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Will the Cost-of-Living Crisis Mark the End of the Booming Crediton Property Market?

Crediton property prices have increased by 23.2% over the last two years.

Crediton house prices have risen on the back of several things, including changes in how people see their homes and how they live and work (i.e., working from home), a lack of properties on the market and government tax incentives (the stamp duty holiday in 2020).

Yet, the tide could be beginning to turn as the number of houses coming on the market is increasing as supply is starting to catch up with demand – in Q1 2022, 389,811 properties came onto the market in the UK compared to 425,295 in Q2 2022. One would typically expect Q1 to be larger than Q2 in average years.

Yet some commentators are saying one thing that could stifle this growth is the cost-of-living crisis.

I wanted to delve deeper into what was happening in Crediton instead of reading headlines in the newspapers. Let me start with average incomes.

The average Crediton household income is £595.20 per week, compared to £577.30 in the Mid Devon region and £613.10 nationally.

Roll the clock back twenty years to 2002, and the average Crediton household income was £349.

I wanted to go into greater detail a few weeks ago; I stated that mortgage costs for first-time buyers were much lower today (as a percentage of household income) than in 1989 and 2007. Many of you commented on social media or sent me messages asking what happened to other household bills.

In 1989, 16% of people’s household income went on housing (rent or mortgage) compared to 17.5% in 2021.

Food represented 19% of people’s spending in 1989, compared to 14.4% in 2021.

Also, gas and electricity were 6% of household income in 1989 compared to 4.81% in 2021.
(although that was before we saw the recent energy price hikes)

Interestingly, the UK household spent 15% of their monthly income on leisure activities in 2021, compared to 10% in 1989.

Household goods and services (i.e. household appliances, insurance etc.) have risen from 11% in 1989 to 14.9% in 2021.

Before I leave these stats, I had a peek at the 1957 stats (the earliest stats available), and in that year, food represented 33% of the household income and tobacco 6% (today, it’s 2.34%).

So, compared to 1989, the big-ticket items of housing, food and fuel combined have gone down from 41% to 36.7% of the household income, whilst leisure has increased from 10% to 15%.

The fuel element of household bills will rise to around 11% to 12% of household income, and I suspect the leisure budget will be hit the hardest to pay for that. We are seeing food inflation of around 10% to 15%, meaning that food will go from its current 14.4% of household income to around 16% to 17%.

It’s going to be tough, especially for those people in rented accommodation who may not earn near the average wage yet, as they have similar fixed costs for gas, electricity and food.

Next, let me look at the inflationary effects on housing costs.
A rise in the base rate will, in theory, slow inflation by reducing consumer demand. In the short-term, this increase in the base rate will increase mortgage rates, thus adding fuel to the fire of the cost-of-living crisis by growing mortgage costs.

Those Crediton homeowners on tracker or variable rate mortgages will instantly increase their mortgage payments.

Encouragingly though, just under 17 out of 20 people are on fixed-rate mortgages, the majority on 5-year fixed rate deals, so their housing costs won’t go up significantly in the short-term.

This will alleviate some of the interest rate effects, making it more challenging and expensive for new borrowers like first-time buyers.

However, as I have explained in previous articles on the Crediton property market, many Crediton landlords have been sitting on their hands in the last couple of years as owner-occupiers have outbid each other in buying their next ‘forever home’. If there aren’t going to be so many Crediton first-time buyers, then I suspect we might see more Crediton landlords coming out of the woodwork and buying again.

This is especially true as investing in buy-to-let in inflationary times is an excellent hedge to protecting the buying power of your hard-earned savings (drop me a message if you want to read that article).

In conclusion, although the amalgamation of the Crediton house price rises in the last two years, the increasing interest rate rises, and the continuing cost-of-living crisis, there is no doubt the momentum in the Crediton housing market will be slower in the next 12 months compared to the last 24 months. Nevertheless, I anticipate Crediton house price growth will ease (and, in some months, be slightly negative). A better bellwether of the state of the Crediton property market is the number of people moving house (i.e., the transaction levels).

I expect transaction levels to be lower in the latter part of this year and the first half of 2023, yet they are most likely to stay close to the long-term average. The boom is over, yet it shouldn’t be a bust situation.
What are your thoughts on this? Let me know.

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Crediton Starter Homes are 39.8% Cheaper Today Than in 1989

Even though the average value of a Crediton first-time buyer property has risen by 333.5% since 1989 to £247,270, the monthly payments Crediton first-time buyers must make on their mortgages as a proportion of their take-home pay is 39.8% less today compared to 1989.

According to the Nationwide Building Society …

the average Crediton first-time buyer only needs to pay out 38.5% of their household take-home pay on their mortgage payments, compared to 64% in 1989 (i.e. just over a third less).

You might say 1989 was 33 years ago, a long time ago and not relevant to today. I would agree.

So next, I looked a little closer to home, and in 2007 …

the average Crediton first-time buyer had to spend 51% of their household income on mortgage payments (i.e. 24.5% proportionally cheaper than today).

So why do I say all these things?

Last month, the Bank of England revealed that its Financial Policy Committee would be removing their mortgage market affordability test on people taking out mortgages in August.

The test was introduced in 2014 to ensure the UK didn’t have a repeat of the 2008 Credit Crunch and particularly hit first-time buyers with what they could afford to buy.

This rule change means Crediton property buyers could soon be able to borrow thousands of pounds more and purchase larger homes.

The decision to withdraw the affordability test certainly raised eyebrows in the press, primarily as the Bank of England has raised interest rates five times in the last six months to try and reduce rising inflation. Yet, as stated in the first part of this article, Crediton first-time buyers are comfortably paying their mortgages compared to previous years therefore –  everything should be ok with this rule change.

The old rules tested home buyers on mortgage repayments if interest rates rose to 6%/7%, yet the Bank thought that rule was too harsh.

Not all rules have been changed, as the important Bank of England ‘loan to income ratio’ stays put.

The Bank were keen to stress that the mortgage market was not going to turn into a free-for-all as it did in the mid-2000s when the likes of Northern Rock were offering 125% mortgages, and a sixth of all UK mortgages were given without proof of income.

I believe it will have a progressive effect on the Crediton property market.

Many Crediton tenants who have been paying rents far more than actual mortgage payments for the same Crediton home, but have failed affordability assessments regardless, will now be able to get on the property ladder.

The rule change should open the Crediton property market up a little more and allow house prices to grow in Crediton.

I advise anyone who has been refused a mortgage on affordability in the past to speak to a mortgage arranger. If you don’t know of one, drop a message to me, and I will give you details of mortgage arrangers you could talk to.

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Why Are There So Few Homes For Sale?

  • 85% drop in the number of properties for sale in Crediton in the last 12 months.
  • 36 Crediton homes have sold (stc) in the last three months alone, taking the time from the ‘for sale board’ going up to sale agreed to a median of 14 days.
  • The £200k to £300k price range in Crediton is the most active, where it only takes 12 days to sale agreed, but the £300k to £400k is taking 27 days.

Yet, what issues cause people to want to move home and what can people, who want to move in 2022, do to ensure they sell and find the home of their dreams?

There are 10 properties for sale today in Crediton; roll the clock back exactly a year, and the figure was 68 – there’s been a drop of 85%. This drop is being dubbed ‘for sale board crunch’.

The ‘for sale board crunch’ has left many prospective home buyers stressing to find the right property as the number of properties available to buy has dropped significantly.

I am sure you know people looking for their next home, but when they see it on the portals (Rightmove, OnTheMarket etc.) the properties are gone within days.

With demand at an all-time high, many home buyers are in a state of misery as house prices have grown in the last few years, forcing many of them to review their plans.

They are victims of the ‘for sale board crunch’ in the property market, the likes of which have not been seen since 2007.

Normally when there has been excess demand in the residential sales market, that frothiness has been taken care of by people moving into rented accommodation. However, the number of Crediton properties available to rent is at a 15-year low.

So why is the property market this way?

Demand for homes has exceeded the number of properties for sale since the General Election in December 2019. After years of long drawn out Brexit negotiations, homeowners and buyers were more confident about their move. Many people who put their home move on hold in 2018/19 had more confidence to return to the market.

The first lockdown in the spring of 2020 did nothing to quell this pent-up urge, and since the late spring of 2020, the property market has been on fire! The lockdown changed what homeowners are looking for in their home. Proximity to public transport dropped down the wish list for buyers, and demand for apartments dropped. Whilst properties with larger gardens and rooms that could double up as home offices tended to be at the top of most buyers’ wish lists.

Around 36% more properties have sold in the last 18 months than the long-term 20-year average.

Looking at the supply side of the equation, in the last five years, an average of 204,410 new homes per year have been added to the number of properties available in the UK. Also, 239,600 properties came back into the market when they became available after their owners had sadly passed away. Yet still, that isn’t enough. The country needs at least 300,000 new dwellings to keep pace with demand.

There is also another problem that has come to light with the cladding issue of apartments. Just over three-quarters of million apartments have issues with cladding. Whilst these are being sorted out (which will take many years), they are essentially unsaleable unless a fire safety expert on these buildings signs them as safe.

These cladding issues prevent these apartments from coming onto the market (thus reducing the supply of properties to buy). It also precludes their owners from moving up the property ladder from their apartment to a house. Also, many first-time buyers who can save a bigger deposit or be gifted cash from the Bank of Mum and Dad are skipping the apartment as their first home and going straight for a house, thus intensifying the lack of larger properties for sale.

So, how long does it take to sell a Crediton property now?
  • Apartments: 13 days
  • Terraced/Town House: 11 days
  • Semi-Detached: 11 days
  • Detached: 20 days

This means it is a seller’s market in, empowering them to push up their asking prices in high demand areas. However, most sellers are also buyers, which means the advantage they have on selling their property is turned on its head when they come to buy.

Many sellers prefer to find their future home before putting their current home on the market. That is making the lack of properties on the market seem even harsher than it may otherwise be.

The ‘for sale board crunch’ would be somewhat eased if sellers put their property onto the market whilst they were hunting for their next ‘forever home’.

However, not all homeowners are doing so, partially because they (wrongly) believe they will be made homeless if they find a buyer and can’t find another property to buy (remember, you are not legally committed to moving until exchange of contracts).

A big issue will be finding a suitable home. We very much have a chicken and egg scenario. Some homeowners are waiting for the right property to come onto the market before they put their home on the market. This will probably mean that that property will sell even before the photographs have been taken of your home.

Yet, many homeowners are worried if they put their house on the market and it sells, they won’t be able to find another suitable home and thus be homeless.

Classic chicken and egg – so what do you do first?

There is another way of doing this. It’s a technique estate agents used to use before the internet, and it’s called ‘chain building’. Many homeowners are contacting me to move home yet don’t want to be made homeless. What we do is slowly build a group of people in a chain over many months. It requires a lot of patience to build a chain downwards and upwards around you.

There is no cost to this and no legal commitment to go through. It can take six, even twelve months to build a chain of people who are prepared to wait for the chain to form.

Yet, everyone normally gets their next ‘forever home’ by playing this long game

Because if you don’t play the long game, build relationships with estate agents (who can build these chains) and only rely on waiting for properties to appear on Rightmove or OnTheMarket, you will be sorely disappointed.

According to national research from Denton House Research, 7 out of 8 people who viewed a house through an estate agent in 2021 were not on the mailing list of that agent before they viewed it.

That means all these properties, built on a chain builder (as above), will sell yet won’t appear on Rightmove or Zoopla, meaning you will miss out.

You must get yourself on the mailing list of our estate agency (and other agents if they do this chain building) so you don’t miss out on your next forever home. You can also join our free private Facebook Group here https://www.facebook.com/groups/propertypremiere where we post all upcoming properties to the market before they arrive on Rightmove etc. I’d love to see you in there!

If you would like a chat about anything mentioned in this article, feel free to drop me a message or call me on 01363 777999

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My 11 Rules to Buying a Crediton Property

Finding your next property, be that for yourself to live in or as a buy-to-let landlord, can sometimes be a scary task. You are possibly making one of the biggest purchases of your life, and you want to ensure you make the right choice.

Buying your next property is all about finding a property with the features that match your requirements. However, what might be important to you as a homebuyer, might not be as important to other Crediton homebuyers.

Some features will be red line must haves, whilst other features might be more negotiable, yet understanding what your requirements need to be, will make it easier to find the home of your dreams.

Let’s look at my top 11 rules you need to consider when buying a property:

1 Location Location Location!

You can change many things within a property, but location isn’t one. They say you should buy a property for the things you can change. Go and visit the different neighbourhoods of Crediton. Don’t just drive through them, walk through them at different times of the day. Look at weekdays as well as weekends. Think about transport links with access to bus routes, arterial roads. If you have children (or your tenants may have), think about school catchment areas for primary/secondary schools

2 Bedrooms

Did you know there are 9,413 bedrooms in Crediton?

Well, you do now! Anyway, the number of bedrooms is a very significant consideration when buying your new home. If you need bedrooms for your children, the location of the bedrooms could be an issue. Depending on the age of any children, you might not want them to be a long way from the master bedroom, or if the children are teenagers, the opposite could be true. Bedroom size is also important. Is there enough space for children to study or have wardrobes? Do you need bedrooms for an office? If office space is required, you might want to consider a property with one less bedroom and one more reception room – and it will probably be a little cheaper. All things to consider.

3 Potential Future House Price Growth in Crediton

The type of house you buy will determine how it increases in value in the future. Now this shouldn’t be the main consideration, yet it’s important to consider.

Since 2001, the different types of property in Crediton have risen by different percentages.

  • Detached properties have risen by 173.5%
  • Semi-detached properties have risen by 193.2%
  • Town houses/terraced properties have risen by 181.6%
  • Apartments/flats have risen by 166.8%

On a standalone point for landlords, the level of rent and yield are important considerations for your Return on Investment (ROI). There tends to be an inverse relationship between capital growth and yield (i.e. Crediton properties with higher capital growth tend to have lower rental yields). If you are a Crediton landlord and have any questions on this (or any point), drop me a note.

4 The Overall Interior Size of Your Future Property

On average a person only views five houses before they buy a house and only spends around 20 minutes in each on a viewing. Therefore, I would advise that you have a good idea about the size of home you require before you start your search. If you have a big family you are going to need a bigger house obviously, yet you still need the budget to afford to buy the bigger home. A top tip for you, the general rule of thumb is the older the house, the more you get for your money.

One great idea to calculate the square metreage of your potential home. Ask to view the full copy of the Energy Performance Certificate, as it has the size of the property in square metres.

Bigger houses tend to cost more money to run with utility bills and council tax.

A final thought on size is the question of whether your family is likely to grow in the next decade? Will you have more children or is a parent coming to live with you?

5 The Price You Will Have to Pay For Your Next Crediton Home

In the last 12 months, the local property market has remained buoyant as people were forced to spend more time at home. Therefore, they looked for more space … but what did they have to pay for that privilege?

  • 99 Crediton area detached properties have sold for an average £387,600
  • 55 Crediton area semi-detached properties have sold for an average £287,900
  • 71 Crediton area town house/terraced properties have sold for an average £229,200
  • 7 Crediton area apartment/flat have sold for an average £111,000

Look at the property portals (e.g. Rightmove, Boomin, Zoopla and OnTheMarket) and search for Crediton property that is both available and sold subject to contract. Get a feel for asking prices of the properties that are sold subject to contract as these will give you a good idea what they roughly sold for. Again, if you are not sure, pick up the phone or drop me a line.

6 Bathroom(s)

Check the bathroom for water leaks. Do the toilets flush OK, do the taps drip? Is there any mould? And do you need more than one?

7 The Lounge / Living Room

You will undoubtedly be spending a lot of time in the lounge / living room, so it needs to meet your requirements. Do you need a dining area? Does the design and arrangement of the room suit your lifestyle (or your tenants). Will you need new furniture? Are there enough electrical sockets? What are the carpets like? That goes for all rooms.

8 Central Heating for your Property

What type of central heating system is present, and does it meet the requirements of you and the home? The Energy Performance Certificate (EPC) will tell you how energy efficient the property is and how much it will cost to run. You would be amazed how few buyers ask to see the full copy of the EPC – yet you have the right to view it – always ask the estate agent for a copy or download it for free from the Government website.

9 The Outside

The outside space of your future home is also something you need to reflect on before you start your search. What sort of back garden do you want? Do you want low maintenance? Do you want a bigger garden?  You also need to ensure the outside of your next home is in great condition. Yet, if it’s a ‘do’er-upper’, does the price allow for those works to be done?

10 The Loft & Cellar

Another aspect to consider when buying a Crediton property is the loft (or even the cellar/basement if it has one). In both, look for water damage that could mean problems in the future whilst in cellars/basements, a musty smell could be poor ventilation meaning dry damp could be an issue. Also check for insulation in the loft (the Energy Performance Certificate will tell you if it’s up to standard).   

11 Garage / Off Road Parking Space

How many cars do you have in your family? Can you park them all on your drive? Visit the property during the day, the evening, and weekends to see how the parking provision changes. If the property has a garage, can it be used for something else?

These are my top 11 rules – yet do you have others I haven’t considered? Let me know in the comments!

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A frank and honest view of the property market right now by George Clover

Here’s some background from me, I grew up and have been lucky enough to work in Mid Devon as an estate agent for the last 15 years.

A quick summary of the last 18 months goes like this. End of 2019 and all is well. It was a good (but normal) year for sales with prices increasing just ahead of inflation as usual. I think it’s safe to say that there was a consistent supply of properties of all types coming to the market and indeed a similar amount of properties being sale agreed. In a normal market, the supply and demand is balanced to create a stable and level playing field. January to March 2020 continued like nothing was happening, houses still coming on, still being agreed.

The news of the pandemic did little to surpress the market locally until lockdown hit in mid March. Clearly everything stopped. If you think back to that initial lockdown, it was a hard lockdown. The world stopped, the country stopped and the housing industry stopped. Very few deals where being progressed by solicitors, agents weren’t able to value (except virtually) and even if selling services were wanted, we couldn’t get out to take photos!

When the housing market “opened” in the middle of May, we had no idea what that market would look like. It was a surprise. May 2020 and we’re allowed to conduct estate agency business in a covid secure manner. It was new, but ok. The market was crazy. Straight back into plenty of listings, plenty of sales being agreed – but why? Initially the pent up demand from people being unable to buy due to lockdown caused a bit of a jump start but nothing really unusual, prices were still fairly similar to pre-lockdown and bids over the guide prices were rare.

At this stage the chatter started in the press about people fleeing cities. This wasn’t the case, it was simply that the usual buyers from all over the country hadn’t been able to search in person for their next home so it was busy. We saw many country homes going to local buyers.

The government also then announced the stamp duty holiday to stimulate the market. As we know, the whole process of moving house creates plenty of revenue for the country and therefore it was a welcome act. However, it was a countrywide, blanket approach. Did Devon need stimulating? Maybe it did, but maybe it didn’t. What this holiday of stamp duty did do was to bring forward properties to the market that maybe hadn’t planned to sell in 2020. This meant a bumper year for sales. Pricing in the summer and autumn was still fairly consistent. Life was getting back to normal but there were still plenty of properties to go around.

We then reached Christmas 2020. Lockdown again. This time, the lockdown slowed the market in a different way. We were still able to operate, people could buy and sell with a few restrictions but the housing market remained open. With home schooling, post Christmas lockdown, worries about when this will end, many decided to stay put. I mean, who wanted to have buyers in their mess of a house when the kids were causing havoc, winter isn’t the best time to sell either and as I mentioned early, many of the moves planned for Spring 2021 already happened in 2020!

So this led to a shortage of properties hitting the market. That’s a shortage of properties across the board. A pattern that’s replicated all over the country not just here. The housing market is all about supply and demand and right now, supply is low and demand is high. It isn’t (in my opinion) that all the good houses are being bought by people from outside the area because they’ve suddenly decided to move here, it’s that they would have moved here anyway and there’s less properties to go around and they do have deeper pockets than some locals. Combine that with all the local people that have sold or are waiting to sell when their net house comes up – it’s a recipe for prices to jump and over the guide price prices to be paid.

This is what we are seeing and not just the properties with land, village and town properties are going for more too. It’s not just the country/land market that its happening to. The frustration is there for all. There aren’t many properties coming on. Agents aren’t helping matters by only allowing sold/cash buyers to view which prevents more housing stock coming to the market because they fear they’ll agree a sale and have no-where to go and this behaviour will prolong this cycle. At Helmores, we’re allowing non-proceedable viewings from local people wherever possible for them to start the process of a move, it’s in all our interests to do this.

So what’s going to happen? The answer is that we don’t know but something has to give. Either more properties must come on, or less buyers be available. At the moment, it doesn’t look like the latter but my diary is filling up more and more for properties coming onto the market. I can’t promise they’ll be in budget, or equestrian dream homes but the more properties that are on the market, of any type, the better it will be for the market in general.

The thing is, we live in such a beautiful place, there’s always demand! Let’s hope that we gradually see more coming on and get back to that balance and everyone knows where they stand – at the moment it’s the Wild West (country). If anyone would like to hear more then please get in touch and I’d love to help you guys get moving!!

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249 Crediton Homeowners to be ‘Unchained’ from Toxic Leasehold Agreements in Biggest Shake-up of Property Law in Decades

When William the Conqueror invaded our fair shores in 1066, like all good kings, he needed to buy loyalty and raise cash to build his castles and armies. He did this by feudal law system and granted all the faithful nobles and aristocrats with land. In return, the nobles and aristocrats would give the King money and the promise of men for his army (this payment of money and men was called a ‘Fief’ in Latin, which when translated into English it becomes the word ‘Fee’… as in ‘to pay’).

These nobles and aristocrats would then rent the land to peasants in return for more money (making sure they made a profit of course) and the promise to enlist themselves and their peasants into the Kings Army (when requested during times of war). The more entrepreneurial peasants would then ‘sublet’ some of their land to poorer peasants to farm and so on and so forth.

The nobles and aristocrats owned the land, which could be passed on to their family (free from a fee i.e. freehold), while the peasants had the leasehold because, whilst they paid to use the land (i.e. they ‘leased it’ which is French for ‘paid for it’) they could never own it. Thus, Freehold and Leasehold were born (you will be pleased to know that in 1660 the Tenures Abolition Act removed the need of freeholders to provide Armies for the Crown!).

4.3 million properties in the UK are leasehold…

and 249 properties in Crediton are leasehold. By definition, even when you have the leasehold, you don’t own the property (the freeholder does). Leasehold simply grants the leaseholder the right to live in a property for 99 to 999 years. Apart from a handful of properties in the USA and Australia, England and Wales are the only countries of the world adhering to this feudal system style tenure. In Europe you own your apartment/flat by using a different type of tenure called Commonhold.

The average price paid for leasehold properties in Crediton is

over the last year £139,654.

The two biggest issues with leasehold are firstly, as each year goes by and the length of lease dwindles, so does the value of the property (particularly when it gets below 80 years). The second is the payment of ‘ground rent’ – an annual payment to the freeholder.

Looking at the first point of the length of lease, the Government brought in the Leasehold Reform Act 1967, which allowed tenants of such leasehold property to extend their lease by upwards of 50 years. However, this was very expensive and as such only kicked the can down the road for half a century (when the owner would have to negotiate again to extend another 50 years – costing them more money, time and effort).

Ground rents on most older apartments are quite minimal and unobtrusive. The reason it has become an issue recently was the fact some (not all) new homes builders in the last decade started selling houses as leasehold with ground rents. The issue wasn’t the fact the property was sold as leasehold nor that it had a ground rent, it was that the ground rent increased at astronomical rates.

Many Crediton homeowners of leasehold houses are presently subject to ground rents that double every 10 years.

That’s okay if the ground rent is £200 a year today, yet by 2121, that would be £204,800 a year in ground rent, meaning the value of their property would almost be worthless in 100 years’ time. One might say it allows for inflation, yet to give you an example to compare this against, if a Crediton leasehold property in 1921 had a ground rent of £200 per annum, and it increased in line with inflation over the last 100 years, today that ground rent would be£9,864 a year.

This is important because the majority of leasehold properties sold in Crediton during the last 12 months were apartments, selling for an average price of £144,135.

So, without reforms, the value of these Crediton homes will slowly dwindle over the coming decades. That is why the Government reforms announced recently will tackle the problem in two parts.

Firstly, ground rents for new property will be effectively stopped under new plans to overhaul British Property Law. Under the new regulations, it will be made easier (and cheaper) for leaseholders to buy the freehold of their property and take control by allowing them the right to extend the lease of their property to a maximum term of 990 years with no ground rent.

Secondly, in the summer the Government will create a working group to prepare the property market for the transition to a different type of tenure. Last summer the Law Commission urged Westminster to adopt and adapt a better system of leasehold ownership – Commonhold. Commonhold rules allow residents in a block of apartments to own their apartment, whilst jointly owning the land the block is sitting on plus the communal areas with other apartment owners.

These potential leasehold rule changes will make no difference to those buying and selling second-hand Crediton leasehold property.

Yet, if you are buying a brand-new leasehold property, most builders are not selling them with ground rent (although do check with your solicitor). The only people that need to take any action on this now are people who are extending their lease. If you are thinking of extending the lease of your Crediton property before you sell to protect its value, your purchaser may prefer to buy on the existing terms and extend under the new (and better) ones later (meaning you lose out).

Like all things – it’s all about talking to your agent and negotiating the best deal for all parties. Should you have any questions or concerns, feel free to pick up the phone, message me or email me and let’s chat things through.

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Will the Crediton Property Market Crash in 2021?

…and the three reasons why it will not be the catastrophic scenario some are predicting.

In the last few months, the Crediton (and UK) property market has resisted and flouted every economist’s prediction. With the economy a shadow of its former self, unemployment set to hit 11.9%, the Government on track to borrow nearly half a trillion pounds to pay for Coronavirus support packages etc., all of this has had no effect on Crediton homeowners’ enthusiasm or capability to want to move home. It highlights the influence of both the emotional impact of lockdown and the enticing appeal of saving thousands of pounds on your Stamp Duty Tax bill.

For the last few months, the Crediton property market has been akin to a surfer, riding an unexpectedly large wave. The question is, will the surfer crash down (i.e. the property market) onto the rocks or will it calmly arrive at the beach unscathed? Well looking at house prices firstly …

UK house prices are 4.7% higher than they were 12 months ago according to the Land Registry, whilst in Crediton they are 2.7% higher

Looking at the data over the country, things overall are looking good for property prices. Yet it must be remembered the Land Registry data is on completed house sales and is always a couple of months behind, so this data is for house sales up to September that were agreed in the spring. Also, it does not take into account the prices being paid today on Crediton homes (as they will only show in statistics the Spring and Summer of 2021 when the sale completes).

Crediton house prices will inevitably ease in 2021

Anecdotal evidence over the last few months has suggested buyers are using their Stamp Duty savings on the price they are prepared to pay for the Crediton home of their dreams, so when the Stamp Duty holiday finishes in Spring 2021, we will see a reduction in the price Crediton properties sell for, as buyers will now have to hold back some of their cash to pay the Stamp Duty Tax.

Mortgage Approvals at a 13-year high

A better statistic to judge the property market by are the number of mortgage approvals. As the vast majority of house buyers need a mortgage, that is another good place to look at the numbers as they are much more up to date than the Land Registry figures. The Bank of England recently stated 97,500 mortgages were approved last month, up from the long-term average of just over 65,400 per month. This was the highest number of mortgage approvals since September 2007, and a whole third higher than mortgage approvals in February 2020 when we had the Boris Bounce in the property market.

As a country, we are due to smash through 2019’s 524,000 total number of mortgage approvals this month, despite the fact that the property market was closed for nearly three months in the spring. It’s vital to remember, that mortgage approvals do not equate to people moving home, as many of you reading this can attest to … property sales do fall through.

I do have apprehensions that many Crediton people, buying and selling their Crediton homes and in a chain, may not be able to realise the move before the Stamp Duty rules change at the end of March 2021, as there is a massive backlog with mortgage lenders, local authorities and the searches, chartered surveyors surveying the property and solicitors with the legal work, all combining to slow down the house selling and buying machine.

If you are in chain at the moment, you must constantly be talking to all the parties involved and ensuring everything is focused on getting the sale complete by the end of March. You have a responsibility to get information requested back in hours, not weeks … because if you don’t, you might not get your Crediton home move through before the end of the Stamp Duty holiday, and without that discount, someone in your chain may pull out of the sale altogether and the chain will break. 

The number of people moving home in Crediton is anticipated to drop sharply after the Stamp Duty holiday ends at the end of March 2021

And that is probably going to be the biggest impact on the Crediton property market in 2021. Yes, there will be a slight readjustment in the prices paid after March 2021 (as mentioned above) yet, a reduction in the number of people selling their Crediton home does not inevitably lead to a house price crash.

Yes, there will be a number of people who have to sell in 2021 because they have lost their jobs (i.e. ‘forced sales’). In the last two ‘Property Market Crashes’ of 1988 and 2008, there were a large number of forced sales in a short period of time (because business owners had to sell their home as their business had gone bankrupt because of the Credit Crunch, as well as people who had lost their job), increasing the supply of properties coming to the market in 1988 and 2008.

This in turn pushed Crediton house prices down as the property market was flooded with lots of property to sell in a short period of time. Yet this time, we have had the cushion/parachute of Bounce Back Loans, Furlough and Mortgage Holidays over the last 9 months.

Also, another important factor about the last property market crashes were the levels of interest rates and the amount borrowed.  

Interest Rates are the key to the future of the Crediton property market

In 1988, mortgage interest rates were an eye watering 11.5% and 6% in 2008, meaning mortgages were much more expensive compared to the 0.1% rate we have today. Also, with 77.2% of mortgagees with fixed rate mortgages, and only 1 in 21 mortgages owing more than 90% of the value of their home (and 1 in 303 mortgagees owing more than 95% of the value of their home), negative equity should not be so much an issue like it was in 1988.

This means most Crediton homeowners are in a much better place to weather the storm of 2021, than they were in 1988 and 2008

I foresee many Crediton sellers will simply wait until activity in the Crediton property market picks up again before placing their property on to the market. This means fewer properties will be placed on to the market for sale in the later part of 2021, meaning Crediton house prices will tend to hold up. The people that will be affected by less properties coming onto the market will be estate agents, solicitors and home removals people.

I also believe there will be ‘interesting investment opportunities’ to be had for Crediton buy to let in the latter half of 2021 with the potential changes in Capital Gains Tax regulations, although those won’t go on the open market, so do keep your ear to the ground and build relationships with all the letting agents in Crediton so you get to hear of the property portfolios coming up for sale (as they tend to sell ‘off market’). Again, if that’s something that interests you – do drop me a line.

So, where is the Crediton property market heading in 2021?

Well, the Crediton property market (aka our “surfer”) has seen a house price growth of 34.1% since 2009 … and this has been fuelled on the back of …

  1. Ultra-low interest rates mean money is cheap to borrow and so mortgage payments are low. With the Bank of England pumping £150bn into the economy in November with Quantitative Easing (QE) to add to the £725bn they have already spent on QE since 2009 – interest rates will continue to stay low for some time.
  2. There has been an increase in the demand for housing with annual net migration of 214,400 since 2009 (meaning 96,700 additional households per year have been required since 2009 just to house those people – a total of 1,063,700 households).
  3. The average age of death has risen by 2.1 years since 2008 in the UK. People living longer delays property from being released back onto the property ladder. For every extra year of life the average Brit lives, an extra 290,850 households are required in the UK.

None of these things have changed because of Covid.

As a country, we have only built on average 165,100 homes a year since 2009. Supply and demand shows that whilst we will probably have a turbulent choppy ride on the 2021 wave (because of the economy) our surfer (aka the property market), with long term demand for housing outstripping supply since the 1980’s, will continue to ride the wave (probably not as large as it has been in 2020) as the ultimate long-term outlook for the property market in Crediton looks good.

All this means demand for decent, private rented Crediton property will be good as long as the property ticks all the boxes of the tenants. If you are a Crediton landlord, whether you are a client of mine or not, feel free to drop me a line to pick my brain on the future of the buy to let market in Crediton.

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Crediton Landlords and Second Homeowners will probably save money from the proposed new Capital Gains Tax changes

Yet, if the proposals were adopted in full, some Crediton landlords would pay £13,000 less Capital Gains Tax than they would currently

The government borrowed £394bn this financial year (April ‘20 to April ‘21). This figure does not include the cost of November lockdowns and support measures, which means the final bill will probably be over half a trillion pounds, these billions will ultimately need to be paid back to cover the cost of Coronavirus.

The Office of Tax Simplification (OTS) published a report for tax reform and, as was predicted by many in the press, the Government Dept suggested the Chancellor contemplate readjusting current Capital Gains Tax (CGT) rates with a person’s own Income Tax rates. This would mean increasing the rate of CGT for selling a buy to let property from 28% to 40% for high-rate taxpayers and 45% for additional rate taxpayers. To add salt to the wound, the OTS is suggesting cutting the £12,300 annual CGT allowance.

This has meant many Crediton buy to let landlords contacting me in the last few weeks, wondering if this is the time to exit the Crediton buy to let property market, especially as they have been hit by growing levels of rental legislation and higher taxes.

With tax bills about to go through the roof, is this the time to leave the Crediton buy to let property market?

Yet, like all things, the devil is in the detail as Crediton 2nd homeowners and Crediton landlords may well finish up having lower CGT tax bills with these new taxation proposals, even though the CGT restructurings are being introduced to raise the much-needed cash for the Government.

Apart from the suggested cut of the annual CGT allowance and increase in the CGT percentage rates, the OTS report also proposed reintroducing rebasing and indexation. In layman’s terms, the OTS are suggesting all gains made before 2000 would not be taxable (rebasing) and any capital gains would be calibrated to account for inflation.

So, what would that actually look like for a Crediton landlord? Let us assume we have a landlord who bought a Crediton buy to let property in 2000.

Under the current CGT rules

  • The average value of a Crediton property in 2000 was £108,100
  • Today, that same Crediton property has increased in value to £304,200
  • Meaning a profit of £196,100
  • As our landlord is a high-rate taxpayer (earning £60,000 a year), their CGT bill would, after the annual allowance be £54,464

Under the new proposed CGT rules

Under the new proposals, the CGT payable (assuming the CGT rate of 40% and a lower annual allowance of £5,000), the same landlord would only pay £41,250– a saving of just over £13,000.

And the savings don’t stop there. Remember, under the new OTS proposals, all capital gains made before 2000 would also be tax-free.

However, let us not forget the responsibility of the OTS is to report on tax simplification opportunities, not to set Government taxation policy. None of us have a crystal ball on what Rishi Sunak will do with CGT on buy to let property or second homes. Although, as time has always taught us with investments, often the worse thing to do is to make impulsive decisions on what MAY happen.

You have to remember, CGT only gets charged when you sell or transfer your investments, and most people use their rental investments to provide them with income. If you did sell up, the best 90-day building society accounts are obtaining 0.8% pa, the stock market is a rollercoaster (good luck with that) and Government 10-year bonds are paying a princely 0.324% pa … where else are you going to invest to get the income Crediton property investments provide?

Property is an asset you can touch, feel and ultimately understand. Maybe, this is the time (if you haven’t already) to take portfolio advice on your buy to let investments? Many landlords do so, whether they use our agency, another agency or they manage their property themselves. The service is free of charge, we don’t need to meet face to face as we can do it over Zoom and it’s all without obligation. I promise to tell you what you need to hear – not what you want to hear … what do you have to lose?

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5 ways all Crediton landlords can escape the worst of the coronavirus downturn on their rental property.

Now the second lockdown started on the 5th November 2020, does this mean Mid Devon landlords can wave goodbye to their buy-to-let investment and see it go up in smoke on the bonfire of buy-to-let dreams, like a Guy Fawkes puppet?

With many Crediton tenants at risk of losing their jobs after the furlough scheme ends in March and as the reverberations of the Coronavirus recession hit this winter, what does this all mean for Mid Devon landlords and what can they do to mitigate the risks?

Since the spring, most tenants and buy-to-let landlords have been protected from the coronavirus crisis thanks to the banks with their mortgage payment holidays and job support schemes.

Before the second lockdown was announced on the 31st October, it was expected that as the furlough and mortgage payment holidays were due to end on Halloween, there would be some serious fallout from those schemes finishing. One silver lining from the lockdown (if you can call it that) is that mortgage payment holidays and furlough have been extended, yet does all that just kick the can down the road?

The question is, what can landlords do to mitigate the financial risk on their buy-to-let investment?

  1. Help Your Tenants Get the Financial Support They are Entitled To 

Billions of pounds are being spent by the Government to help those people whose income has been hit by coronavirus. The better letting agents and self-managing landlords are supporting, guiding and helping those tenants in financial difficulty to gain a better understanding of the Universal Credit (UC) processes, systems and payment levels, to enable their tenants to pay the rent and ultimately indirectly help their landlord. Also, if you are a tenant, and that support isn’t given when you ask, don’t forget Mid Devon District Council do hold special cash reserves for discretionary housing payments, which can be utilised to close the gap in rent between what UC pays and your current rental commitments. Also, the Government’s Money Advice Service & Citizens Advice are a good online resource for you to find out what you are entitled to.

  • Adopting, Adapting & Improving Your Crediton Buy-to-Let Property

Demand for gardens or office space means Mid Devon landlords will need to think outside the box. Those homes with tenants sharing (e.g. HMO’s and shared houses) might need to price their pre-coronavirus 4 bed sharing house to maybe a 3 bed sharing house plus a work/office room and, if you haven’t already, installing a top of the range, fast and dependable internet connection could be the thing that swings it. Outdoor space and gardens are really high on housebound tenant’s wish lists, in fact I have come across some Crediton tenants demanding that new rental properties have a landscaped garden or those that bought a dog or cat for company during the first lockdown, are looking for their landlords to relax their ‘no pets policy’.

  • Hold On to Your Good Tenants

Those buy-to-let landlords with decent tenants, who find themselves in financial dire straits should consider attempting to keep them, even if their own monetary circumstances mean they have to decrease their rent somewhat over the short term. Now of course, I would expect that tenants need to prove their circumstances, yet if their plight was real, surely it would be a wise choice to reduce the rent by perhaps £50 a month and support your tenants? You know they are taking great care of your rental property and rather than risk the issue of advertising your empty buy-to-let property – particularly when there is no assurance you will achieve your existing rent and ultimately risk drawn-out void periods with no rent coming in at all. What I would suggest therefore,  in such circumstances, is that you create a new Assured Shorthold Tenancy agreement with a longer term with your existing tenant at a lower rent – a temporary measure but with peace of mind for both parties which can then be reviewed once that tenancy is up for renewal.

  • Carry Out Firmer Checks on Your Prospective Tenants 

Many private landlords and a few slipshod letting agents tenant checks are somewhat lacking in their depth. Trust me, there is tenant referencing … and then there is ‘proper’ forensic tenant referencing. As certain parts of the British economy have been hit harder than others, landlords must consider when choosing their new tenants, the type of work they do or who their employer may be, to enable them to decide on their future capacity to meet their rental commitments.

  • Rent Guarantee Insurance for your Crediton Rental 

There are still insurance companies offering landlord rent guarantee insurance if your tenants become unable to pay the rent. Many insurance firms removed these insurance products in the first lockdown, yet some have returned to the insurance market although insurance premiums have gone up in price. Remember to check the small print of the insurance, although you will get a lower insurance premium if you can show stringent tenant referencing (as per the previous point). 

The Nuclear Option – Eviction

Landlords need to be conscious that, should their tenancy run into trouble, the Government have changed the rules when it comes to eviction during the coronavirus pandemic. Going into the first lockdown, there was already a backlog in the courts and now, just before going into the second lockdown, bailiffs have been instructed not to enter rental properties in high risk Tier-2 and Tier-3 Covid-19 areas.

Eviction really does have to be the very last option. Negotiation or arbitration will nearly always deliver quicker and improved outcomes for both parties. Landlords who do come to mutually agreeable arrangements with their tenants by briefly reducing the rent, or allowing payment holidays with legally enforceable pay back schedules should ensure they get the agreed terms in writing and run by a solicitor or their agent (feel free to drop us a note if you need advice).

However, if eviction is required, it doesn’t mean the tenant gets off ‘scot free’. Evicted tenants, depending on their circumstances, will either be placed temporarily into an inexpensive B&B, asked to move in with family or given one of the local authority’s temporary accommodation properties, with the goal to then move them into long term council accommodation (as the chances of obtaining private rented accommodation would be slim with agent’s heightened reference checks – more of that at the end).

The Potential Cost of Evicting a Problem Tenant

The average rent for a Crediton property currently stands at £607 per calendar month.

Thankfully, evictions are very rare. Last year before lockdown, tenants from 201.4 rental properties were evicted each working day in the UK … but if yours was one of those, that is still a potentially large cost.

Working on the basis that most evictions from the first rent not being paid, through to eviction, refurbishment of the kitchen, bathroom, carpets and décor (because often these do need sorting/replacing) were taking on average between eight to nine months before Coronavirus hit, (plus the mortgage payments), this means a Crediton landlord could be hit by a £23,617 bill, broken down as follows:

Missing rent (8½ months)£5,160
New kitchen£3,853
Bathroom£2,812
Carpets£2,286
Redecorate£2,008
Agents fees£542
Legal fees & court fees£3,500
Mortgage payments£3,457
Total£23,617

What that would be now is anyone’s guess – it could be a lot more.

This is why it is so important to get the best tenant from day one. Many tenants, who know they wouldn’t pass the references of letting agents, are attracted to those private landlords who don’t use a letting agency, as they know their referencing checks are not as strict and may be a softer touch. That’s not to say going with a letting agent is a guarantee you won’t need to evict; it just means the chances are much, much smaller. Like anything in life – it’s a choice.

Whether you are a landlord who uses a letting agent or not, and feels their reference checks are not to the standard or level you might hope or if you just want a chat about the best rental guarantee insurance, then give us a call what have you got to lose?

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Crediton Homebuyers Have Saved £34,380 Thanks to the Stamp Duty Holiday – Yet Many Could Miss Out

Crediton homebuyers and Crediton landlords purchasing residential property have saved £34,380 since the Chancellor reduced stamp duty on 8th July 2020, yet many more Crediton homebuyers could miss out.

My analysis of properties sold in the area from the Land Registry between the introduction of the stamp duty holiday on 8th July 2020 and 14th August 2020 (which is the most up to date sales data), reveals that many Crediton homeowners have saved a considerable amount of money in stamp duty. According to my research…

Since the stamp duty holiday was launched 5 Crediton homeowners have saved on average £6,875 each.

That’s a total Crediton property value of £1,687,500.

Mind you, it’s not all good news as I estimate 11 Crediton homebuyers risk missing out on the stamp duty savings (worth as much as £15,000 each) due to solicitors/conveyancers and mortgage lenders struggling with demand and failing to hit the 31st March 2021 deadline.

The short-term tax relief, together with the easing of lockdown restrictions, has seen demand for Crediton property soar this summer as Crediton property buyers race to move home.

Chancellor Rishi Sunak introduced a stamp duty holiday in the summer, with the stamp duty holiday due to end on 31st March 2021. Yet, I fear the combined pent-up demand caused by…

  • the post Boris Bounce
  • people wanting to leave their metropolitan city centres for homes in the countryside
  • property with gardens
  • property with extra rooms for working from home
  • the stamp duty savings

…has created a certain amount of constipation and backlog in the Crediton property market.

I know 31st March 2021 seems an age away, however nothing could be further from the truth. The average Crediton property sale was taking 19 weeks between the offer price being agreed and the keys/monies handed over BEFORE THE POST-LOCKDOWN. So with as many as 40% to 50% more Crediton homeowners in that same sales pipeline of agreeing the offer and the legal and finance to be sorted as we speak, solicitors/conveyancers and mortgage lenders are really struggling with demand for their services, meaning the average time will increase. Hence, I believe as many as…

11 Crediton people could miss out on the £75,630 stamp duty tax savings.

There is time left to sell and legally complete your Crediton property sale before 31st March stamp duty deadline if you put the property on the market now with a realistic asking price, a decent marketing plan, and razor sharp reflexes when it comes to the legal and mortgage work.

Yet with 40% to 50% more home movers in the system, those looking to sell their Crediton home should be very suspicious of agents being too optimistic on their initial asking price (many estate agents get a commission to put a property on the market, meaning they over- egg the pudding on the suggested asking price to flatter you, only to badger you to reduce the asking price weeks later).

Those wasted weeks at an inflated asking price will mean the difference of between you securing a buyer and you then buying your next Crediton home with or without the stamp duty savings, which are up to £15,000 per home move.

And whilst many Crediton buyers seem ready, willing and able to pay top dollar prices for Crediton properties that match their changed post-lockdown home needs, speaking privately to many Crediton agents, some Crediton homeowners’ price expectations for their Crediton homes are now becoming too optimistic, meaning they will undoubtedly lose out.

We also can’t forget as many as 1 in 5 mortgage surveys are being down valued by the surveyor, meaning unless all parties are willing to negotiate, the sale falls through and the homeowner has to go back to ‘Square One’.

My best piece of advice for those currently sold and in the sales systems with lawyers and mortgage brokers is to speak to your solicitor and mortgage broker every single week and ask if there is anything you need to do to ensure the sale proceeds smoothly and expediently. Also, if you are asked for any information from your solicitor or mortgage broker in between times, drop everything and respond quickly to their request. The odd day here and there will make all the difference.