1 in 16 Rugby Properties are Leasehold

There are 23.36 million properties in England and Wales with 64% being owner occupied and 36% being rented either from a private landlord, local authority or housing association.

Over nine out of ten of those English and Welsh owner-occupied properties are a whole house or bungalow. Now, most people would assume they would be freehold – however, of those renting nearly half of rental properties, 44% to be precise, lived in other leasehold apartments and flats.

It might be wise to quickly explain the difference between freehold and leasehold. When someone owns the freehold of a property they own it outright, including the land it is built on, whilst with a leasehold property the leaseholder owns the property for the length of their lease agreement. Leaseholders must pay the person who owns land (the freeholder) ground rent and other fees. When the leasehold ends, ownership returns to the freeholder although the leaseholder can extend the lease or they can buy the freeholder out, but there are rules and regulations with regards doing that.

Therefore, it would be safe to assume that houses are freehold and flats are leasehold .. wouldn’t it? Not necessarily! Most houses are freehold but some might be leasehold – usually through shared-ownership schemes – but more and more new homes builders are selling houses on a leasehold as well. The protection of the law afforded to leaseholders who own a flat is massive, but sadly lacking to leasehold houses sold privately.

Looking specifically at the figures for Rugby, at the last count in CV21 there were 17,015 properties. Since 1995, 16,441 properties in CV21 have changed hands and have been sold. Looking further at those 16,441 transactions in CV21 since 1995, using data from Land Registry and solicitors practice My-Home-Move, 6.20% have been leasehold (lower than the national average of 15%).

However, I am concerned about a few new homes builders selling new houses (not flats – houses) as leasehold. There has been a growing (yet small) trend for new-build houses to be sold as leasehold in recent years. While not all house builders use this model, those that do maintain it helps make developments financially viable.

The issue comes when builders sell the freehold separately to an investment company without informing the lease holder  – which they are legally allowed to do without telling the leaseholder. In England and Wales, the “right of first refusal” to buy the freehold is written in law to leaseholders of flats i.e. the freeholder must offer it to the leaseholders of all the flats of the building first), but not leaseholders of houses.

.. and this is the point I am trying to get across. If you are buying a new home and it’s a house (i.e. not a flat) – please check very carefully indeed whether its freehold or leasehold. If it is a leasehold, whilst you do have rights, they are not as strong as for those people buying a leasehold flat. I appreciate I am only talking about a very small percentage of the property market, but potentially this could end up costing thousands of pounds to those affected.

 

Iain Havell

Rugby Flats Out Perform Property Market Average by 42%

According to the Land Registry’s latest House Price Index for Rugby and the surrounding locality, the value of apartments/flats are rising at a faster rate than terraced/town houses, semi-detached properties and even detached property.

 

Values of apartments in Rugby have increased by 4.53% over the past year, which is proportionally 42% more than the Rugby average rise of 3.2%. The last time flats/apartments in Rugby out performed all the other types of property, by such a gulf, was back in the spring of 2003. For comparison, the other property types performed as follows ..

 

  • Detached homes rose by 3.63%
  • Semi-detached homes rose by 3.15%
  • Terraced/Town-Houses rose by 2.43%

 

This moderately increasing rate of property value growth is opportune – but no one should confuse it with a strong and vigorous healthy Rugby property market. Instead, it is somewhat an indicator of the long-lasting lack of property on the market. In fact, I have spoken about the lack of homes for sale in Rugby on a number of occasions in my Rugby Property Blog and whilst it isn’t as bad as it was 12 months ago – choice is quite limited for buyers.

 

The average property value in Rugby

now stands at £245,700.

 

When split down into property types ..

 

  • Rugby Apartments at £138,700
  • Rugby Detached at £366,000
  • Rugby Semi-Detached at £215,100
  • Rugby Terraced/Town-House at £172,600

 

 

So why have Rugby apartments performed so well, and is it just a Rugby thing? When I scrutinised the figures for the rest of the UK, it appears that apartments are pacemakers in the clear majority of the country. Of the 379 local authority areas in the UK, the value of apartments is rising faster than detached, semi-detached and terraced houses in 320 of them.

 

So, should Rugby apartment owners be getting out the Champagne? Well, I would keep it on ice as the Land Registry figures are notorious for short term fluctuations. It’s hard to have faith in the fact that Rugby house values rose rapidly last month given that, in the last six months, the Land Registry has frequently made downward revisions to their first published House Price Index figures.

 

Thankfully, the bigger picture from the Council of Mortgage Lenders (CML) stated that home buying activity last month was up 2% over the same month in 2016 – not bad as we have had the Autumn, Winter and now Spring since Brexit. The CML stated first time buyer’s levels of affordability was being squeezed and that the average amount borrowed by those first-time buyers dropped slightly last month, but the overall amount borrowed (by all buyers) was an impressive 12% higher than the same month in 2016.

 

So, what next for the Rugby Property market? I believe the uplift in the values of apartments is a short-term blip. The real issue is with the way wage growth might not keep up with inflation as the effects of 2016 exchange rate sucks in inflation (meaning real wage growth stagnates). This will mean buyer demand growth will be curtailed and with property values already so full, I believe a renewed hastening in house price growth is unlikely.

 

I believe we are starting to return to the housing market we saw in the mid 1990’s, Steady demand, steady supply – nothing silly when it comes to house price growth. Therefore, I believe, with what is happening around us – this isn’t a bad thing at all. HMS Rugby Property Market…. “Nice and steady as she goes”, says the Captain

 

Iain Havell

5.50 Babies Born for Each New Home Built in the Rugby area

As more babies are being born to Rugby mothers, I believe this increase will continue to add pressure to the over stretched Rugby property market and materially affect the local property market in the years to come.

 

On the back of eight years of ever incremental increasing birth rates, a significant 5.50 babies were born for every new home that was built in the Rugby council area in 2016.  I believe this has and will continue to exacerbate the Rugby housing shortage, meaning demand for housing, be it to buy or rent, has remained high.  The high birth rate has meant Rugby rents and Rugby property prices have remained resilient – even with the challenges the economy has felt over the last eight years, and they will continue to remain high in the years to come.

 

This ratio of births to new homes has reach one its highest levels since 1945 (back in the early 1970’s the average was only one and a half births for every household built).  Looking at the local birth rates, the latest figures show we in the Rugby council area had an average of 67.6 births per 1,000 women aged 15 to 44.  Interestingly, the national average is 61.7 births per 1,000 women aged 15 to 44 and for the region its 63.9 births per 1,000 women aged 15 to 44.

 

The number of births from Rugby women between the ages of 20 to 29 are significantly higher than the national average, but those between 35 and 44 were much lower.  However overall, the birth rate is still increasing, and when that fact is combined with the ever-increasing life expectancy in the Rugby area, the high levels of net migration into the area over the last 14 years (which I talked about in the previous articles) and the higher predominance of single person households … this can only mean one thing … a huge increase in the need for housing in Rugby.

 

Again, in a previous article a while back, I said more and more people are having children as tenants because they feel safe in rented accommodation.  Renting is becoming a choice for Rugby people.

 

The planners and Politian’s of our local authority, central Government and people as a whole need to recognise that with individuals living longer, people having more children and whilst divorce rates have dropped recently, they are still at a relatively high level (meaning one household becomes two households) … demand for property is simply outstripping supply.

 

The simple fact is more Rugby properties need to be built

… be that for buying or renting.

Only 1.1% of the Country is built on by houses.  Now I am not suggesting we build tower blocks in the middle of the Cotswolds, but the obsession of not building on any green belt land should be carefully re-considered.

 

Yes, we need to build on brownfield sites first, but there aren’t hundreds of acres of brownfield sites in Rugby, and what brownfield sites there are, building on them can only work with complementary public investment.  Many such sites are contaminated and aren’t financially viable to develop, so unless the Government put their hand in their pocket, they will never be built on.

 

I am not saying we should crudely go ‘hell for leather’ building on our Green Belt, but we need a new approach to enable some parts of the countryside to be regarded more positively by local authorities, politicians and communities and allow considered and empathetic development.  Society in the UK needs to look at the green belts outside their leisure and visual appeal, and assess how they can help to shape the way we live in the most even-handed way.  Interesting times!

 

For more thoughts on the Rugby Property market – visit the Rugby Property Blog

http://www.rugbypropertyblog.wordpress.com

 

Iain Havell

Hard Brexit could cause 1,800 properties to be dumped onto the Rugby Property market.

So all cards up in the air! A general election will be on the books, but one thing is for sure … whoever gets the job to deal with Brexit has a hard job on their hands (I’m just glad its not me!) As it currently stands, by not assuring the rights of EU citizens in the UK, Theresa May has squandered an opportunity to give peace of mind to our EU co-workers working and living in Rugby (and the rest of the UK). No.10 Downing Street’s point of view is that in promising the rights of EU citizens in the UK, it will postpone the same guarantee to the 1.5 million UK citizens living in the other nations of the EU.

Putting aside the politics for one second, the simple fact is now Article 50 has been triggered, we have two years to make a deal with the EU; otherwise it will be a ‘hard Brexit’. Now you might not think a hard Brexit will affect you in your home in Rugby … but nothing could be further from the truth.

Of the 98,180 people who are resident in the Rugby Borough Council area, 86,799 were born in the UK, 2,098 were born in EU countries from West Europe and 3,217 were born in EU countries from the former Soviet States in East Europe (the rest coming from other countries around the world).

The rights of these EU citizens living in the Rugby area are not guaranteed and will now be part of the negotiation with Europe. It is true a lot of our EU next door neighbours in Rugby will have acquired rights relating to the right to live, to work, to own a business, to possess a property, the right to access health and education services and the right to remain in a UK after retirement… yet those acquired rights are up for negotiation in the next two years.

So, what would a hard Brexit do to the Rugby property market?

Well a hard Brexit could mean the nuclear option when it came to the Rugby housing market. It could mean that every EU citizen would have to leave the UK.

In the Rugby Borough area, 1,339 of the 2,098 Western European EU citizens own their own home and (so they would all need to be sold) and 2,305 of the 3,217 Eastern European EU citizens rent a property, so again all those rental properties would all come on the market at the same time.

Hard Brexit and mass EU Migration would mean c. 1,800 properties being dumped onto the housing market in a short period of time, meaning there would be a massive drop in Rugby property values and rents, causing negative equity for thousands of Rugby homeowners and many buy-to-let landlords would be out of pocket.

While there is no certainty as to what the future will hold, both UK expats in the EU and EU citizens in the UK rights will no longer be guaranteed and will be subject to bilateral renegotiation.

All I ask is that the politicians are sensible with each other in the negotiations. A lot of the success of the Rugby (and UK) property market has been built on high levels of homeownership and more recently in the last 10/15 years, a growth of the rental sector with lots of demand from Eastern Europeans coming to Rugby (and the surrounding area) to get work and provide for their families. Many Rugby people have invested their life savings into buying a buy to let property.

Much will depend on what is politically realistic. Unilateral knee-jerk reactions and measures caused by a hard Brexit would not only likely cause major disruption or suffering to the 3 million EU citizens living in the UK, but also everyone who owns property in the UK … politics aside – a hard Brexit is in no one’s interests.

 

Iain Havell