PROPERTY TALK
ALEXANDRE BOYES PROPERTY TALK
| 1
I mean it was only nine years ago we went through the global financial crisis with the credit crunch. Nationally, in most locations including East Grinstead, property values dropped in value by 16% to 19% over an 18-month period. If we had a similar percentage drop, it would only take us back to the property value levels we were achieving in 2015. And let’s not forget that the Bank of England introduced some measures to ensure we didn’t have another bubble in any future property market. One of the biggest factors of the 2009 property crash was the level of irresponsible lending by the banks. The Bank of England Mortgage Market Review of 2014 forced Banks to lend on how much borrowers had left after regular expenditure, rather than on their income. Income multipliers that were 8 or 9 times income precredit crunch were significantly curtailed (meaning a Bank could only offer a small number of residential mortgages above 4.5 times income), and that Banks had to assess whether the borrower could afford the mortgage if interest rates at the time of lending rose by three percentage points over the first five years of the loan ... meaning all the major possible stumbling blocks have been mostly weeded out of the system.
So, what next?
BREXIT, NO BREXIT, HARD BREXIT… IN THE WHO SCHEME OF THINGS, IT WILL BE ANOTHER FOOTNOTE TO HISTORY IN A DECADE. Kate Boyes, FARLA MRICS I have been asked a number of times recently what a hard Brexit would mean to the East Grinstead property market. To be frank, I have been holding off giving my thoughts, as I did not want to add fuel to the stories being banded around in the national press. However, it’s obviously a topic that you as East Grinstead buy to let landlords and East Grinstead homeowners are interested in ... so I am going to try and give you what I consider a fair and unbiased piece on what would happen if a hard Brexit takes place in March 2019. After the weather and football, the British obsession on the UK property market is without comparison to any other country in the world. I swear The Daily Mail has the state of the country’s property market on its standard weekly rotation of front-page stories! There are better economic indexes and statistics to judge the economy (and more importantly) the property market. The number of transactions is just as important, if not more, as a bellwether of the state of the property market.
2 |
ALEXANDRE BOYES PROPERTY TALK
Worries that the Brexit referendum would lead to a fast crash in East Grinstead (and national) property values were unfounded, although the growth of property values in East Grinstead has reduced since the referendum in the summer of 2016. Now, it’s true the East Grinstead property market is seeing less people sell and move and the property values are rising at a slower rate in 2018 compared to the heady days of the first half of this decade (2010 to 2015), but before we all start panicking, let’s ask ourselves, what exactly has happened in the last couple of years since the Brexit vote? Mid Sussex and East Grinstead house prices have risen by 4.93% since the EU Referendum...
...and yes, in 2018 we are on track (and again this is projected) to finish on 2,508 property transactions (i.e. the number of people selling their home) ... which is less than 2017 ... and only just below the long term 12 year average of 2,544 transactions in the local council area.
So, it appears the EU vote hasn’t caused many major issues so far, however, if there was a large economic jolt, that could be a different game, yet how likely is that? The property market is mostly influenced by interest rates and salaries. A hard Brexit would subdue wage growth to some degree, yet the level of the change will depend on the undetermined type of Brexit deal (or no deal). If trade barriers are imposed on a hard Brexit, imports will become more expensive, inflation will rise and growth will fall, although at least we are not in the Euro, meaning this could be tempered by the exchange rate of the Pound against the Euro. In plain language, a hard Brexit will be worse for house prices than a deal. So why did the Governor of the Bank of England suggest a disorderly hard Brexit would affect house prices by up to 35%?
A lot of East Grinstead homeowners might wait until 2019 to move, meaning less choice for buyers, especially in the desirable areas of East Grinstead. For East Grinstead landlords, East Grinstead tenants are also likely to delay moving until next year, although I suspect (as we had this on the run up to the 2015 General Election when it was thought Labour might get into Government), during the lull, there could be some East Grinstead buy to let bargains to be had from people having to move (Brexit or No Brexit) or the usual panic selling at times of uncertainty. Brexit, No Brexit, Hard Brexit … in the whoscheme of things, it will be another footnote to history in a decade. We have survived the Oil Crisis, 20%+ Hyperinflation in the 1970’s, Mass Unemployment in the 1980s, Interest Rates of 15% in 1990’s, the Global Financial Crash in 2009 ... whatever happens, happens. People still need houses and a roof over their head. If property values drop, it is only a paper drop in value ... because you lose when you actually sell. Long term, we aren’t building enough homes, and so, as I always say, property is a long game no matter what happens - the property market will always come good. Growth in UK property values as well as in East Grinstead seems fated to slow over the next five to ten years, whatever sort of Brexit takes place.
ALEXANDRE BOYES PROPERTY TALK
| 3
EAST GRINSTEAD FIRST TIME BUYERS NEED 13.5 TIMES ANNUAL SALARY TO GET ON HOUSING LADDER Kate Boyes, FARLA MRICS What is it to be British? Our stubbornness, longsuffering stoicism, our vexation at injustice, our obsession with football and rugby, we are weather obsessed external awkward noncommittal modest people whilst underneath seething like a volcano because someone jumped the queue….. and our No.1 obsession is with the property ladder. This ‘love affair’ with owning our own home has been both good and bad for the UK as a whole; giving people financial freedom in their later years whilst also reducing the quantity (and quality) of housing provision whilst adding the extra pressure of a ‘them and us’ society. Strong words I know .. but let me explain more. I honestly believe that most Governments since the end of the 1970’s, Conservative and Labour, have attempted to nourish our addiction to home ownership (to keep the housing market on track) with the Council House Right to Buy sell off in the 1980’s,
4 |
ALEXANDRE BOYES PROPERTY TALK
tax relief of mortgages, relaxation of the mortgage rules in the late 1990’s/early 2000’s and most recently, the Help to Buy scheme.
property values by the average annual earnings of first time buyers - in 2007, that was £17,485 pa and that has risen to £20,043 pa .. giving us the ratio of 13.5 to 1.
But the Brits haven’t always had this obsession. Roll the clock back 100 years and, in 1918, just under a quarter of all Brits owned their own homes and the other 77% rented. Go back 50 years to 1968, and only 46% of people owned their own home, the rest rented. This homeownership thing is quite a recent phenomenon.
However, what must be remembered is that these are raw statistics from the ONS and don’t take into account other factors, like most people buy their first home as a couple. Also, mortgage rates are at an alltime low and who can remember mortgage rates of 15%+ in the 1990’s, meaning borrowing today is relatively cheap. Also, 95% Loan to Value first time buyer mortgages have been available since the end of 2009 (i.e. you only need to save a 5% deposit) and first time buyer rates of 2.19% fixed for 5 years can be obtained (correct at time of writing this article)… it is cheaper to buy than rent .. fact!
According to my research, anyone looking to get a foot onto the property ladder as a first-time buyer in East Grinstead today, AS A SINGLE PERSON, would need to spend 13.5 times their earnings on an East Grinstead first time buyer property. Using the numbers from the Office of National Statistics (ONS), the average value of a first-time buyer property in East Grinstead today is £270,000, compared to £189,000 in 2007. If we divide those
I believe there has been a mind-set change to owning a home. Home ownership was the goal of the youngsters in the latter half of the 20th century. Britain is changing to a more European model of homeownership, where people rent in early to mid-
life, wait to inherit the money from their parents when in their 50’s and then buy thus continuing the circle albeit in a different way to the last Century. This means the demand for privately rented accommodation will, in the long term, only continue to grow. If you would like to know more about where the hot spots are for that growth in East Grinstead, then drop me or our lettings manager Ally Hutchings an email:
kate@alexandre-boyes.co.uk ally@alexandre-boyes.co.uk or telephone call 01342 321142
F eel free to pick our brains on the best places to buy (and not to buy) in East Grinstead to ensure your rental investment gets you what you want.
ALEXANDRE BOYES PROPERTY TALK
| 5
THE £
2,096,467
TICKING TIME BOMB FOR EAST GRINSTEAD LANDLORDS
Kate Boyes, FARLA MRICS
“I just love looking over and keeping up to date the 108 pieces of legislation that govern the rental of residential property in the UK” ...No East Grinstead Landlord, ever If you are one of the 634 East Grinstead landlord’s that manages your own property, would it surprise you to know that there are 108 separate pieces of legislation that govern the rental of private houses to tenants. On top of the 108 pieces of law, there are a further 300+ regulations in the mix. Many East Grinstead landlords are now seeing self management as a false economy. In the last four years, an additional 244 landlords in East Grinstead have converted from self-managed to having their property managed by a letting agent, taking the total number of properties under management in East Grinstead to 992 (out of a total of 1,626 private rental properties). Now, don’t get me wrong, self-managing your rental
6 |
ALEXANDRE BOYES PROPERTY TALK
property can be a very fulfilling experience, allowing you to build a deep relationship with your tenant and your emergency 24 hour plumber, builder (happy to do small jobs at a drop of a hat), decorators, first name terms with their deposit provider, lawyer and EPC provider to name but a few. (Wow!) Also, did you know if your tenants deposit isn’t registered, or doesn’t continue to be registered after the end the periodic tenancy upon renewal ... you could be fined up to three times your deposit? With the average rental deposit in East Grinstead being £1,102, each self-managed landlord in East Grinstead could be fined £3,306 per tenancy if the deposit isn’t currently registered. Therefore... ...if every deposit of every East Grinstead self-managed landlord’s property wasn’t registered, the total fines would amount to £2,096,467. Now of course, I am not suggesting for one minute all the self-managed landlords of East Grinstead haven’t registered their deposits, yet almost on a daily basis, I come across horror stories to that effect. Another two (but by no means all) hot issues that the Courts are cracking down on, are doing immigration ‘Right To Rent’ checks on all tenants (yes all tenants) and
confirmation proving the tenant received the ‘How to Rent’ guide. If that second issue cannot be proved (a ‘sent’ email won’t suffice), the landlord cannot serve the section 21 Notice, meaning the tenant cannot be served notice to vacate the property. To many, it’s really a case of DIY or getting a qualified professional in … as those additional East Grinstead landlords mentioned above have done since 2014. You might say, “Of course you are going to say all this – you are a Letting Agent”. Well the choice really comes down to your time and your knowledge. If a East Grinstead landlord is not equipped, or able, to devote time keeping up-to-date of legislation and law nor doesn’t want to be bothered 24/7/365 about a blown light bulb, dripping taps, have that confrontational conversation with their tenants about missing rental payments, or arbitrate arguments and disagreements between your tenant and the neighbours, it is perhaps better to pass this accountability/responsibility onto a letting agent. One thing I would say is all letting agents aren’t the same. Would it surprise you to know that letting agents aren’t regulated?
East Grinstead landlords that do use a letting agent should not forget that passing over management to a letting agent doesn’t mean they can disregard legislation and they are still responsible for deposit/ rent repayment legal directives, civil fines or action if the letting agent makes a mistake. Therefore, it’s important to pick a respectable letting agent from the start and preferably one who is a member of a professional body such as ARLA or the RICS. Nevertheless, for those East Grinstead landlords that see their job as a professional landlord and want to be intricately involved in the day to day administration of their rental properties, it can be a worthy pursuit. If you are a self-managed landlord in East Grinstead, and want to know if your paperwork is in order please feel free to drop me a line and I am more than happy to do an ‘MOT’ on it to ensure you are the right side of the law.
ALEXANDRE BOYES PROPERTY TALK
| 7
TUNBRIDGE WELLS EAST GRINSTEAD EDENBRIDGE
01892 525522 | 48 MOUNT EPHRAIM, TN4 8AU
01342 321142 | 1 WEST STREET, RH19 4EY
01732 862184 | 4A HIGH ST, TN8 5AG
BLOCK MANAGEMENT:
WWW. ALEXANDRE- BOYES. CO. UK
8 |
ALEXANDRE BOYES PROPERTY TALK
|
01892 574880 | 43 MOUNT EPHRAIM, TN4 8AA
INFO@ ALEXANDRE- BOYES. CO. UK