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