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For most Maidstone people, a mortgage is the only way to buy a property. However, for some, especially Maidstone homeowners who have paid off their mortgage or Maidstone buy to let landlords, many have the choice to pay exclusively with cash. So the question is, should you use all your cash, or could a mortgage be a more suitable option?

 

Well, looking at the numbers locally...

 

5,378 of the 18,966 property sales in the last 7 years in Maidstone were made without a mortgage (i.e. 28.4%)

 

Interesting when compared with the national average of 31.9% cash purchases over the last seven years. Next, I wanted to see that cash percentage figure split down by years. As you can see from the graph, this level of cash purchases vs mortgage purchases has remained reasonably constant over those seven years...

  

Next, if you are going to go for a mortgage, the next question has to be whether you should fix the rate or have a variable rate mortgage. In the last Quarter, 90.57% of people that took out a mortgage, had a fixed rate mortgage at an average interest rate of 2.27%, although what did surprise me was only 65.79% of the £1.429 trillion mortgages outstanding in the whole of the UK were on a fixed rate. The level of mortgage debt compared to the value of the home itself (referred to as the Loan to Value rate - LTV) was interesting, as 61.9% of people with a mortgage have a LTV of less than 75%. Although, one number that did jump out at me was only 4.33% of mortgages are 90% and higher LTV - meaning if we do have another property slump, the number of people in negative equity will be relatively small.

 

Next, looking at the actual number of properties sold, it can be clearly seen the number of house sales has dipped slightly in 2018…

 

So those are the numbers ... let us have a look at the pros and cons of taking a mortgage, with specific focus on Maidstone buy to let landlords. 

 

Taking a mortgage will help a landlord increase their investment across more properties to maximise the return, rather than putting everything into one Maidstone buy to let property. This will enable the landlord to ensure if there a void in the tenancy, there should still be rent coming from the other properties. The flip side of the coin is that there is a mortgage to pay for, whether or not the property is let.

 

The other great motivation of taking a mortgage is that landlords can set the mortgage interest against the rental income, although that will only be at the basic rate of tax by 2021 due the recent tax changes. Banks and Building Societies will characteristically want at least a 25% deposit (meaning Maidstone landlords can only borrow up to 75%) and will assess the borrowing level based on the rental income covering the mortgage interest by a definite margin of 125%.

 

A lot will depend on what you, as a Maidstone landlord, hope to attain from your buy to let investment and how relaxed you would feel in making the mortgage payments when there is a void (interestingly, Direct Line calculated a few months ago that voids cost UK landlords around £3bn a year or an average of £1000 per property per year). You also have to consider that interest rates could also increase, which would eat into your profit ... although that can be mitigated with fixing your interest rate (as discussed above).

 

So, with everything that is happening in the world, does it make sense to buy rental properties? Now we help many newbie and existing landlords work out their budgets, taking into account other costs such as agent’s fees, finance, maintenance and voids
in tenancy. The bottom line is we as a country aren’t building enough property, so demand will always outstrip supply in the medium to long term, meaning property values will keep rising in the medium to long term. That’s not to say property values might fall back in the short term, like they did in 2009 Credit Crunch, the 1988 Dual MIRAS crash, the recession of the early 1980’s, the 1974 Oil Crisis, the early 1930’s Great Depression ... yet every time they have bounced back with vigour. Therefore, it makes sense to focus on getting the best property that will have continuing appeal and strong tenant demand and to conclude, buy to let should be tackled as a medium to long term investment ... because the wisest landlords see buy to let investment in terms of decades - not years.

 

I was recently reading a report by Rightmove that a North South Divide has started to appear in the UK property market – so I wanted to see if Maidstone was falling in line with those thoughts.  In the North, there are 7.12% less properties on the market than 12 months ago, whilst in contrast, in the South, there are 14.7% more properties on the market than 12 months ago.

With the decline in the number of properties for sale in the North compared to 12 months ago, that means the North is more of a sellers’ market.  However, on the other side of the coin, there is a significant rise in buyer choice in all of the Southern regions, showing there are signs of a buyers’ market, which in some markets is a driving force for a buyers’ market and some downwards price pressure.

So, looking closer to home at asking prices and the number of homes on the market. In the South East region, according to Rightmove, the average asking prices of new to the market properties are 1.2% higher than 12 months ago and 0.1% higher over the last month.  Now I must stress, this is asking prices – not what is happening to actual property values.  Also, regionally, there are 20% more properties on the market than 12 months ago.

Even closer to home, overall, the number of properties and building plots for sale in Maidstone has increased by 25%, going from 791 properties for sale a year ago to 985 properties for sale as I write this article, meaning Maidstone does in fact match the regional trend.

 

Looking at the individual types of Maidstone property, you can quite clearly see the different markets within Maidstone.  The two sets of figures that stand out are the increase in Semi-detached homes for sale, rising 46% and the decrease in Detached properties by 6%.

 

Type

Properties for Sale 12 months ago

Properties for Sale Today

Change

Detached Property in Maidstone

251

236

-6%

Semi Detached Property in Maidstone

196

286

46%

Terraced/Town House in Maidstone

109

142

30%

Apartments in Maidstone

172

195

13%

 

(NB There are a handful more Building plots and other types of property that can’t be placed into the four category’s ... and it’s those that make up the total numbers in the paragraph above the table)

 

Although these figures don’t tell the whole story because in certain areas of Maidstone, certain types of properties (particular locations and Primary school catchment areas) are in short supply.  This has caused some frustration with buyers of those types of properties with this lack of supply, which in turn has sparked some very localised asking price growth within those hot spot areas, although sometimes to levels where sellers optimism turns into silly over the top asking prices.

This means the property sticks, which isn’t sustainable, therefore as a consequence, there are certain parts of the Maidstone housing market with upward asking price movements being offset in part by intermittent asking price reductions where home owners or their estate agents have been over optimistic with their initial marketing asking price.

What does this mean for homeowners and landlords in Maidstone?

If you are planning to sell your home or buy to let investment, the key for determined sellers is to set your asking price correctly from the start.  It’s so vital to be competitive to attract buyers.  Everyone has access to three main property portals (Rightmove, On the Market and Zoopla) so can easily compare your property against similar ones.  When you do search these portals, make sure you ask the website to show properties that are sold subject to contract as well to check what properties are selling for in your neighbourhood. Unless you have something highly unusual or unique, this perhaps isn’t the best market to set an optimistic asking price in hoping to find someone who would pay that silly price.

 

And if you are buying in Maidstone?  The numbers of buyers are lower than a few years ago, although those buyers that are in the market have become quite serious.  The times of time wasting “carpet treaders” (estate agency slang for the same type of people car dealers call tyre kickers) are long gone.  Those buyers that are in the market are real buyers, wanting to buy, but only at the right price.  We live in a 21st century society that is “time-poor” so nobody is wanting to even view a house, let alone pay over the odds if they believe the asking price is too high.  So, if you are buying, do your homework, ask plenty of questions of the agent, find out the motivation of the sellers and the real reasons behind why they are moving ... and you might just bag a good deal?

 

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

This ‘love affair’ with owning our own home 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 most Governments since the end of the 1970’s, Conservative and Labour, have attempted to nourish 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 Brits haven’t always had this obsession.

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 50 years to 1968, and only 46% of people owned their own home, the rest rented. This homeownership thing is quite a recent phenomenon.

According to my research, anyone looking to get a foot onto the property ladder as a first-time buyer in Maidstone today, AS A SINGLE PERSON, would need to spend 10.3 times their earnings on a Maidstone first time buyer property.

 

Using the numbers from the Office of National Statistics (ONS), the average value of a first-time buyer property in Maidstone today is £220,000, compared to £160,000 in 2007. If we divide those property values by the average annual earnings of first time buyers - in 2007, that was £17,098 pa and that has risen to £21,277 pa .. giving us the ratio of 10.3 to 1.

 

However, what must be remembered is that these are raw statistics from the ONS and don’t take into account other factors, like most people buy their first home as a couple. Also, mortgage rates are at an all-time low and who can remember 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 been a mind-set change to owning a home. Home ownership was the goal of the 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, wait to inherit the 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, in the long term, only continue to grow. If you would like to know more about where the hot spots are for that growth in Maidstone, then one place would be my property blog www.maidstonepropertynews.co.uk  or if you want to drop me an email or telephone call, feel free to pick my brain on the best places to buy (and not to buy) in Maidstone to ensure your rental investment gets you want you want. The choice is yours!

 

Should you, as a landlord for buy to let or for personal occupation, buy a brand-new home?

Well, let’s start by looking at the numbers …

Over the last 10 years, 3,177 new homes have been built in the Maidstone area

That is a lot of bricks and mortar! Roll the clock back twenty years in the Maidstone property market, and there were two distinct camps of property buyers - folks who would only contemplate living in period character properties with their original fireplaces and beams, and those people who preferred the low maintenance of a new home. Old period homes were ridiculed as money pits by new-home aficionados, while new-home owners were accused of buying boring boxes, all vanilla, all the same, homogenous and bland.

However, it’s not as black and white as that anymore – or not as I see it in Maidstone. New home builders are now trying to change their cookie-cutter uniform rows of suburban boxes into developments that are as individual as the families that love in them, thus increasing their appeal. Nonetheless, whether you choose a stone cottage, archetypal Victorian semi or terrace, 1970’s/80’s functional home or a untouched new home, whatever home you buy, it can result in supplementary costs that are often not taken into math’s when buying by potential homeowners or buy to let landlords.

So looking at the numbers in greater detail, let’s see what type of new homes people have been buying in the Maidstone area ..

 

 

Number of New Homes Built in Our Local Authority in the last Decade

New Homes Built in Our Local Authority in the last Decade as a Percentage

New Homes Built Nationally in the last Decade as a Percentage

Detached

685

21.6%

29.2%

Semi

588

18.5%

21.9%

Terraced

802

25.2%

26.6%

Flat

1,102

34.7%

22.3%

 

I thought the mix of what was built/bought locally over the last 10 years when compared to the national figures was fascinating … it’s interesting (but not surprising) to see a greater proportion of flats built locally and fewer detached homes being built, when compared to the national averages. This is because of the nature of the Maidstone area, its position in the country, the availability of building land, planning restrictions by Maidstone Borough Council and the price of building land.

So, should you buy a new home (because a lot of people locally have over the last ten years)?

Well if you are considering new, take care when buying one, as often the show home isn’t the actual property you end up buying. It’s like visiting the car showroom and falling in love with the model in the showroom (which is spec’d up to an inch of its life) – only to get the base model when handed the keys. Look out for things like curtain rails, tv aerials (or lack of them), kitchen appliances, carpets and curtains … and outside – make sure you aren’t unwittingly buying a square piece of earth instead of the manicured landscaped gardens.

New homes are a lot more efficient on energy consumption compared to the old drafty, high fuel bill Victorian semis, as their owners can testify. Older properties will have maintenance issues, with 100yo brickwork and roofs that might need replacement and extra insulation, rotten wooden windows and a dodgy central heating boiler (all sounding rather a strain on your bank balance if you weren’t aware). The point I am trying to get across is open your eyes and don’t assume .. ask questions and get a surveyor to make a detailed inspection of the property so you know what you are getting yourself into.

Next, I also wanted to break down the new home stats to each individual year in our local area to see if there was a pattern to when people bought a new home. As you can see, there was a drop in new homes selling between 2013 and 2015 but, apart from then, the general trend has been better! Looking at the much larger second hand housing market in Maidstone over the same 10 years, the coloration between the new homes market and second market has been quite strong – which shows the new home builders don’t make (or break) the Maidstone housing market – just follow it

So, should you buy brand-new or second hand? If price is your sole motivator, then new homes are always CHEAPER when the economy is bad. However, in normal and good housing market conditions, you will pay a ‘new build premium’. The Royal Institute of Chartered Surveyors admits that this can be as high as 10% extra, when compared to a similar second hand property – so be aware of that (it’s like paying extra for a new car and losing a bit (or a lot) of money as soon as you drive off the forecourt). Although, it’s not always about pure pound notes.

Older houses are bigger (more room) yet take more money to heat. Older houses have bigger gardens (to enjoy) – but you will spend more time tending to them. Older houses are in more established areas (with more facilities), whilst everyone is starting afresh on new homes. It all comes down to personal opinion. One final thought though, at least with new homes there is no gazumping or no upward chain to ruin any sale completion dates …

The choice as they say … is yours!

 

The simple fact is we are not building enough properties. If the supply of new properties is limited and demand continues to soar with heightened divorce rates, i.e. one household becoming two, people living longer and continued immigration, this means the values of those existing properties continues to remain high and out of reach for a lot of people, especially the blue collar working families of Maidstone.

Looking at some recent statistics released by the Government, the ratio of the lower quartile house prices to lower quartile gross annual salaries in Maidstone Borough Council has hit 10.57 to 1.

What does that mean exactly and why does it matter to Maidstone landlords and homeowners?

If we ordered every property in the Maidstone Borough Council area by the value of those properties, the average value of the lower quartile properties (i.e. lowest 25%) would be £225,000. If we then did the same, and ordered everyone’s salary in the same council area, the average of the lowest quartile (lowest 25%), the average salary of the lowest 25% is £21,277 pa, thus dividing one with the other, we get the ratio of 10.57 to 1.

Assuming there is one wage earner in the house, the chances of a Maidstone working family being able to afford to buy their own home, when it’s over ten times their annual salary, is very slim indeed. The existing affordability crisis of people wanting to buy their own home is the unavoidable outcome of the decade on decade failure to build enough homes to keep up with demand. Nevertheless, improving affordability is not a case of just constructing more homes. Maidstone Borough Council needs to ensure more properties are not only built, but built in the right locations and of the right type and at the right price to ensure the needs of these lower income working families are met, because at the moment, they presently have few options apart from the private rental sector.

 

Looking at the historic nature of the ratio, it can clearly be seen in the graph below that this has been an issue since the early to mid 2000’s

 

 

However, if one looks at the historic data, those on the bottom rung of the ladder (those in the lower quartile of wage earners) used to be housed by the local authority instead of buying. However, the vast majority of council houses were sold off in the 1980’s, meaning there are much fewer council houses today to house this generation.

 

Many of the lower quartile working class families were given a lifeline to buy their own homes in middle 2000’s, with 100% mortgages, but the with the credit crunch in 2009, that rug (of 100% mortgages) was rudely pulled from under their feet. You see it is cheaper to buy than rent ... it’s the finding of the 5% deposit that is the challenging issue for these Maidstone working class families. So unless the Government allow 100% mortgages back, the fact is, demand for rental properties will outstrip supply.

 

In the long term, to alleviate that, I would suggest the Maidstone community hold their local politicians at Maidstone Borough Council to account for the actions they could take to ensure the affordability of housing and the extent to which they work with private developers and housing associations and aggressively use the planning tools at their disposal to safeguard the local community getting the new households we need. Maidstone Borough Council could make certain parcels of residential building land for private rented development only, eliminating the opportunity of the land being bought to develop large executive homes, which do not solve the current problem.

 

Yet in the short term, all this means is demand for rental properties will continue to grow, keeping Maidstone house prices high and Maidstone rents high.

 

The one place for more information is My Maidstone Property Blog.  If you are a landlord or thinking of becoming one for the first time, and you want to read more articles like this about the Maidstone Property Market together with regular postings on what I consider  the best buy to let deals in Maidstone then, it is well worth reading.  You can also email me on This email address is being protected from spambots. You need JavaScript enabled to view it.

If you are in Maidstone feel free to pop in to  our office which is right at the bottom of the High Street (right next to river—don’t ask me what happened Christmas Day 2013!)

View the link below to view back dated edition of the Maidstone Property News!

Seekers are a family owned Estate and Letting agency established in 1982.

 

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