2,191 Rugby Homeowners to be ‘Unchained’ from Toxic Leasehold Agreements in Biggest Shake-up of Property Law in Decades

When William the Conqueror invaded our fair shores in 1066, like all good kings, he needed to buy loyalty and raise cash to build his castles and armies. He did this by feudal law system and granted all the faithful nobles and aristocrats with land. In return, the nobles and aristocrats would give the King money and the promise of men for his army (this payment of money and men was called a ‘Fief’ in Latin, which when translated into English it becomes the word ‘Fee’… as in ‘to pay’).

These nobles and aristocrats would then rent the land to peasants in return for more money (making sure they made a profit of course) and the promise to enlist themselves and their peasants into the Kings Army (when requested during times of war). The more entrepreneurial peasants would then ‘sublet’ some of their land to poorer peasants to farm and so on and so forth.

The nobles and aristocrats owned the land, which could be passed on to their family (free from a fee i.e. freehold), while the peasants had the leasehold because, whilst they paid to use the land (i.e. they ‘leased it’ which is French for ‘paid for it’) they could never own it. Thus, Freehold and Leasehold were born (you will be pleased to know that in 1660 the Tenures Abolition Act removed the need of freeholders to provide Armies for the Crown!).

4.3 million properties in the UK are leasehold …

and 2,191 properties in Rugby are leasehold. By definition, even when you have the leasehold, you don’t own the property (the freeholder does). Leasehold simply grants the leaseholder the right to live in a property for 99 to 999 years. Apart from a handful of properties in the USA and Australia, England and Wales are the only countries of the world adhering to this feudal system style tenure. In Europe you own your apartment/flat by using a different type of tenure called Commonhold. 

The average price paid for leasehold properties in Rugby 

over the last year is £135,445.

The two biggest issues about leasehold are firstly, as each year goes by and the length of lease dwindles, so does the value of the property (particularly when it gets below 80 years). The second is the payment of ‘ground rent’ – an annual payment to the freeholder.

Looking at the first point of the length of lease, the Government brought in the Leasehold Reform Act 1967, which allowed tenants of such leasehold property to extend their lease by upwards of 50 years. However, this was very expensive and as such only kicked the can down the road for half a century (when the owner would have to negotiate again to extend another 50 years – costing them more money, time and effort).

Ground rents on most older apartments are quite minimal and unobtrusive. The reason it has become an issue recently was the fact some (not all) new homes builders in the last decade started selling houses as leasehold with ground rents. The issue wasn’t the fact the property was sold as leasehold nor that it had a ground rent, it was that the ground rent increased at astronomical rates.

Many Rugby homeowners of leasehold houses are presently subject to ground rents that double every 10 years.

That’s okay if the ground rent is £200 a year today, yet by 2121, that would be £204,800 a year in ground rent, meaning the value of their property would almost be worthless in 100 years’ time.  One might say it allows for inflation, yet to give you an example to compare this against, if a Rugby leasehold property in 1921 had a ground rent of £200 per annum, and it increased in line with inflation over the last 100 years, today that ground rent would be £9,864 a year.

This is important because the majority of leasehold properties sold in Rugby during the last 12 months were apartments, selling for an average price of £121,592.

So, without reforms, the value of these Rugby homes will slowly dwindle over the coming decades. That is why the Government reforms announced recently will tackle the problem in two parts. 

Firstly, ground rents for new property will effectively stop under new plans to overhaul British Property Law.  Under the new regulations, it will be made easier (and cheaper) for leaseholders to buy the freehold of their property and take control by allowing them the right to extend the lease of their property to a maximum term of 990 years with no ground rent. 

Secondly, in the summer the Government will create a working group to prepare the property market for the transition to a different type of tenure.  Last summer the Law Commission urged Westminster to adopt and adapt a better system of leasehold ownership – ‘Commonhold’. Commonhold rules allow residents in a block of apartments to own their apartment, whilst jointly owning the land the block is sitting on plus the communal areas with other apartment owners.

These potential leasehold rule changes will make no difference to those buying and selling second-hand Rugby leasehold property.

Yet, if you are buying a brand-new leasehold property, most builders are not selling them with ground rent (although do check with your solicitor). The only people that need to take any action on this now are people who are extending their lease. If you are thinking of extending the lease of your Rugby property before you sell to protect its value, your purchaser may prefer to buy on the existing terms and extend under the new (and better) ones later (meaning you lose out). 

Like all things – it’s all about talking to your agent and negotiating the best deal for all parties. Should you have any questions or concerns feel free to pick up the phone, message me or email me and let’s chat things through.

How Will the Brexit Deal Affect Rugby House Prices & Your Mortgage Payments?

Christmas Eve brought the news that Boris Johnson had conclusively agreed on a Brexit deal for the UK with the European Union. This gave optimism that the economic turmoil of leaving the EU would be radically reduced, yet what will this ‘trade deal’ do to the value of your Rugby home and the mortgage payments you will have to make?

Since the summer, the Rugby property market has been booming, yet many commentators have cautioned that the momentum cannot last. With unemployment and the end of Stamp Duty Holiday on the 31st March, the Halifax reported last week that they believed UK house prices would drop by at least 2% (and in some areas 5%) in 2021.

I find it fascinating the Rugby property market has defied the doom and gloom swamping the wider British economy in the last seven months. The Rugby property market has profited from the large swell in demand from better-off existing Rugby households trying to buy larger Rugby houses (as they are required to work from home) together with the added benefit of saving money from the Stamp Duty Holiday. 

Rugby house prices are 5.9% higher than a year ago, making our local authority area the 116th best performing (of the 396 local authorities) in the UK.

With the Brexit deal being voted through in the Commons on the 30th December, many say this will boost the property market just as the Government-backed measures supporting the property market come to an end. Yet, in the face of rising unemployment due to the pandemic, the Brexit deal may do little more than avoid uncertainty for the Rugby housing market.

What will happen to Rugby house prices?

The Rugby property market in 2019 was held back because of the uncertainty of the Brexit deal. In January 2020, we saw the demand released in the fabled ‘Boris Bounce’, only for buyer and seller activity to fall off a cliff in March during the first lockdown. It then took off like a rocket once lockdown was lifted. UK house prices are 4.19% higher today, year on year (although some areas are breaking the mould, like Aberdeen whose house prices have dropped by 5.1% and at the other end of the scale, Worcester’s house prices have increased by 11.9% year on year). A lot of that growth in UK property prices has been fuelled by buyers spending their stamp duty savings on the purchase price of their new home. Yet, it cannot be ignored.

Of the 55,600 workers in Rugby, 3,300 are still on furlough (although roughly 40% of those people are still only on part-time furlough).

When the furlough scheme ends in April 2021, unemployment is likely to rise to in excess of 11%, whilst the protection for the homeowners utilising mortgage holidays will finish. 

Piloting the rocky shoreline of the recession is more important than any Brexit deal for Rugby homeowners, buy-to-let landlords, buyers and sellers. 

In April, the market will also be dealing with the end of the Stamp Duty Holiday, which is due to come to an abrupt halt on the 1st April 2021. Consequently, we will continue to see the house price index’s show growth in the first half of 2021. They will then recede as the prices of Rugby homes purchased after the 1st April 2021 reflect the lower price paid (because buyers would have had to pay for their stamp duty again). Therefore, probably by the end of 2021, the Halifax may be correct, and Rugby house prices will be 2% to 5% lower than they are today, simply because of the stamp duty.

What will happen to mortgage rates?

The real benefit from the Brexit deal is that there will be no tariffs on most goods coming into the UK. 52% of all goods imported into the UK are from the EU (totalling £374bn per annum). The UK Government were planning to add between 2% and 10% tariffs under World Trade Organisation rules on the vast majority of those goods. Price increases because of those tariffs would have fuelled inflation, meaning the Bank of England would have to increase interest rates. Although 77.2% of British mortgages are on fixed rates (paying an average of 2.16%), eventually those increased Bank of England rates would have fed through into higher mortgage payments. To show you how vital low interest rates are…

The average Rugby homeowners’ mortgage is £386.90 pm, owing an average of £157,739.

Yet if interest rates rose only 1.5%, Rugby homeowners’ monthly mortgage payments would rise to £584.07 pm, and if interest rates were at their 50-year average, then the mortgages payments would be an eye-watering £1,137.47 pm (note all mortgage payment figures mentioned above are only for the interest element of the mortgage- the capital repayment element would be additional and variable depending on the length of mortgage).

As I have mentioned many times in the articles I have written about the Rugby property market, low-interest rates are vital to ensure we don’t have a property market crash. That’s not to say just because they are at an all-time low of 0.1% to aid the economy that there won’t be some form of realignment of property prices later in the year (as mentioned above). Yet low interest rates mean people can still pay their mortgages, so there won’t be panic selling. That would mean there won’t be a flood of property come to the market (like there was in the 1988 and 2008 property crashes when interest rates were much higher), suggesting property prices should remain a lot more stable.

No Deal Brexit – The Prediction for Rugby House Prices

Roll the clock back to April 2020, and major financial economists and property market commenters were sounding the alarm. The very best-case scenario was a 5% drop in property values by the end of the year, and most were in the 10% to 15% range. They forewarned the Covid-19 stimulated recession would trim tens of thousands of pounds off the value of Rugby homes.

Yet the Rugby property market seemed not to get the memo on that, and now as we find ourselves at the end of 2020 and the worst of lockdown restrictions appear to be passed, vaccinations on the way and economy starting to grow, Rugby property prices seem to be doing quite well.

What happened to the Rugby house price crash that wasn’t?

Before I answer that, it reminded me of what the Treasury said in 2016 about a leave vote on the Brexit referendum. The considered opinion of the Treasury was house prices would drop by 18% if the country voted to leave the EU, so let us see what that would have done to Rugby house prices if that had taken place and then what exactly has happened in the last four and half years …

 Average Value
2016
Predicted Drop by
The Treasury because
of Brexit
Average Value
Today
Uplift in Value
in Last 4.5 Years
% Increase since
Brexit Vote
Rugby
Detached
£296,700£243,300£356,900£60,20021.3%
Rugby
Semi
£195,200£160,100£211,700£16,5007.5%
Rugby
Terraced / Town House
£145,700£119,500£170,200£24,50017.8%
Rugby
Apartments
£109,400£89,700£131,800£22,40019.5%

So why has the Rugby property market not matched the property pundits twice in the last five years or so?

Well for most of us, owning a property is about having somewhere to live rather than an investment (an Englishman’s home is his castle??). Nevertheless, once a homeowner is on the proverbial ‘property ladder’, it cannot be denied that it is eternally beneficial to know, as a homeowner, that you have made a healthy investment in your home and that the value will rise to alleviate the ache of trading up market — or down market when you retire.

Those Rugby homeowners who own detached homes would have made an average of £60,200 profit, a rise of 21.3% or a weekly profit of £231.54 — calculated between the price they would have paid in the summer of 2016 and the price they would sell for today. Looking at the weekly profit for all property types in Rugby since the Brexit vote …

  • Rugby detached homes weekly profit of £231.54 per week
  • Rugby semi-detached homes weekly profit of £63.46 per week
  • Rugby terraced homes/town houses weekly profit of £94.23 per week
  • Rugby apartments weekly profit of £86.15 per week

Whilst it is no surprise the property market boom was inspired by the Chancellor’s Stamp Duty holiday, this is not exclusively the Chancellor’s achievement. The three ‘D’s have been with us throughout 2020, Covid or no Covid (Debt, Divorce and Death), together with a huge shift in the way Rugby homeowners see their homes.  With us cooped up during the lockdown and working from our dining room tables, the want and need of Rugby people to have a home with an extra bedroom to work from, together with a garden has been one of the most challenging this year… hence the rise in demand.

So, what of 2021? It’s true that the country will have high unemployment, yet at the same time, we have ultra-low interest rates and for the last 20 years, on average we have only built 150,000 households per year as a nation, but needed 300,000 per year to keep up with immigration, people living longer and changes in the way households are made up (compared to the Millennium).

Many people can predict what will happen – yet none of us really know what will actually happen to the Rugby property market in 2021.

Covid was a black swan event and the fallout from that, I believe, has changed Rugby peoples’ lives and their lifestyles, especially how they see their home. Instead of making predictions, nothing can get away from property market fundamentals, which have driven price booms on the back of high demand for homes and low supply (i.e. properties coming onto the market) and price crashes on the back of over-supply and low demand. Only time will tell if, in 2021 the Rugby property market will see a flood of properties coming to the market because of debt or the demand for larger homes continues to rise unabated.

Please do let me know your thoughts on the matter.

Will the Rugby Property Market Crash in 2021?

…and the three reasons why it will not be the catastrophic scenario some are predicting

In the last few months, the Rugby (and UK) property market has resisted and flouted every economist’s prediction. With the economy a shadow of its former self, unemployment set to hit 11.9%, the Government on track to borrow nearly half a trillion pounds to pay for Coronavirus support packages etc., all of this has had no effect on Rugby homeowner’s enthusiasm or capability to want to move home. It highlights the influence of both the emotional impact of lockdown and the enticing appeal of saving thousands of pounds on your Stamp Duty Tax bill.

For the last few months, the Rugby property market has been akin to a surfer, riding an unexpectedly large wave. The question is, will the surfer crash down (i.e. the property market) into the rocks or will it calmly arrive at the beach unscathed? Well looking at house prices firstly…

UK house prices are 4.7% higher than they were 12 months ago according to the Land Registry, whilst in Rugby they are 5.2% higher

Looking at the data over the country, things overall are looking good for property prices. Yet it must be remembered the Land Registry data is on completed house sales and is always a couple of months behind, so this data is for house sales up to September that were agreed in the spring. Also, it does not take into account the prices being paid today on Rugby homes (as they will only show in statistics the Spring and Summer of 2021 when the sale completes).

Rugby house prices will inevitably ease in 2021

Anecdotal evidence over the last few months has suggested buyers are using their Stamp Duty savings on the price they are prepared to pay for the Rugby home of their dreams, so when the Stamp Duty holiday finishes in Spring 2021, we will see a reduction in the price Rugby properties sell for, as buyers will now have to hold back some of their cash to pay the Stamp Duty Tax.

Mortgage approvals at a 13 year high

A better statistic to judge the property market by are the number of mortgage approvals. As the vast majority of house buyers need a mortgage, that is another good place to look at the numbers as they are much more up to date than the Land Registry figures. The Bank of England recently stated 97,500 mortgages were approved last month, up from the long-term average of just over 65,400 per month. This was the highest number of mortgage approvals since September 2007, and a whole third higher than mortgage approvals in February 2020 when we had the Boris Bounce in the property market.

As a country, we are due to smash through 2019’s 524,000 total number of mortgage approvals this month, despite the fact that the property market was closed for nearly three months in the spring. It’s vital to remember, that mortgage approvals do not equate to people moving home, as many of you reading this can attest to … property sales do fall through.

I do have apprehensions that many Rugby people, buying and selling their Rugby homes and in a chain, may not be able to realise the move before the Stamp Duty rules change at the end of March 2021, as there is a massive backlog with mortgage lenders, local authorities’ and the searches, chartered surveyors surveying the property and solicitors with the legal work, all combining to slow down the house selling and buying machine.

If you are in chain at the moment, you must constantly be talking to all the parties involved and ensuring everything is focused on getting the sale complete by the end of March. You have a responsibility to get information requested back in hours, not weeks… because if you don’t, you might not get your Rugby home move through before the end of the stamp duty holiday, and without that discount, someone in your chain may pull out of the sale altogether and the chain will break. 

The number of people moving home in Rugby is anticipated to drop sharply after the Stamp Duty holiday ends at the end of March 2021

And that is probably going to be the biggest impact on the Rugby property market in 2021. Yes, there will be a slight readjustment in the prices paid after March 2021 (as mentioned above), yet a reduction in the number of people selling their Rugby home does not inevitably lead to a house price crash.

Yes, there will be a number of people who have to sell in 2021 because they have lost their jobs (i.e. ‘forced sales’). In the last two ‘Property Market Crashes’ of 1988 and 2008, there were a large number of forced sales in a short period of time (because business owners had to sell their home as their business had gone bankrupt because of the Credit Crunch, as well as people who had lost their job), increasing the supply of properties coming to the market in 1988 and 2008.

This in turn pushed Rugby house prices down as the property market was flooded with lots of property to sell in a short period of time. Yet this time, we have had the cushion/parachute of Bounce Back Loans, Furlough and Mortgage Holidays over the last 9 months.

Also, another important factor about the last property market crashes were the levels of interest rates and the amount borrowed.

Interest Rates are the key to the future of the Rugby property market

In 1988, mortgage interest rates were an eye watering 11.5% and 6% in 2008, meaning mortgages were much more expensive compared to the 0.1% rate we have today. Also, with 77.2% of mortgagees with fixed rate mortgages, and only 1 in 21 mortgages owing more than 90% of the value of their home (and 1 in 303 mortgagees owing more than 95% of the value of their home), negative equity should not be so much an issue like it was in 1988.

This means most Rugby homeowners are in a much better place to weather the storm of 2021, than they were in 1988 and 2008

I foresee many Rugby sellers will simply wait until activity in the Rugby property market picks up again before placing their property on to the market. This means fewer properties will be placed onto the market for sale in the later part of 2021, meaning Rugby house prices will tend to hold up. The people that will be affected by less properties coming onto the market will be estate agents, solicitors and home removals people.

I also believe there will be ‘interesting investment opportunities’ to be had for Rugby buy to let in the latter half of 2021 with the potential changes in Capital Gains Tax regulations, although those won’t go on the open market, so do keep your ear to the ground and build relationships with all the letting agents in Rugby so you get to hear of the property portfolios coming up for sale (as they tend to sell ‘off market’). Again, if that’s something that interests you – do drop me a line.

So, where is the Rugby property market heading in 2021?

Well, the Rugby property market (aka our “surfer”) has seen a house price growth of 55.6% since 2009 … and this has been fuelled on the back of…

  • Ultra-low interest rates mean money is cheap to borrow and so mortgage payments are low. With the Bank of England pumping £150bn into the economy in November with Quantitative Easing (QE) to add to the £725bn they have already spent on QE since 2009 – interest rates will continue to stay low for some time.
  • There has been an increased demand for housing with annual net migration of 214,400 since 2009 (meaning 96,700 additional households per year have been required since 2009 just to house those people – a total of 1,063,700 households).
  • The average age of death has risen by 2.1 years since 2008 in the UK. People living longer delays property from being released back onto the property ladder. For every extra year of life the average Brit lives, an extra 290,850 households are required in the UK.

None of these things have changed because of Covid.

As a country, we have only built on average 165,100 homes a year since 2009. Supply and demand shows that whilst we will probably have a turbulent choppy ride on the 2021 wave (because of the economy) our surfer (aka the property market), with long term demand for housing outstripping supply since the 1980’s, will continue to ride the wave (probably not as large as it has been in 2020) as the ultimate long-term outlook for the property market in Rugby looks good.

All this means demand for decent, private rented Rugby property will be good as long as the property ticks all the boxes of the tenants. If you are a Rugby landlord, whether you are a client of mine or not, feel free to drop me a line to pick my brain on the future of the buy to let market in Rugby.

Rugby Landlords and Second Homeowners Will Probably Save Money From The Proposed New Capital Gains Tax Changes

If the proposals were adopted in full, some Rugby landlords would pay £8,500 less Capital Gains Tax than they would currently

The government borrowed £394bn this financial year (April ‘20 to April ’21). This figure does not include the cost of the November lockdown and support measures, which means the final bill will probably be over half a trillion pounds. Ultimately, these billions will need to be paid back to cover the cost of Coronavirus.

The Office of Tax Simplification (OTS) published a report for tax reform and, as was predicted by many in the press, the Government Dept suggested the Chancellor contemplate readjusting current Capital Gains Taxation (CGT) rates with a person’s own Income Tax rates. This would mean increasing the rate of CGT for selling a buy to let property from 28% to 40% for high-rate taxpayers and 45% for additional rate taxpayers. To add salt to the wound, the OTS is suggesting cutting the £12,300 annual CGT allowance.

This has led to many Rugby buy to let landlords contacting me in the last few weeks, wondering if this is the time to exit the Rugby buy to let property market, especially as they have been hit by growing levels of rental legislation and higher taxes.

With tax bills about to go through the roof, is this the time to

leave the Rugby buy to let property market?

Yet, like all things, the devil is in the detail as Rugby 2nd homeowners and Rugby landlords may well finish up having lower CGT tax bills with these new taxation proposals, even though the CGT restructurings are being introduced to raise the much-needed cash for the Government. 

Apart from the suggested cut of the annual CGT allowance and increase in the CGT percentage rates, the OTS report also proposed reintroducing rebasing and indexation. In layman’s terms, the OTS are suggesting all gains made before 2000 would not be taxable (rebasing) and any capital gains would be calibrated to account for inflation.

So, what would that actually look like for a Rugby landlord? Let us assume we have a Rugby landlord who bought a Rugby buy to let property in 2000.

Under the current CGT rules 

  • The average value of a Rugby property in 2000 was £84,500
  • Today, that same Rugby property has increased in value to £242,500
  • Meaning a profit of £158,000
  • As our Rugby landlord is a high-rate taxpayer (earning £60,000 a year), their CGT bill would, after the annual allowance, be £40,796

Under the new proposed CGT rules

Under the new proposals, the CGT payable (assuming the CGT rate of 40% and a lower annual allowance of £5,000) the same Rugby landlord would only pay £32,382 – a saving of almost £8,500.

And the savings don’t stop there. Remember, under the new OTS proposals, all capital gains made before 2000 would also be tax-free.

However, let us not forget the responsibility of the OTS is to report on tax simplification opportunities, not to set Government taxation policy. None of us have a crystal ball on what Rishi Sunak will do with CGT on buy to let property or second homes. Although, as time has always taught us with investments, often the worse thing to do is to make impulsive decisions on what MAY happen. 

You have to remember, CGT only gets charged when you sell or transfer your investments, and most people use their rental investments to provide them with income. If you did sell up, the best 90-day building society accounts are obtaining 0.8% pa, the stock market is a rollercoaster (good luck with that) and Government 10-year bonds are paying a princely 0.324% pa… where else are you going to invest to get the income Rugby property investments provide? 

Property is an asset you can touch, feel and ultimately understand. Maybe, this is the time (if you haven’t already) to take portfolio advice on your Rugby buy to let investments? Many Rugby landlords do so, whether they use our agency, another Rugby agency or you manage your property yourself. The service is free of charge, we don’t need to meet face to face as we can do it over Zoom and it’s all without obligation. I promise to tell you what you need to hear – not what you want to hear … what do you have to lose?

The 2020 Review of the Rugby Property Market

Looking back at the Rugby property market for 2020, it certainly can be seen as a frenetic game of two halves, albeit with a very long half time in the spring. Between the General Election in mid-December and Christmas, many Rugby agents saw an unusually higher uplift in activity in the property market just as we were getting ready for Christmas 2019. Yet once the New Year festivities were out of the way, that pre-Christmas uplift in the local property market was nothing when compared to the bang on Monday 6th January 2020 with the fabled ‘Boris Bounce’ of the Rugby property market. January, February and most of March were amazing months, with pent up demand from people wanting to move following the Brexit uncertainty of 2018/9 being released in the first few months of 2020.

The pandemic hit mid-March, and the Rugby property market was put on ice for nearly three months (as was almost everyone else’s lives). Yet at the end of spring, the property market was one of the first sectors of the economy to be re-opened. Every economist predicted house price drops in the order of 10% in the best-case scenario and 25% in the worst, yet nothing could be further from the truth.

When the lockdown restrictions were lifted from the property market, those three months allowed Rugby homeowners to re-evaluate their relationships with their homes. The true worth of an extra bedroom (for an office) became priceless, as people working from home were having to take calls and work from the dining room table. Rugby properties with gardens and/or close to green spaces all of a sudden became even more desirable. More fuel was put on the fire of the Rugby property market with the introduction of the Stamp Duty Holiday, meaning buyers could save thousands of pounds in tax if they moved before the end of March 2021. This stoked the local property market and now …

Property values in Rugby are set at 6.4% higher today compared to a year ago.

The fallout of that increased demand for a new home meant those Rugby properties on the market coming out of lockdown in early summer with those extra rooms and gardens were snapped up in days for ‘full’ price. Rugby buyers were having to spend their Stamp Duty savings on paying top dollar for the home of their dreams. Yet the increased number of properties coming onto the market in the late summer quenched a lot of that demand and the prices being achieved became a little more reasonable and realistic. This increased the number of properties sold (stc), so much so that nationally, almost two thirds more homes have been sold (stc) than would be expected at this time of year!

However, as we all know, just because a property is sold (stc), it doesn’t mean the property is actually sold. The number of people who have moved home in the last 12 months in Rugby, is as you would expect, much lower. Over the last 10 years, on average 1,484 Rugby homes have changed hands per year, compared to only 678 Rugby homes in the last 12 months.

So, what is a Rugby property worth today? Drilling down to the four types of homes locally, some interesting numbers appear. Looking at the table, you can see what the average property types are worth locally, and within each type, the average price paid in the last 12 months. (So, if the average price paid for the last 12 months is higher than the overall average, that means more higher priced property in that type has sold in the last year compared to the overall average – and vice versa

 Average Overall Value TodayAverage Price Paid in the Last Year
Rugby Detached£364,080£379,030
Rugby Semi-Detached£209,630£240,290
Rugby Town House / Terraced£165,100£184,760
Rugby Apartments/ Flats£133,790£137,780
Stats from the Land Registry, Zoopla, Office of National Stats and Denton House Research

Of course, these are the overall average values. To give you an idea of what Rugby properties are selling by their square footage, these are those averages values …

Average Value per sq. ft (internal)
Rugby Detached£234.63
Rugby Semi-Detached£226.60
Rugby Town House / Terraced£194.97
Rugby Apartments/ Flats£208.05
Stats from the Land Registry, Zoopla, Office of National Stats and Denton House Research

So, what about 2021? Well normally when the Country’s GDP drops like a stone (as it did in the Summer of 2020), the property market follows in unison. Yet as the economy went south, the house price growth and activity in the property market went north. This would appear to be a quite remarkable outcome given that economic framework, but it is gradually becoming clear that, as far as the Rugby property market is concerned, people’s time in lockdown has been spent reflecting on what they really wanted from their home and has meant that the normal rules of the game simply do not apply… for now.

Each Rugby Landlord Could be Hit by a £25,070 Bill

… and the 5 ways on how all Rugby landlords can escape the worst of the coronavirus downturn on their Rugby rental property.

With the second lockdown starting on the 5th November 2020, does this mean Rugby landlords can wave goodbye to their Rugby buy-to-let investment and see it go up in smoke on the bonfire of buy-to-let dreams, like a Guy Fawkes puppet? 

With many Rugby tenants at risk of losing their jobs after the furlough scheme ends in March and as the reverberations of the coronavirus recession hit this winter, what does this all mean for Rugby landlords and what can they do to mitigate the risks?

Since the spring, most Rugby tenants and buy-to-let landlords have been protected from the coronavirus crisis thanks to the banks with their mortgage payment holidays and job support schemes. 

Before the second lockdown was announced on the 31st October, it was expected that as the furlough and mortgage payment holidays were due to end on Halloween, there would be some serious fallout from those schemes finishing. One silver lining from the lockdown (if you can call it that) is that mortgage payment holidays and furlough have been extended, yet does all that just kick the can down the road?

The question is, what can Rugby landlords do to mitigate the financial risk on their Rugby buy-to-let investment? 

  1. Help Your Rugby Tenants get the Financial Support They are Entitled To 

Billions of pounds are being spent by the Government to help those people whose income has been hit by coronavirus. The better Rugby letting agents and self-managing landlords are supporting, guiding and helping those Rugby tenants in financial difficulty to gain a better understanding of the Universal Credit (UC) processes, systems and payment levels, to enable their tenants to pay the rent and ultimately indirectly help their Rugby landlord. Also, if you are a Rugby tenant, and that support isn’t given when you ask, don’t forget Rugby District Council do hold special cash reserves for discretionary housing payments, which can be utilised to close the gap in rent between what UC pays and your current rental commitments. Also, the Government’s Money Advice Service & Citizens Advice are a good online resource for what you are entitled to.

  1. Adopting, Adapting & Improving Your Rugby Buy-to-Let Property

Demand for gardens or office space means Rugby landlords will need to think outside the box. Those Rugby homes with tenants sharing (e.g. HMO’s and shared houses) might need to price their pre-coronavirus 4 bed sharing house to maybe a 3 bed sharing house plus a work/office room and, if you haven’t already, installing a top of the range, fast and dependable internet connection could be the thing that swings it. Outdoor space and gardens are really high on housebound tenant’s wish lists, in fact I have come across some Rugby tenants demanding that new rental properties have a landscaped garden or those that bought a dog or cat for company during the first lockdown, are looking for their landlords to relax their ‘no pets policy’.

  1. Hold On to Your Good Rugby Tenants

Those Rugby buy-to-let landlords with decent tenants, who find themselves in financial dire straits should consider attempting to keep them, even if their own monetary circumstances mean they have to decrease their rent somewhat over the short term. Now of course, I would expect that tenants need to prove their circumstances, yet if their plight was real, surely it would be a wise choice to reduce the rent by perhaps £50 a month and support your tenants? You know they are taking great care of your Rugby rental property and rather than risk the issue of advertising your empty buy-to-let property  – particularly when there is no assurance you will achieve your existing rent and ultimately risk drawn-out void periods with no rent coming in at all. What I would suggest therefore,  in such circumstances, is that you create a new Assured Shorthold Tenancy agreement with a longer term with your existing tenant at a lower rent – a temporary measure but with peace of mind for both parties which can then be reviewed once that tenancy is up for renewal.

  1. Carry out Firmer Checks on Your Prospective Rugby Tenants 

Many private Rugby landlords and a few slipshod Rugby letting agents tenant checks are somewhat lacking in their depth. Trust me, there is tenant referencing … and then there is ‘proper’ forensic tenant referencing. As certain parts of the British economy have been hit harder than others, Rugby landlords must consider when choosing their new tenants, the type of work they do or who their employer may be, to enable them to decide on their future capacity to meet their rental commitments.

  1. Rent Guarantee Insurance for your Rugby Rental 

There are still insurance companies offering landlord rent guarantee insurance if your tenants become unable to pay the rent. Many insurance firms removed these insurance products in the first lockdown, yet some have returned to the insurance market although insurance premiums have gone up in price. Remember to check the small print of the insurance, although you will get a lower insurance premium if you can show stringent tenant referencing (as per the previous point). 

The Nuclear Option – Eviction

Rugby landlords need to be conscious that, should their tenancy run into trouble, the Government have changed the rules when it comes to eviction during the coronavirus pandemic. Going into the first lockdown, there was already a backlog in the courts and now, just before going into the second lockdown, bailiffs have been instructed not to enter rental properties in high risk Tier-2 and Tier-3 Covid-19 areas.

Eviction really does have to be the very last option. Negotiation or arbitration will nearly always deliver quicker and improved outcomes for both parties. Rugby landlords who do come to mutually agreeable arrangements with their tenants by briefly reducing the rent, or allowing payment holidays with legally enforceable pay back schedules should ensure they get the agreed terms in writing and run by a solicitor or their agent (feel free to drop me a note if you need advice).

However, if eviction is required, it doesn’t mean the tenant gets off ‘scot free’. Evicted tenants, depending on their circumstances, will either be placed temporarily into an inexpensive B&B, asked to move in with family or given one of the local authorities temporary accommodation properties, with the goal to then move them into long term council accommodation (as the chances of obtaining private rented accommodation would be slim with agent’s heightened reference checks – more of that at the end).

The Potential Cost of Evicting a Problem Rugby Tenant

The average rent for a Rugby property currently stands at £730 per calendar month. 

Thankfully, evictions are very rare.  Last year before lockdown, tenants from 201.4 rental properties were evicted each working day in the UK … but if yours was one of those, that is still a potentially large cost.

Working on the basis that most evictions from the first rent not being paid, through to eviction, refurbishment of the kitchen, bathroom, carpets and décor (because often these do need sorting/replacing) were taking on average between eight to nine months before coronavirus hit, (plus the mortgage payments), this means a Rugby landlord could be hit by a £25,070 bill, broken down as follows:

Missing rent (8½ months)£6,205
New kitchen£3,706
Bathroom£2,587
Carpets£2,398
Redecorate £1,865
Agents fees£652
Legal fees & court fees£3,500
Mortgage payments£4,157
Total£25,070

What that would be now is anyone’s guess – yet it could be a lot more.

This is why it is so important to get the best tenant from day one. Many Rugby tenants, who know they wouldn’t pass the references of letting agents, are attracted to those private landlords who don’t use a letting agency, as they know their referencing checks are not as strict and may be a softer touch. That’s not to say going with a letting agent is a guarantee you won’t need to evict; it just means the chances are much, much smaller. Like anything in life – it’s a choice. 

Whether you are a Rugby landlord who uses a letting agent or not, and feels their reference checks are not to the standard or level you might hope or want and you need a  chat about the best rental guarantee insurance, then give me a call … what have you got to lose?

Rugby Homebuyers Have Saved £198,050 Thanks to the Stamp Duty Holiday – Yet Many Could Miss Out

Rugby homebuyers and Rugby landlords purchasing residential property have saved £198,050 since the Chancellor reduced stamp duty on 8th July 2020, yet many more Rugby homebuyers could miss out.

My analysis of properties sold in Rugby from the Land Registry between the introduction of the stamp duty holiday on 8th July 2020 and 14th August 2020 (which is the most up to date sales data), reveals that many Rugby homeowners have saved a considerable amount of money in stamp duty. According to my research…

since the stamp duty holiday was launched, 42 Rugby homeowners have saved on average £4,715 each.

That’s a total Rugby property value of £12,361,000.

Mind you, it’s not all good news as I estimate 92 Rugby homebuyers risk missing out on stamp duty savings (worth as much as £15,000 each) due to solicitors/conveyancers and mortgage lenders struggling with demand and failing to hit the 31st March 2021 deadline.

The short-term tax relief, together with the easing of lockdown restrictions, has seen demand for Rugby property soar this summer as Rugby property buyers race to move home.

Chancellor Rishi Sunak introduced a stamp duty holiday in the summer, with the stamp duty holiday due to end on 31 st March 2021. Yet, I fear the combined pent-up demand caused by…

  • the post Boris Bounce
  • people wanting to leave the metropolitan city centres for homes in the countryside
  • property with gardens
  • property with extra rooms for working from home
  • and the stamp duty savings

…has created a certain amount of constipation and backlog in the Rugby property market.

I know 31 st March 2021 seems an age away, however nothing could be further from the truth. The average Rugby property sale was taking 19 weeks between the offer price being agreed and the keys/monies handed over BEFORE THE POST-LOCKDOWN. So with as many as 40% to 50% more Rugby homeowners in that same sales pipeline of agreeing the offer and the legal and finance to be sorted as we speak, solicitors/conveyancers and mortgage lenders are really struggling with demand for their services, meaning the average time will increase. Hence, I believe as many as…

92 Rugby people could miss out on the £433,820 stamp duty tax savings.

There is time left to sell and legally complete your Rugby property sale before 31st March stamp duty deadline if you put the property on the market now with a realistic asking price, a decent marketing plan and razor sharp reflexes when it comes to the legal and mortgage work.

Yet with 40% to 50% more home movers in the system, those looking to sell their Rugby home should be very suspicious of agents being too optimistic on their initial asking price (many estate agents get a commission to put a property on the market, meaning they over-egg the pudding on the suggested asking price to flatter you, only to badger you to reduce the asking price weeks later).

Those wasted weeks at an inflated asking price will mean the difference between you securing a buyer and you then buying your next Rugby home with or without the stamp duty savings, which are up to £15,000 per home move and whilst many Rugby buyers seem ready, willing and able to pay top dollar prices for Rugby properties that match their changed post-lockdown home needs, speaking privately to many Rugby agents, some Rugby homeowners’ price expectations for their Rugby homes are now becoming too optimistic, meaning they will undoubtedly lose out.

We also can’t forget as many as 1 in 5 mortgage surveys are being down valued by the surveyor, meaning unless all parties are willing to negotiate, the sale falls through and the homeowner has to go back to ‘Square One’.

My best piece of advice for those currently sold and in the sales systems with lawyers and mortgage brokers is to speak to your solicitor and mortgage broker every single week and ask if there is anything you need to do to ensure the sale proceeds smoothly and expediently. Also, if you are asked for any information from your solicitor or mortgage broker in between times, drop everything and respond quickly to their request. The odd day here and there will make all the difference.

Rugby 2nd & 3rd Time Buyers Finding It Tougher (and Slower) to Move Up the Rugby Property Ladder

Post lockdown, the need for Rugby families who want bigger homes has meant Rugby homebuyers must now to pay considerably more to trade up to that larger home…

One thing that has come out of lockdown has been the inexorable movement of Rugby households wanting to upsize to a larger home. Often considered to be first time buyer properties, the smaller 1st step on the property ladder one and two bedroom properties are selling quite well yet demand for those properties on the 2nd and 3rd step rungs on the Rugby property ladder (i.e. the three or four bedroom homes) has been even greater.

This demand has been driven by Rugby buyers looking for more living space, especially those looking for an area or room to work from home (be that a bedroom, reception room or even an outbuilding converted into a study).

The average asking price of a 3 bed Rugby home is £242,800, whilst for a 4 bed Rugby home it stands at £365,300

As you can see, quite a jump for an extra bedroom! The heightened contest for 2nd and 3rd step Rugby homes for that extra bedroom has pushed demand to a record in October for those looking to take the next step up the ladder. Historically, as a family and its household income grow, the need for more space has permanently been the No.1 reason for moving home, yet now there is a new need for additional space to facilitate people working from home. This means not only do we have growing families wanting larger Rugby homes, there are also the people needing the same larger homes for space for a home office. Therefore, looking at the current stats, as you can see, the Rugby property market is doing quite well…

69.3% of all 3 bed and 64.5% of all 4 bed homes

in Rugby are sold (subject to contract)

Roll the clock back to pre-Covid and ask any Rugby homeowner who had enough bedrooms for their children if they wanted an additional bedroom, and most homeowners would say that was very much a ‘nice to have’, yet not a ‘must have’. With us all being cooped-up over the spring this year, demand for additional rooms is at a high, with those presently looking for their next larger Rugby home are probably going to find that only offers close to (if not sometimes over) the asking price will be accepted.

Even though no properties sold during lockdown, putting the Rugby (and UK) property market on hold for many months, many more people buying their next Rugby home will have more than made up for it since lockdown was lifted as the portals have stated if the UK property market remains at its existing trajectory, then the number of properties sold YTD by the end of October 2020 will be greater than YTD October 2019.

Yet all these properties sold are causing another issue. Just because a property becomes Sold Subject to Contract (SSTC) doesn’t mean the property is actually “sold”. Before going into Covid, it was taking approximately 19 weeks from agreeing a sale price (and instructing lawyers) to completing the sale. Yet, because we are nationally running at 140% to 150% of properties SSTC (than where we normally are at this time of year), many of my estate agents colleagues are having to manage expectations with buyers and sellers, and tell them that the date they are going to move will take a little longer.

The elephant in the room is that the temporary stamp duty holiday ends on the 31st March 2021

It sounds an age away, yet trust me, nothing could be further from the truth.  Adding an extra month for the additional homes in the bottleneck means even if the sale of your Rugby home was agreed today, that would take us to the 3rd week in March … that’s cutting it very close for the stamp duty holiday.

It is so fundamental for buyers and sellers of Rugby homes to work meticulously with their estate agent, solicitor and mortgage lender. For example, there are less staff in the local authorities to do the local searches, bank staff are working from home meaning mortgages are taking much longer to get approved, and conveyancer/solicitors are snowed under with work. Therefore, if you get a document that needs filling in, are asked to provide documents, pay disbursements or questions need answering, do it immediately and without delay. A day here and day there will snowball and could mean you miss the stamp duty holiday … and that could cost you thousands and thousands of pounds.

The bottom line is that we haven’t seen this sort of pressure on the UK property market since 1987, when dual-MIRAS was abolished. Now, as we are slowly starting to come out of Covid, with many legal and banking staff working remotely or still on furlough, the perfect storm has occurred with unprecedented demand from buyers looking to move post lockdown. The best advice I can give is, as soon as you put your property onto the market, find a solicitor that has the capacity to work with you, then instruct that solicitor to start work immediately to prepare the paperwork, so once you have a buyer, things can move more smoothly and quickly. The last thing you want is to lose out on saving thousands of pounds by missing the stamp duty holiday by a whisker.

Why are Some Banks Reining in Over-Enthusiastic Rugby Homebuyers and Buy-to-Let Investors?

The Rugby property market is an enigma and chock-full of contradictions.

Notwithstanding an economic recession and forecasts of property values dropping, nobody seems to have informed the Rugby homeowners selling their homes and those Rugby people looking to buy them. As I have discussed in many recent articles on the locality, the Rugby property market is booming and property values in some sections of the market are rising, yet amidst enthusiastic reports of gazumping, there are disgruntled and malcontent grumbles about mortgage company surveyors down valuing property on survey.

However, before we talk about the banks and surveyors, let’s look at what is happening in the Rugby property market now.

Land Registry figures published last week showed unyielding evidence for what everyone in the property industry had been saying since the market reopened after a seven-week lockdown on May 13: property prices are rising.

The average value of a Rugby home rose by 2.6%

in the year to June to £254,400

Many expect the statistics to show more rises following the Stamp Duty Holiday announced in July, which unbridled a burst of buying activity in the Rugby property market. In many (not all) sectors some properties have been going for over the asking price whilst some have been going to sealed bids.

Some newspapers have even suggested a small minority of homeowners are ‘backdoor-gazumping’, which is genteelly being referred to by estate agents as ‘retuning the asking price’ – as in, the homeowner removing the property from the market, ‘retuning the asking price’ in an upward direction, then placing it back onto the market.

Conceivably enthused by these stories, some house sellers and estate agents might be getting a little carried away and placing overambitious asking prices on homes they are selling. Customarily a property with too high an asking price wouldn’t sell – yet some over-enthusiastic Rugby buyers are paying over the odds for certain types of properties.

So, let’s look at what is happening to the Rugby property market (Rugby plus 3 miles) by house type and the number of bedrooms…

 Number of Rugby properties
on the market
…and of those –
how many are Sold STC
% Sold STC
compared to those for sale
Detached House47329762.8%
Semi Det House35926573.8%
Terraced/Town House34823367.0%
Apartment1608452.5%
Bungalows1077772.0%

And when we look at the number of bedrooms …

Number of Rugby properties
on the market
…and of those –
how many are Sold STC
% sold STC
compared to those for sale
Studio/1 bed875158.6%
2 beds34823968.7%
3 beds57039569.3%
4 beds32721164.5%
5+ beds1257056.0%

As you can see, the best performing type of property in Rugby is the semi-detached house and the best-selling properties when it comes to bedrooms are 3 beds.

These are quite impressive figures for the Rugby property market, yet some of the banks are having none of it

They are looking apprehensively into 2021 when furlough/the new job support scheme ends, meaning it’s quite tough for all buyers borrowing high percentage mortgages (i.e. more than 80% to 85% of the value of the property in a mortgage). 

It is even tougher for self-employed buyers (whose income is less than assured) to get those high percentage mortgages – and finally, the banks are most certainly concerned with high percentage mortgage buyers who pay over-inflated prices for property using the bank’s money… hence the down valuing (Definition of Down valuing : the buyer and seller agree a sale price, then the mortgage is applied for with the buyer’s bank and the bank’s surveyor states the purchase price the buyer is paying is too much).

One small note to Rugby landlords – I am also hearing that some overzealous Rugby buy to let landlords who are over-egging the potential rental figures on their buy-to-let purchase in order to obtain the mortgage, are also being reined in by the banks.

Now this is not a huge issue (e.Surv – a nationwide surveying firm only reported a 4% increase in surveyors having to down value property in Q2 2020 compared to Q1), yet should you be lucky enough to have multiple offers on your home, ask the agent what the overall buying position of the buyers are. You need to specifically ask what percentage loan the buyer is taking on and the position of the buyer in the chain (they have to find this out anyway by law and you have a right to know that information as the property seller if you ask).

The bottom line is the highest bidder might not be the best buyer for you. It’s true, average property prices are rising nationally, yet this does not mean you should pay over the odds for your next Rugby property.

If you would like a chat about any aspect of the Rugby property market – please do send me a message or pick up the phone.