Doncaster Property Blog » February 2018

Monthly Archives: February 2018

Doncaster Property News

Doncaster’s £134,548,560 “Rentirement” Property Market Time Bomb

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Yes, I said ‘rentirement’, not retirement … rentirement and it relates to the 1,119 (and growing) Doncaster people, who don’t own their own Doncaster home but rent their home, privately from a buy to let landlord and who are currently in their 50’s and early to mid-60’s.

The truth is that these Doncaster people are prospectively soon to retire with little more than their state pension of £155.95 per week, probably with a small private pension of a couple of hundred pounds a month, meaning the average Doncaster retiree can expect to retire on about £200 a week once they retire at 67.

The average rent in Doncaster is £501 a month, so a lot of the retirement “income” will be taken up in rent, meaning the remainder will have to be paid for out their savings or the taxpayer will have to stump up the bill (and with life expectancy currently in the mid to late 80’s, that is quite a big bill …  a total of £134,548,560 over the next 20 years to be paid from the tenant’s savings or the taxpayers coffers to be precise!

You might say it’s not fair for Doncaster tax payers to pick up the bill and that these mature Doncaster renters should start saving thousands of pounds a year now to be able to afford their rent in retirement.  However, in many circumstances, the reason these people are privately renting in the first place is that they were never able to find the money for a mortgage deposit on their home in the first place, or didn’t earn enough to qualify for a mortgage …and now as they approach retirement with hope of a nice council bungalow, that hope is diminishing because of the council house sell off in the 1980’s!

For a change, the Doncaster 30 to 40 somethings will be better off, as their parents are more likely to be homeowners and cascade their equity down the line when their parents pass away.  For example, that is what is happening in Europe where renting is common, the majority of people rent in their 20’s, 30’s and 40’s, but by the time they hit 50’s and 60’s (and retirement), they will invest the money they have inherited from their parents passing away and buy their own home.

So, what does this all mean for buy to let landlords in Doncaster?

Have you noticed how the new homes builders don’t build bungalows anymore … in fact some would said the ‘bungalow storey’ is over.  The waning in the number of bungalows being built has more to do with supply than demand.  The fact is that for new homes builders there is more money in constructing houses than there is in constructing bungalows.  Bungalows are voracious when it comes to land they need as because bungalow has a larger footprint for the same amount of square meterage as a two/three storey house due to the fact they are on one level instead of two or three.

That means, as demand will continue to rise for bungalows supply will remain the same.  We all know what happens when demand outs strips supply … prices (i.e. rents) for bungalows will inevitably go up.

Doncaster Property News

Doncaster Private Rents Hit £7.05 per sq. foot

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As I am sure you are aware, one the best things about my job as an agent is helping Doncaster landlords with their strategic portfolio management. Gone are the days of making money by buying any old Doncaster property to rent out or sell on. Nowadays, property investment is both an art and science. The art is your gut reaction to a property, but with the power of the internet and the way the Doncaster property market has gone in the last 11 years, science must also play its part on a property’s future viability for investment.

Many metrics most property professionals (including myself) use when deciding the viability of a rental property is what properties are selling for, the average rent, the yield and an average value per square foot.

However, another metric I like to use is the average rent per square foot. The reason being is that is a great way to judge a property from the point of view of the tenant … what space they get for their money. Now of course, location  has a huge influencing factor when it comes to rents (and hence rent per square foot). Like people buying a property, tenants also have that balancing act between better/worse location, more vs. less money and size of accommodation (bigger and more rooms equalling more money) and where they live (location) verses making ends meet.

Interestingly, I know there are a lot of you in Doncaster who like to see my statistics on the Doncaster property market, so before I talk about the rental figures per square foot, I wanted to share the £ per square foot on the values. In Doncaster, the current AVERAGE figures are being achieved (and I must stress, these are average figures, so there will an enormous range in these figures), but on average, properties in Doncaster, split down by type are achieving …

  • Doncaster Detached Property – £176 / sq ft
  • Doncaster Semi Detached Property – £142 / sq ft
  • Doncaster Terraced Property – £118 / sq ft
  • Doncaster Apartments – £177 / sq ft

So, the rental figures:

The extent of space you get for your rent is replicated in the space you get for your money when buying a property. The average size of rental property in the Doncaster area is 846.7 sq ft (interesting when compared to the national average of 792.1 sq ft)

This means the average rent per square foot currently being

achieved on a Doncaster rental property is £7.05 per sq ft per annum

So, what we can deduce from this?  Well the devil is always in detail!

Whilst I was able to quote the average overall figure and the fact my research showed it was quite clear from data that there is relationship between the average £ per sq ft figures on property values and average £ per sq ft on rental figures as a property grows in size. However, something quite intriguing happens to those figures, in terms of what the property will sell for and what it will rent for, when we change and increase the size of the property.

My research showed that doubling the size of any Doncaster property doesn’t mean you will double the value of it … in either value or rent. This is because the marginal value increases diminish as the size of the property increases. In layman’s terms … Subject to a few assumptions, double the size of the house doesn’t mean double the value … what really happens is a doubling of the size gives only an approximately 40% to 65% uplift in value, but here comes the even more fascinating part … when it came to the rental figures, double the size of the house meant only 20% to 45% in increase in rent.

In a future article, I will be discussing the actual added value an extension can bring … but in the meantime, in an overall and sweeping statement, most of the time it makes sense to extend if you are going to live in the property as long as the extension is proportionate to the property, but if you are going to rent it out … possibly not.


Buy to let deal of the day

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Our buy to let deal of the day is here. Natalie is in Old Rossington, outside a 2 bedroom flat for sale on the market with Portfield for £45,000. Rental income is £400 pcm which gives you a yield of 10.6%. This is a first floor flat and a excellent opportunity. The link to the property is below as is the video. Make sure you keep a eye on our YouTube to see our buy to let deals throughout the week.

Doncaster Property News

£382.61pm – The Profit made by every Doncaster Property Owner over the last 20 years

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As we go headlong into 2018, I believe UK interest rates will stay low, even with the additional 0.25% increase that is expected in May or June. That rise will add just over £20 to the typical £160,000 tracker mortgage, although with 57.1% of all borrowers on fixed rates, it will probably go undetected by most buy-to-let landlords and homeowners. I forecast that we won’t see any more interest rate rises due to the fragile nature of the British economy and the Brexit challenge. Even though mortgages will remain inexpensive, with retail price inflation outstripping salary rises, it will still very much feel like a heavy weight to some Doncaster households.

Now it’s certain the Doncaster housing market in 2017 was a little more subdued than 2016 and that will continue into 2018. Property ownership is a medium to long-term investment so looking at that long-term time frame; the average Doncaster homeowner who bought their property 20 years ago has seen its value rise by more than 239%.

This is important, as house prices are a national obsession and tied into the health of the UK economy as a whole. The majority of that historic gain in Doncaster property values has come from property market growth, although some of that will have been added by homeowners modernising, extending or developing their Doncaster home.

Taking a look at the different property types in Doncaster and the profit made by each type, it makes interesting reading..

However, I want to put aside all that historic growth and profit and looking forward to what will happen in the future. I want to look at the factors that could affect future Doncaster (and the Country’s) house price growth/profit; one important factor has to be the building of new homes both locally and in the country as a whole. This has picked up in 2017 with 217,350 homes coming on to the UK housing ladder in the last year (a 15% increase on the previous year’s figures of 189,690. However, Philip Hammond has set a target of 300,000 a year, so still plenty to go!

Another factor that will affect property prices is my prediction that the balance of power between Doncaster buy-to-let landlords and Doncaster first-time buyers should tip more towards the local first-time buyers in 2018.

The Council of Mortgage Lenders expects the number of buy to let mortgages to drop by 34% from levels seen in 2015. This is because of taxes being increased recently on buy-to-let and harder lending criteria for buy to let mortgages, which means I foresee a gradual move in the balance of power in favour of first-time buyers rather than buy-to-let landlords. First time buyers will also be helped by The Chancellor eradicating Stamp Duty for all properties up to £300,000 bought by first-time buyers in the recent budget.

This means Doncaster buy-to-let landlords will have to work smarter in the future to continue to make decent returns (profits) from their Doncaster buy-to-let investment. Even with the tempering of house price inflation in Doncaster in 2017, most Doncaster buy to let landlords (and homeowners) are still sitting on a copious amount of growth from previous years.

The question is, how do you, as a Doncaster buy to let landlord ensure that continues?

Since the 1990’s, making money from investing in buy-to-let property was as easy as falling off a log. Looking forward though, with all the changes in the tax regime and balance of power, making those similar levels of return in the future won’t be as easy. Over the last ten years, I have seen the role of the forward thinking letting agents evolve from a ‘rent collector’ and basic property management to a more holistic role, or as I call it, ‘landlord portfolio strategic leadership’. Thankfully, along with myself, there are a handful of letting agents in Doncaster whom I would consider exemplary at this landlord portfolio strategy where they can give you a balanced structured overview of your short, medium and long-term goals, in relation to your required return on investment, yield and capital growth requirements. If you would like such advice, speak with your current agent – or whether you are a landlord of ours or not – without any cost or commitment, feel free to drop me a line.