Thursday, 21 January 2016

Where will Epsom Property Prices be by 2021?

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

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

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

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

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

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


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

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

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

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

Tuesday, 12 January 2016

How EU Migration has changed the Epsom Property Market

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

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

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

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

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

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