Ashford 30 to 34 year olds today own their own home (interestingly mirroring the National picture of 24.5% and 64.2% respectively).

Taxing Times Ahead for the 2,593 Ashford Buy To Let Landlords

There was concern in Government since the late Noughties that this shift from homeownership to private renting wasn’t good for the well-being of the Country and things needed to change, to supposedly make it a far more level playing field for first time buyers. House prices needed to be more realistic and there needed to be a carrot and stick for both landlords and first time buyers.

In the 1980’s and 1990’s, interest rates were the weapon of choice for the Government to cool or heat the UK housing market – and it worked – up to a point. It’s just that interest rates also affect so many other sectors of the UK economy (and not always in a good way). The policy of interest rates to control the economy is called ‘Monetary Policy’. (Monetary policy is primarily concerned with the management of interest rates (and the supply of money) and is implemented by the Bank of England (under direction from the Government)).

In the current post-Credit Crunch, Brexit environment, the use of higher interest rates wouldn’t directly affect landlords (as around two thirds of buy to let properties are bought without a mortgage). Therefore, an increase in interest rates would have hardly any effect on landlords and hit the first-time buyers instead – the very people the Government would be trying to help!

Also, given muted growth of real income (i.e. real income being the growth salaries after inflation) in the past few years, an uplift in interest rates (from their currently still ultra-low 0.75% level) would have a significant effect on Brits’ household disposable income. Yet, with over 90% of new mortgages in 2018 being taken at fixed rate and with such low rates, it has made buying a property comparatively attractive.

Instead, over the last 8 years, the Government has encouraged first time buyers and clipped the wings of landlords with another type of economic policy – Fiscal Policy (Fiscal Policy is the collective term for the taxing (and spending) actions of the Government).

First time buyers have had the Help to Buy Scheme, Stamp Duty Exemption and contributions to their deposit by HMRC. On the other side the coin, landlords have had the tax relief of their mortgage payments against income changed (for the worse), an increase in Stamp Duty (for the worse) and they will likely also be hit with additional costs as the Government will be phasing out tenants’ fees in the next 12 to 18 months.

So, what does this all mean for Ashford’s 2.593 landlords?

The days of making money from Ashford buy to let with your eyes closed are long gone. There are going to be some testing times for Ashford landlords, yet there is still a defined opportunity for those Ashford landlords who are willing to do their homework and take guidance from specialists and experts.

It’s all about looking closely at your Ashford portfolio (or getting a property professional to do so) and ascertaining if your current portfolio, mortgage and gearing are designed to hit what you want from the investment (because that is what it is – an investment) in terms of income now and income in the future, capital growth and when you plan to dispose of your assets.

I meet many Ashford landlords (both those who use me or my competitors to manage their rental property or find them tenants) and on some occasions recently, I have advised them to sell – yes SELL some of their portfolio to either reduce mortgage debt or buy other types of property instead that better match what they want to achieve in the short and long-term from their investments. I know that sounds strange – but my role isn’t just to collect the rent – it is also, where wanted, to give a Landlord strategic advice and opinion.

Attractive opportunities WILL appear in the Ashford property market for Ashford landlords from gentler growth in property values linked with a more restrained Ashford property market, meaning if you put in the time, there will be deals and some great bargains to have. Many landlords in Ashford (both clients and non-clients) send me Rightmove links each week, asking my opinion on the suitability of the investment. Some are exceptional – others are duds.

The bottom line is, private renting will continue to outgrow first time buyers in the next 5 to 10 years and, as we aren’t building enough homes in the UK, this means the trend for rents can only really go in one direction – upwards!

The Ashford Bank of Mum and Dad Lent £7.007m Last Year

 

My analysis has shown that up to the end of the last quarter, Ashford’s first time buyers purchased 493 Ashford properties. With wages rising at 2.8%, unemployment at a low rate of 4.2% (down from 4.6% from a year earlier and now the joint lowest since 1975), national GDP rising at 1.87% and inflation at 2.3%, tied in with indifferent house price growth (compared to a few years ago), this has given first time buyers a chance to get a foot hold on the Ashford property market.

Over the last year, the average purchase price of an Ashford first time buyer property has been £200,600 and the average deposit £32,497. Furthermore, my calculations show the average Ashford parents contributed £14,218 of that £32,497 figure.

You see “The Bank of Mum and Dad (Ashford Branch)” is, for countless Ashford twenty-something’s, perceived to be the only way they will ever be able to afford their first home. In fact, Ashford parents put up a substantial £7.007m in the last 12 months to help their progeny onto the property ladder. This assistance towards the deposit can make a huge difference, enabling Ashford youngsters who thought they couldn’t get on the housing ladder much more able to do so.

With mortgage rates at all-time lows, few Ashford twenty something’s would struggle to make the mortgage repayments, but it is the requirement of the deposit which is the issue, although as parents (and grandparents) are helping out where they can, it does little to address the real problems of the housing market, whether for people renting or buying their first home.

If you think about it, as a Country we have been fortunate that the older generation who control the biggest share of the nation’s wealth are so plentiful to those following after. We need to remember, though, that this generosity is
 a sign of the issues of the British housing shortage, not its solution.

But before I leave this article … note I used the word PERCEIVED in a previous paragraph. Yes, the average first time buyer deposit is 16.1%, but that is an average. Did you know 95% mortgages returned to the first time buyer market in late 2009 and have been available ever since? Also, lenders like Barclays and many local Building Society’s now offer 100% mortgages (i.e. no deposit) at 2.75% fixed for three years.

The perception is you need a 15%, 20%, even a 25% deposit to be a first-time buyer

You don’t! You don’t need any deposit, but (there is always a but!)… Over the last decade, many renters have upgraded themselves into homes that they (or any generation before them) could never have ever afforded as a first time buyer in the past. You see the British housing market started to change with the dawn of the new Millennium and I am seeing a slow but steady attitude change when it comes to renting. Those tenants have found the price difference of upgrading from a typical 1970’s “Rising Damp” style rental property to a plush terraced, or even semi-detached modern home, with all the mod cons, comparatively inexpensive (when compared to the increase in mortgage payments if they had to make that move as a buyer).

Renting is no longer seen as the poor man’s choice, as many young and, increasingly, older people are becoming far more at ease and comfortable with the flexibility offered by private renting a property rather than jumping ‘lemming-like’ into home ownership. Ashford landlords will thus continue to see good growth in the sector and, like Germany, todays renters will likely become homeowners in 20 years’ time – when they inherit the released wealth of their parents’ home.

Ashford Millennials Spend £155,407 on Rent by Age of 35

 

The Millennials were born between the mid 1980’s and late 1990’s thus making them currently aged between 22 and mid-30’s. They are imaginative, artistic youngsters who grew up with the newest tech and computers and who are huge aficionados of music festivals, brunches, gourmet pizzas, emoji’s, selfies and old school nostalgia. Although known as Generation Rent, many Millennials have discovered that renting is a good choice for their shelter and accommodation – avoiding the hassle that comes from buying a home.

Nonetheless, that is not the only reason they don’t buy property:

When they should be concentrating on their profession, putting down roots and starting a family, Millennials are still suffering the pressure and strain of student debt whilst, at the same time, finding it tough to pay rent.

The hot topic at the moment is the cost of renting, with all political parties finding mileage in wooing the Millennial Generation’s voters. With the average rent in Ashford currently £1,088 per month, making it a big-ticket item in the monthly budget, I was intrigued to find out how much Ashford Millennials will spend on rent by their mid 30’s. The average age people leave home in the UK is 22; so looking at an Ashford 22-year-old who left home in 2005 then between 2005 and today that Ashford Millennial will have shelled out £155,407 in rent.

It’s no wonder local Millennials can’t afford to buy an Ashford home given their tremendous debt

Younger Ashford Millennials will probably carry on renting for the foreseeable future, simply because the prospect of buying a home is not yet achievable.. that is until you look more deeply at the numbers…

Ashford rent increases v inflation since 2005

Looking at the chart above, the average rent of an Ashford property in 2005 was £895pcm … if it had risen by inflation, today, that would be £1,261pcm. As I have already mentioned in the article, today it stands at just £1,088 per month. Looking over the last 12 years, adding up all the differences between what the average actual rent was compared to what it should have been if rent had gone up by inflation, the average Ashford Millennial tenant would have paid £169,284.

average Ashford rents have lagged inflation since 2005

This means that an average 35-year-old Ashford Millennial tenant, who has been renting since 2005, is better off by £13,877 when comparing the actual rent paid compared to what it would have been if it had risen by inflation.

In a nutshell, tenants have done well from sub-inflation growth in rents

In fact, if you recall I mentioned in an article a few weeks ago, the older Ashford Millennials are starting to use those savings and are gradually shifting towards home ownership. They are finally catching up with the British homeownership dream with the Bank of Mum and Dad helping with the deposit. Also, the scrapping of Stamp Duty from the Government starts to kick in together with the realisation that if the 5% mortgage deposit can be scraped together (95% first time buyer mortgages have been available since 2009), it is still a lot cheaper to buy than rent, which will unquestionably drive demand for Ashford homes for sale – good news for Ashford homeowners.

What does this mean for Ashford landlords?

Well the vast majority of younger Millennials are still renters and I foresee this to be the case for the next ten to fifteen years, minimum.

Landlords will, however, need to keep improving their properties to ensure they attract the best tenants and they will see a much higher rent achieved. Millennials will pay top dollar for the right property.

It is important to do things correctly as making money won’t be as easy as it has been over the last twenty years. With a greater number of properties on the market comes greater choice. Don’t buy the first thing you see, buy with your head as well as your heart … because as recently promised, the first rule of Buy To Let Investment is….. “You are not going to live in the property yourself”.

13% More Ashford Home Owners Wanting to Move Than 12 Months Ago

 

As I have mentioned a number times in my Ashford property news blog, with not enough new-build properties being built in the Ashford area to keep up with demand (be that tenants or homebuyers), it’s good to know more Ashford owners are putting their properties on the market than a year ago.

At the start of 2007 there were 817 properties for sale in Ashford but by May 2008, when the credit crunch was really beginning to bite, that number had risen to 1,116 properties on the market – this at a time when demand was at an all-time low, creating an imbalance in the local property market.

Basic economics dictates that if there is too much supply of something and demand is poor prices will drop. In fact, house prices dropped between 15% and 20%, depending on the type of Ashford property, between the end of 2007 and Spring 2009.

However, over the last five years, we have seen a steady decrease in the supply of properties coming onto the market for sale and steady buyer demand, meaning Ashford property prices have remained robust. A stable housing market is one of the foundations of a successful British economy, as it’s all about getting the healthy balance of buyer demand with a good supply of properties. Nevertheless, if you had asked me a couple of years ago, I would have said we were beginning to see there was in fact NOT enough properties coming on to the market for sale … meaning in certain sectors of the Ashford property market, house prices were overheating because of this lack of supply.

So, it is pleasing to note, looking at the recent numbers …

There are 13% more properties for sale in Ashford today than a year ago

Number of Ashford properties for sale by year

12 months ago there were 427 properties for sale, and today that stands at 484. It doesn’t sound a lot, yet this is a small step in the right direction to a more stable property market.

Even better news, since the Chancellor announced the stamp duty changes for first time buyers (FTB), Ashford agents report that the number of FTB’s registering has increased year on year. For many that has still to translate into actually buying their first home, however, with the heightened levels of confidence being demonstrated by both Ashford house sellers and potential house buyers, I do foresee the local Property Market will show steady yet sustained improvement during the first half of 2018.

What does this mean for Ashford landlords or those considering dipping their toe into the buy to let market for the first time? Landlords will need to keep improving their properties to attract the best tenants. It is true that demand amongst FTB’s is increasing, albeit from a low base. Even with the new landlord tax rules, buy to let in Ashford still looks a good investment, providing Ashford landlords with a good income at a time of low interest rates and a volatile stock market.

If you are thinking of investing in bricks and mortar in Ashford, it is important to do things correctly as making money won’t be as easy as it has been over the last twenty years. With a greater number of properties on the market comes greater choice. Don’t buy the first thing you see, buy with your head as well as your heart … and don’t forget the first rule of Buy To Let Investment!

I will tell you that first rule in another article in a couple of weeks time….

Homeownership Amongst Ashford’s Young Adults Slumps to 51.33%

 

The degree to which young Ashford people are no longer entering the Ashford housing market has been revealed in new statistics.

An Ashford landlord was asking me the other week to what effect homeownership rates in Ashford in the young-adult to middle-aged  age ranges had affected demand for rental property in Ashford since the Millennium. I knew anecdotally that it had affected the Ashford rental market, but I wanted some cold hard numbers to back it up. As you know, I like a challenge when it comes to the stats… so this is what I found out for the landlord, and I’d like to now share them with you as well.

Anyone in Ashford, and most would say especially the case for more recent generations, are drastically less likely to own their own home at any given age than those a decade earlier, let’s roll the clock back to the Millennium and compare the figures from then to today.

In the year 2000, 52.0% of Ashford 28-year-olds (born in 1972) owned their own home, whilst a 28 year-old today (born in 1990) has a 27.7% chance of owning their own home.

Next, let’s look at someone born ten years earlier:

So, going back to the turn of the Century, a 38 year Ashford person (therefore born in 1962) would have a 76.7% chance of owning his or her own home whilst just 59.8% of Ashford 38 year-olds today (born in 1980) own their own home.

Since the Millennium, overall general homeownership in the 25 to 44 year-old age range in Ashford has reduced from 70.99% to 51.33%

If you look at the graph below, split into the four age ranges of 25 to 29 year-olds (yo), 30 to 34yo, 35 to 39yo and finally 40 to 44yo, you will quite clearly see the changes since the Millennium in Ashford. The fact is the figures in Ashford show the homeownership rate has proportionally fallen most for the youngest (25 to 29yo) age range compared to the other age ranges.

Homeownership Last 20 Years in Ashford by Age Group

The landlord suggested this deterioration in homeownership in Ashford across the age groups could be down to the fact that many more of those born in the 1980’s and 1990’s (over those born in the 60’s and 70’s) are going to University and hence entering the job market at an older age or those young adults are living with their parents longer.

I read some national homeownership statistics of different age groups the same number of years after they left education (rather than at the same age) and that gave an identical dip to the graph above. Neither are these drops in homeownership related to a significant increase in the number of young adults living with their parents. Again, nationally, that has hardly changed over the last 20 years as the percentage of 30-year-olds living with Mum and Dad only increased from 22% of those born in the early ‘70s to 23% of those born in the early ‘80s.

So, what does this mean for the Ashford rental market?

Clearly only one thing: With the local authority not building Council Houses, Housing Associations strapped for the cash to build new properties, and the younger generation not buying – there is only one way these youngsters can secure a roof over their head and have a home of their own… through the private rented sector.

Now, with tax changes and up and coming licensing rules, Ashford landlords will have to work even smarter to ensure they make the same investment returns they have in the past. If you ever want to pick my brains on the future direction of the Ashford rental market… drop me line or pop in next time you are passing my office.

489 First-Time Buyers Bought Their Own Ashford Home in 2017

 

A little bit of good news this week for the Ashford Property Market as recently released data showed that the number of first-time buyers taking out their first mortgage in 2017 increased more than in any other year since the 2009 global financial crisis. The data shows there were 489 first-time buyers in Ashford, the largest number since 2006.

I expect in 2018 that this increase of first-time buyers may level out and maybe dip slightly as, nationally, figures demonstrate that first-time buyer’s average household income was £40,691, with mortgage payments representing 17.3% of their take home pay.

It might surprise readers that it is actually cheaper to buy than it is to rent at the ‘starter home’ end of the housing market. Many of you will remember mortgage rates at 12%… even 15%. Today, at the time of writing this article, I found on the open market, 189 first-time buyer mortgages at 95% LTV (meaning only a 5% deposit was required) with 3 year fixed rates from a reputable High Street bank at 2.49% … I even found a 3 year fixed rate 100% mortgage for 2.89%!

Interestingly, looking at the other end of the market, buy-to-let investment in Ashford was subdued, with only 101 buy-to-let properties being purchased with a mortgage. However, I must stress there is no hard and fast data on the total numbers of landlords buying-to-let.

With HM Treasury believing only 30% to 40% of buy-to-let property is bought with a mortgage – the full data just isn’t available at such a granular level. There have certainly been cash only buy-to-let purchases in Ashford, as I can confirm with several of my clients having recently expanded their portfolios without mortgage finance.

In terms of the level of mortgage debt in Ashford, looking specifically at the TN23 to TN25 postcodes, you can see from the graph below there has clearly been a steady rise in borrowing over the last few years:

Outstanding mortgage debt in Ashford between 2013 and 2017

This is pleasing to see, as new mortgage debt is created by first-time buyers, buy-to-let landlords and home movers themselves, that is being roughly equalled by the amount being paid off with mature mortgaged homeowners in their 50’s and 60’s finally paying off their mortgage.

So, what does all this mean for the Ashford Property Market? Well, the statistics paint a picture, but don’t give us the whole story.

The upper end of the Ashford property market has been weighed down by the indecision around the Brexit negotiations and the 2014 rise in stamp duty, which made it considerably more expensive to buy a home costing more than £1m. The middle segment of the Ashford property market has been affected by issues of mortgage affordability and a lack of good properties to buy, as selling prices have reached the limit of what buyers can afford under existing mortgage regulations. The lower to middle Ashford property market was hit by tax changes for buy-to-let landlords, although this has been offset by the increase in first-time buyers.

If you are in the market to sell now and want to ensure you get your Ashford property quickly sold, the bottom line is you have to be 100% realistic with your pricing from day one and you might not get as much as you did say a year ago (but the one you want to buy will be less, so – swings and roundabouts?). I know it’s not comfortable hearing that your Ashford home may not be worth as much as you thought, but Ashford buyers are now unbelievably discerning.

So, if you are thinking of selling your Ashford property in the coming months, don’t ask your agent out just a few days before you want to put the property on the market, get them out now to ask them what you can do to ensure you get maximum value in the shortest possible time.

Ashford’s Millennials Set to Inherit £394,864 Each in Property!

 

But before we start, who are Generation X, let alone Generation Z, Millennials and the Baby Boomers?… these phrases are bandied around about the different groups and generations of our society. But when terms like this are used so often and habitually (i.e. Gen X this, Millennial that etc.), it appears particularly vital we have some practical idea of what these terms actually mean.

The fact is that while everyone uses these phrases, often, like myself, they are perhaps not 100% sure where the lines are drawn!

So, for clarity …

Generation Z: Born after 1996
Millennials: Born 1977 to 1995
Generation X: Born 1965 to 1976
Baby Boomers: Born 1946 to 1964
Silent Generation: Born 1945 or earlier

My research found there are 6,763 households in Ashford owned either by Ashford Baby Boomers (born 1946 to 1964) or Ashford’s Silent Generation (born 1945 or earlier). It also shows there are 14,914 Generation X-owned homes (people born between 1965 to 1976).

Looking at demographics, homeownership statistics and current life expectancy, around two-thirds of those Ashford 14,914 Generation X people have parents and grandparents who own those 6,763 Ashford properties.… and they will profit from one of the biggest inheritance explosions of any post-war generation to the tune of £2.207bn of Ashford property or £221,891 each but they will likely have to wait until their early 60’s to get it!

However, it’s the Millennials that are in line for an even bigger inheritance windfall.

There are 10,573 Millennials in Ashford and my research shows around two thirds of them are set to inherit 8,532 Ashford Generation X-owned properties. Those Generation X’s Ashford homes are worth £2.785bn meaning, on average, each Ashford Millennial could inherit £394,864; but not until at least 2040 to 2060!

AShford Millenials in line for a property inheritance windfall

So, while the Ashford Millennials have done far less well in amassing their own savings and assets than previous generations, they are more likely to take advantage of an inheritance windfall in the years to come. This will probably be very welcome news for those Ashford Millennials, including some from poorer upbringings who in the past would have been unlikely to receive any form of gift or legacy.

However, inheritance is not the silver bullet that will get the Millennials on to the Ashford housing ladder or tackle the growing wealth cracks in UK society, as any inheritance is unlikely to be available while they are struggling to buy their first home…but before all you Ashford Millennials start running up debts, bear in mind over 50% of women and around 35% of men are going to need nursing home care in their old age. Interestingly, I read recently that a quarter of people who have to pay for their own such care run out of money.

So, if you are an Ashford Millennial there will potentially be nothing left for you!

Of course, parents want to give their children an inheritance. For most, the thought of the assets they have worked genuinely hard for over their working life not going to their children to help them through their lives is a really awful one … maybe that is why I am seeing a lot of Ashford grandparents doing something meaningful now by helping their grandchildren, the Millennials, with the deposit for their first house.

One solution to the housing crisis in Ashford (and the UK as a whole) is for relatives, where able, to help financially with the deposit for a house. Buying is cheaper overall than renting – so, it’s not a case of younger generations being unable to afford the mortgage payments, the issue for Millennials is raising that 5% to 10% mortgage deposit.

Maybe families should be distributing some of the family wealth now (in the form of helping with house deposits) as opposed to waiting to the end… that would make a huge difference to everyone in the long run.

Just a thought?

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