Local property market information for the serious investor

Month: October 2017

Edgware Home Owners Are Only Moving Every 16 Years (part 1)

As I mentioned in a previous article, the average house price in Edgware is 16.02 times the average annual Edgware salary. This is higher than the last peak of 2008, when the ratio was 10.37. A number of City commentators anticipated that in the ambiguity that trailed the Brexit vote, UK (and hence Edgware) property prices might drop like a stone. The point is – they haven’t.

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

The Total Number of Property Sales Per Annum in Edgware

and the Barnet London Borough Council Area Since 1995

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
4,758 6,254 6,853 6,500 7,083 6,648 6,942 7,446 6,313 6,798 5,459
                     
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
6,832 6,950 3,493 3,214 4,209 3,951 4,085 4,746 4,914 4,961 4,909

 

 

Even though we are not anywhere near the post credit crunch (2008 and 2009) low levels of property sales, the torpor of the Edgware housing market following the 2016 Brexit vote has seen the number of property sales in Edgware 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 Edgware 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 Edgware people moving home has slumped to once every 16 years.

If you are a landlord or thinking of becoming one for the first time, and you want to read more articles like this about the Edgware Property Market together with regular postings on what I consider the best buy to let deals in Edgware, out of the many of properties on the market, irrespective of which agent is selling it, then feel free to get in touch! Email me at Steve@benjaminstevens.co.uk

If you are in the area feel free to pop into the office we are based at 194 Station Road Edgware Middlesex HA8 7AT– the kettle is always on.

Don’t forget to visit the links below to view back dated deals and Edgware Property News.

Blog – http://www.benjaminstevens.co.uk/edgware-property-blog

Facebook – https://www.facebook.com/BenjaminStevensEstateAgents

Twitter – https://twitter.com/BenjamStevensEA

Website – http://www.benjaminstevens.co.uk

 

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Edgware House Prices Outstrip Wage Growth by 21.12% since 2007

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 Edgware. 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 Barnet London Borough Council, some interesting figures came out…

Barnet London Nationally
2007  £28,688  £28,907  £23,920
2008  £30,618  £30,238  £24,960
2009  £32,349  £31,106  £25,506
2010  £32,063  £31,533  £26,088
2011  £32,313  £31,658  £26,010
2012  £31,034  £31,892  £26,432
2013  £31,819  £31,892  £26,931
2014  £32,115  £32,089  £27,097
2015  £32,682  £32,282  £27,508
2016  £33,212  £32,885  £28,132

 

Salaries in Barnet have risen by 15.77% 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 13.76%) 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 Barnet are 36.89% higher than they were in late 2007 (not forgetting they did dip in 2008 and 2009). Therefore…

Property values in the Edgware area have increased at a higher rate than wages to the tune of 21.12% … meaning, Edgware 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 Edgware landlords as they need to be aware of this when making their buy-to-let plans for the future. If more Edgware people are buying, then demand for Edgware 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 Edgware 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 simultaneously, meaning for many Edgware 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 Edgware tenants and decent law-abiding Edgware landlords (and indirectly owner occupier homeowners). Whatever has happened to salaries or property prices in Edgware 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 Edgware property market is going.

If you are a landlord or thinking of becoming one for the first time, and you want to read more articles like this about the Edgware Property Market together with regular postings on what I consider the best buy to let deals in Edgware, out of the many of properties on the market, irrespective of which agent is selling it, then feel free to get in touch! Email me at Steve@benjaminstevens.co.uk

If you are in the area feel free to pop into the office we are based at 194 Station Road Edgware Middlesex HA8 7AT– the kettle is always on.

Don’t forget to visit the links below to view back dated deals and Edgware Property News.

Blog – http://www.benjaminstevens.co.uk/edgware-property-blog

Facebook – https://www.facebook.com/BenjaminStevensEstateAgents

Twitter – https://twitter.com/BenjamStevensEA

Website – http://www.benjaminstevens.co.uk

 

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Moving from a 2 bed Edgware Property to a 4 bed will cost you £1,660 pm

Moving to a bigger home is something Edgware 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 Edgware homes are much in demand and it can be a costly move.

If you live in Edgware in a two-bedroom property and wish to move to a four-bedroom house in Edgware, you would need to spend an additional £420,250 (or £1,659.99 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 Edgware 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 an Edgware property by the number of bedrooms it has.

Average Property Price in Edgware by Bedroom
1 bed 2 bed 3 bed 4 bed 5 bed
£275,445 £400,925 £564,441 £821,174 £1,016,634

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).

Edgware
Price Difference to make the move Cost per month to move up market (Mortgage)
1 bed to 2 bed £125,480  £495.64
2 bed to 3 bed £163,517  £645.89
2 bed to 4 bed £420,250  £1,659.99
3 bed to 4 bed £256,733  £1,014.09
4 bed to 5 bed £195,459  £772.06

There are some interesting jumps in costs when moving upmarket as an Edgware 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 Edgware 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 Edgware would cost you 45.48% 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 Edgware, this also makes interesting reading …

Housing Stock in Edgware by Bedrooms
1 bed 2 bed 3 bed 4 bed 5 bed
8.57% 32.21% 32.21% 20.78% 6.23%

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 Edgware, they face stiff competition from these 20/30 something families, making the three bedroom Edgware 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 Edgware 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 Edgware family homebuyers.

Yet, the cost of an additional bedroom can be too much for some Edgware 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 Edgware 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 Edgware landlords – well these changes in the way people live also mean there are opportunities to be had in the Edgware rental market. Many Edgware landlords are starting to pick my brain on this, so if you don’t want to miss out – drop me a line.

If you are a landlord or thinking of becoming one for the first time, and you want to read more articles like this about the Edgware Property Market together with regular postings on what I consider the best buy to let deals in Edgware, out of the many of properties on the market, irrespective of which agent is selling it, then feel free to get in touch! Email me at Steve@benjaminstevens.co.uk

If you are in the area feel free to pop into the office we are based at 194 Station Road Edgware Middlesex HA8 7AT– the kettle is always on.

Don’t forget to visit the links below to view back dated deals and Edgware Property News.

Blog – http://www.benjaminstevens.co.uk/edgware-property-blog

Facebook – https://www.facebook.com/BenjaminStevensEstateAgents

Twitter – https://twitter.com/BenjamStevensEA

Website – http://www.benjaminstevens.co.uk

 

 

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30.7% Drop in Edgware People Moving Home in the Last 10 Years

I was having a lazy Saturday morning, reading through the newspapers at my favourite coffee shop in Edgware.  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.  aAd others feature articles about the severe lack of new homes being built (which is especially true in Edgware!).  A However, 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, although this has steadily recovered,  since then, 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 .  … Tbut the question is … why are there fewer house sales?

 

To answer that, we need to go back 40/50 years.  Inflation was high in the late 1960’s, 70’s and early 80’s.  To combat thisat, the Government raisedset interest rates to a high level in a bid high to try 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, thisat wasn’t all bad news sinceas the high inflation tends to eroded the mortgage debt in ‘real spending power terms’.  Consequently, as wages grew (to keep up with inflation), this allowed home ownersthem to get even biggeran even higher mortgages.  At the same time (whilst their mortgage debt was decreasing, ) and 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 significantlyexponentially, meaning people could continue to move up the property ladder (even without the effects of inflation).

This snowball effect (of significant numberseveryone moving house) continued into the mid noughties (2004 to 2007), as Banks and Building Society’s slackened their lending criteria.  [You (who will probably can remember the 125% loan to value Northern Rock Mortgages that could be obtained with just a note from your Mum!!].  This ) meanting 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) (a 320+ year all time low), the the number of people moving would be booming – wouldn’t you ?  However, this has not been the case.  Less people are moving because:

with

(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

( and (4) high property values comparative to salaries (I talked about this a couple of months ago)

What does this translate to in pure numbers locally?), all these four points have come together to mean less people are moving … but by how many?

In 2007, 6,950 properties sold in the London Borough of Barnet Council area and last year, in 2016 only 4,814 properties sold – a drop of 30.73%.

Therefore, we have just over 2,135 less households moving in the Edgware 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 1,752 mortgaged households a year (fourth fifths of the figure of 2,135) in the Edgware 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 abased on a recent report by the Council of Mortgage Lenders (CML). So, of those estimated 1,752 annual Edgware (and surrounding area) non-movers, based on that CML report –

 

  1. 1.         There are around 631 households a year that aren’t moving due to a fall in the number of mortgaged owner occupiers (i.e. demographics).

 

  1. 2.         I then estimate another 245 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 (i.e. lifestyle).

 

  1. 3.         Then, I estimate 105 households of our Edgware (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 (i.e. high house price growth).

 

  1. 4.         Finally, and the majority of people that would have moved (but can’t). I believe there are 771 Edgware (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 (i.e. mortgage).

 

Undoubtedly,  whilst the first three points above (demographics, lifestyle and high price growth) is something beyond the Government or Bank of England control.  However could there be some influence exerted to help, it is the fourth point where something could be done , as it is the people and households in that final 4th point (the non-movers because of financing the new mortgage and keeping within the new rules of mortgage affordability?) that if Edgware 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.

And 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.

If you are a landlord or thinking of becoming one for the first time, and you want to read more articles like this about the Edgware Property Market together with regular postings on what I consider the best buy to let deals in Edgware, out of the many of properties on the market, irrespective of which agent is selling it, then feel free to get in touch! Email me at Steve@benjaminstevens.co.uk

If you are in the area feel free to pop into the office we are based at 194 Station Road Edgware Middlesex HA8 7AT– the kettle is always on.

Don’t forget to visit the links below to view back dated deals and Edgware Property News.

Blog – http://www.benjaminstevens.co.uk/edgware-property-blog

Facebook – https://www.facebook.com/BenjaminStevensEstateAgents

Twitter – https://twitter.com/BenjamStevensEA

Website – http://www.benjaminstevens.co.uk

 

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