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%.




Thursday, 4 June 2015

Are Attitudes to Home Ownership changing in Epsom?

Speaking to an Ashtead Landlord the other day, we got talking about the state of the Epsom property market and whether we, as a Country, are turning more and more to the European style of property ownership, where it is the norm to rent as a opposed to automatically buying once you have a good job etc.

Even though a recent report by the Halifax stated homeownership remains a goal for 85% of twenty to forty five year olds, there is information emerging that attitudes in the UK towards renting your own home as opposed to owning it have softened, showing more and more, that renting is being seen as a life style choice. In fact it is recognised in learned circles that the cycle of renting is also repeated by the fact that people who grow up primarily in rented accommodation are themselves more likely to rent than buy.

The biggest barrier often mentioned to buying a house is the claim that they are not buying property at the moment because of a lack of sufficient wages and by the high level of deposits required, but like we said a few weeks ago, in Epsom, if a couple, one on the average Epsom salary of £37,498 pa and the other on the Minimum wage, assuming they had a reasonable credit history, they would be showered with lenders offering them a 95% mortgage (a reasonable credit history means they haven’t defaulted on loans, paid all their bills on time nor got any County Court Judgements. Just because you missed just one credit card payment won’t mean you have messed up your credit score and your ability to get a mortgage) and they would only need to find £11,500 as a deposit to buy a decent apartment in any area of Epsom....it comes down to the perceived capability of the youngsters in Epsom to buy nowadays.

Interestingly, when I looked at the Epsom figures, the average Epsom tenant has a middle aged profile (in the 35 to 49 year old age range) than the English and Welsh average, as can be seen from the graph below. What interested me as well was the relatively large number of people renting over the age of 50! I know we have a large number of mature tenants at our agency, but I always thought that was the exception to the rule. Obviously not! (And that is good news for landlords as they make excellent tenants)

So what does all this mean for Epsom landlords and future Epsom landlords? I honestly believe there is a difference between the hope and perceived capability of the younger generation to buy a home. Although homeownership is seen as advantageous by a majority, many tenants admitted in the Halifax report they are not taking the steps they need to purchase their own home.

As the local authority aren't building any properties in Epsom, people still need a roof over the head, and that is why, as I mentioned a few weeks ago in the Epsom Property Blog, the demand for rental properties will only continue to steadily rise in the coming decade. If you want to know where the Epsom Property market is heading and where you should (and shouldn’t buy), keep checking back here at the Epsom Property Blog or send me an email to ian@directresidential.co.uk.