What will the General Election do to 5,604 Baldock Homeowners?

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In Baldock, of the 5,604 households, 1,792 homes are owned without a mortgage and 2,034 homes are owned by a mortgage. Many homeowners have made contact me with asking what the General Election will do the Baldock property market?  The best way to tell the future is to look at the past.

I have looked over the last five general elections and analysed in detail what happened to the property market on the lead up to and after each general election. Some very interesting information has come to light.

Of the last five general elections (1997, 2001, 2005, 2010 and 2015), the two elections that weren’t certain were the last two (2010 with the collation and 2015 with unexpected Tory majority). Therefore, I wanted to compare what happened in 1997, 2001 and 2005 when Tony Blair was guaranteed to be elected/re-elected versus the last knife edge uncertain votes of 2010 and 2015,  in terms of the number of houses sold and the prices achieved.

Look at the first graph below comparing the number of properties sold and the dates of the general elections:

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It is clear, looking at the number of monthly transactions (the blue line), there is a certain rhythm or seasonality to the housing market. That rhythm/seasonality has never changed since 1995 (seasonality meaning the periodic fluctuations that occur regularly based on a season – i.e. you can see how the number of properties sold dips around Christmas, rises in Spring and Summer and drops again at the end of the year).

To remove that seasonality, I have introduced the red line. The red line is a 12 month ‘moving average’ trend line which enables us to look at the ‘de-seasonalised’ housing transaction numbers, whilst the yellow arrows denote the times of the general elections. It is clear to see that after the 1997, 2001 and 2005 elections, there was significant uplift in number of households sold, whilst in 2010 and 2015, there was slight drop in house transactions (i.e. number of properties sold).

I then wanted to consider what happened to property prices. In the graph below, I have used that same 12-month average, housing transactions numbers (in red) and yellow arrows for the dates of the general elections but this time compared that to what happened to property values (pink line):

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It is quite clear none of the general elections had any effect on the property values.  Also, the timescales between the calling of the election and the date itself also means that any property buyer’s indecisiveness and indecision before the election will have less of an impact on the market.

Finally, what does this mean for the landlords of the 767 private rented properties in Baldock? Well, as I have discussed in previous articles (and just as relevant for homeowners as well) property value growth in Baldock will be more subdued in the coming few years for reasons other than the general election. The growth of rents has taken a slight hit in the last few months as there has been a slight over supply of rental property in Baldock, making it imperative that Baldock landlords are realistic with their market rents.  However, in the long term, as the younger generation still choose to rent rather than buy the prospects, even with the changes in taxation, mean investing in buy-to-let still looks a good bet.  If you want to find out more about the Baldock property market or for any advice, please either pop into the office, call us on 01462 894565 or e-mail: lettings@satchells.co.uk.

How The Rented Sector Has Transformed The Property Market In Baldock

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The Baldock housing market has gone through a sea change in the past decades with the Buy-to-Let (B-T-L) sector evolving as a key trend, for both Baldock tenants and Baldock landlords.

The government recently released a white paper on housing which I have read and wish to offer my thoughts on the topic.  It was interesting that the private rental sector played a major part in the future plans for housing. This is especially important for our growing Baldock population.

In 1981, the population of North Hertfordshire stood at

108,600 and today it stands at 131,700

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Currently, the private rented (B-T-L) sector accounts for 13.2% of households in the town.  The Government want to assist people living in the houses and help the economy by encouraging the provision of quality homes, in a housing sector that has grown due to worldwide economic forces, pushing home ownership out of the reach of more and more people. Interestingly, when we look at the 1981 figures for home ownership, a different story is told.

53.01% Baldock people owned their own home in 1981

38.08% Baldock people rented from the Council or Housing Association in 1981

 and 8.91% Baldock rented from a Private Landlord       

The significance of a suitable housing policy is vital to ensure suitable economic activity and create a vibrant place people want to live in. With the population of North Hertfordshire set to grow to 161,000 by 2037 it is imperative that North Hertfordshire District Council and central government all work actively together to ensure the residential property market does not hold the area back, by encouraging the building and provision of quality homes for its inhabitants.

One idea the government has proclaimed is a variety of measures aimed at encouraging the Build-to-Rent (B-T-R) sector (instead of the B-T-L sector). These include allowing local authorities to proactively plan for B-T-R schemes, and making it simpler for B-T-R developers to offer inexpensive private rented homes.

To do this, the government will invent a distinct affordable housing class for B-T-R, called ‘Affordable Private Rent’, which will oblige new homes builders to provide at least 1 in 5 of a new home developments at a 20% discount on open-market rents and three year tenancies for tenants. In return, the new home builders will get better planning assurances.

Private landlords will not be expected to offer discounts, nor offer 3-year tenancies but it is something Baldock landlords need to be aware of as there will be greater competition for tenants.

Over the last ten years, home ownership has not been a primary goal for young adults as the world has changed. These youngsters expect ‘on demand’ services from click and collect, Amazon, dating apps and TV with the likes of Netflix. Many Baldock youngsters see that renting more than meets their accommodation needs, as it combines the freedom from a lifetime of property maintenance and financial obligations, making it an attractive lifestyle option.

Private rented housing in Baldock and North Hertfordshire, be it B-T-L or B-T-R, has the prospective to play a very positive role.

 

Baldock’s ‘Generation Trapped’ and the £712.9m legacy

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Last week, I wrote an article on the plight of the Baldock 20 something’s often referred to by the press as ‘Generation Rent’. Attitudes to renting have certainly changed over the last twenty years and as my analysis suggested, this change is likely to be permanent. In the article, whilst a minority of this Generation Rent feel trapped, the majority don’t – making renting a choice not a predicament. The Royal Institution of Chartered Surveyors (RICS) predicted that the private rental sector is likely to grow substantially by 1.8m households across the UK in the next 8 years, with demand for rental property unlikely to slow and newly formed households continuing to choose the rental market as opposed to buying.

However, my real concern for Baldock homeowners and Baldock landlords alike, is our mature members of the population of Baldock.  Currently OAP’s (65+ yrs in age) in Baldock are sitting on £418.7m of residential property.  However, what about the ‘Baby Boomers’, the 50yr to 64yr old Baldock people and what their properties are worth – and more importantly, how the current state of affairs could be holding back those younger generation renters.

In Baldock, there are 465 households whose owners are aged between 50yrs and 64yrs and about to pay their mortgage off.  That property is worth, in today’s prices, £174.3m. There are an additional 320 mortgage free Baldock households, owned by 50yr to 64yr olds, worth £119.9m in today’s prices, meaning…

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Baldock Baby Boomers and Baldock OAP’s are sitting

on £712.9m worth of Baldock property

These Baldock Baby Boomers and OAP’s are sitting on 7,918 Baldock properties and many of them feel trapped in their homes, and hence I have dubbed them ‘Generation Trapped’.

Recently, the English Housing Survey stated 49% of these properties owned by the Generation Trapped, as I have dubbed them, are ‘under-occupied’ (under-occupied classed as having at least two bedrooms more than needed). These houses could be better utilised by younger families, but research carried out by the Prudential suggest in Britain it’s estimated that only one in ten older people downsize while in the USA for example one in five do so.

The growing numbers of older homeowners who want to downsize their home are often put off by the difficulties of moving. The charity United for all Ages, suggested recently many are put off by the lack of housing options, 19% by the hassle and cost of moving, 14% by having to de-clutter their possessions and 14% by family reasons such as staying close to children and grandchildren.

Helping mature Baldock (and the Country) homeowners to downsize at the right time will also enable younger Baldock people to find the homes they need – meaning every generation wins, both young and old. However, to ensure downsizing works, as a Country, we need more choices for these ‘last time buyers’.

Theresa May and Philip Hammond can do their part and consider stamp duty tax breaks for downsizers, our local Council in Baldock and the Planning Dept. should play their part, as should landlords and property investors to ensure Baldock’s ‘Generation Trapped’ can find suitable property locally, close to friends, family and facilities.

‘Flipping heck – Baldock’s property values rise by £41.58 a day!

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Investing in Baldock buy to let property is different from investing in the stock market or depositing your hard earned cash in a  Building Society. When you invest your money in a Building Society, this is considered by many as the safe option but the returns you can achieve are awfully low (the best 2-year bond rate from Nationwide is a whopping 0.75% a year!). Another investment is the Stock Market, which can give good returns, but unless you are on the phone every day to your Stockbroker, most people invest in stock market funds, making the investment quite hands off and one always has the feeling of not being in control.

However, with buy to let, things can be more hands on. One of the things many landlords like is the tactile nature of property – the fact that you can touch the bricks and mortar. It is this factor that attracts many of Baldock’s landlords – they are making their own decisions rather than entrusting them to city whizz kids in Canary Wharf playing roulette with their savings.

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I always say investing in property is a long-term game. When you invest in the property market, you can earn from your investment in two ways. When a property increases in value over time, it is known as ‘capital growth’.

Capital growth, also known as capital appreciation, has been strong in recent times in Baldock, but the value of property does go up as well as down just like shares do but the initial purchase price rarely decreases.

Rental income is what the tenant pays you – hopefully this will also grow over time. If you divide the annual rent into the value (or purchase price) of the property, this is your yield, or annual return. So, over the last 5 years, an average Baldock property has risen by £75,892 (equivalent to £41.58 a day), taking it to a current average value of £367,100. Yields range from 5% a year and can reach double digits’ percentages (although to achieve those sorts of returns, the risks are higher).

However, something I haven’t spoken of before is the more specialist area of flipping property to make money.  Flipping – buying a property, carrying out some minor cosmetics and re selling it quickly.  I have seen several investors recently who have made decent returns from this strategy. For example …

One Baldock Investor paid £300,000 for a 3 bedroom house on Church Street in September 2015.  The property was re-furbished and it was resold a few months ago (November 2016) for £437,500 … 45.83% return before costs (or compound annual return equivalent of 37.34% AER).

Some shots of the property before the work was completed:

A shot  of the  garden after  the work was completed & intended kitchen:

This demonstrates how the Baldock property market has not only provided very strong returns for the average investor over the last five years but how it has permitted a group of motivated buy to let Baldock landlords and investors to become particularly wealthy.

As my article mentioned a few weeks ago, more and more Baldock people may be giving up on owning their own home and are instead accepting long term renting whilst buy to let lending continues to grow from strength to strength. If you want to know what  would, and what would not,  make a decent buy to let property in Baldock, please contact us on 01462 894565 or send us a rightmove link to consider.

Baldock property of the week…..

Take a look at our latest property of the week video – Country Properties are selling a two bedroom apartment with Juliet balcony in prime high street development for £199,950.  With a potential rental yield of around 5% this is one we feel landlords should look at.   Click here for Country Properties advert and call them quick – this won’t hang around long!

With 1,539 people in Private Rented Properties in Baldock – Should you still be investing in Baldock Buy To Let?

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If I were a buy to let landlord in Baldock today, I might feel a little bruised by the assault made on my wallet after being (and continuing to be) ransacked over the last 12 months by HM Treasury’s tax changes on buy to let. To add insult to injury, Brexit has caused a tempering of the Baldock property market with property prices not increasing by the levels we have seen in the last few years. I think we might even see a very slight drop in property prices this year and, if Baldock property prices do drop, the downside to that is that first time buyers could be attracted back into the Baldock property market; meaning less demand for renting (meaning rents will go down). Yet, before we all run for the hills, all these things could be serendipitous to every Baldock landlord, almost a blessing in disguise.

Baldock has a population of 13,085, so when I looked at the number of people who lived in private rented accommodation, the numbers astounded me …

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Yields will rise if Baldock property prices fall, which will also make it easier to obtain a buy to let mortgage, as the income would cover more of the interest cost. If property values were to level off or come down that could help Baldock landlords add to their portfolio. Rental demand in Baldock is expected to stay solid and may even see an improvement if uncertainty is protracted. However, there is something even more important that Baldock landlords should be aware of: the change in the anthropological nature of these 20 something potential first time buyers.

At a recent family get together, I got chatting with my nephew and his partner.  Both are in their mid/late twenties, both have decent jobs in Baldock and they rent. Yet, here was the bombshell, they were planning to rent for the foreseeable future with no plans to even save for a deposit, let alone buy a property. I enquired why they weren’t planning to buy? The answers surprised me as a 40 something, and it will you. Firstly, they don’t want to put cash into property, they would rather spend it on living and socialising by going on nice holidays and buying the latest tech and gadgets. They want the flexibility to live where they choose and finally, they don’t like the idea of paying for repairs. All their friends feel the same. I was quite taken aback that buying a house is just not top of the list for these youngsters.

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So, as 11.8% of Baldock people are in rented accommodation and as that figure is set to grow over the next decade, now might just be a good time to buy property in Baldock – because what else are you going to invest in?  Give your money to the stock market run by sharp suited city whizz kids – because at least with property – it’s something you can touch – there is nothing like bricks and mortar!

For more views and opinions on the Baldock property market – visit the Baldock property market blog:  www.baldockpropertyblog.co.uk.