Warminster OAP’s sitting on £727.2 m of Property

Warminster people aged over 65 currently hold more housing wealth in their homes than the annual GDP of the whole of the Shetland Isles … and this is a problem.

Many retiree’s want to move but cannot, as there is a shortage of such homes for mature people to downsize into.  Due to the shortage, bungalows command a 10% to 20% premium per square foot over houses of the same size with stairs. To add to the woes, in 2014, just 1% of new builds in the UK were bungalows, according to the National House Building Council - down from 7% in 1996.

My research has found that there are 2,489 households in Warminster owned outright (i.e. no mortgage) by over 65 year olds.  Taking into account the average value of a property in Warminster, this means £727.2 million of equity is locked up in these Warminster homes, compared to the GDP of the whole of the Shetland Isles being £524 million of GDP.

A recent survey by YouGov, found that 36% of people aged over 65 in the UK are looking to downsize into a smaller home.  However, the Government seems to focus all its attention on first-time buyers with strategies such as Starter Homes to ensure the youngsters of the UK don’t become permanent members of ‘Generation Rent’.  Conversely, this overlooks the chronic under-supply of appropriate retirement housing essential to the needs of the Warminster’s rapidly ageing population. Regrettably, the Warminster’s housing stock is woefully unprepared for this demographic shift to the 'stretched middle age’, and this has created a new 'Generation Trapped’ dilemma where older people cannot move.

Some OAP’s who are finding it difficult to live on their own, are unable to leave their bungalow because of a lack of sheltered housing and ‘affordable’ care home places.  So, older retirees can't leave bungalows, younger retirees can't buy bungalows and younger people can't buy family houses.

Interestingly, adding insult to injury, the problem will only get worse, as in the 50 year old to 64 year old home ownership age range there are an additional 1,294 Warminster households that are mortgage free and a further 1,358 Warminster households who will be completing their mortgage responsibility.  With Government projections showing the proportion of over 65’s will rise by over a third from the current 17.7% to 24.3% of the population in the next 20 years ... this can only add greater pressure to the Warminster Property market.

House prices have rocketed over the last 40 years because the supply of property has not kept up with demand. With migration, people living longer and high divorce rates (meaning one family becomes two) we need, as a Country, 240,000 properties to be built a year to just stand still.  In the 1990’s and early 2000’s, the Country was building on average 180,000 to 190,000 households a year, but since the Credit Crunch (2009), that has only been between 130,000 and 145,000 households a year.

The solution …. release more land for starter homes, bungalows and sheltered accommodation because land prices are killing the housing market as the large firms dominating the construction industry are more likely to focus on traditional houses and apartments.  My opinion – until the Government change the planning rules and allow more land to be built on – Bungalows could be a decent bet for future investment as they continue to attract ever growing premiums?

Warminster Property Market – Q4 Update

Well, wasn’t 2016 been eventful. The ups and downs of Brexit, the Queen’s 90^th, Andy Murray winning Wimbledon, Trump, Bake Off to Channel 4 and something close to the hearts of every buy to let landlord and homeowner in Warminster ... the Warminster property market.

So, let’s look at the headlines for the Warminster property market...

In the last month, Warminster property values rose by 2.03%, leaving them, year on year 10.4% higher, whilst interestingly, Warminster asking prices are down 0.9% month on month. All three statistics go to show the Warminster property market has recovered well after the beginning of the summer, which was impacted by the uncertainty surrounding the EU vote back in June. Irrespective of all the issues, the average value of a home in BA12 now stands at £296,700.

Generally, Warminster asking prices continue to hold up well, as asking prices are 5.7% higher year on year. At this time of year, asking prices tend to drop on the run up to Christmas and locally, they have dropped by 0.9% in November 2016, although this compares well with last year’s drop in Warminster asking prices, as we saw asking prices drop by 2.3% in November 2015.

Now it’s true to say, after chatting with fellow property professionals, all of us have seen the number of property sales fall slightly, suggesting a slowing market, but it is very early days and it could be the time of year. Also, the numbers are limited, so it’s interesting to take note from a recent survey by the Royal Institution of Chartered Surveyors, stating new buyer enquiries and new instructions are falling at the same rate, suggesting that there will not be a downward pressure on property values.

Looking at the figures for the UK, property values are generally rising slower than a few years ago, but on a positive note, there's still growth across the UK. You see, slowing property value growth isn't solely Brexit related, but after a number years of double digit rises in property values, affordability has weakened and cooling price growth is widely seen to be a natural correction of the market.

On the other hand, interest rates being at a record low of 0.25% are helping the property market. The cut in interest rates in the late summer was the medicine for the post-Brexit worry and will, as a consequence, ensure that the UK economy continues to be underpinned by buoyant property prices.

 So, what will happen in 2017 in the Warminster property market?

Some say until we know what type of exit the UK will make from the EU it is hard to evaluate the outcome. Although, I believe, the whole Brexit issue is a sideshow to the main issue in the UK (and Warminster) housing market as a whole. As I have mentioned time and time again over the last few months in my blog, the biggest issue is demand outstripping supply when it comes to the number of households required to house us all. Warminster has an ever-growing population: with immigration (we still have at least two years of free movement from EU members into the UK), people living longer and the fact we need thousands of additional households as the country has nearly 115,000 divorces a year (where one household becomes two households).  These are interesting times ahead!  

Warminster Semi Detached House Prices rise by 311% in 20 years

The semi-detached house with its bay windows and net curtains has long been ridiculed as an emblem of safe, lacklustre and desperately uncool suburban life; the homes of the likes of Hyacinth Bucket in Keeping up Appearances and more latterly Alan Partridge – but they could have the last laugh - having enjoyed the highest price growth of any property type in Warminster, up by an average 311% increase in the last twenty years.

The semi can now laugh in the face of its posher detached counterpart, which saw a rise of only 86% in the same 20-year period. Looking at smaller properties, flats/apartments rose 225%, whilst terraced houses only rose 181% (although they were starting from a lower base and demand from buy to let landlords has had a big part in driving the values on that type of house (i.e. the price a buy to let landlord is prepared to pay is driven by the rent the landlord can achieve).

In 1996 the average value of a Warminster semi stood at £55,100,

today it stands at £226,100

Such is the attractiveness of semis, which are cheaper than detached houses but have most of the same benefits for families. Semi-detached houses were built in their hundreds of thousands by the Victorians and Edwardians between the wars and through to the present day. Interestingly in the late 19^th Century and early 20^th century – they often weren’t referred to as semi-detached – but as villas!

So whilst Europeans live on top of each other in apartments us British chose, in the late Victorian and early Edwardian times, suburban comfort, being near … but not too near, the neighbours! I once heard someone say the semi-detached house was a peculiar crossbreed that doesn’t stand on its own — it is inseparable from its neighbour — yet somehow still embodies a dream of suburban independence.

Over one in three houses in Warminster is a semi-detached house

There are 2,648 semi-detached properties in Warminster and they represent 35.19% of all the households in Warminster. Warminster has such a mix of semi-detached properties with the older semis to more modern ones built in the last couple of decades. Especially with the older ones, the semi offered a hall to provided separation between the reception rooms and privacy for their occupants. Also the downstairs offered larger rooms to accommodate dining tables, whilst upstairs, bedrooms were smaller, yet cosy.

However, probably the most overlooked aspect of popularity for semis is the garden. The front garden, designed to separate the house from the world, and the back garden designed for private relaxation. The semi in the suburbs was relaxing, well presented, plumbed and enhanced by a garden so that when a window was opened the air had a chance of being genuinely fresh… and it’s for all those reasons why 54 semi-detached houses have been sold in Warminster in the last 12 months alone.  Still as popular today as they were with the Victorians all those years ago – some things just stand the test of time!

Warminster First Time Buyers Are Paying 9.4% More Than 12 Months Ago

Figures released by the Bank of England, show that for the first half of 2016, £128.73bn was lent by UK banks to buy UK property - impressive when you consider only £106.7bn was lent in the first half of 2015. Even more interesting, was that most of the difference was in Q2, as £68.12bn was lent by UK banks in new mortgages for house purchase, which is the highest it has been for two years. Looking locally, in Warminster at the last quarter, £346.1m was loaned on BA12 properties alone!

Even though the Bank won’t be releasing the Q3 figures until December 2016, as I discussed a few weeks ago, HMRC have published their own preliminary data to suggest Q3 will be even better, with a massive growth of buy-to-let landlords to the housing market in that time frame. Fascinating, as it seems to fly in the face of the popular narrative – that the uncertainty surrounding Brexit would negatively impact buyer sentiment.

And it’s not just buy-to-let landlords that seem to be flourishing. I am finding that first-time buyers are also a lot more confident too. Low, and now negative, inflation has had a tangible impact on household finances and first-time buyers feel more secure in their jobs. Couple with a low interest rate environment and you have all the ingredients for a strengthening property market. To back that up with numbers, of the £68.12bn of mortgages lent in the Quarter (Q2), £14.9bn was lent to first-time buyers (the highest proportion of that overall lending for over two years at 21.99%).

When I looked at the data for Wiltshire Council area, the average price paid by first-time buyers (FTB’S) was £200,834, which is a drop of 0.41% from last month but a rise of 9.40% to twelve months ago. The Land Registry then categorise the remaining buyers into cash buyers or those buying with a mortgage. The average price paid by cash buyers was £244,735, a drop of 0.54% from last month but a rise of 9.19% to twelve months ago, whilst buyers with mortgages (but not FTB’s), the average price paid by them was £255,962, again a drop of 0.52% from last month with a rise of 9.30% to twelve months ago.

What surprised me with these figures was how close the property prices, values and percentages were to each other. It just goes to show the combination of low mortgage rates and a stable job market will continue to have a positive effect on the Warminster and UK market.  And that is why, while there is undoubtedly more cautiousness in the market at present than a year or so ago (among borrowers and mortgage companies alike) - mortgage rates are so competitive that they are inducing people to commit to a home purchase.

It seems the great Brexit uncertainty was over hyped, and house price growth as well as mortgage approvals, could pick up pace into 2017.

£10m paid in Stamp Duty by Warminster Residents

“A pound saved is worth two pounds earned . . . after taxes” is what my Grandfather used to say. He loved his irony, yet was always a wise man, and it is tax I want to talk about today, in particular, property taxation .. Stamp Duty in fact.

Apart from some minor exemptions, Stamp Duty is paid by anyone buying a property over £125,000 in the UK. It presently raises £10.68bn a year for the HM Treasury (interesting when compared with £27.6bn in fuel duty, £10.69bn in alcohol duty and £9.48bn in tobacco duty).

In the latest set of data from HMRC, in the MP constituency that covers Warminster, property buyers paid £10m stamp duty in one year alone – a lot of money in anyone’s eyes (although not as much as the £227m in income tax that all of us in the same area paid last year).

However, as you may know, George Osborne introduced an additional tax for landlords and from 1^st April 2016 they had to pay an additional 3% stamp duty surcharge on top of the normal stamp duty rate when purchasing a buy to let property. There were tales of woe and Armageddon with a report by Deutsche Bank suggesting that the new surcharge could see house prices fall by as much as 20%.

HMRC data released in the Summer for Quarter 2 (Q2) of 2016 did seem to back up those fears as they published some worrying figures; only one in seven properties purchased was a second home or buy-to-let (in real numbers, only 30,300 of the 207,900 properties in Q2 were bought by landlords).

In previous articles, I spoke about the slump of property transactions after the 1^st of April (as landlords rushed through their property purchases in March to beat the April deadline). In Q2 of 2016, £1.976bn was raised in Stamp Duty from Residential Property. Of that £1.976bn, £652m was paid by buy to let landlords (£424m in normal stamp duty and £228m in the additional 3% surcharge).

However, looking at Q3, the numbers have improved significantly. Of the 235,000 property sales, nearly one in four of them (56,100 to be precise) were bought by buy to let landlords and of the £2.208bn in stamp duty, £864m was paid in ‘normal’ stamp duty by BTL landlords and an impressive £442m paid by those same landlords in the additional stamp duty surcharge.

The statistics suggest buy to let investors have thankfully not been deterred by the stamp duty surcharge introduced in April this year. The figures also show that 65.4% of "buy to let" purchases cost less than £250,000, 23.7% of properties were in the £250k to £500k range and 10.9% (or 6,100 additional properties) of buy to let properties bought cost over £500k – interestingly nearly one in four (22.2%) of £500k properties purchased in Q3 were buy to let properties.

It just goes to back up what I stated a few weeks ago when I suggested that many investors had rushed to make purchases before 31^st March, making figures in the following months (Q2) artificially low when the 3% supplement was introduced, but in Q3 the number of buy to let properties purchased increased by 85%.

It just goes to show you shouldn’t believe everything you read in the newspapers! I can assure you the Warminster property market is doing just fine.