Rugby Property Market Worth More Than British Land Co

The value of all the homes in Rugby has risen by more than 262% in the past two decades, to £6.619bn, meaning its worth more than the stock listed company British Land Company, which is worth £6.505bn.

Those Rugby homeowners and Buy-to-Let landlords who bought their homes twenty or more years ago have come out on top, adding thousands and thousands of pounds to the value of their own Rugby homes as the younger generation in Rugby continue to be priced out of the market.  This is even more remarkable because, in those twenty years, we had the years of 2008 and 2009 following the global financial crisis, where we saw a short term drop in Rugby house prices of between 15% and 20% (depending on the type of property). And although there have been a number of consecutive years of growth in property values recently in Rugby it hasn’t been anywhere near the levels seen in the early 2000’s.

Twenty years ago, the total value of Rugby property was worth £1.827bn. Over those twenty years, total property values have increased by £4.792bn, meaning today, the total value of all the properties in Rugby is worth £6.619bn. Even more remarkable, when you consider the FTSE100 has only risen by 40.84% in the same time frame. Also, when I compared it with inflation, i.e. the UK Retail Price Index, inflation had risen by 72.2% during the same twenty years.

So, what does this all mean for Rugby?  Well as we enter the unchartered waters of 2018 and beyond, even though property values are already declining in certain parts of the previously over cooked central London property market, the outlook in Rugby remains relatively good as over the last five years, the local property market has been a lot more sensible than central London’s.

Rugby house values will remain resilient for several reasons. Firstly, demand for rental property remains strong with persistent immigration and population growth.  Secondly, with 0.25% interest rates, borrowing has never been so cheap and finally, the simple lack of new house building in Rugby. Not even keeping up with current demand, let alone eating into years and years of under investment mean only one thing – yes it might be a bumpy ride over the next 12 to 24 months but, in the medium term, property ownership and property investment in Rugby has and always will, out ride out the storm.

In the coming weeks, I will look in greater detail at my thoughts for the 2018 Rugby Property Market. As always, all my articles can be found at the Rugby Property Market Blog https://rugbypropertyblog.co.uk/

 

An extension could add £50,650 to the value of your Rugby home

As our families grow bigger the need for more space, be that bedrooms or reception rooms, has grown with it. Also, as our older generation lives longer and nursing home bills continue to rise quicker than a rocket on the 5th of November  (the average nursing home bill in the area being £777.75 per week) many families are bringing two households into one larger one.

So, should you move somewhere larger, or extend your Rugby property to make it large enough for you and your family? In some circumstances the choice has been made for you. If you live in an apartment with no garden, there isn’t much of an opportunity of making it larger. But if you have a house with a garden or an attic with sufficient headroom, extending your home becomes a real prospect.

Even if it makes more sense to extend or move, the choice hangs on a number of different dynamics – your future plans, money (both saved and access to finance), in what way you are emotionally attached to your home, the particular area of Rugby you live in and finally, the type/style of house you prefer.

Interestingly, the average British home is 968 sq.ft, which as you can see from the table, is in the middle of developed nations when it comes to the size of a property. Of the 1.11m homes sold in 2016 in England and Wales, the average floor area of the houses was 1,119 sq.ft – that’s about an eighth the size of an Olympic sized swimming pool. Apartments averaged 530 sq.ft that’s just over ten times bigger than an average garden shed. Looking at apartments and houses together, the average size of properties sold in England and Wales 968 sq.ft  – are slightly smaller than the European average, and much smaller than households in the US.

So back to the question in hand.. extending does mean you will have a lot of inconvenience whilst the work is being carried out. The location of your Rugby property, the quality of construction, what type of room(s) you want to add, your plot, neighbouring building lines, planning regulations and the overall demand for your type of Rugby home, will make a vast difference to the financial repercussions of extending versus moving.

A medium-sized 270 sq.ft single storey extension (say around 17ft x 16ft) will add on average £50,650 to the value of a property in Rugby

It’s important to note the end result of the extension needs to be a sensible and realistic home. A two bed semi-detached house extended to a four bedrooms with no lawn or driveway, or a home with outsized reception rooms downstairs and miniscule bedrooms upstairs, could be problematic if  and when you come to sell your home in the future. Irrespective of whether your strategy is to live in your extended home for a long time, you will want to side-step outlaying a lot of money on costly building work that will make it tougher to sell.

In terms of what it would cost to build an extension, you can expect to pay on average between £140 to £200 per sq.ft, depending whether the extension is a single or double storey extension and other factors including finish and type of extension (note – I have seen it cost a lot more than these figures – so please speak with a builder) … So taking a mid line figure, that same 270 sq.ft extension on your Rugby home would cost on average £55,080.

However, moving means there are substantial costs incurred – Estate Agency fees, Removal Van, Survey Fees, Legal fees and Stamp Duty on the property you are buying. Neither option is the obvious choice and comparing the costs of extending your Rugby home to that of moving is not a stress-free undertaking.

How realistic each option is will probably come down to one thing .. your mortgage provider. You will need a considerable sum of equity in your Rugby home before you can think of increasing your mortgage more, because most lenders will require you to have at least 10% to 20% equity left in your property after the extension or move has been done.

The best advice I can give .. don’t assume anything …. get advice and opinion from builders, mortgage brokers, architects, mortgage people and of course… an agent. Look at your options and make an educated decision with all the superficial and objective facts in front of you.

GOVERNMENT CLAMP DOWN ON ROGUE LANDLORDS AND ROGUE LETTING AGENTS

Could you be facing a £30,000 Fine?

 The Government are clamping down on rogue landlords and rogue letting agents in a bid to make the private rental sector safer for tenants.

Rugby’s ‘Millennials’ set to inherit £366,555 each in property!

That got your attention … didn’t it!

But before we start, what is Generation X, let alone Generation Z, Millennials, Baby Boomers  … these are phrases banded around about the different life stages (or subcomponents) of our society. But when terminologies like this are used as often and habitually as these phrases (i.e. Gen X this, Millennial that etc.), it appears particularly vital we have some practical idea of what these terms actually mean. The fact is that everyone uses these phrases, but often, like myself, they are not exactly sure where the lines are drawn …until now…

So, for clarity …

Generation Z:         Born after 1996
Millennials:             Born 1977 to 1995
Generation X:         Born 1965 to 1976
Baby Boomers:      Born 1946 to 1964
Silent Generation:  Born 1945 and before

My research shows there are 9,006 households in Rugby owned by Rugby Baby Boomers (born 1946 to 1964) and Rugby’s Silent Generation (born 1945 and before). It also shows there are 15,231 Generation X’s of Rugby (Rugby people born between 1965 to 1976). Looking at demographics, homeownership statistics and current life expectancy, around two-thirds of those Rugby 15,231 Generation X’s have parents and grandparents who own those 9,006 Rugby properties.

… and they will profit from one of the biggest inheritance explosions of any post-war generation to the tune of £2.363bn of Rugby property or £232,597 each but they will have to wait until their early 60’s to get it!

However, it’s the Millennials that are in line for an even bigger inheritance windfall.

There are 10,504 Millennials in Rugby and my research shows around two thirds of them are set to inherit the 9,788 Rugby Generation X’s properties. Those Generation X’s Rugby homes are worth £1.2.568bn meaning, on average, each Millennial will inherit £366,555; but not until at least 2040 to 2060!

While the Rugby Millennials have done far less well in amassing their own savings and assets, they are more likely to take advantage of an inheritance boom in the years to come. This will probably be very welcome news for those Rugby Millennials, including some from poorer upbringings who in the past would have been unlikely to receive gifts and legacies.

However, inheritance is not the magic weapon that will get the Millennials on to the Rugby housing ladder or tackle growing wealth cracks in UK society, as the inheritance is unlikely to be made available when they are trying to buy their first home…but before all you Rugby Millennials start running up debts, over 50% of females and around 35% of men are going to have to pay for nursing home care. Interestingly, I read recently that a quarter of people who have to pay for their care, run out of money.

So, if you are a Rugby Millennial there potentially will be nothing left for you.
Of course, most parents want to give their children an inheritance, the consideration that what you have worked genuinely hard for over your working life won’t go to your children to help them through their lives is a really awful one … maybe that is why I am seeing a lot of Rugby grandparents doing something meaningful, and helping their grandchildren, the Millennials, with the deposit for their first house.

One solution to the housing crisis in Rugby (and the UK as a whole) is if grandparents, where they are able to, help financially with the deposit for a house. Buying is cheaper than renting – we have proved it many times in these articles … so, it’s not a case of not affording the mortgage, the issue is raising the 5% to 10% mortgage deposit for these Millennials.

Maybe families should be distributing a part of the family wealth now (in the form of helping with house deposits) as opposed to waiting to the end… it will make so much more of a difference to everyone in the long run.

Just a thought?

Rugby’s £120,047,520 “Rentirement” Property Market Time Bomb

Yes, I said ‘rentirement’, not retirement … rentirement and it relates to the 653 (and growing) Rugby people, who don’t own their own Rugby home but rent their home, privately from a buy to let landlord and who are currently in their 50’s and early to mid-60’s.

The truth is that these Rugby people are prospectively soon to retire with little more than their state pension of £155.95 per week, probably with a small private pension of a couple of hundred pounds a month, meaning the average Rugby retiree can expect to retire on about £200 a week once they retire at 67.

The average rent in Rugby is £766 a month, so a lot of the retirement “income” will be taken up in rent, meaning the remainder will have to be paid for out their savings or the taxpayer will have to stump up the bill (and with life expectancy currently in the mid to late 80’s, that is quite a big bill …  a total of £120,047,520 over the next 20 years to be paid from the tenant’s savings or the taxpayers coffers to be precise!

You might say it’s not fair for Rugby tax payers to pick up the bill and that these mature Rugby renters should start saving thousands of pounds a year now to be able to afford their rent in retirement.  However, in many circumstances, the reason these people are privately renting in the first place is that they were never able to find the money for a mortgage deposit on their home in the first place, or didn’t earn enough to qualify for a mortgage …and now as they approach retirement with hope of a nice council bungalow, that hope is diminishing because of the council house sell off in the 1980’s!

For a change, the Rugby 30 to 40 somethings will be better off, as their parents are more likely to be homeowners and cascade their equity down the line when their parents pass away.  For example, that is what is happening in Europe where renting is common, the majority of people rent in their 20’s, 30’s and 40’s, but by the time they hit 50’s and 60’s (and retirement), they will invest the money they have inherited from their parents passing away and buy their own home.

So, what does this all mean for buy to let landlords in Rugby?
Have you noticed how the new homes builders don’t build bungalows anymore … in fact some would said the ‘bungalow storey’ is over.  The waning in the number of bungalows being built has more to do with supply than demand.  The fact is that for new homes builders there is more money in constructing houses than there is in constructing bungalows.  Bungalows are voracious when it comes to land they need as because bungalow has a larger footprint for the same amount of square meterage as a two/three storey house due to the fact they are on one level instead of two or three.

That means, as demand will continue to rise for bungalows supply will remain the same.  We all know what happens when demand outs strips supply … prices (i.e. rents) for bungalows will inevitably go up.

Rugby Private Rents Hit £10.83 per sq. foot

As I am sure you are aware, one the best things about my job as an agent is helping Rugby landlords with their strategic portfolio management. Gone are the days of making money by buying any old Rugby property to rent out or sell on. Nowadays, property investment is both an art and science. The art is your gut reaction to a property, but with the power of the internet and the way the Rugby property market has gone in the last 11 years, science must also play its part on a property’s future viability for investment.

Many metrics most property professionals (including myself) use when deciding the viability of a rental property is what properties are selling for, the average rent, the yield and an average value per square foot.

However, another metric I like to use is the average rent per square foot. The reason being is that is a great way to judge a property from the point of view of the tenant … what space they get for their money. Now of course, location has a huge influencing factor when it comes to rents (and hence rent per square foot). Like people buying a property, tenants also have that balancing act between better/worse location, more vs. less money and size of accommodation (bigger and more rooms equalling more money) and where they live (location) verses making ends meet.

Interestingly, I know there are a lot of you in Rugby who like to see my statistics on the Rugby property market, so before I talk about the rental figures per square foot, I wanted to share the £ per square foot on the values. In Rugby, the current AVERAGE figures are being achieved (and I must stress, these are average figures, so there will an enormous range in these figures), but on average, properties in Rugby, split down by type are achieving …

”    Rugby Detached Property – £264 / sq ft
”    Rugby Semi Detached Property – £238 / sq ft
”    Rugby Terraced Property – £214 / sq ft
”    Rugby Apartments – £238 / sq ft

So, the rental figures:

The extent of space you get for your rent is replicated in the space you get for your money when buying a property. The average size of rental property in the Rugby area is 814.8 sq ft (interesting when compared to the national average of 792.1 sq ft)

This means the average rent per square foot currently being
achieved on a Rugby rental property is £10.83 per sq ft per annum

So, what we can deduce from this?  Well the devil is always in detail!

Whilst I was able to quote the average overall figure and the fact my research showed it was quite clear from data that there is relationship between the average £ per sq ft figures on property values and average £ per sq ft on rental figures as a property grows in size. However, something quite intriguing happens to those figures, in terms of what the property will sell for and what it will rent for, when we change and increase the size of the property.

My research showed that doubling the size of any Rugby property doesn’t mean you will double the value of it … in either value or rent. This is because the marginal value increases diminish as the size of the property increases. In layman’s terms … Subject to a few assumptions, double the size of the house doesn’t mean double the value … what really happens is a doubling of the size gives only an approximately 40% to 65% uplift in value, but here comes the even more fascinating part … when it came to the rental figures, double the size of the house meant only 20% to 45% in increase in rent.

In a future article, I will be discussing the actual added value an extension can bring … but in the meantime, in an overall and sweeping statement, most of the time it makes sense to extend if you are going to live in the property as long as the extension is proportionate to the property, but if you are going to rent it out … possibly not.