Extra Funding Is Required for Affordable Homes in Rugby

In my blog about the Rugby Property Market I mostly only talk about two of the three main sectors of the local property market, the ‘private rented sector’ and the ‘owner occupier sector’. However, as I often stress when talking to my clients, one cannot forget the third sector, that being the ‘social housing sector’ (or council housing as some people call it).

In previous articles, I have spoken at length about the crisis in supply of property in Rugby (i.e. not enough property is being built), but in this article I want to talk about the other crisis – that of affordability. It is not just about the pure number of houses being built but also the equilibrium of tenure (ownership vs rented) and therein, the affordability of housing, which needs to be considered carefully for an efficient and effectual housing market.

An efficient and effectual housing market is in everyone’s interests, including Rugby homeowners and Rugby landlords, so let me explain ..

An average of only 146 Affordable Homes per year have been built by Rugby Borough Council in the last 9 years

The requirement for the provision of subsidised housing has been recognised since Victorian times. Even though private rents have not kept up with inflation since 2005 (meaning tenants are better off) it’s still a fact there are substantial numbers of low-income households in Rugby devoid of the money to allow them a decent standard of housing.

Usually, property in the social housing sector has had rents set at around half the going market rate and affordable shared home ownership has been the main source of new affordable housing yet, irrespective of the tenure, the local authority is simply not coming up with the numbers required. If the local authority isn’t building or finding these affordable homes, these Rugby tenants still need housing, and some tenants at the lower end of the market are falling foul of rogue landlords. Not good news for tenants and the vast majority of law abiding and decent Rugby landlords who are tarnished by the actions of those few rogue landlords, especially as I believe everyone has the right to a safe and decent home.

Be it Tory’s, Labour, SNP, Lib Dems, Greens etc, everyone needs to put party politics aside and start building enough homes and ensure that housing is affordable. Even though 2017 was one of the best years for new home building in the last decade (217,000 home built in 2017) overall new home building has been in decline for many years from the heady days of the early 1970s, when an average of 350,000 new homes were being built a year.  As you can see from the graph, we simply aren’t building enough ‘affordable’ homes in the area.

The blame cannot all be placed at the feet of the local authority as Council budgets nationally, according to Full-Fact, are 26% lower than they have been since 2010. 

So, what does this mean for Rugby homeowners? Well, an undersupply of affordable homes will artificially keep rents and property prices high. That might sound good in the short term, but a large proportion of my Rugby landlords find their children are also priced out of the housing market. Also, whilst your Rugby home might be slightly higher in value, due to this lack of supply of homes at the bottom end of the market, as most people move up the market when they do move, the one you want to buy will be priced even higher.

Problems at the lower end of the property market will affect the middle and upper parts. There is no getting away from the fact that the Rugby housing market is all interlinked .. it’s not called the Property ‘Ladder’ for nothing!

39% More Rugby Home Owners Wanting to Move Than 12 Months Ago

As I have mentioned a number times in my local property market blog, with not enough new-build properties being built in Rugby and the surrounding area to keep up with demand for homes to live in (be that tenants or homebuyers), it’s good to know more Rugby home sellers are putting their properties on to the market than a year ago.

At the start of 2007 there were 682 properties for sale in Rugby but by September 2008, when the credit crunch was really beginning to bite, that number had risen to 1,068 properties on the market at a time when demand was at an all-time low, thus creating an imbalance in the local property market.

Basic economics dictates that if there is too much supply of something and demand is poor (which it was in the Credit Crunch years of 2008/9) … prices will drop. In fact, house prices dropped between 15% and 20% depending on the type of Rugby property between the end of 2007 and Spring 2009.

However, over the last five years, we have seen a steady decrease in supply of properties coming onto the market for sale and steady demand, meaning Rugby property prices have remained robust.  A stable housing market is one of the foundations of a successful British economy, as it’s all about getting the healthy balance of buyer demand with a good supply of properties. Nevertheless, if you had asked me a couple of years ago, I would have said we were beginning to see there was in fact NOT enough properties coming on to the market for sale … meaning in certain sectors of the Rugby property market, house prices were overheating because of this lack of supply.

So, it is pleasing to note, looking at the recent numbers …

There are 39% more properties for sale in Rugby today than a year ago

There were 176 properties for sale 12 months ago, and today that stands at 245. Definitely a step in the right direction to a more stable property market.

Even better news, since the Chancellor announced the stamp duty rule changes for first time buyers (FTB), my fellow agents in Rugby say that the number of FTB’s registering on the majority of agent’s books has increased year on year. That has still to follow through into more FTB’s buying their first home, however, with the heightened levels of confidence being demonstrated by both Rugby house sellers and potential house buyers, I do foresee the Rugby Property Market will show steady yet sustained improvement during the first half of 2018.

What does this mean for Rugby landlords or those considering dipping their toe into the buy to let market for the first time? Landlords will need to keep improving their properties to ensure they get the best tenants. It is true that demand amongst FTB’s is increasing, albeit from a low base. Even with the new landlord tax rules, buy to let in Rugby still looks a good investment, providing Rugby landlords with a good income at a time of low interest rates and a roller coaster stock market.

If you are thinking of investing in bricks and mortar in Rugby, it is important to do things correctly as making money won’t be as easy as it has been over the last twenty years.  With a greater number of properties on the market .. comes greater choice. Don’t buy the first thing you see, buy with your head as well as your heart … and don’t forget the first rule of Buy To Let Investment …..

I will tell you that 1st rule in a couple of weeks!

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/

 

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.

£439 per month – The Profit made by every Rugby Property Owner over the last 20 years

As we go headlong into 2018, I believe UK interest rates will stay low, even with the additional 0.25% increase that is expected in May or June. That rise will add just over £20 to the typical £160,000 tracker mortgage, although with 57.1% of all borrowers on fixed rates, it will probably go undetected by most buy-to-let landlords and homeowners. I forecast that we won’t see any more interest rate rises due to the fragile nature of the British economy and the Brexit challenge. Even though mortgages will remain inexpensive, with retail price inflation outstripping salary rises, it will still very much feel like a heavy weight to some Rugby households.

Now it’s certain the Rugby housing market in 2017 was a little more subdued than 2016 and that will continue into 2018. Property ownership is a medium to long-term investment so looking at that long-term time frame; the average Rugby homeowner who bought their property 20 years ago has seen its value rise by more than 274%.

This is important, as house prices are a national obsession and tied into the health of the UK economy as a whole. The majority of that historic gain in Rugby property values has come from property market growth, although some of that will have been added by homeowners modernising, extending or developing their Rugby home.

Taking a look at the different property types in Rugby and the profit made by each type, it makes interesting reading..

However, I want to put aside all that historic growth and profit and looking forward to what will happen in the future. I want to look at the factors that could affect future Rugby (and the Country’s) house price growth/profit; one important factor has to be the building of new homes both locally and in the country as a whole. This has picked up in 2017 with 217,350 homes coming on to the UK housing ladder in the last year (a 15% increase on the previous year’s figures of 189,690. However, Philip Hammond has set a target of 300,000 a year, so still plenty to go!

Another factor that will affect property prices is my prediction that the balance of power between Rugby buy-to-let landlords and Rugby first-time buyers should tip more towards the local first-time buyers in 2018.

The Council of Mortgage Lenders expects the number of buy to let mortgages to drop by 34% from levels seen in 2015. This is because of taxes being increased recently on buy-to-let and harder lending criteria for buy to let mortgages, which means I foresee a gradual move in the balance of power in favour of first-time buyers rather than buy-to-let landlords. First time buyers will also be helped by The Chancellor eradicating Stamp Duty for all properties up to £300,000 bought by first-time buyers in the recent budget.

This means Rugby buy-to-let landlords will have to work smarter in the future to continue to make decent returns (profits) from their Rugby buy-to-let investment. Even with the tempering of house price inflation in Rugby in 2017, most Rugby buy to let landlords (and homeowners) are still sitting on a copious amount of growth from previous years.

The question is, how do you, as a Rugby buy to let landlord ensure that continues?

Since the 1990’s, making money from investing in buy-to-let property was as easy as falling off a log. Looking forward though, with all the changes in the tax regime and balance of power, making those similar levels of return in the future won’t be as easy. Over the last ten years, I have seen the role of the forward thinking letting agents evolve from a ‘rent collector’ and basic property management to a more holistic role, or as I call it, ‘landlord portfolio strategic leadership’. Thankfully, along with myself, there are a handful of letting agents in Rugby whom I would consider exemplary at this landlord portfolio strategy where they can give you a balanced structured overview of your short, medium and long-term goals, in relation to your required return on investment, yield and capital growth requirements. If you would like such advice, speak with your current agent – or whether you are a landlord of ours or not – without any cost or commitment, feel free to drop me a line at 01788 820028.

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

Rugby House Prices Outstrip Wage Growth by 2.35% since 2007

I recently read a report by the Yorkshire Building Society that 54% of the country has seen wages (salaries) rise faster than property prices in the last 10 years. The report said that in the Midlands and North, salaries had outperformed property prices since 2007, whilst in other parts of the UK, especially in the South, the opposite has happened and property prices have outperformed salaries quite noticeably.

As regular readers of my blog know, I always like to find out what has actually happened locally in Rugby. To talk of North and South is not specific enough for me. Therefore, to start, I looked at what has happened to salaries locally since 2007. Looking at the Office of National Statistics (ONS) data for Rugby Borough Council, some interesting figures came out…

Salaries in Rugby have risen by 21.42% since 2007 (although it’s been a bit of a rollercoaster ride to get there!) – interesting when you compare that with what has happened to salaries regionally (an increase of 17.79%) and nationally, an increase of 17.61%.

Next, I needed to find what had happened to property prices locally over the same time frame of 2007 and today. Net property values in Rugby are 23.77% higher than they were in late 2007 (not forgetting they did dip in 2008 and 2009). Therefore…

Property values in the Rugby area have increased at a higher rate than wages to the tune of 2.35% … meaning, Rugby is bucking the regional trend

All this is important, as the relationship between salaries and property values is the basis on how affordable property is to first (and second, third etc.) time buyers. It is also vitally relevant for Rugby landlords as they need to be aware of this when making their buy-to-let plans for the future. If more Rugby people are buying, then demand for Rugby rental properties will drop (and vice versa).

As I have discussed in a few articles in my blog recently, this issue of ‘property-affordability’ is a great bellwether to the future direction of the Rugby property market. Now of course, it isn’t as simple as comparing salaries and property prices, as that measurement disregards issues such as low mortgage rates and the diminishing proportion of disposable income that is spent on mortgage repayments.

On the face of it, the change between 2007 and 2017 in terms of the ‘property-affordability’ hasn’t been that great. However, look back another 10 years to 1997, and that tells a completely different story. Nationally, the affordability of property more than halved between 1997 and today. In 1997, house prices were on average 3.5 times workers’ annual wages, whereas in 2016 workers could typically expect to spend around 7.7 times annual wages on purchasing a home.

The issue of a lack of homeownership has its roots in the 1980’s and 1990’s. It’s quite hard as a tenant to pay your rent and save money for a deposit simultaneously, meaning for many Rugby people, home ownership isn’t a realistic goal. Earlier in the year, the Tories released proposals to combat the country’s ‘broken’ housing market, setting out plans to make renting more affordable, while increasing the security of rental deals and threatening to bring tougher legal action to cases involving bad landlords.

This is all great news for Rugby tenants and decent law-abiding Rugby landlords (and indirectly owner occupier homeowners). Whatever has happened to salaries or property prices in Rugby in the last 10 (or 20) years … the demand for decent high-quality rental property keeps growing. If you want a chat about where the Rugby property market is going – please read my other blog posts on http://www.rugbypropertyblog.wordpress.com or drop me note via email, like many Rugby landlords are doing.

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

kindest regards

Iain Havell

iain.havell@newman.uk.com

Moving from a 2 bed Rugby Property to a 4 bed will cost you £833 pm

Moving to a bigger home is something Rugby people with growing young families aspire to. Many people in two bedroom homes move to a three-bedroom home and some even make the jump to a four-bed home. Bigger homes, especially three-bed Rugby homes are much in demand and it can be a costly move.

If you live in Rugby in a two-bedroom property and wish to move to a four-bedroom house in Rugby, you would need to spend an additional £210,796 (or £833.64 pm in mortgage payments (based on the UK Bank average standard variable rate)). However, going straight to a four bed from a two-bed home is quite rare as most people jump from a two to three-bedroom home, then later in life, from a three to four-bedroom home.

So, after being asked my thoughts on moving home in Rugby by a friend recently, please find my analysis of the local property market and then some thoughts. To start with, let us see what the average property price is for a Rugby property by the number of bedrooms it has.

I then decided to calculate what it would cost to make the jump upmarket from one bedroom to two bedrooms, two to three bedrooms etc, etc, both in actual money and in mortgage payments (using the current standard variable rate of UK Banks of 4.74% – so the mortgage cost could be higher or lower depending on the mortgage taken).

There are some interesting jumps in costs when moving upmarket as a Rugby buyer. The cost of moving from one to two beds, and two to three beds is relatively reasonable, whilst the jump from three to four beds in Rugby is quite high and therefore financially prohibitive for most families. This helps provide a partial explanation as to why some four-bed properties are currently taking slightly longer to sell.

As an aside, there is a lesson here for all my blog readers. You can quite clearly see why the larger 4 and 5 bed properties don’t offer the best returns for buy to let. Simply put the monthly finance costs and rents achieved don’t match up so well (i.e. a mortgage for a 4 bed home in Rugby would cost you 60.83% compared to a 3 bed mortgage, but the jump in rent would be a lot less than that). I don’t wish to be dismissive about the solidity of investing in larger properties because it does depend on your circumstances. Four bedroom properties sometimes offer other advantages. Pick up the phone if you want to know what they are in more detail.

A further look at the stock of properties in Rugby is revealing.

The most active purchasers are 20 and 30 something home-owning parents with growing families. Many look to more modern developments for the perfect balance of access to decent primary schools, commutability and lifestyle. For landlords looking to buy within Rugby, they face stiff competition from these 20/30 something families, making the three bedroom Rugby home massively in demand, often attracting spirited offers and selling within weeks of listing. This mix of homebuyers and landlords is a pressure point in the Rugby property market.  Again, if you are a landlord, call me and I will show you areas with decent returns where you aren’t in so much competition with young Rugby family homebuyers.

Yet, the cost of an additional bedroom can be too much for some Rugby buyers. It is quite challenging moving home the first time, but to then find you are priced out on the next move up the ladder can be quite disconcerting, with families often having to move to a different part of town to get the bigger home they need.

Nevertheless, that’s the position many homeowners find themselves in with the cost of the additional bedroom being too much to bear. To those buying their home for the first time, all I suggest is they not only consider the mortgage payments and other costs of their first home, but also do their homework into their next rung up the Rugby property ladder. Thinking about it now will keep you ahead of the game in the future; as your number of bedrooms, family property needs and lifestyle wants change.

..and Rugby landlords – well these changes in the way people live also mean there are opportunities to be had in the Rugby rental market. Many Rugby landlords are starting to pick my brain on this, so if you don’t want to miss out – drop me a line.

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

kindest regards

Iain Havell

iain.havell@newman.uk.com