What does 2016 have in store for the Milton Keynes Property Market?

Milton Keynes house prices up or Milton Keynes house prices down? ... and if so, by how much? Those of you who read the Milton Keynes Property Blog will know I am not the sort of person who pulls punches nor someone who ever fails to give a forthright and straight talking opinion – so here are my thoughts for the 35,450 Milton Keynes homeowners and landlords.

The average Milton Keynes property is 10.6% higher today than it was a year ago, which doesn’t sound a lot, but when you consider inflation is currently running at -0.1% (ie consumer/retail prices are dropping) and average salary growth is only around 2.5% pa, this is bad news for first time buyers as property affordability continues to decrease (although I was reading in The Times the other day that wage inflation (ie salary growth) is showing signs of weakening).

Some commentators have said the higher stamp duty taxes announced a few weeks ago in the Autumn Statement for buy to let landlords, concerns over first time buyer affordability and the outlook of UK interest rate rises in 2016 will really dampen the property market. I hope you all read my previous article about what the new stamp duty rule changes would REALLY mean for Milton Keynes landlords in my blog, but I believe the real issue in the Milton Keynes property market is the shortage of property to buy, as people either worry there will be no suitable house to move to, or cannot afford to upgrade. However, on the supply side, Mr Osborne said in his Autumn Statement that he will change the planning laws to ensure the government meets the pledge made at the General Election (back in May) of 200,000 new homes a year.  All I can say is .. good luck George hitting those numbers!

Why? Because houses take years to build .. not months .. so George and his fabled house building aside .... where does that leave us in Milton Keynes in 2016?

Well, talking of supply ... whilst Mr Osborne builds his properties (and let’s be honest - a week doesn’t go by without him being filmed on a building site with a high viz jacket and hard hat building a house here and there!), let us look at the shortage of properties for sale. Back in December 2011, 2,596 properties were for sale in Milton Keynes .. today that figure is 1,098. On the face of it, this means there is less choice for Milton Keynes buyers – but it also means with a restricted supply of properties for sale .. it keeps property prices high for Milton Keynes house sellers.

Everything isn’t all doom and gloom though ... again back in December 2011, the average property in Milton Keynes took 106 days to find a buyer .. latest figures state this has dropped to 55 days .. a drop of 48% in how long it takes to find a buyer. However, when you delve even deeper, the best performing type of property today in Milton Keynes is the 3 bed, which only takes 40 days to find a buyer (on average) compared to the 1 bed, which takes 69 days. It just goes to show, even though the average has dropped since 2011, how varied that change has been!

 

So, back to the question everyone is asking .... What will happen to property values in Milton Keynes in 2016?  I am going to suggest they will rise between 9% and 10% ... nothing out of the ordinary, but unless something cataclysmic happens in the world, 2016 will be like 2015! For more thoughts, opinions and views on the Milton Keynes property market .. visit the Milton Keynes Property Blog

Milton Keynes Landlords could be fined £1,476,000 per year

“Who would want to move to Milton Keynes in weather like this?”, was what one landlord said to me as we shook hands outside his property, the other afternoon. It was windy, cold, it had been raining most of the day and it was the last appointment of the day at 4.45pm. I will admit, as I had been out of the office all day, I was looking forward to getting home, putting the fire on, and watching telly with a big mug of tea.. but this landlord lived in neighbouring Luton and this was the earliest he could do. 

It turned out he had been self-managing the property himself over the last few years, but was worried with all the new legislation that had been introduced recently. He was particularly concerned about the up and coming ‘Right to Rent’ legislation, so as his tenant had handed in their notice recently, on this new tenancy he called us for our opinion.

For those Milton Keynes landlords that don’t know, landlords will need to check the immigration status of any new tenants moving into properties from February 2016 or face a £3,000 fine. It is called the 'Right to Rent' rules. However, tenants should also be aware that as well as traditional landlords, tenants who sub let rooms and homeowners who take in lodgers, must also check the right of prospective tenants to reside in the UK.

Our landlord from Luton wanted to know how much of a real issue was ‘Right to Rent’ in Milton Keynes. I was able to tell him, the last available figures (from a couple of years ago) show that 492 people (whom were registered as Non-UK Born Short-term Residents) moved into private rented accommodation in the Milton Keynes Borough Council area in one year alone. If all of those people weren’t supposed to be in the UK, that would be a fine of £1,476,000 to the landlords of the town.

It doesn’t sound a lot when you think there are 171,750 residents in Milton Keynes Borough Council area, and of those, 134,417 people (or 78.26%) were born in the UK. But Milton Keynes is a cosmopolitan town as the country of birth of the residents in the Milton Keynes Borough Council area can be split down as follows:

·         UK                                                                          78.26%

·         Ireland                                                                    0.74%

·         Europe                                                                   5.83%

·         Africa                                                                      6.61%

·         Middle East and Asia                                           7.01%

·         Americas and Caribbean                                    1.25%

·         Australia and Pacific region                               0.26% 

 

However, it must also be recognised that landlords, by checking up on tenants, could potentially be accused of discrimination under the Equality Act. This is a real minefield for landlords, especially when you consider that not all of the 10,010 Europeans in the area necessarily have the right to live in the UK either.

 

 

In a nutshell, Milton Keynes landlords will need to check and retain copies of certain documents that show a potential tenant has the right to live in the UK. These include ....

·         UK Passport

·         EEA Passport/Identity card

·         Travel document or Permanent Residence Card showing indefinite leave to remain

·         Paperwork from Home Office stating their Immigration status

·         Certificate of registration or naturalisation as a British citizen.

 

I hope the new law will target dishonest landlords who repeatedly fail to carry out Right to Rent checks by making it a criminal offence. This means they could face imprisonment for failing to check on their tenants. That is why more and more landlords are asking agents to manage their properties, so they can stay the right side of the law.

So what did our landlord do?

Well after our chat, he asked us to find a tenant and manage the property for him - he had been reading the Milton Keynes Property Blog for a while and because of the knowledge we impart to the landlords of Milton Keynes, we obviously know what we are talking about.  Even better news for him, even though this would cost him agency fees, I was able to get him an additional £60 per month for his property (when we found him a tenant one week later). Now, together with the peace of mind we will keep him the right side of the law and put a stop to midnight phone calls complaining about dripping taps, it was a win-win situation for everyone.

Will the young people of Milton Keynes ever own their own home?

I had the most interesting chat with a mature couple (in their early/mid 50’s) from Loughton the other day, whilst viewing one of our rental properties. The property wasn’t for them, but their son, who wanted a second viewing with his parents to get the parental blessing. Now I know that isn’t the norm, but in this case the parents were going to act as guarantor. We got chatting about the Milton Keynes property market and how they had bought their first property in the town just after they got married in the late 1980’s when they were in their early/mid 20’s. Anyway, we got chatting about how the youngsters of the UK seem to rent more than buy nowadays and from that the conversation covered a number of similar topics. I want to share the highlights of that conversation with you today.

Their son, like many 20 to 30 year olds in Milton Keynes, desperately wants to own his own property and the parents said he had read in the Telegraph recently, when you compare house prices to earnings, the current 20 to 30 something’s generation have to spend more of their salary in mortgage payments than any previous generation. The demand for private rental sector accommodation in Milton Keynes is huge. There are in fact 12,700 private rental properties in Milton Keynes at the last count, impressive when you consider there are 6,923 council houses in the town. However, let us not forget 35,450 properties are owner occupied (23,945 with a mortgage).

Let us all be honest, private renting doesn’t have the stigma it had a few decades ago and it might surprise people that even though us Brit’s class ourselves as a nation of homeowners, roll the clock back 100 years and over 75% of people rented their own home (and it was all from private landlords as council housing only started to come in with the ‘homes for hero’s’ after the first World War). It might also surprise you to learn that at the time of the 1971 census, still more people rented than owned their own home.

Looking at the affordability issue, I have proved time and time again, it is in fact cheaper to buy a property than rent, when one looks at starter homes for first time buyers. 95% mortgages have been available to first time buyers for over four years and whilst you could certainly find better properties in better condition in better areas, apartments can be bought for as little as the early £80,000’s in the Walnut Tree area of Milton Keynes (meaning a modest deposit of just under £4,200 would be required).

When it came to affordability, I was able to tell them that when they bought their first house in Milton Keynes in 1988, the ratio of house prices to salary was 7.54 to 1 in Milton Keynes ... and here was the surprise for both of us, today’s ratio is only 6.53 to 1!

I said I believed there had been a cultural attitude change towards renting property in Britain and that this quiet revolution was likely to be permanent. In the 60’s, 70’s and 80’s, saving for the deposit was everything and buying a house was everything. Youngsters today have far much more disposal income today than people had in the Callaghan and Thatcher years, but choose to spend it upgrading their mobile phones every 12 months, the newest tablet or PC, a newest 50” plasma LCD TV and two sun drenched holidays a year, than go without and save for a deposit.

Yes, there are horror stories of tenants living in rat infested properties with landlords who charge massive rents and don’t repair their properties. But that is very much the exception as most tenants rent homes of a quality they couldn’t ever to afford to buy. Twenty years ago, if you said you rented a property, you were considered the lowest of the low ... but now it’s the norm.

So with mortgage affordability being well within the bounds of most first time buyers, the level of deposit required for a 95% being surprisingly modest (starting off at c.£4,200 in Milton Keynes as mentioned above) until we change our attitudes, the UK housing market is slowly but surely turning into a more European model, where people rent for long periods of their life, then eventually inherit their parents properties and subsequently become homeowners themselves, albeit later in life.

Hence, I cannot see the demand for decent, high quality rental properties ever dropping in the next 10 to 20 years, but only ever increasing as the population continues to soar. Just make sure you by the right property, at the price, in the right location. One source of information on such matters would be the Milton Keynes Property Blog ...

Has George killed the buy to let market in Milton Keynes?

Well George Osborne, in his Autumn statement last week, caused Milton Keynes landlords to ask whether buy to let is a viable investment option, when he announced that landlords, when buying another buy to let property from April 2016 will have to pay an additional 3% stamp duty on top of the standard rate. So for example, on a £100,000 terraced, the stamp duty goes from nil to £3,000. It becomes quite stark when you look at the middle to upper market, so it means that the stamp duty bill for a £285,000 buy to let home will rise from the current £4,250 to £12,800 from April next year. 

Some say property in Milton Keynes will be worth less because potential landlords will not be willing to pay as much for them, and if house builders or existing homeowners don't feel they are going to get as much for them , then there is less motivation to build / sell them?... and the person we can blame for this is George himself. Back in 2012, he choose to utilise the British housing market to kick start the UK economy, with  subsidies, Funding for Lending and Help to Buy. However, whilst that helped the Tory’s get back into power in 2015, some say this impressive growth in the UK property market has been at the expense of pricing out youngsters wanting to buy their first home.

Others say this is the straw that breaks the camel’s back as over the next four years Landlords will slowly lose the ability to offset all their mortgage interest against tax on rental income, after changes announced in the Summer Budget. At the moment, landlords can claim tax relief on buy to let mortgage monthly interest repayments at the top level of tax they pay (ie 40% or 45%). However, over the next four years this will reduced slowly to the basic rate of tax – currently 20%.

Surely this is the end of Buy to Let in Milton Keynes? Probably.. but before we all run to hills panicking .. let me give you another thought.

Stamp Duty rules were changed in December 2014. Before then, landlords were eagerly buying up properties under the ‘old slab style Stamp Duty’ system. For example, the stamp duty bill on that £285,000 property was lower on the old slab style duty (pre Dec 2014), at £8,550, yet it isn’t a million miles away from new £12,800 stamp duty bill. Interestingly though, George has left a legal loophole in the new rules, because when it comes to selling up, they can offset purchase costs against any eventual capital gains tax, including stamp duty.

I believe that total returns from buy to let will continue to outpace other investments, such as the stock market, gilts, bonds and even pensions. Also, the best part about investing in property is that it is bricks and mortar. You can touch it, you can feel it, and it isn’t controlled by some City whiz kid in Canary Wharf .. the British understand property and that goes a long way!

Buy to let has enough impetus behind it that prospective landlords will continue to buy even with a larger stamp duty bill. Milton Keynes landlords will need to be savvy with what property they buy to ensure the extra stamp duty costs are mitigated.   Buying buy to let property is a long term venture. In the past, it didn’t matter what property you bought in Milton Keynes or at what price – you would always make money. Now with these extra taxes, the adage of ‘any old Milton Keynes house will make money’ has gone out the window.   You wouldn’t dream of investing in the stock market without at least looking in the newspapers or taking advice and opinion from others, so why would you take the same advice and opinion about buying a buy to let property in Milton Keynes?

The Milton Keynes Property Market and £1,300,000,000,000,000,000 in loose change

The 5^th of March 2009 was the date Mervyn King, the then Bank of England Governor, slashed UK interest rates to the unparalleled figure of 0.5%. In just under five months, starting on 8^th October 2008, the rate had come down from 4.5% to that low figure, all in an attempt to ensure the British economy survived the worldwide credit crunch. Now as we deck the halls with bows of holly nobody expected that, over six years later, rates would still be at that low level.

In the summer, people were predicting a rise in the New Year, yet now, some forecast it may remain the same for years to come the due to the issues in China. Now, I am not some City Whiz kid with a hotline to Mr Carney at Threadneedle Street, but merely a humble letting agent from Milton Keynes, so I can not profess to know what will happen to interest rates. However, what I do know, speaking to my Milton Keynes friends and Milton Keynes landlords is that these low interest rates have hit savers really hard.

If you added up everyone’s bank and building society savings in the UK, they would add up to £1,300,000,000,000,000,000 (that’s £1.3 trillion), most of which is earning a pittance in interest.  That is why more and more 40 and 50 year old Milton Keynes landlords have been investing some of that cash into Milton Keynes bricks and mortar, as they search for a low risk investment opportunity.

Buying a Milton Keynes buy to let property isn’t risk free, but there are certainly things you can do to mitigate and lower one’s exposure to risk. You see by buying a rental property, it potentially offers an enigmatically decent proposition in terms of being able to obtain attractive returns that beat inflation and savings accounts, yet without taking the levels of risk associated with stock markets.

The UK residential property market has long been the safest form of collateral for lenders of all varieties. Against a backdrop of a greatly changing economic environment, Milton Keynes house prices have been extraordinarily robust, increasing by over 2148.0% between 1974 and today. Some will say there have been significant property price falls, namely in 1975, 1988 and 2008, yet each time after this has been followed by an upturn in property values. For the record, the stock markets in the same time frame only rose by 432.5%!

.. and that is the best thing about buy to let property. Unlike the stock market, with its unfathomable equities, shares and bonds, that nobody really understands (as they are controlled by some faceless whizz kid in Canary Wharf!) with a buy to let property, landlords can take control and understand their investment .. in fact you can touch and feel the bricks and mortar investment.

..  but before you go out and buy any old Milton Keynes property, plenty of landlords still get it wrong. You have to be aware of your legal responsibilities when it comes to tenant safety, tenants deposits, energy certificates and in the new year, landlords will have the added responsibility of checking the immigration status of prospective tenants. Get it wrong and big fines and even prison is an option – but that’s why many agents use a letting agent to manage their property for them.

Next, you have to buy the right property at the right price. Recently I have seen some really heart breaking situations in Milton Keynes and the immediate area, of people paying way too much for a property, only to lose out when they came to sell. One example that comes to mind is that of a property owner in one of those apartments in The Hub on Rillaton Walk, a bustling and highly sought after development ideally suited to commuters or those who enjoy easy access to restaurants and bars as well as shopping and the commercial district of Milton Keynes .. a decent two bed apartment, 59 sq metres inside (635 sq ft in old money) sold in June 2008 for £239,950. In the summer, it only obtained £206,000, a drop of 14.15% or 2.14% a year - a very disappointing result.

I cannot stress enough the importance of doing your homework. One source of information and advice is the Milton Keynes Property Blog where I have similar articles to this about the Milton Keynes property market and what I consider to be the best buy to let deals around at any one time in the town, irrespective of which agent it is on the market with. If you haven’t visited and you are interested in the local property market in Milton Keynes .. you are missing out!

 

Milton Keynes vs Luton– Clash of the Property Market Titans

Many landlords have been asking me my thoughts on the Milton Keynes property market recently and in particular, what is happening to property values. My calculations show property values in Milton Keynes quite interestingly grew in the month of September by 1.9%.  When one looks at the annual growth, Milton Keynes values are 9.1% higher (when comparing Sept 14 to Sept 15), impressive when you consider the annual growth of property values was only 8.4% per annum in August.  On the other hand, there are signs that the fundamental growth of property values in Milton Keynes has now peaked, despite those average property values being above levels recorded in 2007 (just before the 2008 crash).

Whilst the Milton Keynes headline rate appears to be better, i.e. the year on year (Sept 14 to Sept 15) growth rate of 9.1% is obviously better than the 8.4% in August 14 to August 15), this rise of Milton Keynes property values masks the underlying truth in what is really happening to local property values in the town.  Throughout 2015, property values have been yo-yo like on a month by month basis, being quite volatile in nature.  For example:

·         September 2015               1.2% rise

·         August 2015                       0.1% rise

·         July 2015                              1.0% rise

·         June 2015                            0.3% drop

·         May 2015                             0.5% rise

·         April 2015                            0.7% rise

·         March 2015                         1.0% rise

This is in part due to seasonal factors, as well as mortgage approvals increasing over June and July and then falling by over 15% in August, according to the Council of Mortgage Lenders (CML).

The outlook for the Milton Keynes property market remains positive against the foundations of low mortgage rates and growing consumer confidence. However, I do have to question the recent CML mortgage data and whether that raises issues over whether the rate of growth since the Tory’s were re-elected in the early summer can continue? However, on a positive note, Milton Keynes property values are still running ahead of salaries and average property values are 8.2% above the levels recorded in 2007.

Talking to fellow property professionals in the town, demand for property has been showing signs of moderating in the final few months of 2015, which in turn will lead to a slight slowdown in the pace of house price growth in the run up to the festive season. You see, it is really important not to read too much into one month’s (September’s) headline figures.

Readers might be interested to note that before the 2008 property crash, all the UK region’s housing markets tended to move up and down in tandem like the Milton Keynes Synchronised Swimming team at the Wolverton Swimming and Fitness Swimming Pool!  Since then though, the Greater London property market took off like a rocket in 2009/10, whilst the rest of the UK only really started to grow in 2012/13 and even then that growth was a lot more modest than the Capital’s.  Looking closer to home, it can even be different in neighbouring towns, areas and cities, so whilst Milton Keynes property values are 9.1% higher than a year ago (as mentioned above), Luton property values are 14.2% higher than a year ago.

I cannot stress enough the importance of doing your homework.  One source of information and advice is the Milton Keynes Property Blog where I have similar articles to this about the Milton Keynes property market and what I consider to be the best buy to let deals around at any one time in the town, irrespective of which agent it is on the market with.  If you haven’t visited and you are interested in the local property market in Milton Keynes….. you are missing out!

Values of Milton Keynes Terraced Houses smash through the £230/sqft barrier

The Council of Mortgage Lenders (CML) latest snapshot of the buy to let mortgage market shows us that buy to let landlords haven’t been put off by the Chancellors announcements on the way buy to let’s are taxed.

Last month, the CML stated £1.4billion was borrowed by UK landlords to purchase 10,500 buy to let properties, up 26.5% from the same month in 2014, when only 8,300 properties were bought with a buy to let mortgage. Go back two years and the number of buy to let mortgages used for purchasing (again not re-mortgaging) is 36.4% higher! Even more interesting has been the fact that the average amount borrowed has risen as well. The average buy to let mortgage last month was £133,330, up from £128,480 a year ago.

In Milton Keynes, I am speaking to more and more landlords, be they seasoned professional landlords or FTL’s (first time landlords), as they read reports that the Milton Keynes rental market is doing reasonably well, with rents and property values rising.  Interestingly, one landlord recently asked how much he should be paying per square foot (more of that in a second).

The first thing you have to decide is whether you want great capital growth or great rental yield, as every knowledgeable landlord knows, you can’t have both. Over the last twenty years, property values in Milton Keynes have risen by 256.69%, compared to Greater London’s 436.2%. This has proved that capital growth increases faster in the more expensive South, but your investment money doesn’t go very far, meaning there won’t be as much rental yield from a 1 bed flat in Chelsea (2% per year at best with a fair wind) as a 2 bed semi in Milton Keynes. However, whilst the figure of 256.69% is an average for the area, certain areas of Milton Keynes have seen capital growth much higher than that and others areas much worse (we have talked about those in previous articles).

If you recall in an earlier article, my research reveals that Milton Keynes apartments tend to generate a better yield than houses, probably because several sharers can afford to pay more than a single family. But houses tend to appreciate in value more rapidly and may well be easier to sell, simply because there are fewer being built.

So what should you be buying in Milton Keynes, and more importantly, how much?

·         The average apartments in the town are currently selling for approximately £250 per square foot.

·         Terraced houses in Milton Keynes are currently obtaining, on average, £197,500 or £235 per square foot,

·         An average semi in Milton Keynes is selling for £227,500 (and achieving £257 per square foot). 

Now these are of course averages, but it gives you a good place to start from. In the coming weeks, I will look at rents being achieved on Milton Keynes houses and apartments, and the yields that can be obtained, depending how many bedrooms there are. In the meantime, if you would like to read more articles like this, then can I suggest you visit the Milton Keynes Property Blog? 

Milton Keynes Buy To let –Freehold House or Leasehold Flat?

Well my Milton Keynes Property Blog reading friends, as seems to be all the rage with Jeremy Corben asking the PM questions emailed in to him at Prime Minster Question Times, I too wish to answer a question emailed into me from a potential Milton Keynes landlord last week. Nice chap, lives in Shenley Brook End, and it turns out, after having a coffee with him, he works in IT, has a spare bit of cash (now the kids have flown the nest) and wanted to buy his first buy to let property.

His main question was ... Do I buy a freehold house or a leasehold flat in Milton Keynes?

Most people will say freehold every time, because you own the land. However, it’s not as simple as that (it never would be would it!). The definitive answer though is to research what Milton Keynes tenants want in the area of Milton Keynes they want! The tenant is ultimately your customer, and, if they don't want to rent what you decide is best to buy, then you are not going to have a successful BTL investment. So starting with the tenant in mind and working backwards from there, you won’t go far wrong. In a nutshell, find the demand before you think about creating the supply.

Leasehold flats and apartments in Milton Keynes are excellent in some respects as they offer the landlord certain advantages, including the fact a flat can be initially cheaper to buy. Yields can be quite good, offering better cash flow. The building will already be insured and yes there is a service charge, but it’s still for a service at the end of the day and that cost is spread between many others (i.e. when your freehold house roof goes, its falls 100% on your shoulders) and one of my favourites is that there is often no garden to maintain or blown down fences to replace!

However, some Milton Keynes leasehold flats can suffer from poor capital growth. Some leasehold properties have no cap on the level of the service charge and it may get out of control. The length of the lease will significantly affect value if not renewed before it gets too short. Thankfully there’s not many, but some Milton Keynes apartments/flats have burdensome clauses. Finally, with leases, there can be sub-letting issues – which means you can’t let them out.

So what do the numbers look like? Well since 2003, the average freehold property in Milton Keynes (detached, semis and terraced) has risen from £152,931 to £293,362, a rise of 92% whilst the average Milton Keynes leasehold property (flats and apartments) has gone up in value from £78,655 to £150,983, a similar rise of 92%. 

I was really interested to note that of the 15,930 rental properties in the Milton Keynes Council area that the Office of National Statistics believe are either let privately or through a letting agency, 4,748 of them (or 29.8%) are apartments. However, there are only 15,264 apartments in the whole council area (be they owned, council rented or privately rented), which represents 15.5% of the whole housing stock in the area. This really intrigued me that, quite obviously, there is a high proportion of Milton Keynes’s leasehold apartments/flats rented to tenants compared to detached, semi’s or terraced. Fascinating don’t you think?

Every Milton Keynes apartment block, every terraced house or semi is different. Like I said at the start, the definitive answer though is to research what Milton Keynes tenants want in the area of Milton Keynes they want. Demand for town centre apartments, near the nightlife and transport links can be popular and can offer the Milton Keynes landlord very good yields with minimal voids. However, Milton Keynes terraced houses and semis, whilst not always offering the best yields (although sometimes they can), they do offer the Milton Keynes landlord decent capital growth.

My advice to the prospective landlord as it is to you is do your homework.  One such website, which only talks about the Milton Keynes buy to let Property Market, is the Milton Keynes Property Blog. Another source of info many Milton Keynes landlords use is me! What many Milton Keynes landlords do, irrespective of whether you are a landlord of ours, a landlord with another agent or a DIY landlord, if you see any property in Milton Keynes, that catches your eye as a potential buy to let property, be it a terraced house, semi or flat ... email me and I will email you back with my thoughts (although I will tell you what you need to hear .. not want to hear!)

Milton Keynes Tenants pay 38.4% of their salary in rent

I had the most interesting chat with a local Milton Keynes landlord the other day about my thoughts on the Milton Keynes property market. The subject of the affordability of renting in Milton Keynes came up in conversation and how that would affect tenant demand. Everyone wants a roof over their head, and since the Second World War, owning one’s home has been an aspiration of many Brits.  However, with rents at record highs, many are struggling to save enough for a house deposit.

Let’s be honest, it’s easy to get stuck in a cycle of paying the rent and bills and not saving, but even saving just a small amount each month will sooner or later add up.  George Osborne announced such schemes as the upcoming Help to Buy ISA, where the Government will top up a first time buyers deposit.

Therefore, I thought I would do some research into the Milton Keynes property market and share with you my findings.  Milton Keynes tenants spend on average just over a third of their salary to have a roof over their head.  According to my latest monthly research, the average cost of renting a home in Milton Keynes is £1,134 per month.  When the average annual salary of a Milton Keynes worker stands at £35,394 per year, that means the average Milton Keynes tenant is paying 38.4% of their salary in rent.  I doubt there is much left to save for a deposit towards a house after that, and that my Milton Keynes Property Blog reading friends is such a shame for the youngsters of Milton Keynes.

You see one the reasons for rents being so high is property prices being high.  As I have mentioned before, there is a severe lack of new properties being built in Milton Keynes.  It’s the classic demand vs supply scenario, where demand has increased, but the number of houses being built hasn’t increased at the same level.  Also, Milton Keynes people aren’t moving home as often as they did in the 80’s and 90’s, meaning there are fewer properties on the market to buy.  If you recall, a few weeks ago I said back in Spring 2008, there were over 3,700 properties for sale in Milton Keynes and since then this has steadily declined year on year, so now there are only 1,162 for sale in the town.

So, the planners in Milton Keynes haven’t allowed enough properties to be built in the town and existing Milton Keynes homeowners are not moving home as much as they used to, thus creating a double hit on the number of properties to buy.  This is a long term thing and the continuing diminishing supply of housing has been happening for a number of decades and there simply aren’t enough properties in Milton Keynes to match demand, these are the reasons houses prices in Milton Keynes have remained quite buoyant, even though economically, over the last 5 years, it was one of the worst on record for the country and the South East region as a whole.

However, things might not be all doom and gloom as originally thought, as a recent Halifax Survey  (their Generation Rent 2015 Survey) suggested  more and more people may be long term, if not lifelong tenants. In fact there is evidence in the report to suggest that the perception of how difficult it is to get on the housing ladder is vastly different between parents and people aged 20 to 45.  It seems from this survey that the state of the UK economy has shifted priorities quite significantly in quite a short space of time.  With fewer people able to save up the deposit required by mortgage lenders, more and more people are continuing to rent.  This delay in moving up the property ladder has driven rents across the UK up as more people were seeking rental properties .

 It is often said that more people in central Europe rent for longer or never own their own property. The last two census in 2001 and 2011 show that proportionally the percentage of people who own their own home in Britain is slowly reducing and, as a country, we are becoming more and more like Germany.   That isn’t a bad thing as Germany is considered to have a more successful economy, one of the main stays, often quoted,  is because they have a much more flexible and mobile workforce, (which renting certainly gives) and from that, they have a higher personal income than in the UK.      

Therefore, if we are turning into a more European model and the youngsters of Milton Keynes and the Country have changed their attitudes, demand for rental properties will only and can only go from strength to strength, good news for Milton Keynes tenants as wages will start to rise and good news for Milton Keynes landlords, especially as property values in Milton Keynes are now 8.5% higher than year ago!

Milton Keynes House owners desert the housing market with an 8 year low

Even though the housing market is in an upbeat state in many parts of the UK, getting on the property ladder is still challenging for many and regarded as unattainable by some.  However, that goal has become even worse recently in Milton Keynes as the number of houses available to buy is at an 8 year all time low.

Back in Spring 2008, there were over 3,700 properties for sale in Milton Keynes and since then this has steadily declined year on year, so now there are only 1,162 for sale in the town.  This continuing diminishing supply of housing has been happening over those years for a while and there simply aren’t enough properties in Milton Keynes to match demand.

According to a recent report by the National Association of Estate Agents, that said, “There are now 11 house hunters fighting after every available house which isn’t sustainable.”   What that means is Milton Keynes youngsters, who are looking to buy their first home, are finding themselves being squeezed out by the competition.  However, in the meantime, nobody wants to live with parents until they are in their 30’s, so that in turn creates demand for more rental properties, which means landlords have a greater demand for more rental properties so are buying more, resulting in even less smaller properties for the youngsters to buy, it’s a vicious circle.   

Talking to fellow agents, mortgage arrangers, surveyors and solicitors in the town, all of whom have extensive dealings in the Milton Keynes property market like myself, most of us agree the movement in the Milton Keynes market is taking place in the middle to upper market, higher up the property ladder and it’s second and third steppers pushing through the properties that are being bought and sold.

That has meant as people tend to move less in the middle to upper market, the number of the properties actually selling has drastically reduced over the last couple of years.

When we look at the individual areas of the town, it paints an interesting picture.

• MK2 -  Central Bletchley, Fenny Stratford, Water Eaton 22 properties sold in May 2015 (with an average value of £ 164,799), whilst over the Summer months of 2014, the number of properties selling in this postcode was always in the mid/late 20’s.
• MK3 - Far Bletchley, Old Bletchley, Newton Leys, West Bletchley23 properties sold in May 2015 (with an average value of £208,471), whilst over the Autumn months of 2014, the number of properties selling in this postcode reached into the early 60’s.
• MK4 -  Emerson Valley, Furzton, Kingsmead, Oxley Park, Shenley Brook End, Tattenhoe, Tattenhoe Park, Westcroft, Whaddon, 30 properties sold in May 2015 (with an average value of £310,014), whilst over the Summer months of 2014, the number of properties selling in this postcode reached into the early 70’s.
• MK5 - Crownhill, Grange Farm, Oakhill, Loughton, Medbourne, Shenley Brook End, Shenley Church End, Shenley Lodge 15 properties sold in May 2015 (the most recent set of figures from the HM Land Registry), whilst over the Summer months of 2014, the number of properties selling in this postcode was always between 22 and 25 per month. (Interestingly the average value of those properties was £279,786).
• MK6 -  Ashland, Beanhill, Coffee Hall, Eaglestone, Fishermead, Leadenhall, Netherfield, Oldbrook, Peartree Bridge, Springfield, Tinkers Bridge, Woughton on the Green, Woughton Park, Simpson, 21 properties sold in May 2015 (with an average value of £192,928), whilst over the Summer months of 2014, the number of properties selling in this postcode reached into the late 20’s.
• MK10 - Broughton, Kingston, Middleton, Monkston, Oakgrove 43 properties sold in May 2015 (with an average value of £ 308,684), whilst over the Summer months of 2014, the number of properties selling in this postcode remained in the mid 60’s.

So what does this all mean for homeowners and landlords alike in Milton Keynes?  Demand for Milton Keynes property is fairly good, especially at the lower end of the market.  However, with fewer properties coming up for sale, it means property prices are proving reasonably stable too.

You see I believe a more stable, consistent Milton Keynes property market, with less people seeing property as an easy way to make a quick buck (as many did in the early 2000’s when prices were rising at nearly 20% a year so people were buying and selling every other minute), but a property market that has a steady growth of property values in Milton Keynes, year on year, without the massive peaks and troughs we saw in the late 1980’s and mid/late 2000’s might just be the thing that the Milton Keynes property market needs in the long term.

For more insights, comments and facts on the Milton Keynes Property market please visit the Milton Keynes Property Blog ,where you will find many similar articles to this.

Could your Milton Keynes property save you from Pension oblivion?

If you were born in the early 1970’s or late 1960’s, if you haven’t started to think about it yet, retirement is closer than you think. In fact the number of years you have left to work is less than the number of years you have worked. The basic state pension is worth £115.95 a week for a single person in 2015/16 (or £6,029 a year) and £231.90 a week for a couple (£12,118 a year) as long as your partner has paid their stamp (although there are certain get of jail cards if they haven’t). 

As a household, could you live on just over £12k a year?

However, could the property you are living in in Milton Keynes save you from poverty when you reach retirement? You see, a regular income is vital in retirement, and the bricks and mortar you own in Milton Keynes could provide a way for you to finance life when you retire.

If you are in your 30’s, instead of saddling yourself with bigger and bigger mortgages, going from your first time buyer flat, to a terraced, to the semi and then the large detached house, you could instead keep your terraced or small semi, turning it into buy a buy to let property, let the rent pay the mortgage and then rely on capital growth to provide you with a lump sum when you sell the property and retire.  One of the biggest plus points of buy to let is what is known as leverage. Let me explain ... say you have a deposit of 25% and the value of the property rises by 3% a year, your gains in fact multiply to 12%.  However, if property prices drop, 'leverage' can be catastrophic, as losses will also be multiplied. Property values have dropped a number of times in the last 50 years, but they always seem to bounce back ... property must be seen as a long term investment.

Let me explain how leverage could work for you. If you had bought a Milton Keynes house in Spring of 1983 for £40,000, using a 75% mortgage and 25% deposit, (meaning your deposit would be £10,000). Today, that Milton Keynes property would have risen in value to £289,516, a rise of 623.8%. However, when you look at the growth on just your deposit, the rise is even better ... instead of 623.8%, we see a rise of 2795% (remembering that the mortgage would have been paid off).

However, buy to let is not all about capital growth and in retirement, income is more important than capital growth, as rent is the key to a steady income.

So surely the best strategy is to buy those Milton Keynes properties with the high rents (when compared to the value of the property). These are called high yield properties in the buy to let world because the monthly return is so much greater. So surely they are the best in Milton Keynes? Possibly, but the properties that offer these higher yields (in the order of 5% to 6% per year) tend to be in such areas as Netherfield or Fishermead in Milton Keynes, historically they haven’t offered such good capital growth when compared to the town average, have a higher tendency for void periods and such properties tend to attract tenants that have a greater propensity to be high maintenance.

Therefore, if a high maintenance rental portfolio wasn’t for you, another strategy could be buy a property with relatively smaller rental returns of 3% to 4% per year (i.e. lower yields), but in a more up market area such as Loughton. Properties such as these tend to suffer from less void periods (i.e. when there is no tenant in the property paying you rent) and they historically have had better long term capital growth when compared to the town average.

Every landlord is different and every property is different. All I suggest to you is do your homework.

As regular readers will know, I am happy to share my knowledge and experience of the Milton Keynes property market, high yields, high capital growth, what to buy, what not to buy and where to buy in the Milton Keynes Property market can always be found on the Milton Keynes Property Blog

Milton Keynes tenants feel the squeeze as rents continue to rise

As my regular readers know, my passion is talking about Milton Keynes property. As a property agent I like to comment on the Milton Keynes property market, which I hope will be of interest to both homeowners and buy to let landlords alike. However, this week, I want to highlight the plight of the tenants of Milton Keynes as more and more of their wages are being taken up by ever increasing rents.

The cost of renting a home in Milton Keynes has broken through the £1000 a month barrier as the average rent for a property in the town, now stands at £1087 per month, and whilst this was a drop of 0.6% last month, rents for new lets are 7% higher than they were 12 months ago.

House price inflation has certainly eased in Milton Keynes from the heady days of 2014, but still with retail price inflation (for goods and services) reducing to 0% any increase in property values, no matter how small, means in real terms property is still getting more expensive. Meanwhile, many tenants have given up saving for a mortgage deposit as rents continue to take more and more of their wage packets leaving nothing to save for a deposit. That means, more and more tenants are deciding to rent for the long term and therefore the desire for decent high quality rental properties continues to exceed the available rental stock.

I would go as far as to suggest that rents are an ideal barometer to the state of the local economy as a whole and strongly believe that the recent increase in Milton Keynes rents are a sign that the Milton Keynes economy is picking up. 

This means Milton Keynes landlords are continuing to capitalise on the Milton Keynes property market. The most recent Land Registry data suggests the annual property price rises in the town have eased over 2015, leaving property values 9.13% higher than 12 months ago, so as property price growth is easing off, with the increased rents, rental yields are strengthening for the first time in years to compensate. The mortgage market has become more stable after the mad months of May and June after the Tory’s got back into No.10  and so, everything is set to be good news for landlords; even with the Chancellors change of tax rules in the coming years for buy to let mortgages.

You can get some amazingly low mortgage rate deals at the moment, so with mortgage rates so low and returns still extraordinarily attractive, there’s rarely been a better time to invest in rental properties.

However,  (you knew there would be a however!),  it’s all about buying the right property at the right price. Not all property types are seeing equal rises in rents and capital growth.  Different parts of the town, different types of properties are experiencing quite different changes.  For example, the average length of time the 31 Milton Keynes properties up for rent between £250 to £500 per month is an eye watering 259 days, whilst the average length of time the 194 properties at £500 to £1000 per month is 38 days and 158 properties that fall into the £1000 to £2000 per month price bracket is 74 days.

When you start comparing different parts of Milton Keynes, the numbers are even stranger!  The bottom line is that you must take advice and opinion. One source of advice and opinion is the Milton Keynes Property Blog. In the Milton Keynes Property Blog, you will see many more articles like this, discussions and even what I consider to be the best buy to let deals around, irrespective of which agent is selling it.

Whether you are a landlord, ‘Homes Under the Hammer’ addict or just a homeowner who is interested in what is happening to the local property market, then please visit the Milton Keynes property Blog

Milton Keynes Property Market - Asking Prices Drop But Values Rise

Those of you who regularly read my weekly articles in the Milton Keynes Property Blog will know I like to keep abreast of the Milton Keynes property market. Something attracted my attention this week about the local property market, something I wanted to share with my many readers.

Over the last month, there appears to have been an anomaly in the local property market, whereby asking prices in the town have dropped, yet property values have increased.  The average asking price of a Milton Keynes property, according to Rightmove, fell 1.2% this month yet the average value of a Milton Keynes property rose by 0.9%.

So how does this relate in monetary terms?  This anomaly has driven the average asking price of a Milton Keynes property down slightly to £283,600 whilst the average value is now £260,600.

So why the difference? Technically an ‘asking price’ can be any price that a homeowner wants to place his or her property on the market for. Unfortunately, many times this is done without research and can result in overpriced properties that don't sell. As the Summer months are normally slightly quieter those left on the market wanting to sell often temper their asking prices in these months to try and generate interest in their property.

On the other side of the coin, the property ‘value’ is the price that a willing buyer is prepared to pay and a willing seller is prepared to sell at.   Therefore, in a nutshell, Milton Keynes property values are continuing to rise and those homeowners in Milton Keynes who have properties on the market, last month on average, reduced their asking prices .. great news for property owners and buyers alike!

In previous articles, I have spoken about the continued fundamental shortage of property coming on to the market compared to buyer demand. That is especially true for homeowners wanting to upgrade to a better house/better location.  I can appreciate Milton Keynes home owners are reluctant to put their own property on the market speculatively and wait for the right property to become available and some high demand locations can suffer from a property stalemate.

Most homeowners don’t want to sell and have nothing to buy.

But that’s the beauty of the much maligned English and Welsh house buying process. You can find a purchaser for your property, then ask them to wait. By agreeing a sale (subject to contract) before you try to buy sounds concerning to many, but with fewer properties for sale you need to have a buyer for your property or you will be treated as a less serious buyer yourself. If you cannot find the right home for you, you can slow the deal with your purchaser until it comes along. If nothing suitable does comes along and you lose your buyer then the worst outcome is that you have to find another purchaser or take your property off the market and stay put for now and as long as you mention this at the start they must not commit to any costs until you have agreed your onward purchase.

However, for the landlord/buy to let investors, these potential problems are nothing further from the truth. As I write this article, there are over 240 flats for sale, 244 terraced houses and 160 semis for sale in Milton Keynes.  Landlord/Buy to let investors can normally pick up some bargains in the Autumn months, as sellers who are selling their homes often have a pressing need to sell by this time.

The types of houses a Milton Keynes landlord typically buys, are not the same types as the homeowners wanting to move to a posher area of the town as they are attracted by larger semis and detached properties. The best types of properties for buy to let are the smaller flats, terraced and semis (not the big detached ones). There are in fact too many of these smaller properties for sale .. just look at the numbers of properties for sale (mentioned in the previous paragraph).

If you are a landlord or thinking of become one for the first time, and you want to read more articles like this about the Milton Keynes Property Market together with regular postings on what I consider the best buy to let deals in Milton Keynes, out of the hundreds of properties on the market,  irrespective of which agent is selling it, then you might like to visit the Milton Keynes Property Blog.

Interest rates set to rise – How will that affect the Milton Keynes property market?

A couple of weeks ago, I mentioned in this blog about how the Bank of England has been indicating recently that UK interest rates will be going up in the not too distant future. Therefore, if you are one of the 23,945 homeowners in Milton Keynes, who own your own home with a mortgage, then you need to consider your options and start to budget for an interest rate rise. However, if you are a landlord, who owns one of the 11,899 rental properties in the town, whilst your exposure to interest rate rises is lower, it is most certainly something you should be aware of.

Since the spring of 2009, British interest rates have been at a record low of 0.5%. It’s not a case of if, but when, they will rise. Some people think it will be before Christmas, although I am of the opinion, it will early in the New Year around Easter time, when they do rise. I also expect those rises will be slow, steady and limited. It depends on what is happens to UK wage rises, UK inflation and the general state of the British economy. Nevertheless, as much most of us in Milton Keynes would love to pull the shutters and stick two fingers up to the world, we have to recognise we are part of a global economy and global economic worries still exist to prevent an abrupt and instantaneous rate rise.

Those Milton Keynes landlords, who do have a mortgage, need to realise that as interest rates rise, their monthly mortgage costs rise. It’s easy to say you will look at your mortgage next month, then before you know it, Christmas will be here!  Don’t forget, mortgage lenders have always removed the juicy low rate mortgage deals a few months before interest rate rise. Speak to a qualified mortgage arranger, there are lots of them in Milton Keynes and seriously consider fixing your mortgage rate now.  You didn’t buy your Milton Keynes buy to let property for it to become a millstone around your neck. It’s all about mitigating your costs and maximising your income to make your Milton Keynes buy to let property the investment you want it to be.

However, on the other side of the coin, two in three landlords who have bought property since 2007, have done so without a mortgage. A rise in interest rates might be a good thing. Let me give you some background first, then I’ll explain why. Milton Keynes landlords have see their return on investment for their Milton Keynes buy to let property, over the last couple of years, perform very well indeed with Milton Keynes property values rising by 36.58% since the Spring of 2009. However, when rates do rise, whilst more expensive mortgage rates will ease the demand for borrowing, on the other hand, it may temper house price growth, making the property market more competitive... and therefore, we should see the return of some bargain property buys in Milton Keynes!

Finally though, can I ask all Milton Keynes homeowners and Milton Keynes landlords, who have a mortgage that isn’t fixed, they need to recognise that rates will rise throughout 2016 to 2018 and will continue to move steadily upwards towards more viable and feasible long term levels.  I am not qualified to give that advice and this is my personal opinion, so please speak to a qualified mortgage arranger and, if appropriate, fix your mortgage before interest rates rise. Don’t say I didn’t warn you!

In the meantime, if you are a landlord looking for a bargain now, don’t despair ... there are plenty out there, if you know where to look! One place is Rightmove, another Zoopla and another OnTheMarket. However, sometimes, you can’t see the wood for the trees. At the time of writing, Rightmove had 1,082 properties for sale in Milton Keynes, Zoopla 785 properties for sale in the town and OnTheMarket 148 properties ... where do you start? A lot of savvy Milton Keynes landlords like to visit the Milton Keynes Property Blog , where, irrespective of which agent is selling it, I regularly post what I consider out of the hundreds of properties on the market, to be the best buy to let deal in Milton Keynes.   

 

 

 

Crisis in the Milton Keynes Property Market ..probably?

I don’t know about you, but if you watch Sky News every waking hour or read the newspapers, it always seems we as a Country, Europe or the World seem to lurch from one crisis to another. Another week, another crisis averted. It was only last summer the soothsayers were predicting the end of the world over the supposed house price bubble that many believed was developing in the South. Property prices were rising at 20%+ per annum in London, only for things to ease as the property market in the Capital showed a controlled slowdown and cooling in activity with price growth easing to a more realistic 8% to 9% per annum. Interestingly, there was no panic when some modest price drops were seen in some of London’s highest priced suburbs.

However, this month’s crisis is the buy to let boom and as George Osborne always likes to be topical, in the July emergency budget, he declared that he will start to scale back, from 2017, the tax relief that those high income tax rate landlords with a mortgage have benefited from. The Daily Mail ran headlines stating it was the end of the private landlord; predicting many landlords will give up on buy to let altogether and we will be inundated with rental properties up for sale as landlords feel squeezed from the market.

Even Mr Carney, the Governor of the Bank of England, recently cautioned that the buy to let property market could destabilise the whole UK property market. He was concerned landlords who bought with high loan to value mortgages could be spooked if there is a property crash, they would panic because of negative equity, sell cheaply, which would worsen house price falls.

End of the world then?   .. this week, yes probably, but next week .. that’s another story!  Before we all go and live like a hermit in the Scottish highlands, let me explain to you my perspective on the whole subject. As I mentioned a few weeks ago, two thirds of buy to let properties bought in the last eight years have been bought mortgage free – so they won’t be affected by the Chancellors’ tax changes.  Also, something I feel is often overlooked but very important, is the fact that landlords historically have only been able to normally borrow up to 75% of the value of the rental property.  In the last property crash of 2008, property values dropped by the not so insignificant figure of 19.7% in Milton Keynes, but even then, when we had the credit crunch and the world’s banking sector was on the brink, no landlord would have been in negative equity in Milton Keynes.

I believe we have a case of ‘bad news selling newspapers’ and I believe that buy to let, and the property market as a whole, will carry on relatively intact. It’s true reducing tax relief will hit landlords who pay the higher rate of income tax and this may slightly diminish buy to let as an investment vehicle, but I doubt people will sell. Many landlords have been lazy with their investments, buying with their heart, not their head. You would never dream of investing in the stock market without doing your homework and talking to people in the know. If you want to make money in the Milton Keynes property market as a buy to let landlord, it’s all about having the right property and as you grow, the right portfolio mix to offer a balanced investment that will give you both yield and capital growth.

The Milton Keynes buy to let market still offers good investment opportunities to new and old alike. Those who have bought in the last twelve to eighteen months have reaped the benefit from buying in Milton Keynes, because the town offered a combination of reasonable house prices with subsequently increasing rents.  Property values have risen by 15.57% in the last eighteen months in Milton Keynes, whilst looking at rents, in Q2 2015, average rental values for new tenancies were 11% higher than Q2 2014, which is particularly interesting as they only rose by 4.5% between Q2 2013 and Q2 2014.

I cannot stress enough the importance of doing your homework. One source of information and advice is the Milton Keynes Property Blog where I have similar articles to this about the Milton Keynes property market and what I consider to be the best buy to let deals around at anyone time in the City, irrespective of which agent it is on the market with. If you haven’t visited and you are interested in the local property market in Milton Keynes .. you are missing out! ..