Tag: estate agent

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The Art of Home Staging: Why It Truly Counts in Selling Your Property

In the competitive real estate market, first impressions matter, and staging a property is not just a luxury but a strategic necessity. Home staging, the process of preparing a residence for sale by showcasing its best features, has evolved into a crucial aspect of the selling process. In this blog post, we’ll explore the reasons why staging a property counts and how it can significantly impact your chances of a successful sale.

1. Enhances Visual Appeal

One of the primary reasons to stage a property is to enhance its visual appeal. Staging allows you to highlight the property’s strengths and create a visually appealing environment that potential buyers can envision themselves living in. From furniture arrangement to decor choices, staging transforms spaces, making them more attractive and inviting.

2. Facilitates Emotional Connection

Buyers often make decisions based on emotions. Staging helps create an emotional connection between the potential buyer and the property. By presenting a well-staged home, you are not just selling a house; you are selling a lifestyle. Thoughtfully arranged furniture and decor can evoke positive emotions, making it easier for buyers to imagine themselves living in the space.

3. Showcases Functionality

Proper staging allows you to showcase the functionality of each room. By arranging furniture in a way that highlights the purpose of each space, potential buyers can easily understand the flow and potential uses of different areas in the home. This clarity can be a deciding factor for buyers who are trying to envision how they would utilize the available space.

4. Sets the Right Tone

Staging helps set the right tone for the property. Whether you’re aiming for a cozy family home, a modern urban apartment, or a luxurious estate, staging enables you to convey a consistent theme throughout the property. This cohesive presentation creates a memorable experience for potential buyers and sets the property apart in their minds.

5. Maximizes Perceived Value

A well-staged property can create a sense of luxury and quality, maximizing the perceived value in the eyes of potential buyers. Thoughtful decor choices and attention to detail can make a property feel more upscale, potentially justifying a higher asking price. Investing in staging can yield returns by influencing buyers to perceive the property as a premium offering.

6. Accelerates the Selling Process

Staged homes tend to sell faster than their non-staged counterparts. The enhanced visual appeal, emotional connection, and perceived value contribute to a more attractive listing. A quicker sale not only reduces the time and effort invested in marketing but also avoids the potential challenges associated with a property lingering on the market.

7. Attracts Online Attention

In today’s digital age, the first encounter many potential buyers have with a property is through online listings. Staged homes photograph well, capturing the attention of online browsers. High-quality images of a beautifully staged property can generate more interest, clicks, and inquiries, ultimately leading to more showings and a higher likelihood of a successful sale.

In conclusion, staging a property is not just a superficial aspect of the selling process; it is a strategic investment that can significantly impact the success of your real estate transaction. From creating an emotional connection to accelerating the selling process, the benefits of staging are multifaceted. So, if you’re considering selling your property, remember that staging isn’t just about making it look good; it’s about making it irresistible to potential buyers.

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Evolving Sale Property Preferences: A Shift in Types of Sale Properties Purchased Over the Last Two Years

The Sale property landscape is constantly evolving, shaped by societal, economic and cultural factors.

The type of properties people have bought in the last few years since Lockdown One has undergone some notable changes, reflecting shifting preferences and lifestyle choices.

This article explores the transformations in property purchasing trends over the last two years compared to the long-term, almost three-decade average, with a focus on Sale detached houses, semi-detached houses, terraced houses and apartments.

Sale Detached Houses: A Shift Towards Modernity

Detached houses, long considered the epitome of homeownership, have witnessed a transformation in Sale buyer preferences. They still hold significant appeal, particularly for Sale families seeking privacy and ample space, the demand for Sale detached properties in the last couple of years has decreased, when compared to the previous average of the last three decades. This shift started before lockdown and can be attributed to several factors, including changing demographics, the way people live, varying land costs and evolving lifestyles that prioritise convenience and urban living.

Between 1995 and 2020, 3,365 detached homes sold in the Sale area, representing 16.0% of all the property sales in those 26 years.

In the last two years (2021 & 2022), 269 detached homes sold in the Sale area, representing 12.2% of all the property sales in those 2 years, a proportional drop of 23.4%.

Sale Semi-Detached Houses: Balancing Space and Affordability

Sale semi-detached houses have maintained a relatively stable position in the property market over the past three decades, striking a balance between the space offered by detached houses and the affordability of terraced houses. While their popularity has seen minor fluctuations, their appeal to both Sale families and young professionals looking for more spacious living arrangements remains consistent.

In recent years, there has been a noticeable increase in demand for well-presented mature Sale extended semi-detached houses as homeowners increasingly seek larger properties that accommodate work-from-home setups and additional living spaces for multi-generational living. This trend suggests a growing emphasis on both comfort and adaptability within the modern Sale home.

Between 1995 and 2020, 9,907 semi-detached homes sold in the Sale area, representing 47.0% of all the property sales in those 26 years.

In the last two years (2021 & 2022), 930 semi-detached homes sold in the Sale area, representing 42.3% of all the property sales in those 2 years, a proportional drop of 10.1%.

Sale Terraced Houses: Embracing Urban Living

Sale terraced houses have witnessed a resurgence in popularity with many new home builders utilising the modern ‘town house’ in a three-storey format. These houses in modern suburban areas provide a contemporary take on this traditional property type, attracting younger Sale buyers looking for a low-maintenance lifestyle without sacrificing space (as they are built over three floors).

Then we have the Victorian terraced home which offers a blend of affordability, convenience and a sense of community tracing its history back over 100+ years. Young professionals, couples and small families are attracted to the charm and character of these properties, the generous square footage and close to the town centre location, often means the need for a car is reduced.

Between 1995 and 2020, 4,368 terraced homes sold in the Sale area, representing 20.7% of all the property sales in those 26 years.

In the last two years (2021 & 2022), 554 terraced homes sold in the Sale area, representing 25.2% of all the property sales in those 2 years, a proportional increase of 21.5%.

Sale Apartments: The Rise of Vertical Living

Perhaps the most significant transformation in property type preferences over the past three decades can be observed in the increased popularity of apartments in the UK. Rapidly rising land costs and a growing desire for low-maintenance living have propelled the demand for apartment living to new heights.

Apartments offer a range of benefits, including affordability, security, access to amenities and a lock-and-leave lifestyle. Millennials and young professionals are drawn to the convenience and vibrant urban environments that apartments often provide. Additionally, the growing focus on sustainable living and reduced carbon footprints has further fuelled the demand for high-density housing options. Also, the issue of cladding which has become a great worry is hopefully on its way to being sorted.

Between 1995 and 2020, 3,429 apartments sold in the Sale area, representing 16.3% of all the property sales in those 26 years.

In the last two years (2021 & 2022), 447 apartments sold in the Sale area, representing 20.3% of all the property sales in those 2 years, a proportional increase of 24.8%.

This is particularly interesting when we compare the Sale stats to the national picture. Detached houses have seen an increase in demand from 34% of sales a decade ago to 39% last year, semi-detached houses have maintained their appeal and increased from 26% to 28% in the last decade. Terraced houses have witnessed a drop from 26% a decade ago to 21% last year and finally apartments have slightly increased from 11% to 12%.

The property preferences in Sale have experienced notable shifts over the past two years compared to the long-term average of the last three decades. As Sale’s property landscape continues to evolve, it is crucial to analyse these shifting preferences to understand the needs and desires of potential Sale homeowners (and tenants).

Of course, detached houses remain a peak of home ownership, yet as the Sale market is adapting to cater to changing demographics, urbanisation and evolving lifestyles, this might start to change in the coming decade.

By recognising and responding to these trends, homeowners, buy-to-let landlords and planners and developers can ensure that Sale’s property market continues to thrive and meet the demands of the future.

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6-Step Guide to Selling Your Home

As a trusted estate agent with years of experience in the property market, we understand that selling your home can be a daunting task. That’s why we’ve put together a simple, 6-step guide to help you navigate the process with ease.

Step 1: Determine Your Home’s Value

Setting the right price for your property is crucial to a successful sale.

Many homeowners start by using online valuation tools on the portals, which can provide a fair indication of the current market value of your home based on recent sales in the area.

However, these tools are computer-generated valuations and cannot consider such things as your décor, any improvements you have made, or which side of the street you are on (for example one side of your street might have North facing gardens with no views and the other South facing with open views).

We recommend inviting two or three high street estate agents to provide a more accurate valuation. Be sure to ask each local estate agent how they arrived at their valuation, and don’t be swayed by an agent who promises an unrealistically high price.

Step 2: Choose the Right Estate Agent

When choosing an estate agent, it’s important to consider your needs and preferences. If you’re short on time and prefer a more hands-off approach, a traditional high street agency may be the best choice. They will take care of marketing your home and screen viewings (to reduce time wasters) on your behalf. However, if you’re comfortable doing some of the work yourself, an online estate agent may be a more affordable option. However, keep in mind that online agents often require payment regardless of whether your property sells or not.

Step 3: Get Your Home Market-Ready

Before putting your home on the market, it’s important to ensure that it’s in the best possible condition. This means decluttering, depersonalising, and making any necessary repairs or improvements. If you need any guidance on that, do pick up the phone.

Step 4: Market Your Property

Marketing is key to attracting potential buyers for your home, so it’s important to make sure your property is visible across all relevant channels. Your agent should take care of this for you, but it’s worth asking them about their marketing strategy to ensure it aligns with your expectations.

Step 5: Conduct Viewings

Once your property is on the market, you’ll need to conduct viewings for potential buyers. Either the estate agent will take care of this on your behalf, or you can do them yourself. Make sure to prepare your home for viewing and be ready to answer any questions potential buyers may have.

Step 6: Negotiate the Sale

Once you’ve received an offer on your property, it’s time to negotiate the sale. Your agent will handle this on your behalf, but it’s important to be clear about your expectations and preferences. Remember, the goal is to achieve a fair price for your property that satisfies both you and the buyer.

If you’re thinking of selling your home, why not take advantage of our free valuation service?

Our expert team can provide you with an accurate assessment of your property’s value and guide you through the selling process from start to finish. Contact us today to book your no-obligation valuation and take the first step towards a successful house move.

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Could the humble ‘granny annexe’ help solve the Sale housing crisis for mature homeowners?

Most Sale homeowners born before 1960 have been in their homes for more than 25 years.

Yet of all the properties sold in the UK since the first lockdown in the summer of 2020, 50% of those property owners had only been in their homes for six years and four months or less. That means we almost have a two speed housing market.

One market of homeowners in their 20s and 30s who move every four to five years and another property market of homeowners who, when they hit their late 40s, tend to stay put for decades. Yet now those mature homeowners, many of whom are retired and on fixed incomes with pensions, are finding it a lot more challenging to make ends meet with the cost-of-living crisis.

Evidence suggests nationally and locally, a lot of larger houses (property which tends to be owned by mature homeowners) have come onto the market in the last 12 months compared to the previous few years.

There has been a drop of 22.9% of properties priced up to £200,000 on the market in the UK in the last 12 months, yet an increase of 13.3% of properties priced between £500k and £1m.

Focusing on the lower price range nationally, there are 39.4% fewer properties for sale in the price range up to £100k, 27% fewer in the £100k to £150k range and 14.9% fewer in the £150k to £200k range. The range that has seen the highest growth is the £600k to £750k, which has grown by 14.2%.

ooking closer to home in Sale …

there are 18% more properties for sale in the Sale area today, compared to a year ago (396 properties for sale now compared to 336 a year ago).

But it gets much more interesting when you split the increases by bedrooms and property type.

Properties with more bedrooms tend to be more expensive than those with fewer. Also, detached and semi-detached properties are more expensive than terraced/townhouses and apartments.

5-bed Sale properties – an increase of 10%

4-bed Sale properties – an increase of 39%

3-bed Sale properties – an increase of 74%

2-bed Sale properties – a decrease of 12%

1-bed Sale properties – a decrease of 19%

And now, by type …

Sale detached properties – an increase of 5%

Sale semi-detached properties – an increase of 98%

Sale terraced/town house properties – an increase of 38%

Sale apartments – a decrease of 25%

The increase in these larger Sale homes is great news for second or third-time movers, as it releases larger homes for them to bring up their young families.

Yet, the other side is the lack of properties for these mature Sale homeowners to buy.

There are 12.7 million people aged 65 and over in the UK (19% of the total population), yet there are only 2 million bungalows (which represent 7.2% of all UK property).

When it comes to new properties, the figures are even worse.

Of the 173,660 properties built in 2019, only 2,384 were bungalows.

And this is where the annexe could be one part of the solution.

Annexes are buildings often erected in gardens or extended onto an existing property to be used as separate and independent living accommodation.

Generally, the ‘granny annexe’ has been used to keep one’s parents and grandparents nearby whilst retaining their independence. Roll the clock back to the Millennium; annexes were seen as excess accommodation that added little to the saleability or value of property.

Interestingly though, in the last few years, the annexe has had a renaissance and has become a practical, economical and emotional answer for a more flexible group of homeowners.

Lockdown brought working from home to the fore, and the annexe is undoubtedly an excellent solution for many homeowners.

Lockdown saw many people recognise the importance of having their family close by. I have seen several mature Sale homeowners build an annexe extension in the garden, then move into the annexe themselves and give their original property to their children to live in.  Thus helping two families with their accommodation needs and the advantage of shared fuel costs (plus other benefits such as childcare).

Also, as mortgage rates are rising, the annexe could be the salvation for either your first-time buyer child/grandchild who cannot afford to buy their first home because of mortgage affordability rules or who is finding it tough to save a deposit for a mortgage.

The demand is there for annexes. In December 2020, Rightmove reported a year-on-year 89% increase in the number of home buyers and tenants searching for the term ‘annexe’. Demand is high and supply, as seen by these statistics, is low.

Of the 396 properties for sale in the Sale area, only 3 have an annexe.

I believe the lockdown made many of us look at how we live in the UK. Many people are adopting, adapting and changing how they look at housing. With recent planning regulation changes, the rules were relaxed a few years ago, which allowed homeowners to extend their homes without planning permission in an arrangement called ‘Permitted Development’.

If you are a mature/older Sale homeowner or have mature/older parents and want to look at all your options regarding upsizing, downsizing and annexes then, without any obligation, drop me a message and let’s chat through your options.

For everyone else in Sale, what do you think about annexes? And what other solutions could help solve the housing issue in Sale and the UK as a whole?

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Will Sale buy-to-let continue to be profitable in the next few years?

Being a Sale landlord is undoubtedly a challenge. The glory years of making money from ‘any old property’ are certainly in the past. With increased legislation and taxation from Government and the cost-of-living crisis (which will result in some Sale tenants struggling to pay their rent), times are challenging for many landlords.

Then newspapers are full of stories of landlords being pushed into the red as mortgage rates continue to rise. A landlord last summer could have fixed their 5-year buy-to-let rate with a 25% deposit at 1.86%, whilst today the best 5-year deal is with Barclays at 4.36%. This increase will add more than £246 per month to the landlord’s mortgage bill for the average UK buy-to-let property.

Landlords’ mortgages stand at £237.81bn, meaning collectively, landlords could have to pay an additional £7.11 billion per year in mortgage interest payments.

Next, the press is reporting in Q2 2022 (when compared to Q2 2021), landlord possession claims for arrears increased from 6,997 to 18,201 properties (a rise of 160%), property orders from 5,431 to 14,319 (an increase of 164%), warrants from 3,786 to 7,728 (a rise of 104%) and landlord repossessions from 1,582 to 4,900 (a rise of 210%).

This is on the back of the Section 24 tax changes made a few years ago and ahead of expensive energy efficiency upgrades that the Government is expected to legislate for in the coming 12 months.

Doesn’t sound good for landlords.

Until you look past the headlines and look at the actual detail.

79.93% of UK buy-to-let (BTL) mortgages are interest-only mortgages (compared to 12.29% of homebuyers), meaning the repayments are considerably lower than typical homebuyer mortgages. Therefore, the rise in interest rates won’t hit landlords’ profitability as much as many thought initially.

93.21% of all new BTL mortgages agreed in the last two years have been on a fixed rate mortgage, and 73.27% of all existing BTL mortgages are on a fixed rate. So, the increase in mortgage payments will only affect one in four landlords on variable-rate mortgages.

Let us not forget that less than one in three landlords have a BTL mortgage, meaning two out of three landlords aren’t affected by these interest rate rises.

The average rent of a Sale property is now £1,454 per month, an impressive rise of 9.8% compared to a year ago.

Those possession orders mentioned above look high until you realise that there are 4.4 million properties in the private rented sector. That means only 2.04% of UK rental properties had arrears bad enough for landlords (or agents) to start possession proceedings to evict the tenant. Also, only 0.045% of tenants were evicted through the courts in a calendar year.

Talking of arrears, recent studies using statistics from the Government and other letting industry sources show that…

landlords who didn’t use a letting agent to manage their property were 272.5% more likely to be two months or more in rent arrears in 2021. It pays to use a letting agent!

Next, the potential cost of upgrading rental properties’ energy efficiency.

The proposed changes in the MEES regulations a minimum energy efficiency (measured by its Energy Performance Certificate (EPC)) to a ‘C’ rating on new tenancies from 2025 and existing tenancies by 2028. That will cost, on average, £10,000+ per property.

Yet it cannot be forgotten when the rules changed in 2018, properties had to have a minimum EPC rating of E in England and Wales to be legally compliant. If a landlord of an ‘F’ or ‘G’ rated rental property could prove that it would cost more than £3,500 to make those improvements to their EPC rating, then that was the most the landlord had to pay. No doubt something similar will take place in the future proposed legislation.

Then there is the profitability of renting. Rental yields are the primary guide to profitability in buy-to-let.

Yields are starting to rise as Sale rental growth is beginning to outstrip Sale house price growth.

The average yields being achieved in Sale today are:

  • 1 bed – 5.7% yield
  • 2 bed – 4.9% yield
  • 3 bed – 4.1% yield
  • 4 bed – 3.2% yield

Yet investing in buy-to-let isn’t just about the yield.

Demand from tenants plays a massive part in the success or failure of your buy-to-let investment, so other yardsticks, such as void periods, should be considered. There is no point in securing a higher-yielding rental property if that buy-to-let investment remains empty.

My research has found that the Sale overall void period average so far is 41.4% lower than 18 months ago, reducing from 29 days in April 2021 to 17 days in September 2022 (the void period being the time it takes from the date of an old tenant moving out until the new tenant moves in).

Finally, buy-to-let investment is also an excellent hedge against inflation compared to other investments. If you would like more information on that, drop me a line, as it’s too long to post here.

In conclusion, the days of buying any old Sale buy-to-let property at any price and making loads of money from it as easy as falling off a log

are gone!

The next few years will be challenging for everyone. Still, with the advice and opinion of a decent Sale letting agent to guide and support you on your buy-to-let journey, buy-to-let will continue to be a profitable investment.

You need to review your rental portfolio regularly. See how your portfolio measures up against yield vs capital growth see-saw. Review your mortgage financing and EPC status of your portfolio. 

If you would like a no obligation chat with me to discuss your options as a new potential landlord or an existing landlord with a rental portfolio, then let’s talk.

Let us see whether your expectations from buy-to-let match your potential investment in Sale property. I look forward to you picking up the phone or sending me a message for a no-obligation chat.

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Lymm’s ‘Generation Stuck’ and Their £934m Tied-up Equity

The predicament of the Lymm 20 to 30 year olds who rent and their inability to get onto the housing ladder is often discussed in the press.

There are 4.43m properties in the UK that are still in the private rented sector (compared to 2.13m in 2002).

This group of people in their 20s and 30’s, who rent from a private landlord, are often called ‘Generation Rent’.

Yet would it surprise you that since 2017, the number of UK households in the private rented sector has reduced by 260,000 whilst the number of homeowners has increased by 1.1m?

In this article I want to talk about another set of people, not ‘Generation Rent’, but ‘Generation Stuck’.

Generation Stuck are our middle-aged and mature homeowners of Lymm. They are the generation that could be described as late ‘Baby Boomers’ (born in late 1950s and early 1960s) and the early ‘Gen X’ (born in the mid 1960s to early 1970s).

These 50 to 64 year old people feel stuck in their Lymm homes, and therefore I have nicknamed them ‘Generation Stuck’. Their inability to move could be holding back those younger Lymm ‘Generation Renters’.

So, let me look at the numbers involved.

In Lymm, there are 904 households, whose owners are aged between 50 and 64 years old and about to pay their mortgage off on property that is worth £440.42m.

There are an additional 1,015 mortgage free Lymm households, owned by 50 to 64 year olds, worth £494.50m, meaning …

Lymm ‘Baby Boomers’ and Lymm ‘Gen X ‘are sitting on £934.9m worth of Lymm property.

According to the Census, 47.8% of homes occupied by 50 to 64 year olds have two or more spare bedrooms.

This is backed up by the annual English Housing Survey that states nationally, 49% of properties occupied by these ‘Generation Stuck’ are ‘under-occupied’.

Under-occupied is categorised as having at least two spare bedrooms.

Looking at the statistics closer to home

52.7% of Warrington 50 to 64 year olds have two or more spare bedrooms, making it the 124th highest local authority in the country (out of 348 local authorities).

The rising number of older Lymm homeowners who want to downsize their Lymm home are often held back by the lack of suitable housing options for older people and the difficulties of moving.

Lots of over 50 year old Lymm people cannot move home in the way that they would like, due to a lack of suitable housing options and so can find themselves ‘stuck’ in homes which are no longer suitable for them as they age.

Only 1 in 29 people over the age of 50 move home each year, compared to 1 in 15 for the rest of the population.

Helping mature Lymm homeowners (Generation Stuck) to downsize their homes at the right time will also allow younger Lymm people (Generation Rent) to find the Lymm family homes they need – meaning every generation wins, both young and old.

However, to ensure downsizing works, we need more choices for these “last-time-buyers”.

That means building more bungalows or more ground floor apartments suitable for the middle to older generation.

One way this could be done is by changing the planning rules to force builders to build these types of properties, whilst the other could be the changing of the stamp duty tax breaks for downsizers.

In this way, older Lymm people will be more able to move into homes which suit their specific needs, improve their quality of life whilst meeting their goals in life, all without them becoming detached from their friends and family locally in the Lymm area.

These are my thoughts, please let me know yours.

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Why Aren’t Liz and Rishi Courting Lymm’s Generation Rent?

With the cost-of-living crisis beginning to hit, the 20 and 30-somethings of Lymm urgently need the help and support of the Government to help them get on the property ladder.

For the last few weeks, we have listened to the debates and hustings of Liz and Rishi. Between them, they have told us how they are going to stop building on the green belt, slash taxes, outbid each other on the number of refugees they are going to deport and push back against WOKE culture wars, but what are they doing for the 20 to 30-somethings of Lymm?

Dubbed ‘Generation Rent’ by the press, desperate to get on the property ladder, this is an open goal for any candidate to obtain more votes to become the next Prime Minister.

Yet only 16% of the c.200,000 Tory membership is aged 18 to 34

whilst 47% of members are aged between 55 and 74.

Therefore, it’s not a surprise that neither Liz nor Rishi aren’t speaking daily about the cost of petrol for the daily commute, rising childcare fees or the lack of opportunities for first-time buyers to purchase their own properties.

(For balance, 16% of Labour’s members are 18 to 34, 20% for the Lib Dems and 16% for the SNP).

Everyone is feeling the effect on their household budgets with the rise in energy bills. Yet, it is the younger generation (i.e., Generation Rent) that are having to cope with the frenzy of rising energy costs the most.

Whilst increasing energy prices will affect all households across the country, younger (and less affluent) households are more prone to be disproportionately affected than those on the lowest incomes (i.e., Generation Rent).

In the financial year ending in 2020, the least well off 25% of households spent 5.59% on energy compared to 3.9% for the average UK household. With 2023 energy bills set to be triple those figures, energy bills for those in the lower quartile will rise to around 16.8% of their household budget.

And let’s look at the housing element of the ‘Generation Rent’ household budget.

The average rental of a Lymm property in the summer of 2020

was £1,147 PCM; by the summer of 2021, itwas £1,186 PCM,

and today, it is £1,296 PCM.

Overall, Lymm rents are 9.3% higher than a year ago and 13.1% higher than two years ago.

This is the fastest annual rate of rental growth since records began in 2006. This increase in rents isn’t standard. Before 2020, I would have expected to see this level of rent growth over a seven-to-ten-year period – not two years. Good news for Lymm landlords, yet not so for Lymm tenants.

Why have rents increased so much in Lymm?

It comes down to fewer rental properties and existing Lymm tenants not moving as much.

There are 41 fewer rental properties in Lymm than five years ago, leaving only 724 private rental properties in Lymm.

9 out of 10 rentals come onto the market because the existing tenant is moving. Yet, because there are fewer Lymm rental properties and the asking rents for those are much higher than their current home, many Lymm tenants are not moving, exasperating the issue even further.

Today, I looked on Rightmove, and there were only 11 properties available to rent. I would have expected that to be over double that pre-pandemic.

Neither candidate has been silent on the topic of homeownership for the young.

Rishi Sunak said he would stop building on the greenbelt. This, however, would not help Generation Rent massively.

Liz Truss has pledged to help more renters buy their first home by stating she will ensure tenant’s rental payments could be used as part of mortgage affordability assessments. This is important as the mortgage payments can be 10% to 20% lower than the rental payments.

 

Tied in with new relaxed mortgage affordability rules announced by the Bank of England in early August, this is undoubtedly a step in the right direction to help Generation Rent.

 

Truss also plans to scrap the red tape holding back housebuilding and give local populations more say on developments. However, when Boris Johnson suggested something similar a few years ago, the policy was quietly dropped after the Liberal Democrats used this against them resulting in the Tory’s resounding by-election defeat in 2021 in Chesham and Amersham. So, by the end of the first week of September, we will know who the Prime Minister will be. Whoever gets the job has a gigantic task on their hands. I wish them luck and ask them not to forget the younger generation and their aspiration to be homeowners.

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Lymm Starter Homes are 25.8% Cheaper Today Than in 1989

Even though the average value of a Lymm first-time buyer property has risen by 361.4% since 1989 to £355,430, the monthly payments Lymm first-time buyers must make on their mortgages as a proportion of their take-home pay is 25.8% less today compared to 1989.

Today, according to the Nationwide Building Society…

the average Lymm first-time buyer only needs to pay out 24.5% of their household take-home pay on their mortgage payments, compared to 33.0% in 1989 (i.e., just over a quarter less).

You might say 1989 was 33 years ago, a long time ago and not relevant to today. I would agree.

So next, I looked a little closer to home, and in 2007…

the average Lymm first-time buyer had to spend 37.9% of their household income on mortgage payments (i.e., 35.4% proportionally cheaper than today).

So why do I say all these things?

Last month, the Bank of England revealed that its Financial Policy Committee would be removing their mortgage market affordability test on people taking out mortgages in August.

The test was introduced in 2014 to ensure the UK didn’t have a repeat of the 2008 Credit Crunch and particularly hit first-time buyers with what they could afford to buy.

This rule change means Lymm property buyers could soon be able to borrow thousands of pounds more and purchase larger homes.

The decision to withdraw the affordability test certainly raised eyebrows in the press, primarily as the Bank of England has raised interest rates five times in the last six months to try and reduce rising inflation. Yet, as stated in the first part of this article, Lymm first-time buyers are comfortably paying their mortgages compared to previous years – therefore everything should be ok with this rule change.

The old rules tested home buyers on mortgage repayments if interest rates rose to 6%/7%, yet the Bank thought that rule was too harsh.

Not all rules have been changed, as the important Bank of England ‘loan to income ratio’ stays put.

The Bank were keen to stress that the mortgage market was not going to turn into a free-for-all, as it did in the mid-2000s when the likes of Northern Rock were offering 125% mortgages, and a sixth of all UK mortgages were given without proof of income.

I believe it will have a progressive effect on the Lymm property market.

Many Lymm tenants who have been paying rents far more than actual mortgage payments for the same Lymm home, but have failed affordability assessments regardless, will now be able to get on the property ladder.

The rule change should open the Lymm property market up a little more and allow house prices to grow in Lymm.

I advise anyone who has been refused a mortgage on affordability in the past to speak to a mortgage arranger. If you don’t know of one, drop a message to me, and I will give you details of mortgage arrangers you could talk to.

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Has the Property Market Peaked?

Should you buy now or wait for the bargains?

  • Many commentators believe we have seen the peak of the property market.
  • So, should savvy bargain hunters wait for house prices to fall?
  • Or could postponing your house buying for any anticipated house price drop be a costly mistake?

Over the last two years, the property market has been a rollercoaster ride of hyperactive demand together with the new sport of getting your offer accepted when you compete with 30 other bidders.

Yet there are clouds on the horizon that the property market could be at its peak.

Bank of England interest rates have increased four times in the last few months to try and combat inflation. Meanwhile many households are finding it tough to counter the most significant drop in real incomes in a single year since records began in the mid-1950s, all at the same time as gas, heating oil and electricity prices are predicted to rise again in the autumn.

Hence why some economists are predicting house price drops in the coming 18 to 24 months of 3% to 5%.

So, surely this is not the best time to buy a property – and surely savvy buyers should wait for house values to fall?

Is it realistic to see double-digit national house price growth? Certainly not.

The question is how far the property market will slow and whether the slowing will drop into modest falls.

Let me look at household income first.

At best, the outlook is gloomy as real household disposable income is set to drop by 2.4% in 2022/23, the largest drop since records began in 1956. This is despite the £17.6 billion of financial support for British households revealed in Rishi Sunak’s Spring 2022 Statement with the National Insurance thresholds, energy bill support package and duty cut on petrol. Without these changes announced by the Chancellor, real household disposable income would have fallen by an additional 1% in 2022/23.

Second, as interest rates increase, mortgage rates will increase in line, increasing mortgage costs, so surely that will curtail demand, meaning house prices will drop, and buyers should wait to catch a bargain?

Finally, with inflation on the rise, the real value of people’s savings will decrease quicker, and the value of their deposits will diminish, meaning prices will surely drop, and people should wait to buy?

Surely the property market has peaked and buyers should wait for the bargains?

Well, I don’t think so, and these are the reasons why I say that.

I believe, subject to no significant shocks in the world economy, house price growth will be very slow in the next 18/24 months and go into low single digits (even the odd month dipping ever so slightly into the red), but not the 16% to 19% annual drop we saw in 2008/9.

Let me look at real household income. Every economist predicts growth in real household income in 2023/24 by around 1%.

If the two years are combined, the predicted effect on real household income in the next two years (2022/23/24) is a net loss of 1.4%, whilst in the credit crunch years 2010/11/12, the net loss was 2.7%.

I was looking at the increase in mortgage rates. 79% of owner-occupiers have fixed their mortgage costs and had their affordability stress-tested to Bank of England interest rates of 3% to 4% under the Mortgage Market Review rule changes in 2014. I believe the most significant impact of increasing interest rates will be at the point of taking on a new mortgage by first-time buyers (as opposed to servicing or the porting of an existing mortgage from one house to the next house).

The four successive Bank of England base rate rises, inflation and the rising cost of living are likely to bring more cautiousness over summer and autumn when it comes to people buying a property. Yet, there is still a massive imbalance of demand for property over the number of properties for sale to quench that demand.

The potency of the job market and the ongoing mismatch between the supply of properties on the market and demand for those properties will support property values.

Finally, the by-product of increasing inflation is that it makes buy-to-let more attractive. If there is a reduction in first-time buyers, this will be counterweighted by more landlords buying again, supporting the current level of properties.

But what if house prices do drop significantly?

So let’s assume that house prices do fall, irrespective of the reasons above, it will not inevitably help buyers.

If we have a house price crash, people tend to find their careers are at risk, and their salaries don’t rise as much. The younger generation (i.e. first-time buyers age range) often gets hit the toughest by recessions.

If first-time buyers wait until 2024 to buy and property values drop by 10%, that will prove more expensive.

In the last 2008/09 crash, lenders weren’t offering 5% deposit mortgages. The lowest deposit mortgage that first-time buyers could get was with a 10% deposit and even then, they were hard to come by.

When writing this article, first-time buyers can obtain a 5% deposit mortgage for a fixed rate of 2.66% for five years.

If we look at Lymm as an example, the typical first-time buyer terraced house in LymM sells for £341,000.

So, if they were to buy now, on this mortgage deal, the first-time buyer would have to stump up a £17,050 deposit and their mortgage payments would be £1,186.07 per month.

Yet, let’s say property values in Lymm do drop by 10% in the next 18 months, the terraced house would now be worth £306,900, so a significant saving. Or is it?

Everyone believes interest rates will rise further, so let’s assume they go to 3% by the autumn of 2023. That means the mortgage rate for a 10% deposit mortgage will be in the early 5%’s, so let me assume 5.29% (because the banks tend to increase the gap between the base rate and the mortgage rate in recessions to allow for the extra risk).

The monthly mortgage payment on the 5.29% mortgage would be £1,445.50 per month, and you would need to double your deposit to £30,690.

So even if Lymm’s house prices did drop by 10%, the first-time buyer would be £3,110 worse off a year in mortgage payments and would have to find double the deposit.

…and then there is the other cost of waiting.

You have two years’ worth of rent to pay. The average rent for a Lymm property is £1,185 per month.

If you waited a couple of years for Lymm house prices to drop by 10%, you would spend £28,440 in rent.

Choosing to buy a Lymm property makes even more economic sense if it is a long-term choice, as homeowners can ride out any house price drops.

Homeowners who plan to stay in a property can generally rely on getting their money back within six to ten years whilst not paying any rent.

Will prices go up, or will they go down?

Remember, George Osbourne said house prices would drop by 18% in May 2016 if we voted to leave the EU, whilst many economists said they would drop by 5% to 10% when Covid hit in March 2020.

And we all know what happened.

If you think you will be better off owning your own home rather than renting one, don’t bother to wait for the suggested house price drop that may never happen.

These are my thoughts, what are yours? Let me know in the comments.

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Sale Property Market to Crash in 2022?

  • According to some newspapers and pundits, the property market boom could soon be over with the increasing interest rates and inflation.
  • In this article, I share the 3 fundamental economic reasons why things are different to the last property market crash.
  • The insider’s way to find out if there will be a property crash.
  • … and 4 reasons why buy-to-let landlords are coming back into the Sale rental market to protect their wealth and hedge against inflation.

With inflation and the cost-of-living crisis, some say this could cause property values to drop by between 10% and 20% in the next 12 to 18 months.

There can be no doubt that the current Sale property market is very interesting. 

At the time of writing, there are only 278 properties for sale in Sale (the long-term 15-year average is between 970 and 990), meaning house prices have gone up considerably.

According to the Land Registry …

Sale property prices have increased by 8.2% (or £26,600) in the last 12 months.

So, as Robert Kiyosaki says, ‘the best way to predict the future is to look to the past’. I need to look at what caused the last property crash in 2008 and how that compares to today.

  1. Increase in Interest Rates

One reason mentioned as a possible cause of a crash is the rise in the Bank of England interest rates, affecting homeowners’ mortgages.

Higher mortgage rates mean homeowners will have to pay a lot more on their mortgage payments, leaving less for other household essentials. In 2007 (and the 1989 property crash), many Sale people put their houses up for sale to downsize to try and reduce their mortgage payments.

Yet the newspapers fail to mention that 79% of British people with a mortgage have it on a fixed interest rate (at an average mortgage rate of 2.03%).

Also, just under 19 out of 20 (93.2%) of all UK house purchases in 2021 fixed their mortgage rate. 

So, in the short to medium-term (two to five years), most homeowners won’t see a rise in mortgage payments for many years. Also, 27.8% of all UK house purchases were 100% cash (i.e. no mortgage).

Of the 932,577 house purchases registered since February 2021 in the UK, 259,205 were bought without a mortgage.

Yet some people say this will be a problem when all these homeowners come off their fixed rate. The mortgage lending rules changed in 2014, and every person taking out a mortgage would have been assessed at application as to whether they could afford their mortgage payments at mortgage rates of 5% to 6% rates, not the 2% to 3% they may well be paying now.

No pundit says the Bank of England interest rates will go above 2% with a worst-case scenario of 3%. If the Bank of England did raise interest rates to 3%, homeowners would only be paying 4.5% to 5.5% on their mortgages and thus well within the stress test range made at the time of their mortgage application.

This means the probability of a mass sell-off of Sale properties or Sale repossessions because of interest rate rises (both of which cause house prices to drop) is much lower.

2. House Price/Salary Ratio

Another reason being bandied about by some people for another house price crash is the ratio of average house prices compared to average wages.

The higher the ratio, the less affordable property is. In 2000, the UK average house price to average salary ratio was 5.30 (i.e. the average UK house was 5.3 times more than the average UK salary). At its peak just before the last property crash in 2008, the ratio reached 8.64.

The ratio now is 8.85, so some commentators are beginning to think we’re in line for another house price crash. However, I must disagree with them because mortgage rates are much lower today than in 2007. For example …

The average 5-year fixed-rate mortgage in 2007 was 6.19% (just before the property crash), yet today it’s only 1.79%.

So, whilst the house price/salary ratio is the same as the last property crash in 2008, mortgages today are proportionally 71.1% cheaper.

3. Banks Reckless Lending

Another reason for a property crash in 2008 was the reckless lending practices in the run-up to that crash.

The first example of reckless lending was self-certified mortgages. A self-certified mortgage is when the lender doesn’t require proof of income.

In 2007, 24.6% of new mortgages were self-certified mortgages.

So, when the economy got a little sticky in 2008, the people that didn’t have the income they said they had to pay for their mortgages (because they were self-certified) promptly put their properties on the market.

The banks’ second aspect of reckless lending was how much they lent buyers to buy their homes. Today, banks want first-time buyers to have at least a 10% deposit and ideally more. There are 95% mortgages available now (meaning the first-time buyer only requires a 5% deposit), yet they are pretty challenging to obtain.

Back in 2005/6/7, Northern Rock was allowing first-time buyers to borrow 125% of the value of their home. Yes, first-time buyers got 25% cashback on their mortgage!

In 2007, 9.5% of all mortgages were 95%, and 6.1% of mortgages were 100% to 125%.

Meaning that nearly 1 in 6 mortgages (15.6%) taken out in 2007 had a 95% to 125% mortgage.

When the value of a property goes below what is owed on the mortgage, this is called negative equity. A lot of Sale homeowners with negative equity (or who were getting close to negative equity) in 2008 panicked because of the Credit Crunch and put their houses up for sale.

To give you an idea of what happened last year (2021) regarding mortgage lending, only 2.4% of mortgages were 95%, and 0.2% of mortgages were 100%. This is because the mortgage lending rules were tightened in 2014.

So why did Sale house prices drop in 2008?

Well, in a nutshell, a lot more Sale properties came onto the market at the same time in 2008, flooding the Sale property market with properties to sell.

Meanwhile, mortgages became a lot harder to obtain (because it was the Credit Crunch), so we had reduced demand for Sale property.

Prices drop when we have an oversupply and reduced demand for something. Sale property prices fell by between 16% and 19% (depending on the property type) between January 2008 and May 2008.

So, what were the numbers of properties for sale in Sale during the last housing market crash?

There were 1,305 properties for sale on the market in Sale in the summer of 2007 (just before the crash), whilst a year later, when the Credit Crunch hit, that had jumped to 2,220.

This vast jump in supply and the reduction in demand caused Sale house prices to drop in 2008.

Compared with today, there are only 278 properties for sale in Sale, whilst the long-term 15-year average is between 970 and 990 properties for sale.

So, what is going to happen to the Sale property market?

The Sale house price explosion since we came out of Lockdown 1 has been caused by a shortage of Sale homes for sale (as mentioned above) and increased demand from buyers (the opposite of 2008).

However, there are early signs the discrepancy of supply and demand for Sale properties is starting to ease, yet this takes a while before it has any effect on the property market, so it will be some time before it takes effect.

This will mean buyer demand will ease off whilst the number of properties to buy (i.e. supply) increases. This should gradually bring the Sale property market back in line with long-term levels, rather than the housing market crash.

My advice is to keep an eye on the number of properties for sale in Sale at any one time and only start to worry if it goes beyond the long-term average mentioned above.

But before I go, I need to chat about what inflation and the cost of living will do to the Sale property market.

How will inflation and cost of living affect the Sale Property Market?

There is no doubt that cost-of-living increases will have a dampening effect on buyer demand. If people have less money, they won’t be able to afford such high mortgages. This will slow Sale house price growth, especially with Sale first-time buyers.

Yet, the reduction in first-time buyers is being balanced out by an increase in buy-to-let landlord’s buying, especially at the lower end of the market.

This, in turn, will stabilise the middle to upper Sale property market. This means the values of such properties (mainly Sale owner-occupiers) will see greater stability and a buyer for their home, should they wish to take the next step on the property ladder.

So why are more Sale landlords looking to extend their buy-to-let portfolios, even in these economic circumstances?

I see new and existing buy-to-let Sale landlords come back into the market to add rental properties to their portfolios. As the competition with first-time buyers is not so great, they’re not being outbid as much.

Yet, more importantly, residential property is a good hedge against inflation.

Firstly, in the medium term, property values tend to keep up with inflation.

Secondly, inflation benefits both landlords and existing homeowners, with the effect of inflation on mortgage debt. As Sale house prices rise over time, it reduces the loan to value percentage of your mortgage debt and increases your equity. When the landlord/homeowner comes to re-mortgage in the future, they will receive a lower interest rate.

Thirdly, as the equity in your Sale property increases, your fixed-rate mortgage payments stay the same.

Finally, inflation also helps Sale buy-to-let landlords. This is because rents tend to increase with inflation. So as rents go up, your fixed-rate buy-to-let mortgage payments stay the same, creating the prospect of more significant profit from your buy-to-let investment.