What does abolishing section 21 “no fault evictions” mean for Ipswich landlords?

Recently the government announced plans to abolish section 21 notices or “no fault evictions”. This is where a landlord  can ask to reclaim their property with two month’s notice. There’s been much uproar amongst many Ipswich landlords that we have spoken with. For many law abiding landlords there are several concerns.

The first concern is that a section 8 notice would be required instead. A section 8 means that you have to apply to the court before you can take possession. The waiting period for Ipswich county court is “between three and eight weeks depending on volume”, which means a much lengthier process and potentially prolonging a problem tenants stay. Section 8 notices also require a lot more in depth information such as police or reports if there is anti-social behaviour. With new GDPR rules the police and council can’t share certain information – an instant catch 22. As court appearances are common as well, witness neighbours can feel intimidated and decline to appear. All this meaning a judge potential siding with the tenant.

Add this to the cost of serving a section 8 notice. David Smith of the Residential Landlords Association (RLA) has said a landlord would need to spend up to £5,000 to evict a problem tenant by taking them to court. This is money that could otherwise have been spent upgrading their properties for the benefit of their tenants, he added.

Mr Smith said the change would force reputable property owners to reduce their investment in the sector or sell up and could see the return of rogue landlords.

“There’s a real risk that, by getting rid of section 21, we return to the old days when some of the properties were really bad and some landlords were really unpleasant people,” he warned.

So why do the government want to abolish the notice? Georgie Laming of Generation Rent said she believed the changes would lead to a fairer relationship between tenant and landlord.

“The abolition of section 21 will definitely start to even out the playing field for tenants and landlords,” she said. “It will protect tenants from revenge evictions and mean that there are more long-term tenancies where the landlord and the tenant get on well.”

Ms Laming argued that, once the threat of a no-fault eviction was removed, tenants would be comfortable remaining in the rental sector for longer.

The government are purposing a new housing court that will deal with disputes. This proposal both the RLA and Generation Rent agree could cause further needless red tape and increased costs for both landlord and tenants. Both parties also agree that there is current legislation that can be enforced by the relevant local bodies to protect landlords and tenants.

As agents, we can’t stress enough how important it is to match good quality landlords with good quality tenants and that anything other than this should be addressed. What we do feel when speaking with Ipswich landlords that this proposed change, along with the recent cuts to mortgage and stamp duty relief, mean that we’re seeing decreasing numbers of new landlords and increasing numbers of landlords selling. What are your thoughts on the current and proposed legislation and how it will affect your properties? Please feel free to drop us a line for a chat.

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Average homeowner moves every 20.2 years. How does Ipswich fair?

It was reported this week in a popular estate agents trade magazine that the average homeowner moves every 20.2 years, this up from 10.5 years in the mid 80’s. During the 90’s this increased to around 14-16 years and remained at a constant. When the credit crunch hit this shot up to over 25 years, people either unable to move due to negative equity or not having enough confidence within their market place to do so. Since 2010 the average has steadily fallen and last year even reached a low of 18.7 years.

The graph is a very indicator of the economy and as you can see after the credit crunch it looks like homeowners were taking advantage of greater demand and smaller supply to make the move to their next home. The real question to look at next as why is the average length of time still a lot more than the low’s of the 80’s. Is it the need for more of a deposit? Need for higher equity? Or is it just less desire to move homes. Well looking at the numbers, particularly in Ipswich since the 80’s, general numbers have steadily increased so the appetite is very much there. Looking at the number of years you stay in your home determines how much you will pay back on the mortgage you took out when buying it. If you stay longer, you have the prospect to pay back a larger portion of the money you borrowed to buy the home. Interestingly, if you consider someone with a 25-year mortgage on the UK average variable rate of 3.4% for existing mortgage borrowers, borrowed say £200,000 at the start of the mortgage and made monthly payments on that mortgage, it would take 15 years and 1 month to build up over 50% (or £100k) in equity (and 17 years 2 months if interest rates were at their historic average in the 1980s and 1990s of 7%) … all assuming there was no decrease in value of the property.

 

I think there are a couple of other things to really consider. The traditional opinion of “trading up” which was a big focus 30 years ago has slowed somewhat. People not wanting a larger mortgage, more expensive cost of living and the opportunity to go mortgage free all plays a part in this. There’s also generation rent to consider. The combination of either not being to get onto the housing market but also the change in social attitude with the flexibility and freedom of renting being more accepted. With a lot more buy to let properties than 30 years ago, you have to also factor in how long some landlords hold onto a property. Ipswich (and Uk) landlords in particular don’t tend to trade up and stick with the sound investments that they’ve made.

 

We then decided to look at Ipswich v the UK in terms of property transactions since 1995, specifically the percentage of overall stock that had been sold.

As you can see, Ipswich residents move 1% more than the national average. 82.2% of Ipswich’s private housing stock has been sold compared to 79% nationally. Why have Ipswich residents moved more frequently on average? Well, feel free to chat us with your theories!

39% of Ipswich Properties are tenanted with buy to let levels falling.

 

There was an interesting news story this week stating that the number of British people who own a second home, buy-to-let or overseas property has doubled since 2001. The story then went onto say that while the number of millennials who own a home continues to fall, one in 10 people now own an additional property. Just 37% of people born in the 1980s managed to buy a home at the age of 29, compared with half of those born in the 1960s. Wealth from owning a second home has risen since 2001 to almost £1 trillion.

We then looked at the Ipswich housing market make up;

The figures show that in Ipswich of all privately owned housing, 1 in 3 is a buy to let house, higher than the national average but not surprising given the wealth of the county in comparison to the rest of county versus average price.

Buy-to-let property is now the most common form of property wealth, having grown by 58% since 2006-08, the report also found.

However, when looking at the number of people who can afford an additional property, millennials and indeed Ipswich millennials match the property ownership rates of other generations.

This suggests that only younger people who are rich can afford a second home – a sign, according to the foundation, that property wealth is not distributed fairly across the country.

What is really interesting about this storey was that The Resolution Foundation wants to see policymakers step in to reform the housing market, in particular buy-to-let, in order to rebalance the housing market back towards first-time buyers.

“The sheer scale of additional property wealth is an important driver of rising wealth gaps across Britain,” says George Bangham, policy analyst at the Resolution Foundation.

“While young people in particular are less likely to own their own home than previous generations, those that do own are more likely to have more than one property.

“And as the huge stock of second homes, buy-to-let and overseas properties starts to be passed on to younger generations, Britain risks becoming a country where getting ahead in life depends as much on what you inherit, as what you earn.”

Chris Norris, director of policy and practice at the National Landlords Association, defended second home owners.

“There is a distinct difference between those who have a second home for personal use, leaving it empty for long periods of time, and those who have invested in a rental property which provides a valued home for someone else,” he said.

“Far from the stereotype of the wealthy property baron, most private landlords invest in residential property to provide for their future and their family’s in the form of supplementing a pension or establishing a business.”

Meanwhile, the government said it was helping first-time buyers get on the housing ladder.

“The Government is determined to ensure that a new generation can realise the dream of homeownership,” a spokesman said.

“Last year saw the highest number of first-time buyers in more than a decade. Since 2015, we have helped more than 300,000 people to purchase a home through schemes such as Help to Buy.”

As you can see from the amount of private and social tenants in Ipswich (39%) that second home ownership, particularly buy to let, is very much needed in Ipswich to fulfil the ever growing population and demand. With the oversubscribing to popular schools and the growth of the university combined with the lack of major new housing on the horizon means we are facing a serious shortage in Ipswich. If you’re a prospective buy to let landlord looking for areas to invest in then please feel free to contact us.

 

Ipswich Property Market Update – Half Year Review

As unbelievable as it is, we’re already half the way through the year! New years resolutions maybe long forgotten but the housing market is still ticking along. With all of the talk about Brexit and it’s delay combined with the general political uncertainty, we thought now would be the perfect to see how the housing market is fairing in Ipswich.

 

At present the numbers in Ipswich read as follows;

Property’s Available: 1,097

Properties Sold Subject to contract: 927

Percentage of properties sold subject to contract: 54%

 

There’s been a notable surge since March (where Brexit was delayed) with new activity for homes to the market. In March there was peak of 886 of properties so we’re at over 200 more as we sit today. Certainly, from the client we speak to, there is very much a feeling of not being able to put life on hold and waiting another six months plus before moving. There was a peak last year of 1,216 houses available so the market is still somewhat subdued in terms of activity numbers however it will be interesting to see how the rest of the year pans out and if it reaches last years high.

 

We then started to look at the number of days properties are on the market.

As you can see, Ipswich property is taking on average 12% longer than last year. The reasons for this certainly isn’t down to more choice in the market as discovered previously. So does that mean there are less buyer and if so how is this affecting the average sales price.

So we then look at whether Ipswich house prices have been affected by the decreased stock levels or less buyers. We’ve looked at the numbers here;

Interesting the average house price is now up 1.6% compared with the same time last year. A lower stock level with a similar demand will naturally raise the house prices as there is more competition. This you can really notice with semi and detached houses in particular having an increase of more than £5,000 and £8,000 respectively. Apartments on the other hand have seen a slight dip off £300 on average, which can be attributed to the quantity of flats now available in Ipswich compared with last year. What the data does show is that there is still plenty of demand for family houses in Ipswich and people will pay increased prices in a competitive market.

 

So the first six months of the year have been interesting. A decline in transaction levels with houses taking longer to sell but average house prices rising. The next six months are going to be interesting with many questions to be answered, will transaction levels continue to rise? Will Brexit affect the market? Will prices continue to rise? We will be monitoring the market with a keen eye at Beagle and will be advising our landlord’s and vendor’s on how best to navigate the market. If you would like any advice then please feel free to pop into our office for a chat.

7.4% Fewer Properties Available in Ipswich with Houses Selling nearly Two Weeks Quicker than in 2018

We were having a conversation with one of our landlords the other day and he happened to say “there seems like there’s less houses available now compared to last year”. This got us wondering whether or not this was actually the case with properties in Ipswich.

The number of homes available in Ipswich is a really good barometer for the local market and provides a lot more information as well, such as percentage of properties sold stc, number of properties on multi agencies and how long properties are taking to sell. A lot of this information you can find yourself on various websites such as Rightmove (we’re happy to show you how if you’re keen).

So in terms of Ipswich lets take a look at the number of properties for sale and how long they have been on the market compared to a year ago, then we can look at what this means for the Ipswich property market. So to start, let’s look at the number of properties for sale in Ipswich compared to a year ago.

Now there are two things that are instantly very interesting when you look at this data. There are actually more apartments and bungalows available now compared with last year. The flats is not a surprise as there have been some new developments come available in the last year, both on the waterfront and with some office blocks in the town centre being converted. Bungalows there is only really a fractional difference in comparison. The big change is in houses with 330 fewer properties available. So lets see what is happening with the average number of days to sell.

Again there’s a couple of interesting points to come out of this. With apartments, there’s that classic supply and demand issue here. More apartments available, taking on average an extra 21 days to sell meaning there are more available than buyers searching. With houses, it’s interesting to see that the time taking now is 12 days quicker. With less stock available but buyer level’s for houses in Ipswich still remaining very strong, competition is as strong as ever. It’s now even more important for a buyer to be in a position where they can move on a property immediately.

 

So why else are the apartments sticking on the market and why do some houses seem to stay on the market longer than others? There is an argument to suggest that property buyers see excessive days on the market as an indication that the seller is becoming desperate to sell because the property hasn’t sold. Buyers are also mindful to believe that there might be something wrong with the home, a defect that caused other buyers to pass it up. This can concern them when they view the property – if they view it at all, as that possible and perhaps made-up defect is on their minds, even if it is sub-consciously.

 

Normally, both assumptions are wrong.  A property can loiter on the market for several reasons. The most common reason for a property sticking on the market is overvaluing or overpricing. In an effort to get the property on the market, some estate agents may have deluded the seller into believing the property was worth more than the property market will bear. There is a fine line between testing the market and completely barking up the wrong tree. Yet, if you aren’t getting a steady stream of viewers after a few weeks, then that testing can back fire. You see, by setting the asking price too high to see if they can find someone to pay that inflated price, then finding there is nobody in the market that will pay the price, here lies the biggest trap for house sellers on keeping the inflated asking prices for too long.

Sellers can also get stuck on an asking price and they are willing to wait out the market until it catches up to what they want for their property – yet we aren’t in that type of property market at the moment.  If you look at various surveys done by Zoopla, Savills & Which, having to reduce your price by 5% or more can add an extra 51 – 72 days on your sale time.

Also, I have seen countless times, house sellers insist on an inflated asking price because they’re not in a rush or haven’t found a new property. They the reduce 12 weeks later or when something suitable comes available but by now buyers think there is something wrong with it so the homeowner gets fed up and accepts a lower offer to get the property sold, whereas if the house seller had gone onto the market at the right asking price, they would get much nearer to what they deserve for their property.

 

So in conclusion. It probably does seem like there are less properties available than there actually is. Demand is for houses which there are fewer of and selling quicker meaning fewer available. If you’re in the market for apartment, particularly if you are an investment purchaser or Ipswich landlord, could be where there is a bargain to be had. There are more & more available (particularly with the Wine Rack nearing completion which will add yet more) and taking longer to sell. For advice on your next purchase, or to go ahead of the market and register with us for houses before they even hit the market, then please do contact our Ipswich office.

 

26.3% of all Ipswich Properties were Purchased Without a Mortgage in the Last 5 Years.

For a lot of people in Ipswich purchasing with a mortgage is the only option. For some people however whom have paid off their mortgage or buy to let landlords, have the choice to pay exclusively with cash. So what we’re going to look at is whether you should use all your cash or whether purchasing with a mortgage is the sensible option.

In the last 5 years there have been 10,842 transactions in Ipswich. Of these, 2,854 were purchased without finance. Therefore 26.3% of all purchases were done without a mortgage. What is interesting is that nationally, 32% of all transactions were made without a mortgage. Over the past 5 years the spit between cash and mortgage has remained fairly consistent.

If you’re going to go for a mortgage, the next question has to be whether you should go fix or variable rate. In the last Quarter, 90.57% of people that took out a mortgage had a fixed rate mortgage at an average interest rate of 2.27%. What is surprising though is that only 65.79% of the £1.429 trillion mortgages outstanding in the whole of the UK were on a fixed rate. The level of mortgage debt compared to the value of the home itself (referred to as the Loan to Value rate – LTV) is interesting as 61.9% of people with a mortgage have a LTV of less than 75%. Although, one number that did jump out at me was only 4.33% of mortgages are 90% and higher LTV – meaning if we do have another property slump, the number of people in negative equity should be relatively small.

So now for the question, to buy your Ipswich property cash or with mortgage, particularly if you’re a buy to let purchaser.

Taking a mortgage will help a landlord increase their investment across more properties to maximise the return, rather than putting everything into one buy to let property in Ipswich. This will help the landlord with any unforeseen void periods as the rise will be spread across other properties with income still coming in. The counter argument however is that there is still a mortgage to be paid regardless.

Despite the negative press. landlords can still set the mortgage interest against the rental income, although that will only be at the basic rate of tax by 2021 due the recent tax changes. Banks and Building Societies will characteristically want at least a 25% deposit (meaning Ipswich landlords can only borrow up to 75%) and will assess the borrowing level based on the rental income covering the mortgage interest by a definite margin of 125%.

A lot will depend on you. Are you happy with having a mortgage that must be paid every month? A recent survey by L & G found that void periods cost landlords £1000 a year. Another consideration is that interest rates could also increase, which would eat into your profit … although that can be balanced with fixing your interest rate (as discussed above).

Therefore, does it make sense to purchase rental properties. In our view, and somewhat unsurprisingly, yes! We help many new and existing Ipswich landlords work out their budgets, taking into account other costs such as agent’s fees, finance, maintenance and voids in tenancy. The UK is simply not building enough property meaning demand will always outstrip supply in the medium to long term which in turn means property values will keep rising in the medium to long term. I’m not saying that there won’t be short term market corrections e.g. the credit crunch, the recession of the 80’s etc but each and every time there has been a dip, prices have bounced back and often with a bang. Therefore, it makes sense to focus on getting the best property that will have continuing appeal and strong tenant demand and to conclude, buy to let should be tackled as a medium to long term investment.

If you are thinking of selling you’re a property in Ipswich or If you are a landlord or thinking of becoming one for the first time, you can check out other Ipswich property articles or speak to me or one of my team who will be more than happy to assist.

Ipswich v London: How is the property market fairing?

 

London, London, London….if you look at the national news, the last few years in particular, house price news as been very capital centric. In fact, over the last 5 years, the London property market has really manipulated the UK on averages to such an extent that many leading lenders like the Halifax and Nationwide publish two indices, a national one without London and one with.

As has been well documented, the London market is suffering at the moment, particularly the upmarket areas of Mayfair and Kensington where Land Registry have reported values are 11.3% lower than a year ago. However, the UK as a whole they are 1.3% higher. If we look around the different areas and regions of the UK and Northern Ireland, property values are up 5.8% year on year, whilst over the same time frame, Suffolk in particular has risen 2.1%. So, it leads to the question, what is happening in Ipswich and how does this affect Ipswich landlords and homeowners?

We’re big believers in having a long term perspective on property. There are natural fluctuations in the market but is wisest to look at the outlook over a longer period.

So lets see how Ipswich has performed over a longer period, particularly when compared to London and the UK as a whole. We’ll compare like for like and look at average house prices and percentage increase changes for the last 40 years;

 

Anyone else wish they had invested in London 40 years ago? Aside from that we see how the growth of was roughly similar between 1979 and 2007 on all three strands of the graph. Then the credit crunch hit us and we see a drop between late 2007 and 2009. This is when we really notice the different paths and in  2009 London went on a different trajectory to the rest of the UK. Whilst Ipswich & England were generally quite subdued between 2009 and 2012, London kicked on significantly. All areas of the country had a temporary blip in 2012, yet whilst Ipswich and the UK went up a gear again 2013, London went on a phenomenal turn and shot up to a degree never seen before!

As previously mentioned and demonstrated here, you can see London has dipped slightly in the last year, so the hot & natural question for everyone is – “Will price falls spread to Ipswich as they did in previous dips/recessions”. The Bank of England’s opinion is that a London house price drop is unlikely to be the beginning of a countrywide trend. Looking at the graph again, it can be seen London has been in decline for 2 years, whilst the rest of the country has been moving forward.

So taking this into account – what does that mean to Ipswich homeowners and landlords?

Well what happens in London does have an impact, but there are other issues that will have a bigger impact on the local property market. The simple fact is over the last 40 years, we have had 392.9% inflation, yet when we look at an average Ipswich terraced house;

An Ipswich terraced house has jumped in value from an average of £10,521 to £170,828 since 1979 – a rise of 1,524%

This again demonstrates that property has in the long term a sound investment. There are always up’s & downs however if you’re in property for the long term (not necessarily 40 years!) you will be a winner. So are we concerned about market factors going forward? No. Brexit and/or a general election will tamper with the market I suspect but no more than that when you take natural inflation into account. We have two big concerns in Ipswich as I see it – lack of new build housing & house prices far, far outstripping increase in salaries. This combination for me will only see house prices continuing to rise and less disposable income which could then affect other areas spending and the economy. However, time will tell!