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.

Monday, 30 November 2015

Epsom Property Newsletter - November 2015

Here is the sixth issue of the monthly 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, 26 November 2015

Epsom House owners desert the housing market with an 8 year low

Even though the housing market is in an upbeat state in many parts of the UK, getting on the property ladder is still challenging for many and regarded as unattainable by some. However, that goal has become even worse recently in Epsom as the number of houses available to buy is at an 8 year all time low.

Back in Summer 2008, there were over 1,225 properties for sale in Epsom and since then this has steadily declined year on year, so now there are only 352 for sale in the suburb. This continuing diminishing supply of housing has been happening over those years for a while and there simply aren’t enough properties in Epsom to match demand.

According to a recent report by the National Association of Estate Agents, that said, “There are now 11 house hunters fighting after every available house which isn’t sustainable.” What that means is Epsom youngsters, who are looking to buy their first home, are finding themselves being squeezed out by the competition. However, in the meantime, nobody wants to live with parents until they are in their 30’s, so that in turn creates demand for more rental properties, which means landlords have a greater demand for more rental properties so are buying more, resulting in even less smaller properties for the youngsters to buy; it’s a vicious circle.

Talking to fellow agents, mortgage arrangers, surveyors and solicitors in the suburb, all of whom have extensive dealings in the Epsom property market like myself, most of us agree the movement in the Epsom market is taking place in the middle to upper market, higher up the property ladder and it’s second and third steppers pushing through the properties that are being bought and sold.

That has meant as people tend to move less in the middle to upper market, the number of the properties actually selling has drastically reduced over the last couple of years.

When we look at the individual areas of the suburb, it paints an interesting picture.

  • KT17 - Epsom, Ewell, Stoneleigh - 24 properties sold in May 2015 (with an average value of £498,956), whilst over the Autumn months of 2014, the number of properties selling in this postcode reached into the mid/late 40’s.
  • KT18 - Epsom, Tattenham Corner, Headley, Langley Vale - 24 properties sold in May 2015 (the most recent set of figures from the HM Land Registry), whilst over the Summer months of 2014, the number of properties selling in this postcode was always between 34 and 41 per month. (Interestingly the average value of those properties was £473,141).
  • KT19  - Epsom, West Ewell, Stoneleigh, Horton, Longmead - 34 properties sold in May 2015 (with a average value of £418,541), whilst over the Summer months of 2014, the number of properties selling in this postcode reached into the mid 70’s. 

So what does this all mean for homeowners and landlords alike in Epsom? Demand for Epsom property is good, especially at the lower end of the market. However, with fewer properties coming up for sale, it means property prices are proving reasonably stable too.

You see I believe a more stable, consistent Epsom property market, with less people seeing property as an easy way to make a quick buck (as many did in the early 2000’s when prices were rising at nearly 20% a year so people were buying and selling every other minute), but a property market that has a steady growth of property values in Epsom, year on year, without the massive peaks and troughs we saw in the late 1980’s and mid/late 2000’s might just be the thing that the Epsom property market needs in the long term.

Friday, 20 November 2015

Could your Epsom property save you from Pension oblivion?

If you were born in the early 1970’s or late 1960’s, if you haven’t started to think about it yet, retirement is closer than you think. In fact the number of years you have left to work is less than the number of years you have worked. The basic state pension is worth £115.95 a week for a single person in 2015/16 (or £6,029 a year) and £231.90 a week for a couple (£12,118 a year) as long as your partner has paid their stamp (although there are certain get of jail cards if they haven’t).

As a household, could you live on just over £12k a year?

However, could the property you are living in in Epsom save you from poverty when you reach retirement? You see, a regular income is vital in retirement and the bricks and mortar you own in Epsom could provide a way for you to finance life when you retire.

If you are in your 30’s, instead of saddling yourself with bigger and bigger mortgages, going from your first time buyer flat, to a terraced, to the semi and then the large detached house, you could instead keep your terraced or semi, invest in a buy to let property and let the rent pay the mortgage and rely on capital growth to provide you with a lump sum when you sell the property and retire.  One of the biggest plus points of buy to let is what is known as leverage. Let me explain ... say you have a deposit of 25% and the value of the property rises by 3% a year, your gains in fact multiply to 12%.  However, if property prices drop, 'leverage' can be catastrophic, as losses will also be multiplied. Property values have dropped a number of times in the last 50 years, but they always seem to bounce back ... property must be seen as a long term investment.

Let me explain how leverage could work for you. If you had bought an Epsom house in Spring of 1983 for £70,000, using a 75% mortgage and 25% deposit, (meaning your deposit would be £17,500). Today, that Epsom property would have risen in value to £506,653, a rise of 623.8%. However, when you look at the growth on just your deposit, the rise is even better ... instead of 623.8%, we see a rise of 2795% (remembering that the mortgage would have been paid off).

However, buy to let is not all about capital growth in retirement, income is more important than capital growth, as rent is the key to a steady income.

So surely the best strategy is to buy those Epsom properties with the high rents (when compared to the value of the property). These are called high yield properties in the buy to let world because the monthly return is so much greater. So surely they are the best in Epsom? Possibly, but the properties that offer these higher yields (in the order of 5% to 6% per year) tend to be in such areas as Longmead or Watersedge in Epsom, historically they haven’t offered such good capital growth when compared to the average and sometimes have a higher tendency for void periods and maintenance.

Therefore, if a high maintenance rental portfolio wasn’t for you, another strategy could be buy a property with relatively smaller rental returns of 3% to 4% per year (i.e. lower yields), but in a more up market area such as Woodcote. Properties such as these tend to suffer from less void periods (i.e. when there is no tenant in the property paying you rent) and they historically have had better long term capital growth when compared to the town average.

Every landlord is different and every property is different. All I suggest to you is do your homework.

As regular readers will know, I am happy to share my knowledge and experience of the Epsom property market, high yields, high capital growth, what to buy, what not to buy and where to buy in the Epsom Property market, which can always be found here at the Epsom Property Blog or email me at ian@directresidential.co.uk.

Wednesday, 11 November 2015

Southfield Park catchment area properties outperform Epsom average by 52.58%

I was having a chat with an Epsom property investor the other day, when he asked if schools, especially primary schools, affected the local property market in terms of demand from buyers and tenants to a property. Anecdotally, I have always known this to be true, a good school creates good demand and good demand does affect house prices. So, I asked my colleagues on the front line, who take the phone calls from people putting themselves on our mailing list and they confirmed that most people cite location as their number one factor.

After looking through our mailing list, it confirms there is a close correlation between the high demand areas of Epsom and the close proximity to a good primary school. Talking to my team in a recent morning meeting, they agreed many people would look to increase their budget quite significantly, whilst others would consider downgrading their property requirements to be close to a good primary school.

Those of you who regularly read this blog will know I like a challenge, so I decided to look at the science behind these assumptions. According to the School Guide website, Southfield Park Primary School is one of the best primary schools in Epsom. Its figures are certainly impressive. Their last Ofsted Report classified it as Outstanding, 93% of 11-year pupils achieving Level 4 or above in maths, reading and writing whilst 47% of them achieved level 5. Finally, the schools’ KS2 rating was classed as Excellent.

Looking at property sales within half a mile of Southfield Park, property values have risen in value since 1999 by 217.36%, whilst according to recent figures, the Epsom average as a whole has risen in the same time frame by 142.46%.

That means the parents of Southfield Park have seen the values of their properties rise proportionally 52.58% more than the Epsom average ... interesting don’t you think?

However, whilst a good primary school significantly contributes more to house prices, the same can’t be said for secondary schools. There are two reasons for this, firstly, as secondary schools are much larger, so their catchment areas are correspondingly much larger, meaning parents don’t need to live so close to the school. Secondly, in the UK, whilst the difference between the top 25% and bottom 25% of secondary schools is not insignificant, in the primary school sector, the difference between the top 25% and bottom 25%, according to the London School of Economics, is considerably and significantly more.

Many other Epsom landlords, both who are with us and many who are with other Epsom agents and also potential investors pop in for a coffee or ring/email me to discuss the Epsom property market, to consider how Epsom compares with its closest rivals and hopefully we can answer all their questions. You must take lots of advice and seek out the best opinion. One good specific source is here at the Epsom Property Blog or you can email me at ian@directresidential.co.uk for some honest and straight talking advice.

Wednesday, 4 November 2015

Epsom’s £2.07 billion Mortgage Powder Keg

Eight years ago, in the summer of 2007, hardly anyone had heard of the term ‘credit crunch’, but now the expression has entered our daily language and even the Oxford Dictionary. It took a few months throughout the autumn of 2007, before the crunch started to hit the Epsom Property market, but in November / December 2007 and for the following seventeen months, Epsom property values dropped each and every month like the proverbial stone. The Bank of England soon realised in the late Summer of 2008 that the British economy was stalling under the continued pressure of the credit crunch. Therefore, between October 2008 and March 2009, interest rates dropped six times in six months from 5% to 0.5% to try and stimulate the British economy.

Thankfully, after a period of stagnation, the Epsom property market started to recover slowly in 2010, but really took off strongly in late 2013 / early 2014 as property prices started to rocket. However, the heat was taken out of the market in late 2014/early 2015, with the new mortgage lending rules and some uncertainty, when some people had a dose of pre–election nerves.

With the Conservatives having been re-elected in May, the Epsom property market regained its composure and in fact, there has been some ferocious competition among mortgage lenders, which has driven mortgage rates to record lows. Whilst I have no actual figures to back this up, I know an awful lot of long serving bank managers, mortgage arrangers and people in the finance industry, all of whom have told me on previous occasions when interest rates rose (1987, 1992, 1997 and 2003), it wasn’t the first rate rise that was the catalyst for many homeowners and landlords to remortgage, but the second or third increase. The reason being that it was only by the time of the third rate rise, it started to hit the wallet. However, the issue is, by the time of the second or third rate rise the best fixed rates, were in all instances, no longer available as they had been pulled by the banks months before.

But here is the good news for Epsom homeowners and landlords, over the last few months a mortgage price war has broken out between lenders, with many slashing the rates on their deals to the lowest they have ever offered. I read that the well respected UK financial website Moneyfacts said only a couple of weeks ago, the average two year fixed rate mortgage has fallen from 3.6% twelve months ago to just under 2.8%.

Interestingly, according to the Council of Mortgage Lenders, the level of mortgage lending had soared to a seven year high in the UK. So what about Epsom? In Epsom, if you added up everyone’s mortgage, it would total £2.07 billion. Even more interesting is when we look at Epsom and split it down into the individual areas of the town,

  • KT17 - Epsom, Ewell, some of Stoneleigh £697.1m
  • KT18 – Epsom, Tattenham Corner, Headley, Langley Vale £471.9m
  • KT19 - West Ewell, some of Stoneleigh, Horton, Longmead £900.9m

Since 1971, the average interest rate has been 7.93%, making the current 0.5% very low. So, if interest rates were to rise by only 2%, according to my research, the 11,920 Epsom homeowners, who have a variable rate mortgage would, combined, have to pay an approximate additional £23,958,700 a year in mortgage payments. That means every Epsom homeowner with a variable rate mortgage, will on average have to pay an additional £3,473 a year or £289 a month in interest payments.

I know over the last couple of posts, I have talked about mortgages a lot however, I am not a mortgage arranger, but a property letting agent and as regular readers know, I always talk about what I consider to be the most important issues when it comes to the Epsom Property market and at the moment, in my humble opinion, this is the most important thing!

Buy to let is all about maximising your investment, increasing income and reducing costs. I give advice, opinions, thoughts, concerns, worries, expectations and fears about the Epsom Property market in my blog on the Epsom Property Blog. If you are interested in the Epsom Property Market, you might learn something by visiting this blog at www.epsompropertyblog.co.uk or you can email me at ian@directresidential.co.uk.

Monday, 2 November 2015

Epsom Property Newsletter - October 2015

Here is the fifth issue of the monthly 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.

Monday, 26 October 2015

Interest rates set to rise – How will that affect the Epsom property market?

A couple of weeks ago, I mentioned in this blog about how the Bank of England has been indicating recently that UK interest rates will be going up in the not too distant future. Therefore, if you are one of the 4,601 homeowners in Epsom, who own your own home with a mortgage, then you need to consider your options and start to budget for an interest rate rise. However, if you are a landlord, who owns one of the 2,253 rental properties in the town, whilst your exposure to interest rate rises is lower, it is most certainly something you should be aware of.

Since the spring of 2009, British interest rates have been at a record low of 0.5%. It’s not a case of if, but when, they will rise. Some people think it will be before Christmas, although I am of the opinion, it will be early in the New Year around Easter time, when they do rise. I also expect those rises will be slow, steady and limited. It also depends on what happens to UK wage rises, UK inflation and the general state of the British economy. Nevertheless, as most of us in Epsom would love to pull the shutters and stick two fingers up to the world, we have to recognise we are part of a global economy and global economic worries still exist to prevent an abrupt and instantaneous rate rise.

Those Epsom landlords, who do have a mortgage, need to realise that as interest rates rise, their monthly mortgage costs rise. It’s easy to say you will look at your mortgage next month and then before you know it, Christmas will be here! Don’t forget, mortgage lenders have always removed the juicy low rate mortgage deals a few months before interest rate rise. Speak to a qualified mortgage arranger, there are lots of them in Epsom and seriously consider fixing your mortgage rate now. You didn’t buy your Epsom Buy to Let property for it to become a millstone around your neck. It’s all about mitigating your costs and maximising your income to make your Epsom Buy to Let property the investment you want it to be.

However, on the other side of the coin, two in three landlords who have bought property since 2007, have done so without a mortgage. A rise in interest rates might be a good thing. Let me give you some background first, then I’ll explain why. Epsom landlords have see their return on investment for their Epsom buy to let property, over the last couple of years, perform very well indeed with Epsom property values rising by 43.36% since the Spring of 2009. However, when rates do rise, whilst more expensive mortgage rates will ease the demand for borrowing, on the other hand, it may temper house price growth, making the property market more competitive... and therefore, we should see the return of some bargain property buys in Epsom!

Finally though, can I ask all Epsom homeowners and Epsom landlords, who have a mortgage that isn’t fixed, they need to recognise that rates will rise throughout 2016 to 2018 and will continue to move steadily upwards towards more viable and feasible long term levels. However, I am not qualified to give that advice and this is just my personal opinion, so please speak to a qualified mortgage arranger and, if appropriate, fix your mortgage before interest rates rise. Don’t say I didn’t warn you!

In the meantime, if you are a landlord looking for a bargain now, don’t despair ... there are plenty out there, if you know where to look! One place is Rightmove, another Zoopla and another OnTheMarket. However, sometimes, you can’t see the wood for the trees. At the time of writing, Rightmove had 373 properties for sale in Epsom, Zoopla 269 properties for sale in the town and OnTheMarket 136 properties ... where do you start? A lot of savvy Epsom landlords like to visit the Epsom Property Blog, where, irrespective of which agent is selling it, I regularly post what I consider out of the hundreds of properties on the market, to be the best buy to let deal in Epsom. Alternatively you can email me on ian@directresidential.co.uk.

Saturday, 10 October 2015

Epsom Property Newsletter - September 2015

Here is the forth issue of the monthly 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.

Epsom Property Values 9.7% higher than year ago

Epsom property values rose by 0.5% last month, meaning they are 9.7% higher than 12 months ago. Overall, I expect future property price growth to remain firm, built on the foundations of an improving labour market, strengthening economy and very low mortgage rates. In fact, talking to a number of other agents in the area, mortgage arrangers and solicitors (all of whom have their direct finger on the pulse of the Epsom property market), the steady long term growth in Epsom property prices tied in by strong demand conditions so far this summer, alongside an underlying lack of supply and the continued low mortgage rate environment, means the slow but steady upward momentum of the Epsom property market is hopefully likely to continue in the second half of 2015.

However, there are a couple points I wish to highlight as all my blog readers will know, I like to give a balanced and honest opinion of what is happening in the Epsom property market. The two main points being low interest rates and a lack of supply of property.

Interest rates first - Mark Carney (Chief of the Bank of England) said in a speech a few weeks ago at Lincoln Cathedral, the Bank will be seriously considering raising interest rates around Christmas time. An upward movement in interest rates will temper demand and result in a marked slowdown in house price growth. Mr Carney said that only six out of ten people that had a mortgage (57% to exact) had a variable rate mortgage, compared with more than one in seven (73% to be exact) in the Summer of 2012. Now I am not a mortgage arranger and cannot give advice, but rates are only going in one direction, so whether you are a landlord or homeowner, this might be a time to consider fixing your mortgage rate? Don’t say I didn't warn you!

Tie this in with the stricter mortgage lending rules which were introduced in 2014, which affected people’s ability to have larger mortgages, this means homeowners will need to be realistic in their pricing if they want to sell. Reading other recent reports though, property owners have continued to pay off mortgages at a faster rate while mortgage rates have been low. Therefore, when mortgage rates rise, the affect on home movers sentiment which, given the shortage of supply, would result in a marked slowdown in the rate of house price growth.

Shortage of Supply – As I have mentioned in previous articles, the number of houses on the market in Epsom is at an all time low. One reason is the large number of buy to let landlords who have bought Epsom property over the past fifteen years. Unlike first time buyers who tend to move on after a few years, landlords tend to keep their properties long term, meaning there are less properties coming onto the market ... thus restricting supply and sales. In fact over the last four months, only 5,181 properties in the Surrey County Council area have changed hands and sold, compared to 6,599 in the same time frame in 2014, a not so insignificant drop of 21.49%.

If you are planning on investing in the Epsom property market, or just want to know more, also things to consider for a successful buy to let investment, one source of information is here at the Epsom Property Blog or you can email ian@directresidential.co.uk.

Friday, 2 October 2015

Crisis in the Epsom Property Market…probably?

I don’t know about you, but if you watch SKY News every waking hour or read the newspapers, it always seems we as a Country, Europe or the World seem to lurch from one crisis to another. Another week, another crisis averted. It was only last summer the soothsayers were predicting the end of the world over the supposed house price bubble that many believed was developing in the South. Property prices were rising at 20%+ per annum in London, only for things to ease as the property market in the Capital showed a controlled slowdown and cooling in activity with price growth easing to a more realistic 8% to 9% per annum. Interestingly, there was no panic when some modest price drops were seen in some of London’s highest priced suburbs.

However, this month’s crisis is the Buy to Let boom and as George Osborne always likes to be topical, in the July emergency budget, he declared that he will start to scale back, from 2017, the tax relief that those high income tax rate landlords with a mortgage have benefited from. The Daily Mail ran headlines stating it was the end of the private landlord; predicting many landlords will give up on Buy to Let altogether and we will be inundated with rental properties up for sale as landlords feel squeezed from the market.

Even Mr Carney, the Governor of the Bank of England, recently cautioned that the Buy to Let property market could destabilise the whole UK property market. He was concerned landlords who bought with high loan to value mortgages could be spooked if there is a property crash, they would panic because of negative equity, sell cheaply, which would worsen house price falls.

End of the world then? ... this week, yes probably, but next week ... that is another story! Before we all go and live like a hermit in the Scottish highlands, let me explain to you my perspective on the whole subject. As I mentioned a few weeks ago, two thirds of Buy to Let properties bought in the last eight years have been bought mortgage free – so they won’t be affected by the Chancellors’ tax changes. Also, something I feel is often overlooked but very important, is the fact that landlords historically have only been able to normally borrow up to 75% of the value of the rental property. In the last property crash of 2008, property values dropped by the not so insignificant figure of 16.69% in Epsom, but even then, when we had the credit crunch and the world’s banking sector was on the brink, no landlord would have been in negative equity in Epsom.

I believe we have a case of ‘bad news selling newspapers’ and I believe that Buy to Let and the property market as a whole, will carry on relatively intact. It’s true reducing tax relief will hit landlords who pay the higher rate of income tax and this may slightly diminish Buy to Let as an investment vehicle, but I doubt people will sell. Many landlords have been relaxed with their investments, buying with their heart and then looking at the figures. You would never dream of investing in the stock market without doing your homework and talking to people in the know. If you want to make money in the Epsom property market as a buy to let landlord, it’s all about having the right property and as you grow, the right portfolio mix to offer a balanced investment that will give you both yield and capital growth.

The Epsom Buy to Let market still offers good investment opportunities to new and experienced alike. Those who have bought in the last twelve to eighteen months have reaped the benefit from buying in Epsom, because the town offered a combination of reasonable house prices with subsequently increasing rents. Property values have risen by 14.99% in the last eighteen months in Epsom, whilst looking at rents, in Q2 2015, average rental values for new tenancies were 11% higher than Q2 2014, which is particularly interesting as they only rose by 4.5% between Q2 2013 and Q2 2014.

I cannot stress enough the importance of doing your homework. One source of information and advice is the Epsom Property Blog where I have similar articles to this about the Epsom property market and what I consider to be the best Buy to Let deals around at anyone time, irrespective of which agent it is on the market with. If you haven’t visited and you are interested in the local property market in Epsom .. you are missing out! .. www.epsompropertyblog.co.uk or email me at ian@directresidential.co.uk

Thursday, 24 September 2015

My concerns about the Epsom Property market

I am genuinely concerned about the Epsom property market, but in a way that might surprise you. Rightmove announced that average ‘asking prices’ fell last month by 0.4% in the South East, leaving them 5.8% higher than a year ago. Whilst it could be said that monthly change is very modest, in the same period a year ago, we saw a monthly fall of 0.6% in the South East, which is more the norm given the onset of schools breaking up and everyone going on holiday.

Looking at all the data on the Epsom property market; putting aside the need for more houses to be built in the next decade to balance out the increase in population (helped in part by inward European migration) but not matched by a similar increase in housing being built; my research shows there is a widening gap between what property buyers want and what is available to buy. In a nutshell, many more buyers are looking for the smaller one and two bed properties (the typical semi detached and smaller terraced houses/apartments), whilst there is an oversupply of the four and five bed properties, which are the typical large detached properties available.

Demand for smaller properties comes from both first time buyers and the growing number of buy to let landlords, where it is more cost effective and efficient to buy smaller properties to let out compared to larger properties which tend to offer poorer returns. Also, landlords with larger loans (on those larger more expensive properties) will also be hit harder with the changes in the way tax is paid on buy to let investments, which start in 2017.

If you recall, a few weeks ago I did some research on how different types of properties had performed in Epsom since the year 2000. I revisited those calculations and it hit me how different types of properties had performed over the last 15 years. In a nutshell, this mismatch of demand and supply isn’t a new phenomenon, it’s been happening under our noses for years!

In the last 15 years, the average terraced house in Epsom has risen in value from £126,371 to £399,439 whilst the detached house has risen in value from £295,097 to £816,357. Nothing seems amiss until you look at the percentage growth. The terraced has grown in value by 216% whilst the detached by only 177% meaning the gap between the inexpensive terrace’s and expensive detached properties has in percentage terms narrowed enormously (this isn’t just an Epsom thing, it has happened all across the Country).

I am concerned because more houses need to be built, not only in Epsom, but in the South East and the UK as a whole. In particular, there is specific need for more affordable starter homes for the growing demand from both tenants (and the landlords that will buy them) and first time buyers. The Tories need to face up to the fact that unless they can get the builders, the planners (to release more building land), the banks (to finance it) and themselves together, to ensure long term plans can be made, and implemented, this issue will continue to worsen.

The country needs 200,000 houses a year to be built to keep up with demand, let alone reverse the imbalance between demand and supply. Last year, only 141,040 properties were built, the year before 135,510 and 146,850 in the year before that. This means only one thing for Epsom landlords. Unless David Cameron starts to rip up huge swathes of the British countryside and build on acres and acres of green belt, demand will always exceed supply when it comes to property for the foreseeable future.

Therefore, investment in the local Epsom property market as a buy to let investment could be the best move to make as the stock market investments are possibly on the wane. Everyone is different and trust me, there are many pitfalls in buy to let. You must take lots of advice and seek out the best opinion. One source of opinion, specific to the Epsom property market is here at the Epsom Property Blog or you can email me direct at ian@directresidential.co.uk.

Tuesday, 22 September 2015

Epsom – The 10 year Time Bomb on Home Ownership

Many people think the British obsession with owning your own home started with Thatcher in the early 1980’s, when she allowed council tenants to buy their council houses under the right to buy scheme. However, the growth actually started just after the Second World War. Looking at the country as a whole in 1951 30% of residential property was owner occupied then, every ten years that rose incrementally to 39% by 1961; 51% by 1971; 58% by 1981 and 68.07% by 2001 but after that, it dropped to 63.4% by 2011 and continues to drop today.

Young adults tend to start to think about settling down and moving out of the family home in their early-mid twenties. After a couple of years, they will have a choice of either buying their first house (albeit with a mortgage) or decide to privately rent for the long term (because the Council House waiting list is measured in decades at the moment!). The ratio of people owning a house with a mortgage verses privately renting is an extremely important guide to what people are doing about their housing needs and what their attitude to renting vs buying is. With that in mind, within the next ten years, I am predicting there will be more people renting privately in Epsom than own a property with a mortgage and that the British love affair of property ownership will fade as the decades roll on.

This is a really important change in the way we live, as I explained to a local Epsom landlord the other day, knowing when and where the demand of tenants is going to come from in the coming decade is just as important as knowing the supply side of the buy to let equation, in relation to the number of properties built in the town; Epsom property prices and Epsom rents.

In the Epsom and Ewell Borough Council area as a whole there are 3,628 households that are privately rented via a landlord or letting agency verses 12,219 households that are owned with a mortgage, so my prediction appears to be outrageous. However, when we look deeper (as the devil is always in the detail), 6,197 of those 12,219 households are 35 to 49 year olds and 3,760 are households of 50 to 64 year olds. I would expect all the 50+ years to be paying their mortgage off as they enter retirement as I would with some of the people in their mid/late 40’s.

Meanwhile, at the other end, in the 25 to 34 age range (the age most people bought their first home in the 1970’s/80’s/90’s) only 1,473 of the 2,587 households occupied by those 25 to 34 year olds are owner occupiers with mortgages, because 1,114 households are privately rented. This means only 56.9% of 25 to 34 year olds have bought their house (with a mortgage). Twenty years ago, that would have a much higher percentage of homeowners (between 75% to 85%).

It can be seen that as the older generation pay their mortgages off as they start to get to retirement and the younger generation aren’t jumping on the property ladder like they were 20 or 30 years ago, the private rental sector will take up the slack as more and more people will want a roof over their head, but won’t buy one but rent one. With Local Authorities and Housing Associations not building houses anywhere near like the number of houses they were building in the 1950’s, 60’ and 70’s, the private landlord appears to have good demand for their rental properties for many decades to come.

This will create a polarisation in the housing market between those, mostly older, households who own outright and those, mostly younger, households who rent. Our housing market is very much turning into the European model. However, all is not lost, the younger generation will inherit their parents properties, which in turn will enable them to buy, albeit later in life.

If you are a landlord or thinking of become a landlord, and would like to read more articles like this and other information on the Epsom Property Market, then please keep visiting the Epsom Property Blog or you can email me direct at ian@directresidential.co.uk.

Thursday, 17 September 2015

George Osborne – The Epsom landlord’s friend?

Well the last few weeks have been rather hectic as Epsom landlords, some who use us to manage their properties and other landlords who just read our Epsom Property Blog, have been sending me emails or picking the phone up to me not just about new properties to buy, but also about the new rules on buy to let taxation announced in the recent budget. George Osborne confirmed in the recent summer budget that the tax relief given to landlords on mortgage interest payments, on their buy to let (BTL) properties, would be reduced over the coming years for higher rate income tax payers. The Chancellor said the tax relief that private buy to let landlords (who pay the higher rate of income tax) would change in 2017 from the current 45%/40% and would steadily reduce over the following four years to the existing 20% by 2020.

With 19.4% of residential property in the area of Epsom and Ewell being privately rented (as there are 2,450 privately rented properties in the town), these changes are potentially something that will not only affect most Epsom landlords, but also the tenants and the wider property market as a whole. The choice of rental properties could drop, especially at the top end of the market which could push up rents.

However, Epsom landlords could protect themselves by reassigning one or more rental properties into a company structure (e.g., a Limited Company, Partnership or Sole Trader) and by doing so, the total tax paid is greatly reduced, because a company only pays tax on the profit. Nonetheless, before everyone goes off setting up companies for their BTL portfolios, it must also be noted, if a sole trader firm is started, stamp duty needs to be paid, yet if the owner is in business with a partner, they could enjoy some stamp duty relief. The biggest tax variation is Capital Gains Tax (CGT) where the tax bill will be much higher when you come to sell your portfolio. In essence, by going into business with your BTL properties, you will potentially have a modest stamp duty to pay when you start, but you will have a lot less monthly tax to pay, irrespective of the interest rate, but the CGT bill will be much higher when you come to sell ... as you can see, it is not a ‘get out of jail card’. Now it must be remembered, I am not a tax advisor, so you must take advice from a qualified person.

Those planning to purchase a BTL property will have to factor these new rules into their calculations, and this could affect the offers they are willing to make. However, I am not that concerned, as the scaremonger reports fail to see the fact that two out of three BTL properties that have been bought since 2007 have been purchased without the support of BTL mortgage. With those two thirds of landlords paying cash for the purchase of their rental properties, that means two thirds of landlords will be totally unaffected by the changes.

So what of the future? The British love their Bricks and Mortar, it’s an asset that they can touch and feel and has a 70 year track record of capital growth that has out stripped inflation. Buy to Let will still be attractive to Epsom investors and let me explain why. If you invested £80,000 in Epsom property in September 1987, today it would be worth £314,836. If you had invested the same £80,000 in to the London Stock Market (the FTSE 100 to be exact), it would be only be worth £229,012 today, whilst Inflation would have taken the original £80,000 and pushed it up to £166,254.

It’s true some central London landlords relying solely on the tax breaks rather than high yields may be forced out of the market, but even those landlords could seek to recoup any losses by increasing rents. However, those landlords may leave the market and this could constrict the availability of rented houses even more than it is already, increasing rents and thus pushing yields even higher for landlords and BTL investors still in the market... thus attracting new landlords into the market because of those higher yields.

The reality is, there is too much demand and not enough supply of homes for people to live in, in the town. Official figures show the population in Epsom and Ewell is rising by 804 persons per year (i.e., demand rising), but only 215 properties are being built each year (i.e., supply is low). This sets up the Epsom (and UK) property market to continue to create strong and steady returns, irrespective of any tax loophole being there (or not as the case maybe).

If the demand is there, I am happy to organise an informal Buy to Let seminar with a local Epsom accountant one evening, whereby they can show you the options available and what might be best for you. Therefore, if you are interested in attending, please drop me an email to ian@directresidential.co.uk and we will be able to get something organised very soon.

Tuesday, 8 September 2015

Epsom Property Newsletter - August 2015

Here is the third issue of the monthly 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, 3 September 2015

Epsom Landlord’s mortgages top £137 million!

The Brits can’t stop talking about property. The hot topic of discussion at the dinner parties of Ewell, Ashtead and Cheam’s movers and shakers is the subject of the Epsom Property market, but in particular, buy to let. These people are buying up buy to let properties quicker than an ace Monopoly player ... or so it would seem if you read the Sunday papers. So is the buy to let market a sure fire way to make money? Is it something everyone should be jumping into? Is it a sure fire way to make money? The answer is Yes and No to all those questions!

Firstly, the government gives tax breaks to landlords, as it allows the mortgage interest payments on a buy to let property to be tax deductible. Also, a landlord only has to flick through Rightmove or Zoopla, pick any property at random and agree a price. Then, find a modest deposit of 25% (often by remortgaging their own home) which for an average Epsom terraced house, would mean finding £99,859 for the deposit (as the average Epsom terraced house is currently worth £399,439) and borrow the rest with a low interest rate buy to let mortgage. Finally, the landlord would rent out the property in a matter of hours for top dollar and live happily ever after, with the rent then covering the mortgage payments, with loads of money to spare and come retirement have a portfolio of property that would have quadrupled in value in fifteen years. Sounds wonderful – doesn’t it? Or does it???

Let us not forgot that the half of one per cent Bank of England base rate is artificially low. The international money markets can be fickle and if interest rates do rise quicker and higher than expected because of some unforeseen global economic situation, that monthly profit will soon turn into a loss as the mortgage will be more than the rent. Even though tenants are staying longer in their rental property, tenants still come and go and my guidance to landlords is they should allow for void periods, plus the maintenance costs of a rental property and of course, agents fees and VAT. .. all things that eat into that profit.

Interestingly, by my calculations, there are approximately 734 Epsom landlords owing in excess of £13million in mortgages on those Epsom buy to let properties. An impressive amount when you consider Epsom only has 0.069% of all the rental properties in the Country. It really does come down to a number of important factors going forward to ensure you are water tight for the future. A lot of my existing landlords are fixing their mortgage rates. One told me that the Metro Bank are currently offering a 5 year fixed BTL remortgage rate at 3.79% for 5 years (based on a 75% loan). I don’t give financial advice, so you must speak with a qualified mortgage advisor... but that sounds very fair!

However, one thing I do know is that buy to let is a long term investment, it’s a ten, fifteen, twenty year plan and property prices will go down as well as up. You wouldn’t dream of investing in the stock market without advice, so why invest in the Epsom Property Market without advice? We give bespoke detailed advice to our landlords to enable them to spot trends in the Epsom Property Market before others, enabling them to buy better properties at better prices. For example, did you know that flats are selling for around 2% lower than 12 months ago in Epsom yet detached properties are selling for 19% more (with every other type in between). This means we can advise on which properties will go up in value better (or lose less if property prices drop), we can also advise which have lower voids and which properties have higher maintenance issues.

Information on the local property market and ability to process it is the strongest asset we can give you. As Lois Horowitz, the famous author says, ”Not having the information you need when you need it leaves you wanting. Not knowing where to look for that information leaves you powerless. In a society where information is king, none of us can afford that”. One place to find information on the Epsom Property Market is here at the Epsom Property Blog, where you will find many articles just like this. Or you can email Ian at ian@directresidential.co.uk

Thursday, 27 August 2015

The ‘Liquorice Allsorts’ Epsom Property market

Despite the UK economy heading in the right direction with record low mortgage rates and unemployment figures dropping, the rate of property prices rising in Epsom have tempered since the start of the year. This slow but sure downward trend in the rate of growth has been in evidence since mid-2014. Property value increases continue to outpace the growth in salaries, however the gap is closing, helped by a lift in salaries over the last 6 months. Property values in the South East region as a whole are 9.1% higher than a year ago. Compare this to the neighbouring regions of South West at 3.6% higher and within London at 9.1%, the majority of the country continue to see annual house price gains - the exception being Wales which recorded a slight decline of -0.6%.

Even with the tempering in house price inflation, it does not necessarily change my outlook that property prices are likely to be firmer over the second half of 2015 amid heightening activity in the Epsom property market. As stated in a previous article, there is a current shortage of properties on the market, restricting supply, which in turn will provide stability and support to Epsom property prices. Therefore, my overall opinion is that Epsom property prices will rise by 6% over 2015 and roughly the same in 2016 (of course not guaranteed as I do not possess a crystal ball).

Property investment is a long term business. Buying the right sort of property is vital. I have recently been speaking with a number of Epsom landlords about the importance of a balanced portfolio, when buying and renting out property. The balance between buying properties that offer good monthly returns (high yields), but quite often offer poor capital growth (i.e. they don't increase in value that much over the years compared with the average) verses properties that do go up in value quicker but often offer a lower yield. So, what types of properties have performed best over the last few years in Epsom, especially in terms of their capital growth?

When comparing what the average price of detached, semi detached, terraced and flats were selling for back at the start of the Millennium to the present. The results are quite remarkably different, almost like a bag of Liquorice Allsorts, as the different types of property have performed poles apart over the last 15 years:

  • Detached Houses in 2000 were selling on average for £295,097 and so far in 2015, they have been selling on average in Epsom for £816,357, a rise of 177%
  • Semi -Detached Houses in 2000 were selling on average for £180,398 and so far in 2015, they have been selling on average in Epsom for £459,828 a rise of 155%
  • Terraced Houses in 2000 were selling on average for £126,371 and so far in 2015, they have been selling on average in Epsom for £399,439 a rise of 216%
  • Flats and Apartments in 2000 were selling on average for £107,555 and so far in 2015, they have been selling on average in Epsom for £249,557 a rise of 132%

Moving forward, what should new and existing buy to let landlords do with this information? Well, the questions I seem to be asked on an almost daily basis by landlords are:

  • “Should I sell my property in Epsom?”
  • “Is the time right to buy another buy to let property in Epsom and if not Epsom, where?”
  • “Are there any property bargains out there in Epsom to be had?”

Many other Epsom landlords, who are with both us and other Epsom letting agents, like to pop in for a coffee, pick up the phone or email us to discuss the Epsom property market, how Epsom compares with its closest rivals (Sutton, Dorking and Kingston), and hopefully answer the three questions above. I don’t bite, I don’t do hard sell, I will just give you my honest and straight talking opinion and look forward to hearing from you. This and other articles can be seen at this blog or email Ian at ian@directresidential.co.uk

Thursday, 20 August 2015

Epsom Property Market – Bricks and Mortar!

The Land Registry has just released their latest set of figures for the Epsom Property market. It makes interesting reading, as average property values in Epsom remained static in May. This leaves average property values 10.3% higher than 12 months ago, meaning the annual rate of growth in the town fell to its lowest level since July 2014. When we compare Epsom against the regional picture, South East property values rose by 0.9%, leaving them 9.1% higher than a year ago.

Obviously this is a far cry from the price rises we were experiencing in Epsom throughout 2014. At one point (November 2014 to be exact) property values were rising by 14.1% a year. All the same, even with the tempering of the Epsom property values in 2015, property values are still higher. This is good news for local homeowners who had been affected by the downturn after 2007 and still find themselves in negative equity.

However, the thing that concerns me is that the average number of properties changing hands (i.e. selling) has dropped substantially over the last 12 months in the town. In April 2014, 124 properties sold in Epsom but in April 2015, that figure dropped to 55. I have been in the Epsom property market for quite a while now and the one thing I have noticed over the last few years has been the subtle change in the traditional seasonality of the Epsom property market. It has been particularly noticeable this year in that the normal post Easter flood of properties coming onto the market was not seen. This has made an imbalance between supply and demand, with less houses coming onto the market there is simply not as much choice of properties to buy in Epsom and with the population of Epsom ever increasing, this will generally strengthen house price growth for the foreseeable future.

So what does all this mean for Epsom landlords or those considering dipping their toe into the buy to let market for the first time? For many people, buy to let looks a good investment, providing landlords with a decent income at a time of low interest rates and stock market unpredictability.

However, if you are thinking of investing in bricks and mortar in Epsom, it is important to do things correctly. As an investment to provide you with income, for those with enough savings to raise a big deposit, buy to let looks particularly good, especially compared to low savings rates and stock market yo-yo’s. I must also remind readers, landlords have two opportunities to make money from property, not only is there the rent (income), but with the property market bouncing back over the last few years, property value increases has spurred on more investors to buy property in the hope of its value continuing to rise.

Savvy landlords with decent deposits can fix their mortgages at just over 3% for five years, making many deals stack up. Nevertheless, low rates cannot stay low forever, because one day they must rise and you need to know your property can stand that test. I saw some Epsom landlords struggling in the mid noughties, when interest rates rose from 3.5% in July 2003 to 5.75% in July 2007. That might not sound a lot, but that was the difference of making a £100 a month profit in 2003 to having to make up a shortfall in the mortgage payments of £100 per month in 2007.

Its true many landlords were thrown a life raft when the base rate dropped to 0.5% in March 2009. Whilst interest rates have remained there since, mark my words, they will rise again in the future. However, even with the potential for costs to rise, demand for decent rental properties remains high as there are ever more tenants in the market, driving up demand and thus rents. The British love of bricks and mortar plus improving mortgage deals also add up to fuel the buoyant Epsom property market.

If you are planning on investing in the Epsom property market, or just want to know more, things to consider for a successful buy to let investment, one source of information is here at the Epsom Property Blog or email Ian at ian@directresidential.co.uk

Thursday, 13 August 2015

Are ‘would be’ Epsom homeowners warming to the idea of renting?

I was reading a report the other day produced by the Halifax, about the UK property market and why more and more of the younger generation seem to be renting rather than buying. I find it fascinating that over the last ten years, the British obsession of buying a house almost as soon as you left school, and the fact that if you rented you were seen as a second class citizen, has turned on its head to a point where the hopes and dreams to own a nice home will be replaced by the ambition simply to live in one.

In the latter half of the 20th Century, you left school, got a job, bought a small house and kept buying and selling property, constantly upgrading until eventually they carried you out in a box. However, the perceived shame and stigma of renting is no longer the case, as it seems that the British are now beginning to accept a lifetime of renting. This is a very important consideration for both Epsom homeowners and Epsom landlords as it will transform the way the Epsom property ladder looks in the future and I might ask whether or not it will exist at all for some people? The make up of households is one important factor, especially in the Epsom property market. The normal stereotypical married couple, two kids and dog of the 1970’s and 80’s has changed. More and more we have the need for larger houses where two families come together after divorces (+ kids) and need a property to house everyone, through to an increase in the number of one person households.

Looking at the data for Epsom, of the 3,628 private rental properties in the Epsom and Ewell Borough Council area, 24.77% of those rented properties are one person households (899 properties). However, when we compare the number of one person Epsom households who have bought their own property with a mortgage (i.e. therefore they are still in work), of the 22,931 owner occupied households in the area, only 1,646 of those properties are a one person household (i.e. 7.18%). Compared to a decade ago, this explosion in demand for decent high quality rental properties that one person households require has not been met with an increase in supply of such properties. More and more I believe Epsom landlords need to consider this change in the make up of Epsom households, as I believe this could be an opportunity. As an aside, another interesting stat that raised an eyebrow was that 15.69% of those 3,628 rental properties (525 properties) are lone parents households as well. Again, another possible opportunity that Epsom landlords might want to consider in their future investment plans.

It is true that the Governments introduction in 2013 of the Help to Buy scheme, where first time buyers only needed a 5% deposit, changed the perception of peoples’ ability to buy without having to save ten’s of thousands of pounds for a deposit. However, it might surprise you, 95% mortgages were re-introduced within six months of the Credit Crunch in late 2009, so again it comes down to people’s own perception. Many youngsters think they won’t get a mortgage, so don’t even bother trying.

Coming back to the deposit, it’s still a fact that once you start renting it becomes that much harder to save for a deposit, regardless of the size. Interestingly, 7 out of 8 renters polled by the Halifax (86% to be exact) refuse to sacrifice the quality of accommodation they currently live in to reduce the amount of rent they pay in order to save for a deposit. This is the crux and the real reason why people aren’t buying but renting... and why demand for renting will continue to grow in the future (i.e. good news for landlords). Epsom tenants can upgrade the quality and size of the property they live in for a minimal rent increase. The average rent of a two bed property in Epsom is £1,324pm, a three bed is £549pm more at £1,873pm, whilst the average four bed rent is £2,685pm. If you had to make that jump when buying, the monthly mortgage payments would be stratospherically more than that! Without any social pressure and better quality rental properties compared to a decade ago, we will become a nation of renters within the next generation, as the UK is becoming more like Europe, where renting is ‘the norm’. Who is going to supply all these properties to rent? Landlords! Whether you are an existing landlord looking to grow your portfolio or looking to become a ‘first time landlord’, my thoughts are take advice from as many people as possible. However, as the majority of landlords buy their buy to let properties in the same town they live, you will need specific advice about Epsom itself. One place for such advice and opinion is here at the Epsom Property Blog or email Ian at ian@directresidential.co.uk

Thursday, 6 August 2015

Why are less Epsom people moving house?

During my school years (and that was a while ago...), I recall people constantly moving. From research I have carried out it shows things have changed considerably in Epsom over the last few decades, and interestingly, the trend is getting worse ... for the removal van people at any rate!

In Epsom, at the moment there are 12,641 properties. However, after we remove the 1,386 council houses, 2,450 privately rented houses and 148 houses where the occupants live rent free, that leaves us with 8,657 owned properties (be that 100% outright, with a mortgage or shared ownership). This means 68.5% of the properties in Epsom are occupied by the owner (the national average is interestingly 64.2%) but the number of people who have sold and moved house in Epsom, over the last 12 months, has only been 1,164. This means on these figures, the homeowners of Epsom are only moving on average every 7.43 years.

These are the reasons. Firstly, the cost of moving house has risen over the last twenty years. Secondly, with many remortgaging their properties in the mid 2000’s before the price crash of 2008, there is a reluctance or inability in a small minority of homeowners to finance a home sale/purchase, due to lack of equity. These are both factors driving fewer moves by existing homeowners.

However, the big effect has been the change in house price inflation. Back in the 1970’s and 1980’s, house prices were doubling every 5 to 7 years. Even in Greater London, with its stratospheric property price increases over the last few years, it has taken 13 years (August 2002 to be exact) for property values to double to today’s levels.

This change to a relatively low inflation Epsom property market (i.e. Epsom property values not rising quickly) is significant because the long term consequences of sustained low house price growth is that it eats into mortgage debt more slowly than when property price inflation is higher. Epsom homeowners cannot rely on inflation to shrink their debt in real terms as much as they did in say the 1970’s and 1980’s.

So what does this all mean for Epsom buy to let landlords? Well for the same reasons existing Epsom homeowners aren’t moving, less ‘twenty something’s’ are buying their first home as well. Epsom youngsters may aspire to own their own home, but without the social pressure from their peers and parents to buy their first property as soon people reach their early 20’s, the memory of the 2008 housing crisis and the belief the hard times either aren't over or the worst is yet to come, current and would-be homeowners are warming to the idea of renting. I also believe UK society has changed, with the youngster’s wanting prosperity and happiness; but wanting it all now... instantly... today... without the sacrifice, work and patience that these things take. As a society, we expect things instantly, and if it doesn’t come easy, doesn’t come quick, (or free), some youngsters ask if it is really worth the effort to save for the deposit? Why go without holidays, the newest iPhone, socialising four times a week and the fancy satellite package for a couple of years, to save for that 5% deposit if there is no longer a social stigma in renting or pressure to buy as there was... say... a generation ago?

Even though, in real terms, property prices are 5% cheaper than they were ten years ago (when adjusted by inflation), 19.4% of Epsom properties are privately rented (nearly double it was twenty years ago). As a result, the demand for rental properties continues to grow from tenants, meaning those wishing to invest in the buy to let market, over the long term, might be on to a good thing?

Friday, 31 July 2015

Epsom Property Newsletter - July 2015

Here is the second issue of the monthly 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, 30 July 2015

Fewer people are moving house in Epsom

The dust has settled from the General Election thankfully, we can get on with a more normal property market, or that is what the London based ‘Fleet Street’ journalists would lead you to believe. I have been talking to other property professionals in Epsom (solicitors, conveyancers and one of the best sources of info – the chap who puts all the estate agent and letting boards up in Epsom and all of them, every last one of them told me they didn’t see any change over April in business, compared to any other month on the lead up to the Election itself.

I am now of the opinion that maybe in the upmarket areas of Mayfair and Chelsea, the market went into spasm with the prospect of a Labour/SNP pact with their Mansion Tax for properties over £2,000,000, but in little old Epsom, there has only been four properties sold above £2,000,000 mark in the last 5 years.

In a nutshell, the General Election in Epsom didn’t really have any impact on people’s confidence to buy property. As I write this article, of 625 properties that have come on to the market in Epsom since the 2nd of April, 281 of them have a buyer and are sold subject to contract, that’s over four in ten (44.96% to be precise).

I think that things are starting to change in the way people in Epsom (in fact the whole of the country as I talk to other agents around the UK) buy and sell property. Back in the 1970’s, 80’s and 90’s, the norm was to buy a terraced house as soon as you left home and do it up. Meanwhile, property prices had gone up, so you traded up to a 2 bed semi, then a 3 bed semi and repeated the process, until you found yourself in a large 4 bed detached house with a large mortgage.

Looking into this a little deeper like I have referred to in previous articles, Epsom people’s attitude to homeownership itself has changed over the last ten years. The pressure for youngsters to buy when young has gone as renting, not buying, is considered the norm for 20 something’s. This isn’t just an Epsom thing, but, a national thing, as I have noticed that people buy property by trading up (or down) because they need to, not because ‘it’s what people do’. This does mean there are a lot less properties on the market compared to the last decade.

A by-product of less people moving is less people selling their property. My research shows there are a lot fewer properties each month selling in Epsom compared to the last decade. For example, in February 2015, only 49 properties were sold in Epsom. Compare this to February 2002, and 72 properties sold and the same month in 2004, 102 properties. I repeated the exercise on different sets of years, (comparing the same month to allow for seasonal variations) and the results were identical if not greater. So what does this all mean? Demand for Epsom property isn’t flying away, but with fewer properties for sale, it means property prices are proving reasonably stable too. Stable, consistent and steady growth of property values in Epsom, year on year, without the massive peaks and troughs we saw in the late 1980’s and mid/late2000’s might just be the thing that the Epsom property market needs in the long term. For more advice and opinion on the Epsom Property Market, keep ceking this blog or email Ian at ian@directresidential.co.uk

Friday, 24 July 2015

Epsom Buy To let – Bedrooms?

Fairly recently I was talking to a landlord in Epsom after reading the Epsom Property Blog, if he should extend his terraced house making an extra bedroom in the loft.

Having more useable space is generally thought to be consistent with better quality accommodation and homeowners and tenants are prepared to pay for it. If you added a bedroom to a two bed terraced to make a three bed terraced, it will add 10% to the value of the property. Turn a three bed terraced into a four bed terraced and 9% will be added to the value.

Looking at semi detached properties, and turn a two into a three bed and 12% will be added to the value, whilst making a three bed semi into four bed will add 9% in value. However, before you rush off to the planning department there are some important considerations, whether you are a homeowner or landlord. What would be the cost of making that extra bedroom? The average value of a terraced house in Epsom is currently £352,300 whilst the average value of a semi detached house is £444,200, meaning to make money the cost of the extension would need to be less than £33,468 on the terraced property and £46,641 on the semi detached house. Talking to a number of trade’s people in the town, most are booking up into the New Year. Also, it may be wishful thinking that a builder would only charge as little as that.

Well, that got me thinking about how bedrooms affected rental prices and rent-ability as well. Interestingly below, you will see that whilst bedrooms do have an effect on the rent that can be achieved and the rent-ability of the property – the difference does not warrant the expense, hassle and trouble of extending.

  • 39.6% of the one bed properties on the market to rent in Epsom have a tenant with an average rent of £1,156 per month
  • 31.5% of the two bed properties on the market to rent in Epsom have a tenant with an average rent of £1,337 per month
  • 53.4% of the three bed properties on the market to rent in Epsom have a tenant with an average rent of £1,833 per month
  • 29.7% of the four bed properties on the market to rent in Epsom have a tenant with an average rent of £2,566 per month

Now, if you want to increase the value of your property, be you an Epsom landlord or homeowner, there are things that cost a lot less than building extra bedrooms. Spruce up the exterior, emulsion all the rooms, install fresh carpets and curtains. For homeowners, a matter of a few hundred pounds will add thousands, whilst for landlords; these things can add an extra 10% to the rent that you can achieve. For more advice and opinion on the Epsom Property Market, keep chechking back here at the Epsom Property Blog or email Ian at ian@directresidential.co.uk

Friday, 17 July 2015

Simple Affordability of Housing in Epsom

Talking to an elderly relative recently, he reminded me that in his day, you could have bought a property for the same price of what a decent second hand car would sell for today and that his father was buying property for the same price as a decent 50 inch LCD TV! Now of course, these are only headline prices and we have had wage growth and inflation. Interestingly, since the Second World War, property values in Epsom doubled in 1961, 1971, 1975, 1980, 1988, 2000 and 2006.

Looking at more recent times, since the start of the Millennium, these increases in property values have generated large increases in equity for many homeowners, but on the other side of the coin also making housing unaffordable for other people. It might interest readers to note that most of Europe experienced sharp increases in property values in the early years of 2000’s, with only Spain beating us (although we know what has happened to the Spanish property market over the last few years!). In the 2000’s, the British situation was different in two regards. First the property value boom started earlier and saw more sustained increases; second, the regional pattern was fairly uniform.

However, since 2010, the regional pattern has been completely different in the UK. Compared with 2007 (the last property boom), average property values today in England and Wales are 1.2% higher, whilst in Greater London, they are 35.7% higher, whereas in Epsom they are 23.36% higher. The London property market has been like a different country. Looking specifically at Epsom though, it has continued for first time buyers to get on the housing ladder. The best measure of the affordability of housing is the ratio of Epsom Property Prices to Epsom Average Wages, (the higher the ratio, the less affordable properties are).

  • 1997 5.43 to 1 (i.e. the average value of a Epsom property was 5.43 times higher than the average annual wage in Epsom)
  • 2000 8.64 to 1
  • 2002 8.33 to 1
  • 2003 8.39 to 1
  • 2007 11.12 to 1
  • 2009 8.36 to 1
  • 2012 10.15 to 1
  • Today 11.33 to 1

You can see quite clearly, even though we had an improvement just after the 2007 property crash (i.e. the ratio dropped), in following subsequent years with Epsom house price’s rising, but wages not keeping up with them, the ratio started to rise. This has meant there has been deterioration in affordability of property in Epsom over the last couple of years. This is one of the (many) reasons why the younger generation is deciding more and more to rent instead of buy their own house. The local Council sold off council houses in the Thatcher years and for many on low incomes or with little capital, owning a home has simply never been an option.

With fewer people able to save up the deposit required by mortgage lenders, more and more people are looking to rent, this has also resulted in a change in attitudes towards renting over the last decade.  This delay in moving up the property ladder has driven rents up in Epsom over the last few years, as more people are seeking properties to rent.  All these things have combined to make the demand for rental property in Epsom rise.  If you are an existing landlord or someone thinking of become a first time landlord looking for advice and opinion and what (or not to buy in Epsom), one source of information is here at the Epsom Property Blog or please email Ian at ian@directresidential.co.uk

Sunday, 12 July 2015

Epsom Buy To Let – Demand and Supply

Following on from my recent article about the state of the Epsom property market and in particular what had happened to the rents Epsom tenants have had to pay since the Credit Crunch. If you recall, I mentioned rents in Epsom are 7.4% higher than they were in 2008. An Epsom landlord has since rung me after reading the Epsom Property Blog, wanting to know more of the story of what was happening to current rents in the town. The reason he asked was that his current agent hadn’t increased his rent for a number of years and was concerned if he was getting the best return from his Buy to Let investment.

The Epsom rental market is all about supply and demand (isn't it so in all parts of the economy?). On the supply side, 98 rental properties have come up for let in the last 31 days in Epsom. It sounds a lot until you consider there are 2,450 rental properties in Epsom, that means only 4% of the rental stock of properties in Epsom are coming onto the market each month (it is normally around 5%). One reason for this lack of new rental properties coming on the market is the fact that tenants seem to be staying in properties longer.

With this lack of supply, newer tenants have to pay more to secure the property they want. And this is the crux of the matter ...properties they want. Older properties in Epsom, that haven’t been maintained as well as perhaps a new build, still retain some dated finishes in terms of kitchen/bathrooms and decor which have seen their rents drop. Tenants want either modern properties with all the mod cons or older style properties that have been presented to an exceptional standard – and they are prepared to pay for the privilege. Rents for top quality properties in Epsom have risen by 0.5% in the last month. Any properties, old or modern, put on the market in good or excellent condition will rent in a matter of days. Not just this, but better standards means better tenants.

Interestingly, looking at Epsom property values, the Land Registry have just released their latest set of data on property values. Throughout April 2015 (the latest set of data), property values rose in Epsom, with 0.5% growth, meaning they are now 10.8% higher than they were a year ago. When one looks at the regional picture, the South East average property values rose by 0.8% in the last month. The difference doesn’t concern me, as the regional and local property values always even themselves out over the months.

Looking forward, after considering all the statistics and talking to other property professionals, I expect property values in Epsom to rise by 3% to 5% over the coming 12 months, following the Conservative victory.  In a forthcoming article, I will discuss how the number of properties changing hands each month has dropped considerably in the last 10 to 15 years in the town.

...And so back to our landlord. Each property is unique and so as his tenancy agreement allows him to inspect the property with notice to the tenant, we will be visiting the property next week with him to accept his instructions. For more in depth thoughts and opinions like this on the Epsom Property market keep checking back here at the Epsom Property Blog or email ian@directresidential.co.uk

Thursday, 2 July 2015

Epsom Buy To Let – Should you look further afield?

I was approached by a landlord last week who has a couple of Buy to Let properties, following our previous articles. He was keen to know where the next hot spot town or city is to invest his money in and where the best rental yields were. Now it can be tempting to just look at Epsom when growing a Buy to Let property portfolio, but there can be big differences in the amount of rental income (annual yield) you receive and how much your property will appreciate (capital growth) by considering other locations in the country.

Now regular readers of my articles of the Epsom Property Blog know of my love of the ‘Buy to Let seesaw’. On one side of the seesaw are yield and the other capital growth. Landlords should be looking for a high rental yield so that they can comfortably cover any mortgage payments and make some profit from the income return, but you also want the property to rise in value over time so you can get some capital growth when you come to sell. However, high yielding property in say such areas as the Longmead Estate in Epsom, (so the seesaw arm with yield on it goes up on one side), will suffer from low capital growth (so the other arm with capital growth on the seesaw goes down). The relationship works in reverse as well, so in such upmarket areas as the College area of Epsom, properties offer good capital growth, but at the expense of a decent yield.

The North East and North West of the UK are landlord magnets for great yields. The average yield in Epsom today is 3.98%, which when you compare with say Hartlepool in the North East, which achieves 7.73% or 9.43% in the Anfield area of Liverpool, doesn’t look too healthy. Now of course, these are only averages and some of my Epsom landlords are achieving 5% to 6.5% on some of their Epsom properties, but at the expense of capital growth. Anyway, after wasting a tank full of petrol up the A1 to Teeside or the M1/M6 to the Home of the ‘The Reds’, that Liverpool property, would have dropped in value by 2.2% in the last 12 months and the Hartlepool property would have dropped by 1.4%.




When you compare the long term house price growth, it gets even worse. Looking at the graph, Since 1995, property values in Epsom have risen by 142.6%,compared with Hartlepool at 21.02% and Liverpool at 90.11% – it just shows you shouldn’t always chase the yield because of the poor increases in property values in those two places. As I always like to explain to landlords, whether current, future or even using a different agent, a decent yield is important, but when you come to sell your Buy to Let property it would also be nice to make a decent profit.

At the end of the day, as an Epsom landlord, you want to be making gains from both your rent and house price growth, particularly when you want to sell, because when combined, the rental yield and capital growth, that gives you the real return on your investment. If you want to know what (and would not) make a decent property to buy in Epsom for buy to let, then one place for such information is here at the Epsom Property Blog or by emailing me at ian@directresidential.co.uk

Monday, 29 June 2015

Epsom Property Market – Post Election Blues?

With the election now firmly over and the stability of Downing Street secure, in Epsom (as in the rest of the UK) average wages are beginning to grow faster than inflation. This is good news for the Epsom housing market, as some buyers may be willing or able to pay higher prices given the more certain political outlook and attractive inexpensive mortgage rates. However, sellers who think they have the upper hand due to the lack of property for sale, should be aware that we should start to see an increase in the number of people putting their properties on to the market in Epsom giving buyers some extra negotiating power.

At the last election in May 2010, there were 602 properties for sale in Epsom and by October 2010, this had risen to 768, an impressive rise of 28% in five months. An increase in the supply of properties coming on to the market could tip the balance in the demand and supply economics seesaw, thus potentially denting prices. However, as most sellers are buyers and confidence is high, this means there will be good levels of property and buyers, well into the summer, as demand will continue to slightly outstrip supply.

It is important to consider what the uncertainty in April did to the Epsom property market. I mentioned a few weeks ago that property values (i.e. what properties were actually selling for) had remained static in March 2015. Now new data has been released from Rightmove about April’s asking prices of property in Epsom. It shows that pre-election nerves finally came home to roost in the final weeks of electioneering, with the average price of property coming to market only increasing by a very modest 1.1% (April is normally one of the best months of the year for house price growth).

I am sure our local MP, Chris Grayling, would agree that the biggest issue is the lack of new properties being built in Epsom. The Conservative manifesto pledged to build 200,000 discounted starter homes for first-time buyers in the next five years. For Epsom to gets its share, that would mean only 75 such properties being built in Epsom each year for the next five years, not much when you consider there are 41,434 properties in Epsom.

Housing is not a big issue for Conservative voters and because London is an increasingly Labour city where the biggest housing issues are found by a country mile, so will it remain on the ‘to do list’ but won’t get the recognition it deserves. Until another political party gets back into power, nothing will seismically change in the property market, thus demand for housing will continue to outstrip supply, meaning property values will increase (good news for landlords). However, as rents tend to go up and down with tenant wages, in the long term, rents are still only 7.4% higher than they were in 2008 (good news for tenants)... with renting everyone wins! If you want to know what (and would not) make a decent property to buy in Epsom for buy to let, then one place for such information would be here at the Epsom Property Blog or by emailing me at ian@directresidential.co.uk

Monday, 22 June 2015

Epsom Property Newsletter - June 2015

Introducing the first issue of the monthly 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.

Friday, 19 June 2015

Is the Epsom Property Market in crisis?

Since the 1960’s more people have owned their own home than rented but, for many young Epsom people, the dream of buying their own home is dying...or is it? Since the turn of the Millennium, in Epsom (as in the rest of the Country) there has been a significant change in the proportion of people who own their own home in Epsom. In 2001, 83.4% of homes in Epsom were owner occupied, today the figure is 78.5%, a significant decline in such a short time. Buy to let landlords can find tenants because young people say they cannot afford a deposit to buy unless they inherit money or are given a loan from the Bank of Mum and Dad.

In Epsom, only 50.41% of 25 to 34 year olds have a mortgage. When you compare Epsom against the national average of 35.93%, it just shows how different parts of the country have different housing markets. However, the really interesting fact is this ...roll the clock back to 1991 and nationally, 67% of 25 to 34 year olds had a mortgage. After WW2, the supply of properties being built kept up with demand as millions of council homes were built (the most being built in the 1950s, surprisingly under Tory Governments!). Also private house building increased in the 1950’s, but especially in the 1960’s and 1970’s and as the Country got more prosperous it meant that by 1971, there were more home owners than renters.

However, since the 1970’s, the population has grown, but the number of new properties being built hasn’t kept up at the same rate, the result is that there have been huge rises of property prices in the early ‘70s, the late '80s and more recently between 1999 and 2004. Interestingly, since the early 1970’s, out of the 34 richest countries in the world, the UK has seen the highest property price rises.

95% mortgages have been available to first time buyers since late 2009, but with property prices rising by 275.83% since the early Spring of 1995 in Epsom, as property prices have been rising and first time buyers have been saving, the amount they have to save is continually rising at the same time. The stress on saving even for that kind of deposit, coupled with the new stricter mortgage rules introduced in 2014, means that most 20/30 something’s in Epsom are renting instead of buying.

The issue quite simply comes back down to a lack of new homes being built. In Epsom, on average only 272 properties a year are being built whilst the population is rising by 804 a year. The supply of new homes has been limited by planning laws, local councils not having the money to build council houses, hard hitting green belt limitations, and our old friend NIMBY’ism. With a rising population and net migration, especially from the EU, the mismatch between demand and supply is why we have the problem. Until Politian’s have the backbone to realise the Country needs a lot more decent homes built, the problem will just get worse.

In the meantime, demand for rental property will continue to grow because people need a roof over their head at the end of the day ......fact. If you want to know what (and would not) make a decent property to buy in Epsom for buy to let, then one place for such information would be here at the Epsom Property Blog or email me at ian@directresidential.co.uk

Thursday, 11 June 2015

524% Return for Epsom Buy To Let landlords since 2000?

Buy to let is essentially different from investing in stocks and shares or putting money in the Building Society. Whilst these other investments (Building Society Passbooks, Stocks and Shares etc) are passive ie once the money has been invested, you leave it alone, with buy to let, things are more hands on, in fact it’s almost a business. One thing the landlords I speak to say, is the fact that they like buy to let because it is both an investment as well as a business. It is this factor that attracts many of my Epsom landlords – they are making their own decisions rather than entrusting them to others (such as City Whiz Kidz in London playing roulette with their Pension Pot).

So if you are investing in the Epsom property market, you can earn from your investment in two ways. When a property increases in value over time, it is known as 'capital growth'. Capital growth, also known as capital appreciation, has been strong in recent times in Epsom, but the value of property does go up as well as down, just like shares do but the initial purchase price rarely decreases. Rental income is what the tenant pays you - hopefully this will grow over time. If you divide the annual rent into the value (or purchase price) of the property, this is your gross yield, or annual return.

I was talking to a landlord who bought a flat in the Lavender Road area of Epsom. He bought a very pleasant 2 bed flat in 2000 for £106,000. It sold again in November for £245,000, a rise of 131.13% in just over 14 years – a compound annual return of 6.17%.

However, the real returns are for those Epsom landlords who borrowed money to purchase their buy to let property. They have made significantly higher returns than those who paid 100% cash. If the landlord had borrowed 75% of the £106,000 purchase price of the Lavender Road flat on an interest only 75% mortgage, he would have only needed to invest £26,500 (as his 25% deposit... borrowing the remaining £79,500), but his £26,500 would be worth today, £165,500 (£245,000 less £79,500 interest only mortgage)... a rise of 524.52% - a compound annual return of 13.98%... and I haven’t even mentioned the rent he would have received in those 14 years!

This demonstrates how the Epsom buy to let market has not only provided very strong returns for average investors since 2000, but how it has permitted a group of motivated buy to let Epsom landlords to become particularly wealthy. In fact, if this landlord had continued to remortgage the property as it went up in value, he could by our figures have had an additional two or three properties (albeit with larger mortgages, but greater future potential).

As my article mentioned a few weeks ago, more and more Epsom people may be giving up on owning their own home and are instead accepting long term renting whilst buy to let lending continues to grow from strength to strength. If you want to know what (and would not) make a decent property to buy in Epsom for buy to let, then one place for such information would be here at the Epsom Property Blog or by emailing me at ian@directresidential.co.uk

Friday, 5 June 2015

Three more buy-to-let opportunities

Property 1
First Floor Studio - Located on the first floor of a double fronted beautiful looking converted house in to flats. Close to Epsom centre and tenanted by our tenants at £650 per month. Gross yield of 5%.

Take a look - http://www.rightmove.co.uk/property-for-sale/property-34811958.html



Property 2
Centrally located one double bedroom first floor flat. We have tenants in virtually all the flats in this building (St Andrews House) and one bedroom flats command £875 per month, making 5% gross yield.




Property 3
We understand this is purely for investment purchase - A first floor flat located in the heart of Leatherhead town centre and also within easy reach of the station. Currently let at £725 per month offering a gross rental yield of 5.4%.