Doncaster Property Blog » November 2016

Monthly Archives: November 2016

Property News

Doncaster Property Values decrease by 0.66% … good or bad news?

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“How’s the Doncaster housing market doing?” asked an upbeat Doncaster landlord last week.  “Quite strange”, I replied. Our landlord was perplexed! Let me explain…

 

Even the Brexit vote has not hindered Doncaster’s steady rise in property value, as Doncaster property values went down 0.66% last month alone, leaving Doncaster values 4.27% higher than a year ago. An increase in demand from buyers and an uninspiring level of supply (i.e. the number of properties on the market) has driven up the value of the Doncaster’s housing.

 

…And that is where the issue is. With Brexit, the coalition of the 2010-15, a double-dip recession and post credit crunch fallout – I was perplexed that the Doncaster property market (and values) has remained strong, still 7.52% higher than 20 months ago. That is until you start to look into the real reasons why we find ourselves in such a great place.

 

The Doncaster (and the UK) housing market is built on the foundations of basic economic rules that any GCSE Economics student should understand. However, at a time when, as a country, we seem eager to uncouple ourselves from all manner of proven facts, anything is up for grabs.

 

Even the wary RICS said throughout the UK, most of its Chartered Surveyors anticipated house prices to increase in the next six months, which seems contradictory given economic cautions from Mr Hammond and HM Treasury. Even though inflation will rise to around 2% to 3% in 2017 and perhaps a little more in 2018 because of Sterling’s devaluation, together with a high probability of a decelerating GDP and a slight rise in unemployment, how can the RICS and most of my landlords be so confident about the value of our homes?

 

Well, look from where we are starting. Nationally, a base of low unemployment, low inflation and preposterously low interest rates, while in Doncaster, the local economy is doing quite well for itself. Confidence also plays a part. Confidence can supersede basic economic facts for a short time at least, which is why actual property market changes tend to be more exaggerated, as confidence can turn both positive and negative very quickly. The fact is, there is a long-term relationship between property values, wages and unemployment. For example, looking at the graph below, you can quite clearly see the ratio of property values to earnings is nowhere near as high as it reached in 2008 and currently is in the middle of the range for the last 30 years. As a country, we are in a good place.

 

By April 2017, Article 50 will be invoked. This will bring additional political tomfooleries and economic ups and downs. With both purchasers and vendors predisposed by the 24-hour news cycle, which let’s face it, gets more haphazard by the day, it is likely to prove a challenging couple of years … and yes, Doncaster property values might drop slightly in 2017, but based on what we know of the UK plc now, the UK and Doncaster property values are not projected to move that much over 2017 or 2018.  Going into the next two years, we are in much better financial shape as a country compared to the last two crashes of 1987 and 2008.

 

But, on the other side of the coin, what we also know is that we don’t know much about the form of our economic future or indeed many other facets of our lives. Confidence will continue to be the key player in the Doncaster housing market for a while longer – yet this may spur some much needed second-hand market activity? Now, where is my crystal ball?

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Property News

The 10,460 Doncaster Savers batten down the hatches with low interest rates set to continue into the 2020’s

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You might ask, what has the plight of the Doncaster savers to do with the Doncaster Property Market … everything in fact.  Read the newspapers, and every financial wizard is stating that with the decision of the Bank of England’s Monetary Policy Committee in early August to cut the Bank of England base rate to an all time low of 0.25 per cent, savers should prepare themselves for interest rates to stay low well into the early 2020’s.

 

… And this isn’t some made up story to capture the headlines of newspaper editors. The yield (posh word for interest rate or return) on 10-year Government bonds is currently 0.61 per cent. This indicates that the money markets believe that the Bank of England’s base rate will, on average over the next ten years, be below the 0.61% rate they are buying the 10 year bonds at (because they would loose money if the average was over 0.61%). UK Interest rates are going to be low for a long time.

 

For those who have saved throughout their working lives and are looking for ways to maximise their savings, tying their money into property could prove advantageous. You see as a saver, I did a search of the internet and the best savings rate I could find was a 5 year fixed rate at 2.5% a year with Weatherbys Bank. Your £200,000 nest egg would earn you £5,000 a year – not much. However, on the other side of the fence, growth in Doncaster house prices and princely buy to let yields have made property investment in Doncaster an appealing option for many. According to my research, the…

 

Average Yield over the last five years for

Doncaster Buy to let property has been 4.9% a year

 

… and average Property Values in over the same period have risen by 14.94%.

 

Using these averages, the Doncaster landlord’s property would be worth £229,880 and they would have received a total of £49,000 in rent – making the total return £278,880. Meanwhile, whilst our 10,460 Doncaster Saver’s, using the average savings rates for the last 5 years, even if they had reinvested the interest, their £200,000 would only be £221,184.

 

There are risks as well as benefits to buy to let though. As my blog readers know, I tell it like it is and investing in buy to let means locking up capital in a property that may fall in value. Another option would be stock market income based investment funds, which are paying around 5%, especially if put your nest egg into a tax free Stocks and Shares ISA. Although you can only add £15,240 a year into an ISA, but you would also have the ability to sell up quickly if you want … but one last thought…

 

The other side of the coin is that you cannot buy an unloved ‘stock market income based investment fund’ and set about renovating it and adding value yourself. The investment fund isn’t something that you can touch and feel, isn’t something tangible, isn’t something physical, isn’t something concrete, it isn’t bricks and mortar … and that is why my fellow Doncaster homeowners and Doncaster landlords is why the love affair of the British and Property will continue.

 

If you are considering becoming a new buy to let landlord in Doncaster, what do you know about the Doncaster property market? Do what many established landlords do and visit the Doncaster Property Blog where there is a catalogue of articles like this and where the best buy to lets deals are in Doncaster http://www.doncasterpropertyblog.co.uk/

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Market Research

Average Rent Paid by Tenants in Doncaster rise to £412 per month

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Back in the Spring, there was a surge in Doncaster landlords buying buy to let property in Doncaster as they tried to beat George Osborne’s new stamp duty changes which kicked in on the 1st April 2016. To give you an idea of the sort of numbers we are talking about, below are the property statistics for sales either side of the deadline in DN1.

Jan 2016 – 7 properties sold

Feb 2016 – 14 properties sold

March 2016 – 17 properties sold

April 2016 – 4 properties sold

May 2016 – 5 properties sold

Normally, the number of sales in the Spring months is very similar, irrespective of the month. However, as one can see, this year was a completely different picture as landlords moved their purchases forward to beat the stamp duty increase. You would think that even with a basic knowledge of supply and demand economics, rents would be affected in a downwards direction?

However, there appears to be no apparent effect on the levels of rent being asked in Doncaster – and more importantly achieved – and this direction of rents is not likely to inverse any time soon, particularly as legislation planned for 2017 might reduce rental stock and push property values ever upward. The decline of buy to let mortgage interest tax relief will make some properties lossmaking, forcing landlords to pass on costs to tenants in the form of higher rents just to stay afloat. Even those who can still operate may be deterred from making further investments, reducing rental stock at a time of severe property shortage.

.. but it’s not all bad news for tenants. Whilst average rents in Doncaster since 2005 have increased by 16.7%, inflation has been 38.5% over the same time frame, meaning Doncaster tenants are 21.8% better off in real terms when it comes to their rent (which is a sizeable chunk of most people’s monthly household budgets)

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I found it particularly interesting looking at the rent rises over the last five years in Doncaster, as it was five years ago we started to see the very early green shoots of growth of the Doncaster economy.  As a whole, following the Credit crunch (2011), rents in Doncaster have risen by an average of 0.9% a year – fascinating don’t you think?

The view I am trying to portray is that while renting is often portrayed as the unfavorable alternative to home ownership, many young Doncaster professionals like renting as it gives them adaptability with their life. Rents will continue to rise which is good news for landlords as buy to let is an investment but, as can be seen from the statistics, tenants have also had a good deal with below inflation increases in rents in the past. It’s a win-win situation for everyone although on a very personal note, it’s imperative in the future that tenants are not thwarted from saving for a deposit by excessive rental hikes – there has to be a balance.

For more thoughts and opinions on the Doncaster Property Market, if you are a Doncaster Homeowner or Doncaster landlord, please visit the Doncaster Property Blog http://www.doncasterpropertyblog.co.uk/

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Property News

Private Renting set to grow by 3,600 Doncaster households by 2025

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I was having a most interesting chat the other day with a Doncaster landlord when we were looking at a property. We got talking about the Doncaster Property Market and this landlord brought up the subject of a report he had read from the Royal Institution of Chartered Surveyors (RICS) and PricewaterhouseCoopers (PwC) that stated almost 1.8m new rental homes are needed by 2025 to keep up with current demand from tenants. He wanted to know what this meant for Doncaster.

Well my blog reading friends, some commentators said last Winter that buy to let was about to die, what with the new stamp duty changes and how mortgage tax relief will be calculated. Others even said 500,000 rental properties would flood the market nationally in the 12 months after the new Stamp Duty rules came into force on the 1st April 2016 as landlords left the rental market. Well, all I can say is, I wish all the landlords of those half a million properties would hurry up and put them on the market – because I have plenty of other potential landlords wanting to buy them!

Back to the matter in hand.. if the RICS and PwC are indeed correct, what does this mean for Doncaster? The fact is, as a country, we are facing a precarious rental shortage and need to get Doncaster building in a way that benefits a cross-section of Doncaster society, not just the fortunate few. I call on the Prime Minister to drop the higher stamp duty tax on buy to let purchases to ease the pressure on the rental market.

Of the 46,200 households in Doncaster, currently 20,100 tenants live in 8,400 private rented properties. If we apportion those 1.8m households equally around the Country, that means in nine years’ time, the number of rental properties in Doncaster needs to rise by 3,600 (i.e. 42.8%) .. taking the total number of rented properties in the city to 12,000.

That means Doncaster landlords need to buy around 400 properties a year between now and 2025 to meet that demand – because according to my calculations, an additional 8,600 people will want to live in all those ‘additional’ Doncaster rental properties – so why is the government penalising landlords?

Thankfully the new housing minister Gavin Barwell detached Teresa May’s new administration from the Cameron/Osborne laser-like focus of just home ownership to solve our housing issues, saying “we need to build more homes for every single type of person needing a home and not focus on one single tenure”. The private rented sector became a stooge under David Cameron’s watch and still, with increasingly unaffordable Doncaster house prices, the majority of new Doncaster households will be relying on the rental sector in the future to house them. I can only say Westminster must put in place the measures that will allow the rental sector to flourish. Any restrictions on the supply of rental property will push up rents (bad news for tenants), thus side-lining those members of Doncaster society who are already struggling. Let’s hope this new Government continues to see the contribution landlords give to the country as a whole.

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