What does 2016 have in store for the Colchester Property Market?

Colchester house prices up or Colchester house prices down? ... and if so, by how much? Those of you who read the Colchester Property Blog will know I am not the sort of person who pulls punches nor someone who ever fails to give a forthright and straight talking opinion – so here are my thoughts for the 30,255 Colchester homeowners and landlords.

The average Colchester property is 7.9% higher today than it was a year ago, which doesn’t sound a lot, but when you consider inflation is currently running at -0.1% (ie consumer/retail prices are dropping) and average salary growth is only around 2.5% pa, this is bad news for first time buyers as property affordability continues to decrease (although I was reading in The Times the other day that wage inflation (ie salary growth) is showing signs of weakening).

Some commentators have said the higher stamp duty taxes announced a few weeks ago in the Autumn Statement for buy to let landlords, concerns over first time buyer affordability and the outlook of UK interest rate rises in 2016 will really dampen the property market. I hope you all read my previous article about what the new stamp duty rule changes would REALLY mean for Colchester landlords in my blog, but I believe the real issue in the Colchester property market is the shortage of property to buy, as people either worry there will be no suitable house to move to, or cannot afford to upgrade. However, on the supply side, Mr Osborne said in his Autumn Statement that he will change the planning laws to ensure the government meets the pledge made at the General Election (back in May) of 200,000 new homes a year.  All I can say is .. good luck George hitting those numbers!

Why? Because houses take years to build .. not months .. so George and his fabled house building aside .... where does that leave us in Colchester in 2016?

Well, talking of supply ... whilst Mr Osborne builds his properties (and let’s be honest - a week doesn’t go by without him being filmed on a building site with a high viz jacket and hard hat building a house here and there!), let us look at the shortage of properties for sale. Back in December 2011, 1,433 properties were for sale in Colchester .. today that figure is 707. On the face of it, this means there is less choice for Colchester buyers – but it also means with a restricted supply of properties for sale .. it keeps property prices high for Colchester house sellers.

Everything isn’t all doom and gloom though ... again back in December 2011, the average property in Colchester took 103 days to find a buyer .. latest figures state this has dropped to 60 days .. a drop of 42% in how long it takes to find a buyer. However, when you delve even deeper, the best performing type of property today in Colchester is the 3 bed, which only takes 56 days to find a buyer (on average) compared to the 1 bed, which takes 75 days. It just goes to show, even though the average has dropped since 2011, how varied that change has been!

So, back to the question everyone is asking .... What will happen to property values in Colchester in 2016?  I am going to suggest they will rise between 6.5% and 7.5% ... nothing out of the ordinary, but unless something cataclysmic happens in the world, 2016 will be like 2015!

Colchester Landlords could be fined £708,000 per year

“Who would want to move to Colchester in weather like this?”, was what one landlord said to me as we shook hands outside his property, the other afternoon. It was windy, cold, it had been raining most of the day and it was the last appointment of the day at 4.45pm. I will admit, as I had been out of the office all day, I was looking forward to getting home, putting the fire on, and watching telly with a big mug of tea.. but this landlord lived in neighbouring Ipswich and this was the earliest he could do. 

 

It turned out he had been self-managing the property himself over the last few years, but was worried with all the new legislation that had been introduced recently. He was particularly concerned about the up and coming ‘Right to Rent’ legislation, so as his tenant had handed in their notice recently, on this new tenancy he called us for our opinion.

For those Colchester landlords that don’t know, landlords will need to check the immigration status of any new tenants moving into properties from February 2016 or face a £3,000 fine. It is called the 'Right to Rent' rules. However, tenants should also be aware that as well as traditional landlords, tenants who sub let rooms and homeowners who take in lodgers, must also check the right of prospective tenants to reside in the UK.

Our landlord from Ipswich wanted to know how much of a real issue was ‘Right to Rent’ in Colchester. I was able to tell him, the last available figures (from a couple of years ago) show that 236 people (whom were registered as Non-UK Born Short-term Residents) moved into private rented accommodation in the Colchester Borough Council area in one year alone. If all of those people weren’t supposed to be in the UK, that would be a fine of £708,000 to the landlords of the town.

It doesn’t sound a lot when you think there are 119,441 residents in Colchester Borough Council area, and of those, 104,271 people (or 87.30%) were born in the UK. But Colchester is a cosmopolitan town as the country of birth of the residents in the Colchester Borough Council area can be split down as follows:

·        UK                                                                   87.30%

·        Ireland                                                             0.52%

·        Europe                                                             4.94%

·        Africa                                                              1.87%

·        Middle East and Asia                                      4.18%

·        Americas and Caribbean                                 0.88%

·        Australia and Pacific region                            0.29% 

However, it must also be recognised that landlords, by checking up on tenants, could potentially be accused of discrimination under the Equality Act. This is a real minefield for landlords, especially when you consider that not all of the 5,896 Europeans in the area necessarily have the right to live in the UK either.

In a nutshell, Colchester landlords will need to check and retain copies of certain documents that show a potential tenant has the right to live in the UK. These include ....

·        UK Passport

·        EEA Passport/Identity card

·        Travel document or Permanent Residence Card showing indefinite leave to remain

·        Paperwork from Home Office stating their Immigration status

·        Certificate of registration or naturalisation as a British citizen.

I hope the new law will target dishonest landlords who repeatedly fail to carry out Right to Rent checks by making it a criminal offence. This means they could face imprisonment for failing to check on their tenants. That is why more and more landlords are asking agents to manage their properties, so they can stay the right side of the law.

So what did our landlord do?

Well after our chat, he asked us to find a tenant and manage the property for him - he had been reading the Colchester Property Blog for a while and because of the knowledge we impart to the landlords of Colchester, we obviously know what we are talking about.  Even better news for him, even though this would cost him agency fees, I was able to get him an additional £55 per month for his property (when we found him a tenant one week later). Now, together with the peace of mind we will keep him the right side of the law and put a stop to midnight phone calls complaining about dripping taps, it was a win-win situation for everyone.

William H Brown buy to let 6% Return!

This 1 bedroom ground floor apartment has come to market with William H Brown situated to the North of Colchester in California Close. The property benefits from 2 allocated parking spaces and a modern finish throughout. It is also within a close proximity to local shops and also provides very good transport links to the town centre, train station and A12. 

In the current market this property would let for £575pcm and if purchased at the asking price of £115,000 would achieve a return of 6%. This is a fantastic return and the property would offer a great long term investment. 

For more information and to see the internal photos please follow the link below. 

Will the young people of Colchester ever own their own home?

I had the most interesting chat with a mature couple (in their early/mid 50’s) from Beacon End the other day, whilst viewing one of our rental properties. The property wasn’t for them, but their son, who wanted a second viewing with his parents to get the parental blessing. Now I know that isn’t the norm, but in this case the parents were going to act as guarantor. We got chatting about the Colchester property market and how they had bought their first property in the town just after they got married in the late 1980’s when they were in their early/mid 20’s. Anyway, we got chatting about how the youngsters of the UK seem to rent more than buy nowadays and from that the conversation covered a number of similar topics. I want to share the highlights of that conversation with you today.

Their son, like many 20 to 30 year olds in Colchester, desperately wants to own his own property and the parents said he had read in the Telegraph recently, when you compare house prices to earnings, the current 20 to 30 something’s generation have to spend more of their salary in mortgage payments than any previous generation. The demand for private rental sector accommodation in Colchester is huge. There are in fact 10,975 private rental properties in Colchester at the last count, impressive when you consider there are 4,748 council houses in the town. However, let us not forget 30,255 properties are owner occupied (16,834 with a mortgage).

Let us all be honest, private renting doesn’t have the stigma it had a few decades ago and it might surprise people that even though us Brit’s class ourselves as a nation of homeowners, roll the clock back 100 years and over 75% of people rented their own home (and it was all from private landlords as council housing only started to come in with the ‘homes for hero’s’ after the first World War). It might also surprise you to learn that at the time of the 1971 census, still more people rented than owned their own home.

Looking at the affordability issue, I have proved time and time again, it is in fact cheaper to buy a property than rent, when one looks at starter homes for first time buyers. 95% mortgages have been available to first time buyers for over four years and whilst you could certainly find better properties in better condition in better areas, terraced houses can be bought for as little as the mid £110,000’s in the Highwoods area of Colchester (meaning a modest deposit of £5,500 would be required).

When it came to affordability, I was able to tell them that when they bought their first house in Colchester in 1988, the ratio of house prices to salary was 7.54 to 1 in Colchester ... and here was the surprise for both of us, today’s ratio is only 6.53 to 1!

I said I believed there had been a cultural attitude change towards renting property in Britain and that this quiet revolution was likely to be permanent. In the 60’s, 70’s and 80’s, saving for the deposit was everything and buying a house was everything. Youngsters today have far much more disposal income today than people had in the Callaghan and Thatcher years, but choose to spend it upgrading their mobile phones every 12 months, the newest tablet or PC, a newest 50” plasma LCD TV and two sun drenched holidays a year, than go without and save for a deposit.

Yes, there are horror stories of tenants living in rat infested properties with landlords who charge massive rents and don’t repair their properties. But that is very much the exception as most tenants rent homes of a quality they couldn’t ever to afford to buy. Twenty years ago, if you said you rented a property, you were considered the lowest of the low ... but now it’s the norm.

So with mortgage affordability being well within the bounds of most first time buyers, the level of deposit required for a 95% being surprisingly modest (starting off at c.£5,500 in Colchester as mentioned above) until we change our attitudes, the UK housing market is slowly but surely turning into a more European model, where people rent for long periods of their life, then eventually inherit their parents properties and subsequently become homeowners themselves, albeit later in life.

Hence, I cannot see the demand for decent, high quality rental properties ever dropping in the next 10 to 20 years, but only ever increasing as the population continues to soar. Just make sure you by the right property, at the price, in the right location. 

Close to station - 5.8% Return!

This 2 bedroom apartment has come to market with William H Brown. Situated North of Colchester on Chapman Place it is within easy reach to the A12 and Colchester's Mainline train station. The property benefits from an open plan living area, allocated parking and is being old with no onward chain. 

In the current market this property would let for £675pcm and if purchased at the asking price of £139,950 this would achieve a return of 5.8%. This is a great return and would offer a great long term investment. 

For more information please follow the link below.

http://www.rightmove.co.uk/property-for-sale/property-39072954.html

6% Return from Jackson and Co... Tenants in Situ!

This 2 bedroom third floor apartment has come to market with Jackson and Co situated to the east of the Town centre within walking distance to the University of Essex and the Hythe station. The property benefits from two double bedrooms with an en-suite to the master and also allocated parking. 

The apartment is being sold with tenants in situ paying £850pcm, if purchased at the asking price of £169,995 would achieve a return of 6.1%. It is also being sold with no onward chain. 

For more information please follow the link below. 

http://www.rightmove.co.uk/property-for-sale/property-37872039.html

6.1% From Knight west .. Close to university!

This two bedroom apartment has come to market with Knight West benefiting from underfloor heating and an allocated parking space. The well maintained property is situated close to the Town Centre towards the Hythe which is within close proximity to the university and amenities. 

In the current market this property would let for £695pcm and if purchased at the asking price of £135,000 will achieve a 6.1% Return. This is a great return and offers a fantastic investment due to its location. 

For more information on this property please follow the link below. 

http://www.rightmove.co.uk/property-for-sale/property-38963610.html

Palmer and Partners... 6.3% Return!

This 2 bedroom first floor apartment has come to market with Palmer and Partners situated on De Gray road located north Colchester. The property is in a fantastic location with easy access to the A12. It is well presented and also includes one allocated parking space.

This apartment would let for £650pcm in the current market and if purchased at the asking price of £122,500 it would achieve a return of 6.3%. This is a great return and the property is being sold with no onward chain giving the opportunity to get tenants in as soon as possible.

For more information please follow the link below.

http://www.rightmove.co.uk/property-for-sale/property-52564186.html?premiumA=true