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Is This the Beginning of the End for Buy to Let in Crediton?

are buy to let landlords to blame

…. and should Crediton landlords & Crediton homeowners be worried?

In 2019, the private rented sector accounted for just over four and a half million households or 19.9% of UK households, no change from the year before. Interesting, when compared to the proportion of private rented households in the 1980’s and 1990’s, when the proportion of private rented households was stable at around 9.5% to 10.8%.

Most of that growth in the private rented sector came in three main spurts. The first growth spurt was between 1999 and 2003 and that was caused when property values were increasing at 20% per annum, the second came from the migration of 1.69m people from the EU8 countries after 2004 and the final growth spurt came about because of the property crash of 2008/9. When I look at the local stats …

12.4% of Crediton properties in 1991 were privately rented, whilst the most recent stats, stand at 17.4%

Apart from social housing, the other pillar of home tenure is owner occupation. Owner occupation is made up of two separate groups: outright owners and those who own their home yet are buying the property with a mortgage.

In 1991, 29.6% of Crediton households owned their property outright and 39.8% of Crediton households were buying with a mortgage, whilst current stats show 34.7% of Crediton households are outright owners and only 31.6% are buying their Crediton home with a mortgage

Looking at these numbers, two things are clear

  1. The increase in the proportion and number of Crediton outright owners is at least somewhat caused by Crediton’s baby-boomer population retiring, being able to pay off their mortgages and thus going into outright homeownership.
  2. Overall homeownership is down. These figures will be of no surprise to many readers with heightened barriers to home ownership, as saving for the deposit became the prevailing hurdle to getting on the housing ladder together with a substantial increase in the amount of private rented accommodation, provided by an ostensibly ever-growing cohort of buy-to-let investors.

So, on the face of it, everything looks rosy for Crediton buy to let landlords with the private rented sector growing ever upwards.

This is not the case though because these stats on private rented and homeownership on Crediton are from the last census. However, the Government have a number of in-depth annual surveys on the property market and since 2016, the proportion of privately rented properties has remained stagnant at between 19% and 20%. Also, over the same time frame, the proportion of homebuyers with a mortgage has increased quite considerably from 30.7% of all households nationally to 35.5% last year. This increase is mainly attributed to an increase in first time buyers.

So, why have we seen an increase in the number of first time buyers?

Firstly, the government introduced their Help to Buy Scheme in 2013 helping first time buyers get on the property ladder with interest free loans and mortgage guarantees. Secondly, the wide availability of 95% mortgages since the mid 2010’s (meaning first time buyers only need to find a 5% deposit), and finally the continued increasing reliance of deposits from the ‘Bank of Mum and Dad’ have helped to support this growth.

Interestingly, age is an important factor in these stats, as it’s the 25 to 35-year olds that have seen the biggest increase in home ownership, yet it’s decreased for those in the 35 to 45-year old bracket.

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

In the next six months, I believe the growth in first time buyer numbers will ease slightly. The pent-up demand of the Boris Bounce in January and February has now been released, and whilst the early signs are very good, we are still to see the effects of the curtailing of the furlough scheme on the people’s ability to move home. 

Many doom-mongers were predicting the banks would remove 95% mortgages after Covid-19, yet looking on a well-known comparison website, at the time of writing, there were 183 ‘95% mortgages’ available to first time buyers, with eye watering low rates of 1.53% with the Halifax on a 2 year fixed rate and 5 year fixed rate with the Skipton at 1.83%. The Bank of Mum and Dad might be a tougher nut to crack for first time buyers’ deposits – the fall in the FTSE and the repercussions this will have on older households’ pensions income may restrict its availability.

This means even though the Crediton property market is doing reasonably well, Crediton homeowners wanting to sell shouldn’t get carried away and ‘over-egg’ their asking prices. The information available today at all buyers’ fingertips means your property can so easily be overlooked as being overpriced and thus become ignored.

My advice to Crediton landlords is, even though the proportion of private rented properties isn’t growing, in real numbers it is, as we created 230,000 residential homes in the country last year alone, so we aren’t seeing a mass exodus out of private renting.

Yet, now might be the time to consider spending money on upgrading what you already own instead of buying another property. Depending on the type and location of your Crediton rental property, the return on investment of certain upgrades can be in the order of 20% to 30% per annum. Don’t fall for the trap many Crediton landlords fall into and upgrade without speaking to a property professional. Whether you are a client or not, I am always here at the end of the phone to give you my advice and opinion.

Please do let me have your thoughts on the matter!

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What Else Does 2020 Have in Store for Property Landlords?

Image of caucasian uptight family sitting on sofa at home with p

If you had to sum up 2020 in one word (without using “unprecedented” because it has been overused) what would it be?

Weird? Abnormal? Or what about unheard-of?

Okay, maybe that is two words, but you catch our drift.

Whatever adjective you choose, it is a safe bet that you will not forget the first six months of 2020 in a hurry.

But as things slowly edge towards getting back to normal, it is worth taking a moment to look beyond the pandemic.

As we gear up for the second half of the year, there are other issues specific to landlords that are also important to consider.  

Legislative changes

It is vital you stay on top of any new rules or regulations that might have come into place over the past few months – or indeed may be on the horizon.

The situation with Covid-19 understandably absorbed most of our attention, but in the background, lots of other things have been going on.

Make sure any important legal changes do not slip under your radar.

Breach the law and the excuse “I was busy watching the daily press briefing” will not cut it.

In England and Wales, for example, check up on the changes to Minimum Energy Efficiency Standard (MEES) that were introduced in April. The MEES now applies to all private lets meaning that if your property has an energy rating of F or G you cannot rent it out (the fine for doing so could reach £4,000).

If you want to feel reassured that you have got a handle on all your legal requirements, get in touch with us. It is our job to know when new guidance is published and when laws are introduced. 

Tax changes

A change which came into effect in April while we were all adjusting to life in lockdown relates to changes to tax relief.

These changes have been phased in over several years, but the final stage kicked in on April 6. Landlords will now receive a tax credit based on 20% of mortgage interest payments.

This is different to a few years ago when they could deduct their mortgage interest from rental income before calculating tax.

Changing tenant priorities 

If you are looking to let a property in the next few months, take time to reassess its major selling points. Do you need to change your marketing strategy?

Whereas, once proximity to public transport may have been the top drawcard, now the sunny courtyard or the large living area could be the real winner.

Even though many people will be returning to offices soon, flexible working is here to stay.

Expect more people to work from home at least some of the time – hence where they live will be more important to them than ever.

So, consider how you can make your property more appealing to someone who works from home.

Are there small changes you could make inside or out that would make it more marketable?

Ask us for advice about trends in Crediton.

A quick note

Last week the government finally released guidance on the finer details of the Electrical Inspection Condition Reports (EICR) system, which is due to start in England and Wales next month.

This was then promptly withdrawn due to “inconsistencies”. We’re keeping our eyes peeled for a revised version of the guidance any time soon.

Here at Helmores we want to help landlords get through the rest of 2020 and thrive in 2021 and beyond.

If you have any questions about the rental property market in mid Devon, get in touch.

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Five good news stories from the world of property

feelgood friday Helmores

It’s a Feelgood Friday Property Special this week! Check out our 2 minute read of good news property stories from around the globe:

Micro homes for rough sleepers

Six “micro homes” have been built on church land in Cambridge as part of an innovative project to help the homeless.

As well as getting a roof over their heads, rough sleepers who move into the self-contained pods will receive counselling and support.

The micro-homes, which are easy to relocate, will stay on their present site for three years.

After this time, they could be moved to a new location. Let’s hope we see more being done to help the homeless.

Eggs-citing design

Architects have designed a floating chicken farm. Yes, really. The three-storey creation will nestle on a concrete pontoon in a Rotterdam waterway, in The Netherlands. It will house 7,000 hens, an egg processing plant, and a cress farm.

So, what do the neighbours think?

As the chicken farm will go next to an existing floating dairy, we don’t expect them to have any beef with the plans.

Market rebounds

New figures from the Zoopla Property Index show house prices are on an upward trajectory.

Zoopla found house prices were up 2.4% year on year in May. It also predicts property prices in the next quarter will grow by between 2 and 3%.

Coastal dreams

New research from Rightmove shows that Whitby in Yorkshire is the most in-demand seaside location in the UK – up in popularity by almost 5% in a year. The figures are based on inquiries for properties available for sale in the area.

Whitley Bay, Tyne and Wear, was second, followed by Troon in Ayrshire, Scotland.

The most expensive seaside destination though remains Sandbanks, in Poole, where the average cost of a home is £1,243,364.

Back to business

Another positive sign that we’re all getting back to normal is that the Scottish housing market will reopen for business next week. Lettings and estate agents can open their doors from Monday (June 29). Viewings can also take place as long as social distancing measures are observed.

This follows the partial reopening of the housing market in Wales. Viewings can now take place at unoccupied Welsh properties. House moves can also go ahead providing the property has been vacant for 72 hours.

The world of property is emerging strongly after the lockdown, which is good news for anyone looking for a new home.

We want the people of mid Devon to know that we are optimistic about the future and determined to continue to serve our community. Whatever your property needs are, we’re here to help 🙂