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I see many new and experienced Buy- to -Let Landlords .They come from all walks of life. Some have just one property others many more. One of our landlords has 24 but he started with just one ! Our landlords often think of themselves as simply typical landlords but there are so many different types. There are portfolio landlords with a great wealth of experience, we have new landlords who have had some cash to invest. There are’ accidental landlords ‘ who have inherited a property or have moved elsewhere, couldn’t sell and now decided to keep their property as part of their pension scheme.
I have worked in the lettings business for many years and it is important for me to understand the individual needs of each type of landlord as it can change how they want to let their property-the approach to maintenance and the type of tenant required.
As an Independent Family Firm we can tailor what we do to achieve that perfect relationship and get the most from your investment. Many of our clients have been with us for many years .
We produce a fortnightly blog on the Maidstone Property Market – please subscribe by visiting http://maidstonepropertyblog.blogspot.co.uk/
Thinking of Selling please visit our web site www.seekershomes.co.uk and download our selling guide
Now some important Information :
MONDAY NOVEMBER 20 TH
SPEAKER : CHRIS WATKINS PROPERTY JOURNALIST
THE PAST, PRESENT AND FUTURE OF THE MAIDSTONE PROPERTY MARKET
5.30 pm for 6pm VILLAGE HOTEL MAIDSTONE ( JUNCT 6 M20)
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As I mentioned in a previous article, the average house price in Maidstone is 9.68 times the average annual Maidstone salary. This is higher than the last peak of 2008, when the ratio was 8.47. A number of City commentators anticipated that in the ambiguity that trailed the Brexit vote, UK (and hence Maidstone) property prices might drop like a stone. The point is - they haven’t.
Now it’s true the market for Maidstone’s swankiest and poshest properties looks a little fragile (although they are selling if they are realistically priced) and overall, Maidstone property price growth has slowed, but the lower to middle Maidstone property market appears to be quite strong.
Scratch under the surface though, and a different long-term picture is emerging away from what is happening to property prices. Maidstone people are moving home less often than they once did. Data from the Office of National Statistics shows that the number of properties sold in 2016 is again much lower than it was in the Noughties. My statistics show…
Even though we are not anywhere near the post credit crunch (2008 and 2009) low levels of property sales, the torpor of the Maidstone housing market following the 2016 Brexit vote has seen the number of property sales in Maidstone and the surrounding local authority area level off to what appears to be the start of a new long term trend (compared the Noughties).
Interestingly, it was the 1980’s that saw the highest levels of people moving home. Nationally, everyone was moving on average every decade. Even though it was during the Labour administration of the late 1970’s where the right to buy one’s council house started, it was the Housing Act of 1980 that that really got council tenants moving, as Thatcher’s Tory government financially encouraged council tenants to buy their council-rented homes - for which countless then sold them on for a profit and moved elsewhere. The housing market was awash with money as banks were allowed to offer mortgages as well as the existing building societies, meaning it made it simpler for Brits to borrow even more money on mortgages and to climb up the housing ladder.
But coming back to today, looking at the property sales figures in the Maidstone area since 2010/11, a new trend of number of property sales appears to have started. Interestingly, this has been mirrored nationally. The reasons behind this are complex, but a good place to start is the growth rate of real UK household disposable income, which has fallen from 5.01% a year in 2000 to 1.68% in 2016. Also, things have deteriorated since the country voted to leave the EU as consumer price inflation has risen to 2.7% per annum, meaning inflation has eaten away at the real value of wages (as they have only grown by 1.1% in the same time frame).
With meagre real income growth, it has become more difficult for homeowners to accumulate the savings needed to climb up the housing ladder as the level of saving has also dropped from 4.26% of household income to -1.11% (i.e. people are eating into their savings).
Next week I will be discussing how these (and other issues) has meant the level of Maidstone people moving home has slumped to once every 14.5 years.
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I recently read a report by the Yorkshire Building Society that 54% of the country has seen wages (salaries) rise faster than property prices in the last 10 years. The report said that in the Midlands and North, salaries had outperformed property prices since 2007, whilst in other parts of the UK, especially in the South, the opposite has happened and property prices have outperformed salaries quite noticeably.
As regular readers of my blog know, I always like to find out what has actually happened locally in Maidstone. To talk of North and South is not specific enough for me. Therefore, to start, I looked at what has happened to salaries locally since 2007. Looking at the Office of National Statistics (ONS) data for Maidstone Borough Council, some interesting figures came out...
Salaries in Maidstone have risen by 4.29% since 2007 (although it’s been a bit of a rollercoaster ride to get there!) - interesting when you compare that with what has happened to salaries regionally (an increase of 15.87%) and nationally, an increase of 17.61%.
Next, I needed to find what had happened to property prices locally over the same time frame of 2007 and today. Net property values in Maidstone are 29.41% higher than they were in late 2007 (not forgetting they did dip in 2008 and 2009). Therefore...
Property values in the Maidstone area have increased at a higher rate than wages to the tune of 25.12% ... meaning, Maidstone is in line with the regional trend
All this is important, as the relationship between salaries and property values is the basis on how affordable property is to first (and second, third etc.) time buyers. It is also vitally relevant for Maidstone landlords as they need to be aware of this when making their buy-to-let plans for the future. If more Maidstone people are buying, then demand for Maidstone rental properties will drop (and vice versa).
As I have discussed in a few articles in my blog recently, this issue of ‘property-affordability’ is a great bellwether to the future direction of the Maidstone property market. Now of course, it isn’t as simple as comparing salaries and property prices, as that measurement disregards issues such as low mortgage rates and the diminishing proportion of disposable income that is spent on mortgage repayments.
On the face of it, the change between 2007 and 2017 in terms of the ‘property-affordability’ hasn’t been that great. However, look back another 10 years to 1997, and that tells a completely different story. Nationally, the affordability of property more than halved between 1997 and today. In 1997, house prices were on average 3.5 times workers’ annual wages, whereas in 2016 workers could typically expect to spend around 7.7 times annual wages on purchasing a home.
The issue of a lack of homeownership has its roots in the 1980’s and 1990’s. It’s quite hard as a tenant to pay your rent and save money for a deposit simultaneously, meaning for many Maidstone people, home ownership isn't a realistic goal. Earlier in the year, the Tories released proposals to combat the country’s 'broken' housing market, setting out plans to make renting more affordable, while increasing the security of rental deals and threatening to bring tougher legal action to cases involving bad landlords.
This is all great news for Maidstone tenants and decent law-abiding Maidstone landlords (and indirectly owner occupier homeowners). Whatever has happened to salaries or property prices in Maidstone in the last 10 (or 20) years ... the demand for decent high-quality rental property keeps growing.
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The mind-set and tactics you employ to buy your first Maidstone buy to let property needs to be different to the tactics and methodology of buying a home for yourself to live in. The main difference is when purchasing your own property, you may well pay a little more to get the home you (and your family) want, and are less likely to compromise. When buying for your own use, it is only human nature you will want the best, so that quite often it is at the top end of your budget (because as my parents always used to tell me – you get what you pay for in this world!).
Yet with a buy to let property, if your goal is a higher rental return – a higher price doesn’t always equate to higher monthly returns – in fact quite the opposite. Inexpensive Maidstone properties can bring in bigger monthly returns. Most landlords use the phrase ‘yield’ instead of monthly return. To calculate the yield on a buy to let property one basically takes the monthly rent, multiplies it by 12 to get the annual rent and then divides it by the value of the property.
This means, if one increases the value of the property using this calculation, the subsequent yield drops. Or to put it another way, if a Maidstone buy to let landlord has the decision of two properties that create the same amount of monthly rent, the landlord can increase their rental yield by selecting the lower priced property.
Now of course these are averages and there will always be properties outside the lower and upper ranges in yields: they are a fair representation of the gross yields you can expect in the Maidstone area.
As we move forward, with the total amount of buy to let mortgages amounting to £199,310,614,000 in the country, landlords need to be aware of the investment performance of their property, especially in the era of tax increases and tax relief reductions. Landlords are looking to maximise their yield - and are doing so by buying cheaper properties.
However, before everyone in Maidstone starts selling their upmarket properties and buying cheap ones, yield isn’t the only factor when deciding on what Maidstone buy to let property to buy. Void periods (i.e. the time when there isn’t a tenant in the property between tenancies) are an important factor and those properties at the cheaper end of the rental spectrum can suffer higher void periods too. Apartments can also have service charges and ground rents that aren’t accounted for in these gross yields. Landlords can also make money if the value of the property goes up and for those Maidstone landlords who are looking for capital growth, an altered investment strategy may be required.
In Maidstone, for example, over the last 20 years, this is how the average price paid for the four different types of Maidstone property have changed…
- Maidstone Detached Properties have increased in value by 251.1%
- Maidstone Semi-Detached Properties have increased in value by 274.5%
- Maidstone Terraced Properties have increased in value by 285.4%
- Maidstone Apartments have increased in value by 279.6%
It is very much a balancing act of yield, capital growth and void periods when buying in Maidstone. Every landlord’s investment strategy is unique to them. If you would like a fresh pair of eyes to look at your portfolio, be you a private landlord that doesn’t use a letting agent or a landlord that uses one of my competitors – then feel free to drop in and let’s have a chat. What have you got to lose? 30 minutes and my tea making skills are legendary!
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My thoughts to the landlords and homeowners of Maidstone…
The tightrope of being a Maidstone buy-to-let landlord is a balancing act many do well at. Talking to several Maidstone landlords, they are very conscious of their tenants’ capacity and ability to pay the rent and their own need to raise rents on their rental properties (as Government figure shows ‘real pay’ has dropped 1% in the last six months). Evidence does suggest many landlords feel more assured than they were in the spring about pursuing higher rents on their properties.
During the summer months, historic evidence suggests that the rents new tenants have had to pay on move in have increased. June/July/August is a time when renters like to move, demand surges and the normal supply and demand seesaw mean tenants are normally prepared to pay more to secure the property they want to live in, in the place they want to be. This is particularly good news for Maidstone landlords as average Maidstone rents have been on a downward trend recently. So look at the figures here...
Rents in Maidstone on average for new tenants moving in have risen 0.9% for the month, taking overall annual Maidstone rents 0.9% lower for the year
However, several Maidstone landlords have expressed their apprehensions about a slowing of the housing market in Maidstone. I think this negativity may be exaggerated.
Before we get the Champagne out, the other side of the coin to property investing is capital values (which will also be of interest to all the homeowners in Maidstone as well as the Maidstone buy-to-let landlords). I believe the Maidstone property market has been trying to find some level of equilibrium since the New Year. According to the Land Registry…
Property Values in Maidstone are 5.64% higher than they were 12 months ago, rising by 2.3% last month alone!
Yet, I would take those figures with a pinch of salt as they reflect the sales of Maidstone properties that took place in early Spring 2017 and now are only exchanging and completing during the summer months.
The reality is the number of properties that are on the market in Maidstone today has risen by 14.1% since the New Year and that will have a dampening effect on property values. As tenants have had less choice, buyers now have more choice ... and that will temper Maidstone property prices as we head towards 2018.
Be you a homeowner or landlord, if you are planning to sell your Maidstone property in the short term, it is crucial, especially with the rise in the number of properties on the market, that you realistically price your property when you bring it to the market ... with the increase in choice of properties, the balance of power during negotiation generally sways towards the buyer. Given that everyone now has access to property details, including historic stats for how much property have sold for, they will be more astute during the offer and negotiation stages of a purchase.
However, even with this uplift in the number of properties for sale in Maidstone, property prices will remain stable and strong in the medium to long term. This is because the number of properties on the market today is still way below the peak of summer of 2008, when there were 1,812 properties for sale compared to the current level of 790 (if you recall, prices dropped by nearly 20% in Credit Crunch years of ‘08 and ‘09).
Compared to 2008, today’s lower supply of Maidstone properties for sale will keep prices relatively high...and they will continue to stay at these levels for the medium to long term.
Less people are moving than a few years ago, meaning less property is for sale. Fewer properties for sale mean property prices remain relatively high and this is because of a number of underlying reasons. Firstly, buy-to-let landlords tend not sell their properties as often than owner-occupiers, consequently removing the property out of the housing market selling cycle. Secondly, Stamp Duty is much higher compared to 10 years ago (meaning it costs more to move). Next, there is a dearth of local authority rental housing so demand for private rented housing will remain high. Then we have the UK’s maturing owner occupier population, meaning these older people are less likely to move (compared to when they were younger). Another reason is the lack of new homes being built in the country (we need 240k houses a year to be built in the UK and we are currently only building 145k a year!) and finally, the new mortgage rules introduced in 2014 about how much a person can borrow on a mortgage has curtailed demand.
Some final thought’s before I go – to all the Maidstone homeowners that aren’t planning to sell – this talk of price changes is only on paper profit or loss. To those that are moving ... most people that sell, are buyers as well, so as you might not get as much for yours, the one you will want to buy won’t be as much, (swings and roundabouts as Mum used to say!)
To all the Maidstone landlords – keep your eyes peeled – I have a feeling there may be some decent buy-to-let deals to be had in the coming months. One place for such deals, irrespective of which agent is selling it, is my Maidstone Property Blog .