Wednesday 22 July 2015

I HAVE MOVED!

I HAVE UPGRADED MY BLOG TO A MUCH MORE INFORMATIVE, USER FRIENDLY VERSION WHICH CAN BE FOUND AT:

www.derbypropertyblog.co.uk


UNFORTUNATELY, YOU WILL HAVE TO RE-REGISTER TO RECEIVE THE BLOG POSTS BY EMAIL - BUT IT WILL BE WORTH IT!

MANY THANKS

Simon

Monday 13 July 2015

There's a Drought in the Derby Property Market!

Well the dust has settled and the General Election was something that seems to have happened many months ago; a bit like the end of the football season!  So, we can get back to a more normal property market, or that is what the London based ‘Fleet Street’ journalists would lead you to believe. I do find that their opinion is often tainted by the market ‘down south’ so I get my local information from much more reliable sources. I have been talking to many fellow property professionals in Derby; solicitors, conveyancers, mortgage brokers and, one the best sources of information, the chap who puts all the estate agent and letting boards up in the area. Each of them told me the same story - they didn’t see any change in the couple of months that led up to the Election itself on the 7th May.

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 Derby and the surrounding villages, there has only been two properties sold above £2,000,000 mark in the last 7 years so we had a somewhat different reaction!
  
In a nutshell, the General Election didn’t really have any impact on people’s confidence to buy property in Derby. As I write this article, of 1,687 properties that have come on to the market in Derby  since the 2nd of April, 504 of them have a buyer and are sold subject to contract, that’s nearly one in three  - 29.87% to be precise.

I actually think that things are starting to change in the way people in Derby (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 3 bed semi and repeated to the process, until you found yourself in  large 4 bed detached house with a large mortgage.
 
Looking into this a little deeper like I have said in previous articles Derby people’s attitude to home ownership itself have 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 a Derby thing, it’s 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 means there are a lot less properties on the market compared to 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 Derby compared to last decade. For example, in February 2015, only 240 properties were sold in Derby sold. Compare this February 2002, and 423 properties sold and the same month in 2003, 421 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 Derby 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 Derby, year on year, without the massive peaks and troughs we saw in the late 1980’s and mid/late 2000’s might just be the thing that the Derby property market needs in the long term.


Thursday 9 July 2015

Why are less and less people moving house in Derby?

During my school years, my parents seemed to move every other year, or it certainly seemed that way! In reality, looking back at the house moves, we actually moved three times before I left home. In fact I read on the internet that the average UK person moves 8 times in their life - or every 9 to 10 years. However, whilst my parents kept the removal van people in business whilst I was at school, from research I have carried out it shows things have changed considerably in Derby over the last few decades, and interestingly, the trend is getting worse ... for the removal van people at any rate!

In Derby, there are 104,777 properties. However, after we remove the 20,289 council houses, 17,504 privately rented houses and 1,213 houses where the occupants live rent free, that leaves us with 65,771 owned properties, be that 100% outright, with a mortgage or shared ownership. This means 62.8% of the properties in Derby are occupied by the owner (the national average is interestingly 64.2%) but the number of people who have sold and moved house in Derby, over the last 12 months, has only been 4,282. This means on these figures, the homeowners of Derby are only moving on average every 15.35 years.

There are a couple of reasons for this. Firstly, the cost of moving house has risen dramatically over the last twenty years and, secondly, with many remortgaging their properties in the mid 2000’s before the price crash of 2008, there is a reluctance or inability in a small minority of homeowners to finance a home sale/purchase, due to lack of equity. These are both factors leading to driving fewer moves by existing homeowners.

However, the big effect has been the change in house price inflation. Back in the 1970’s and 1980’s, house prices were doubling every 5 to 7 years. Even in Greater London, with its stratospheric property price increases over the last few years, it has taken 13 years (August 2012 to be exact) for property values to double to today’s levels.

This change to a relatively low inflation Derby property market - Derby property values not rising quickly - is significant because the long term consequences of sustained low house price growth is that it eats into mortgage debt more slowly than when property price inflation is higher. Derby home owners cannot rely on inflation to shrink their debt in real terms as much as they did in say the 1970’s and 1980’s.

So what does this all mean for Derby buy to let landlords? Well, for the same reasons existing Derby homeowners aren’t moving, less ‘twenty something’s’ are buying their first home as well. Derby youngsters may aspire to own their own home, but without the social pressure from their peers and parents to buy their first property as soon people reach their early 20’s, the memory of the 2008 housing crisis and the belief the hard times either aren't over or the worst is yet to come, current and would-be homeowners are warming to the idea of renting. I also believe UK society has changed, with the youngster’s wanting prosperity and happiness; but wanting it all now... instantly... today... without the sacrifice, work and patience that these things take. 

As a society, we now expect things instantly, and if it doesn’t come easy, doesn’t come quick, some youngsters ask if it is really worth the effort to save for the deposit?  Why go without holidays, the newest iPhone, socialising four times a week and the fancy satellite package for a couple of years, to save for that 5% deposit. Why should they if there is no longer a social stigma in renting or pressure to buy as there was say a generation ago?

Even though, in real terms, property prices are 5% cheaper than they were ten years ago (when adjusted by inflation), 16.7% of Derby properties are privately rented, nearly double it was twenty years ago. As a result, the demand for rental properties continues to grow from tenants, meaning those wishing to invest in the buy to let market, over the long term, might be on to a good thing?


Thursday 18 June 2015

Derby investment properties – the eternal bedroom question!

Last week, a Derby landlord emailed me, after reading the Derby Property Blog, to ask if he should extend his terraced house, making an extra bedroom in the loft. He had a builder friend who owed  him a  favour, and thought it a good way to achieve an ‘inexpensive’ extension.

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 terrace, it will add around 10% to the value of the property.  Turn a three bed terraced into four bed terraced, and approximately 9% will be added to the value. Looking at semi detached properties, and turn a two into a three bed and around 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 Derby is currently £115,800 whilst the average value of a semi detached house is £145,900, meaning to make money the cost of the extension would need to be less than £11,001 on the terraced property and £15,319 on the semi detached house. 

Talking to a number of trade’s people in the City, most are booking up into the New Year. Also, no matter how good a friend he was, I know of no builders that would charge as little as that! Maybe the builder was just thinking of a bit pointing work on the chimney!

Well, that got me thinking about how bedrooms affect rental prices and rentability. Interestingly, you will see below that whilst bedrooms do have an effect on the rent that can be achieved and the rentability of the property – the difference does not really warrant the expense, hassle and trouble of extending.

18.8% of the one bed properties on the market to rent in Derby have a tenant paying an average rent of £411 per month

43.3% of the two bed properties, have a tenant paying an average rent of £541 per month

39.8% of three bed properties costs a tenant an average rent of £571 per month

21.5% of the four bed properties have a tenant with an average rent of £669 per month

Now, if you want to increase the value of your property, be you a Derby landlord or homeowner, there are things that cost a lot less than building extra bedrooms. Spruce up the exterior, decorate 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.

If you would like to discuss this topic in more detail or anything related to residential lettings in the Derby area then please don't hesitate to contact me on:

07977 235545

or via email on:

Thursday 11 June 2015

Buy to Let in Derby. It’s all about Supply and Demand

I had a lot of enquiries and conversations following my recent article about the state of the Derby Property market and in particular what had happened to rents in Derby since 2008. If you recall, I said that rents in Derby are still 4.68% lower than they were in 2008. One particular Derby landlord rang me after reading the Derby Property Blog wanting to know more of the story of what was happening to rents in the City. The reason he asked was that his current agent hadn’t increased his rent for a number of years and he was questioning whether he was getting the best return from his buy to let investment.

The Derby rental market is all about supply and demand - isn’t it so in all parts of the economy? On the supply side, 565 rental properties have come up for let in the last 31 days in Derby. It sounds a lot doesn’t it until you consider there are 15,943 rental properties in Derby, that means only 3.54% of the rental stock of properties in Derby is coming onto the market and 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. This is the crux of the matter.. properties they want. Older properties in Derby, that haven’t been maintained, still retain their wood chip wallpaper from the 1970’s and thread bare carpets 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, generally, they are prepared to pay for the privilege. Rents for top quality properties in Derby have risen by 0.4% in the last month. Any properties, old or modern, put on the market in good or excellent condition will rent in a matter of a few days.
  
Interestingly, looking at Derby property values, the Land Registry has just released it’s latest set of data on property values. Throughout April 2015, the latest set of data, property values remained static in Derby, with 0% growth, meaning they are now 3.3% higher than they were a year ago.  When one looks at the regional picture, the East Midlands average property values rose by 1.4% 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 Derby to rise by 3% to 5% over the coming 12 months, following the Election result.  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 City.

..and so back to my chat with the 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!

Keep reading the Derby Property Blog or get in touch; 





Tuesday 9 June 2015

Investing in Derby – Should you look further afield?

I was at a recent business networking event in Derby, when a landlord who already owned a couple of properties, bent my ear on where the next hot spot town or city is to invest his money in and where the best rental yields are. Now it can be tempting to just look at Derby when growing a buy to let property portfolio, but there can be big differences in the amount of rental income you receive and how much your property will appreciate by considering other locations in the country.

Now regular readers of my articles of the Derby Property Blog know of my love of the ‘buy to let seesaw’. On one side of the seesaw is return and the other, capital growth. Landlords should be looking for a high rental return 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 such areas as the Pear Tree area in Derby - sees the seesaw return arm go up - will suffer from low capital growth - so the capital growth arm goes down.  The relationship works in reverse as well, so in such areas as Littleover, 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 Derby today is around 4.64%, 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 Derby landlords are achieving 6% to 7% on some of their Derby properties, but at the expense of capital growth. Anyway, after wasting a tank full of petrol up the A1 to Teeside or the M1 to Stanley Park,  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 Derby 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 when they either email me, pick up the phone or pop into my offices for a coffee, 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 a Derby 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 return and capital growth, that gives you the real return on your investment. 

Finally, do you know Hartlepool and Liverpool as well you know Derby? Do you know where the good and bad areas are in both those places? Are you happy that it would require you to take a day out of work if there was an issue with your property in the North? If you can’t answer yes to all three questions, then maybe you should be considering a property closer to home?

If you want to get in touch you can email me by clicking on the link below:


Or you can give me a call on the mobile:

07977 235545


Thursday 28 May 2015

With the Derby Rental Market, everyone’s a winner!

With the election now over and the stability of Downing Street secure, with David Cameron and his Blue Tory’s as the largest party in Westminster, in Derby, as in the rest of the UK, average wages are beginning to grow faster than inflation. This is good news for the Derby 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 Derby giving buyers some extra negotiating power.

At the last election in May 2010, there were 2,067 properties for sale in Derby and by October 2010, this had risen to 2,609, an impressive rise of 26% 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.

Just before we leave the run up to the election discussion, it is important to consider what the uncertainty in April did to the Derby Property market. I mentioned a few weeks ago that property values, defined as what properties were actually selling for, had dropped by 0.4% in March 2015. Now new data has been released from Rightmove about April’s asking prices of property in Derby. 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 0.7% - this takes on more significance when you consider that April is normally one of the best months of the year for house price growth. I am sure our local MP’s, Margaret Beckett and Amanda Solloway, would agree that the biggest issue is the lack of new properties being built in Derby. The Conservative manifesto pledged to build 200,000 discounted starter homes for first-time buyers in the next five years. For Derby to gets its share, that would mean only 185 such properties being built in Derby each year for the next five years, not much when you consider there are 102,271 properties in Derby!

On the face of it, it seems that 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 probably won’t get recognition it deserves.  We may have to wait until another political party gets back into power before something will seismically change in the property market, thus demand for housing will continue to outstrip supply, meaning property values will increase; good news for existing landlords and homeowners! However, as rents tend to go up and down with tenant wages, in the long term, rents are still 4.68% lower than they were in 2008; good news for tenants!... in the private rental sector, it seems, everyone wins!

Don’t forget, you can call in and see me at our offices on St. James’ Street to chat about everything lettings!


Thursday 21 May 2015

Property values fell by 0.4% in Derby

Property values in Derby fell by 0.4% in March. This follows several months of sluggish activity in the Derby property market in the run up to the Election, putting the average price of a property in Derby at £170,400, 3.7% higher than in March 2014. Despite the not so insignificant fall in March, the figures showed property values in Derby were still higher in the first quarter of 2015 than in the last quarter of 2014.

Interestingly, the Council of Mortgage Lenders and Estate Agent trade bodies over the last few months have reported seeing a fall in mortgage lending and enquiries from prospective homebuyers. This is important because it comes amid an overall fall in housing market activity in Derby. Data from the Land Registry state that completed house sales in Derby in the three months to January 2015, (the most up-to-date figures available) fell by 10.49% (compared to the same three month period up to January 2014).

However, I believe that the slowdown in property sales in Derby is actually supporting Derby property values, as there is a shortage of houses coming onto the market. Even though in the whole of the first Quarter of 2015, Derby property value increases may seem subdued when compared to 2014, let us remember, property values are still rising well above the level of inflation.

As I have said many times before, the population in Derby is growing at a much higher rate than the number of properties being built. This increasing demand for a roof over people’s head in Derby, which is outpacing the supply of new houses being built in Derby, is creating  a severe imbalance in both the Derby and the rest of the UK housing markets, thus making homeownership an ever increasingly distant dream for many of Derby’s potential first time buyers.

In fact, I still maintain the view that house prices are likely to rise by around 3 to 5% in Derby in 2015, even after taking into account this blip at start of the year. The reason being is that the rise reflects both strong economic conditions and steady market conditions with and, this is the most important factor, very low numbers of properties on the market.

Many Buy to Let landlords know that investing in the Derby property market is a long term strategy of 10, 20 even 30 years. Governments come and go, but unless the powers that be start to build thousands of new properties a year to make up for the shocking lack of supply, we will continue to have problems. Derby people will always want a roof over their head, and irrespective of which party is in power, if there aren’t any council houses and they can’t, or are unable to buy, a demand for rental properties will always remain.

As my existing Derby landlord clients will testify, whether you manage your property yourself, or another Derby agent manages your properties, everyone is always made to feel welcome when they pop in for a coffee at our offices in Derby to discuss anything to do with the Derby property market, and how Derby compares with its closest rival towns. I don’t bite, I don’t do hard sell, I will just give you my honest and straight talking opinion. However, if you are too busy to pop into town, you could always visit the Derby Property Blog for advice, intelligent commentary and analysis of the Derby Property market!


Wednesday 13 May 2015

What does the General Election result mean for the Derby 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 Derby property market. Talking to other Derby agents, surveyors and solicitors in the area over the last few days, there are signs this has started a new impetus the Derby property market after a subdued six months, when an amalgamation of tougher lending conditions, a natural correction after the strong recovery in Derby 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 Derby 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 portfolio. Now that uncertainty has been removed, the long term picture is very positive.

So, where next for the Derby property market? Well, with inflation at zero and with the Money Markets happy that 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 larger deposits will now be wooed by the mortgage companies in the coming months with low rates.

Over the past couple of years, Derby landlords have benefitted from a booming Derby job market. Unemployment in the city has dropped to 3.15%, as a year ago, 5,357 people were claiming unemployment benefit compared with today’s 3,287. 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 Derby properties.

Some landlords might be nervous about the Tory’s plans for the housing market in 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. However, these 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 180 Derby properties since April 2013. Considering 4,366 properties have changed hands in the last year alone in Derby, 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, in some quarters, you were seen as a second class citizen if you rented a property. Not any more! In Derby, 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 Derby or thinking of becoming one (or as we like to call you.. a FTL.. a ‘first time landlord’), then I must recommend you out seek specialist advice and opinion. Like many agents in Derby, we will happily give you our opinion on the current state of the market and the advantages/disadvantages to investing in the Derby property market, so why not you pop into our offices for a chat. However, if time is at a premium, another source of information on the Derby Property Market is the Derby Property Blog!



Friday 8 May 2015

1303% return for Derby landlords since 1999...

Investing in property 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  i.e. once the  money has been invested it 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 Derby landlords – they are making their own decisions rather than entrusting them to others - such as City Whizz Kids in London playing roulette with their pension pots.

So if you are investing in the Derby 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, this has been strong in recent times in Derby, 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 yield, or annual return.

I was talking to a landlord who bought a terraced house in the Dairyhouse Road area of Derby. He bought a very pleasant 4 bed terraced house in 1999 for £27,000. It sold again in January just gone for £115,000, a rise of 325.92% in just over 15 years – a compound annual return of 10.14%.

However, the real returns are for those Derby 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 £27,000 purchase price of the Dairyhouse Road terraced house on an interest only 75% mortgage, he would have only needed to invest his deposit of £6,750 and then borrowing the remaining £20,250. His £6,750 would be worth £94,750 today; £115,000 less £20,250 interest only mortgage) ..a rise of 1303.7%! -  a compound annual return of 19.26%.  ..and I haven’t even mentioned the rent he would of received in those 15 years!

This demonstrates how the Derby buy to let market has not only provided very strong returns for average investors since 1999 but how it has permitted a group of motivated buy to let Derby 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 reckoning 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 Derby 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 Derby for buy to let, then one place for such information would be the Derby Property Blog!



Friday 1 May 2015

Will the Election cure the issues within the Derby property market?

With the General Election almost upon us, all the parties are trying to woo voters with policies that will attract those important votes come the 7th May 2015. 

There are 30,724 tenants of voting age in Derby living in private rented accommodation. In a tight election, their votes could be crucial.

Labour’s motivation to keep the private rental sector rents in line with inflation is pretty straightforward; cap rents and extend tenancy terms whilst the Conservatives are focussing on a ‘Right to Buy’ solution.

Since the turn of the Millennium, there has been a significant change in the proportion of people who own their own home in Derby. In 2001, 69.23% of homes in Derby were owner occupied, today the figure is 61.37%, 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’ …but wasn’t that the way how most people got on to the property ladder; 10, 20 even 30 years ago or you just got on and went without and saved up?

In Derby, only 38.08% of 25 to 34 year olds have a mortgage. When you compare Derby 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 that if you 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. 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 highest property prices rises.

95% mortgages have been available to first time buyers since late 2009, but with property prices rising by 153% since 1997 in Derby, 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 Derby are renting instead of buying. Yet at the same time, don’t blame the landlords for this. For every mortgage approved for a landlord last year, three were approved for first time buyers!

The issue quite simply comes back down to a lack of new homes being built. In Derby, only 984 properties a year are being built whilst the population is rising by 2,250 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 nimbyism (Not in my back yard!).  In fact, I read the Lyons Housing Review Report a few months ago, and in it, it said that at least 243,000 properties a year need to build to keep up with the number of new households being formed in the UK. In 2014, the country only built 109,000!  

With a rising population and net migration, especially from the EU, the mismatch between demand and supply is why we have the problem. Until politician’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.



Thursday 23 April 2015

Just who are the Renters in Derby?

Speaking to a Bank Manager the other day in Derby, we got talking about the state of the Derby 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.

Many people think that the UK should lose its fixation with homeownership and that people would be happier as a result. If this pattern were to continue, then this would suggest that the people entering the housing market are less likely to want to own a home, and are more likely to remain  ‘Renters for Life’, irrespective of changing market conditions, leading to a longer term shift in the home ownership make-up of the country.

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 but like we said a few weeks ago, in Derby, a single person on the average Derby salary of £26,241pa, 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 £4,500 as a deposit to buy a decent terraced house in Rosehill. ..it comes down to the perceived capability of the youngsters in Derby to buy nowadays.

Interestingly, when I looked at the Derby figures, the average Derby tenant has a younger profile than the England 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 Derby landlords and future Derby 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 Derby, people still need a roof over the head, and that is why, as I mentioned a few weeks ago in the Derby Property Blog, the demand for rental properties will only continue to steadily rise in the coming decade. If want to know where the Derby Property market is heading and where you should (and shouldn’t buy), maybe the one place you should visit is the Derby Property Blog or send me an email!



Thursday 9 April 2015

Derby v London.. it's like being in a different country!

I had an interesting conversation with a local Derby accountant the other day. He is quite an observant chap - I know this because I have known him for a few years, but I suppose you have to be to be an accountant! Anyway, he mentioned a few things he had noticed recently in Derby, one that Derby 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 Derby - and more importantly ones with sold slips on them - had increased over the last couple of years.

The rate of house price inflation in Derby continues to slow with growth of 4.6% in the 12 months to February compared to 5.5% just over six months ago, according to the latest Land Registry data. However, there is considerable local variation with house price growth ranging from 1.6% in Leicester, to 8.3% in Northamptonshire over the last 12 months.

Whilst Derby hasn’t seen the 20%+ per year in house price growth of London over the last couple of years, Derby 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 City. Since the Second World War in the UK, when the number of properties sold has grown, property values grew soon after. The 7% uplift in property transactions in Derby in 2014, compared to 2013, indicates the most significant recovery in house market activity in Derby (outside London) since 2007.

When you compare Derby with London, you could be looking at two different countries. In London, its 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 Derby 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 Derby property sales in 2014 is still 58.8% lower than the level seen in 2007 and property values are 11% below the 2007 levels. The ongoing housing recovery is far from broad based and remains focused on middle to higher value areas within Derby where households have equity and find it easier to access mortgage finance.


If you want to know more about the Derby Property Market, please to not hesitate to contact me! Mobile, office, text, e-mail, carrier pigeon - I'm not bothered!






Thursday 2 April 2015

Have we got a dual speed property market in Derby?

Even with the General Election on the horizon, property values in Derby are still 0.42% 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 a Derby landlord’s point of view, the Derby properties favoured by investors are in short supply in many parts of the city because of a number of factors. One of the factors has been that we seen the number of first time buyers coming to buy their first home increase over the last 12 months in Derby.  Another factor has been the fact that the banks have been pushing ‘let to buy’ - yes ‘let to buy’ 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 Derby.

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’ Derby people wanting to become landlords for the first time. In Derby, the highest returns for the lowest investment are at the lower end of the market e.g. the classic Victorian terraced house. Unfortunately Victorian terraced houses, with two bedrooms are coming to the market in smaller numbers than the larger four bedroom ones in  top end sectors of the Derby property market.

When looking at the actual numbers, in the latter part of the Summer of 2014 in Derby, in one month alone 589 two bed houses were on the market in Derby. However, in January this year, a notoriously excellent bumper month for properties coming on to the market, there were only 440 two bed houses on the market in Derby to choose from. Today, that figure stands at only 360..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 Derby, 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 Derby 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 market.. and that can only mean one thing ... prices will go up quicker on the smaller properties than the larger ones in Derby, thus narrowing the gap for people looking to move up market!




Tuesday 31 March 2015

Rent Guarantee. It's a No-Brainer!

When a landlord invests in property, insurance is an area some end up neglecting. The kind of cover that a standard home policy deals with is often inadequate for the requirements of landlords. This is because they need a policy that deals with all sorts of potential issues to do with tenancies, third party damage and so on.

Landlords are aware that the usual landlord insurance policies will provide them with protection against such events as damage caused by a tenant as well as rent lost when a property is inhabitable following a valid insurance claim. However, these policies will not stretch as far as actually covering the rent when a tenant simply fails to pay up.

It is very realistic that there are occasions when a tenant simply fails to pay, be it out of malevolence, financial incompetence or a sudden change for the worse in their financial circumstances that they might not even tell the landlord about. Landlords without a rent guarantee insurance policy may be in for a shock. Those who do have such cover can rest easy. It is at this point where a landlord can make a claim on their rent guarantee policy and ensure their rental income is safe. The insurer can then chase up the tenant for the shortfall. For those landlords who don't, the implications can be awful, especially if there is a mortgage on the property and the rent is relied upon to help make the necessary loan repayments.


One of the great benefits of having Rent Guarantee insurance in place is that the policies often include Legal Expenses cover necessary for potential evictions. Lengthy court cases take up  time, energy and can stifle cash flow. However, your Rent Guarantee insurance can cover the legal costs and help reduce the process.

Indeed, with disputes often ending up in court, it is not just the repayment of the missing rental money that becomes an issue. Legal costs can be prohibitive for landlords if they are unable to get the money without recourse to such measures, so it will be reassuring to know that rent guarantee insurance can also take care of this, particularly as legal fees will be much harder to pay for those whose budgets are hit by non-payment.

There is always a chance landlords will be hit by non-payment. How much better it would be to have a policy in place that will help mitigate losses, as well as ensuring legal costs are covered to prevent a catch-22 situation occurring where an investor is too cash-strapped by the loss of income to pay for the legal action needed to recover unpaid rent.


Professional Properties offer two types of Rent Guarantee protection. Firstly, we offer the a policy that will recover rent if the tenant fails to pay. The policy includes such benefits as Nil Excess; Payable until vacant possession; Cover limit of £2,500; Total claims limit of £50,000; Full legal expense cover.

An alternative is our RentOnTime product which guarantees to pay your rent, on time, every month, whether your tenant pays on time. The great advantage of this is that the payment of rent is not retrospective, it is immediate.

If you wish to discuss either of the products in more detail, then please do not hesitate to contact me directly on 07977 235545 or our lettings office in Derby on 01332 366171.

Sunday 29 March 2015

Government plans to allow subletting.. What effect on landlords?

George Osborne's Budget seemed to be aimed at homeowners and first-time buyers - but hidden in the small print is a change of rules for renters. And it could be a big deal. Renters sometimes face strict rules on sub-letting, which can create a sticky situation if one tenant suddenly needs to leave.

But could this be about to change? In the 2015 Budget, the Government outlined plans to make it easier to sub-let rooms. In particular, it plans to ban landlords from introducing rules preventing us from sub-letting on a short-term basis. This could be on the cards for longer-term tenancies as well.

Almost buried on page 51 of the Budget Red Book the Chancellor gives a very brief outline of his intention to prevent the Private Rental Sector from stopping tenants being able to sublet.

This document states:

Support for the sharing economy 1.193

The government wants to ensure that Britain is the global centre for the sharing economy, enabling individuals and businesses to make the most of their assets, resources, time and skills through a range of online platforms. This Budget therefore announces a comprehensive package of measures that will break down barriers, create opportunities for sharing, and unlock the potential of this dynamic and growing area. Building on the recommendations of the independent review of the sharing economy, the government will:

Make it easier for individuals to sub-let a room through its intention to legislate to prevent the use of clauses in private fixed-term residential tenancy agreements that expressly rule out sub-letting or otherwise sharing space on a short-term basis, and consider extending this prohibition to statutory periodic tenancies.”

The government hasn’t given any further details about the proposal which could mean anything from letting spare rooms in rental properties to giving tenants the power to sub-let entire properties to third parties.

Residential Landlords Association (RLA) chairman Alan Ward described the move as a “nightmare in the making” and said it smacked of “back of the fag packet” policy making".

Key questions remained unanswered such as who will be responsible for a property if the tenant sub-letting leaves the house but the tenant they are sub-letting to stays? Similarly, given the Government wants landlords to check the immigration status of their tenants, who would be responsible for checking the status where sub-letting occurs?

Eviction specialist firm Landlord Action said the move would be “catastrophic for the rental industry”.

Founder Paul Shamplina has repeatedly warned about the increase in subletting scams in the private rented sector.

“We have never seen so many subletting cases going to court because of unscrupulous tenants trying to cream a profit from a property they have rented,” he said. “We experience continual problems with tenants taking out tenancy agreements and then, in some instances, not even moving into the property themselves, but putting up partitions and subletting to as many people as possible. They draw up separate agreements and trick sub-tenants into thinking they are the landlord. By the time landlords find out, damage to properties from over-crowding can run into thousands, and the tenant who holds the legitimate tenancy agreement is nowhere to be found.”

Sub-letting also throws up problems from an insurance point of view. Pricing for landlord insurance policies is based on the tenant type, among other factors, with insurers attributing higher risk for certain types of tenant.

“It will be difficult for a landlord to disclose the details of their tenants, and answer the risk question accurately if they no longer have the final say on who occupies their property” said Steve Jones, director of Rentguard Insurance. “The real problem would come if underwriters decide to charge the higher rate to everyone to factor in the likelihood of damage cause by tenant’s sub-letting the property.”

Problems may also arise as tenants are unlikely to professionally reference those they sublet to and may as a result know very little about them, their lifestyle, background and ability to regularly pay the rent.

So, it remains to be seen if the government will rethink this move after the backlash it has faced from the private rented sector, as at the moment it is hard to see who this new ruling actually benefits.

Keeping reading my blog for further updates.

Thursday 26 March 2015

Rents paid by tenants In Derby are on the rise…

With Easter almost upon us and considering we are a quarter of the way through 2015, I was talking to landlord from Allestree the other day about what is happening to the level of rents that are being achieved in the Derby property market.

In terms of rents in Derby, it appears that rents being achieved for new rentals (i.e. when the tenant moves out and new tenant moves in) have risen by 4% in the last 12 months on top of the range modern semis, yet remained static for older Victorian terraced houses. However, landlords with existing tenants, irrespective of age, are not increasing their rents, as most landlords prefer to keep their existing tenant paying the same rent and have the peace of mind that their tenant remains, paying the rent thus reducing the risk of a void period.

It must be remembered rents dropped by 7.8% over 2008/9, due to oversupply in the rental market in 2009.) A lot of the people who couldn’t sell their property in Derby in 2008/9 when the Credit Crunch hit in 2008, decided to let their house out instead of selling at a loss. In fact, the number of houses on the market in Derby dropped by 62.5% between March 2008 and March 2010, a lot of which came on to the rental market in Derby. However, looking at the longer term though, tenants have had it good  because since the turn of the Millennium, average wages have grown by 46%, but rents outside London have only grown by 36% rental growth over this period.

I told the landlord that there is a lack of new rental properties in Derby coming on the market, in fact according to the Office of National Statistics, there are only 81 new rental properties are coming to the market each month in Derby but the population of Derby is rising by 225 people a month – something will have to give soon! This is compounded by the fact a number of landlords are looking to sell their rental properties in the coming months, as the property market in Derby has improved. This further compounded as tenants in existing rental properties appear to be staying in properties for longer periods of time.

Looking at the rents charged in Derby, historic evidence in the UK suggests private market rents have moved in line with general inflation. Government figures only go back as far as the year 2000, but looking at other countries with similar housing markets (America, Australia, Ireland and Holland) the fact is rents paid by tenants tend to rise in line or just ahead of inflation.

As short term wage growth in Derby has eased off recently, rising by only 1.3% in the last 12 months, taking average salaries in Derby to £26,241p.a, with the tax breaks announced by The Chancellor in the Budget, I believe, even though rents have kept pace with inflation in the past, renting as an option has become more affordable, and is increasingly seen as a lifestyle choice. With returning economic growth and expected increases in the rate of growth of wages, above inflation rental growth could rise.

If you want a chat about the local Derby property market, pop in for a coffee or email me via the link below!