6.69% of Rugby is Built on … Building Plot Dilemma or Not?

Well the fallout from the recent Budget is still continuing.  I was chatting to a couple of movers and shakers from the Rugby area the other day, when one said, “There isn’t enough land to build all these 300,000 houses Philip Hammond wants to build each year”.

…and if you read the Daily Mail, you would be forgiven for thinking the Country was at bursting point … or is it?

It was 60 years ago the first satellite was launched (Sputnik). All the Superpowers have used them to take high definition pictures of each other for decades, but now satellites and their high-powered cameras are being used for more peaceful purposes. The European Environment Agency (EEA) have been taking high definition pictures of the UK from outer-space to give us a focused picture of what every corner of the Country really looks like … and the findings will come as a surprise.

As my blog readers know, I always like to ask the important questions relating to the Rugby property market. If you are a Rugby landlord or Rugby homeowner, this knowledge will enable you to make a more considered opinion on your direction and future in the Rugby property market. Like every aspect of all economic life, it’s all about supply and demand, because over the last twenty or so years, there has been an imbalance in the British (and Rugby) housing market, with demand outstripping supply, meaning the average value of a property in Rugby has risen by 339.04%, taking an average value from £52,000 in 1995 to £228,300 today.

Using the information from the EEA and data crunched by Sheffield University with their Corine-Land Cover project, I posed them a few questions about the local area, interesting questions I would like to share with you …

1. What proportion of the whole of Rugby is built on?

6.69%

That surprised you, didn’t it! In the study, land classified as ‘urban fabric’ defined has land which has between 50% and 100% of the land surface is built on, (meaning up to a half might be gardens or small parks, but the majority is built on).

2. How much land is intensively built on locally?

Of that amount mentioned above, how much of it is high-density urban fabric? (i.e. where 80% to 100% is built on – still leaving 20% for gardens)  Less than 0.1%  – again I bet that surprised you!

3. So how is the land used locally?

Industry                      1.61%
Sports Facilities        1.81%
Pastures                     36.03%
Arable Farmland       51.08%

…the rest being made up of various other minor types such as forests and waterways, etc.

Rugby and the surrounding areas are greener than you think! In fact, I read that property covers less of the UK than the land revealed when the tide goes out. The assumption that vast bands of our local area have been concreted over doesn’t stand up to inspection. However, the effect of housing undoubtedly spreads beyond its actual footprint, in terms of noise, pollution and roads.

Now I am not suggesting for one second we concrete over every inch of the locality, but the bottom line is we, as a country, are growing at a quicker rate than the households we are building. I appreciate the emotional effect of housing is greater than other land use types because most of us spend the vast majority of our time surrounded by it. As Brits, we live our lives driving along roads, walking on footpaths and working and living in buildings meaning we tend, as a result, to considerably overemphasise how much of it there is.

In fact, I was only flying home recently back from a short break abroad, when I looked down and I was reminded just how green Britain actually is!

The bottom line is Rugby people and the local authorities are going to have to put their weight into building more homes for people to live in. There is going to have to be some give and take on both sides, otherwise house prices will continue to rise exponentially in the future and Rugby youngster’s won’t be able to buy their own Rugby home, meaning Rugby rents and demand for private rented accommodation in Rugby can (and will) also grow exponentially.

 

Rugby Rents Set to Rise to £818 pm in Next 5 Years

It’s now been a good 12/18 months since annual rental price inflation in Rugby peaked at 3.9%. Since then we have seen increasingly more humble rent increases. In fact, in certain parts of the Rugby rental market over the autumn, the rental market saw some slight falls in rents. So, could this be the earliest indication that the trend of high rent increases seen over the last few years, may now be starting to buck that trend?

Well, possibly in the short term, but in the coming few years, it is my opinion Rugby rents will regain their upward trend and continue to increase as demand for Rugby rental property will outstrip supply, and this is why.

The only counterbalance to that improved rental growth would be to meaningfully increase rental stock (i.e. the number of rental properties in Rugby). However, because of the Government’s new taxes on landlords being introduced between 2017 and 2021, that means buy-to-let has (and will) be less attractive in the short term for certain types of landlords (meaning less new properties will be bought to let out).

Interestingly, countless market experts assumed at the start of 2017, that the number of rental properties would in fact drop throughout the year. The assumption being as the new tax rules for landlords started to kick in, landlords looked to kick their tenants out, sell up and invest their capital elsewhere. (Although ironically that would lower supply of rental properties, decreasing the supply, meaning rents would increase again!).

Anecdotal evidence suggests, confirmed by my discussions with fellow property, accountancy and banking professionals in Rugby, that Rugby landlords are (instead of selling up on masse), actually either (1) re-mortgaging their Rugby buy-to-let properties instead or (2) converting their rental portfolios into limited companies to side step the new taxation rules.

The sentiment of many Rugby landlords is that property has always weathered the many stock market crashes and runs in the last 50 years. There is something inheritably understandable about bricks and mortar – compared to the voodoo magic of the stock market and other exotic investment vehicles like debentures and crypto-currency (e.g. BitCoin).

Remarkably, there is some good news for tenants, as Tory’s recently published the draft Tenants’ Fee Bill, which is designed to prohibit the charging of tenants lettings fees on set up of the tenancy. However, looking at evidence in Scotland, I expect rents to rise to compensate landlords, thus hammering faithful tenants looking for long-term tenancy agreements the hardest. This growth will be on top of any usual organic rent growth.  It really is swings and roundabouts!

So, what does this all mean for landlords and tenants in Rugby? In my considered opinion,

Rents in Rugby over the next 5 years will rise by 10.4%, taking the average rent for a Rugby property from £741 per month to £818 per month.

To put all that into perspective though, rents in Rugby over the last 12 years have risen by 19.3%. In fact, that rise won’t be a straight-line growth either, because I have to take into account the national and local Rugby economy, demand and supply of rental property, interest rates, Brexit and other external factors. Please see the graph for my projections

In the past, making money from Rugby buy-to-let property was as easy as falling off a log. But with these new tax rules, new rental regulations and the overall changing dynamics of the Rugby property market, as a Rugby landlord, you are going to need work smarter and have every piece of information, advice and opinion to hand on the Rugby, Regional and National property market’s, to enable you to continue to make money.

One place for that information is the Rugby Property Market blog https://rugbypropertyblog.wordpress.com/

 

One in 20 rental properties in the Rugby area will be illegal in 2018

As the winter months draw in and the temperature starts to drop, keeping one’s home warm is vital. Yet, with the price of gas and electricity rising quicker than a Saturn V rocket and gas, oil and electricity taking on average 4.4% of a typical Brit’s pay packet (and for those Brit’s with the lowest 10% of incomes, that rockets to an eye watering 9.7%), whether you are a tenant or homeowner, keeping your energy costs as low as possible is vital for the household budget and the environment as a whole.

For the last 10 years, every private rental property must have an Energy-Performance-Certificate (EPC) rating.  The property is given an energy rating, very similar to those on washing machines and fridges with the rainbow coloured graph, of between A to G (A being the most efficient and G the worst). New legislation comes in to force next spring (2018) for English and Welsh private landlords making it illegal to let a property that does not meet a certain energy rating. After the 1st of April next year, any new tenant moving into a private rented property or an existing tenant renewing their tenancy must have property with an energy performance rating of E or above on the property’s EPC and the new law will apply for all prevailing tenancies in the spring of 2020. After April 2018, if a landlord lets a property in the ‘F’ and ‘G’ ratings (i.e. those properties with the worst energy ratings) Trading Standards could fine the landlord up to £4,000.

Personally, I have grave apprehensions that many Rugby landlords may be totally unaware that their Rugby rental properties could fall below these new legal minimum requirements for energy efficiency benchmarks. Whilst some households may require substantial works to get their Rugby property from an F/G rating to an E rating or above, my experience is most properties may only need some minor work to lift them from illegal to legal. By planning and acting now, it will mitigate the need to find tradespeople in the spring when every other Rugby landlord will be panicking and paying top dollar for work to comply.

Whilst there is money and effort involved in upgrading the energy efficiency of rental property, a property that is energy efficient will have greater appeal to tenants and other buy-to-let landlords/investors and this will enable you to obtain higher rents and sale price (when you come to sell your investment).

So, how many properties are there in the area that are F and G rated .. well quite a few in fact. Looking at the whole of the Rugby Borough Council area, of the 5,903 privately rented properties, there are ..

226 rental properties in the F banding

63 rental properties in the G banding

That means just over one in 20 rental properties in the Rugby and surrounding area has an Energy Performance Certificate (EPC) rating of F or G. From April next year it will be illegal to rent out those homes rated F and G homes with a new tenancy.

Talking with the Energy Assessors that carry out our EPC’s, they tell me most of a building’s heat is lost through draughty windows/doors or poor insulation in the roof and walls. So why not look at your EPC and see what the assessor suggested to improve the efficiency of your property? I can find the EPC of every rental property in Rugby, so irrespective of whether you are a client of mine or not, don’t hesitate to contact me via email (or phone) if you need some guidance on finding out the EPC rating or need a trustworthy contractor that can help you out?

 

If you would like to read more interesting articles on the property market in Rugby please check out the Rugby Property Blog – http://www.rugbypropertyblog.wordpress.com