Stotfold First Time Buyers Mortgages taking 33.9% of their Wages

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I received a very interesting letter the other day from a Stotfold resident.  He declared he was a Stotfold homeowner, retired and mortgage free.  He stated how unaffordable Stotfold’s rising property prices were and that he worried how the younger generation of Stotfold could ever afford to buy.  He went on to ask if it was right for landlords to make money on the inability of others to buy property and if, by buying a buy to let property, Stotfold landlords are denying the younger generation the ability to in fact buy their own home.

Whilst doing my research for my many blog posts on the Stotfold property market, I know that a third of 25 to 30 year olds still live at home. It’s no wonder people are kicking out against buy to let landlords as they are the greedy bad people who are cashing in on a social woe.  In fact, most people believe the high increases in Stotfold’s (and the rest of the UK’s) house prices are the very reason owning a home is outside the grasp of these younger would be property owners.

However, the numbers tell a different story.  Looking at the age of first time buyers since 1990, the statistics could be seen to pour cold water on the idea that younger people are being priced out of the housing market.  In 1990, when data was first published, the average age of a first time buyer was 33, today it’s 31.

171 - fixed Graph showing Average Age of First time buyers

Nevertheless, the average age doesn’t tell the whole story.  In the early 1990’s, 26.7% of first time buyers were under 25, while in the last five years just 14.9% were.  In the early 1990’s, four out of ten first time buyers were 25 to 34 years of age and now its six out of ten first time buyers.

171 - fixed graph Age Distribution of First Time Buyers in UK since 1990

Although, there are also indications of how unaffordable housing is, the house price to earnings ratio has almost doubled for first time buyers in the past 30 years.  In 1983, the average Stotfold home cost a first-time buyer (or buyers in the case of joint mortgages), the equivalent of 2.8 times their total annual earnings, whilst today, that has escalated to 5.4 times their income.

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Again, those figures don’t tell the whole story.  Back in 1983, the mortgage payments as percentage of take home pay for a Stotfold first time buyer was 29.4%.  In 1989, that had risen to a staggering 75.9%.  Today, it’s 33.9%, and no that’s not a typo, 33.9% is the correct figure.

To answer the gentleman’s questions about the younger generation of Stotfold being able to afford to buy and if it was right for landlords to make money on the inability of others to buy property, it is not all to do with affordability as the numbers show.

What of the landlords?  Some say the government should sort the housing problem out themselves, but according to my calculations, £18bn a year would need to be spent for the next 20 or so years to meet current demand for households.  That would be the equivalent of raising income tax by 4p in the pound and I don’t think UK tax payers would swallow that.

So, if the Government haven’t got the money, who else will house these people?  Private sector landlords will and thankfully they have taken up the slack over the last 15 years.

Some say there is a tendency to equate property ownership with national prosperity but this isn’t necessarily the case.  The youngsters of Stotfold are buying houses, but buying later in life. Also, many Stotfold youngsters are actively choosing to rent for the long term, as it gives them flexibility, something our 21st Century society craves more than ever.

 

Council House Waiting List in Stotfold Drops by 78% in last 3 years

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Should you buy or rent a house?  Buying your own home can be expensive but could save you money over the years.  Renting a property through a letting agent or private landlord offers less autonomy to live by your own rules, with more flexibility if you need to move.

Yet, there is a third way that many people seem to forget, yet it plays an important role in the housing of Stotfold people.  Collectively known as social housing, it is affordable housing, which is let by either South Bedfordshire Council or a Housing Association to those considered to be in specific need, at rents below those characteristic in the private rental market.

In Stotfold, there are 332 social housing households, which represent 11.65% of all the households in Stotfold.  There are a further 741 families in the South Bedfordshire Council area on their waiting list, which is similar to the figures in the late 1990’s. The numbers peaked in 2013, when it stood at 3,371 families, so today’s numbers represent a drop of 78%.

Biggleswade 172 Graph

Nevertheless, this doesn’t necessarily mean that more families are being supplied with their own Council House or Housing Association property.  Six years ago, Westminster gave local authorities the authority to limit entitlement for social housing, quite conspicuously dismissing those that did not have an association or link to the locality.

Interestingly, the rents in the social rented segment have also been growing at a faster rate than they have for private tenants.  In the South Bedfordshire Council area, the average rent in 1998 for a council house / housing association property was £200.94 a month.  Whilst we have no up to date figures, because of the ‘Large Scale Voluntary Transfer’ of all or most of the local authority’s stock was transferred to a Private Registered Provider sector, so the average rent is no longer applicable.  Therefore, using the average rent increase for England of 108% (England’s average rent being £183.08 a month in 1998 and £381.03 a month today) we can guesstimate an average of approximately £415.

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When comparing social housing rents against private rents, the stats don’t go back to the late 1990’s for private renting, so to ensure we compare like for like, we can only go back to 2005.  Over the last 12 years, private rents have increased nationally by a net figure of 19.7%, whilst rents for social housing have increased by 59.1%.

What does this all mean for the homeowners, landlords and tenants of Stotfold?

Rents in the private rental sector in Stotfold will increase sharply during the next five years.  Even though the council house waiting list has decreased, the number of new council and Housing Association properties being built is at a seventy year low.  The government crusade against buy-to-let landlords together with the increased taxation and the banning of tenant fees to agents will restrict the supply of private rental property, which in turn using simple supply and demand economics, will mean private rents will rise.  This makes buy to let investment a good choice of investment again (irrespective of the increased fees and taxation laid at the door of landlords).  It will also mean property values will remain strong and stable as the number of people moving to a new house (and selling their old property) will continue to remain restricted and hence, due to lack of choice and supply, buyers will have to pay decent money for any property they wish to buy.

Interesting times ahead for the Stotfold property market!

32 miles – The average distance Stotfold people go when they move to a new house

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“How far do Stotfold people go to move to a new house?”  This was an intriguing question asked by one of my clients the other week.  Readers of my property blog will know I love a challenge, especially when it comes to talking about the Stotfold property market.

For the majority, the response is not very far.  It is much more common for homeowners and tenants in Great Britain to move across town than to the next town or county.  Until now, it’s been hard to say how many homeowners and tenants moved from and to relatively far away to buy or rent their new home.  However, I carried out some research and requested some statistics from the Royal Mail and what came back was fascinating.

Using statistics for the 12 months up to the middle of Autumn 2016, 151 households moved out of Stotfold and the average distance was 32.03 miles, the equivalent of moving from Stotfold to Buckingham as the crow flies.  The greatest distance travelled was 514 miles, that’s almost 20 marathons, when someone moved to Banachton in Scotland.

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Considering there were 141 property sales in Stotfold in the year and countless tenant moves, the numbers seems consistent.  Once you find a town you like, you tend to want to settle down and if you do move, you might only move to a different neighbourhood, a better transport links or to be closer to the school you want to get your children into.  The likelihood is however is that you won’t travel far.

I then turned my attention to people moving into Stotfold.  Using the same statistics for the 12 months up to the middle of Autumn 2016, 164 households moved into Stotfold and the average distance was 28.90 miles, the equivalent of moving from Aylesbury to Stotfold, again as the crow flies.  The greatest distance travelled again was 354 miles, that’s the same as 13 marathons when someone moved from Parkhead in Scotland to Stotfold.

I have looked at the data of every person moving into Stotfold and these have been plotted on a map of the UK. Looking at the map below, it shows exactly where most people come from, when moving into Stotfold.  As you can see, there are a high proportion of people moving from London and from the South West.

Stotfold 170 in pic

What does all this mean for the landlords and homeowners of Stotfold?

When an agent markets a property for rent or let, it is vital to know the tenant or property buyer well, that the properties they are letting / selling fit those tenants / buyers, so they almost sell themselves.  These days that means not only knowing how many bedrooms, reception rooms a property offers but the budget buyers and tenants want to spend on a property in that area as well as where they come from.

The estate and lettings industry loves the mantra “location, location, location”.  I say it might be helpful to factor in where and how far people are moving from, so the property can be sold or let more easily.  Many say knowledge is power and whilst I do enjoy writing my blog on the Stotfold property market, I also use the information to help my clients buy, let and sell well.  So for example, the information gained from this article will enable my team and I to be more efficient in where to direct our marketing resources to ensure we maximise our client’s properties sale-ability or rent-ability.

For more information and advice about the Stotfold property market, give us a call on 01462 894565 or pop into the office for a chat – we don’t bite!

237 Stotfold Landlords – Is This a Legal Tax Loop-Hole?

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In November 2015, George Osborne disclosed plans to restrain the buy-to-let (BTL) market, implying its growing attractiveness was leaving aspiring first time buyers contesting with landlords for the restricted number of properties on the market.  One of things he brought in was that tax relief on BTL mortgages would be capped, starting in April 2017.  Before April 2017, a private landlord could claim tax relief from their interest on their BTL mortgage at the rate they paid income tax – (i.e. 20% basic / 40% higher rate and 45% additional rate).

So, for example, let’s say we have a Stotfold landlord, a high rate tax payer who has a BTL investment where the rent is £900 a month and the mortgage is £600 per month.  In the tax year just gone (2016/17), assuming no other costs or allowable items, the figures are below:

  • Annual rental income £10,800.
  • Taxable rental income would be £3,600 after tax relief from mortgage relief
  • Meaning they would pay £1,440 in income tax on the rental income

And assuming no other changes, the landlord would have income tax liabilities (at the time of writing May 2017) in the tax years of:

  • (17/18) £1,800
  • (18/19) £2,160
  • (19/20) £2,520
  • (20/21) £2,880

Landlords who are higher rate tax payers are going to have be a lot smarter with their BTL investments and ensure they are maximising their rental properties full rental capability.  However, there is another option for landlords.

The Stotfold landlords who own the 237 Rental properties

in the town could set up a Limited Company and sell their

property personally to that Limited Company

In fact, looking at the numbers from Companies House, many landlords are doing this.  In the UK, there are 93,262 buy-to-let limited companies, and since the announcement in November 2015, the numbers have seen a massive rise.

  • Q2 2015 / Q3 2015 – 4,193 Buy to Let limited companies set up
  • Q4 2015 / Q1 2016 – 5,403 Buy to Let limited companies set up
  • Q2 2016 / Q3 2016 – 3,007 Buy to Let limited companies set up
  • Q4 2016 / Q1 2017 – 7,149 Buy to Let limited companies set up

 

173 Stotfold Graph

By selling their buy to let investments to their own limited company, owned 100% by them, these landlords could then offset the costs of running their BTL’s as an ‘allowable expense’ – effectively writing off the cost of 100% of their mortgage outgoings, wear and tear and upkeep, letting agent’s fees etc.

I am undeniably seeing more Stotfold landlords approach me for my thoughts on setting up a BTL limited company, so should you make the change to a limited company?

In fact, I have done some extensive research with companies house and in the 15 months between 1st January 2016 to 31st March 2017, 67 buy-to-let limited companies have been set up in the SG postcode alone.

If you are looking to hold your BTL investments for a long time, it could be very favourable to take the short-term pain of putting your BTL’s in a limited company for a long-term gain.  You see, there are huge tax advantages to swapping property ownership into a limited company but there are some big costs that go with the privilege.

As the law sees the new limited company as a separate entity to yourself, you are legally selling your BTL property to your limited company, just like you would be selling it on the open market.  Your limited company would have to pay stamp duty on the purchase and if you (as an individual) made a profit from the original purchase price, there could be a capital gains tax liability of 18% to 28%.  The mortgage might need to be redeemed and renegotiated too and this could come with exit charges.

On a more positive note, what I have seen by incorporating (setting up the limited company) is landlords can roll up all their little buy to let mortgages into one big loan, often meaning they obtain a lower interest rate and the ability to advance new purchase capital.  Finally, if the tax liability is too high to swap to a limited company, some savvy buy to let investors are leaving their existing portfolios in their personal name whilst purchasing any new investment through a limited company, just an idea, not advice!

It’s vital that landlords get the very best guidance and information from tax consultants with the right qualifications, experience and insurance.  Whatever you do, always get the opinions from these tax consultants in writing and you shouldn’t hurry into making any hasty decisions.  The modifications to BTL tax relief are being progressively eased in over the next three years so there is no need to be unnerved and rush into any decisions before finding out the specifics as they relate precisely to your personal situation.  With decent tax planning from a tax consultant and good rental / BTL portfolio management (which I can help you with), whatever you do, let’s keep you the right side of the line!

Great investment opportunity not to be missed……!

Our Satchells sales team in Stotfold are marketing this one bedroom apartment in the neighbouring town of Arlesey.  Just round the corner from the station, with an asking price of £129,950 and potential rental yield of 5% this will go quickly!

Call the Stotfold office now on 01462 733730.

 

6.82 Babies born for each new home built in the Stotfold area

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As more babies are being born to Stotfold and  Central Bedfordshire mothers, I believe this increase will continue to add pressure to the over stretched Stotfold property market and materially affect the local property market in the years to come.

On the back of eight years of ever incremental increasing birth rates, a significant 6.82 babies were born for every new home that was built in the Central Bedfordshire Council area in 2016.  I believe this has and will continue to exacerbate the Stotfold housing shortage, meaning demand for housing, be it to buy or rent, has remained high.  The high birth rate has meant Stotfold rents and Stotfold property prices have remained resilient, even with the challenges the economy has felt over the last eight years, and they will continue to remain high in the years to come.

This ratio of births to new homes has reach one its highest levels since 1945 (back in the early 1970’s the average was only one and a half births for every household built).  Looking at the local birth rates, the latest figures show we in the Central Bedfordshire Council area had an average of 66.7 births per 1,000 women aged 15 to 44.  Interestingly, the national average is 61.7 births per 1,000 women aged 15 to 44 and for the region its 67.6 births per 1,000 women aged 15 to 44.

166 - National Graph JPEG (fixed graph) - to be used to add weight to your local graph

The number of births  from Stotfold  and Central Bedfordshire women between the ages of 20 to 29  are close to the National average, but those between 35 and 44 were much higher.

 However overall, the birth rate is  still increasing and when  that fact is  combined  with the ever-increasing life  expectancy in the Stotfold area, the high levels of net migration into the area over the last 14  years (which I talked about in the previous articles)  and the  higher predominance of single person households … this can only mean one thing … a huge increase in the need for housing in Stotfold.

Again, in a previous article a while back, I said more and more people are having children as tenants because they feel safe in rented accommodation.  Renting is becoming a choice for Stotfold people.

The planners and politicians of our local authority, central Government and people as a whole need to recognise that with individuals living longer, people having more children and whilst divorce rates have dropped recently, they are still at a relatively high level (meaning one household becomes two households) … demand for property is simply outstripping supply.  The simple fact is more Stotfold properties need to be built, be that for buying or renting.

Only 1.1% of the Country is built on by houses.  Now I am not suggesting we build tower blocks in the middle of the  Stotfold Nature Reserve , but the obsession of not building on any green belt land should be carefully re-considered.

Yes, we need to build on brownfield sites first, but there are not  hundreds of acres of brownfield sites in Stotfold, and what brownfield sites there are, building on them can only work with complementary public investment.  Many such sites are contaminated and are not financially viable to develop, so unless the Government put their hand in their pocket, they will never be built on.

I am not saying we should crudely go ‘hell for leather’ building on our Green Belt, but we need a new approach to enable some parts of the countryside to be regarded more positively by local authorities, politicians and communities and allow considered and empathetic development.  Society in the UK needs to look at the green belts outside their leisure and visual appeal, and assess how they can help to shape the way we live in the most even-handed way.  Interesting times

Should the 1,155 home owning OAP’s of Stotfold be forced to downsize?

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This was a question posed to me on social media a few weeks ago, after my article about our mature members of Stotfold society and the fact many retirees feel trapped in their homes.  After working hard for many years and buying a home for themselves and their family, the children have subsequently flown the nest and now they are left to rattle round in a big house.  Many feel trapped in their big homes (hence I dubbed these Stotfold home owning mature members of our society, ‘Generation Trapped’).

Should we force OAP Stotfold homeowners to downsize?

In the original article, I suggested that we as a society should encourage, through building, tax breaks and social acceptance that it’s a good thing to downsize. But should the Government force OAP’s?

One of the biggest reasons OAP’s move home is health (or lack of it).  Looking at the statistics for Stotfold, of the 1,155 homeowners who are 65 years and older, whilst 681 of them described themselves in good or very good health, a sizeable 366 home owning OAPs described themselves as in fair health and 105 in bad or very bad health.

164 Graph Stotfold

9.54% of Stotfold home owning OAP’s are in poor health

If you look at the figures for the whole of Central Bedfordshire District Council (not just Stotfold), there are only 818 specialist retirement homes that one could buy (if they were in fact for sale) and 956 homes available to rent from the Council and other specialist providers (again, you would be waiting for dead man’s shoes to get your foot in the door) and many older homeowners wouldn’t feel comfortable with the idea of renting a retirement property after enjoying the security of owning their own home for most of their adult lives.

My intuition tells me the majority ‘would be’ Stotfold down-sizers could certainly afford to move but are staying put in bigger family homes because they can’t find a suitable smaller property.  The fact is there simply aren’t enough bungalows for the healthy older members of the Stotfold population and specialist retirement properties for the ones who aren’t in such good health … we need to build more appropriate houses in Stotfold.

The government’s Housing White Paper, published recently, could have solved so many problems with the UK housing market, including the issue of homing our ageing population. Instead, it ended up feeling annoyingly ambiguous. Forcing our older generation to move with such measures as a punitive taxation (say a tax on wasted bedrooms for people who are retired) would be the wrong thing to do.  Instead of the stick, maybe the Government could use the carrot tactics and offered tax breaks for down-sizers.  Who knows, but something has to happen?

Come to think about it, isn’t the word ‘downsize’ such an awful word?  I prefer to use the word ‘decent-size’ instead of ‘down-size’ as the other phrase feels like they are lowering themselves as though they are having to downgrade themselves in their retirement (and let’s be frank – no one likes to be downgraded).

The simple fact is we are living longer as a population and constantly growing with increased birth rates and immigration. So, what I would say to all the homeowners and property owning public of Stotfold is … more houses and apartments need to be built in the Stotfold area, especially more specialist retirement properties and bungalows.  The government had a golden opportunity with the White Paper and were sadly found lacking.

A message to my Stotfold property investor readers, whilst this issue gets sorted in the coming decade(s), maybe seriously consider doing up older bungalows as people will pay handsomely for them be that for sale or even rent?  Just a thought!