Yearly Archives: 2017

Doncaster

12.26% of Doncaster is Built on … Building Plot Dilemma or Not?

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Well the fallout from the recent Budget is still continuing.  I was chatting to a couple of movers and shakers from the Doncaster area the other day, when one said, “There isn’t enough land to build all these 300,000 houses Philip Hammond wants to build each year”.

…and if you read the Daily Mail, you would be forgiven for thinking the Country was at bursting point … or is it?

It was 60 years ago the first satellite was launched (Sputnik). All the Superpowers have used them to take high definition pictures of each other for decades, but now satellites and their high-powered cameras are being used for more peaceful purposes. The European Environment Agency (EEA) have been taking high definition pictures of the UK from outer-space to give us a focused picture of what every corner of the Country really looks like … and the findings will come as a surprise.

As my blog readers know, I always like to ask the important questions relating to the Doncaster property market. If you are a Doncaster landlord or Doncaster homeowner, this knowledge will enable you to make a more considered opinion on your direction and future in the Doncaster property market. Like every aspect of all economic life, it’s all about supply and demand, because over the last twenty or so years, there has been an imbalance in the British (and Doncaster) housing market, with demand outstripping supply, meaning the average value of a property in Doncaster has risen by 234.25%, taking an average value from £36,200 in 1995 to £121,000 today.

Using the information from the EEA and data crunched by Sheffield University with their Corine-Land Cover project, I posed them a few questions about the local area, interesting questions I would like to share with you …

  1. What proportion of the whole of Doncaster is built on?

12.26%

That surprised you, didn’t it! In the study, land classified as ‘urban fabric’ defined has land which has between 50% and 100% of the land surface is built on, (meaning up to a half might be gardens or small parks, but the majority is built on).

  1. How much land is intensively built on locally?

Of that amount mentioned above, how much of it is high-density urban fabric? (i.e. where 80% to 100% is built on – still leaving 20% for gardens)  Less than 0.1%  – again I bet that surprised you!

  1. So how is the land used locally?

Sports Facilities                    1.99%

Mineral Extraction               2.18%

Industry                                 2.5%

Arable Farmland                  65.08%

…the rest being made up of various other minor types such as pastures, forests and waterways, etc.

Doncaster and the surrounding areas are greener than you think! In fact, I read that property covers less of the UK than the land revealed when the tide goes out. The assumption that vast bands of our local area have been concreted over doesn’t stand up to inspection. However, the effect of housing undoubtedly spreads beyond its actual footprint, in terms of noise, pollution and roads.

Now I am not suggesting for one second we concrete over every inch of the locality, but the bottom line is we, as a country, are growing at a quicker rate than the households we are building. I appreciate the emotional effect of housing is greater than other land use types because most of us spend the vast majority of our time surrounded by it. As Brits, we live our lives driving along roads, walking on footpaths and working and living in buildings meaning we tend, as a result, to considerably overemphasise how much of it there is.

In fact, I was only flying home recently back from a short break abroad, when I looked down and I was reminded just how green Britain actually is!

The bottom line is Doncaster people and the local authorities are going to have to put their weight into building more homes for people to live in. There is going to have to be some give and take on both sides, otherwise house prices will continue to rise exponentially in the future and Doncaster youngster’s won’t be able to buy their own Doncaster home, meaning Doncaster rents and demand for private rented accommodation in Doncaster can (and will) also grow exponentially.

Doncaster Property News

Doncaster Property Market and Hammond’s Budget Promise to Build 300,000 more homes

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I miss the good old days of George Osborne as Chancellor, with his hardhat and hi-vis jacket. He must have visited every new home building site in the UK with his trademark attire! For the last few years, the nearest Philip Hammond got to donning a ‘Bob the Builder’ outfit was at his grandchild’s birthday party. However, with what appears to be a change in focus by the Tories to ensure they get back in power in 2022, they appear to have fallen in love with house building again with the Chancellor’s promise to create 300,000 new households in a year.

Nationally, the number of new homes created has topped 217,344 in the last year, the highest since the financial crash of 2007/8. Looking closer to home: in total there were 1,049 ‘net additional dwellings’ in the last 12 months in the Doncaster Metropolitan Borough Council area, a very decent increase of 107% on the 2010 figure.

The figures show that 91% of this additional housing was down to new build properties. In total, there were 954 new dwellings built over the last year in Doncaster. In addition, there were 87 additional dwellings created from converting commercial or office buildings into residential property and a further 12 dwellings were added as a result of converting houses into flats.

While these all added to the total housing stock in the Doncaster area, there were 4 demolitions to take into account.

I was encouraged to see some of the new households in the Doncaster area had come from a change of use. The planning laws were changed a few years back so that, in certain circumstances, owners of properties didn’t need planning permission to change office space in to residential use.

With the scarcity of building land available locally (or the builders being very slow to build on what they have, for fear of flooding the market), it was pleasing to see the number of developers that had reutilised vacant office space into residential homes in the local council area. Converting offices and shops to residential use will be vital in helping to solve the Doncaster housing crisis especially, as you can see on the graph, that the level of building has hardly been spectacular over the last seven years!

Now we have had the autumn budget, Theresa May and Philip Hammond have set out their stall with housing as their key focus. I was glad to see the Government introducing a variety of changes to improve housing, including more funding for the supply side and an injection of urgency into the planning system.

The biggest question is, just where are the Government going to build all these new houses? Maybe a topic for a future article?

Back to the main point though and the focus on the housing market by the Tory’s is good news for all homeowners and buy to let landlords, as it will encourage more fluidity in the market in the longer term, sharing the wealth and benefits of homeownership for all. However, in the short term, demand still outstrips supply for homes and that will mean continued upward pressures on rents for tenants.

Doncaster Property News

Doncaster Rents Set to Rise to £537 pm in Next 5 Years

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It’s now been a good 12/18 months since annual rental price inflation in Doncaster peaked at 2.3%. Since then we have seen increasingly more humble rent increases. In fact, in certain parts of the Doncaster rental market over the autumn, the rental market saw some slight falls in rents. So, could this be the earliest indication that the trend of high rent increases seen over the last few years, may now be starting to buck that trend?

Well, possibly in the short term, but in the coming few years, it is my opinion Doncaster rents will regain their upward trend and continue to increase as demand for Doncaster rental property will outstrip supply, and this is why.

The only counterbalance to that improved rental growth would be to meaningfully increase rental stock (i.e. the number of rental properties in Doncaster). However, because of the Government’s new taxes on landlords being introduced between 2017 and 2021, that means buy-to-let has (and will) be less attractive in the short term for certain types of landlords (meaning less new properties will be bought to let out).

Interestingly, countless market experts assumed at the start of 2017, that the number of rental properties would in fact drop throughout the year. The assumption being as the new tax rules for landlords started to kick in, landlords looked to kick their tenants out, sell up and invest their capital elsewhere. (Although ironically that would lower supply of rental properties, decreasing the supply, meaning rents would increase again!).

Anecdotal evidence suggests, confirmed by my discussions with fellow property, accountancy and banking professionals in Doncaster, that Doncaster landlords are (instead of selling up on masse), actually either (1) re-mortgaging their Doncaster buy-to-let properties instead or (2) converting their rental portfolios into limited companies to side step the new taxation rules.

The sentiment of many Doncaster landlords is that property has always weathered the many stock market crashes and runs in the last 50 years. There is something inheritably understandable about bricks and mortar – compared to the voodoo magic of the stock market and other exotic investment vehicles like debentures and crypto-currency (e.g. BitCoin).

Remarkably, there is some good news for tenants, as Tory’s recently published the draft Tenants’ Fee Bill, which is designed to prohibit the charging of tenants lettings fees on set up of the tenancy. However, looking at evidence in Scotland, I expect rents to rise to compensate landlords, thus hammering faithful tenants looking for long-term tenancy agreements the hardest. This growth will be on top of any usual organic rent growth.  It really is swings and roundabouts!

So, what does this all mean for landlords and tenants in Doncaster? In my considered opinion,

Rents in Doncaster over the next 5 years will rise by 8.9%, taking the average rent for a Doncaster property from £493 per month to £537 per month.

To put all that into perspective though, rents in Doncaster over the last 12 years have risen by 19.4%. In fact, that rise won’t be a straight-line growth either, because I have to take into account the national and local Doncaster economy, demand and supply of rental property, interest rates, Brexit and other external factors.

In the past, making money from Doncaster buy-to-let property was as easy as falling off a log. But with these new tax rules, new rental regulations and the overall changing dynamics of the Doncaster property market, as a Doncaster landlord, you are going to need work smarter and have every piece of information, advice and opinion to hand on the Doncaster, Regional and National property market’s, to enable you to continue to make money.

One place for that information is the Doncaster Property Market blog.

Doncaster Property News

Increase in Interest Rates to cost Doncaster Home Owners £159.43 a year

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Doncaster homeowners will be among those affected by the latest rise in the Bank of England interest rates. The first increase in 10 years; they have just been raised from 0.25 percent to 0.5 per cent. This uplift comes as inflation hits a 51-month high of 2.9 per cent whilst the national unemployment rate is at an all-time low of 4.3 per cent.

Interestingly, the Governor of the Bank of England has indicated that the interest rate is likely to increase again over the next couple of years, but Mr Carney said mortgages and savings would not be affected in the short term. However, look at all the big banks and just about all of them have increased their standard variable mortgage rate..

The average Doncaster mortgage is £63,770
I have to ask by how much Doncaster homeowners (on variable rate or tracker mortgages) will see their repayments increase?

In the DN1-12 postcodes there are 46,096 homeowners with a mortgage, of which 19,803 have a variable rate mortgage (the remaining have fixed rate mortgages). The total amount owed by those DN1-12 homeowners with those variable rate mortgages is £1,262,834,923, meaning the average monthly mortgage payment for those home owners on variable rate mortgages before the interest rate rise was £497.23 per month and now its £510.52 per month … meaning

The interest rate rise will cost Doncaster homeowners on average an extra £159.43 per year
Whilst this is the first raise in interest rates in over 10 years, it must be noted it is at a significantly low level compared to figures in the 1970s and early 1990s. Many of my readers talk of interest rates at 17 per cent when Sir Geoffrey Howe increased them to try and combat the hyperinflation (from the fallout of the financial crisis that hit Britain in the 1970’s) and Norman Lamont in September 1992 with the infamous Black Wednesday crisis, when interest rates were raised from 10% to 15% in just one day.

So, what will this interest rate actually do to the Doncaster housing market?

Well, if I’m being frank – not a great deal. The proportion of Doncaster homeowners with variable rate mortgages (and thus directly affected by a Bank of England rate rise) will be smaller than in the past, in part because the vast majority of new mortgages in recent years were taken on fixed interest rates. The proportion of outstanding mortgages on variable rates has fallen to a record low of 42.3 per cent, down from a peak of 72.9 per cent in the autumn of 2011.

If more Doncaster people are protected from interest rate rises, because they are on a fixed rate mortgage, then there is less chance of those Doncaster people having to sell their Doncaster properties because they can’t afford the monthly repayments or even worse case scenario, have them repossessed.

However, and this will be of interest to both Doncaster homeowners and Doncaster buy to let landlords …

.. for every 1% increase in the Bank of England interest rate, it will cost the average Doncaster homeowner on a variable rate mortgage £53.14 per month
So, what next? Because UK inflation levels are at 2.9 per cent (the country’s highest rate since April 2012) and the Bank of England is tasked by HM Government to keep inflation at 2 per cent using various monetary tools (one of which is interest rates) – you can see why interest rate rises might be on the cards in the future as increasing interest rates tends to dampen inflation.

Now of course there is a certain amount of uncertainty with regard to Brexit and the negotiations thereof, but fundamentally the British economy is in decent shape. People will always need housing and as we aren’t building enough houses (as I have mentioned many times in the Doncaster Property Blog), we might see a slight dip in prices in the short term, but in the medium to long term, the Doncaster property market will always remain strong for both Doncaster homeowners and Doncaster landlords alike.

Doncaster Property News

Doncaster Homeowners Are Only Moving Every 19.5 Years (part 2)

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In the credit crunch of 2008/9 the rate of home moving plunged to its lowest level ever. In 2009 the rate at which a typical house would change hands slumped to only once every 31.5 years. The biggest reason being that confidence was low and many homeowners didn’t want to sell their home as Doncaster property prices plunged after the onset of the financial crisis in 2008. However, since 2009, the rate of home moving has increased (see the table and graph below), meaning today:

The average period of time between home moves in

Doncaster is now 19.5 years.

This is an increase of 62.90 per cent between the credit crunch fallout year of 2009 and today, but still it is a 38.24 per cent drop in moves by homeowners, compared to 15 years ago (The Noughties).

So why aren’t Doncaster homeowners moving as much as they did in the Noughties?
The causes of the current state of play are numerous. In last weeks article I talked about how ‘real’ incomes and savings had been dropping. Another issue is the long-term failure in the number of properties being built. Only a few weeks ago in the blog, I was discussing the draconian planning rules meaning house builders struggle to locate building land to actually build on.
Back in the 1960’s and 1970’s, as a country, we were building on average 300,000 and 350,000 households a year. The Barker Review a few years ago said that for the UK to stand still and keep up with housing demand (through immigration, people living longer, a just under 50% increase in the number of households with a single person since the 1980’s and family makeup (i.e. divorce makes one household now two)) we needed to build 240,000 households a year. Over the last few years, we have only been building between 135,000 and 150,000 households a year.

Finally, as the UK Population gets older, there is no getting away from the fact that a maturing population is a less mobile one.

So, what does this mean for Doncaster homeowners and landlords?
Well, if Doncaster people are less inclined to move or find it hard to sell a property or acquire a new one, they are probably less likely to move to an improved job or a more prosperous part of the UK.
Many of the older generation in Doncaster are stuck in property that is simply too big for their needs. The fact is that, in Doncaster Metropolitan Borough, nearly five out of every ten (or 48.7 per cent) owned houses has two or more spare bedrooms; or to be more exact …

40,540 of the 83,178 owned households in the Doncaster Metropolitan Borough area have two or more spare bedrooms.

So, as their children and grandchildren struggle to move up the housing ladder, with those young families bursting at the seams in homes too small for them i.e. overcrowding, we have a severe case of under-occupation with the older generation – grandparents staying put in their bigger homes, with a profusion of spare bedrooms.

Regrettably, I cannot see how the rate of properties being sold will rise any time soon. Many commentators have suggested the Government should give tax breaks to allow the older generation to downsize, yet in a recent White Paper on housing published just weeks before the General Election, there was no reference of any thoughtful and detailed policies to inspire or support them to do so.

This means that there could be an opportunity for Doncaster buy to let landlords to secure larger properties to rent out, as the demand for them will surely grow over the coming years. As for homeowners; well those in the lower and middle Doncaster market will find it a balanced sellers/buyers market, but will find it slightly more a buyers market in the upper price bands.

Interesting times ahead!

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One in 33 rental properties in the Doncaster area will be illegal in 2018

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As the winter months draw in and the temperature starts to drop, keeping one’s home warm is vital. Yet, with the price of gas and electricity rising quicker than a Saturn V rocket and gas, oil and electricity taking on average 4.4% of a typical Brit’s pay packet (and for those Brit’s with the lowest 10% of incomes, that rockets to an eye watering 9.7%), whether you are a tenant or homeowner, keeping your energy costs as low as possible is vital for the household budget and the environment as a whole.

For the last 10 years, every private rental property must have an Energy-Performance-Certificate (EPC) rating.  The property is given an energy rating, very similar to those on washing machines and fridges with the rainbow coloured graph, of between A to G (A being the most efficient and G the worst). New legislation comes in to force next spring (2018) for English and Welsh private landlords making it illegal to let a property that does not meet a certain energy rating. After the 1st of April next year, any new tenant moving into a private rented property or an existing tenant renewing their tenancy must have property with an energy performance rating of E or above on the property’s EPC and the new law will apply for all prevailing tenancies in the spring of 2020. After April 2018, if a landlord lets a property in the ‘F’ and ‘G’ ratings (i.e. those properties with the worst energy ratings) Trading Standards could fine the landlord up to £4,000.

Personally, I have grave apprehensions that many Doncaster landlords may be totally unaware that their Doncaster rental properties could fall below these new legal minimum requirements for energy efficiency benchmarks. Whilst some households may require substantial works to get their Doncaster property from an F/G rating to an E rating or above, my experience is most properties may only need some minor work to lift them from illegal to legal. By planning and acting now, it will mitigate the need to find tradespeople in the spring when every other Doncaster landlord will be panicking and paying top dollar for work to comply.

Whilst there is money and effort involved in upgrading the energy efficiency of rental property, a property that is energy efficient will have greater appeal to tenants and other buy-to-let landlords/investors and this will enable you to obtain higher rents and sale price (when you come to sell your investment).

So, how many properties are there in the area that are F and G rated .. well quite a few in fact. Looking at the whole of the Doncaster Metropolitan Borough Council area, of the 18,774 privately rented properties, there are ..

443 rental properties in the F banding
124 rental properties in the G banding

That means just over one in 33 rental properties in the Doncaster and surrounding area has an Energy Performance Certificate (EPC) rating of F or G. From April next year it will be illegal to rent out those homes rated F and G homes with a new tenancy.

Talking with the Energy Assessors that carry out our EPC’s, they tell me most of a building’s heat is lost through draughty windows/doors or poor insulation in the roof and walls. So why not look at your EPC and see what the assessor suggested to improve the efficiency of your property? I can find the EPC of every rental property in Doncaster, so irrespective of whether you are a client of mine or not, don’t hesitate to contact me via email (or phone) if you need some guidance on finding out the EPC rating or need a trustworthy contractor that can help you out?

Doncaster Property News

Doncaster Home Owners Are Only Moving Every 19.5 Years (part 1)

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As I mentioned in a previous article, the average house price in Doncaster is 5.16 times the average annual Doncaster salary. This is higher than the last peak of 2008, when the ratio was 5.11. A number of City commentators anticipated that in the ambiguity that trailed the Brexit vote, UK (and hence Doncaster) property prices might drop like a stone. The point is – they haven’t.

Now it’s true the market for Doncaster’s swankiest and poshest properties looks a little fragile (although they are selling if they are realistically priced) and overall, Doncaster property price growth has slowed, but the lower to middle Doncaster property market appears to be quite strong.

Scratch under the surface though, and a different long-term picture is emerging away from what is happening to property prices. Doncaster people are moving home less often than they once did. Data from the Office of National Statistics shows that the number of properties sold in 2016 is again much lower than it was in the Noughties. My statistics show…

Even though we are not anywhere near the post credit crunch (2008 and 2009) low levels of property sales, the torpor of the Doncaster housing market following the 2016 Brexit vote has seen the number of property sales in Doncaster and the surrounding local authority area level off to what appears to be the start of a new long term trend (compared the Noughties).

Interestingly, it was the 1980’s that saw the highest levels of people moving home. Nationally, everyone was moving on average every decade. Even though it was during the Labour administration of the late 1970’s where the right to buy one’s council house started, it was the Housing Act of 1980 that that really got council tenants moving, as Thatcher’s Tory government financially encouraged council tenants to buy their council-rented homes – for which countless then sold them on for a profit and moved elsewhere. The housing market was awash with money as banks were allowed to offer mortgages as well as the existing building societies, meaning it made it simpler for Brits to borrow even more money on mortgages and to climb up the housing ladder.

But coming back to today, looking at the property sales figures in the Doncaster area since 2010/11, a new trend of number of property sales appears to have started. Interestingly, this has been mirrored nationally. The reasons behind this are complex, but a good place to start is the growth rate of real UK household disposable income, which has fallen from 5.01% a year in 2000 to 1.68% in 2016. Also, things have deteriorated since the country voted to leave the EU as consumer price inflation has risen to 2.7% per annum, meaning inflation has eaten away at the real value of wages (as they have only grown by 1.1% in the same time frame).

With meagre real income growth, it has become more difficult for homeowners to accumulate the savings needed to climb up the housing ladder as the level of saving has also dropped from 4.26% of household income to -1.11% (i.e. people are eating into their savings).

Next week I will be discussing how these (and other issues) has meant the level of Doncaster people moving home has slumped to once every 19.5 years.

Doncaster Property News

Doncaster Wages Outstrip House Price Growth by 17.8% since 2007

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I recently read a report by the Yorkshire Building Society that 54% of the country has seen wages (salaries) rise faster than property prices in the last 10 years. The report said that in the Midlands and North, salaries had outperformed property prices since 2007, whilst in other parts of the UK, especially in the South, the opposite has happened and property prices have outperformed salaries quite noticeably.

As regular readers of my blog know, I always like to find out what has actually happened locally in Doncaster. To talk of North and South is not specific enough for me. Therefore, to start, I looked at what has happened to salaries locally since 2007. Looking at the Office of National Statistics (ONS) data for Doncaster Metropolitan Borough Council, some interesting figures came out…

Salaries in Doncaster have risen by 18.74% since 2007 (although it’s been a bit of a rollercoaster ride to get there!) – interesting when you compare that with what has happened to salaries regionally (an increase of 17.08%) and nationally, an increase of 17.61%.

Next, I needed to find what had happened to property prices locally over the same time frame of 2007 and today. Net property values in Doncaster are 0.94% higher than they were in Spring 2007 (not forgetting they did dip in 2008 and 2009). Therefore…

Wages in the Doncaster area have increased at a higher rate than property values to the tune of 17.8% … meaning, Doncaster is in line with the regional trend

All this is important, as the relationship between salaries and property values is the basis on how affordable property is to first (and second, third etc.) time buyers. It is also vitally relevant for Doncaster landlords as they need to be aware of this when making their buy-to-let plans for the future. If more Doncaster people are buying, then demand for Doncaster rental properties will drop (and vice versa).

As I have discussed in a few articles in my blog recently, this issue of ‘property-affordability’ is a great bellwether to the future direction of the Doncaster property market. Now of course, it isn’t as simple as comparing salaries and property prices, as that measurement disregards issues such as low mortgage rates and the diminishing proportion of disposable income that is spent on mortgage repayments.

On the face of it, the change between 2007 and 2017 in terms of the ‘property-affordability’ hasn’t been that great. However, look back another 10 years to 1997, and that tells a completely different story. Nationally, the affordability of property more than halved between 1997 and today. In 1997, house prices were on average 3.5 times workers’ annual wages, whereas in 2016 workers could typically expect to spend around 7.7 times annual wages on purchasing a home.

The issue of a lack of homeownership has its roots in the 1980’s and 1990’s. It’s quite hard as a tenant to pay your rent and save money for a deposit at the same time, meaning for many Doncaster people, home ownership isn’t a realistic goal. Earlier in the year, the Tories released proposals to combat the country’s ‘broken’ housing market, setting out plans to make renting more affordable, while increasing the security of rental deals and threatening to bring tougher legal action to cases involving bad landlords.

This is all great news for Doncaster tenants and decent law-abiding Doncaster landlords (and indirectly owner occupier homeowners). Whatever has happened to salaries or property prices in Doncaster in the last 10 (or 20) years … the demand for decent high-quality rental property keeps growing. If you want a chat about where the Doncaster property market is going – please read my other blog posts on http://www.doncasterpropertyblog.co.uk or drop me note via email, like many Doncaster landlords are doing.

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33.6% Drop in Doncaster People Moving Home in the Last 10 Years

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I was having a lazy Saturday morning, reading through the newspapers at my favourite coffee shop in Doncaster.  I find the most interesting bits are their commentaries on the British Housing Market.  Some talk about property prices, whilst others discuss the younger generation grappling to get a foot-hold on the property ladder with difficulties of saving up for the deposit.  Others feature articles about the severe lack of new homes being built (which is especially true in Doncaster!).  A group of people that don’t often get any column inches however are those existing homeowners who can’t move!

 

Back in the early 2000’s, between 1m and 1.3m people moved each year in England and Wales, peaking at 1,349,306 home-moves (i.e. house sales) in 2002.  However, the ‘credit crunch’ hit in 2008 and the number of house sales fell to 624,994 in 2009.  Since then this has steadily recovered, albeit to a more ‘respectable’ 899,708 properties by 2016.  This means there are around 450,000 fewer house sales (house-moves) each year compared to the noughties.  The question is … why are there fewer house sales?

To answer that, we need to go back 50 years.  Inflation was high in the late 1960’s, 70’s and early 80’s.  To combat this, the Government raised interest rates to a high level in a bid to lower inflation.  Higher interest rates meant the householders monthly mortgage payments were higher, meaning mortgages took a large proportion of the homeowner’s household budget. However, this wasn’t all bad news since inflation tends to erode mortgage debt in ‘real spending power terms’.  Consequently, as wages grew (to keep up with inflation), this allowed home owners to get even bigger mortgages.  At the same time their mortgage debt was decreasing, therefore allowing them to move up the property ladder quicker.

Roll the clock on to the late 1990’s and the early Noughties, and things had changed.  UK interest rates tumbled as UK inflation dropped.  Lower interest rates and low inflation, especially in the five years 2000 to 2005, meant we saw double digit growth in the value of UK property.  This inevitably meant all the home owner’s equity grew significantly, meaning people could continue to move up the property ladder (even without the effects of inflation).

This snowball effect of significant numbers moving house continued into the mid noughties (2004 to 2007), as Banks and Building Society’s slackened their lending criteria.  [You will probably remember the 125% loan to value Northern Rock Mortgages that could be obtained with just a note from your Mum!!].  This meant home movers could borrow even more to move up the property ladder.

So, now it’s 2017 and things have changed yet again!

You would think that with ultra-low interest rates at 0.25% (a 320-year low) the number of people moving would be booming – wouldn’t you?  However, this has not been the case.  Less people are moving because:

(1) low wage growth of 1.1% per annum
(2) the tougher mortgage rules since 2014
(3) sporadic property price growth in the last few years
(4) high property values comparative to salaries (I talked about this a couple of months ago)

What does thistranslate to in pure numbers locally?

In 2007, 6,384 properties sold in the Doncaster City Council area and last year, in 2016 only 4,235 properties sold – a drop of 33.66%.

Therefore, we have just over 2,150 less households moving in the Doncaster and surrounding Council area each year.  Now of that number, it is recognised throughout the property industry around fourth fifths of them are homeowners with a mortgage. That means there are around 1,762 mortgaged households a year (fourth fifths of the figure of 2,150) in the Doncaster and surrounding council area that would have moved 10 years ago, but won’t this year.

The reason they can’t/won’t move can be split down into different categories, explained in a recent report by the Council of Mortgage Lenders (CML). So, of those estimated 1,762 annual Doncaster (and surrounding area) non-movers, based on that CML report –

  1. There are around 634 households a year that aren’t moving due to a fall in the number of mortgaged owner occupiers (e. demographics).
  2. I then estimate another 247 households a year are of the older generation mortgaged owner occupiers. As they are increasingly getting older, older people don’t tend to move, regardless of what is happening to the property market (e. lifestyle).
  3. Then, I estimate 106 households of our Doncaster (and surrounding area) annual non-movers will mirror the rising number of high equity owner occupiers, who previously would have moved with a mortgage but now move as cash buyers (e. high house price growth).
  4. I believe there are 775 Doncaster (and surrounding area) mortgaged homeowners that are unable to move because of the financing of the new mortgage or keeping within the new rules of mortgage affordability that came into play in 2014 (e. mortgage).

The first three above are beyond the Government or Bank of England control.  However could there be some influence exerted to help the non-movers because of financing the new mortgage and keeping within the new rules of mortgage affordability? If Doncaster property values were lower, this would decrease the size of each step up the property ladder.  This would mean the opportunity cost of increasing their mortgage would reduce (i.e. opportunity cost = the step up in their mortgage payments between their existing and future new mortgage) and they would be able to move to more upmarket properties.

Then there is the mortgage rules, but before we all start demanding a relaxation in lending criteria for the banks, do we want to return to free and easy mortgages 125% Northern Rock footloose and fancy-free mortgage lending that seemed to be available in the mid 2000’s … available at a drop of hat and three tokens from a cereal packet?

We all know what happened with Northern Rock …. Your thoughts would be welcome on this topic.

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Moving from a 2 bed Doncaster Property to a 4 bed will cost you £602 pm

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Moving to a bigger home is something Doncaster people with growing young families aspire to. Many people in two bedroom homes move to a three-bedroom home and some even make the jump to a four-bed home. Bigger homes, especially three-bed Doncaster homes are much in demand and it can be a costly move.

If you live in Doncaster in a two-bedroom property and wish to move to a four-bedroom house in Doncaster, you would need to spend an additional £152,424 (or £602.08 pm in mortgage payments (based on the UK Bank average standard variable rate)). However, going straight to a four bed from a two-bed home is quite rare as most people jump from a two to three-bedroom home, then later in life, from a three to four-bedroom home.

So, after being asked my thoughts on moving home in Doncaster by a friend recently, please find my analysis of the local property market and then some thoughts. To start with, let us see what the average property price is for a Doncaster property by the number of bedrooms it has.

Average Property Price in Doncaster by Bedroom
1 bed 2 bed 3 bed 4 bed 5 bed
£69,168 £99,099 £125,848 £251,523 £315,359

I then decided to calculate what it would cost to make the jump upmarket from one bedroom to two bedrooms, two to three bedrooms etc, etc, both in actual money and in mortgage payments (using the current standard variable rate of UK Banks of 4.74% – so the mortgage cost could be higher or lower depending on the mortgage taken).

Doncaster
Price Difference to make the move Cost per month to move up market (Mortgage)
1 bed to 2 bed £29,931  £118.23
2 bed to 3 bed £26,749  £105.66
2 bed to 4 bed £152,424  £602.08
3 bed to 4 bed £125,675  £496.42
4 bed to 5 bed £63,836  £252.15

There are some interesting jumps in costs when moving upmarket as a Doncaster buyer. The cost of moving from one to two beds, and two to three beds is relatively reasonable, whilst the jump from three to four beds in Doncaster is quite high (and hence why some four bed properties are taking slightly longer to sell nowadays). On an aside, a lesson here for all my landlord property blog readers, you can quite clearly see why the larger 4 and 5 bed properties don’t offer the best returns for buy to let because the monthly finance costs and rents achieved don’t match up so well (i.e. A mortgage for a 4 bed home in Doncaster would cost you 99.86% compared to a 3 bed mortgage, but the jump in rent would be a lot less than that – although depending on your circumstances, 4 bed homes can offer other advantages to buy to let – pick up the phone if you want to know what they are in more detail).

So, coming back and looking at the stock of properties in Doncaster, this also makes interesting reading …

Housing Stock in Doncaster by Bedrooms
1 bed 2 bed 3 bed 4 bed 5 bed
4.89% 25.60% 50.05% 15.72% 3.74%

 

The most active purchasers are 20 something and 30 something home-owning parents with growing families. Many look to more modern developments for the perfect balance of access to decent primary schools, commutability and lifestyle. For landlords looking to buy within Doncaster, they face stiff competition from these 20/30 something families, making the three bedroom Doncaster home massively in demand, often attracting spirited offers and selling within weeks of listing. This mix of homebuyers and landlords is a pressure point in the Doncaster property market.  Again, if you are a landlord, call me and I will show you areas with decent returns where you aren’t in so much competition with young Doncaster family homebuyers.

Yet, the cost of an additional bedroom can be too much for some Doncaster buyers. It is quite challenging moving home the first time, but to then find you are priced out on the next move up the ladder can be quite disconcerting, with families often having to move to a different part of town to get the bigger home they need.

Nevertheless, that’s the place many homeowners find themselves in with the cost of the additional bedroom being too much to bear. To those buying their home for the first time, all I suggest is they not only consider the mortgage payments and other costs of their first home, but also do their homework into their next rung up the Doncaster property ladder. Thinking about it now will keep you ahead of the game in the future; as your number of bedrooms, family property needs and lifestyle wants change.

..and Doncaster landlords – well these changes in the way people live also mean there are opportunities to be had in the Doncaster rental market. Many Doncaster landlords are starting to pick my brain on this, so if you don’t want to miss out – drop me a line.