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Looking at the newspapers between Christmas and New Year, it seemed that this year’s sport in the column inches was to predict the future of the British housing market. So to go along with that these are my thoughts on the Maidstone property market.
With the average 5-year fixed rate mortgage at 1.98% (down from 3.47% in 2014) and 2-year fixed rate at 1.47% (down from 2.37% in 2014), mortgage interest rates offered by lenders are at an all-time low (even with the slight increase on the Bank of England base rate a few months ago). Added to this, there has been a low unemployment rate of 4% in Maidstone, which has contributed to maintain a decent level demand for property in Maidstone in 2017 (interestingly – an impressive 2,204 Maidstone properties were sold in last 12 months), whilst finally, the number of properties for sale in the town has remained limited, thus providing support for Maidstone house prices, meaning ….
Maidstone Property Values are 5.9% higher than a year ago
However, moving into 2018, there will be greater pressures on people’s incomes as inflation starts to eat into real wage packet growth, which will wield a snowballing strain on consumer confidence. Interestingly though, information from the website Rightmove suggested over a third of property it had on its books in October and November had their asking prices reduced, the highest percentage of asking price reductions in the same time frame, over five years. Still, a lot of that could have been house-sellers being overly optimistic with their initial pricing.
In terms of what will happen to Maidstone property values in the next 12 months, a lot will be contingent on the type of Brexit we have and the impact on the whole of the UK economy. A lot of people will talk about the Central London property market in the coming year, and if the banking and finance sectors are negatively affected with a poor Brexit deal, then the London market is likely to see more of an impact.
Nevertheless, the bottom line is Maidstone homeowners and Maidstone landlords should be aware of what happens in the rollercoaster housing market of Central London, but not panic if prices do drop suddenly there in 2018. Over the
last 8 years, the Central London property market has been in a world of its own (Central London house prices have grown by 89.6% in those last 8 years, whilst in Maidstone, they have only risen by 48.1%). So we might see a heavy correction in the Capital, whilst more locally, something a little more subdued.
Hindsight is always better than foresight and predicting anything economic is all well and good when you know what is around the corner. At least we have the Brexit divorce settlement sorted and, as the UK economy and the UK housing market are intertwined, it all depends on how we deal as a Country with the Brexit issue. However, we have been through the global financial crisis reasonably intact ... I am sure we can get through this together as well?
Oh, and house prices in Maidstone over the next 12 months? I believe they will end up between 0.2% lower and 1.5% higher, although it will probably be a bumpy ride to get to those sorts of figures.
If you would like to read more articles on my thoughts on the Maidstone property Market – please visit the Maidstone Property Market Blog http://maidstonepropertyblog.blogspot.co.uk
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My research shows that certain types of Maidstone property are more affordable today than before the 2007 credit crunch.
Roll the clock back to 2007 just before the credit crunch hit which saw Maidstone property values plummet like a lead balloon and the Maidstone property market had reached a peak with the prices for Maidstone property hitting the highest level they had ever reached. Between 2008 and 2010, Maidstone property values lay in the doldrums and only started to rise in 2011, albeit quite slowly to begin with.
Nevertheless, even though property values have now passed those 2007 peaks, my research indicates that Maidstone property, especially flats/apartments, are now more affordable than they were before the 2008 credit crunch.
Back in 2007, the average value of a Maidstone flat/apartment stood at £164,258 and today, it stands at £193,036, a rise of £28,778 or 17.5%.
However, between 2007 and today, we have experienced inflation (as measured by the Government’s Consumer Price Index) of 25.97% meaning that in real spending power terms Maidstone apartments are 8.5% more affordable than in 2007. Looking at it another way, if the average Maidstone apartment (valued at £164,258 in 2007) had risen by 25.97% inflation over those 10 years, today it would be worth £206,916 (instead of the current £193,036).
The point I’m trying to get across is that Maidstone property is more affordable than many people think. Maidstone first time buyers can get on the ladder as 95% mortgages have been readily available to first-time buyers since 2010.
It really comes down to a choice and if Maidstone first-time buyers can get over the hurdle of saving the 5% deposit for the mortgage on the property – they will be on to a winner, especially with these ultralow mortgage interest rates, a mortgage can be between 10% and 30% cheaper per month than the rental payments on the same house.
So why aren’t Maidstone 20 somethings buying their own home?
Back in the 1960’s and 1970’s, renting was considered the poor man’s choice in Maidstone (and the rest of the Country) a huge stigma was attached to renting. However, over the last 10 years as a country, we have done a complete U-turn in our attitude towards renting - meaning that many people find renting a better option and a lifestyle choice.
Saving the 5% deposit means going without many luxuries in life (such as holidays, every satellite movie and sports channel, socialising or the latest mobile phone – even if only in the short term) therefore instead of saving every last pound to put towards a mortgage deposit Maidstone 20 somethings choose to rent.
There is no denying the simple fact that over the next 10 to 15 years, the people who choose to rent instead of buy in Maidstone will continue to rise.
Therefore, everyone in Maidstone has a responsibility to ensure that an adequate number of quality Maidstone rental properties are safeguarded to meet those future demands. Interestingly, what I have noticed though over the last few years are the expectations of Maidstone tenants on the finish and specification of their Maidstone rental property.
I have perceived that in the past, what a tenant wanted from their Maidstone rental property was moderately unassuming because renting a property was only a short-term choice to fill the gap before jumping on the property ladder. Before the millennium, wood chip wall paper and twenty-year-old kitchen and bathroom suites were considered the norm.
However, Maidstone tenants’ expectations are becoming more discerning as each year goes by. I have also noticed the length of time a tenant remains in their Maidstone property is becoming longer (and this was backed up recently by stats from a Government Report), although I have noticed a tendency for many Maidstone landlords not to keep the rental payments at the going market rates - maybe a topic for a future article for my blog?
The bottom line is this … Maidstone landlords will need to be more conscious of tenants needs and wants and consider their financial planning for future enhancements to their Maidstone rental properties over the next five, ten and twenty years - e.g. decorating, kitchen and bathroom suites etc etc ..
The present-day and future situation of the Maidstone private rental property market is important, and I frequently liaise with Maidstone buy-to-let investors looking to spread their Maidstone rental-portfolios. I also enjoy meeting and working alongside Maidstone first time landlords, to ensure they can navigate through the minefield of rental voids, the important balance of capital growth and yield and ensuring the property is returned back to you in the future in the best possible condition.
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I miss the good old days of George Osborne as Chancellor, with his hardhat and hi-vis jacket. He must have visited every new home building site in the UK with his trademark attire! For the last few years, the nearest Philip Hammond got to donning a ‘Bob the Builder’ outfit was at his grandchild’s birthday party. However, with what appears to be a change in focus by the Tories to ensure they get back in power in 2022, they appear to have fallen in love with house building again with the Chancellor’s promise to create 300,000 new households in a year.
Nationally, the number of new homes created has topped 217,344 in the last year, the highest since the financial crash of 2007/8. Looking closer to home: in total there were 1,145 ‘net additional dwellings’ in the last 12 months in the Maidstone Borough Council area, a decent increase of 79% on the 2010 figure.
The figures show that 89% of this additional housing was down to new build properties. In total, there were 1,019 new dwellings built over the last year in Maidstone. In addition, there were 265 additional dwellings created from converting commercial or office buildings into residential property and a further 11 dwellings were added as a result of converting houses into flats.
While these all added to the total housing stock in the Maidstone area, there were 150 demolitions to take into account.
I was encouraged to see some of the new households in the Maidstone area had come from a change of use. The planning laws were changed a few years back so that, in certain circumstances, owners of properties didn’t need planning permission to change office space in to residential use.
With the scarcity of building land available locally (or the builders being very slow to build on what they have, for fear of flooding the market), it was pleasing to see the number of developers that had reutilised vacant office space into residential homes in the local council area. Converting offices and shops to residential use will be vital in helping to solve the Maidstone housing crisis especially, as you can see on the graph, that the level of building has hardly been spectacular over the last seven years!
Now we have had the autumn budget, Theresa May and Philip Hammond have set out their stall with housing as their key focus. I was glad to see the Government introducing a variety of changes to improve housing, including more funding for the supply side and an injection of urgency into the planning system.
The biggest question is, just where are the Government going to build all these new houses? Maybe a topic for a future article?
Back to the main point though and the focus on the housing market by the Tory’s is good news for all homeowners and buy to let landlords, as it will encourage more fluidity in the market in the longer term, sharing the wealth and benefits of homeownership for all. However, in the short term, demand still outstrips supply for homes and that will mean continued upward pressures on rents for tenants.
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I had the most interesting conversation the other day with a local Maidstone accountant, who asked me about my articles on the Maidstone property market. It was quite humbling to be given praise by such a professional, when he commented enthusiastically on the articles I write. He was particularly interested with the graphs, facts and figures contained within them – so much so he recommended his clients read them, as most of them were either Maidstone homeowners, Maidstone landlords and a lot of the time - both. However, one question that kept me on my toes was, “With so many House-Price-Indices, how do you know which one to use and how can you calculate what is exactly happening in Maidstone?”
To start with, there are indeed a great number of these Indices, including the Land Registry, Office of National Stats, Halifax, Nationwide and LSL to name but a few. The issue occurs when these different house price indices give diverse pictures of the state of the UK housing market. Whilst some indices measure the average value of every property in the UK (sold or unsold), others measure the average ‘price-paid’ of houses that happen to be sold over a fixed time scale… confusing isn’t it!
A lot of the variance between house price indices occurs because of the distinctive ways in which the numerous indices endeavour to beat these issues. You see, the biggest problem in creating a house-price-index when comparing and contrasting with most other indexes (e.g. inflation where the price a ubiquitous tin of Beans can easily be measured over the months and years), is every home is unique and as Maidstone people are only moving every 14.5 years, it appears the only thing that can be measured is the price of property sold in a given month.
By their very nature, all of the indices are only able to paint a picture of the whole of the UK or, at best, the regional housing market. As I have said many times in my articles on the Maidstone property market, it is important to look to the medium term when considering house price inflation/deflation. Looking at the month-to-month jumps, many indices look like one of those jumpy lie-detector needles you see in the cold war movies!
I can guarantee you in the coming few months, on a month-by-month basis, one or more of the indices will say property prices will have dropped. Let me tell you, no property market indices are representative of the housing market in the short term. Many indices have shown a drop around the Christmas and New Year months, even the boom years of 2001 to 2007 and 2013 to 2015.
So, back to the question, how do we work out what is happening in the Maidstone Property Market and can there be a Maidstone House Price Index?
To calculate what I consider is a fair and proper House Price Index for Maidstone, I initially needed to decide on a starting place for the index. I have chosen 2008 as far enough away, but still gives us a medium/long term view. Next, I split all the house sales into their types (Detached/Semi/House /Apartment) to give us an indication of what is actually selling by postcode district. So, for example, below is a table for the ME15 postcode district (the sample shows 2008, 2016 and 2017.
Then I look at the actual numbers of properties sold in the ME15 postcode district. Below is the graph with the numbers for the years already mentioned.
Next, I have looked at the prices paid for those types for every year since 2008, again in this example using the sample years of 2008, 2016 and 2017 for the ME15 postcode.
Finally, I amalgamated the same data points for the other postcode districts covered by Maidstone and the surrounding villages, weighted it accordingly, to produce the Maidstone House Price Index ... which after all that work, currently stands at for Q4 2017 at 159.94 (Q4 2008 = 100).
I hope you found that of interest and over the coming months and seasons, I shall refer back to Maidstone House Price Index in my Maidstone Property Blog www.maidstonepropertyblog.blogspot.co.uk to give you a flavour of what is really happening in the Maidstone Property Market.
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