Chichester Property News: properties

Showing posts with label properties. Show all posts

Thursday, 23 January 2020

How did property fare in the last decade?

Nationwide have released their house price averages for December 2019, which means another decade of data from them is complete. Having started the decade at £162,887, UK house prices increased an average of 33% in the 2010’s to finish at £215,925.

In nominal terms an increase of just over £50,000 seems like a huge jump. In percentage terms though, that 33% rise in ten years is actually the lowest house price growth in a decade since the 1990’s, which is currently the weakest performing decade on record (with a rise of 21%). When you consider house prices in the 1980’s rose 180% and in the 2000’s they grew by 117%, you might wonder why the media portray house prices as out of control.

The problem is that wage growth only rose by 20% in the 2010’s i.e. around a third less than house prices. So, whilst rocketing house prices aren’t necessarily the problem, affordability very much is. In fact, the UK first-time buyer house price to earnings ratio currently stands at 5.0, up from 4.4 at the end of 2009, and is edging ever closer to 2007’s record high of 5.4. This means saving for that all-important deposit has become increasingly difficult; a typical 20% deposit is now equivalent to the entire pre-tax income of an average earner.

The last decade also saw a significant widening in the gap between the least affordable and most affordable regions. Whilst the whole of the UK was hit by the 2007-2009 financial crisis, London was quicker to recover, whereas many regions (particularly up North and in Northern Ireland/Scotland/Wales) have struggled. This is demonstrated by London being the top performer in the 2010’s, with house prices rising an average of 66% i.e. twice as much as the UK average. In contrast to this, house prices in Northern Ireland are a mere 2% higher now than they were at the end of 2009.

The only saviour to rising house prices has been a strong fall in interest rates. At the beginning of the decade the average new mortgage rate was around 5%, whereas by the end of 2019 this had more than halved to 2.4%. This meant first-time buyer mortgage payments as a percentage of take-home pay dropped throughout the decade in every region except London and the Outer Metropolitan area.

So, buying a property definitely became tougher in the 2010’s, with house prices accelerating higher than wage growth. And because of this rise in nominal terms, the amount of money needed by way of a deposit grew, making home ownership seem further away for many. If you could get over that hurdle though, huge drops in interest rates meant servicing the mortgage on a monthly basis became cheaper. And it seems first-time buyers are fighting back, with more than double the 155,000 recorded in 2009 jumping onto the property ladder in 2019.

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E-mail me on clive@crjlettings.co.uk or call 01243 624 599.

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Thursday, 16 January 2020

What’s in store for Chichester’s landlords in 2020?

Last year the government rolled out new laws enforcing the ‘fitness for human habitation’ of rental properties, along with the multi-faceted Tenant Fees Act. Due to the political toing and froing of the past 12 months a lot of new legislation is now up in the air, but it seems there are still many changes afoot for the lettings market:

Final tax relief reductions - confirmed
Until a few years ago a landlord could offset the interest on their buy-to-let mortgages against rental income. This relief has slowly been reduced, whilst from April 2020 it will be removed entirely (in place of a reduced ‘tax credit’).

Changes to capital gains tax also come into effect from April, whereby some lettings reliefs have been reduced and the time you have to pay the tax has been shortened to 30 days.

Minimum energy efficiency rules extended - confirmed
From April 2018 all new tenancies could only go ahead in a property with at least an ‘E’ rating according to their EPC (Energy Performance Certificate). There was a two-year grace period for existing tenancies…which means the rules apply to ALL tenancies from April 2020. Ignoring this can lead to steep fines (starting from £2,000), so check whether any energy upgrades are required to comply with the new laws.

Letting agents must have Client Money Protection - confirmed
Introduced last year, there was a 12-month grace period that ends this April. From then on all letting agents must have this insurance, which covers the misappropriation of their landlords and tenants money, so check they have it!

Electrical safety checks - highly likely
Electrical safety checks every five years are already mandatory in larger shared houses and it stands to reason this will be expanded to the entire rental sector, much like the annual gas safety certificate.

Removal of Section 21 - likely
This has become something of a political football, as its use in evicting tenants ‘without fault’ gains traction in the media. Whilst technically correct, the reason Section 21 is typically used by landlords is to eject bad tenants, knowing that to do so via the courts and having to prove fault is a much trickier process. Supposedly rules to evict non-paying or problematic tenants are to be shored up to counteract this, but if not a lot of landlords will be worried by a significant shift in power towards tenants, regardless of their behaviour.

Impact of Brexit - who knows!!

With all these sticks being thrown at landlords, whilst few carrots get dished out, it’s no surprise that research from RICS shows a falling number of landlords (even though there’s a rising number of tenants). However, I believe those landlords and letting agents who adapt and provide a good-quality product and service to a more-demanding pool of tenants will be in a good position to bear the fruits of their hard work.

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