Value of Rugby Property Market falls £154.4m

The combined value of Rugby’s housing market has fallen by £154,363,248 in the last 6 months, meaning the average value of a Rugby property has decreased in value by an average of £6,084.  

This is great news for Rugby first time buyers and Rugby buy to let landlords, as there is a slight hesitation in the market because of the uncertainty over Brexit. As I have always said, investing in Rugby property, be it for you to live in or as a buy to let investment, is a long-term game. In the grand scheme of things, this minor change over the last 5 or 10 years is nothing.

The RICS’s latest survey of its Chartered Surveyor members showed that nationally the number of properties actually selling has dropped for the 16th month in a row. Locally in Rugby, certain sectors of the market are matching that trend, yet others aren’t. It really depends which price band and type of property you are looking for, as to whether it’s a buyers or sellers market.

The RICS also said its member’s lettings data showed a lower number of rental properties coming on to the market. Anecdotal evidence suggests that (and this is born out in the recent English Housing Survey figures) Rugby tenants over the last few years are stopping in their rental properties longer, meaning less are coming onto the market for rent. I have noticed locally, that where the landlord has gone the extra mile in terms of decoration and standard of finish, this has certainly helped push rents up (although those properties where the landlord has been remiss with improvements and standard of finish are in fact seeing rents drop). Rugby tenants are getting pickier – but will pay top dollar for quality. So much so, I believe there will be a cumulative rise of around fourteen to sixteen per cent over the course of the next five years in private rents for the best properties on the market.

Back to the Rugby Property Values though …

This drop in Rugby property values doesn’t particularly concern me. The fact is that over the last 6 months 415 properties have sold for a combined value of £106,534,650. You see, that drop must be seen in perspective in that 6 months ago, the total value of Rugby property stood at £6,606,665,824 (£6.61bn), and today it stands at £6,452,302,576 (£6.45bn) .. this change is a drop in the ocean.

In the short term, say over the next six months and assuming nothing silly happens in Korea, the Middle East or Brexit negotiations, it will be more of the same until the end of the year. In the meantime, the on-going challenges ensuring we as a Country build more homes (although the Office of National Statistics figures released in July showed nationally the number of new homes started to be built over the second Quarter of 2018 had dropped dramatically) makes me think that Rugby (and Nationally) property value is likely to recommence an upward trajectory as we go into 2019.

One final thought for all the buy to let landlords in Rugby (and indirectly this does affect all you Rugby homeowners too). I do hope the recent tax changes towards buy to let landlords don’t bite as deep as it is possibly starting to with certain landlords I know.  We talked about this in an article a few weeks ago and I know why the Government wanted to change the balance by taxing landlords and providing a lift for first time buyers .. however, this may well come at the expense of higher rents for those Rugby tenants that don’t become first time buyers, as the appeal of buy to let potentially weakens.

‘Taxing’ Time for the 2,722 Rugby Buy To Let Landlords

Over the last twenty years, there has been a shift in the way the Rugby (and the UK’s) property market works. In the 1960’s, 70’s, 80’s and 90’s, a large majority of twenty somethings saved up their 5% deposit, went without life’s luxuries of going out and holidays etc., for a couple of years and then bought their first home with their hard earned savings.

By 2000, 52.7% of Rugby 25 to 29 years owned their own home (compared to 46% Nationally (and 73.6% of Rugby 30 to 34 year olds in 2000 owned their own home – again compared to 64.2% nationally) whilst the remaining youngsters mostly rented from the Council and in some rare cases, privately rented.

Now it’s 2018, and those levels of homeownership have slipped dramatically and now only 28.1% of Rugby 25 to 29 year olds own their own home and 49.5% of Rugby 30 to 34 year olds own their own home (interestingly mirroring the National picture of 24.5% for the younger age cohort and 64.2% for the older 30 to 34 year cohort).

There was concern in Government since the late Noughties that this shift from homeownership to private renting wasn’t good for the well-being of the Country and things needed to change, to make it a more level playing field for first time buyers. House prices needed to be more realistic and there needed to be a carrot and stick for both landlords and first time buyers.

In the 1980’s and 1990’s, interest rates were the weapon of choice of Government to cool or heat up the UK housing market – and it did work – up to a point. It’s just interest rates also affected so many other sectors of the UK economy (and not always a in good way). The policy of interest rates to control the economy is called ‘Monetary Policy’. Monetary policy is primarily concerned with the management of interest rates (and the supply of money) and is carried out by the Bank of England (under direction from the Government).

It’s just in this post Credit Crunch, Brexit environment, the use of higher interest rates wouldn’t directly affect landlords (as around two thirds of buy to let properties are bought without a mortgage). Therefore, an increase in interest rates would have hardly any effect on landlords and hit the first time buyers – the people the Government would be trying to help!

Also, given muted growth of real income (i.e. real income being the growth salaries after inflation) in the past few years, an uplift in interest rates (from their ultra-low 0.5% current levels) would have a massive effect on Brit’s household disposable income. Yet, over 90% of new mortgages in 2018 being taken are fixed rate and with such low rates, it has made buying a property comparatively attractive.

Instead, over the last 8 years, the Government has encouraged first time buyers and clipped the wings of landlords with another type of economic policy – Fiscal Policy (Fiscal Policy is the collective term for the taxing (and spending) actions of the Government).  First time buyers have had the Help to Buy Scheme, Stamp Duty Exemption and contributions to their deposit by HMRC. On the other side the coin, landlords have had the way they are able to offset the tax relief of their mortgage payments against income change (for the worse), an increase in Stamp Duty (for the worse) and they will be hit with additional costs as the Government will be phasing out fees to tenants in the next 12 to 18 months.

So, what does this all mean for the 2,722 Rugby landlords?

The days of making money in Rugby buy to let with your eyes closed are long gone. There are going to be testing times for Rugby landlords, yet there is still a defined opportunity for those Rugby landlords who are willing to do their homework and take guidance from specialists and experts.
It’s all about looking at your Rugby portfolio (or getting a property professional to do so) and ascertaining if your current portfolio, mortgage and gearing are designed to hit what you want from the investment (because that is what it is – an investment) in terms of income now and income in the future, capital growth and when you plan to dispose of your assets.

I have seen many Rugby landlords (both who use me and my competitors) to manage their rental property or find them tenants – and on many occasions recently, I have told them to SELL – yes sell some of their portfolio to either reduce mortgage debt or buy other types of property that match what they want in the short and long-term from their investments. I know that sounds strange – but my role isn’t just to collect the rent  .. it’s also to give strategic advice and opinion on the landlord’s portfolio to help them meet their current and future investment goals.

The opportunities will appear in the Rugby property market for Rugby landlords from gentler growth in property values linked with a restrained Rugby property market, meaning if you put in the time, there will be deals and great bargains to have. Many landlords in Rugby (both clients and non-clients) send me Rightmove links each week, asking my opinion on the suitability of the investment. Some are exceptional – whilst others are duds. The bottom line is, private renting will continue to outgrow first time buyers in the next 5 to 10 years and as we aren’t building enough homes in the UK, which means rents can only go in one direction – upwards!

Rugby Property Market – How Does It Compare Historically to the West Midlands and National Property Market’s?​

Living in our own homes or owning buy to let property in Rugby and the surrounding areas, it’s often easy to ignore the regional and national picture when it comes to property. As a homeowner or landlord in Rugby, consideration must be given to these markets, as directly and indirectly, they do have a bearing on us in Rugby.

Locally, the value of property in Rugby and the number of people moving remain largely steady overall, although looking across at the different regions, there are certainly regional variations. Talking to fellow property professionals in the posh upmarket central London areas of Mayfair and Kensington, the number of people looking to buy and registering interest with agents is continuing to climb after 18 months in the doldrums, whilst in other parts of the UK, there is restraint amongst both buyers and sellers in some locations.

The things that affect the national property market are the big economic numbers. Nationally, over the last few months, thankfully, the economic forecast and predictions have improved, notwithstanding the Brexit uncertainties. Inflation has mercifully throttled back its high growth seen in 2016 to the current level of 2.1% (from 2.7% average last year), coupled with marginally stronger wage growth at 2.5%. Unemployment is at a 42-year low at 4.2% and UK consumer spending power rose to an all-time high last month to £331.04bn – all positives for consumer sentiment.

Look further afield, a resilient property market depends on the UK’s economic health with the outside world, so if Sterling weakens, that makes imports more expensive, meaning inflation increases, and this matter I talked about a few weeks ago in my blog article … interest rates could be raised to bring inflation under control, which in turn could seriously affect the property market. On the assumption Brexit negotiations are successful, economic growth should continue to be upward and positive, meaning confidence would be increased … which is the vital element to a good housing market.

Looking closer to home now, Rugby landlords and Rugby homeowners might be interested in the how the regional and Rugby markets have performed over the last 20 years (compared to the National picture). Let’s look at the regional picture first,

Rugby has outperformed the West Midlands housing market by 4.82%……whilst nationally, Rugby has outperformed the country by 5.81%

That means a Rugby homeowner has profited by an additional £14,776 over the last 20 years compared to the average homeowners across the country.

I found it interesting to see the ups and downs of the Rugby, West Midlands and National markets in this graph. How the lines of graphs roughly go in the same direction, how the 2007/08 property crash timings and effects were slightly different between the three lines and finally how the property markets performed in the post-crash years of 2011 to 2014 … fascinating!

So, what does this all mean for Rugby homeowners and Rugby landlords?

Well, house prices going up or down are only an issue when you sell or buy. In the last 12 months, only 1,076,288 (let’s call it’s a straight million between friends!) properties changed hands out of 27.2 million households in the UK in 2017, meaning only 3.7% would have been affected if property values had dropped in the last year.

Property values in Rugby are 262.48% higher than the summer of 1998

Yet this has been a long-term gain. The number one lesson in property is that it is a long-term game.  The biggest issue in property isn’t house values or prices … it’s the number of homes built, because the number of households nationally has only increased by 6% since 2007, whilst the population has grown by 7.6%. That doesn’t sound a lot, until you express it another way…

If the UK population had had only grown by the same percentage as the percentage growth in UK households in the last decade, there would be 1,000,000 less people living in the UK today

The final thought for this article is this, apart from central London, over the last 20 years it hasn’t mattered what part of the UK you were in with regards to the property market. Be you a landlord or homeowner, property is a long game, so look long term and you will win because until they start to build more homes, from the current levels of 180,000 new homes built per year to at least 250,000 households built per year, demand will, over the long term, outstrip supply for owning and renting!