236 Warminster Landlords Plan to Expand Their Buy To Let Portfolios

A noteworthy number of buy to let landlords in Britain plan to buy more properties over the next year notwithstanding the frustrations, challenges and seismic changes in the private rented sector. According to Aldermore, the specialist buy to let lender, their research shows around 41% of portfolio buy to let landlord’s objective is to grow their buy to let portfolio (Portfolio landlords are landlords that own more than one rental property).

So, I thought, “Are Warminster landlords feeling the same?” If so, if these numbers were applied to the Warminster private rental market, what sort effect would it have on the Warminster property market as whole?

Talking to the landlords I deal with, many are feeling optimistic about the future of the Warminster rental market and the prospect it presents even with the doom and gloom prophecies that the property market will shrink. Many of those landlords who are looking to enlarge their portfolio are doing so because they still see the private rental market as a decent investment opportunity.

With top of the range Bank and Building Society Savings Accounts only reaching 1.5% a year, the rollercoaster ride of crypto currency and the yo-yoing of the stock market, the simple fact is, with rental yields in Warminster far outstripping current savings rates, the short term prospect of a readjustment in property prices isn’t putting off Warminster landlords.

The art to buying a Warminster buy to let investment is to buy the profit on the purchase price, not the anticipation of the future sale price.

No matter what the historical economy has thrown at us, with the global meltdown in 2008/9, dotcom crash of 2000, ERM in 1992, the three day week, oil crisis and hyperinflation in the 1970’s (the list goes on) ... the housing market has always bounced back stronger in the long term. That’s the point ... long term. Investing in buy to let is a long-term strategy. The simple fact is, over the long term with the increasing demand for rental properties, predominantly among Millennials as many cannot afford to get on the property ladder, and with councils not building enough properties of any kind, many youngsters are having to resort to the private rental market for their accommodation needs.

So, what of the numbers involved in Warminster?

There are 264 landlords that own just one buy to let (BTL) property in Warminster and 575 Warminster landlords, who are portfolio landlords. Between those 575 Warminster portfolio BTL landlords, they own a total of 1,207 Warminster BTL properties and they can be split down into the size of landlord portfolio in the graph below….

If I apply the Aldermore figures that means 236 Warminster landlords have plans to expand their BTL portfolio in the coming year or so.

However, the Aldermore Research also showed that 8% of private landlords intended to reduce the number of properties they own. They put this down to continuing Government intervention in the housing market (as many landlords mentioned too many limitations and higher taxation) while some believed that tenants are excessively protected to the disadvantage of the landlord.

I would say there is no arguing that the buy to let market has taken a bit of a beating, thanks to a plethora of Government regulation, new mortgage underwriting rules in 2014 and George Osborne’s tax changes. Yet there still remains an overall consciousness of optimism among the vast majority of landlords. Despite these latest changes, many landlords still view buy to let as a good investment.

If you want to buy right and assess your own portfolio on the yield/capital growth seesaw ... drop me a note.

Warminster Property Market – Asking Prices Down 10.9% in the Last 12 Months

The average asking price of property in Warminster dropped by 10.9% or £34,288 compared to a year ago, taking the current average asking price to £280,949 compared with £315,237 this time last year.

The overall drop in asking prices is being put down to sellers being more realistic with their pricing and looking to benefit from the impending mortgage interest rate rises which are likely later in 2018. This is great news for first, second and third time buyers in Warminster starting their property hunting in the active late spring / early summer market this year.

Even better news is that whilst first time buyers also have to pay less for their property, they also have the bonus of the Chancellor stopping Stamp Duty being paid by first time buyers!

Looking at the different sectors of the Warminster property market, splitting it down into property types, one can see what is happening to each sector of the market with regard to their average asking prices now compared to a year ago. So looking at the pound note amounts…

Interestingly, when one looks at the percentages, the most movement in average asking price pressure is in the detached property type sector.

Now, I must stress this overall drop in the asking prices of Warminster property doesn’t necessarily mean the value of Warminster property is going down by the same amount.

Only time will tell if the current levels of Warminster asking prices is a correction of optimistic house sellers after a couple of months of over enthusiastic asking price rises, or is it an initial sign that property values are slipping. To judge what is really happening to the Warminster property market, I believe these asking prices must be viewed in conjunction with both the values achieved and the length of time it takes to sell the property.

Also, these figures are averages, so it might also mean less expensive types of Warminster semi-detached or Warminster detached, are on the market now, this dragging the average down, compared to a year ago.

One thought I would like to share with the Warminster homeowners and landlords wanting to sell their property, is the fact they need to be aware of the competition of other people selling their homes. One factor that could be contributing to a subdued demand for local property is the progressively strained buyer mortgage affordability (i.e. banks telling people they can only afford so much on a mortgage), meaning more and more buyers are hitting their maximum on the amount they are able to borrow on a mortgage sooner than they thought.

So, what does this all mean, especially for buy to let landlords in Warminster? During these months of flux, there could be some property bargains to be had. Lower asking prices mean you are buying in better yields and potential capital growth at the same time. Many Warminster landlords pick the phone up or email me with Rightmove links, asking my opinion on the BTL potential of property. I don’t charge for that service, so if you don’t want to miss out, follow what they do and make contact ... I don’t bite!

Extra Funding Is Required for Affordable Homes in Warminster

In my blog about the Warminster Property Market I mostly only talk about two of the three main sectors of the local property market, the ‘private rented sector’ and the ‘owner occupier sector’. However, as I often stress when talking to my clients, one cannot forget the third sector, that being the ‘social housing sector’ (or council housing as some people call it).

In previous articles, I have spoken at length about the crisis in supply of property in Warminster (i.e. not enough property is being built), but in this article I want to talk about the other crisis – that of affordability. It is not just about the pure number of houses being built but also the equilibrium of tenure (ownership vs rented) and therein, the affordability of housing, which needs to be considered carefully for an efficient and effectual housing market.

An efficient and effectual housing market is in everyone’s interests, including Warminster homeowners and Warminster landlords, so let me explain ..

An average of only 618 Affordable Homes per year have been built by Wiltshire Council in the last 9 years

The requirement for the provision of subsidised housing has been recognised since Victorian times. Even though private rents have not kept up with inflation since 2005 (meaning tenants are better off) it’s still a fact there are substantial numbers of low-income households in Warminster devoid of the money to allow them a decent standard of housing.

Usually, property in the social housing sector has had rents set at around half the going market rate and affordable shared home ownership has been the main source of new affordable housing yet, irrespective of the tenure, the local authority is simply not coming up with the numbers required. If the local authority isn’t building or finding these affordable homes, these Warminster tenants still need housing, and some tenants at the lower end of the market are falling foul of rogue landlords. Not good news for tenants and the vast majority of law abiding and decent Warminster landlords who are tarnished by the actions of those few rogue landlords, especially as I believe everyone has the right to a safe and decent home.

Be it Tory’s, Labour, SNP, Lib Dems, Greens etc, everyone needs to put party politics aside and start building enough homes and ensure that housing is affordable. Even though 2017 was one of the best years for new home building in the last decade (217,000 homes built in 2017) overall new home building has been in decline for many years from the heady days of the early 1970s, when an average of 350,000 new homes were being built a year.  As you can see from the graph, we simply aren’t building enough ‘affordable’ homes in the area.

The blame cannot all be placed at the feet of the local authority as Council budgets nationally, according to Full-Fact, are 26% lower than they have been since 2010. 

So, what does this mean for Warminster homeowners? Well, an undersupply of affordable homes will artificially keep rents and property prices high. That might sound good in the short term, but a large proportion of my Warminster landlords find their children are also priced out of the housing market. Also, whilst your Warminster home might be slightly higher in value, due to this lack of supply of homes at the bottom end of the market, as most people move up the market when they do move, the one you want to buy will be priced even higher.

Problems at the lower end of the property market will affect the middle and upper parts. There is no getting away from the fact that the Warminster housing market is all interlinked .. it’s not called the Property ‘Ladder’ for nothing!

Warminster Millennials Have Spent £99,300 On Rent By The Age of 35

The Millennials were born between the mid 1980’s and late 1990’s thus making them between the age of around 22 to late 30’s. They are the imaginative, artistic youngsters who grew up with the newest tech and computers and who are huge aficionados of music festivals, gourmet pizzas, emoji’s, selfies and old skool nostalgia. Also known as Generation Rent, many Millennials have discovered that renting is a good choice for their accommodation needs without the hassle that comes from buying a home. Nonetheless, that is not the only reason they don’t buy property. When they should be concentrating on their profession, putting down roots and starting a family, Millennials are still going through the pressure and strain of student loan liabilities whilst, at the same time, finding it tough to pay rent.

The hot topic at the moment is the cost of renting, as both political parties have seen mileage in wooing these Millennial Generation Renters. The average rent in Warminster is currently £707 per month making this a big-ticket item on the monthly budget. I was inquisitive to find out exactly how much Warminster Millennials will spend on rent by the time they reach their mid 30’s. The average age people leave home in the UK is 22; so looking at a Warminster 22-year-old (or Millennial) who left home in 2005 then between 2005 and today that Warminster Millennial will have shelled out £99,300 in rent.

It’s no wonder local Millennials can’t afford to buy a Warminster home given their tremendous debt. This means younger Warminster Millennials will probably carry on renting for the foreseeable future, simply because the prospect of buying a home is not yet achievable.. that is until you look more deeply at the numbers…

Looking at the chart above, the average rent of a Warminster property in 2005 was £572 per month (pm)  … if it had risen by inflation, today, that would be £806 pm. As I have already mentioned in the article, today it only stands at £707 per month. Looking over the last 12 years, adding up all the differences between what the average actual rent was compared to what it should have been if rent had gone up by inflation, the average Warminster Millennial tenant would have paid £86,628.

This means that an average 35-year-old Warminster Millennial tenant, who has been renting since 2005, is better off by £8,890 when comparing the actual rent paid compared to what it would have been if it had risen by inflation. In a nutshell, tenants have done well due to the sub-inflation growth in rents.

In fact, if you recall I mentioned in an article a few weeks ago, the older Warminster Millennials are starting to use those savings and are gradually shifting towards home ownership. They are finally catching up with the British homeownership dream as Bank of Mum and Dad help with the deposit. Also, the scrapping of Stamp Duty from the Government starts to kick in together with the realisation that if the 5% mortgage deposit can be scrapped together (yes, 95% first time buyer mortgages have been available since 2009), it is still a lot cheaper to buy than rent, meaning this will unquestionably drive demand for Warminster homes for sale – good news for Warminster homeowners.

… and what does this mean for Warminster landlords?

Well the vast majority of younger Millennials are still renters and I foresee this to be the case for at least the next ten to fifteen years. Landlords will need to keep improving their properties to ensure they get the best tenants and they will see a much higher rent achieved. Millennials will pay top dollar for a top dollar property. It is important to do things correctly as making money won’t be as easy as it has been over the last twenty years.  With a greater number of properties on the market .. comes greater choice. Don’t buy the first thing you see, buy with your head as well as your heart … because as I promised a few weeks ago, the first rule of Buy To Let Investment ….. “You are not going to live in the property yourself”

Slowing Warminster Property Market? Yes and No!

My thoughts to the landlords and homeowners of Warminster…

The tightrope of being a Warminster buy-to-let landlord is a balancing act many do well at. Talking to several Warminster landlords, they are very conscious of their tenants’ capacity and ability to pay the rent and their own need to raise rents on their rental properties (as Government figure shows ‘real pay’ has dropped 1% in the last six months). Evidence does suggest many landlords feel more assured than they were in the spring about pursuing higher rents on their properties.

During the summer months, historic evidence suggests that the rents new tenants have had to pay on move in have increased. June/July/August is a time when renters like to move, demand surges and the normal supply and demand seesaw mean tenants are normally prepared to pay more to secure the property they want to live in, in the place they want to be. This is particularly good news for Warminster landlords as average Warminster rents have been on a downward trend recently. So look at the figures here...

Rents in Warminster on average for new tenants moving in have risen 2.9% for the month, taking overall annual Warminster rents 2.4% higher for the year

However, several Warminster landlords have expressed their apprehensions about a slowing of the housing market in Warminster. I think this negativity may be exaggerated.

Before we get the Champagne out, the other side of the coin to property investing is capital values (which will also be of interest to all the homeowners in Warminster as well as the Warminster buy-to-let landlords).  I believe the Warminster property market has been trying to find some level of equilibrium since the New Year.  According to the Land Registry…

Property Values in Warminster are 7.09% higher than they were 12 months ago, rising by 2.06% last month alone!

Yet, I would take those figures with a pinch of salt as they reflect the sales of Warminster properties that took place in early Spring 2017 and now are only exchanging and completing during the summer months.

The reality is the number of properties that are on the market in Warminster today has risen by 3.41% since the New Year and that will have a dampening effect on property values. As tenants have had less choice, buyers now have more choice ... and that will temper Warminster property prices as we head towards 2018.

Be you a homeowner or landlord, if you are planning to sell your Warminster property in the short term, it is crucial, especially with the rise in the number of properties on the market, that you realistically price your property when you bring it to the market ... with the increase in choice of properties, the balance of power during negotiation generally sways towards the buyer. Given that everyone now has access to property details, including historic stats for how much property have sold for, they will be more astute during the offer and negotiation stages of a purchase.

However, even with this uplift in the number of properties for sale in Warminster, property prices will remain stable and strong in the medium to long term. This is because the number of properties on the market today is still way below the peak of summer of 2008, when there were 246 properties for sale compared to the current level of 91 (if you recall, prices dropped by nearly 20% in Credit Crunch years of ‘08 and ‘09).

Compared to 2008, today’s lower supply of Warminster properties for sale will keep prices relatively high...and they will continue to stay at these levels for the medium to long term.

Less people are moving than a few years ago, meaning less property is for sale. Fewer properties for sale mean property prices remain relatively high and this is because of a number of underlying reasons. Firstly, buy-to-let landlords tend not sell their properties as often than owner-occupiers, consequently removing the property out of the housing market selling cycle. Secondly, Stamp Duty is much higher compared to 10 years ago (meaning it costs more to move). Next, there is a dearth of local authority rental housing so demand for private rented housing will remain high. Then we have the UK’s maturing owner occupier population, meaning these older people are less likely to move (compared to when they were younger). Another reason is the lack of new homes being built in the country (we need 240k houses a year to be built in the UK and we are currently only building 145k a year!) and finally, the new mortgage rules introduced in 2014 about how much a person can borrow on a mortgage has curtailed demand.

Some final thought’s before I go – to all the Warminster homeowners that aren’t planning to sell – this talk of price changes is only on paper profit or loss. To those that are moving ... most people that sell, are buyers as well, so as you might not get as much for yours, the one you will want to buy won’t be as much, (swings and roundabouts as Mum used to say!)

To all the Warminster landlords – keep your eyes peeled – I have a feeling there may be some decent buy-to-let deals to be had in the coming months

The most recent set of data from the Land Registry has stated that property values in Warminster and the surrounding area were 7.09% higher than 12 months ago and 19.39% higher than January 2015.

Despite the uncertainty over Brexit as Warminster (and most of the UK’s) property values continue their medium and long-term upward trajectory. As economics is about supply and demand, the story behind the Warminster property market can also be seen from those two sides of the story.

Looking at the supply issues of the Warminster property market, putting aside the short-term dearth of property on the market, one of the main reasons of this sustained house price growth has been down to of the lack of building new homes.

The draconian planning laws, that over the last 70 years (starting with The Town and Country Planning Act 1947) has meant the amount of land built on in the UK today, only stands at 1.8% (no, that’s not a typo – its one point eight percent) and that is made up of 1.1% with residential property and 0.7% for commercial property. Now I am not advocating building modern ugly carbuncles and high-rise flats in the rolling Wiltshire countryside, nor blot the landscape with the building of massive 1,000 home housing estates out of town around the beautiful countryside of such villages as Dilton Marsh, Upton Scudamore and Heytesbury.

The facts are, with the restrictions on building homes for people to live in, because of these 70-year-old restrictive planning regulations, homes that the youngsters of Warminster badly need, aren’t being built in the quantity needed. Now I appreciate that the West Warminster Urban Extension is underway, with the first of the new Tascroft Rise properties being marketed but put simply we still need more housing. 

Looking at the demand side of the equation, one might have thought property values would drop because of Brexit and buyers uncertainty. However, certain commenters now believe property values might rise because of Brexit. Many people are risk adverse, especially with their hard-earned savings. The stock market is at an all-time high and many people are uncertain about the money markets. The thing about property is its tangible, bricks and mortar, you can touch it and you can easily understand it.  

The Brits have historically put their faith in bricks and mortar, which they expect to rise in value, in numerical terms, at least. Nationally, the value of property has risen by 635.4% since 1984 whilst the stock market has risen by a very similar 593.1%. However, the stock market has had a roller coaster of a ride to get to those figures. For example, in the dot com bubble of the early 2000’s, the FTSE100 dropped 126.3% in two years and it dropped again by 44.6% in 9 months in 2007… the worst drop Warminster saw in property values was just 18.18% in the 2008/9 credit crunch.

Despite the slowdown in the rate of annual property value growth in Warminster to the current 7.09%, from the heady days of 11.62% annual increases seen in mid 2010, it can be argued the headline rate of Warminster property price inflation is holding up well, especially with the squeeze on real incomes, new taxation rules for landlords and the slight ambiguity around Brexit. With mortgage rates at an all-time low and tumbling unemployment, all these factors are largely continuing to help support property values in Warminster (and the UK).

Warminster Buy-To-Let Predictions up to 2037

On several occasions over the last few months, in my Warminster Property Blog, I predicted that the rate of rental inflation (i.e. how much rents are rising by) had eased over the last year. At the same time I felt that in some parts of the UK rents had actually dropped for the first time in over eight years. Recent research backs up this prediction.

Rents in Warminster for new tenancies only grew by 1.8% in the last 12 months (i.e. not existing tenants experiencing rental increases from their existing landlord). When we compare that current rate with the historical rental inflation in Warminster, an interesting pattern emerges ..

·         2016 - Rental Inflation in Warminster was 3.2%

·         2015 - Rental Inflation in Warminster was 13.6%

·         2014 - Rental Inflation in Warminster was 6.6%

The reason behind this change depends on which side of the demand/supply equation you are looking from. On the demand side (from the tenants point of view) there is the uncertainty of Brexit and the fact that salaries are not keeping up with inflation for the first time in three years. Critically this means tenants have less disposable income to pay their rent. As an aside, it is interesting to note that nationally, rent accounts for 29% of a tenant’s take home pay (Denton House).

On the supply side of the equation (landlords point of view) Brexit also creates uncertainty. However, the biggest issue was a massive upsurge of new rental properties coming on to the market in late 2016, caused by George Osborne’s new 3% stamp duty tax for landlords in the first part of 2016. This meant a lot of new rental properties were ‘dropped’ on to the rental market all at the same time. The greater choice of rental properties for tenants curtailed rental growth/inflation. A slight softening of Warminster property prices has compounded this.  Figures from The Bank of England suggested that first time buyers rose over the last 12 months as some were more inclined to buy instead of rent. Together, these factors played a part in the ongoing moderation of rental growth.

The lead up to the General Election in May didn’t help: after all people don’t like doubt and uncertainty. So now that we have a mandate for going forward over the next 5 years hopefully that has removed any stumbling blocks stopping tenants making the decision to move home.

Whether it be ‘hard’ or ‘soft’ Brexit negotiations (and with the Election result the Tory’s might have to be ‘softer’ on those negotiations) the simple fact is, we aren’t building enough properties for us to live in. Both in Warminster, the South West and the wider UK, long-term population trends imply that rents will soon be growing faster than inflation again. Look at the projections by the Office of National Statistics.

Population Estimates for Wiltshire Council over the next 20 years
2016 (actual)	2021	2026	2031	2036
489,784	503,925	515,951	526,169	535,633

Tenants will still require a vibrant and growing rental sector to deliver them housing options in a timely manner. As the population grows in Warminster, and wider afield, any restriction to the supply of rental properties (brought about by poor returns for landlords) cannot be in the long-term best interest of tenants. Simply put rents must go up!

The fact is that I see this as a short-term blip and rents will continue to grow in the coming years. With rents only accounting for 29% of a tenants’ disposable income, the ability for most tenants to absorb a rent increase does exist.