Friday, 29 May 2015

Epsom Property Market – What is really happening?

I had an interesting conversation with a local Epsom accountant the other day. He is quite an observant chap (I know this because I have known him for many years. .. but I suppose you have to be to be an accountant!). Anyway, he mentioned a few things he had noticed recently in Epsom, one that Epsom property prices had gone up in the last few years, but nowhere near the growth levels that were being achieved in central London and secondly, that he thought the number of for sale boards in Epsom (and more importantly ones with sold slips on them) had increased over the last couple of years.

The rate of house price inflation in Epsom continues to slow with growth of 12.4% in the 12 months to February compared to 14.1% just under six months ago, according to the latest Land Registry data. However, there is considerable local variation with house price growth ranging from 13.3% in Merton as an example to 15.6% in Sutton over the last 12 months.

Whilst Epsom hasn’t seen the 20%+ per year in house price growth of London over the last couple of years, Epsom has seen a sharp uplift in the number of properties sold throughout 2014 as base line demand for housing grows, which suggests there is substance to the recent pick-up in house price growth in the town. Since the Second World War in the UK, when the number of properties sold has grown, property values grew soon after. The 4.81% uplift in property transactions in Epsom in 2014, compared to 2013, indicates the most significant recovery in house market activity in Epsom (outside London) since 2007.

When you compare Epsom with London, you could be looking at two different countries. In London, the mid/late teens house price to earnings ratios are impacting demand (i.e. the average property value is often 15 or 17 times the average wage in London... in fact in Knightsbridge the ratio can be 30 to 1). However, the number of people wanting to sell has dropped considerably, meaning that falling sales volumes combined with a general slowdown in activity in the run up to the General Election are resulting in lower mortgage approvals for home purchase.

Transactions are a great indicator for house prices. The acceleration in house price growth in London in the last two years was preceded by three years of rising transactions. A similar pattern is being registered in the Epsom area, as pent up demand returns to the market supported by low mortgage rates and an improving economic outlook.

But before you get the Champagne out, while the uplift in activity is welcome news, the number of Epsom property sales in 2014 are still 22.3% lower than the level seen in 2007 and property values are 16.9% above the 2007 levels. The ongoing housing recovery is far from broad based and remains focused on middle to higher value areas within Epsom, where households have equity and find it easier to access mortgage finance. If you want to know more about the Epsom Property Market, please keep checking the Epsom Property Blog or send me an email to ian@directresidential.co.uk.

Thursday, 21 May 2015

Two Speed Epsom Property Market?

With the General Election out of the way, property values in Epsom are still 1.02% higher than they were 3 months ago, the diversion and ambiguity of an election typically makes house sellers who need to sell, price their property more realistically (although this only lasts a couple of months). Looking specifically at it from an Epsom landlord’s point of view, the Epsom properties favoured by investors are in short supply in many parts of the town because of a number of factors. One of the factors has been that we have seen the number of first time buyers coming to buy their first home increase over the last 12 months in Epsom. Another factor has been the fact that the banks have been pushing ‘let to buy’ (yes ‘let to buy’ which is different to ’buy to let’) to homeowners (more of ‘let to buy’ in an up and coming article). Next, because of the banks, who are chasing low risk landlords with high deposits with very low mortgage rates- and the low risk landlords with high deposits tend to be attracted to the safer modern two and three bed town houses and semis in Epsom.

As I mentioned a few weeks back, the pension rules are changing which means buy to let landlords can use some, or all, of their pension pot to buy a property. It shouldn’t be forgotten there are tax implications taking more than a quarter of your pension pot out (see the article from a couple of weeks ago), so whilst many pension pots may not be able to fund a suitably big enough tax free lump sum to buy the property outright, for most it will provide enough for the 25% deposit (required by most BTL mortgage providers). It shouldn’t be forgotten landlords that the interest paid on the mortgage is tax deductible against the rent, thus lowering your income tax paid.

In the last 12 months, I have noticed a particular uplift in interest from ‘50 something’ Epsom people wanting to become landlords for the first time. In Epsom, the highest returns for the lowest investment are at the lower end of the market e.g. the classic apartment. Unfortunately apartments, with two bedrooms are coming to the market in smaller numbers than the larger four beds’ in top end sectors of the Epsom property market. When looking at the actual numbers, in the later part of the Summer of 2014 in Epsom, in one month alone 101 two bed properties were on the market in Epsom. However, in January this year, a notoriously excellent bumper month for properties coming on to the market, there were only 74 two bed properties on the market in Epsom to choose from. Today, that figure stands at only 67...whilst the number of four and five beds has increased significantly ... interesting don’t you think?

At that lower end of the property market in Epsom, (i.e. where first time buyers and landlord investors compete with each other to buy those smaller properties), I believe throughout 2015, there will be a slow and steady tipping of the scales between supply and demand. In fact, from what I am seeing and hearing, early anecdotal evidence has suggested over the last few months (although we will need to look at figures later in the Spring once we have the data from The Land Registry), we are beginning to see a polarised Epsom property market, where we have high demand but low supply at the bottom end of the property market, yet high supply but lower demand at the top of the market... and that can only mean one thing ... prices will go up quicker on the smaller properties than the larger ones in Epsom, thus narrowing the gap for people looking to move up market!

If you would like to read more or get some great advice, please keep reading the Epsom Property Blog or please email me at ian@directresidential.co.uk.

Thursday, 14 May 2015

What will General Election result do to the Epsom Property Market?

After the shock of the Conservatives returning to power with a majority at Westminster, all the potential issues and possible uncertainties of a hung parliament has lifted the cloud from the Epsom property market. Talking to other Epsom agents, surveyors and solicitors in the area over the last few days, there are signs this has started a new impetus in the Epsom property market after a subdued six months, when an amalgamation of tougher lending conditions, a natural correction after the strong recovery in Epsom property prices in 2014, and political uncertainty ahead of the General Election slowed demand.

Against the back drop of Labour’s election promises of rent controls and three year tenancies, some Epsom buy to let landlords were waiting to see how these new policies would be implemented before they committed themselves to buying more property for their buy to let portfolio. Now that uncertainty has been removed, the long term picture is very positive.

So, with all that uncertainty now removed, where next for the Epsom property market? Well with inflation at zero and with the Money markets happy David Cameron is still at No.10, the Bank of England have no reason to raise interest rates until 2016 at the earliest. As mortgage rates are at their lowest levels since 2010, landlords with large deposits will now be wooed by the mortgage companies in the coming months with low rates.

You see over the past couple of years, Epsom landlords have benefitted from a booming Epsom job market. Unemployment in Epsom has dropped to 0.8%, as a year ago, 674 people were claiming unemployment benefit compared to today’s 410. With more jobs and better pay, as the level of rents is directly linked to tenant’s wages, there has been an increase in the rental prices tenants are willing to pay for good quality Epsom properties.

Some landlords might be nervous about the Tory’s plans for the housing market over the next five years in terms of tenant demand for their rental properties. One plan is for Housing Association tenants to have the right to buy their property. These kind of tenants were never in the private rented sector and will actually increase the supply of properties in the housing stock in decades to come. The Government ‘Help to Buy Scheme’ has only helped to buy 67 (yes only sixty seven) Epsom properties since April 2013. Considering 1,489 properties have changed hands in the last year alone in Epsom and Ewell, I don’t think it has made a huge difference to our local property market.

The biggest matter, when it comes to tenant demand of rental property going forward, comes from the shift in the mindset and attitudes towards renting itself. Twenty years ago you were seen as a second class citizen if you rented a property. In Epsom, as in the rest of the UK (apart from Central London), renting continues to offer good value for money for tenants. If you are an existing landlord in Epsom or thinking of becoming one, then I must suggest you seek out specialist advice and opinion. Like many agents in Epsom, we will happily give you our opinion on the current state of the market and the advantages/disadvantages to investing in the Epsom property market if you pop into our offices. However, if time is at a premium, another source of information on the Epsom Property Market is this blog or you can always email Ian at ian@directresidential.co.uk