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£556,546 – ‘Wood’ You Pay That For a Crediton Semi-Detached House?

The value of an average Crediton semi-detached house has increased in value by £24,940 in the last 12 months, an increase in value of 9.5%.

Yet the costs of building a Crediton home have shot up even more in the last 12 months, meaning the price of Crediton new homes and any building works you do to your Crediton home in the coming months and years could be a lot higher.

The British house building profession is experiencing a building materials supply problem. Everything from cement to bricks, timber and roof tiles, plastic guttering, copper wire and pipe to insulation, even kitchen sinks have become scarce – and when people can find them, they are costly.

For example, looking at the timber industry, three-quarters of the UK’s building timber comes from abroad, so lockdowns around Europe put a restraint on the timber processing industries of Sweden, Lithuania and Latvia throughout 2020. In addition, building material supply chains were interrupted due to the application lockdowns imposed by their Governments, resulting in many sawmills in those countries restricting shift work to comply with their country’s social distancing rules. Some mills even stopped all work for eight weeks last year, meaning they were incapable of cutting, milling or treating timber, causing their existing stocks of building wood to run dry. 

Yet, whilst we were all in lockdown, everyone started doing DIY projects, so the public demand for building timber in the UK remained high, giving little opportunity for UK sawmills (let alone North-eastern Europe) to catch up and restock to the levels previously held before the pandemic.

Building timber costs 112% more than a year ago, steel RSJ’s are a lot more expensive because iron ore has gone up 120.1% whilst aluminium is up 56.8%, and copper is up 59.7%.

All the blame cannot be laid at the feet of the virus and lockdown. The ‘B’ word caused issues with supply at the start of the year. Building materials are a worldwide supply chain issue; this spring’s Suez boat crisis, when many boats were diverted around Africa (as the length of time the blockage was going to last was unknown), exacerbated the problem. All this has combined to make the cost of sending a 40ft container from China to Tilbury Docks £7,576 today, compared to £1,195 just before the crisis. Also, supplies of sand and cement are particularly low with massive demand from the large £98bn High Speed (HS2) rail project. All this combined is affecting many building projects, big and small, across the UK.

If an average Crediton semi-detached house had risen by the price of building timber in the last 12 months, today it would be worth £556,546, not the current £287,462.

RSJ (steel joists) take twenty weeks to arrive, compared with the typical five weeks, whilst plasterboard is being rationed with weeks of delays for the ‘good stuff’ and MDF wood, usually takes seven days to arrive; now it takes over a month. Roof battens need to be ordered a month in advance, whilst pre-lockdown they were commonly held in stock by every building merchant.

Demand for building materials has increased so quickly because many British homeowners are driving the explosion. Those people in safe jobs with little opportunity to spend money on foreign holidays and fancy restaurants decided to invest in their property and gardens. According to the Bank of England, this craving for home improvement has particularly exploded since the mature generation have started to be double jabbed (their savings accounts having increased by £180bn during the pandemic).

As I have explained in previous articles, these increases in the price of raw materials will fuel inflation, possibly affecting interest rates upward. An increase in interest rates will make a material difference to the value of Crediton property. To what extent? Please read my previous articles on the Crediton property market.

Please do share your stories of issues with builders and building materials over the last 15 months in the comments. I appreciate any stories you can provide to help others in Crediton.

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Is Crediton Heading Towards a House Price Crash?

Crediton house prices rose by 5.0% last month, according to the Land Registry.

This means the annual rate of house price growth in Crediton has increased to 12.6%.

Looking at the national figures, many people were concerned the UK property market was overheating as spring saw annual growth of 9.9%, the highest rate of house price growth documented since June 2007 (when national house prices were rising by 10.8% p.a.). It was only a matter of a few months later the Credit Crunch hit, and the average value of a UK home plummeted from £190,032 to £154,452 in 18 months, a drop of 18.7%.

Government economic measures such as the Furlough Scheme and the Stamp Duty Holiday have so far shielded the Crediton property market from the worst economic recession since 1709.

So, the question is, can this growth in Crediton house prices continue, or is this the start of a house price crash?

One thing is for sure, looking at the number of For Sale boards going up and turning to sold just as quick, shows this market is not maintainable for the long term. Most of the Crediton people looking to move home have brought forward their home-moves from 2022/3 to this year because of the Stamp Duty Holiday and the lifestyle choice of wanting a bigger garden/office space at home.

Nonetheless, the doom-mongers in the press say there will be a second wave of house sellers that will flood the Crediton property market in the autumn and winter when furlough ends. They believe many of the 3.4m people still on furlough will be made redundant when furlough finishes at the end of September 2021 forcing them to move home.

This was the catalyst for the house price slump in 2008/9 mentioned above, when many Crediton homeowners dumped their homes onto the Crediton housing market.

After all, many Crediton homeowners lost their jobs and had mortgages paying 6% to 7% in interest payments.

However, the devil is always in the detail. The industry groups with the highest take-up rates of furlough are the hospitality (public houses) sector, where 70% of staff are furloughed. 65% of hotel staff are furloughed, and 44% people in the creative arts and entertainment industry are furloughed. Most employees in these sectors are in their 20’s and early 30’s and are tenants, not homeowners. This is going to be more of an issue for landlords than homeowners.

And of those furloughed homeowners who do unfortunately get made redundant later in the year, looking at the last four most recent house price crashes, buyers were wrestling with significant declines in mortgage affordability. For example, back in 1988, average mortgage rates were 13.9% before that crash and in 2007 (the Credit Crunch crash) 6.5%. Whilst today, they are under 2%, meaning the mortgages are a lot more affordable, and most Crediton homeowners who get made redundant will be able to ride out the storm better.

But surely, if Crediton house prices are rising, won’t Crediton homes become unaffordable?

Well, with low-interest rates, this means Crediton homes are still relatively affordable. In 1989, the house price to earnings ratio was 5.4 to 1 (i.e. the average house was 5.4 times the average UK salary), whilst today that stands at 8.8 to 1. It’s no wonder some people are concerned there will be a house price crash (as there was in 2008 when that ratio hit 7.5 to 1).

However, it doesn’t matter what the house price to earnings ratio is …. it is what percentage of your income is required to pay your mortgage.

In 1989, 74.6% of your income was required to service an 80% loan to value mortgage on an average UK home (i.e. you borrowed 80% of the value of your house on a mortgage). In the 1990s that percentage dropped yet rose steadily over the next decade and a half, so by the time we got to 2008, that was an equally eye-watering figure of 61.6% of your income to service an 80% mortgage.

Today, it’s only 35.9% of your income to service an 80% mortgage because of low interest rates.

So, if the issue is not the affordability of houses, what is the problem for Crediton homeowners?

Interest rates!

Bank of England interest rates will affect what people pay on their mortgage (higher interest rates normally mean higher mortgage payments). Interest rates are used to reduce inflation, so if inflation rises, interest rates also rise to bring inflation back under control.

UK inflation has just gone through the 2% barrier, and I believe by the end of this year or early next, it will touch 4% or 5%. In normal circumstances, this would trigger the Government (or now the Bank of England) to raise interest rates. Yet, we had a similar scenario in the late 1980s/early 1990s with a spike in inflation to 8.5% due to a shortage of raw materials and labour, but this was soon sorted out, and inflation dropped quite quickly thereafter.

In the coming year, a shortage of raw materials might be an issue. If there is a shortage of raw materials (supply problems are being found in key items such as timber, concrete, aggregates and steel), this will fuel construction and manufacturing costs upwards.

Next, will there be a shortage of labour? Some say it won’t be an issue (as unemployment will be higher), yet there are certain sectors of the economy that have an imbalance of trained staff of specialised jobs or people not wanting work in that type of job in the first place.

For example, many hospitality and dining establishments are reporting a shortage of staff because they were often filled with hard-working European migrants. I have read reports of London restaurants advertising for chefs and waiting staff, who would have received 1000+ enquiries for such jobs pre-pandemic to only be receiving applications that could be counted on two hands this summer. The hospitality and dining sector was hit harder than most, having to stop trading during the three lockdowns and working under firm restrictions. This led to the majority of staff being placed on furlough (as mentioned above, 7 in 10 are still on furlough), which has prompted some to ride out the pandemic in their own country.  

The question is – will they return? If not, to entice them back restaurants will have to increase the wages they pay to attract the staff, which in turn will mean they will have to put their prices up (i.e. inflation). If businesses have to put their wages up and the cost of raw materials continues to rise, prices for everything will rise, and at this point, higher interest rates will kick in.

But how will increased interest rates affect the Crediton property market?

Thankfully, 91% of all new mortgages being written are fixed interest rate mortgages and 78% of all existing UK mortgages are fixed-rate (compared to 32.8% in the credit crunch) … meaning we won’t have so many houses being dumped on the housing market like we did in the Credit Crunch, because on a fixed rate mortgage if interest rates rise – mortgages don’t follow suit.

And that’s the key … unemployment combined with high-interest rates caused many Crediton homeowners to put their property on to the market in 2008/9. Tied in with curtailed demand for property, because it was really difficult to get a mortgage (that’s why it was called the Credit Crunch) … we had an oversupply and subdued demand of Crediton homes – causing house prices to drop by 16% to 19% depending on what type of property you owned.

So, a good bellwether and indicator on what will (or will not) happen to Crediton property prices is the number of properties for sale at any one time.

There are only 49 properties available to buy in Crediton today, low when compared to the 14-year average of 97 properties for sale in the town, whilst at the height of the Credit Crunch, there were 213 properties for sale at one point in Crediton.

As we look to the future, if you want a crystal ball of what will happen to the Crediton property market … you won’t go that far wrong by getting yourself on the property portals and seeing how many properties are for sale.

These are my thoughts … what are yours?

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Crediton Buy-to-Let Landlords Owed £127,515 in Unpaid Rent Rogues or Saviours?

There is no getting away from the fact that the rise in the number of buy-to-let properties in Crediton has been nothing short of astonishing over the last twenty years. As a result, many in the press have said Britain is a broken nation, with many twenty and thirty-somethings unable to buy their first home. The press has named this group ‘Generation Rent.’

Crediton landlords have been accused of scooping up all the smaller Crediton properties for their buy-to-let property empires. Others blamed the Government (of both persuasions) for pouring petrol on the buy-to-let fire for giving landlords an unfair advantage with the way buy-to-let has been taxed in the past. Many have said these landlords have priced out Crediton’s ‘Generation Rent’. Many say they are rogues, and you can see why there is little sympathy for landlords, especially as…

Crediton landlords receive £6,923,904 a year in rent – easy money or what?

So, as we come out of lockdown, I want to make a stand for Crediton landlords and talk about the great work they have been doing during the pandemic.

Since lockdown, it has been (almost) illegal to evict a tenant from private rented property. Yet, in the last few weeks, this ‘ban on evictions’ has begun to be eased, making some commentators forecast a ‘tsunami of homelessness’ as landlords ready themselves to kick out the tenants who cannot pay their rent.

You might say they can afford it, yet I need to highlight an often-untold story in the massive numbers of Crediton landlords who have co-operated with their Crediton tenants to evade eviction.

The personal finances of some Crediton landlords and tenants have been ruthlessly strained during the last 16 months — something that is going to have ramifications on the back pockets of both landlords and tenants, as well as the attraction of being a buy-to-let landlord (more of that later).

55 Crediton tenants are in arrears with their rent to the tune of £127,515.

That’s money these landlords need to pay their mortgages with and even to live off themselves.

The eviction ban was imposed in March 2020 and the Government has expected private landlords to stand the cost of their tenant’s rent if they could no longer pay. It was estimated over 1 in 5 landlords with mortgages had requested a mortgage payment holiday in 2020. Thankfully, that now stands at 1 in 100 as most Crediton landlords with shortfalls in rent have been using their own personal savings to cover the mortgage payments.

I have seen so many landlords giving their Crediton tenants rent breaks and discounts to help them through these times. However, most landlords I talk to acknowledge that it is better to have a tenant paying something rather than a tenant paying nothing, hoping that total rent will start flowing as the economy recovers.

Going into the pandemic, 1 in 25 Crediton tenants were in arrears, yet that now stands at 1 in 11.

So, are we going to see lots of evictions? I would go as far as to rebuff the idea that we will see a rush to the courts of landlords to obtain possession orders now the eviction ban has been lifted. I have always viewed evictions as a last resort.  

Before the pandemic, it took about 12 months for courts to hear rental repossession cases, so this backlog will be nearer two years (if not more). Nonetheless, the threat of a County Court Judgement (CCJ) often makes tenants pay up as it will demolish their credit rating, making it very challenging for them to rent another home.

I feel for those Crediton tenants under furlough or reduced hours as they have the quandary of wanting to reduce their outgoings by moving to a cheaper rental property, yet whose rental deposits will be sacrificed to cover their rent arrears. However, some have said that because house prices have exploded during the last 16 months, Crediton landlords should write off their tenants’ arrears as a goodwill gesture.

The issue is, 97 Crediton landlords only have a single property for rent, so the arrears would have to be funded by their personal savings.

For them, the pandemic experience could be the incentive to sell up for good.

A National Residential Landlords Association survey found around a third of all landlords were now more likely to sell their buy-to-let properties altogether or sell some of them. This would mean fewer properties for tenants to rent, thus driving up the rent.

According to government and industry data, evidence suggests that a tenant who rents a property directly through a landlord and not through a letting agent is between two and three times more likely to go into arrears of 2 months or more. Is this because tenants know that private landlords who advertise directly for tenants on Gumtree and other platforms don’t carry out the checks letting agents do on them?

Many of those landlords are switching the management of their property to an agent, and for those landlords sticking with self-management of their property, there is circumstantial evidence they are starting to become a lot pickier when starting new tenancies. Even though illegal, spurning tenants on benefits is woefully all too common. I also worry there could be a stigma about renting properties to self-employed people because of the erratic nature of their income.

Looking into the future, I envisage a growth in the use of ‘rent guarantor contracts’, whereby the tenant is called upon to provide a 3rd party person to pay the rent if the tenant doesn’t. These are pretty common for student lets and those on certain benefits, and it wouldn’t surprise me if these are used more often for self-employed tenants and regular professional lets.

That is why I believe Crediton landlords should be celebrated … most of them have been saviours. These are my thoughts – what are yours?

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Your Great-Great Crediton Grandfather Would Have Only Paid £378 7s 7d for His Crediton Home in 1871

Would it surprise you even more when I said the ratio of house prices to wages are still lower today when compared to 1871? Yes, you read that correctly, as a proportion of average wages British house prices are 17.6% proportionally cheaper today than they were in 1871.

I wish to talk about the last 150 years of the British property market and later in the article, the Crediton property market. I will also touch on why, before the 1900s, buying a home in Crediton was considerably more expensive than today and why that changed.

So, let’s look at some interesting stats to get us started:

  • In 1871, each house was occupied by an average of 5.33 people (i.e. for every 100 houses, 533 people lived in them), whilst today that stands at 2.39 people per house
  • In 1871, there were 4.5 million properties in the UK, whilst today that stands at 27.9 million.
  • In 1871, the weekly average wage was 13s 8½d (68p), whilst today it’s £585.50
  • In 1871, only 20% of people owned their own home, whilst today its stands at 65%

I stated in the first part of the article it was more expensive to buy in the latter parts of the 19th Century than today. It may only be of historical interest, but back in 1871, the ratio of average house prices to average wages was 10.5 to 1 (i.e. the average house was worth ten and half times the average person’s wage), whilst today it stands at 8.8 to 1.

Interestingly, for the next 45 years, that ratio went on a downward trend relative to wages and only stopped falling after WW1, where the average house was worth only 2.2 times the average wage. This made houses more affordable and set the foundations for the homeowning passion we Brits have today.

So why did this happen, what can we learn from it and what does it mean for Crediton homeowners and Crediton landlords?

There are three significant drivers that made property a lot more affordable between 1871 and 1911: the Victorians built more property, made them smaller and people’s wages rose significantly.

  • In the 40 years between 1871 and 1911, the number of properties in the UK rose from 4.5 million to 8.9 million. To give you some perspective, there were 18 million properties in the UK in 1981. If the UK had grown by the same rate between 1981 and today that was experienced between 1871 and 1911, there would be 35.6 million households in the UK (and not the 27.9 million mentioned above).
  • In 1871, the average plot size of a property was 0.23 acres, yet by 1911, that was down to 0.06 acres (or a plot of 72ft by 40ft). This came about from building smaller types of property (i.e. a change away from larger Georgian detached houses towards the infamous rows of Victorian terraces), and a downshift in the average size of houses within each category.
  • The average value of property dropped by 26% between 1871 and 1911, whilst wages rose by 85% over the same time frame.

So, by 1911, the average Crediton property had dropped in value from £378 in 1871 to £281.

N.B. – you might have noticed I wrote £378 in a slightly different way in the title of the article. Up to 1971, a pound was split not into 100 pence but 240 pence. There were 12 pence in a shilling and 20 shillings (or 240 pence) in a pound. It was expressed in the form £sd and spoken as “pounds, shillings and pence”. I dropped that into the title as it’s the 50th anniversary this year of when the UK decimalised its currency (younger readers – do google the story – it’s a fascinating topic).

So back to the property market and at the end of WW1, four in five people still rented, virtually all from private landlords. Politicians were concerned about the poor living standards of people’s homes, and this led to the ‘homes fit for heroes’ 1919 Housing Act which delivered subsidies for local councils to build council houses. The average value of a Crediton property in 1922 was £442.

The 1930s – By 1930, the average value of a Crediton property stood at £558. With the country building a third of a million houses per annum, interest rates fixed at 2% and hardly any planning regulations, supply of property was outstripping demand, so the average Crediton home dropped ever so slightly in value to £516 by 1938.

The 1940s – With the bombing of many towns and cities and housebuilding being stopped because of the war, this created a perfect storm to increase house prices after the war. By 1947, the average Crediton home had risen in value to £1,725 because just as food was rationed during and after the war, so were building materials. Builders could spend no more than £350 on building materials for a new home (and that lasted until 1954).

The 1950s – The ’50s were all about building council houses – a quarter of a million of them each year. By 1959, the average Crediton home had risen steadily to £2,393.

The 1960s – This decade saw even more houses being built in the UK, with an average of a third of a million houses a year being built. Crediton is full of 1960’s council houses and now even more owner-occupied housing, meaning by the end of the decade Britain had as many homeowners as renters. The average Crediton house had risen in value to £4,389 by 1969.

The 1970s – We experienced the first boom and bust housing bubble in the early 1970s with house prices rising by over 30% a year in the early years of the decade (so the current 10% a year is child’s play!) but prices dropped in 1974. They recovered quickly in the following years, not because of increased demand but due to hyperinflation, making the average Crediton house price rise to £22,321 by 1980.

The 1980s – This was the decade of council tenants being able to buy their own homes, although not many people know it was an idea from Labour. They decided against the idea, but it was seized upon by the Tories, who made it the cornerstone of their 1979 election manifesto. The property market helped improve the economy, and by 1988, Crediton property values increased to £46,687 (only to drop by 32% a couple of years later).

The 1990s – The housing market crash of the early 1990s was painful for all, exacerbated by mortgage interest rates being raised to 15% on Black Wednesday (16 September 1992) and left there for 12 months. Unemployment went from 1.5m to 3m for the second time in ten years, and many of those homeowners who had taken out large mortgages in the late 1980’s housing boom could no longer afford the repayments because of the high interest rates, meaning repossessions went through the roof. The crash also made builders nervous, and they only built 150,000 houses on average a year in this decade. Yet, by the mid-1990s, things started to improve. So much so, the average Crediton home was worth £87,520 by the turn of the millennium.

The 2000s – The decade of cheap mortgages and the rise of Buy to Let, together with a severe drop in the number of new homes being built, contributed to the UK’s third big housing bubble since WW2. The average Crediton house price more than doubled to £234,374 by 2008, before the Credit Crunch brought the boom to an end, and a year later (2009), the average Crediton property had dropped to £208,170.

The 2010s – The property market started to come back to life in the early 2010s with property values steadily rising throughout the decade, yet builders were only building around 135,000 new homes a year. It also might surprise you that by 2015/6, the number of homeowners was starting to rise quite significantly, meaning today, as we enter the 2020’s decade, the average value of a Crediton property now stands at £283,115.

So, now we are back to 2021.

Yes, your Great-Great-Grandfather might have been able to buy their Crediton house for a shade over £378 in 1871. Taking inflation into account since 1871, that same Crediton house today would be £45,578.63, yet if his wages had increased by inflation at the same rate, the average wage today would be £81.91 per week, not the current £585.50 per week.

I appreciate there are plenty of other factors involved with this topic, such as the cost of renting, raising a deposit, changing lifestyles and the biggest point, the cost of borrowing money on a mortgage.

All this begs the question, what does the future hold for the Crediton property market?

It’s obvious since the mid-1980s, house prices have sustained a period of impressive growth (even withstanding a couple of property crashes). The Bank of England has gone on record to say that much of the rise in average house values, comparative to wages, between 1985 and now can be seen because of a sustained, dramatic and consistently unexpected decline in real interest rates and additionally concludes that: ‘An unexpected and persistent increase in the medium-term real interest rates will generate a fall in real house prices.’

Cheap mortgages and a lack of building have created this situation. So as long as interest rates don’t go back to their long-term average of the 5% to 7% range or the Government decides to increase building new homes to half a million a year (from the current 240,000 per year) … things will carry on as they are in the medium to long term.

These are my thoughts … I would love to hear any stories of your family buying property in the late 19th Century or early 20th Century and what they paid for it, together with the affordability of Crediton property and the future of it.

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23.6% of Crediton Landlords Could Be Fined £5,000 Each with New Energy Regs

… whilst possible new mortgage rules for Crediton homeowners would make it harder to sell their draughty old properties

As the UK has committed to a legally binding target to be carbon neutral by 2050, one of the biggest producers of greenhouse gasses are residential properties. To hit that target, every UK property will need to achieve a minimum grade of C on their Energy Performance Certificate (EPC) by 2035. The issue is that two thirds of UK’s homes (around 19 million households) are rated D or below.

To help the country hit its targets, in 2018 and again in 2020, the EPC requirements altered for buy-to-let landlords, meaning they couldn’t rent their property unless it had a minimum energy rating of ‘E’ or above.

And now for homeowners, the Government are considering forcing banks and building societies to publish the average EPC rating for all the homes they lend money on and if the banks and building societies don’t hit the Government EPC targets, they will be fined (meaning those homeowners with low energy efficient properties will have to pay much more for their mortgages).

So, let’s look at these two issues, first regarding Crediton landlords and their EPC’s, so you know what your lawful responsibilities are and what else landlords can expect in the future.

Since October 2008, all UK rental properties have required an EPC, yet from April 2018, the Minimum Energy Efficiency Standards (MEES) regulations regarding EPCs have also required all rental properties’ new tenancies and renewals to have a minimum EPC rating of ‘E’ or above. However, since April 2020, the MEES regulations have applied to all existing tenancies as well, meaning if your Crediton rental property doesn’t have a valid EPC rating of ‘E’ (or above), it is illegal to let out.

379 rental properties in Mid Devon are currently let out with a ‘F’ or ‘G’ EPC rating, making them illegal to rent out and each landlord liable for a £5,000 fine – they just don’t know it

The EPC lasts for 10 years and gives an energy rating of between A – very energy efficient to G – very energy inefficient. So, if you find yourself, as a Crediton landlord, with a rental property that has an EPC rating of below ‘E’, what are your options?

To start with, you have a responsibility by law to carry out the changes suggested in your EPC report to improve the energy rating of your property. The law states that landlords should spend up to a maximum of £3,500 on the energy efficiency improvements set out in the EPC. Yet, if by spending £3,500, that improves your EPC rating but doesn’t mean you reach the ‘E’ rating, whilst you will still be expected to improve the rental property and spend the money, you will be able to apply for a high-cost exemption via the PRS Exemptions Register and still let the property (even though you will have an EPC rating of F or G).

It must be noted that some properties are exempt from the MEES legislation. If your property is listed or protected and the improvements would unacceptably alter it, it is exempt from EPC requirements.

Once your EPC has been registered, it is then valid for ten years. Because the EPC regulations came into force in 2008, there will be some rental properties that had their initial EPC but not had it renewed on its 10th birthday. Now as a Crediton landlord, you do not need to get a new EPC if your EPC reaches its 10th birthday, unless that is, you are starting a new tenancy with new tenants. The issue is …

of 5,091 rental properties in Mid Devon, 1,204 of them have an EPC that is 10 years or older which has not been renewed.

If you are a Crediton landlord, your EPC is 10 years old (or older) and your tenant leaves, you will require a new EPC, because if you don’t, you will be fined £5,000. If all those buy-to-let landlords in our local authority area ignored that law, accumulatively they could be fined £6m.

Secondly, what about Crediton homeowners and the mortgage companies?

Under new legislation being considered, homeowners living in poorly insulated and draughty homes (meaning they would have a low EPC rating) could pay more for their mortgages and lose value from their Crediton homes under Government plans to prioritise mortgages on properties with high energy-efficiency ratings.

There are 8,521 properties in Mid Devon with a rating of ‘E’ or below

The Department of Business (DoB) wants to force mortgage providers to classify the energy ratings of their borrowers’ homes and put the average into a Government league table, which will be presented on the DoB’s website. Mortgage providers will then get time sensitive targets to improve their average EPC scores, punishable by fines, meaning this would increase the mortgage costs for those with low energy efficient homes.

Maybe it’s time you looked at your EPC certificate and find out how you can improve your rating? If you are a Crediton landlord or Crediton homeowner, and would like to chat about your legal position or would like a copy of your EPC emailing to you, don’t hesitate to drop me a line and I will be more than happy to discuss your personal circumstances further, without obligation.

So, is it right Crediton landlords should have to fork out to improve the energy performance of their rental property, yet they aren’t the ones benefiting? Also, should Crediton homeowners have to have higher mortgage payments in the future because they have a low energy efficient home?

Let me know your thoughts.

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Will the Crediton Property Market Continue to Boom?

All the signs are that the Crediton housing market is sat on good foundations, yet one key hazard could still scupper the market.

‘UK Property Prices Rising at Record Levels’ is the headline of many newspapers. In the last few weeks, the Halifax reported they had grown by 6.5% in the last 12 months, whilst the Nationwide said 7.1% and not to be outdone, the Government’s own Land Registry said 8.6%. Nothing new there then you might think, don’t UK house prices always increase?

Actually, they don’t, as many Crediton homeowners will remember 2009, when they dropped by 19%. Also, some more mature Crediton homeowners will remember the early 1990’s where house prices dropped just over 40% over 4 years (after the 1989 property crash). So, the increase in UK house prices over the last 12 months has mystified all the forecasts made by most economists as …

house prices were forecast to drop during the pandemic because during the previous six UK recessions experienced since WW2, house prices have always fallen sharply in real terms.

Yet 2020 was different with house price growth increasing at its highest rate since 2014 as the substantial Government support programmes (including Bounce Back Loans, grants and furlough) has mollified the hit to household incomes. Add to that the pent-up demand from the Boris Bounce, all the people working from home wanting an extra room for an office and therefore needing to move, plus the stamp duty holiday, with the cherry on the cake of 0.1% Bank of England interest rates keeping borrowing affordable. This has meant …

Crediton property values are 9.6% higher than a year ago.

Yet the affordability of property is a big issue going forward. By the time of the height of the last property boom in 2008, the national ratio of average property values to earnings had risen from 5.1 in 2000 to 8.8 (i.e. the average house price was 8.8 times the size of the UK’s average person’s annual earnings). We then had the property crash in the proceeding years, and the ratio dropped to around late six’s/early seven’s. However, over the last few years, the ratio has been steadily rising and now with the recent growth in demand for property (the five reasons mentioned in the previous paragraph), the ratio has now smashed past nine. Looking locally …

the ratio of average property values to earnings in Crediton as a comparison was 5.1 in 2000, rising to 9.5 in 2008, dropping to 7.8 the year later when the Credit Crunch hit, and now currently stands at 9.4. 

So, are we heading for another house price crash? Maybe, maybe not – because the House Price to Earnings ratio only tells us part of the story. Another indicator of the property market is mortgage affordability, which measures the proportion of mortgage payments to average incomes. For all mortgage holders, in 2015, this stood at 24.13% and today it is only just above the national long-term average of 25%, demonstrating that property is still affordable.

Yet, the life blood of the property market are first-time buyers. The long-term average percentage of income which goes on mortgage payments for first-time buyers is 33%. Just before the 1989 property market crash, this stood at 54%. Whilst just before the 2008 property crash, it reached 49%. Today, it stands at 31.7% (and the reason it’s so low, even with record high property prices, is low interest rates because when mortgage interest rates are low, this permits people to afford larger mortgages, which enables them to bid up house prices).

So why aren’t more first-time buyers buying more homes? Well in fact they are buying more homes. At the turn of the Millennium, just over half of 25yo to 35yo were homeowners and by 2014, this had dropped to just a third, although since then it has increased to 41%. Now with the reintroduction of the Government backed 95% mortgages in April, this demand will continue further.

Once furlough ends, unemployment will doubtless rise in the following 12 months, yet the economy is more than likely to be in a boom phase, so by the spring/summer of 2021, the unemployment rate should start to fall.

So, does everything look great for the Crediton property market?

Before you get the Champagne out, there is a cloud on the horizon – the possibility of higher interest rates.

Undoubtedly, for the next few years, interest rates will not go up (and if they do – it will only be nominally). However, down the line it may be a different tale. Interest rates are used to control a number of economic factors, one being the currency and secondly inflation.

As many suggest, if we get an economic boom in the next 12 to 18 months, as we come out of lockdown, this will put upward pressure on the price of goods and services. Normally, when prices go up (inflation), to ensure that inflation doesn’t get out of control, interest rates are normally increased to dampen down the inflation.

So, will interest rates rise? Undoubtably they will. Crediton homeowners and buy-to-let landlords should seriously consider protecting themselves with fixed rate mortgages (yet 3 in 10 mortgagees are still on variable rate mortgages!). I believe we will see some inflation in the order of 3% to 5% in the coming 24 to 36 months, yet the interest rates won’t be enabled to bring it down. We had a similar case in the early 2010’s when we had a mis-match of demand and supply of goods, and inflation spiked to 5%, before returning back to its long term 2% average quite quickly thereafter.

The Chancellor will also encourage some inflation to reduce the ‘real’ cost of the Billions he has borrowed because of the pandemic, yet won’t want to see interest rates increase to take the cost of the borrowing upwards.

If you are considering moving home or buying/selling a buy-to-let property in Crediton in the next 12 to 18 months, and want a chat about your options, don’t hesitate to drop me a line.

Finally, these are interesting times ahead – I would love your thoughts on this matter. Please do share them in the comments.

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Crediton Buy-to-Let Property Market Going into Crisis?

…as Crediton first-time buyers now only need a 5% deposit for a mortgage.

Crediton landlords, sell your property portfolios, your tenants will soon be leaving in droves as they buy their first home with the new 5% deposit mortgages backed by the Government’s new mortgage-guarantee scheme revealed in March’s budget! These 95% mortgages are to be supported by the Treasury, lessening losses for mortgage lenders should the borrower be incapable of repaying and get repossessed, as the Government want Generation Rent to turn into Generation Buy.

This sounds like the death knell for buy-to-let investment in Crediton as many tenants will soon be buying their first home – or is it?

It’s true that on first impressions it might look like many Crediton first-time buyers will now be leaving their rental properties in their droves with this new low deposit mortgage scheme. However, these potential Crediton first-time buyers are facing four big issues which will inhibit their ability to take advantage of the mortgage scheme, meaning many will continue to rent.

Firstly, the mortgage rate for 95% mortgages has increased. The lowest five-year fixed-rate mortgage with a 5% deposit today (with Barclays) is 3.45%, up from 2019’s best rate of 2.75%. That doesn’t sound a lot, yet it makes a massive difference to the monthly mortgage payments (as you will see below).

Secondly, due to pent-up demand post lockdown and the stamp duty holiday, this has increased demand for Crediton property, placing upward pressure on Crediton property prices which has made it problematic for first-time buyers to get on the Crediton property ladder. This has meant…

the average price of a Crediton first-time buyer property has risen from £227,786 to £233,033 in the last 12 months…

and in turn this means, Crediton first-time buyers have had to save an additional £262.35 for their deposit to keep up with the house price increase. That means…

the monthly payment on a 30-year mortgage for a Crediton first-time buyer has jumped from £883.42 per month in 2019 to £987.93 a month today, an increase of £104.51 per month.

The third issue is demand for Crediton first-time property from buy-to-let landlords is surpassing supply, adding further fuel to the fire of driving up prices. Finally, the fact that most Crediton first-time buyers are of the younger generation and it’s the younger workers that have been most at risk of unemployment or salary cuts during the economic crisis.

 5 Year Fixed Rate – 20195 Year Fixed Rate – 2021
Purchase Price£227,786£233,033
5% Deposit Required£11,389£11,652
95% Mortgage Borrowed£216,397£221,381
Annual Interest Rate2.75%3.45%
Mortgage Length (in years)3030
Mortgage Payment per Month£883.42£987.93
Sum of Mortgage Payments over whole mortgage term£318,031£355,656
Total Interest Cost over the whole mortgage term£101,635£134,274

You might say things will change in 2022 but would it surprise you that 95% mortgages have been available to first-time buyers since the summer of 2010 and were only withdrawn during the first lockdown in 2020?

Since 2010, even with ultra-low interest rates, the number of private rented properties in the UK has grown by 580,000 households from 3.8m households to 4.4m households and will continue to grow, let me explain why.

The notion that buy-to-let property is a strong long-term investment has not altered with the pandemic. Since 1930 with the all the crises we have had with WW2, the Oil Crisis, 3-day week and hyper-inflation in the 1970’s, Crediton property has been a hedge against inflation and in addition, delivers a decent income yield of 5% and upwards. Not bad when compared to the 0.5% with a savings account (if you are lucky).

It is a fact that those landlords that see buy-to-let investment in Crediton as a long-term strategy will win.

It is certainly the case that I am starting to see an exodus of the ‘amateur landlord’, leaving more professional landlords who see ‘landlord-ing’ as a business, not a game. Those long-term Crediton landlords can see through the present predicament as they have a long-term buy-to-let investment mindset.

Many Crediton landlords are intensely aware that demand for high quality private rental properties in Crediton is only going to flourish as a consequence of the pandemic; whilst not forgetting that demand presently exceeds supply. Also, those same Crediton landlords know that a responsible approach to their tenants with regard to condition and repairs, is a key to ensuring the rent keeps flowing in with minimal void periods.

Finally, even though Crediton house prices are, on average, on the up, there are still some bargains even in this market. By doing their homework and working with an agent like myself, these savvy Crediton landlords are paying reasonable prices, thus giving them a sturdier rental yield and the ability for future capital growth.

If you are a landlord, as my clients all know, I am here to help and guide landlords on their long-term investment strategy. I therefore extend this offer to all Crediton landlords, irrespective of whether you manage your property yourself or use one of my excellent competitor agents in Crediton, I am here to help.  

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Panic Buying in the Crediton Property Market?

Would it surprise you that there are 42% fewer properties for sale today in Crediton (EX17) than a decade ago? Property values are much higher than a decade ago and the property market at the moment in Crediton is on fire. In all my years as an agent, I have never seen it like it is at the moment. Many people are saying it’s reminiscent of 1988 when dual-MIRAS relief was abolished by Nigel Lawson, as people are paying top dollar for property, because they are buying property like there is no tomorrow.

70.8% of properties on the market in Crediton are sold stc

In a ‘normal property market’, that figure would be between 30% to 40%. There is no rhyme or reason behind it because it’s not as if we are going to run out of property to sell (unlike the panic buying of loo rolls last year in the supermarkets). With such a buoyant Crediton property market, being adept to state what your Crediton property is worth is exceptionally problematic.

This is further exacerbated by the lower-than-average properties on the market at the moment. To give you an idea of the issue…

there are 130 properties for sale in Crediton today, compared to 224 a decade ago.

When there aren’t many properties on the market, some estate agents, to gain your instruction, will value your Crediton property by giving you an over inflated suggestion for the asking price. Why do they do that when the considered wisdom is estate agents only get paid once they sell it?

Well would it surprise you that many (not all) estate agents pay their employees a bonus to put your property onto the market and then pay a further bonus when they get you to reduce the asking price? Some estate agents know the fastest way to get your property to market is to be optimistic on the asking price to secure your property for sale, then work on you to reduce your asking price after it has been sitting on the market for a few months.

Nothing wrong with that you might say, I want to get the most for my Crediton home (and it is indeed the job of the estate agent to get the best price for their client). If I believe it is worth testing the market at a slightly higher asking price, I will suggest that, yet will always explain my thinking and if we have over cooked the asking price, we can swiftly realign it after a couple of weeks.  

Yet because many estate agents are disposed to suggest over inflated asking prices to the house seller just to secure their business (i.e. overvaluing) but not manage the property for month and months … this in turn causes Crediton properties to sit on the market and not sell.

In the best property market for 20 years, 18% of properties for sale in Crediton have been on the market for 6 months or more. Overvaluing is widespread among Crediton estate agents.

Most Crediton homeowners will ask three or four estate agents to value their Crediton home and take the middle figure when they want to sell. Yet, if all (or most) of your Crediton estate agents are over optimistic and they all give you a ‘gilded lily’ price to secure your instruction to sell your home (i.e. overvalue), then that middle figure will be too much.  Most Crediton estate agents know they don’t win the business (i.e. secure the listing) if they tell the homeowner what they don’t want to hear.

So, what is the risk of overvaluing?

There is a potential massive cost to putting your Crediton home on the market at too high an asking price. Your estate agent will tell you that your Crediton home is worth a certain figure and then lock you in to a 16-week sole agency agreement (sometimes longer) which you cannot get out of early. If you are getting around two or three viewings a week, and the pictures and marketing material are half decent, then your pricing is about right, meaning in this market you should be sold (subject to contract) within a month to six weeks.

Yet, if your Crediton home has an over optimistic asking price (i.e. it is overpriced), you might only have a handful of viewings in a month and no offers. As the weeks and months go by, your overpriced Crediton home makes similar homes to yours (i.e. your competition) look really good value for money. That’s when you will get the price reduction call from the agent.

How many times have you seen a property that has been on the market a while and you have wondered what’s wrong with it? Also, to add insult to injury, the portals tell you how long a property has been on the market, adding weight to that argument. 

The longer your property stays on the market, the desirability of your Crediton home drops.

You will end up selling your Crediton home but only after a handful of price reductions, yet at what cost? Firstly, in those lost months, you would have missed out on many properties that you fell in love with, yet couldn’t buy because your home was languishing on the market with no interest (this is backed up by consumer champion Which, who said that if you have to reduce your asking price by 5% or more, it adds an extra 64 days to the sales process).

Secondly, you will end up selling your Crediton property for less than if you had placed the property on the market at a realistic asking price from day one (again backed up by Which). This is because buyers think there is something wrong with it, so as the homeowner gets fed up, they accept a lower offer to get their property sold.

Finally, because you take less for your property, your choice of the next property to buy will also be curtailed, meaning your dream home move might be more of a nightmare?

The best advice I can give you is to search the portals, make sure you look at properties that are also sold stc (which can normally be found by clicking on the filter section of the search on the portal). Then ask a couple of straight-talking trusted friends to do the same and compare your property to the competition that is both on the market and sold (stc).

Compare their locations, number and size of the rooms and size of plot and ask them where they see your property against those. Carry out the same exercise yourself (of course you will be slightly biased) and take a bellwether from all those figures. Then ask a number of Crediton agents to value your property and if you feel any are being overly optimistic challenge how they get to their figure and get them to qualify their belief in that figure – is their valuation realistically achievable in the market at the time? As we all know markets change and property prices go up and down and ultimately a property is only worth what a buyer will pay for it – this all requires careful consideration.

I can assure you most of the estate agents in Crediton are decent people, who want to do the best for you. All I ask is you do your homework and look at the sale of your Crediton property through the eyes of a cold-blooded buyer.

If you would like to chat about selling your Crediton home do give me a call.

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Over 1 in 5 Crediton Properties Being Sold with No Chain

So is it a good idea to rent in between moving home, to be chain-free?

Moving home is said to be the third most stressful thing you can do, so if you can do anything to reduce that stress, so much the better? When buying your next Crediton home, being chain-free can certainly reduce your stress and offers many advantages over other buyers (and some disadvantages).

So, what is a chain? A property chain is made when there is a line of home buyers and home sellers linked through their property transactions e.g. a Crediton first-time buyer purchases a property, the sellers of that property then buy another property, and those sellers then buy another property, so on and so forth. Each home sale and purchase are reliant upon the success of every property in the so called ‘chain’. This means if there is one hiccup on one of the properties, every sale and purchase along the whole chain would collapse. No wonder everyone is on tenterhooks when there is a long chain involved.

Yet Crediton buyers who sell their home before searching for a new Crediton home considerably reduce their stress levels because they are not needing all the ducks to ‘line up in a row’ on the sale of their home in order to buy their new Crediton home.

Being chain-free puts Crediton home buyers in an enhanced position to negotiate with home sellers and they in turn may be more enthusiastic to accepting a lower offer.

Sounds brilliant this chain-free life doesn’t it? Everyone is a chain-free buyer once … when they are a first-time buyer and if they are lucky enough to have an additional home to move into. The other option is selling your Crediton home and moving into rented accommodation, but that will end up costing quite a few thousand pounds (in what many perceive as wasted money) together with the added cost of employing the services of home removers twice (with all the hassle that entails doubled!). However, that is what many Crediton homeowners are doing.  

21.3% of all the properties on the market today in Crediton are being sold without a chain.

I can’t disagree, moving home twice in a short period will be stressful and rent could be perceived as ‘wasted money’, but I have to recommend you look at the bigger picture. It is one of the sturdiest sellers’ markets in a generation, meaning you should get top dollar for your Crediton home, knowing that many buyers are keen to complete before the stamp duty holiday ends in the autumn.

Then by waiting for the return of stamp duty and for the full roll out on the immunisation programme to give more Crediton homeowners the peace of mind to place their home on to the property market, for house prices to cool and the number of properties for sale to increase. Then you could pounce in and buy, with more homes to choose from and at more realistic asking prices.

So, does the type of Crediton property that is being sold make any difference?

  • 12.4% of detached houses in Crediton are being sold chain-free
  • 35.9% of semi-detached houses in Crediton are being sold chain-free
  • 21.7% of town house/terraced houses in Crediton are being sold chain-free
  • 36.0% of apartments/flats in Crediton are being sold chain-free
  • 21.7% of bungalows in Crediton are being sold chain-free

Of course, these aren’t all Crediton homeowners going into rented accommodation hoping to bag a bargain next year. Many of the bungalows are being sold because their homeowner has either moved into sheltered accommodation or sadly passed on and there are Crediton landlords selling their buy-to-let rental investments.

And don’t get me wrong, there are also risks involved with this type of home buying strategy. Moving into rented accommodation means you are out of the Crediton property market. Property values could dip in the next 12 months, yet they still could continue to rise – you are taking a gamble on a dip in the market and it could go wrong.

Like most things in life, it depends on your own personal circumstances, where you are in your life, your attitude to risk and your belief on what will (or won’t) happen to property values in Crediton in the next 12 to 18 months.

If you would like a chat about your potential choices for your home move, then drop me a line.

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Crediton Property Market: 2011-2021

A look back at the Crediton housing market over the last decade

With all of us completing the Census a couple of weeks ago, it made me realise profoundly that mine and my family’s life, which from our own point of view seems unique and delightful, makes us all into a series of statistics for the Census gatherers to pore over. To digest and regurgitate facts, figures and trends for those who are interested in the ever-changing social circumstances of these islands.

However, the information from the Census is vital to improving our lives – Governments can plan the future with the information it provides and we in turn can wonder about the lives of our past generations with the information provided therein historically if we so wish. 

Whilst the information from this Census won’t be published until March 2023, let us have a look at what has been happening in the Crediton property market since the last time we completed the Census in 2011.

Just to remind you, 2011 saw the wedding of Prince William and Kate Middleton, Mr Cameron was the PM, there was the last flight of the Space Shuttle and Game of Thrones premiered.

Whilst in the Crediton property market ….

  • The average price paid for a Crediton detached home in the last 12 months has been £382,700. The average value of a Crediton detached home has risen by 35.2% in the last 10 years or £95,200
  • The average price paid for a Crediton semi-detached home in the last 12 months has been £289,400. The average value of a Crediton semi-detached home has risen by 40.8% in the last 10 years or £79,600
  • The average price paid for a Crediton town house/terraced home in the last 12 months has been £189,100. The average value of a Crediton town house/terraced home has risen by 31.4% in the last 10 years or £54,200
  • The average price paid for a Crediton apartment/flat in the last 12 months has been £143,900. The average value of a Crediton apartment/flat has risen by 37.5% in the last 10 years or £42,500

New properties built in Crediton…

Irrespective of any dip in Crediton house prices or transactions when the Stamp Duty Holiday ends in the autumn, this is a trend that looks set to continue, with no sign that supply of new homes is anywhere near to keeping pace with demand for households.

There have only been 550 new properties built in Crediton in the last 10 years, that’s less than 6 a month. That means the population in Crediton has risen by 1.48 people for every new home built over that decade.

Nationally, the Country has only built just over 180k homes a year over the last decade 120k less than the national target of 300k. In the meantime, the population has grown by more than 4 million.

When looking locally at the size of new build property in Crediton, the average property is just over 900 sq. ft., which is 26% larger than a decade ago.

Rents in Crediton…

Whether you are a winner or loser in terms of rental values depends on whether you are a Crediton landlord or a Crediton tenant.

The average rent for a property in Crediton currently stands at £550 per month, whilst a decade ago, it was £458 per month

This means private rents have increased by 76p a month for the past ten years. Interesting, when compared to the national average of 98p a month whilst in London, rents have grown by £4.64 a month.

The next 10 years of the Crediton Property Market…

The next ten years will be just as fascinating. To try and predict would be a fool’s game.

For example, who would have believed what the Crediton property market has done in the last 12 months since the start of Lockdown 1.0. The number of transactions (i.e., people moving) in turn with UK house prices having risen so much in the last year … all during a worldwide pandemic and at a time of such mayhem and havoc in the UK and world economy, is nothing short of remarkable … the question is – is it sustainable?

Read these articles in the coming months and years and I will share with you what is happening to the value of your Crediton property, be you a Crediton homeowner or Crediton landlord.