‘Flipping’ Heck - Warminster Property Values Rise by £33.18 a day

Investing in Warminster buy to let property is different from investing in the stock market or depositing your hard-earned cash in the Building Society. When you invest your money in the Building Society, this is considered by many as the safe option but the returns you can achieve are awfully low (the best 2-year bond rate from Nationwide is a whopping 0.75% a year!). Another investment is the Stock Market, which can give good returns, but unless you are on the phone every day to your Stockbroker, most people invest in stock market funds, making the investment quite hands off, and one always has the feeling of not being in control.

However, with buy to let, things can be more hands on. One of the things many landlords like is the tactile nature of property - the fact that you can touch the bricks and mortar. It is this factor that attracts many of Warminster’s landlords – they are making their own decisions rather than entrusting them to city whizz kids in Canary Wharf playing roulette with their savings.

I always say investing in property is a long-term game. When you invest in the property market, you can earn from your investment in two ways. When a property increases in value over time, it is known as 'capital growth'. Capital growth, also known as capital appreciation, has been strong in recent times in Warminster, but the value of property does go up as well as down just like shares do but the initial purchase price rarely decreases.  

Rental income is what the tenant pays you - hopefully this will also grow over time. If you divide the annual rent into the value (or purchase price) of the property, this is your yield, or annual return. So, over the last 5 years, an average Warminster property has risen by £60,550 (equivalent to £33.18 a day), taking it to a current average value of £289,800. Yields range from 5% a year and can reach double digits’ percentages (although to achieve those sorts of returns, the risks are higher).

However, something I haven’t spoken of before is the more specialist area of flipping property to make money. (flipping - buying a property, carrying out some minor cosmetics and re selling it quickly).  I have seen several investors recently who have made decent returns from this strategy. For example …

·         One Warminster Investor paid £140,000 for a 2 bed terrace on Middleton Close in September 2015.  Some cosmetic work was done to the property and it was resold a few months ago (October 2016) for £165,000 … 17.86% return before costs (or compound annual return equivalent of 16.76% AER) http://www.rightmove.co.uk/house-prices/detailMatching.html?prop=61671398&sale=4437082&country=england

This demonstrates how the Warminster property market has not only provided very strong returns for the average investor over the last five years but how it has permitted a group of motivated buy to let Warminster landlords and investors to become particularly wealthy.

As my article mentioned a few weeks ago, more and more Warminster people may be giving up on owning their own home and are instead accepting long term renting whilst buy to let lending continues to grow from strength to strength. 

How The Rented Sector Has Transformed The Property Market In Warminster

The Warminster housing market has gone through a sea of change in the past decades with the Buy-to-Let (B-T-L) sector evolving as a key trend, for both Warminster tenants and Warminster landlords.

A few weeks ago, the Government released a White Paper on housing. I have had a chance now to digest the report and wish to offer my thoughts on the topic. It was interesting that the private rental sector played a major part in the future plans for housing. This is especially important for our growing Warminster population.

In 1981, the population of Wiltshire stood at 375,200

and today it stands at 486,100.

Currently, the private rented (B-T-L) sector accounts for 19.5% of households in the town.  The Government want to assist people living in the houses and help the economy by encouraging the provision of quality homes, in a housing sector that has grown due to worldwide economic forces, pushing home ownership out of the reach of more and more people. Interestingly, when we look at the 1981 figures for homeownership, a different story is told.

57.2% Warminster people owned their own home in 1981

26.13% Warminster people rented from the Council or Housing Association in 1981

 and 16.67% Warminster rented from a Private Landlord

The significance of a suitable housing policy is vital to ensure suitable economic activity and create a vibrant place people want to live in. With the population of Wiltshire set to grow to 537,000 by 2037 – it is imperative that Wiltshire Council and Central Government all work actively together to ensure the residential property market doesn’t hold the area back, by encouraging the building and provision of quality homes for its inhabitants.

One idea the Government has proclaimed is a variety of measures aimed at encouraging the Build-to-Rent (B-T-R) sector (instead of the B-T-L sector). These include allowing local authorities to proactively plan for B-T-R schemes, and making it simpler for B-T-R developers to offer inexpensive private rented homes.

To do this, the government will invent a distinct affordable housing class for B-T-R, called ‘Affordable Private Rent’, which will oblige new homes builders to provide at least 1 in 5 of a new home developments at a 20% discount on open-market rents and three year tenancies for tenants. In return, the new homebuilders will get better planning assurances.

Private landlords will not be expected to offer discounts, nor offer 3-year tenancies – but it is something Warminster landlords need to be aware of as there will be greater competition for tenants.

Over the last ten years, home ownership has not been a primary goal for young adults as the world has changed. These youngsters expect ‘on demand’ services from click and collect, Amazon, Dating Apps and TV with the likes of Netflix. Many Warminster youngsters see that renting more than meets their accommodation needs, as it combines the freedom from a lifetime of property maintenance and financial obligations, making it an attractive lifestyle option.

Private rented housing in Warminster and Wiltshire, be it B-T-L or B-T-R, has the prospective to play a very positive role.

Warminster’s ‘Generation Trapped’ and the £1.48bn legacy

Last week, I wrote an article on the plight of the Warminster 20 something’s often referred to by the press as ‘Generation Rent’. Attitudes to renting have certainly changed over the last twenty years and as my analysis suggested, this change is likely to be permanent. In the article, whilst a minority of this Generation Rent feel trapped, the majority don’t – making renting a choice not a predicament. The Royal Institution of Chartered Surveyors (RICS) predicted that the private rental sector is likely to grow substantially by 1.8m households across the UK in the next 8 years, with demand for rental property unlikely to slow and newly formed households continuing to choose the rental market as opposed to buying.

However, my real concern for Warminster homeowners and Warminster landlords alike, as I discussed a couple of months ago, is our mature members of the population of Warminster. In that previous article, I stated that the current OAP’s (65+ yrs in age) in Warminster were sitting on £719.7m of residential property ... however, I didn’t talk in depth about the ‘Baby Boomers’, the 50yr to 64yr old Warminster people and what their properties are worth – and more importantly, how the current state of affairs could be holding back those younger Generation Renters.

In Warminster, there are 1,358 households whose owners are aged between 50yrs and 64yrs and about to pay their mortgage off. That property is worth, in today’s prices, £392.7m. There are an additional 1,294 mortgage free Warminster households, owned by 50yr to 64yr olds, worth £374.2m in today’s prices, meaning...

Warminster Baby Boomers and Warminster OAP’s are sitting

on £1.48bn worth of Warminster Property

These Warminster Baby Boomers and OAP’s are sitting on 5,141 Warminster properties and many of them feel trapped in their homes, and hence I have dubbed them ‘Generation Trapped’.

Recently, the English Housing Survey stated 49% of these properties owned by the Generation Trapped, as I have dubbed them, are ‘under-occupied’ (under-occupied classed as having at least two bedrooms more than needed). These houses could be better utilised by younger families, but research carried out by the Prudential suggest in Britain it’s estimated that only one in ten older people downsize while in the USA for example one in five do so.

The growing numbers of older homeowners who want to downsize their home are often put off by the difficulties of moving. The charity United for all Ages, suggested recently many are put off by the lack of housing options, 19% by the hassle and cost of moving, 14% by having to declutter their possessions and 14% by family reasons such as staying close to children and grandchildren.

Helping mature Warminster (and the Country) homeowners to downsize at the right time will also enable younger Warminster people to find the homes they need – meaning every generation wins, both young and old. However, to ensure downsizing works, as a Country, we need more choices for these ‘last time buyers’.

Theresa May and Philip Hammond can do their part and consider stamp duty tax breaks for downsizers, our local Council in Warminster and the Planning Dept. should play their part, as should landlords and property investors to ensure Warminster’s ‘Generation Trapped’ can find suitable property locally, close to friends, family and facilities. 

‘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!