August 5, 2020
There is no doubt that Coronavirus will affect The Heatons property market, but just how?
The ensuing economic challenges are going to impact The Heatons (and UK) property market, yet no one knows the real answer. The newspapers eulogise different opinions, but that’s all they are – opinions and everybody’s got a different opinion. The truth of the matter is we don’t know and won’t know for another few months at least, if not more?
There have been some outstanding Government supportive measures both for tenants, landlords, home buyers and sellers (including a pause on evictions for tenants, and for landlords and homeowners, mortgage payment deferments and stamp duty reductions to make buying a home cheaper), and whilst these are only temporary, they have done their job, meaning there is a good level of activity in The Heatons property market.
A lot of that is pent-up demand from a couple of years of uncertainty because of Brexit. Also, we had the General Election in late 2019, so there have been so many reasons for people to sit on their hands. At the beginning of 2020, it was like a water hose ready to burst with the Boris Bounce in January and February. Then, just as things were beginning to get going in The Heatons property market, we had everything freeze up for months during lockdown. So, since lockdown has been lifted …
The Heatons property market is open once again for business and there is unquestionably some impressive activity both in the sales and rental market
So, back to the original question and where are we going? I think what we will see is a subtle change to where people want to live because of the pandemic. People working from home has shown that the need to be in the big cities has reduced and as employees have realised, they can work very efficiently from home, plus they are happier and have a better work/life balance. Their employers are also happy as they get more work out of their staff and can reduce their costly office footprint in the cities. The same goes for The Heatons tenants as they are wanting more from their rental homes. Three trends we have noticed is there is greater demand for properties with gardens, greater demand for The Heatons landlords who will accept pets (as they now can have them as they work from home) and finally, tenants willingness to pay top dollar for ‘top of the range’ properties, whilst more basic and uncared for properties without all the ‘bells and whistles’ need to go for a discount. There certainly has been a flight to quality.
Yet, what worries me is the fundamental future uncertainty in 2021 and beyond. What will things look like say in spring 2021 when the Stamp Duty reductions are phased out? Any property sold needs to have completed by the end of March 2021 to take advantage of the tax holiday, meaning you need to have sold your Heatons property by November 2020 at the very latest to ensure your property purchase and sale deal goes through in time (as it is taking on average up to 17 weeks between sale agreed and completion). This is where the difference between a great solicitor, brilliant estate agent and awesome mortgage broker compared to average ones will show. Good ones, when all three are working together for you, can get the sale through in 6 to 8 weeks, not the national average of 17 weeks, meaning if you are cutting it fine, you might not be able to take advantage of the tax savings in the Spring. Give me a call if you want to know who the best of the best in The Heatons are to ensure you don’t lose out on those tax savings.
The value of the average The Heatons home currently stands at £284,000
So, what is going to happen to The Heatons property market? It really depends on the economy as a whole and of course the property market is a large part of that. I know one thing that buy to let landlords and home buyers don’t like is ambiguity and the British housing market has always lived and breathed on emotion and sentiment. People will only buy and sell property (and borrow the money to make those transactions happen) when they feel good. Are all these things like Stamp Duty holidays just putting off the inevitable? Are we heading for the mother of all property crashes?
Well, let me put sentiment and opinion aside for a second and look at the simple facts.
We have an increasing population, yet we don’t build enough houses
Since 1995, we have built on average 150,200 properties per year. The Barker Report said 2004 the country needed 240,000 per year to satisfy annual demand for new homes and whilst the number of new homes built in the UK last year rose 1% to a 13-year high, only 161,000 homes were built. That means over the last 25 years, with the difference between actual homes built and the targets set out in the Barker Report, we have an inbuilt shortage of 2,245,000 fewer homes, meaning.
Since the Millennium, property values in The Heatons have increased by 174.9%
Other factors have contributed to that. The average age of a person leaving their parents’ home in the UK is 24.4 years and that has been dropping for a few years meaning more homes are required. People are also living longer (in 2000 the average person lived until 77.7 years and now it’s 81.1 years – doesn’t sound a lot until one considers for each additional year the average person lives in the UK, we need an additional 356,500 homes). Finally, we have got immigration. In the year ending March 2019, 612,000 people moved to the UK (immigration) and 385,000 people left the UK (emigration) – meaning a net increase of 227,000 people (or a requirement of c.100,000 homes to house them in one year alone). All those factors in themselves mean …
we have more demand for The Heatons property than we have supply and that’s not going to change any time soon.
Property markets are driven (like all markets) by supply and demand so I believe The Heatons property values can only rise in the long term. The question is whether The Heatons people will have the sentiment and confidence to borrow money on a mortgage and invest in The Heatons property, yet at the moment with ultra-low interest rates, borrowing money to buy a home has never been so cheap and if you are in it for the long-term (which you should be with property) then I think it’s good news.
One piece of good news is that mortgage lenders are willing to lend up to 90 per cent loan to value mortgages for first time buyers (and in some rare cases 95 per cent), albeit with a lot of strings attached … yet this is a good sign as the banks and building societies wouldn’t be lending at these levels if they were too scared.
Investing in property, be it for yourself to live in or buy to let is a long-term game. We might see an uplift in prices in the short term because of the demand mentioned above, then again, we might see a dip in 2021 … yet again for the reasons mentioned above – until we start to build new homes to the scale of 300,000+ a year (something that has never been achieved since 1969), the long-term picture appears to be good. Be you The Heatons landlord, The Heatons house seller or The Heatons buyer, you have to be a lot more strategic and thoughtful about what you are going to do. If you would like to pick my brains, drop me a message on social media or pick up the phone.
So those are my thoughts, tell me your thoughts for the future of The Heatons property market?
July 28, 2020
Join Julian today as he braves the rain to tell you a bit more about this property in Leeside. This is a must view fantastic property, arrange a viewing here…https://www.julianwadden.co.uk/…/HMR…/stockport/sk4/leeside…
July 15, 2020
The British are infatuated with owning their own property and politicians know that. Margaret Thatcher used it as a vote winner in 1979 when she allowed council house tenants to buy their own home. Coming to the present day, Boris Johnson’s Conservative government have anxieties that the Brits have not been buying nearly enough homes lately and, as with all countries in the world, the British property market was put ‘on ice’ for several months to help contain the Coronavirus, exacerbating the problem.
The Chancellor, Rishi Sunak, announced on Wednesday plans to boost the property market by momentarily scrapping Stamp Duty Tax (a tax paid by homebuyers) when they buy a property that costs less than £500,000.
Interestingly, Stamp Duty was originally introduced in 1694 as a way to raise funds for The Nine Years’ War (1688–1697) against Louis XIV of France and applied to property and some legal documents.
Why is this important? Well the Government recognise that when the property market is working well, the economy also tends to work well, yet one of the barriers to people moving home is Stamp Duty. Even before Coronavirus, Brits were moving 40.21% less than they were at the start of the millennium, and now with this dreadful situation, the natural reaction is for people to stay put in their own homes, meaning another potential nail in the coffin for the economy.
Stamp Duty has raised not an insignificant £166.53bn since 1998, impressive when you consider the NHS costs £129bn per annum. Looking at more recent figures, the Government currently raise £1.045bn per month from Stamp Duty Tax and this statement will remove a good chunk of that from the Chancellors coffers each month, yet the Government knows a healthy property market will help the wider economy.
As Stamp Duty is a transaction tax, it restricts labour market mobility, making people who are thinking of switching jobs think twice before moving. Stamp Duty also holds back elderly homeowners from downsizing to smaller homes, which is an issue for the UK, as we don’t have enough homes to meet supply and also curtails first time buyers as it forces them to use some of the savings on the tax, as opposed to using for a deposit.
Before the changes, the Stamp Duty thresholds were as follows:
- Zero percent up to £125,000
- Two percent of the next £125,000 (the portion from £125,001 to £250,000)
- Five percent of the next £675,000 (the portion from £250,001 to £925,000)
- Ten percent of the next £575,000 (the portion from £925,001 to £1.5 million)
- 12% of the remaining amount (the portion above £1.5 million)
and between the 8th July 2020 and 31st March 2021
- Zero percent up to £500,000
- Five percent of the next £425,000 (the portion from £500,001 to £925,000)
- Ten percent of the next £575,000 (the portion from £925,001 to £1.5 million)
- 12% of the remaining amount (the portion above £1.5 million)
Landlords and Buy to Let Landlords will also benefit from these reduced rates, yet will still have to pay their additional premium for second homes (as they have since April 2016).
To give you an idea how significant this is, if these rules had been in place exactly a year ago for Heatons properties purchased under £500,000 (i.e. between 8th July 2019 and 31st March 2020).
Stamp Duty would not have been paid on 295
Heatons properties, worth in total £84,643,700
Anyone buying any home in the Heatons over £500,000 are also winners in this, as they will save having to pay the first £15,000 in stamp duty (under the old scheme). This is because during these 9 months, stamp duty is only paid on the difference over £500,000 (so if you buy a property for say £620,000 – one only pays the stamp duty on the difference between £620,000 and £500,000 i.e. £120,000).
I’m all for reducing Stamp Duty, which is imposed progressively at higher rates the higher a property costs (as you can see from the tables above). Yet, short-lived changes to property taxation risk warping the property market and generating a ‘property market hangover’ in Spring 2021. I am part of a group of 2,500 estate and letting agents from the UK, and most of us were running at 150% speed before this announcement, coping with the post Coronavirus explosion in demand.
Now it seems that the ‘feast’ will continue until the end of March 2021 as many more people will move to take advantage of the cut in tax. However, some are suggesting this could lead to ‘famine’ down the line as it will stop people moving into the late spring and summer of 2021.
History tells us different stories on the influence on transaction volumes from changing Stamp Duty rates. In 1991 the Tory’s raised the Stamp Duty threshold at which house buyers started paying and Gordon Brown did so in 2008 when we went into the Credit Crunch. More recently, both George Osborne and Philip Hammond fine-tuned Stamp Duty so that landlords had to pay an additional Stamp Duty Premium after March 2016 whilst first-time buyers pay less Stamp Duty and the purchasers of more expensive homes (over £1.5m) pay more.
The Stamp Duty changes for landlords in 2016 affected the property market only for a short while and by the autumn, transactions levels had returned to normal. However, in 1991, John Major’s Stamp Duty change encouraged home buyers to bring forward home purchases but nevertheless the property market ground to a standstill again once the benefit ended (although the steps up the 1990’s Stamp Duty levels were much harsher as the tax applied to the whole purchase price, not the margin steps as it had in the 1990’s).
So how much money will Heatons people save when buying a home under £500k?
The average Stamp Duty paid by those Heatons homebuyers in the 9 months between 8th July 2019 and 31st March 2020 was £4,347
Being objective, I can see why the Chancellor could see this as a suitable way to motivate spending because when people move home, they are more inclined to spend comprehensively on property renovations and the services of solicitors, home removal people, tradesmen and estate agents. So, drastically reducing Stamp Duty will undoubtedly help the UK economy, or at least contain some of the damage from the Coronavirus.
Also, the experience of being in lockdown will have confirmed to many of the Heatons people that they need a bigger home or one with a bigger garden. I also suspect other people may be able to work from home on a more long-lasting basis, meaning there could be a shift from the larger cities to outlying towns and even a move to the countryside.
So, these are my thoughts, what are yours?
July 10, 2020
One of my Heatons landlords contacted me last week from Heaton Moor, after he had spoken to a landlord friend of his from Didsbury. He told me they were deliberating The Heatons property market and neither of them could make their mind up if it was time to either sell or buy property following Covid-19. His friend said he would wait to see what would happen to property prices following Covid-19, yet my landlord wanted to pick my brain in order to help him decide what to do.
I said the press are aware bad news sells newspapers and the doom mongers are plying their trade on uncertainty in the world economic situation. Roll the clock back to the Credit Crunch of 2008/9, and there were quite a few landlords in The Heatons who had overexposed themselves with high percentage loan to value buy to let mortgages, backing the hope they would make their money on the capital growth, yet fell foul of a drop in rents and thus got bankrupted (but who could blame them when the property market was rising at 15% to 20% a year in the early 2000’s and banks like Northern Rock were giving mortgages out to anyone with a pulse and note from their Mum).
Thankfully the Bank of England changed the rules on all mortgages in 2014 banning self-certification mortgages, tightening the rules around interest-only mortgages and the requirement around affordability to be checked, plus a tough stress test if interest rates rose. It’s obvious we are going to enter into a recession because of Covid-19, yet this time The Heatons property market is better placed to weather the storm.
However, gone are the days when you could buy any old house in The Heatons and it would make money. Yes, in the past, anything in The Heatons that had four walls and a roof would make you money because since World War 2, property prices doubled every seven years … it was like having a free cash machine.
If a landlord bought a Heatons terraced / town house in the summer of 2000, he or she would have seen a profit of £132,200 to its current value of £214,000, a rise of 161.7%
Nonetheless, if that landlord had bought the same property in 2010, The Heatons landlord would have only made £29,900 profit (a 16.2% increase). Yet since 2010, the country has experienced 31.5% inflation, meaning our Heatons landlord has seen the ‘real’ value of their property decrease by 15.3% (i.e. 16.2% less 31.5% inflation).
And this is my point. Nobody has been complaining about the property market in the last ten years, yet landlords are still worse off in real terms. If we do see a slight dip in property prices because of Covid-19 (looking at the market at the moment I haven’t seen any indication of its slowing down from its post lockdown takeoff), but if we do, The Heatons landlords need to realise property values aren’t the only indicator of whether the property market is good or not.
The reality is, since around the early 2000’s we haven’t seen anything like the capital growth in property we have seen in the past and it’s not predicted to grow at the rates it has previously done either. So, I believe it is high time for The Heatons landlord, pondering investing in The Heatons property to stop believing the hype and do some serious research using independent investment expertise. You can still make money by buying the right The Heatons property at the right price and finding the right tenant.
Think about it, properties in real terms are 15.3% lower than a decade ago, so investing in The Heatons property is not only about capital growth, but also about the yield (the return from the rent). It’s also about having a balanced property portfolio that will match what you want from your investment – and what is a ‘balanced property portfolio’? Well we discuss such matters on The Heatons Property Blog … if you haven’t seen the articles, then it might be worth a few minutes of your time?
June 30, 2020
If you are a Buy to Let Landlord looking for your next investment then look no further. I have found a house that would be a great investment which is brand new to the market!
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June 17, 2020
If you are a property investor looking for your next property then look no further. I have found a house that would be a great investment for both first time Landlords and those with larger portfolios!
Watch my video below to find out more…
June 1, 2020
Two weeks ago today, we formally reopened our doors for both Sales & Lettings, and the demand has been simply incredible. A huge number of enquiries, viewings and offers being agreed to both sides, the effects of the property market coming out of lockdown have been noticed.
May 21, 2020
Based on Shaw Road newly formed Hero Fitness are still on downtime at the moment with the lockdown still taking hold. But do not fear, the guys have currently switched to online and park 1 to 1 sessions in accordance to government guidelines. Normally this time of the year it’s a holiday to get you in shape, but many people are concentrating on their mental health and well being which is intelligent in the current climate.
Whether it be improving your cardio or doing online videos, Hero Fitness can cater to your needs.
May 21, 2020
Having been working from home for the past few weeks, it’s been great getting back to some sort of normality by opening the office after so many days working from home. With weeks of pent up frustration, we have seen a huge surge of activity with all sales and rental properties creating plenty of viewing.
Working with government guidelines we are ready to work with the strict parameters set. The new changes which include having to make an appointment if you would like to visit the showroom, will dramatically cut the risk of virus spread. Please call the office on 0161 432 1115 if you would like to organise a visit.
The safety of our staff and customers is paramount.
May 21, 2020
As we try and adapt to living with COVID 19, The Heatons is slowly starting to move again as local businesses adapt. Eateries including Nook and Juniper, are starting to provide a takeout service and the wonderful Heaton Moor Golf Course has just opened to the delight of many of its members. With the talk of an impending recession, it is more important than ever that we all get behind our small local businesses.
Fingers crossed everyone survives the pandemic and we can see every four Heatons trader thrive once again in the very near future. The Heatons recent success has been massively impacted by the independent vibe and local events such as the Heatons Summer & Christmas Festivals which have been organised be the 4HTA.
So keep strong, stay safe and please Think Local.