Since 2001, UK average house prices have risen by an astonishing 187.2% across the UK, while in London the figure is 247.6%.  

Looking back at the people that bought in those first few years of the new Millennium, few of those buying or selling property in 2001 could have forecast the massive financial impact that their decision then would have on the rest of their lives.

In those years, there have been winners and losers, where some buyers have made hundreds of thousands of pounds and renters have paid out tens of thousands of pounds and yet been unable to buy their first home – but life is often not as simple as that, so in this article I wanted to discuss the matter further.

The average house price in mid Devon has increased by 170% to £314,700 in the last 20 years, a profit of £198,150.

Now of course these are average prices and don’t take inflation into consideration.

Yet even when adjusted for inflation, house prices have still risen by 97.9% in the last 20 years.

Characteristically, the longer a homeowner has owned their property, the larger the gain when they sell. Yet most of these profits are never seen by homeowners. It has never been money in the bank unless you sell up and downsize or move somewhere cheaper. Instead, these gains are re-invested back into the housing market when they buy their next home.

So, whether the gains are banked or tied up in their bricks and mortar, it looks like all mid Devon homeowners are in the driving seat. 

What about all the first-time buyers, priced out of the market and unable to get on to the property ladder?

Are the young losing out again?

Reading the newspapers you would think so, yet nothing could be further from the truth. In fact…

It’s 26.8% cheaper today to buy a house in Crediton compared to 2007

That isn’t a typo!

In 2002, 28.3% of a first-time buyer’s household income went on the mortgage payments. Today, that figure stands at 37.3%, yet in 2007, it was 51% … hence why it’s cheaper today!

Of course, for most young potential first-time buyers, the other largest barrier to home ownership is the matter of raising an adequate deposit.

Rising rents (and future energy prices) won’t help and will in fact make this problem worse, giving ambitious first-time buyers not much left at the end of the month to save a deposit for their first home. 

With soaring house prices, this means the amount renters need to save for their deposit is growing year on year.

For these annoyed renters, there is the unpleasant irony that if they could only get on the housing ladder, they would find themselves better off. They would spend a lower proportion of their monthly take home pay on keeping a roof over their heads. 

Some people in the press have suggested the older generation, with all the equity tied up in their homes over the last 20 years, should release some of the money and give it to their children or grandchildren to help them on the ladder maybe?

Reports in the press have also described many homeowners in their 60’s (and older) changing their plans to move home. Many were planning to downsize to release the tied-up equity in their home. That equity would either be used to invest in the bank to produce an income for them and/or to help their children (sometimes even grandchildren) on to the property ladder.

Yet with the interest paid by banks and building societies on any lump sum being very low, to many mature homeowners it hardly seems worthwhile making the move to downsize. This means many younger would-be first-time buyers are missing out on help from the Bank of Mum and Dad (or the Bank of Grandad and Grandma) with their deposit.

However, the problems caused by low interest rates could also be their saviour.

Many older homeowners have turned to Equity Release, thus allowing them to get hold of a share of the equity amassed in their property, in exchange for a tax-free lump sum of cash.

Cash that could be used to help with deposits for their children/grandchildren?

The mature homeowner then stays in their larger family home and helps their family buy a property.

Whilst I am not a mortgage adviser (and you must take proper advice from a qualified mortgage broker), equity release mortgages don’t have end dates and the interest payments are rolled up (until you pass away). This means that there aren’t any monthly payments.

The interest rate you pay is normally fixed for the mortgage and because interest rates are so low, that means the debt shouldn’t balloon up. And should you decide to sell in a few years’ time, you just pay back the capital, redemption fee and the small amount of interest accrued.

Now of course, that does mean there will be less for your offspring to inherit when you pass away.

Equity release mortgages though have had some bad press recently. In the past they were unregulated and pricey. Yet today, there is more protection for borrowers.

One answer to the growing interest debt is to pay part or all of the monthly mortgage interest charged, yet you must have the income for that.

You also need to take advice on how the equity release will affect your liability for nursing home fees and inheritance tax. Also, if only one person in your home is the owner of the property, if that homeowner dies, the partner who is not on the mortgage (because only owners can go on a mortgage) won’t have any rights to stay in the family home.

Finally, if you are planning to move, don’t just compare the interest rate, but the redemption charge for early repayment – some of them can be very high.

My advice – take professional advice and speak to your family and involve them. Yes, we have all built up some amazing equity in our Devon homes, and yes, there is potential to help the younger generations with that wealth. Just go in with eyes open and know all the facts, all the pros and all the cons – then decide what is best for you with all that information to hand.

What are your thoughts, as a mature homeowner or a first-time buyer, on this?
It would be good to hear from you.

Did you know 462 Crediton area homeowners are considering selling their home between now and the summer of 2023?

Reports in the press suggest 1 in 5 homeowners are considering moving home in the next 18 months.

This will change the dynamics of selling your home, meaning there are certain matters that you, as a homeowner, should do before placing your property on the market to ensure you get the best price, reduce the hassle and even more importantly, when you do sell, ensure the move actually takes place. Why is this important?

1 in 3 Crediton area house sales fall through between sale agreed and the keys being handed over

Also, nationally, the average length of time a property is taking from sale agreed to key hand over is 19 weeks … and the longer the sale takes, the greater the propensity for the sale to fall through.

So, if you are thinking of selling your home, here are 7 things you should consider (plus some tips for those homeowners currently on the market) …

1.   Get your ducks in a row

Although it may seem apparent, having everything in place for the time you come onto the housing market can really take weeks off the time between sale agreed and key handover and even avert the house sale collapsing. 

For example, if you have had any building works done on your house, ensure you have the relevant paperwork now. That could be ensuring you have the Completion Certificate from the local authority for that extension you had a few years ago. Yes, you had planning permission, but are you aware you need a Completion Certificate from Mid Devon District Council as well?

If you haven’t got the required building regulations or planning consent for any work (including changing your windows), that can really harm the price you achieve for your home, or it could even finish the deal altogether.

Also, if your home is old (say 150 years plus) or even listed, you should think about spending a few hundred pounds and get a survey done on your own house, especially if you have been in the house for more than 10 years.

This will highlight any issues that need to be rectified (and be shown to potential buyers) in case they start to nit-pick. If you need recommendation of a good Crediton chartered surveyor – drop me a line.

2.   Carpet ‘photo’ bombing

First impressions are everything, and you only get to make a first impression twice.

Yes, I said twice, once with the photographs and the second time when the potential buyers view your home.

They say a picture speaks a thousand words, so ensure your agent photographs the best rooms from the best angles. The most important photograph is the front shot of your home, so always ask to see the photographs before your property goes live on to the market to make sure they show your property in the best light possible.

The second ‘first impression’ is when viewers view your home. Often the thing that lets the side down here is your carpets. If your carpets are more than 10 years old, then seriously consider replacing them with something inexpensive with some decent underlay or give them a good professional clean.

In this Facebook world, your home needs to look as good as it can to appeal to as many Crediton buyers as possible.

3.   Make it a potential home for your buyer, not a shrine to you

There was a house in the East Midlands called “Disaldu” (as in “This will Do”) that had been on the market for four years with six estate agents. As soon as it changed its name, it sold in a week. Be careful about over personalising your property as that could be off-putting to possible home buyers. 

Try not to be too daring with styles and colour schemes in your bathroom and kitchens, as your buyer won’t want to spend another £25,000 changing your neon pink kitchen units to something a bit more mainstream.

Homebuyers often hate to change something which has just been finished but is not to their personal taste. Now I am not talking about magnolia everywhere as there is room for some flare, yet be aware it’s a fine balance between your personal tastes and making your home attractive and selling it in the largest mainstream market possible.

Finally in this section, is your home cluttered or untidy? Many people won’t be able to see past the jumbled house and overflowing bookcases. If you are unsure, drop me a message and I can pop round your home when I am passing for 5 minutes if you want an impartial opinion.

4.   Highlight the potential of your home – but not too much

If you were considering extending your home with a garden room, loft conversion or extension, then getting a local architect technician to draw you up some outline plans to demonstrate the development potential of your property could be worth spending a few hundred pounds on.

Yet at the same time, be careful not to extend to make your house more sellable. I have seen a handful of Crediton homes be over-developed (i.e. almost over extended), making the house too big for its plot. It’s all about balancing the house with the size of the plot. Again, if you are uncertain in any way, drop me a line and I can give you some impartial advice (even if you aren’t moving for another 12 / 18 months).

5.   Don’t let your garden grow on you

Since the lockdown began in spring 2020, our gardens have become one of our most cherished features. Homes with decent sized gardens have attracted a premium. However, over-fussy and poorly planned gardens can also be detrimental to the value of your home, rather than add value to it.

6.   Offices, offices, offices

Working from home could be here to stay for a few years. With this new age of homeworking, even if you don’t work from home, maybe set up a study area. It might even be worth investing in one of those office pods for your garden.

7.   Make sure the price is right

The bottom line is, if a property isn’t selling it probably means the asking price is too high. Yes, even in a market such as this …

30.0% of Crediton area properties have been on the market more than 3 months

Putting your home up for sale at too high an asking price is one of the most harmful things you can do as a seller. This approach regularly costs homeowners between 3% and 5% of their potential price agreed.

If you decrease your asking price at a later date in order to achieve a sale on your house, you probably won’t get what you might have done if it had been realistically priced from the beginning.

I am aware of a 3-bed semi-detached property in Crediton which, in the summer just gone, began with an asking price of £310,000 yet ended up selling for only £255,500. It should have achieved £269,950 with a £275,950 initial asking price (even worse, they missed out on the property of their dreams because that one, being realistically priced, sold before they dropped their own price).

The sturdiest and most important property market response is always in the first couple of weeks of exposure. Many homeowners waste this optimum sales time by being too hopeful on their asking price.

If you are on the market and believe you should reduce your asking price, be courageous with your reduction. Make one substantial change of at least 5%, not a series of salami price changes of a 1% here or 2% there.

So, if you are currently on the market and feel you aren’t getting anywhere, and think it could be your asking price, then again, drop me a line.

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 Crediton home and the mortgage payments you will have to make?

Since the summer, the Crediton property market has been booming, yet many commentators have cautioned that the momentum cannot last. With unemployment and the end of the Stamp Duty Holiday on 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 Crediton property market has defied the doom and gloom swamping the wider British economy in the last seven months. The property market has profited from the large swell in demand from better-off existing Crediton households trying to buy larger houses (as they are required to work from home) together with the added benefit of saving money from the Stamp Duty Holiday.

Crediton house prices are 1.6% higher than a year ago, making our local authority area the 328th 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 Crediton housing market.

What will happen to Crediton house prices?

The 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 36,300 workers in Mid Devon, 1,900 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 Crediton 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 1^st 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 Crediton homes purchased after the 1^st 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 Crediton 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 Crediton homeowners’ mortgage is £469.34 pm,

owing an average of £191,350.

Yet if interest rates rose only 1.5%, Crediton homeowners’ monthly mortgage payments would rise to £708.53 pm, and if interest rates were at their 50-year average, then the mortgages payments would be an eye-watering £1,379.85 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 Crediton 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.

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 homes.

Yet the Crediton 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, Crediton property prices seem to be doing quite well.

What happened to the Crediton 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 Crediton house prices if that had taken place and then what exactly has happened in the last four and half years …

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

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 Crediton homeowners who own detached homes would have made an average of £63,300 profit, a rise of 19.1% or a weekly profit of £243.46 – 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 Crediton since the Brexit vote…

• Crediton detached homes weekly profit of £243.46 per week
• Crediton semi-detached homes weekly profit of £155.00 per week
• Crediton terraced homes/town homes weekly profit of £111.54 per week
• Crediton apartments weekly profit of £56.92 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 Crediton homeowners see their homes.  With us cooped up during the lockdown and working from our dining room tables, the want and need of 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 Crediton property market in 2021.

Covid was a black swan event and the fallout from that, I believe, has changed Crediton 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 Crediton 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.

With the banks reducing the number of low deposit mortgages (i.e. deposit of 10% and below) since Covid-19 hit in the spring, this has meant that the number of Crediton first-time buyers has been decreasing quickly, meaning many of those would-be buyers wanting to make the first step on the property ladder are having to stay in the rental sector.

This has caused demand to grow amongst Crediton renters for larger homes to ride out Covid, as they hunker down for the long haul to wait for normality to return to the property market. This has caused…

Crediton rents to rise from £572 to the current £607 per month over the last 12 months, an increase of 6.2%.

Interestingly, the opposite is happening in Central London, where the rents tenants are having to pay has dropped by 3.8% in the last 12 months, as demand has dropped like a stone. It appears Central London tenants are looking to move out to the suburbs, in search of bigger homes, gardens and green open spaces. For example, the average rent for a 1-bed apartment in St. John’s Wood currently stands at a very reasonable £1,817 per month whilst a 2-bed apartment in Kensington and Chelsea is currently at an average bargain rent of £3,715 per month (yes, they might be low compared to last year, yet for us in Crediton, that still seems like a lot of money!). Also, there has been further downward pressure on Central London rents, as many Airbnb landlords have dumped their short-term holiday let properties onto the long-term rental market as the tourism in the capital has dwindled because of the pandemic.

This has been the sharpest drop in Central London rents since the summer of 2009, when the property market was still stumbling from the Credit Crunch.

This means there is a reverse of the trend of the 2010’s (2010 to 2018 to be exact), when initially the London property market was shooting up whilst the rest of the country was in the doldrums. Then, when the rest of the UK did start to rise slowly in 2013, London kicked on even further like a rocket … yet now it appears the opposite is happening.

Getting back to Crediton, according to the Land Registry property values currently stand 6.0% higher than a year ago, this is split down as follows:

• Detached Crediton homes 6.0% higher
• Semi-detached Crediton homes 7.0% higher
• Townhouse / Terraced Crediton homes 5.8% higher
• Crediton Apartments / Flats 2.2% higher

Yet, do remember, these figures do NOT take into account the prices paid by desperate buyers this summer, often paying top dollar to secure the property. This will only filter through in the figures released in the spring.

So, why are the banks curtailing the number of low deposit mortgages, meaning that first-time buyers must find a much larger down payment before they are able to buy their first Crediton property?

The reason is the banks are fearful of a house price crash in 2021 (although if you recall I wrote about that a few weeks ago and the reasons why that is less likely to happen). They too are afraid of the frothy nature of the property market since the end of the first lockdown in late spring. The bank is lending its own money to buyers and no mortgage lender wants to be holding an enormous amount of these types of high percentage mortgages if house prices fall in 2021, because the bank would be saddled with negative equity and repossession on their hands (and we all know what that did to the housing market in the late 1980’s and early 1990’s as repossessions rocketed).

This can quite clearly be seen in the pricing and availability of low deposit mortgages. As the Bank of England has reduced its base rate to 0.1%, in the last 12 months 10% deposit mortgages rates have actually increased from 2% to 2.8%. Also, when lenders have been offering 10% mortgages throughout the summer, borrowers have had only a 24-hour window to commit before the lender withdraws the mortgage product from the market because of over subscription. As with all economics, if demand is greater than supply, the price goes up. That extra 0.8% doesn’t sound a lot until you realise a first-time buyer would have to pay an additional £167 per month in interest payments on a 10% deposit mortgage, assuming they borrowed £250,000.

However, it’s not all doom and gloom for first-time buyers as there are embryonic signs that the 10% deposit mortgage market could gradually be returning to normal, as I have recently heard some lenders are taking up to a week for their 10% deposit mortgage offers to run out. Fingers crossed!

So, what does this all mean for Crediton landlords? Those Crediton landlords with properties with gardens and larger rooms will be seeing increased demand. The ability to have pets in the rental property is also an advantage, and depending on the property, can add a decent premium to the rent that can be charged.

One final thought though for all homebuyers in Crediton, be aware it’s going to be very challenging to get your house purchase through in time to meet the 31^st March 2021 stamp duty holiday cut off if you are starting the process in November. Make sure your lender and solicitor have the capacity to meet that deadline and when you are asked for information, you drop everything to provide it. The odd day delay here and there will mean the difference between you getting the keys for your new Crediton home before the end of March 2021 and saving thousands of pounds in Stamp Duty Tax … or feeling a fool from the 1^st of April 2021 and having to pay the tax!

So, wind the clock back to 2008 we had the once in a lifetime event of the credit crunch, we then had another once in a lifetime event with the Brexit vote in 2016 and now the mother of all ‘once in a lifetime’ events, Coronavirus in 2020 – three once in a lifetime events in the space of 3 Olympic Games!

The doom-mongers forecast that the British property market would drop like a lead balloon  on the scale of the 1989 housing crash (where property values dropped by 30.87% in a couple of years) but would be nothing compared to the tsunami that was Covid. Yet in the first 100 days of the property market coming out of lockdown, behavioural and economic changes mean that many Crediton homebuyers are now even more dedicated to moving home and the Crediton property market is doing quite well.

Going into lockdown, the effect on activity in the Crediton property market during those two months was expectable and predictable as it was placed in suspended animation during April and May. When the Crediton property market re-opened in mid-May, nobody predicted what happened next. Of course, many of us in the property industry estimated some release of pent-up demand from the Boris Bounce, yet nobody anticipated such a ricochet in activity.

This is particularly interesting when one considers GDP dropped by 20.4% in Q2 2020 (fascinating when compared to notable historic times when it dropped by 13.8% in WW2 and 16.7% in WW1), yet amidst the largest contraction in the UK economy ever in a single quarter, what wasn’t expected was an increase of potential property buyers and sellers wanting to move post-lockdown.

Some have cited this boost to the property market on a number of factors. Firstly, we have had the Stamp Duty Holiday, others have pointed at the never seen before 0.1% Bank of England base rates making mortgages cheap, then we had the furlough scheme which protected so many jobs and finally, the pent-up demand from the Boris Bounce.

Yet, when one actually talks with buyers and sellers, whilst all of them cite one or two of the above reasons, all of them mention and talk about how the lockdown has made them re-evaluate and reconsider how they want to live, their work-life balance and where they want to live. This is also reflected with tenants changing their requirements when looking for a property to rent (so Crediton landlords – be aware of this).

Demand for apartments in the centre of Crediton has eased off, whilst demand for property with a good-sized garden or other outside space has increased. One question we get asked all the time is also the broadband speeds, although they are quite decent in Crediton (the average broadband in our local Council area being 21.0 Mbps download and 5.2 Mbps upload).

So, with record numbers of Crediton properties coming on to the market – is it boom time for Crediton homeowners?

Yes, the Crediton property market is good, yet the number of people who have placed their property on the market has also gone up. Us estate agents have never been so busy putting property on the market and I feel sorry for Ken who puts up our for-sale boards – his poor wife hasn’t seen him in daylight for weeks!

But that does mean you are in competition with so many other properties on the market (the number of properties coming on to the market typically at this time of the year is about a third to half less). The Stamp Duty boost ends in March 2021, so that means you need to have found a buyer by November at the very latest. By overegging your asking price, to test the market, might mean you will lose out on this hiatus and could end up missing the boat!

The prices being achieved for the Crediton properties that have been selling have been fair and realistic and have stood up much better than many were originally predicting.

Yet as the country looks forward, given the ambiguous nature of the outlook for the British economy and the possibility that Covid-19 may be with us for a little while yet, I must implore Crediton property sellers to be realistic with their asking price so a greater number of you who want to make the move, are able to do so.