Friday, 24 June 2016

47.9% of Epsom & Ewell Voters voted to leave the EU – What now for the 10948 Epsom Landlords and Homeowners?

It’s 5.50am as I start to type this article and David Dimbleby has just announced the UK will be leaving the EU as the final votes are counted. As most of the polls suggested a Remain Vote, it came as a surprise to most people, including the City. The Pound has dropped 6% this morning after the City Whiz kids got their predictions wrong and MP’s from the Remain camp are using words like “challenging times ahead”.

.. and now the vote has been made .. what next for the 8498 Epsom homeowners especially the 4601 of those Epsom homeowners with a mortgage?

The Chancellor in the campaign suggested property prices would drop by 18%. Using Treasury estimates, their method of calculating this was tenuous at best, but focused around the abrupt and hasty increase in UK interest rates, which in turn would raise the cost of mortgages, and therefore lower demand for property, causing a drop in property prices.… and I would say, yes .. that will probably happen.

Epsom Property Values

Epsom property values will probably drop in the coming 12 to 18 months – but by 18% - I am sorry I find that a little pessimistic and believe that figure was rhetoric to get homeowners and landlords to vote in a particular way. But the UK property market is quite a monster.

Since the last In/Out EU Referendum in June 1975, property values in Epsom have risen by 2132.8%

(That isn’t a typo) and whilst property prices did drop nationally by 18.7% between the peak of 2007 and bottom of the market in 2009, when one compares property values today in the country, compared to that all-time high of 2007, (the period before the financial crisis of the Credit Crunch of 2008/9) .. they are still up 10.14% higher.

Another Credit Crunch?

And so, notwithstanding the Credit Crunch, the worst global economic outlook since the 1930s and the recession it brought us, a matter of a few years later, the Government were panicking in 2012/3/4 that the housing market was a runaway train.

Now the same Credit Crunch doom-mongers and Sooth-Sayers that predicted soup kitchens in 2008/9 are predicting Brexit meltdown. Bad news sells newspapers. Stock markets may rise, stock markets may fall, yet the British public continued to buy property in 2009/10 and beyond. Aspiring first time buyers and buy to let landlords dusted themselves down, took a deep breath and carried on buying… because us Brit’s love our Bricks and Mortar .. we need a roof over our head.

However, as mentioned previously, if the value of the pound drops, in the past UK Interest Rates have risen to reverse that drop. However, whilst a cheaper pound will make your pint of Sangria a little more expensive on your Spanish holiday this year and make your brand new BMW pricer .. it will make British export cheaper! Which is great for the economy.

Interest rates

… and what of interest rates? Since 2009, interest rates have been at 0.5% and lots of people have become accustomed to those sorts of levels. So what if interest rates rise .. end of the world? Interest rates in the 1986/88 property boom were on average 9.25%, the 1990’s they were on average around 6.5% and uber-boom years (when UK property values were rising by 20% a year for three or four straight years across the UK) .. 4.5%. Many of you reading this who are in their 50’s and older will remember interest rates at 15%.

But I suspect interest rates won’t rise that much anyway, as Mark Carney (Chief of the Bank Of England) knows, raising interest rates causes deflation – which is the last thing the British economy needs at the moment. In fact they have been printing money (aka Quantitative Easing) for the last few years (which causes inflation) to the tune of £375bn a month. A bit of inflation because the pound has slipped on the money markets (not too much mind you) might be a good thing?

.. because whilst property values might drop in the country, they will bounce back. It’s only a paper loss.. because it only becomes real if you sell. And if you have to sell, again as most people move up market when they sell, whilst your property might have dropped by 5% or 10%, the one you want to buy would have dropped by the same 5% to 10% .. and here is the best part – (and work your sums out) you would actually be better off because the more expensive property you would be purchasing would have come down in value (in actual pound notes) than the one you are selling.

The Epsom landlords of the 4,701 Epsom buy to let properties have nothing to fear neither, nor do the 11,612 tenants living in their properties.

Buy to let is a long term investment. I think there might even be some buy to let bargains in the coming months as some people, irrespective of evidence, panic. Even if we pull up the drawbridge at Dover and immigration stopped today, the British population will still increase at a rate that will exceed the current property building level. Britain is building 139,600 properties a year, but needs according to the eminent ‘Barker Review of Housing Supply Report’, the country needs to build about 250,000 properties a year to even stand still, and as the the birth rate is increasing, the population is living longer and just under a quarter of all UK households now are occupied by a single person demand is only going up whilst supply is stifled. Greater demand than supply equals higher prices. That is definitely a fact.

So, what will happen next?

Well, there are many challenges ahead. The country has spoken and we are now in unchartered territory – but we have been through a couple of World Wars, an Oil Crisis, Black Monday, Black Wednesday, 15% interest rates and a Credit Crunch … and we survived!

And the value of your Epsom property? It might have a short term wobble… but in the long term -it’s safe as houses regardless.



Local Result - Epsom and Ewell
Leave 47.9% 21,707 VOTES (BLUE)
Remain 52.1% 23,596 VOTES (YELLOW)
Turnout: 80.4%

National Results
England
Leave 53.4% 15,188,406 VOTES
Remain 46.6% 13,266,996 VOTES
Counting complete Turnout: 73.0%

Northern Ireland
Leave 44.2% 349,442 VOTES
Remain 55.8% 440,437 VOTES
Counting complete Turnout: 62.9%

Scotland
Leave 38.0% 1,018,322 VOTES
Remain 62.0% 1,661,191 VOTES
Counting complete Turnout: 67.2%

Wales
Leave 52.5% 854,572 VOTES
Remain 47.5% 772,347 VOTES
Counting complete Turnout: 71.7%

Wednesday, 25 May 2016

Epsom Property Newsletter - Summer 2016

Here is the summer edition of the Epsom Property Newsletter which is a great way to catch up on the latest news from this blog.



You can download and view the newsletter by clicking here.

Thursday, 21 January 2016

Where will Epsom Property Prices be by 2021?

I received a call last week from an investor friend of mine, when the subject of property came up. He asked me my thoughts on the Epsom property market for the next five years. Property prices are both a British national obsession and a key driver of the British consumer economy. So what will happen next in the property market? So here is what I told him, and now wish, my blog reading friends, to share with you.

Before I can predict what will happen over the next five years to Epsom house prices, firstly I need to look at what has happened over the last five years. One of the key drivers of the housing market and property values is unemployment (or lack of it), as that drives confidence and wage growth – key factors to whether people buy their first house, existing homeowners move up the property ladder and even buy to let landlords have an appetite to continue purchasing buy to let property.

When the Tory’s came to power in May 2010, the total number of people who were unemployed in the suburb stood at 1,051 (or 2.0% of the working age population in Epsom parliamentary constituency). Last month, this had dropped to 375 people (or 0.7% of the working age population).

As the Epsom job market has improved with better job prospects, salaries are rising too, growing at their highest level since 2009, at 3.4% per year in the private sector (as recently reported by the ONS), property values in the Epsom area continue to increase and are 31.03% higher today than they were five years ago.

Many home occupiers have held back moving house over the past seven to eight years following the Credit Crunch but with the outlook more optimistic, I expect at least some to seize the opportunity to move home, releasing pent up demand as well as putting more stock onto the market. With a more stable economy in the suburb, this will, I believe, drive a slow but clearly defined five year wave of activity in home sales and continued house price growth in Epsom.

I forecast that the value of the average home in Epsom will increase by 21.6% by 2021


21.6% might sound optimistic to some, but according to Land Registry, values are currently rising in Epsom at 8.0% year on year, I believe my forecast to be fair, reasonable and a reflection of both positive (and negative) aspects of the local property market and wider UK economy as whole. (My forecast is based on looking at history and economic factors, which of course could plummet as well)!

However, it wouldn’t be correct not to mention those potential negative issues as I do have some slight concerns about the future of the Epsom housing market. The number of properties for sale in Epsom is lower than it was five years ago, restricting choice for buyers (yet the other side of the coin is that that keeps prices higher). Interest rates were being predicted to rise around Easter 2016, but now I think it will be nearer Christmas 2016 and finally the new buy to let taxation rules which are being introduced between 2016/7 and 2021 (although choosing the right sort of property / portfolio mix in Epsom will, I believe, mitigate those issues with the next taxation rules).

I am telling the landlords I speak to, that with interest rates at their current level 0.5%, the cash in your Building Society Passbook is going to grow so slowly that it might as well be kept under their bed. Property prices, by contrast, have rocketed over the years, even after the property crashes, far outstripping bank accounts and inflation.

So my final thought ... property is a long term investment, it has its’ up and downs, but it has always outperformed, in the long term, most investments. Those in their 40’s and 50’s in Epsom would be mad not to include property in their long term financial calculations. Just make sure you buy the right property, at the right price in the right location. One source of information on such matters would be here at the Epsom Property Blog.

Tuesday, 12 January 2016

How EU Migration has changed the Epsom Property Market

The argument of migration and what it does, or doesn’t do, for the country’s economic wellbeing is something that has been hotly contested over the last few years. In my article today, I want to talk about what it has done for the Epsom Property market.

Before we look at Epsom though, let us look at some interesting figures for the country as a whole. Between 2001 and 2011, 971,144 EU citizens came to the UK to live and of those, 171,164 of them (17.68%) have bought their own home. It might surprise people that only 5.07% of EU migrants managed to secure a council house. However, 676,091 (69.62%) of them went into the private rental sector. This increase in population from the EU has, no doubt, added great stress to the UK housing market.

Looking at the figures, the housing market as a whole is undoubtedly affected by migration but it has been the private rented housing sector, especially in those areas where migrants come together, that is affected the most. Indeed, I have seen that many EU migrants often compete for such housing not with UK tenants but with other EU migrants. In 2001, 3.68 million rented a property from a landlord in the UK. Ten years later in 2011, whilst EU migration added an additional 676,091 people renting a property from a landlord, there were actually an additional 4.14 million people who became tenants and were not EU migrants, but predominately British!

As a landlord, it is really important to gauge the potential demand for your rental property, especially if you are a landlord who buys property in areas popular with the Eastern European EU migrants. To gauge the level of EU migration (and thus demand), one of the best ways to calculate the growth of migrants is to calculate the number of people who ask for a National Insurance number (which EU members are able to obtain).

In Epsom and Ewell migration has risen over the last few years. For example, in 2005 there were 545 migrant national Insurance cards (NIC) issued and the year after in 2006, 535 NIC cards were issued. In 2014, this had increased to 674 NIC’s. However, if the pattern of other migrations since WW2 continues, over time there will be an increasing demand for owner occupied property, which may affect the market in certain areas of high migrant concentration. On the other hand, over time some households move into the larger housing market, reducing concentrations and pressures.

In essence, migration has affected the Epsom property market; it couldn’t fail to because of the additional 5,374 working age migrants that have moved into the Epsom and Ewell area since 2005. However, it has not been the main influence on the market. Property values in Epsom today are 45.37% higher than they were in 2005. According to the Office of National Statistics, rents for tenants in the South East have only grown on average by 0.95% a year since 2005 .... I would say if it wasn’t for the migrants, we would be in a far worse position when it came to the Epsom property market. This was backed up by the then Home Secretary Theresa May back in 2012 - more than a third of all new housing demand in Britain is caused by inward migration and there is evidence that without the demand caused by such immigration, house prices would be 10% lower over a 20 year period.

Thursday, 3 December 2015

Epsom Property Market Crisis as New House Building slumps by 55.77%

One of the key factors that determine the price of anything is the demand and supply of the item that is being bought and sold. When it comes to property, demand can change overnight, but it takes years and years to build new properties, thus increasing the supply.

The Conservatives have pledged to build over 1 million homes by 2020. I am of the opinion that as a country, irrespective of which party, we have not built enough homes for decades and if the gap between the number of households forming and the number of new homes being built continues to grow, we are in danger of not being able to house our children or grand children. I believe the country is past the time for another grand statement of ambition by another Housing Minister. Surely it’s right to give normal Epsom families back the hope of a secure home, be that rented or owned? As a town, we need to exert pressure on our local MP Chris Grayling, so they can make sure Westminster is held accountable, to ensure there is a comprehensive plan, with enough investment, that can actually get these homes built. Indeed the increase in stamp duty by 3% to buy to let investors will help, but will this be enough for the building?

To give you an idea of the sorts of numbers we are talking about, in the Epsom and Ewell Borough Council area in 2007, 340 properties were built; in 2013 it peaked at 520. By 2014, that figure had dropped by a massive 55.77% to 230 properties built.

The outcome of too few homes being built in Epsom means the working people of the town are being priced out of buying their first home and renters are not getting the quality they deserve for their money. The local authority isn’t building the estates they were after the war and housing associations are having their budgets tightened year on year, meaning they have less money to spend on building new properties. I know of many Epsom youngsters, who are living with their parents for longer because they cannot afford to get onto the housing ladder and growing families are unable to buy the bigger homes they need.

I talk to many Epsom business people and they tell me they need a flexible and mobile workforce, but the high cost of moving home and lack of decent and affordable housing are barriers to attracting and retaining employees. Furthermore, building new homes is a powerful source of growth, creating jobs across the county and supporting hundreds of Epsom businesses. It is true that landlords have taken up the mantle and over the last 15 years have bought a large number of properties. The Government need to be thankful to all those Epsom landlords, who own the 2,450 rental properties in the borough. Most local landlords only have a handful of rented properties (to aid their retirement), and without them, I honestly don’t know who would house all the extra people in Epsom!

Moving forward, those Epsom landlords have many pitfalls, both in the short term and medium term. For instance, were you aware that the rules on changes for new tenancies from the 1st October 2015 (with some imposing penalties including loosing the right to require the tenant to vacate, if they are done incorrectly) or in the medium term, the planned change in the way buy to let’s are taxed?

More than ever, the days of buying any old property in Epsom and you would be set for life are gone. Now, it’s all about ensuring you stay the right side of the law, buying the right property (and that might mean even selling some to buy others), so you build the right portfolio for you as a landlord. One source of info on all of these issues, where you will find other articles similar to this on the Epsom property market, is here at the Epsom Property Blog.