Population in the Ipswich area set to rise to 162,000 by 2026

 

We’ve spoken about this before but Ipswich is facing a predicament. The population is growing and the provision of new housing isn’t keeping up (check out our previous article https://beaglepropertyblog.wordpress.com/2019/03/07/new-build-housing-in-ipswich-only-equates-to-4-2-of-properties-sold-in-2017-2018/)    With the average age of a Ipswich person being 38.0 years (compared to the East of England average of 40.2 years old and the national average of 39.4 years of age), the population of Ipswich is growing at an alarming rate. This is due to a combination of longer life expectancy, a fairly high birth rate (compared to previous decades) and high net immigration, all of which contribute to housing shortages and raising house prices.

Looking closely at some statistics, specifically for the Ipswich Borough Council area, the population projections make some startling reading…
For the Ipswich Borough Council area … these are the statistics and future forecasts

2001 population           127,790
2011 population           144,957
2018 population           150,334
2021 population           153,654
2026 population           162,351

The normal ratio of people to property is 2 to 1 in the UK, which therefore means…

We need just under 10,000 additional new properties to be built
in the Ipswich Borough Council area over the next 20 years.

Whilst focusing on population growth does not tackle the housing crisis in the short term in Ipswich, it does have a role to play in the overall strategy and development of the future of our town. The rise of Ipswich property values in the last five years (and the seemingly reduced impact that was expected with Brexit), are primarily a result of a lack of properties coming onto the market, a lack of new properties being built in the town and rising demand (especially from landlords looking to buy property to rent them out to the growing number of people wanting to live in Ipswich but can’t buy or rent from the Council).

I’ve frequently talked about the need to improve supply, the issue of rising demand from population growth is often overlooked. Nationally, the proportion of 25-34 year olds who own their own home has dropped dramatically from 66.7% in 1987 to 41.8% in 2018, whilst 78.2% of over 65s own their own home. Longer life expectancies mean houses remain in the same hands for longer.

In the short to medium term, demand for a property will continue to grow in Ipswich (and the country as a whole). In the short term, that demand can only be met from the private rental sector (which is good news for homeowners and landlords alike as that keeps house prices higher).

With regards to the long term future it’s simple. Local & national government need to act on the reports they run and the alarming statistics in front of them. Over the next 20+ years we need to house the increasing number of people in our country. We need sustainable, environmentally friendly building that will benefit our community in Ipswich and across the country.

Figures from Rightmove, ONS, Citypopulation & Ipswich borough council

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Over 7,000 letting agents predicted to be trading illegally by 1st April 2019

 

Regular readers of our blog know that the property market is under the microscope at present from different angles of government. There have been more legislative changes announced and enforced in the last three years than the previous 25! Agents are currently scrambling about to comply with the new CMP regulations (Client Money Protection) which must be done by 1^st April 2019 otherwise after this date lettings agents will be trading illegally. With all this in mind we thought in this weeks article we would talk about the new upcoming law changes and how this will affect landlords and tenants alike.

Client Money Protection (CMP): Mandatory 1^st of April 2019

The Government have left it late but they have now approved providers whom over CMP. This will mean all letting agents will have to insure their business for the loss of any landlord & tenant monies, including rent, deposit and maintenance funds.
As agents, we have to demonstrate that we hold client money in a separate client bank account and we operate this account in the appropriate way. Agents must demonstrate the deposit scheme’s they use to hold tenant deposits also. This provides greater cover for both landlord & tenants when parting with hard earned money.
If a letting agent fails to comply with by the 1^st April 2019 then they will be trading illegally.

Tenant Fee Ban: Mandatory 1^st June 2019

All ready enforced in Scotland, this major law change is going to see a big shake up to the market in England. From the 1^st of June landlords and agents will not be able to charge fees for the following;

• Charging for a guarantor form
• Credit checks
• Inventories
• Cleaning services
• Referencing
• Professional cleaning
• Having the property de-flead as a condition of allowing pets in the property
• Admin charges
• Requirements to have specific insurance providers
• Gardening services

This list is not exhaustive.
Holding deposits, deposits and rent are exempt however there are now restrictions coming into place. Holding deposits will be limited to a maximum one weeks rent & deposits capped to 5 weeks rent are the headline changes here. So if you’re a tenant applying for a property after 1^st June then make sure you know your rights and chose a reputable agent.
The changes apply to all assured shorthold tenancies and will affect the majority of landlords & agents. It’s imperative you use an agent that adhere to the law as the fines for this could be eye watering (up to £30,000 and a banning order) and also make tenancies invalid.

The Homes Act: 20^th March 2019

In just a few days The Homes (Fitness for Human Habitation) Act 2018 which has been renamed ‘The Homes Act’ comes into force. The Act means that tenants won’t have to rely on the Local Authority to take up any complaints if they believe a property isn’t being well maintained – they can go straight to court.

Under the Deregulation Act 2015, as a landlord you have to respond to tenants’ complaints about a property’s condition within 14 days and make any necessary repairs in a reasonable time frame.

If you have any properties that haven’t been checked by a property professional for some years, it might be worth contacting your local agent to ensure you are on the right side of the law.

Minimum Energy Efficiency Standards Raise: Effective on new tenancies now and on all existing tenancies 1^st April 2020

Those coloured graphs that you rarely pay attention to! Last year properties with an EPC rating below ‘E’ couldn’t be rented legally on a new tenancy and from April 2020, this will apply to ALL existing tenancies.  If your rented property is currently rated ‘F’ or ‘G’ and you aren’t able to secure an exemption, it is worth considering upgrading your property sooner rather than later, especially bearing in mind the minimum rating may even rise to “D” in 2022.

Public Availability of the rogue landlords act 

The ‘rogues database’ that was introduced in April last year. The Government has announced that it will now be made public to help better protect tenants. It’s also possible that there will be further steps taken towards requiring all individual landlords to sign up to a redress scheme. We’ll update you when we are aware of any deadlines on this.

As you can see, there are some big changes imminent. If you fail to comply or use an agent whom fails to comply then the penalties could be catastrophic. At Beagle Property we have all ready acted upon the legislative changes and have introduced some exciting new services for both landlords and tenants that not only won’t increase any charges, will actually save you money and make letting or renting easier. To here about these or to have a chat about the compliance of your properties then please feel free to get in touch.

New build housing in Ipswich only equates to 4.2% of properties sold in 2017/2018.

 

It’s widely known that there is a housing crisis nationally. There is an unending and severe shortage of new housing being built in the Ipswich area (and the UK as a whole).  Despite current perceived confidence issues fuelled by newspapers hungry for bad news (lets not mention the B word), the ever growing population of Ipswich (combined with increased levels of immigration) and attractively low interest rates mean a high demand for property versus a stunted supply of properties being built. This imbalance locally and nationally is likely to prop up the market.
We consistently here how targets are in place for this region and that region in order to ease the problem however I wanted to look at how Ipswich is fairing.  Firstly lets look at how many new build properties have been sold and how that compares to the market as a whole.

Year	New Build Houses	Existing Properties
2017	50	2,124
2018	87	2,065

Over the last two years that only 137 new houses have been sold with new building housing only equating to 3.3% of all sales.

It becomes really interesting when we look back to new build sales over the past 10 years.

It’s well known that the waterfront and town centre of Ipswich has changed dramatically over the past 10-15 years. Redevelopment has been rife with the focus on new build housing. The last major developments were completed in late 2009 and you can see that since then no major development has restarted.

Under the current Conservative government the national target is to build 1,000,000 homes by 2022. It’s considered that 10,000 homes are needed in Ipswich and the surrounding area to catch up with current population levels and demand.  In terms of affordable housing, Ipswich borough council have targeted 1,000 homes over the next 10 years – only 13 were built last year.

Since these figures were announced in 2016 it means with the current number of houses actually being built and sold we need 472 houses built per year to even stand still.

Is it all doom and gloom on the new built front? It’s undoubted that the council recognise the scale of the problem. Ribbans Park is on another phase of building, Europa way has restarted, Tooks Bakery is due to start at the end of the month, 100 more homes at Ravenswood have also been given the green light as well as the Garden Suburb to the Northern Fringe due to start work at the end of the year which will produce 2,000 new properties. There are various other sites also earmarked for planning so this number should yet increase further. Increased development means potential opportunities for first time buyers, current homeowners and investment purchasers alike. More opportunities to move are created, particularly if the popular 3 and 4 bedroom semi and detached houses are built that Ipswich residents are keen to move too (you can check out our previous blog about this). For landlords there will be opportunities created as well, if you want to talk to us about these then feel free to give us a call to chat these through.

Data from land registry, office of national statistics & Ipswich borough council

£26,000 increase in the average Ipswich semi detached house since the Brexit referendum

Brexit, I think it’s fair to say we’re suffering fatigue over it. No matter which side your allegiance is with, Leave or Remain, we can all agree that the uncertainty about the future is a constant worry in all aspects of our life, whether it be personal or business. With the news ramping up in recent days (and certainly no sign of this slowing down!) we thought it would be a good idea to look at how so called “Brexit uncertainty” has actually affected the Ipswich property market.

With all the doom & gloom that’s being reported in all aspects of potential deals and no deals, what effect did this actually have on the local Ipswich property market?

 

Well, it seems not much. House selling prices rose in Ipswich by 2% in 2018. This is an increase of 12% on 2016 when the average house price in town was £175,790, which means since the Brexit referendum house prices have actually gone up by 12%. Flats/Apartments have also faired well in this time period increasing by 9.9%.

It’s interesting if this is then broken down further by property to see which Ipswich property types have risen the most.

Property Type	June 2016	January 2019	Percentage Change
Detached	£302,351	£340,671	12.6%
Semi	£195,791	£219,990	12.3%
Terrace	£154,969	£170,748	10.1%
Flats/Apartments	£126,710	£139,283	9.9%

Detached and semi detached houses have had this biggest increases in property prices with over 12% growth. As mentioned in previous articles, Ipswich has an ever growing population which is outstripping the number of properties available. As families grow, detached and semi detached properties become increasing popular, particularly for popular school catchments (Copleston & Northgate very much driving price still). Whilst this remains the case it’s unlikely we’ll see a major negative turn in house prices locally.

What is also interesting is when we look at the number of properties sold in Ipswich since June 2016.

The last two years have seen less people moving in Ipswich and reduced stock levels overall. Is Brexit the reason? Quite possibly. However there are other considerable factors which includes a 0.5% rate increase, all of which means on a national and local level you will naturally see less home movers as people may have affordability issues.
With less home movers it does mean one thing, premium property becomes even more premium which is certainly a major contributing factor in the continual price increase.

In the current market it’s really important for buy to let investors to be aware of these figures when searching for suitable property acquisitions. Firstly to be sure not to be paying an over inflated price (at present we are seeing some ambitious asking prices in reflection of price rises and stock shortage) and secondly to be aware of how much capital growth could be there for the medium and long term investments. A great buy to let yield is a staple in any investors figures, but capital growth should also play a major factor – £26k average increase for a semi in the last three years is something certainly not to be sniffed at!

Post March is going to be the real test to see how prices will react on a local level. If you want to know what areas we think are likely to see growth, irrespective of Brexit, then feel free to pop into the office for a chat.

Data from land registry, office of national statistics & Zoopla.

Moving from a 2 bed Ipswich Property to a 4 bed will cost you £731 pm

Moving to a bigger home is something Ipswich people with growing young families aspire to. Many people in two bedroom homes move to a three-bedroom home and some even make the jump to a four-bed home. Bigger homes, especially three bed Ipswich homes are much in demand but it can be a costly move.

If you live in Ipswich in a two-bedroom property and wish to move to a four-bedroom house in Ipswich, you would need to spend an additional £185,113 (or £731.20 pm in mortgage payments (based on the UK Bank average standard variable rate). Going straight from a two bedroom property to a four doesn’t happen as often as you think as most people move up a bedroom at a time, so going from a two bedroom to a three bedroom is more common.

After being asked about this I thought I would look locally in Ipswich at the stats and then offer my thoughts. Firstly, the average price of a property by bedroom.

Average Property Price in Ipswich by Bedroom
1 bed	2 bed	3 bed	4 bed	5 bed
£117,590	£168,627	£226,153	£353,740	£520,109

The next step is to look at this in monetary terms to make the jump, including factoring in the mortgage repayments (using the current standard variable rate of UK Banks of 4.99% – so the mortgage cost could be higher or lower depending on the mortgage taken).

	Ipswich
	Price Difference to make the move	Cost per month to move up market (Mortgage)
1 bed to 2 bed	£51,037	£201.60
2 bed to 3 bed	£57,526	£227.23
2 bed to 4 bed	£185,113	£731.20
3 bed to 4 bed	£127,587	£503.97
4 bed to 5 bed	£166,369	£657.16

There are some interesting jumps in costs when moving upmarket as an Ipswich buyer. The cost of moving from one to two beds, and two to three beds is relatively reasonable, whilst the jump from three to four beds in Ipswich is quite high (and hence why some four bed properties are taking slightly longer to sell at present). On aside note here to the landlord blog readers, you can quite clearly see why the larger 4 and 5 bed properties don’t offer the best returns for buy to let because the monthly finance costs and rents achieved don’t match up so well (i.e. A mortgage for a 4 bed home in Ipswich would cost you 56.42% compared to a 3 bed mortgage, but the jump in rent would be a lot less than that – although depending on your circumstances, 4 bed homes can offer other advantages to buy to let – pick up the phone if you want to know what they are in more detail).

Looking at stock by bedrooms as a percentage also makes for interesting reading.

Housing Stock in Ipswich by Bedrooms
1 bed	2 bed	3 bed	4 bed	5 bed
14.45%	34.87%	35.45%	11.37%	3.85%

The most active purchasers are 20 and 30 something parents with growing families. Many look to more modern developments for the perfect balance of access to decent primary schools, commutability and lifestyle. For landlords looking to buy within Ipswich, they face stiff competition from these 20/30 something families, making the three bedroom Ipswich home massively in demand, often attracting spirited offers and selling within weeks of listing. This mix of homebuyers and landlords is a pressure point in the Ipswich property market.  Again, if you are a landlord, call me and I will show you areas with decent returns where you aren’t in so much competition with young Ipswich family homebuyers.

Yet, the cost of an additional bedroom can be too much for some Ipswich buyers. It is quite challenging moving home the first time, but to then find you are priced out on the next move up the ladder can be quite disconcerting, with families often having to move to a different part of town to get the bigger home they need.

Nevertheless, that’s the place many homeowners find themselves in with the cost of the additional bedroom being too much to bear. To those buying their home for the first time, all I suggest is they not only consider the mortgage payments and other costs of their first home, but also do their homework into their next rung up the Ipswich property ladder. Thinking about it now will keep you ahead of the game in the future; as your number of bedrooms, family property needs and lifestyle wants change.

For landlords, it does also mean there are opportunities to be had in the Ipswich rental market. Many Ipswich landlords are starting to pick my brain on this, so if you don’t want to miss out – drop me a line.

Ipswich House Prices Outstrip Wage Growth by 35.7% since 2009

There was a national article I read not so long ago stating that 54% of the country has seen wages (salaries) rise faster than property prices in the last 10 years. The report said that in the Midlands and North, salaries had outperformed property prices since 2007, whilst in other parts of the UK, especially in the South, the opposite has happened and property prices have outperformed salaries quite noticeably.

This got me thinking, what about Ipswich more specifically?

To start, I looked at what has happened to salaries locally since 2009. Looking at the Office of National Statistics (ONS) data for Ipswich Borough Council, some interesting figures came out…

	Ipswich	National
2009	£22,308	£25,506
2010	£24,352	£26,088
2011	£22,927	£26,010
2012	£23,624	£26,432
2013	£23,878	£26,931
2014	£24,534	£27,097
2015	£24,955	£27,508
2016	£25,620	£28,132
2017	£26,312	£28,600
2018	£28,028	£29,588

Salaries in Ipswich have risen by 20.4% since 2009 (although it’s been a bit of a roller coaster ride to get there!) – interesting when you compare that with what has happened to salaries regionally (an increase of 18.65%) and nationally, an increase of 17.61%.

Next the local property prices from 2009 and today. Net property values in Ipswich are 35.7% higher than they were in late 2007 (not forgetting they did dip in 2009). Therefore…

Property values in the Ipswich area have increased at a higher rate than wages to the tune of 15.3% … meaning, Ipswich is in line with the national trend

All this is important as the relationship between salaries and property values is the basis on how affordable property is to first (and second, third etc.) time buyers. It is also vitally relevant for Ipswich landlords as they need to be aware of this when making their buy-to-let plans for the future. If more Ipswich people are buying, then demand for Ipswich rental properties will drop (and vice versa).

Property affordability is a great indicator of not just nationally but the Ipswich property market itself. It’s obviously not as simple as comparing salaries and property prices, as it doesn’t account for other issues which can affect the market such as mortgage rates and the diminishing proportion of disposable income that is spent on mortgage repayments.

The real jump isn’t so much the last 10 years, the more surprising stats come about in 1997. House prices were on average 3.5 times workers’ annual wages, whereas in 2016 workers could typically expect to spend around 7.7 times annual wages on purchasing a home.

Decreasing home ownership can be traced back to the 1980’s and 1990’s. It’s quite hard as a tenant to pay your rent and save money for a deposit simultaneously, meaning for many Ipswich people, home ownership isn’t a realistic goal. The focus of the government over the past 3 years has been to fix the “broken housing market” with targets on affordable housing and more regulation being particularly prevalent.

This is all great news for Ipswich tenants and decent law-abiding Ipswich landlords (and indirectly owner occupier homeowners). Whatever has happened to salaries or property prices in Ipswich in the last 10 (or 20) years … the demand for decent high-quality rental property keeps growing. If you want a chat about where the Ipswich property market is going, please feel to pop into our office for a chat or contact me directly.

Data from land registry and office of national statistics.

Ipswich Buy-to-Let Return / Yields up 2.3% to 8.0% a year

 

Buying your first buy to let is an exciting time. In terms of buying the property however you must go into the transaction with a completely different mindset to when you purchased your first home. With you first property you may well have stretched your budget, not compromised on certain aspects and negotiated with your heart opposed to your head. When buying for yourself it’s all about getting the very best that you can within your restraints.
 
With a buy to let property, if your goal is a higher rental return, then a higher price doesn’t always equate to higher monthly return. The so called “cheaper” Ipswich properties can bring in bigger monthly returns. Most landlords use the phrase ‘yield’ instead of really drilling down on the monthly return. In order to calculate the yield on a buy to let property you multiply the monthly rent by 12 to get the annual rent and then divide it by the value of the property.
 
This means, if you increase the value of the property using this calculation, the subsequent yield drops. Or to put it another way, if an Ipswich buy to let landlord has the decision of two properties that create the same amount of monthly rent, the landlord can increase their rental yield by purchasing the lower priced property.
 
To give you an idea of the sort of returns in Ipswich…

Average Rental Purchase Price – £195,925

Average Yield – 8%

Average buy to let mortgage costs annual – £3,630

Average Rental Return – £676

Average Annual Return – £8,112

Average Yield Increase Annually 2.30%
 

With the total amount of buy to let mortgages amounting to £1,400,000,000,000 in the country, landlords need to be aware of the investment performance of their property, especially with recent tax increases and tax relief reductions. Landlords across the UK are looking to maximise their yield – and are doing so by buying cheaper properties.

However, before everyone in Ipswich starts selling their higher priced properties and buying cheaper ones, yield isn’t the only factor when deciding on what Ipswich buy to let property to buy.  Void periods (i.e. the time when there isn’t a tenant in the property between tenancies) are an important factor and those properties at the cheaper end of the rental market can experience higher void periods. Apartments can also have service charges and ground rents that aren’t accounted for in these gross yields. Landlords can also make money if the value of the property goes up and for those Ipswich landlords who are looking for capital growth, an altered investment strategy may be required…

In Ipswich, for example, over the last 20 years, this is how the average price paid for the four different types of Ipswich property have changed…

• Ipswich Detached Properties have increased in value by 258.2%
• Ipswich Semi-Detached Properties have increased in value by 278.1%
• Ipswich Terraced Properties have increased in value by 286.4%
• Ipswich Apartments have increased in value by 291.5%

It is very much a balancing act of yield, capital growth and void periods when buying in Ipswich. Every landlord’s investment strategy is unique to them. If you would like a fresh pair of eyes to look at your portfolio, whether you’re a first time landlord, seasoned pro, let out privately or to one of our competitors we would love to hear from you. Our advice is completely free so what have you got to lose!

Data from land registry, landinvest, simplybusiness & the telegraph.