Rugby Property Values 9.8% higher than year ago – What’s the PLAN to fix the Rugby Property Market?

It’s been nearly 18 months since Sajid Javid, the Tory Government’s Housing Minister published the White Paper “Fixing the Broken UK Housing Market”, meanwhile Rugby property values continue to rise at 9.8% (year on year for the council area) and the number of new homes being constructed locally bumps along at a snail’s pace, creating a potential perfect storm for those looking to buy and sell.

The White Paper is important for the UK and Rugby people, as it will ensure we have long-term stability and longevity in property market as whole. Rugby home-owners and Rugby landlords need to be aware of these issues in the report to ensure they don’t lose out and ensure the local housing market is fit for purpose. The White Paper wanted more homes to be built in the next couple of decades, so it might seem counter-intuitive for existing home-owners and landlords to encourage more homes to be built and a change in the direction of housing provision – as this would appear to have a negative effect on their own property.

Yet the country needs a diversified and fluid property market to allow the economy as whole to grow and flourish … which in turn will be a greater influence on whether prices go up or down in the long term. I am sure every homeowner or landlord in Rugby doesn’t want another housing crisis like we had in 1974, 1988 and most recently in 2008.

Now, as Sajid Javid has moved on to the Home Secretary role, the 17th Housing Minister in 20 years (poisoned chalice or journeyman’s cabinet post) James Brokenshire has been given the task of making this White Paper come alive. The White Paper had a well-defined notion of what the issues were.

The first of the four points brought up was to give local authorities powers to speed up house building and ensure developers complete new homes on time. Secondly, statutory methods demanding local authorities and builders build at higher densities (i.e. more houses per hectare) where appropriate. The other two points were incentives for smaller builders to take a larger share of the new homes market and help for people renting.

However, lets go back to the two initial points of planning and density.

(1) Planning

For planning to work, we need a robust Planning Dept. Looking at data from the Local Government’s Association, in Rugby, the council is below the regional average, only spending £24.72 per person for the Planning Authority, compared the regional average of £30.13 per head – which will mean the planning department will be hard pressed to meet those targets.

However, 92% of planning applications are decided within the statutory 8-week initial period, above the regional average of 83% (see the graph below).  I am slightly disappointed and also pleased with the numbers for our local authority when it comes to the planning and the budget allowed by our Politician to this vital service.

(2) Density of Population

2.9 people live in every hectare (or 2.471 acres) in Rugby

It won’t surprise you that 75,815 of 100,075 Rugby residents live in the urban conurbations of the authority, giving a density of 20.2 people per hectare (again – much lower than I initially thought), whilst the villages have a density of 0.8 people per hectare.

I would agree with the Governments’ ambition to make more efficient use of land and avoid building homes at low densities where there is a shortage of land for meeting identified housing needs, ensuring that the density and form of development reflect the character, accessibility and infrastructure.

It’s all very good building lots of houses – but we need the infrastructure to go with it.

Talking to a lot of Rugby people, their biggest fear of all this building is a lack of infrastructure for those extra houses (the extra roads, doctors surgeries, schools etc.). I know most Rugby homeowners and landlords want more houses to be built to house their family and friends … but irrespective of the density … it’s the infrastructure that goes with the housing that is just as important … and this is where I think the White Paper failed to go as far as I feel it should have done.

Interesting times ahead I believe!

Nearly Five Babies Born for Every New Home Built in the Past Five Years in Rugby

Nearly 5 babies have been born for every new home that has been built in Rugby since 2012, deepening the Rugby housing shortage.

This discovery is an important foundation for my concerns about the future of the Rugby property market – when you consider the battle that todays twenty and thirty somethings face in order to buy their first home and get on the Rugby property ladder. This is particularly ironic as these Rugby youngsters’ are being born in an age when the number of new babies born to new homes was far lower.

This will mean the babies being born now, who will become the next generation’s first-time buyers will come up against even bigger competition from a greater number of their peers unless we move to long term fixes to the housing market, instead of the short term fixes that successive Governments have done since the 1980’s.

Looking at the most up to date data for the area covered by Rugby Council, the numbers of properties-built versus the number of babies born together with the corresponding ratio of the two metrics …

It can be seen that in 2016, 6.80 babies had been born in Rugby for every home that had been built in the five years to the end of 2016 (the most up to date data). Interestingly, that ratio nationally was 2.9 babies to every home built in the ‘50s and 2.4 in the ‘70s. I have seen the unaudited 2017 statistics and the picture isn’t any better! (I will share those when they are released later in the year).

Our children, and their children, will be placed in an unprecedented and unbelievably difficult position when wanting to buy their first home unless decisive action is taken. You see it doesn’t help that with life expectancy growing year on year, this too is also placing excessive pressure on homes to live in availability, with normal population growth nationally (the number of babies born less the number of people passing away) accumulative by two people for every one home that was built since the start of this decade.

Owning one’s home is a measure many Brits to aspire to. The only long-term measure that will help is the building of more new homes on a scale not seen since the 50’s and 60’s, which means we would need to aim to at least double the number of homes we build annually.

In the meantime, what does this mean for Rugby landlords and homeowners? Well the demand for rental properties in Rugby in the short term will remain high and until the rate of building grows substantially, this means rents will remain strong and correspondingly, property values will remain robust.

765 Rugby Landlords Plan to Expand Their Buy To Let Portfolios

A noteworthy number of buy to let landlords in Britain plan to buy more properties over the next year notwithstanding the frustrations, challenges and seismic changes in the private rented sector. According to Aldermore, the specialist Buy To Let lender, their research shows around 41% of portfolio buy to let landlord’s objective is to grow their buy to let portfolio (Portfolio landlords are landlords that own more than one property).

So, I thought, “Are Rugby landlords feeling the same?” If so, if these numbers were applied to the Rugby private rental market, what sort effect would it have on the Rugby property market as whole?

Talking to the landlords I deal with, most are feeling quite optimistic about the future of the Rugby rental market and the prospect it presents notwithstanding the doom and gloom prophecies that the property market will shrink. Many of those Rugby landlords who are looking to enlarge their portfolio are doing so because they still see the Rugby rental market as a decent investment opportunity.

With top of the range Bank and Building Society Savings Accounts only reaching 1.5% a year, the rollercoaster ride of Crypto currency and the yo-yoing of the Stock Market, the simple fact is, with rental yields in Rugby far outstripping current savings rates, the short term prospect of a minor drop in property prices isn’t putting off Rugby landlords.

The art to buying a Rugby buy to let investment is to buy the profit on the purchase price, not the anticipation of the future sale price.

No matter what the historical economy has thrown at us, with the global meltdown in 2008/9, dotcom crash of 2000, ERM in 1992, the three day week, oil crisis and hyperinflation in the 1970’s (the list goes on) … the housing market has always bounced back stronger in the long term. That’s the point … long term. Investing in buy to let is a long-term strategy. The simple fact is, over the long term with the increasing demand for rental properties, predominantly among Millennials as many cannot afford to get on the property ladder, and with councils not building enough properties of any kind, many youngsters are having to resort the private rental market for their accommodation needs.

So, what of the numbers involved in Rugby?

There are 857 landlords that own just one buy to let (BTL) property in Rugby and 1,865 Rugby landlords, who are portfolio landlords. Between those 1,865 Rugby portfolio BTL landlords, they own a total of 3,915 Rugby BTL properties and they can be split down into the size of landlord portfolio in the graph below….

If I apply the Aldermore figures that means 765 Rugby landlords have plans to expand their BTL portfolio in the coming year or so.

However, the Aldermore Research also showed that 8% of private landlords intended to reduce the number of properties they own. They put this down to continuing Government intervention in the housing market (as many landlords mentioned too many limitations and higher taxation) while some believed that tenants are excessively protected to the disadvantage of the landlord.

I would say there is no repudiating that the buy to let market has taken a bit of a beating, thanks to a plethora of Government regulation, new mortgage underwriting rules in 2014 and George Osborne’s tax changes. Yet there still remains an overall consciousness of optimism among the vast majority of Rugby buy to let landlords. Despite these latest changes, many landlords still view buy to let as a good investment, as long as you buy right and expand your portfolio taking into account the second rule of buy to let … assess your position on the ‘buy to let seesaw’ of capital growth and yield.

If you want to buy right and assess your own portfolio on the yield/capital growth seesaw … drop me a note. I don’t bite and the opinion I give, whether you are landlord of mine or not as the case may be, is given freely, without obligation or cost. The choice is yours. Thank you for reading this article. To read others, please visit my Rugby Property Blog.

Extra Funding Is Required for Affordable Homes in Rugby

In my blog about the Rugby Property Market I mostly only talk about two of the three main sectors of the local property market, the ‘private rented sector’ and the ‘owner occupier sector’. However, as I often stress when talking to my clients, one cannot forget the third sector, that being the ‘social housing sector’ (or council housing as some people call it).

In previous articles, I have spoken at length about the crisis in supply of property in Rugby (i.e. not enough property is being built), but in this article I want to talk about the other crisis – that of affordability. It is not just about the pure number of houses being built but also the equilibrium of tenure (ownership vs rented) and therein, the affordability of housing, which needs to be considered carefully for an efficient and effectual housing market.

An efficient and effectual housing market is in everyone’s interests, including Rugby homeowners and Rugby landlords, so let me explain ..

An average of only 146 Affordable Homes per year have been built by Rugby Borough Council in the last 9 years

The requirement for the provision of subsidised housing has been recognised since Victorian times. Even though private rents have not kept up with inflation since 2005 (meaning tenants are better off) it’s still a fact there are substantial numbers of low-income households in Rugby devoid of the money to allow them a decent standard of housing.

Usually, property in the social housing sector has had rents set at around half the going market rate and affordable shared home ownership has been the main source of new affordable housing yet, irrespective of the tenure, the local authority is simply not coming up with the numbers required. If the local authority isn’t building or finding these affordable homes, these Rugby tenants still need housing, and some tenants at the lower end of the market are falling foul of rogue landlords. Not good news for tenants and the vast majority of law abiding and decent Rugby landlords who are tarnished by the actions of those few rogue landlords, especially as I believe everyone has the right to a safe and decent home.

Be it Tory’s, Labour, SNP, Lib Dems, Greens etc, everyone needs to put party politics aside and start building enough homes and ensure that housing is affordable. Even though 2017 was one of the best years for new home building in the last decade (217,000 home built in 2017) overall new home building has been in decline for many years from the heady days of the early 1970s, when an average of 350,000 new homes were being built a year.  As you can see from the graph, we simply aren’t building enough ‘affordable’ homes in the area.

The blame cannot all be placed at the feet of the local authority as Council budgets nationally, according to Full-Fact, are 26% lower than they have been since 2010. 

So, what does this mean for Rugby homeowners? Well, an undersupply of affordable homes will artificially keep rents and property prices high. That might sound good in the short term, but a large proportion of my Rugby landlords find their children are also priced out of the housing market. Also, whilst your Rugby home might be slightly higher in value, due to this lack of supply of homes at the bottom end of the market, as most people move up the market when they do move, the one you want to buy will be priced even higher.

Problems at the lower end of the property market will affect the middle and upper parts. There is no getting away from the fact that the Rugby housing market is all interlinked .. it’s not called the Property ‘Ladder’ for nothing!

Rugby Millennials Have Spent £102,010 On Rent By The Age of 35

The Millennials were born between the mid 1980’s and late 1990’s thus making them between the age of around 22 to late 30’s. They are the imaginative, artistic youngsters who grew up with the newest tech and computers and who are huge aficionados of music festivals, gourmet pizzas, emoji’s, selfies and old school nostalgia. Also known as Generation Rent, many Millennials have discovered that renting is a good choice for their shelter and accommodation needs without 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 going through the pressure and strain of student loan liabilities whilst, at the same time, finding it tough to pay rent.

The hot topic at the moment is the cost of renting, as both political parties have seen mileage in wooing these Millennial Generation Renters. The average rent in Rugby is currently £544 per month making this a big-ticket item on the monthly budget. I was inquisitive to find out 721 how much Rugby Millennials will spend on rent by the time they reach their mid 30’s. The average age people leave home in the UK is 22; so looking at a Rugby 22-year-old (or Millennial) who left home in 2005 then between 2005 and today that Rugby Millennial will have shelled out £102,010 in rent.

It’s no wonder local Millennials can’t afford to buy a Rugby home given their tremendous debt. This means younger Rugby 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…

Looking at the chart above, the average rent of a Rugby property in 2005 was £605 per month (pm)  … if it had risen by inflation, today, that would be £852 pm. As I have already mentioned in the article, today it only stands at £721 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 Rugby Millennial tenant would have paid £114,432.

This means that an average 35-year-old Rugby Millennial tenant, who has been renting since 2005, is better off by £12,422 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 due to the sub-inflation growth in rents.

In fact, if you recall I mentioned in an article a few weeks ago, the older Rugby Millennials are starting to use those savings and are gradually shifting towards home ownership. They are finally catching up with the British homeownership dream as Bank of Mum and Dad help 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 scrapped together (yes, 95% first time buyer mortgages have been available since 2009), it is still a lot cheaper to buy than rent, meaning this will unquestionably drive demand for Rugby homes for sale – good news for Rugby homeowners.

… and what does this mean for Rugby landlords?

Well the vast majority of younger Millennials are still renters and I foresee this to be the case for at least the next ten to fifteen years. Landlords will need to keep improving their properties to ensure they get the best tenants and they will see a much higher rent achieved. Millennials will pay top dollar for a top dollar 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 I promised a few weeks ago, the first rule of Buy To Let Investment ….. “You are not going to live in the property yourself”

Rugby Property Market – Which Houses are Actually Selling?

Beast from the East, Russia, Facebook, Brexit, Trump, House prices up, House prices down … the Press is full of column inches on Brit’s favourite subjects of politics, scandal, weather and not forgetting (and I appreciate the irony of this!) the property market. As an agent belonging a national group of letting and estate agents, talking to my fellow property professionals from around the UK, the one thing that is immediately apparent is the UK does not have one property market. It is a hodgepodge patchwork (almost like a fly’s eye) of lots of small property markets all performing in different ways.  

… And that made me think … is there just one Rugby Property Market or many?

I like to keep an eye on the property market in Rugby on a daily basis because it enables me to give the best advice and opinion on what (or not) to buy in Rugby, be that a buy-to-let property for a Rugby landlord or an owner occupier house for a home owner.  So, I thought, how could I scientifically split the Rugby housing market into segments, so I could see which part of the market was performing the best and the worst.

I decided the best way was to split the Rugby property market into four equal size price bands (into terms of households for sale). Each price band would have around 25% of the property in Rugby, from the lowest in value (the Lowest Quartile or 25%) all the way through to the highest 25% in terms of value, the Upper Quartile.  Looking at the market, I have calculated that these are the price bands in Rugby are as follows:

· Lowest Quartile (lowest 25% in terms of value) … Up to £160,000

· Lower/Middle Quartile (25% to 50% Quartile in terms of value) …  £160,001 to £230,000

· Middle/Upper Quartile (50% to 75% Quartile in terms of value) … £230,001 to £325,000

· Upper Quartile (highest 25% in terms of value) … £325,001 Upwards

So, having split the Rugby Property Market approximately into four equal sizes, the results in terms what price band has sold (subject to contract or stc) the most is quite enlightening –

The best performing price range in Rugby is the middle market. As I would expect, the upper quartile (the top 25%) is finding things toughest. Interestingly for Rugby landlords, the lower market is also selling well, meaning there are plenty of Rugby landlords buying properties to add to their buy to let portfolios. Even though the number of first time buyers did increase in 2017, it was from a low base and the vast majority of 20 something’s cannot buy, so need a roof over their head (hence the need to rent somewhere).

It is a fact that British (and Rugby’s) housing markets have ridden the storms of Oil crisis in the 1970’s, the 1980’s depression, Black Monday in the 1990’s, and latterly the Credit Crunch together with the various house price crashes of 1973, 1987 and 2008. No matter what happens to us Brexit or anything else … unless the Government starts to build hundreds of thousands extra houses each year, demand will always outstrip supply … so maybe a time for Rugby landlord investors to bag a bargain?

Want to know where those Rugby buy to let bargains are?  Follow my Rugby Property Blog or drop me an email because irrespective of which agent you use, myself or any of the other excellent agents in Rugby, many local landlords ask me my thoughts, opinion and advice on what (and not) to buy locally … and I wouldn’t want you to miss out on those thoughts … would you?

39% More Rugby Home Owners Wanting to Move Than 12 Months Ago

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

At the start of 2007 there were 682 properties for sale in Rugby but by September 2008, when the credit crunch was really beginning to bite, that number had risen to 1,068 properties on the market at a time when demand was at an all-time low, thus creating an imbalance in the local property market.

Basic economics dictates that if there is too much supply of something and demand is poor (which it was in the Credit Crunch years of 2008/9) … prices will drop. In fact, house prices dropped between 15% and 20% depending on the type of Rugby property between the end of 2007 and Spring 2009.

However, over the last five years, we have seen a steady decrease in supply of properties coming onto the market for sale and steady demand, meaning Rugby 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 Rugby 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 39% more properties for sale in Rugby today than a year ago

There were 176 properties for sale 12 months ago, and today that stands at 245. Definitely a step in the right direction to a more stable property market.

Even better news, since the Chancellor announced the stamp duty rule changes for first time buyers (FTB), my fellow agents in Rugby say that the number of FTB’s registering on the majority of agent’s books has increased year on year. That has still to follow through into more FTB’s buying their first home, however, with the heightened levels of confidence being demonstrated by both Rugby house sellers and potential house buyers, I do foresee the Rugby Property Market will show steady yet sustained improvement during the first half of 2018.

What does this mean for Rugby 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 ensure they get 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 Rugby still looks a good investment, providing Rugby landlords with a good income at a time of low interest rates and a roller coaster stock market.

If you are thinking of investing in bricks and mortar in Rugby, 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 1st rule in a couple of weeks!