Are ‘would be’ Colchester homeowners warming to the idea of renting?

I was reading a report the other day produced by the Halifax, about the UK property market and why more and more of the younger generation seem to be renting rather than buying. I find it fascinating that over the last ten years, the British obsession of buying a house almost as soon as you left school, and the fact that if you rented you were seen as a second class citizen, has turned on its head to a point where the hopes and dreams to own a nice home will be replaced by the ambition simply to live in one.

In the latter half of the 20th Century, you left school, got a job, bought a small house and kept buying and selling property, constantly upgrading until eventually they carried you out in a box. However, the perceived shame and stigma of renting is no longer the case, as it seems that the British are now beginning to accept a lifetime of renting. This is a very important consideration for both Colchester homeowners and Colchester landlords as it will transform the way the Colchester property ladder looks in the future and I might ask whether or not it will exist at all for some people? The make up of households is one important factor, especially in the Colchester property market. The normal stereotypical married couple, two kids and dog of the 1970’s and 80’s has changed. More and more we have the need for larger houses where two families come together after divorces (+ kids) and need a property to house everyone through to an increase in the number of one person households.

Looking at the data for Colchester, of the 11,689 private rental properties in the Colchester Borough Council area, 32% of those rented properties are one person households (3,749 properties). However, when we compare the number of one person Colchester households who have bought their own property with a mortgage (ie therefore they are still in work), of the 47,507 owner occupied households in the area, only 4,230 of those properties are a one person household (ie 8.9%). Compared to a decade ago, this explosion in demand for decent high quality rental properties that one person households require has not been met with an increase in supply of such properties.  More and more I believe Colchester landlords need to consider this change in the make up of Colchester households, as I believe this could be an opportunity. As an aside, another interesting stat that raised an eyebrow was that 14.73% of those 11,689 rental properties (1,722 properties) are lone parents households as well. Again, another possible opportunity that Colchester landlords might want to consider in their future investment plans.

It is true that the Governments introduction in 2013 of the Help to Buy scheme, where first time buyers only needed a 5% deposit, changed the perception of peoples’ ability to buy without having to save ten’s of thousands of pounds for a deposit. However, it might surprise you, 95% mortgages were re-introduced within six months of the Credit Crunch in late 2009, so again it comes down to people’s own perception. Many youngsters think they won’t get a mortgage, so don’t even bother trying.

Coming back to the deposit, it’s still a fact that once you start renting it becomes that much harder to save for a deposit, regardless of the size. Interestingly, 7 out of 8 renters polled by the Halifax (86% to be exact) refuse to sacrifice the quality of accommodation they currently live in to reduce the amount of rent they pay in order to save for a deposit.  This is the crux and the real reason why people aren’t buying but renting... and why demand for renting will continue to grow in the future (ie good news for landlords). Colchester tenants can upgrade the quality and size of the property they live in for a minimal rent increase. The average rent of a two bed property in Colchester is £722pm, a three bed is £258pm more at £980pm, whilst the average four bed rent is £1,343pm. If you had to make that jump when buying, the monthly mortgage payments would be stratospherically more than that!  Without any social pressure and better quality rental properties compared to a decade ago, we will become a nation of renters within the next generation, as the UK is becoming more like Europe, where renting is ‘the norm’. Who is going to supply all these properties to rent? Landlords! Whether you are an existing landlord looking to grow your portfolio or looking to become a ‘first time landlord’, my thoughts are take advice from as many people as possible. However, as the majority of landlords buy their buy to let properties in the same town they live, you will need specific advice about Colchester itself.

Haart buy to let....6% Yield!!

This two bedroom terrace house is currently on the market with Haart for £135,000. Staged as the perfect ready to go investment property it is being sold with no onward chain. The property is in fantastic condition, an upstairs bathroom and a private rear garden. Situated on Magdalan street it is within close proximity to the town centre, town station and amenities.

This property would let for £675pcm, if purchased at the asking price it would achieve a return of 6%. 

For more information and photos please follow the link below.

http://www.rightmove.co.uk/property-for-sale/property-35672580.html

Beresfords .. great buy to let 5.76%

This 2 bedroom property would make an ideal investment mainly due to the location, its situated within a 5 minute walk to the Colchester Mainline station situated in Claremont Heights. The property benefits from two good sized bedrooms as well as allocated parking and visitor spaces. 

The property would let for £600pcm and is on the market for sale at £125,000. If purchased at asking price it would achieve a return of 5.76%. This is a great return and would provide an investor with a great long term buy. 

Have a look at the internal pictures on Rightmove by following the link below. 

http://www.rightmove.co.uk/property-for-sale/property-35621883.html

William H Brown...5.78% Yield

William H Brown have this 2 bedroom apartment for sale, situated north of Colchester and within easy reach of the Colchester Mainline station this would make an ideal investment.The property benefits from two double bedrooms and a spacious lounge/diner making it particularly suitable for commuters and sharers. The property also benefits from no onward chain.

The property would let for £650pcm and if purchased at asking price of £134,950 this would generate a return of 5.78%. 

Have a look at the internal photos on Rightmove by following the link below. 

http://www.rightmove.co.uk/property-for-sale/property-34961100.html?premiumA=true

Why are less Colchester people moving house?

During my school years, my parents seemed to move every other year (or it seemed that way). In reality, looking back at the house moves, we actually moved four times before I left home. 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 Colchester over the last few decades, and interestingly, the trend is getting worse ... for the removal van people at any rate!

In Colchester, there are 50,106 properties. However, after we remove the 8,131 council houses, 10,975 privately rented houses and 491 houses where the occupants live rent free, that leaves us with 30,509 owned properties (be that 100% outright, with a mortgage or shared ownership). This means 60.9% of the properties in Colchester are occupied by the owner (the national average is interestingly 64.2%) but the number of people who have sold and moved house in Colchester, over the last 12 months, has only been 3,699. This means on these figures, the homeowners of Colchester are only moving on average every 8.24 years.

These are the reasons. Firstly, the cost of moving house has risen over the last twenty years. 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 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 2002 to be exact) for property values to double to today’s levels.

This change to a relatively low inflation Colchester property market (i.e. Colchester 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. Colchester homeowners 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 Colchester buy to let landlords? Well for the same reasons existing Colchester homeowners aren’t moving, less ‘twenty something’s’ are buying their first home as well. Colchester 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 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 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), 21.9% of Colchester 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?

Great Return from David Martin Group...5.96%

David Martin Group have this well presented two bedroom property for sale situated north of Colchester in Mortimer Gardens. The modern apartment benefits from a communal garden area, a Juliette balcony and due to location it has easy access to the A12. 

The property in the current market would let for £695pcm and if purchased at the asking price of £139,995. 

Have a look at the internal photos on Rightmove by following the link below. 

http://www.rightmove.co.uk/property-for-sale/property-50905363.html

Great Return...6.14%

William H Brown have this two bedroom terrace house for sale situated just off Hythe hill on St Leonards Road. The property is on the market for Offers in excess of £127,000, it benefits from a rear garden, first floor bathroom and is walking distance to the hythe and town stations. 

The property offers a great long term investment and is being sold with no onward chain which makes for a quick turn around to get tenants in. The property would achieve £650pcm and if purchased at £127,000 provides a return of 6.14%.


Have a look at the internal photos by following the link below.

http://www.rightmove.co.uk/property-for-sale/property-42173273.html

Palmer and Partners ... Great buy to let 6% return.

Palmer and Partners have this 2 bedroom property for sale on Brook street, the property is on the market for £129,995. This well presented property benefits from two good sized bedrooms, a courtyard style garden and is within a close proximity to the town centre and local shops.

The property would easily let for £650pcm, this would achieve a return of 6%. This is a great return and would be a popular property with tenants.
 

Have a look at the internal photos by following the link below. 

http://www.rightmove.co.uk/property-for-sale/property-35511642.html?premiumA=true

Buy to let from William H Brown ...5.65%

William H Brown have this well presented three bedroom house for sale situated North of Colchester on Dilbridge Road West. The property is on the market for £189,995 and benefits from three good sized bedrooms, a rear garden and had very easy access to the A12.

The property would let for £895pcm, if purchased at the asking price then this would generate a return of 5.65%. 

Have a look at the internal photos on Rightmove as the property has recently been refurbished, making it a ready made investment suitable for tenants to move straight in. 

http://www.rightmove.co.uk/property-for-sale/property-53307092.html

Affordability of housing in Colchester

Talking to an elderly relative recently, he reminded me that in his day, you could have bought a property for the same price of what a decent second hand car would sell for today and that his father was buying property for the same price as a decent 50 inch LCD TV!  Now of course, these are only headline prices and we have had wage growth and inflation.  Interestingly, since the Second World War, property values in Colchester doubled in 1961, 1971, 1975, 1980, 1988, 2000 and 2006.

Looking at more recent times, since the start of the Millennium, these increases in property values have generated large increases in equity for many homeowners but on the other side of the coin also making housing unaffordable for other people.  It might interest readers to note that most of Europe experienced sharp increases in property values in the early years of 2000’s, with only Spain beating  us (although we know what has happened to the Spanish property market over the last few years!).  In the 2000’s, the British situation was different in two regards.  First the property value boom started earlier and saw more sustained increases, second, the regional pattern was fairly uniform. 

However, since 2010, the regional pattern has been completely different in the UK.  Compared with  2007 (the last property boom), average property values today in England and Wales are 1.2% higher, whilst in Greater London, they are 35.7% higher, whereas in Colchester they are 8.24% higher. The London property market has been like a different country.  Looking specifically at Colchester though, it has continued for first time buyers to get on the housing ladder.  The best measure of the affordability of housing is the ratio of Colchester Property Prices to Colchester Average Wages, (the higher the ratio, the less affordable properties are).  

• 1997       3.68 to 1  (i.e. the average value of a Colchester property was 3.68 times higher than the average annual wage in Colchester)
• 2000       4.38 to 1
• 2002       5.81 to 1
• 2003       6.77 to 1
• 2007       8.04 to 1
• 2009       6.32 to 1
• 2012       7.05 to 1
• Today     7.86 to 1

You  can see quite clearly, even though we had an improvement just after the 2007 property crash (i.e. the ratio dropped), in following subsequent years with Colchester house price’s rising but wages not keeping up with them,  the ratio started rise. This has meant there has been a deterioration in affordability of property in Colchester over the last couple of years.  This is one of the (many) reasons why the younger generation is deciding more and more to rent instead of buy their own house.  The local Council sold off council houses in the Thatcher years and for many on low incomes or with little capital, owning a home has simply never been an option.

With fewer people able to save up the deposit required by mortgage lenders, more and more people are looking to rent, this has also resulted in a change in attitudes towards renting over the last decade.  This delay in moving up the property ladder has driven rents up in Colchester over the last few years, as more people are seeking properties to rent.  All these things have combined to make the demand for rental property in Colchester rise.  If you are an existing landlord or someone thinking of become a first time landlord looking for advice and opinion and what (or not to buy in Colchester).

Colchester Buy To let – Bedrooms?

Colchester Buy To let – Bedrooms? 

Last week, a landlord from Colchester emailed me to ask, after reading the Colchester Property Blog, 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 a good way would be get an ‘inexpensive’ extension.

Having more usable space is generally thought to be consistent with better quality accommodation and homeowners and tenants are prepared to pay for it. If you added a bedroom to a two bed terraced to make a three bed terraced, it will add 10% to the value of the property.  Turn a three bed terraced into a four bed terraced and 9% will be added to the value. Looking at semi detached properties, and turn a two into a three bed and 12% will be added to the value, whilst making a three bed semi into four bed will add 9% in value.

However, before you rush off to the planning department there are some important considerations, whether you are a homeowner or landlord.  What would be the cost of making that extra bedroom? The average value of a terraced house in Colchester is currently £194,000 whilst the average value of a semi detached house is £225,100, meaning to make money the cost of the extension would need to be less than £18,430 on the terraced property and £123,635 on the semi detached house. Talking to a number of trades people in the town, 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 of pointing work on the chimney!

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

·    * 25.7% of the one bed properties on the market to rent in Colchester have a tenant            with an average rent of £599 per month

·    * 32.1% of the two bed properties on the market to rent in Colchester have a tenant            with an average rent of £719 per month

·    * 51.4% of the three bed properties on the market to rent in Colchester have a tenant          with an average rent of £986 per month

·    * 32.1% of the four bed properties on the market to rent in Colchester have a tenant            with an average rent of £1,316 per month

No, if you want to increase the value of your property, be you a Colchester landlord or homeowner, there are things that cost a lot less than building extra bedrooms. Spruce up the exterior, emulsion all the rooms, install fresh carpets and curtains. For homeowners, a matter of a few hundred pounds will add thousands whilst for landlords, these things can add an extra 10% to the rent that you can achieve. 

Ideal Investment...5.96% Yield!!

Haart have this 2 bedroom property for sale in the sought after area of Braiswick park. Located within walking distance to the Colchester Mainline station and a short distance from the town centre this makes an ideal property for anybody looking to commute. Benefiting from allocated parking and a balcony this makes an attractive rental. 

The property is on the market for £140,000 and would easily achieve £695pcm, this provides a return of 5.96%. This is a great return and would make for an ideal long term investment. 

Have a look at the internal photos by following the link below. 

http://www.rightmove.co.uk/property-for-sale/property-35313402.html

Great Buy to Let ... 5.79%

Beresfords have this 2 bedroom terrace house for sale located in south Colchester on Abbots Road. The property benefits from 2 allocated parking spaces, two double bedrooms and a rear courtyard garden. The property would let ofr £675pcm and if purchased at the asking price of £140,000. This would achieve a return of 5.79%, this would make an ideal long term investment. 

Have a look at the internal photos on Rightmove by following the link below. 

http://www.rightmove.co.uk/property-for-sale/property-35297682.html?premiumA=true

Great Investment ... 6% yield

Michaels have this 2 bedroom terrace house for Sale situated to the East of Colchester on Greenstead Road. Located within close proximity to the town and station this would make an ideal buy to let. The property benefits from 2 double bedrooms, open plan living space and newly refurbished interior.

This property would achieve £750pcm and if purchase at the asking price of £150,000 this would achieve a 6% return. This makes a great return and would be a perfect long term investment. 

Have a look at the internal pictures in Rightmove by following the link below.

http://www.rightmove.co.uk/property-for-sale/property-35289549.html?premiumA=true

Colchester Buy To Let – Demand and Supply

Following on from my recent article about the state of the Colchester property market and in particular what had happened to the rents Colchester tenants have had to pay since the Credit Crunch, if you recall, I said rents in Colchester are still 0.71% lower than they were in 2008. A Colchester landlord has since rung me after reading the Colchester Property Blog, wanting to know more of the story of what was happening to current rents in the town. The reason he asked was that his current agent hadn’t increased his rent for a number of years and was concerned if he was getting the best return from his buy to let investment.

The Colchester rental market is all about supply and demand (isn’t it so in all parts of the economy?). On the supply side, 556 rental properties have come up for let in the last 31 days in Colchester. It sounds a lot until you consider there are 10,975 rental properties in Colchester, that means 5.06% of the rental stock of properties in Colchester are coming onto the market each month (it is normally around 5%). However, when you strip out the student properties, which account for around 15% to 20% from these numbers (because by definition each student property changes its tenants each year), the remaining rental properties (in what is called the professional lets sector), the percentage is much lower than the norm.  One reason for this lack of new rental properties coming on the market is the fact that professional tenants seem to be staying in properties longer.

With this lack of supply, newer tenants have to pay more to secure the property they want. And this is the crux of the matter ...properties they want. Older properties in Colchester, 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 they are prepared to pay for the privilege. Rents for top quality properties in Colchester 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 days. 

  

Interestingly, looking at Colchester property values, the Land Registry have just released their latest set of data on property values. Throughout April 2015 (the latest set of data), property values rose in Colchester, with 0.7% growth, meaning they are now 9.4% higher than they were a year ago.  When one looks at the regional picture, the East of England average property values rose by 0.3% 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 Colchester to rise by 3% to 5% over the coming 12 months, following the Conservative victory.  In a forthcoming article, I will discuss how the number of properties changing hands each month has dropped considerably in the last 10 to 15 years in the town. 

...And so back to our landlord. Each property is unique and so as his tenancy agreement allows him to inspect the property with notice to the tenant, we will be visiting the property next week.

Great Buy to let ... 5.82% Yield

Front have this 3 bed semi-detached house for sale in South Colchester. On the market for £169,995 this property would prove very popular and easily let for £825pcm. The property benefits from off road parking, a large garden and being within a close proximity to local shops and bus routes. 

If the property was purchased at asking price and let for £825pcm then this would achieve a return of 5.82%. This is a great return and the property would be a brilliant long term investment. 

Have a look at the photos by following the link below. 

http://www.rightmove.co.uk/property-for-sale/property-49277599.html