Rugby Tenant’s Deposits held total £3,697,525

With the Government preparing to control tenant’s deposits at five weeks rent, Rugby landlords will soon only be protected in the event of a single month of unpaid rental-arrears, at a time when Universal Credit has seen some rent arrears quadrupling and that’s before you consider damage to the property or solicitor costs.

It can’t be disputed that the deposits Rugby tenants have to save for, certainly raises the cost of renting, putting another nail in the coffin of the dream of home ownership for many Rugby renters whilst at the same time, those same deposits being unable to provide Rugby landlords with a decent level of protection against unpaid rent or damage to the property.

In fact, the total of all the tenants’ deposits in Rugby, deposited or protected, is £3,697,525

When you consider the value of all the privately rented properties in Rugby total £1,259,744,382, the need for decent landlord insurance to ensure you are adequately covered as a Rugby landlord is vital.

However, I want to consider the point of view of the Rugby tenant.  Several housing charities believe spending more than a third of someone’s salary on rent as exorbitant, yet for the tenants they find themselves in that very position.  I feel especially sorry for the Rugby youngsters in their 20’s who want to rent a place for themselves, as they face having to pay out the rent and try and save for a deposit for a home.

The average 22 to 29-year-old in Rugby spends 36% of their typical salary on a one bed rental property

….and 40% of their salary for a 2-bed home in Rugby.

40 years ago, British people who rented spent an average of 10% of their salary on rent, and only 14% in London.  Looking in even greater detail, according to the ONS, over the past 60 years the proportion of total spending on all housing (renting and mortgages) has doubled from 9% in the late 1950’s to 18% today.  Whilst on the other hand, the proportion of total expenditure on food has halved (33% to 16%), as has the proportion of total spending on clothing (10% to 5%) … it’s a case of swings and roundabouts!

Yet landlords also face costs that need to be covered from rents including mortgages, landlord insurance (especially the need for the often-inadequate deposits to cover the loss of rent and damage), maintenance and licensing.  In fact, rents in the last 10 years have failed to keep up with UK inflation, so in real terms, landlords are worse off when it comes to their rental returns (although they have gained on the increase in Rugby property values – but that is only realised when a property sells).

There are a small handful of Rugby landlords selling some/or all of their rental portfolio as their portfolios become less economically viable with the recent tax changes for buy to let landlords, which will result in fewer properties available to rent.

However, this will reduce the supply and availability of Rugby rental properties, meaning rents will rise (classic textbook supply and demand), thus landlords return and yields will rise.  Yet, because tenants still can’t afford to save the deposit for a home (as we discussed above) and we are all living longer, the demand for rental properties across Rugby will continue to grow in the next twenty to thirty years as we turn to more European ways where the norm is to rent rather than buy in the 20’s and 30’s age range. This will mean new buy-to-let landlords will be attracted into the market, buy properties for the rental market in Rugby and enjoy those higher yields and returns … isn’t it interesting that things mostly always go full circle?

Rugby House Prices up 27.5% in the last 5 Years

Over the last 5 years, we have seen some interesting subtle changes to the Rugby property market as buying patterns of landlords have changed ever so slightly.

The background to this story was the recently published set of buy-to-let (BTL) lending statistics. Roll the clock back 12 months and 6,700 BTL mortgages were granted (in the same month) for £900m, meaning the average BTL mortgage was £134,200. Looking at last month’s figures, and as one might expect with the Brexit issue overhanging the property market, the lending figures were down, yet not by the amount I originally thought. Last month, just over 6,100 new buy-to-let mortgages were granted for a total sum of £800m (meaning the average landlord mortgage was a respectable £131,100). Yet, when I looked back to the boom year of the 2014 property market, in the corresponding same month, only £1,030 million was borrowed on 8,300 buy-to-let properties (meaning the average buy-to-let mortgage was £124,100). It seems Brexit is having no effect on landlords buying habits.

Looking closer to home in Rugby, throughout 2018, I have been regularly chatting to more and more landlords, be they seasoned professional Rugby BTL landlords or FTL’s (first time landlords) and their attitude is mostly positive. Instead of reading the scare-papers (oops sorry newspapers), those Rugby landlords that look with their eyes, will see the Rugby property market is doing reasonably well, with medium term rents and property values rising; as quite obviously from the mortgage figures .. landlords are still buying.

The question I get asked all the time is .. “What type of buy-to-let property should I buy?  You can make money from property through both the rent (expressed as a yield when compared to the value of the property) and how the actual value of the home itself changes.

Since 2014, property values in Rugby have risen by 27.5%.

We have records of what each type of property (i.e. Detached/Semi/Terraced/Apartments) has achieved per square metre going back 20 years … and looking back over the last 5 years, these are the numbers ..

They all look to have similar percentage uplifts, however as you can see from the table there is in fact some variation throughout and although only slight this can equate to thousands of pounds in monetary terms.

This has proved that semis and terraced houses have performed the best .. although like the £/Sq.M figures, these are just averages. When investing, whilst Rugby apartments haven’t been the best performers in terms of capital growth, they do tend to generate a slightly better yield than houses, probably because several sharers can afford to pay more than a single family. But houses tend to appreciate in value more rapidly and may well be easier to sell, simply because there are fewer being built.

Now these are of course averages, but it gives you a good place to start from. The bigger picture here though is this – irrespective of what is happening in the world, be it Brexit/no Brexit, China, Trump, whatever, Rugby people still need a roof over their heads and we as a Country haven’t built enough homes to keep up with the demand since the late 1980’s. This means even if we have a short term wobble in 2019 when it comes to property values ..in the medium term, demand will always outstrip supply and prices and rents will increase – because, I doubt the local authority, let alone Westminster, have the billions of pounds required to build the one hundred thousand Council houses per year nationally for the next decade to fix this issue – meaning as the population increases, the only people who can fulfil the demand for accommodation in the medium term is the private BTL landlord.

Before I go …on average, housing associations and local authorities have built around 26,500 houses each year since 2010. The Labour government had a lower average, building about 19,000 homes per year, yet in the 1960’s, under both administrations, 180,000 councils were built per year!

Rugby Homeowners 87% More Likely To Live in a Home with 3+ Bedrooms than those that Privately Rent

The conventional way of categorising property in Britain is to look at the number of bedrooms rather than its size in square metres (square feet for those of you over 50!). My intuition tells me that homeowners and tenants are happy to pay for more space. It’s quite obvious, the more bedrooms a house or apartment has, the bigger the property is likely to be. And it’s not only the tangible additional bedrooms, but those properties with those additional bedrooms tend to have larger (and more) reception (living) rooms. However, if you think about it, this isn’t so surprising given that properties with more bedrooms would typically accommodate more people and therefore require larger reception rooms.

In todays Rugby property market, the Rugby homeowners and Rugby landlords I talk to are always asking me which attributes and features are likely to make their property comparatively more attractive and which ones may detract from the price. Over time buyers’ and tenants’ wants and needs have changed.

In Rugby, location is still the No. 1 factor affecting the value of property, and a property in the best neighbourhoods can achieve a price almost 50% higher than a similar house in an ‘average’ area. Nevertheless, after location, the next characteristic that has a significant influence on the desirability, and thus price, of property is the number of bedrooms and the type (i.e. Detached/Semi/Terraced/Flat).

The number of bedrooms for owner-occupiers very much depends on the size of the family and the budget, whilst Rugby landlords have to consider the investment opportunity. In this article, I have analysed Rugby’s housing stock into bedrooms and tenure. Initially looking at Rugby homeowners..

And now the Private rented sector …

It can quite clearly be seen that Rugby owner-occupiers tend to occupy the largerproperties with more bedrooms. This would be expected due to the demographic of homeowners and people that privately rent.

However, this shows there could be opportunities for Rugby buy to let landlords to purchase larger properties with more bedrooms to attract tenants requiring properties with more bedrooms. However, before you all go buying larger 4 bed and 5 bed mansions to rent them out, a lot of bigger properties in Rugby don’t make financial sense when it comes to buy to let.

For numerous years Rugby buy to let landlords have been the lone buyers at the smaller one and two bed starter homes of the market, as they have been lured by elevated tenant demand and eye-catching returns. Some Rugby landlords believe their window of opportunity has started to close with the new tax regime for landlords, whilst it already appears to be opening wider for first time buyers. This is great news for first time buyers .. but one final note for Rugby landlords .. all is not lost .. you can still pick up bargains, you just need to be a lot more savvy and do your homework

Live in Rugby? About to Retire and Privately Rent? You Could be £4,300 a Year Worse Off!

You read the personal finance pages of the newspapers and it all seems to be the impending pensions crisis … where people aren’t saving enough for their retirement. But it’s not the lack of Rugby peoples’ future pension incomes that are my immediate concern. The fact is that so many of the future retirees in Rugby over the coming decade, who never bought their home in the Millennial years of the 1990’s and 2000’s, will have to make some tough decisions regarding what house they live in when they retire anytime between now and 2038.

In Rugby, there are 653 privately rented households, where the head of the household is between 50 years and 64 years of age (meaning they will be retiring anytime between now and 2038). They are working now and easily paying the rent, yet what happens when they retire?

A Rugby retired couple, who currently privately rent and who have paid their fully qualifying NI stamp over the last few decades are likely to retire with the couples State Pension of £1,091 per month plus a tiny bit of private pension if they are lucky. Given that the average rent in Rugby is £768 a month – a lot of that pension will be lost in rent. This means taxpayers will have no alternative but to step in and top up the rent payments with Housing Benefit, yet…

The maximum housing benefit for a couple in Rugby is currently £410.89 per month … leaving a significant gap when you consider the average rent in Rugby is £768 per month

It is most people’s opinion that retirees are either council tenants or own their home outright. Looking at these figures though, it looks like both these ‘mature’ private renters could be having to make some decisions on their lifestyle and where they live, possibly looking at downsizing the home they rent to make things more affordable in their old age. Also, the government will be in for a horrible surprise as more of Rugby people retire and continue to rent from a private landlord. Numerous Rugby private renters, with little or no savings, will have to rely on Housing Benefit, which will put greater pressure on the public purse.

The average Rugby retiree will need to find £4,285 pa to stay in their privately rented home after retirement

A recent report from Scottish Widows suggested that 1 in 8 OAP’s will be privately renting by 2032, up from the current one in 15.47 OAP’s whom currently private rent (or 6.47%). In fact, in that report they said the equivalent of more than one-third of the whole annual NHS budget would be spent on Housing Benefit for OAP’s in retirement living in private rented property.

What does this mean for mature Rugby homeowners? I see many using equity release schemes to stay in their homes to pay for a better retirement and others more open to downsizing, selling their large home to a family that needs it and moving into a smaller apartment or bungalow … yet lets be frank – they aren’t building bungalows in large numbers in Rugby anymore.

And for the Rugby landlords? Well with the younger Millennials showing no appetite in jumping onto the homeownership bandwagon anytime soon, it can only result in the demands on the buy to let market from Rugby tenants rising substantially. Of course, many Millennials will inherit money from their home owning parents in the coming few decades, yet a lot won’t as it will be spent on nursing home care and any leftovers (if any) split between siblings.

For those retiring in post 2050/2060, there is better news as official reports suggest those retirees will enjoy a State Pension approximately similar to today’s pensioners with auto-enrolment into top-up private pensions through their employer.

The solution to all this is to build more homes, of course. Last year we created/built just over 217,000 households in the UK, up from a post Millennial average of just under 150,000 households a year. We need to get back to the building booms of the late 1960’s and early 1970’s when on average 300,000 households were built … but back to reality … that won’t happen so it looks like we are turning into a nation of renters, which is of course good news for Rugby’s buy to let landlords!

Rugby Homeowners Have Made an Annual Profit Of £8,194 Since the Millennium

As we go full steam ahead into 2019, it’s certain that the Rugby housing market in 2018 was a little more restrained than 2016 and 2017 and I believe this will continue into 2019. Property ownership is a medium to long term investment so, looking at the long-term, the average Rugby homeowner, having owned their property since the Millennium, has seen its value rise by more than 226%.

This is important, as house prices are a national obsession and tied into the health of the UK economy as a whole. The preponderance of that historical gain in Rugby property values has come from the growth in Rugby property values, while some of it will have been enhanced by extending, modernising or developing their Rugby home.

Taking a look at the different property types in Rugby, and the profit made by each type, makes interesting reading..

However, we can’t forget there has been just over 60% inflation over those 18 years, which eats into the ‘real’ value (or true spending power of that profit) … so if we take into account inflation since 2000, the true spending power of that profit has been lower.​

 So the ‘real’ value of the profit, after inflation, in Rugby has been £5,002 per year.. still nothing to sniff at.

I wanted to show you that even though we had the 2008/09 Credit Crunch property market crash where, depending on the type of Rugby property, property values dropped between 15% and 20% in 18 months … Rugby homeowners over the long term are still better off than those renting.

Moving forward, the question I get asked time and again is what will happen in the future to the Rugby Property market? Irrespective of what is happening in the World, Europe or even Central London, the biggest factor over the medium to longterm to ensure that this level of house price growth is maintained in Rugby is the building of new homes both locally and in the country as a whole. Whilst we haven’t had the 2018 stats yet, Government sources suggest this will be nearer 180,000 to 190,000, a decrease from the 2017 figure of 217,350 new households being created. When you consider that we need to build 240,000 households to equal demand (immigration, people living longer, higher divorce rates and people co-habiting later in life etc) … demand will outstrip supply and unless the Government start to spend billions building council houses .. this trend will continue for years (and decades to come).

Another factor is that whilst Rugby landlords have been hit with higher taxes to enable them to actually be a landlord most, in every national survey, still intends to increase their portfolio in the medium to long term. The youngsters of Rugby see renting as a choice, giving them flexibility and options that being tied to a home cannot give… thus meaning demand will continue to grow and landlords will be able to enjoy increased rents and capital growth, although those very same Rugby buy to let landlords will have to work smarter in the future to continue to make decent returns (profits) from their buy to let investments. Even with the tempering of house price inflation in Rugby in 2018, most Rugby buy to let landlords (and homeowners) are still sitting on a copious amount of growth from previous years.

The question is, how do you, as a Rugby buy to let landlord, ensure that continues?

Since the 1990’s, making money from investing in buy to let property was as easy as falling off a log. Looking forward though, with all the changes in the tax regime and balance of power, making those similar levels of return in the future won’t be so easy. Over the last ten years, I have seen the role of the forward thinking agents evolve from a person collecting the rent to a more all-inclusive role; I call it, ‘strategic portfolio leadership’. Thankfully, along with myself, there are a handful of agents in Rugby whom I would consider exemplary at this landlord portfolio strategy where they can give you a balanced structured overview of your short, medium and long-term goals, in relation to your required return on investment, yield and capital growth requirements. If you would like such advice, speak with your current agent – whether you are a landlord of ours or not – without any cost or commitment, feel free to drop me a line.

As OAP’s set to rise to 1 in 4 of Rugby’s population by 2037 – Where are they all going to live?

With constant advances in technology, medicine and lifestyles, people in the Rugby area are, on average, living longer than they might have a few decades ago. As Rugby’s population ages, the problem of how the older generation are accommodated is starting to emerge. We, as a town, have to consider how we supply decent and appropriate accommodation for Rugby’s growing older generation’s accommodation needs while still offering a lifestyle that is both modern and desirable.

In 1997 in Rugby, around one in every six people (16%) were aged 65 years and over (and the local authority area as a whole), increasing to nearly one in every five people (19%) in 2017 and it is projected to reach around one in every four people (24%) by 2037, meaning..

Over the next 19 years, the growth of the over 65 population in Rugby will grow by 26.3% – a lot more than the overall growth population of Rugby of 11.2% over the same time frame.

In fact, the number of those over 90 is expected to more than double in our local authority from 1,125 (1.1%) in 2017 to 2,583 (2.2%) by 2037.

And looking at the proportional percentage changes over those years..

Looking at Rugby and the local authority as a whole, there is a distinct under supply of bungalows and retirement living (i.e. sheltered) accommodation. The majority of sheltered accommodation fit for retirement is in the ex-local authority sector whilst the majority of private sector bungalows were built in the 1960s/70s/80s and are beginning to show their age (although that means there is often an opportunity for Rugby investors and Rugby buy to let landlords to buy a tired bungalow, do it up and flip it/rent it out).

In the medium to longer term, we need to build more bungalows and sheltered accommodation and, if we do that, that won’t only be of benefit to the elderly population of Rugby – it will have a direct knock-on effect to the younger and middle-aged population by unlocking those family homes the older generation homeowners live in.  

There have been 17 Housing Ministers since 1997. No one ever seems to stay in the job long enough to create a consensus and direction in Government Policy on the vital issue of the country’s housing shortage, yet the sound bites and White Papers seem only to focus exclusively on first-time buyers when there is an even more severe and disregarded shortage in suitable housing for the older generation.

This scantiness affects both mature homeowners trapped in unsuitably big family properties, unable to find smaller bungalows or suitable retirement apartments, whilst the waiting list for Council sheltered accommodation is putting a strain on other aspects of social care. In both circumstances, policy coming (or not coming) out of Government is repressing the supply and type of accommodation mature people desire, need and want, whilst at the same time, increasing the cost (and taxes) for social and NHS care.

Maybe we need tax breaks for people to downsize or planning permissions that stipulate bungalows only. Whichever way you look .. there are challenging times ahead for us all.

The £5,068,520 Ticking Time Bomb for Rugby Landlords

I just love looking over and keeping up to date the 108 pieces of legislation that govern the rental of residential property in the UK”  

…No Rugby Landlord, ever

If you are one of the 1,861 Rugby landlord’s that manages your own property, would it surprise you to know that there are 108 separate pieces of legislation that govern the rental of private houses to tenants. Oh, and on top of the 108 pieces of law, there are further 300+ regulations in the mix. Whilst Rugby landlords may once have preferred to manage their Rugby buy-to-let properties themselves to boost their profits, many Rugby landlords are starting to see this as a false economy.

In the last four years, an additional 716 landlords in Rugby have converted from self-managed to having their property managed by a letting agent in Rugby, taking the total number of properties under management in Rugby to 2,910 (out of a total of 4,771 private rental properties in Rugby).

Now, don’t get me wrong, self-managing your Rugby rental property can be a very fulfilling experience, allowing you, as a Rugby landlord, to build a deep relationship with your tenant and your emergency 24 hour plumber, builder (happy to do small jobs at a drop of a hat), decorators, first name terms with their deposit provider, lawyer and EPC provider to name but a few. (Wow!)

Also, did you know if your tenants deposit isn’t registered, or doesn’t continue to be registered after the end the periodic tenancy upon renewal … you could be fined up to three times your deposit? With the average rental deposit in Rugby being £908, each self-managed landlord in Rugby could be fined £2,724 per tenancy if the deposit isn’t currently registered. Therefore…

…if every deposit of every Rugby self-managed landlord’s property wasn’t registered, the total fines would amount to £5,068,520

Now of course, I am not suggesting for one minute all the self-managed landlords of Rugby haven’t registered their deposits, yet almost on a daily basis, I come across horror stories to that effect. Another two (but by no means all) hot issues that the Courts are cracking down on, are doing immigration ‘Right To Rent’ checks on all tenants (yes all tenants) and confirmation proving the tenant received the ‘How to Rent’ guide. If that second issue cannot be proved (a ‘sent’ email won’t suffice), the landlord cannot serve the section 21 Notice, meaning the tenant cannot be served notice to vacate the property.

To many, it’s really a case of DIY or getting a qualified professional in … as those additional Rugby landlords mentioned above have done since 2014. You might say, “Of course you are going to say all this – you are a Letting Agent”. Well the choice really comes down to your time and your knowledge. If a Rugby landlord is not equipped, or able, to devote time keeping up-to-date of legislation and law nor doesn’t want to be bothered 24/7/365 about a blown light bulb, dripping taps, have that confrontational conversation with their tenants about missing rental payments, or arbitrate arguments and disagreements between your tenant and the neighbours, it is perhaps better to pass this accountability/responsibility onto a letting agent.

One thing I would say is all letting agents aren’t the same. Would it surprise you to know that letting agents aren’t regulated?

Rugby landlords that do use a letting agent should not forget that passing over management to a letting agent doesn’t mean they can disregard legislation and they are still responsible for deposit/rent repayment legal directives, civil fines or action if the letting agent makes a mistake. Therefore, it’s important to pick a respectable letting agent from the start.

Nevertheless, for those Rugby landlords that see their job as a professional landlord and want to be intricately involved in the day to day administration of their rental properties, it can be worthy pursuit.

If you are a self-managed landlord in Rugby, and want to know if your paperwork is in order please feel free to drop me a line and I am more than happy to do an ‘MOT’ on it to ensure you are the right side of the law.