Wednesday, 30 August 2017
The most recent set of data from the Land Registry has stated that property values in Maidstone and the surrounding area were 4.4% higher than 12 months ago and 17.91% higher than January 2015.
Despite the uncertainty over Brexit as Maidstone (and most of the UK’s) property values continue their medium and long-term upward trajectory. As economics is about supply and demand, the story behind the Maidstone property market can also be seen from those two sides of the story.
Looking at the supply issues of the Maidstone property market, putting aside the short-term dearth of property on the market, one of the main reasons of this sustained house price growth has been down to of the lack of building new homes.
The draconian planning laws, that over the last 70 years (starting with The Town and Country Planning Act 1947) has meant the amount of land built on in the UK today, only stands at 1.8% (no, that’s not a typo – its one point eight percent) and that is made up of 1.1% with residential property and 0.7% for commercial property. Now I am not advocating building modern ugly carbuncles and high-rise flats in the Cotswolds, nor blot the landscape with the building of massive out of place ugly 1,000 home housing estates around the beautiful countryside of such villages as Hunton, Hollingbourne and East Farleigh.
The facts are, with the restrictions on building homes for people to live in, because of these 70-year-old restrictive planning regulations, homes that the youngsters of Maidstone badly need, aren’t being built. Adding fuel to that fire, there has been a large dose of nimby-ism and landowners deliberately sitting on land, which has kept land values high and from that keeps house prices high.
Looking at the demand side of the equation, one might have thought property values would drop because of Brexit and buyers uncertainty. However, certain commenters now believe property values might rise because of Brexit. Many people are risk adverse, especially with their hard-earned savings. The stock market is at an all-time high (ready to pop again?) and many people don’t trust the money markets. The thing about property is its tangible, bricks and mortar, you can touch it and you can easily understand it.
The Brits have historically put their faith in bricks and mortar, which they expect to rise in value, in numerical terms, at least. Nationally, the value of property has risen by 635.4% since 1984 whilst the stock market has risen by a very similar 593.1%. However, the stock market has had a roller coaster of a ride to get to those figures. For example, in the dot com bubble of the early 2000’s, the FTSE100 dropped 126.3% in two years and it dropped again by 44.6% in 9 months in 2007… the worst drop Maidstone saw in property values was just 20.05% in the 2008/9 credit crunch.
Despite the slowdown in the rate of annual property value growth in Maidstone to the current 4.4%, from the heady days of 13.39% annual increases seen in mid 2010, it can be argued the headline rate of Maidstone property price inflation is holding up well, especially with the squeeze on real incomes, new taxation rules for landlords and the slight ambiguity around Brexit. With mortgage rates at an all-time low and tumbling unemployment, all these factors are largely continuing to help support property values in Maidstone (and the UK).
Monday, 7 August 2017
The Maidstone Property Market, The Beatles, Sweden and 50 year mortgages
50 years ago, in 1967, the first human heart transplant was performed by Dr Christian Barnard in South Africa. In the same year Sweden switched from driving on the left-hand side to the right-hand side of the road.
The average value of a Maidstone property was £4,512, interest rates were at 5.5% and The Beatles released one of my favourite albums – their Sgt Peppers album ... but what the hell has that to do with the Maidstone property market today?? Quite a lot actually ... so with my CD Player turned up loud - let me explain my friends!
I have been doing some research on the current attitude of Maidstone first-time buyers.
First-time buyers are so important for both landlords and homeowners. If first-time buyers aren’t buying, they still need a roof over their heads, so they rent (good news for landlords).
The average value of a Maidstone property is currently standing at £340,223 and UK interest rates at 0.25%.
As each year goes by, it appears the age of the everlasting mortgage has started to emerge, prompted by these first-time buyers, eager to get a foot on the housing ladder.
I was reading a report a few days ago where some mortgage companies con-fessed that the battle to gain big returns from the property market has led to mortgages that will take considerably longer than the customary 25 years to pay off.
Over the last few years, it has been commonplace for first-time buyer mortgages to be 30 and 35 years in length as the ‘Bank of Mum and Dad’ have been helping with the deposit (Beatles Sgt Pepper song - “With a Little Help from My Friends”). Now, some high street banks are offering mortgage terms of 40 years.
This means first-time buyers could be paying until their mid 60’s - I can hear that other great track from the same album "When I'm Sixty-Four" ring-ing in my ears! So, a 50-year mortgage does not seem as far-fetched now as it would have been back in the 1970’s. After all life expectancy for a male then was exactly 69 years and today its 79 years and 5 months!
Over the last ten years, Maidstone property prices have continued to rise more than wages, therefore, first-time buyers are looking for bigger loans. If this development continues, the only way repayments can remain reasonable is by increasing the term of the loan.
However, some commenters have said there are worries the mortgage companies are lending money over such a long term, they threaten leaving some first-time buyers with a generation of debt if the house price bubble bursts. Interestingly, when I looked at what had happened to average property values in Maidstone over the last 50 years, there have been bubbles.
First-time buyers should take heart, since as a county we have always recovered from it a few years later.
What if interest rates rise? Well looking at historic UK interest rates, the current rate of 0.25% is at a 300-year low. Mortgages will never be cheaper. I would however, seriously consider fixing the rate to cushion any future potential interest rate rises (since they can only go in one direction when they do change). If Maidstone first-time buyers see buying a home as a long-term decision, based on the last 50 years, they should be just fine!
Before I go, a final thought for property buyers in Sweden, the land of Volvo and Abba.
As Swedish property prices are so high, Swedish Regulators announced last year limits on the length of Swedish mortgage terms. They don’t bother with 50-year mortgages (On and On and On – Abba).
No, our Volvo-loving Swedish friend’s average mortgage length is 140 years (this is not a typo).
Although such mortgages have had their Waterloo (Abba), regulators have significantly reduced the maximum term of a Swedish mortgage to 105 years.
Either way, that’s a lot of Money, Money, Money (Abba again – Sorry!) to pay back!
Now I will leave you in peace as I listen to the 1980’s Madness song ‘Our House’. My apologies to all the Beatles and Abba fans in Maidstone - a bit of light hearted fun albeit on serious topic.
Over nine out of ten of those English and Welsh owner-occupied properties are a whole house or bungalow. Now, most people would assume they would be freehold - however, of those renting nearly half of rental properties, 44% to be precise, lived in other leasehold apartments and flats.
It might be wise to quickly explain the difference between free-hold and leasehold. When someone owns the freehold of a property they own it outright, including the land it is built on, whilst with a leasehold property the leaseholder owns the property for the length of their lease agreement. Leaseholders must pay the person who owns land (the freeholder) ground rent and other fees. When the leasehold ends, ownership re-turns to the freeholder although the leaseholder can extend the lease or they can buy the freeholder out, but there are rules and regulations with regards doing that.
Therefore, it would be safe to assume that houses are freehold and flats are leasehold .. wouldn’t it? Not necessarily! Most houses are freehold but some might be leasehold - usually through shared-ownership schemes – but more and more new homes builders are selling houses on a leasehold as well. The protection of the law afforded to leaseholders who own a flat is massive, but sadly lacking to leasehold houses sold privately.
Looking specifically at the figures for Maidstone, at the last count in ME14-ME16 there were 49,329 properties. Since 1995, 45,946 properties in ME14-ME16 have changed hands and have been sold. Looking further at those 45,946 transactions
in ME14-ME16 since 1995, using data from Land Registry and solicitors practice My Home Move,11.99% have been leasehold (lower than the national average of 15%).
However, I am concerned about a few new homes builders selling new houses (not flats - houses) as leasehold. There has been a growing (yet small) trend for new-build houses to be sold as leasehold in recent years. While not all house builders use this model, those that do maintain it helps make developments financially viable.
The issue comes when builders sell the freehold separately to an investment company without informing the lease holder – which they are legally allowed to do without telling the leaseholder. In England and Wales, the "right of first refusal" to buy the freehold is written in law to leaseholders of flats i.e. the freeholder must offer it to the leaseholders of all the flats of the building first), but not leaseholders of houses. .. and this is the point I am trying to get across. If you are buying a new home and it’s a house (i.e. not a flat) – please check very carefully indeed whether its freehold or leasehold.
If it is a leasehold, whilst you do have rights, they are not as strong as for those people buying a leasehold flat. I appreciate I am only talking about a very small percentage of the property market, but potentially this could end up costing ......
Thursday, 3 August 2017
Maidstone Property Market and Mysterious Politics of the General Election
As the dust starts to settle on the various unread General Election party manifestos, with their ‘bran-bucket’ made up numbers, life goes back to normal as political rhetoric on social media is replaced with pictures of cats and people’s lunch. Joking aside though, all the political parties promised so much on the housing front in their manifestos, should they be elected at the General Election. In hindsight, irrespective of which party, they seldom deliver on those promises.
Housing has always been the Cinderella issue at General Elections. Policing, NHS, Education, Tax and Pensions etc., are always headline grabbing stuff and always seem to go ‘the ball’. However, housing, which affects all our lives, always seems to get left behind and forgotten.
One policy that comes to mind is Margaret Thatcher’s Council House sell off in the 1980’s, when around 1.4m council houses went from public ownership to private ownership. It was a great vote winner at the time (it helped her win three General Elections in a row) but it has meant the current generation of 20 somethings in Maidstone (and elsewhere in the Country) don’t have that option of going into a council house. This has been a huge contributing factor in the rise of the private renting and buy to let in Maidstone over the last 15 years.
Nevertheless, looking back to the start of the Millennium, Labour set the national target for new house building at 200,000 new homes a year (and at one point that increased to 240,000 under Gordon Brown for a couple of years). In terms of what was actually built, the figures did rise in the mid Noughties from 186,000 properties built in 2004 to an impressive 224,000 in 2007 (the highest since the early 1980’s) as the economy grew.
Then the Credit Crunch hit. It is interesting, that the 2010 Cameron/Clegg government did things a little differently. The fallout of the Credit Crunch meant a lot less homes were built, so instead of tackling that head on, the coalition side-stepped the target of the number of new homes to build and offered a £400m fund to help kick start the housing market (a figure that was a drop in the ocean when you consider an average UK property was worth around £230,000 in 2010). The number of new houses being completed dipped from 146,800 in 2011 to 135,500 the subsequent year.
So, one might ask exactly how many new homes do we need to build per year? It is commonly accepted that not enough new properties are being built to meet the rising need for homes to live in. A report by the Government in 2016, showed that on average 210,000 net additional households will be formed each year) up to 2039 (through increased birth rates, immigration, people living longer, lifestyle (i.e. divorce) and people living by themselves more than 30 years ago). In 2016, only 140,600 homes were built ... simply not enough!
Looking at the numbers locally in Maidstone and the surrounding area, it is obvious to me, that we as an area, are not pulling our weight either when it comes to building new homes. Although in the 12 months up to the end of Q1 2017, 1,130 properties were built in the Maidstone District Council area, we may still need to do better. Go back to 2007, that figure was 720, 10 years before that in 1997, 380 new homes and further back to 1988, 1,000 new homes were built.
Who knows if Teresa May’s Government will last the five years? She will think she has bigger fish to fry with Brexit to get bogged down with housing issues. But let me leave you with one final thought.
The conceivable rewards in providing a place to live for the public on a massive house building programme can be enormous, as previous Tory PM’s have found out. Winston Churchill in 1951, asked his Minister for Housing (Harold Macmillan) if he could guarantee the construction of 300,000 new properties a year, he was notoriously told: “It is a gamble—it will make or mar your political career, but every humble home will bless your name if you succeed.”
Isn’t it interesting, that the Tories remained in power until 1964! Mrs May will have to work out if she wants to be the heiress to Harold Macmillan or David Cameron?