‘Generation Rent (Forever)’ – 1,420 Warminster Tenants have no intention of ever buying a property to call home

The good old days of the 1970’s and 1980’s eh … with such highlights lowlights as 24% inflation, 17% interest rates, 3 day working week, 13% unemployment, power cuts ... those were the days (not)… but at least people could afford to buy their own home. So why aren’t the 20 and 30 something’s buying in the same numbers as they were 30 or 40 years ago?

Many people blame the credit crunch and global recession of 2008, which had an enormous impact on the Warminster (and UK) housing market. Predominantly, the 20 something first-time buyers who, confronting a problematic mortgage market, the perceived need for big deposits, reduced job security and declining disposable income, discovered it challenging to assemble the monetary means to get on to the Warminster property ladder.

However, I would say there has been something else at play other than the issue of raising a deposit - having sufficient income and rising property prices in Warminster. Whilst these are important factors and barriers to homeownership, I also believe there has been a generational change in attitudes towards home ownership.

Back in 2011, the Halifax did a survey of thousands of tenants and 19% of tenants said they had no plans to buy a home for themselves. A recent, almost identical survey of tenants, carried out by The Deposit Protection Service revealed, in late 2016, that figure had risen to 38.4%, with many no-longer equating home ownership to success and believing renting to be better suited to their lifestyle.

You see, I believe renting is a fundamental part of the housing sector, and a meaningful proportion of the younger adult members of the Warminster population choose to be tenants as it better suits their plans and lifestyle. Local Government in Warminster (including the planners – especially the planners), land owners and landlords need an adaptable Warminster residential property sector that allows the diverse choices of these Warminster 20 and 30 year olds to be met.

This means, if we applied the same percentages to the current 3,697 Warminster tenants in their 1,471 private rental properties, 1,420 tenants have no plans to ever buy a property – good news for the landlords of those 565 properties. Interestingly, in the same report, just under two thirds (62%) of tenants said they didn’t expect to buy within the next year.

.. but does that mean the other third will be buying in Warminster in the next 12 months?

Some will, but most won’t … in fact, the Royal Institution of Chartered Surveyors (RICS) predicts that, by 2025, that the number of people renting will increase, not drop. Yes, many tenants might hope to buy but the reality is different for the reasons set out above.  The RICS predicts the number of tenants looking to rent will increase by 1.8 million households by 2025, as rising house prices continue to make home ownership increasingly unaffordable for younger generations.  So, if we applied this rise to Warminster, we will in fact need an additional 630 private rental properties over the next eight years (or 79 a year) … meaning the number of private rented properties in Warminster is projected to rise to an eye watering 2,101 households.

Warminster Unemployment At 3.3% and its effect on the Warminster Property Market

It was late May 2016, The Right Hon. Member for Tatton, Mr George Osborne, published an official HM Treasury analysis stating UK house prices would be lower by at least 10% (and up to 18%) by the middle of 2018 compared with what is expected if the UK remained in the European Union. So, eight months on from the Referendum, are we beginning to show signs of that prophecy? The simple answer is yes and no.

Good barometers of the housing market are the share prices of the big UK builders. Much was made of Barratt’s share price dropping by 42.5% in the two weeks after Brexit, along with Taylor Wimpey’s equally eye watering drop in the same two weeks by 37.9%. Looking at the most recent set of data from the Land Registry, property values in Warminster are 0.25% up month on month, but the previous month, property values had decreased by 0.35%  – so is this the time to panic and run for the hills?

Doom and Gloom then? Well, let me consider the other side of the coin.

Well, as I have spoken about many times in my blog, it is dangerous to look at short term. I have mentioned in several recent articles, the heady days of the Warminster property prices rising quicker than a thermometer in the desert sun between the years 2011 and late 2016 are long gone – and good riddance. Yet it might surprise you during those impressive years of house price growth, the growth wasn’t smooth and all upward. Warminster property values dropped by 1.38% in November 2012 and 1.22% in December 2014 – and no one batted an eyelid then.

You see, property values in Warminster are still 9.39% higher than a year ago, meaning the average value of a Warminster property today is £277,950. Even the shares of those new home builders Barratt have increased by 43.3% since early July and Taylor Wimpey’s have increased by 37.3%. The Office for Budget Responsibility, the Government Spending Watchdog, recently revised down its forecast for house-price growth in the coming years - but only slightly.

The Warminster housing market has been steadfast partly because, so far at least, the wider economy has performed better than expected since Brexit. There is a robust link between the unemployment rate and property prices, and a flimsier one with wage growth. Unemployment in the Wiltshire Council area stands at 8,400 people (3.3%), which is considerably better than a few years ago in 2013 when there were 12,900 people unemployed (5.4%) in the same council area.

However, inflation is the only thing that does worry me. Looking at all the pundits, it will get to at least 3% (if not more) in the latter part of 2017 as the drop in Sterling in late 2016 renders our imports with higher prices. If that transpires then the Bank of England, whose target for inflation is 2%, may raise interest rates from 0.25% to 2%+. However, that won’t be so much of an issue as 81.6% of new mortgages in the UK in the last two years have been fixed-rate and who among us can remember 1992 with Interest rates of 15%!

Forget Brexit and yes inflation will be a thorn in the side – but the greatest risk to the Warminster (and British) property market is that there are simply not enough properties being built thus keeping house prices artificially high. Good news for those on the property ladder, but not for those first-time buyers that aren’t! In the coming weeks in my articles on the Warminster Property Market, I will discuss this matter further! 

£1.61bn – The total value of all Warminster Property Market

“How much would it cost to buy all the properties in Warminster?”

This fascinating question was posed by the 14-year-old son of one of my Warminster landlords when they both popped into my office. So I thought to myself, I would sit down and calculate what the total value of all the properties in Warminster are worth … and just for fun, work out how much they have gone up in value since his son was born back in the autumn of 2002.

In the last 14 years, since the autumn of 2002, the total value of Warminster property has increased by 54% or £565.5 million to a total of £1.61 billion. Interesting, when you consider the FTSE100 has risen by 68.9% and inflation (i.e. the UK Retail Price Index) rose by 38.7% during the same 14 years.

When I delved deeper into the numbers, the average price currently being paid by Warminster households stands at £200,775.… but you know me, I wasn’t going to stop there, so I split the property market down into individual property types in Warminster; the average numbers come out like this ..

Warminster Property Market
Average Value of a Detached Property	Average Value of a Semi-Detached Property	Average Value of a Terraced/Town House Property	Average Value of a Flat / Apartment
£304,000	£215,786	£186,163	£78,093

... yet it got even more fascinating when I multiplied the total number of each type of property by the average value. As detached houses are more expensive, when you compare them with the much cheaper terraced/town houses and apartments, you can quite clearly see how valuable detached properties are in terms of total pound note value, when compared to the value of the terraced/town houses and apartments.

Total Value of all the Warminster Detached Properties	Total Value of all the Warminster Semi-Detached Properties	Total Value of all the Warminster Terraced/Town House Properties	Total Value of all the Warminster Apartments
£626,240,000	£571,401,328	£344,960,039	£70,049,421

So, what does this all mean for Warminster?  Well as we enter the unchartered waters of 2017 and beyond, even though property values are already declining in certain parts of the previously over cooked Central London property market, the outlook in Warminster remains relatively good as over the last five years, the local property market was a lot more sensible than central London’s.

Warminster house values will remain resilient for several reasons. Firstly, demand for rental property remains strong with continued immigration and population growth.  Secondly, with 0.25 per cent interest rates, borrowing has never been so cheap and finally the simple lack of new house building in Warminster not keeping up with current demand, let alone eating into years and years of under investment – means only one thing – yes it might be a bumpy ride over the next 12 to 24 months but, in the medium term, property ownership and property investment in Warminster has always, and will always, ride out the storm.

In the coming weeks, I will look in greater detail at my thoughts for the 2017 Warminster Property Market. 

£8m a year black hole in the Warminster Property Market - Is Buy to Let Immoral? (Part 2)

An Englishman’s Home is His Castle as Maggie Thatcher lauded - everyone should own their own home. In 1971, around 50% of people owned their own home and, as the baby-boomers got better jobs and pay, that proportion of homeowners rose to 69% by 2001. Homeownership was here to stay as many baby boomers assumed it’s very much a cultural thing here in Britain to own your own home.

But on the back of TV programmes like Homes Under the Hammer, these same baby boomers started to jump on the band wagon of buy to let properties as an investment. Warminster first time buyers were in competition with landlords to buy these smaller starter homes … pushing house prices up in the 2000’s (as mentioned in Part One) beyond the reach of first time buyers. Alas, it is not as simple as that. Many factors come into play, such as economics, the banks and government policy. But are Warminster landlords fanning the flames of the Warminster housing crisis bonfire?

I believe that the landlords of the 1,471 Warminster rental properties are not exploitive and are in fact, making many positive contributions to Warminster and the people of Warminster. Like I have said before, Warminster (and the rest of the UK) isn’t building enough properties to keep up the demand; with high birth rate, job mobility, growing population and longer life expectancy.

According to the Barker Review, for the UK to standstill and meet current demand, the country needs to be building 8.7 new households each and every year for every 1,000 households already built. Nationally, we are currently running at 5.07 per thousand and in the early part of this decade were running at 4.1 to 4.3 per thousand.

It doesn’t sound a lot of difference, so let us look at what this means for Warminster …

For Warminster to meet its obligation on the building of new homes, Warminster would need to build 66 households each year. Yet, we are missing that figure by around 27 households a year.

For the Government to buy the land and build those additional 27 households, it would need to spend £8,015,841 a year in this area alone. Add up all the additional households required over the whole of the UK and the Government would need to spend £23.31bn each year … the Country hasn’t got that sort of money!

With these problems, it is the property developers who are buying the old run-down houses and buildings which are deemed uninhabitable by the local authority, and turning them into new attractive homes to either be rented privately to Warminster families or Warminster people who need council housing because the local authority hasn’t got enough properties to go around.

The bottom line is that, as the population grows, there aren’t enough properties being built for everyone to have a roof over their head. Rogue landlords need to be put out of business, whilst tenants should expect a more regulated rental market, with greater security for tenants, where they can rely on good landlords providing them high standards from their safe and modernised home. As in Europe, where most people rent rather than buy, it doesn’t matter who owns the house – all people want is a clean, decent roof over their head at a reasonable rent.

So only you, the reader, can decide if buy to let is immoral, but first let me ask this question - if the private buy to let landlords had not taken up the slack and provided a roof over these people’s heads over the last decade .. where would these tenants be living now? ….. because the alternative doesn’t even bear thinking about!

Warminster’s private renting set to hit 2,074 households by 2021 - Is Buy to Let immoral? (Part 1)

Can we blame the 55 to 70-year-old Warminster citizens for the current housing crisis in the town?

Also known as the ‘Baby Boomer Generation’, these Warminster people were born after the end of the Second World War as the country saw a massive rise in births as they slowly recovered from the economic hardships experienced during wartime.

Throughout the 1970’s and 1980’s, they experienced (whilst in their 20’s, 30’s and 40’s) an unparalleled level of economic growth and prosperity throughout their working lifetime on the back of improved education, government subsidies, escalating property prices and technological developments, they have emerged as a successful and prosperous generation.

...Yet some have suggested these Warminster baby boomers have (and are) making too much money to the detriment of their children, creating a ‘generational economic imbalance’, where mature people benefit from house-price growth while their children are forced either to pay massive rents or pay large mortgages.

Between 2001 and today, average earnings rose by 65%,

but average Warminster house prices rose by 107.1%

The issue of housing is particularly acute with the generation called the Millennials, who are young people born between the mid 1980’s and the late 1990’s. These 18 to 30 year olds, moulded by the computer and internet revolution, are finding as they enter early adult life, very hard to buy a property, as landlords are buying up all the property to rent out back to them at exorbitant rents ... it’s no wonder these Millennials are lashing out at buy to let landlords, as they are seen to be cashing in on a social despair.

Like all things in life, we must look to the past, to appreciate where we are now.

The three biggest influencing factors on the Warminster (and UK) property market in the later half of the 20^th Century were, firstly, the mass building of Council Housing in the 1950’s and 60’s. Secondly, for the Tory’s to sell most of those Council Houses off in the 1980’s and finally 15% interest rates in the early 1990’s which resulted in many houses being repossessed. It was these major factors that underpinned the housing crisis we have today.

To start with, in 1995 the USA relaxed its lending rules by rewriting the Community Reinvestment Act. This Act saw a relaxation on the Bank’s lending criteria’s as there was pressure on these banks to lend on mortgages in low wage neighbourhoods, as the viewpoint in the USA was that anyone (even someone on the minimum wage) any working class person should be able to buy a home.  Unsurprisingly, the UK followed suit in the early 2000’s, as Banks and Building Society’s relaxed their lending criteria and brought to the market 100% mortgages, even Northern Rock started lending every man and his dog 125% mortgages.

So when we roll the clock forward to today, and we can observe those very same footloose banks from the early/mid 2000’s (that lent 125% with a note from your Mum and a couple of breakfast cereal tokens), ironically reciting the Bank of England backed hymn-sheet of responsible-lending. On every first time buyer mortgage application, they are now looking at every line on the 20-something’s banks statements, asking if they are spending too much on socialising and holidays ... no wonder these Millennials are afraid to ask for a mortgage (as more often than not after all that – the answer is negative).

Conversely, you have unregulated Buy To Let mortgages. As long as you have a 25% deposit, have a pulse, pass a few very basic yardsticks and have a reasonable job, the banks will literally throw money at you ... I mean Virgin Money are offering 2.99% fixed for 3 years – so cheap!

So, in Part Two later this week, I will continue this emotive article and show you some very interesting findings on why young people aren’t buying property anymore (and it’s not what you think!).

Warminster Property Market Sees An Un-predicted Autumn Boost of 19%

Well, it doesn’t seem like two minutes ago that it was Christmas – and now it’s all over! One cold December morning, after arranging the office’s Christmas cards I thought I would nip out for a quick festive coffee and mince pie at my favourite local coffee shop Coffee#1.  I met an old client of mine in the coffee shop and we got talking about the Warminster property market. I had just completed my research for my next blog article and I would like to share with you the parts of the conversation relating to the Warminster property market.

He asked me what my thoughts were about the last half of the year in regard to the Warminster property market and if there were any great buy to let deals around. In reply I said that, in my view, shrugging off the uncertainty of the initial post Brexit vote, I have seen plenty of demand, and a rise in the number of properties selling at the lower to middle end of the market, meaning both first time buyers and buy to let landlords have been returning in the last few months.

So let’s look at the numbers ..

In November 2016, according to the three main property portals (Rightmove, Zoopla and OnTheMarket) there were a total of 92 properties for sale in Warminster (within 2 miles of the center of Warminster to be exact). In November 2015, there were only 77 properties for sale, a rise of 19%.

When I split it down into bedrooms (note things like building plots and part commercial/part residential etc won’t be in these figures so the numbers below wont exactly match up to those in the above paragraph).

	# Properties on the market in Nov 2015	# Properties on the market in Nov 2016	Per cent Change
5+ Bedrooms	12	12	0%
4 Bedrooms	20	21	+5%
3 Bedrooms	22	26	+18%
2 Bedrooms	18	24	+33%
1 Bedroom	5	9	+80%

.. and when I looked at type of properties  .. it got even more interesting

Type of Property	# Properties on the market in Nov 2015	# Properties on the market in Nov 2016	Per cent Change
Detached	48	46	-4%
Semi	11	17	+55%
Terraced	8	9	+13%
Flat	7	13	+86%

As the number of Warminster properties put up for sale has soared by 19%, homeowners have become more realistic about how much their homes are worth. This increase in homeowners wanting to sell suggests there is renewed confidence in the Warminster property market and there are also signs that people are being more realistic about pricing their property.

As you can see, there has been a significant uplift in flats and semi-detached properties, which means there is greater choice for first time buyers and landlords. So with a combination of realistic pricing and more properties on the market – both first time buyers and landlords alike might be able to pick up a few bargains!  

Warminster property price rises set to be more restrained in 2017 due to Brexit

While Brexit has not yet had a sizeable impact on the Warminster housing market, my analysis is pointing to the fact that the economic viewpoint still remains uncertain and Warminster property price growth is likely to be more subdued in 2017 - although that isn’t a bad thing so let me explain.

Since the summer, apart from a little wobble of uncertainty a few weeks after the Referendum vote, property values (and the economy), on the whole has outperformed what most people were anticipating. In fact, when I looked at the property prices for our Wiltshire Council area, these were the results...

October 2016              - rise of 0.51%

September 2016         - rise of 1.28%

August 2016                - rise of 1.2%

July 2016                     - rise of 1.57%

June 2016                    - rise of 0.4%

The UK property market continues to perform robustly (because we can’t just look at Warminster as if in its own little bubble) with annual price growth set to end this year at 6.91% and most South West region property market at 7.18%.

Talking to fellow agents in London, the significant tidal wave of growth seen from 2013 through to 2015 in the capital has subdued over the last six months. However, as that central London house price wave has started to ripple out, agents are starting to see stronger property growth values in East Anglia and the South East regions outside of London, than what is being seen within the M25. So, fellow Warminster landlords and homeowners, is this the time to get your surfboards ready for the London wave?

Well, we in Warminster haven’t really been affected by what is happening in the central London property mega bubble (i.e. Kensington, Chelsea, Marylebone, Mayfair etc.). The property market locally is more driven by sentiment, especially the ‘C’ word ... confidence. The main forces for a weaker Warminster Property market relate to economic uncertainty surrounding the Brexit process, which I believe will impact unhelpfully on consumer confidence in the run up to and just after the serving of the Section 50 Notice by the end of Q1 2017.

In addition, the influence of reforms to the taxation of landlords is expected to result in a reduced demand from buy to let landlords, which will limit upward pressure on property values. However, on the other side of the coin, demand from tenants has been strong, but this has been counterbalanced by a strong supply of rental properties. In my opinion, there is a slight risk of rents not growing as much in 2017 as they have in 2016, but by 2018 they will rise again to counteract Philip Hammond’s changes to tenant fees.

The broader Warminster rental market looks relatively positive with modest rental growth expected and rents might rise further if landlords begin to sell properties in an effort to offset to the impact of tax rises.

So what do I predict will happen to the Warminster housing market in 2017? In Warminster, I believe property values are expected to rise by 1.5% in 2017, compared to a rise of 7.18% this year, then picking up again with a rise of 2.4% in 2018, 3.1% in 2019, 4.6% 2020 and 6.1% in 2021.

But these predictions do not take into account any effect of a possible snap General Election or further referendum on ratifying any Brexit deal (if that comes to pass in the future).