30 Jun

100% increase in Property Values in Liverpool since the Millennium

100% increase in Property Values in Liverpool since the MillenniumLiverpool house prices since the Millennium have risen by 100.8%, whilst average salaries in Liverpool have only grown by 51.27% over the same time frame. This has served to push homeownership further out of reach for many Liverpool people as they have to battle against raising considerable deposits and meet sterner lending criteria, as a result of new mortgage regulations introduced in 2014/5.  The private rental market in Liverpool has grown throughout the last twenty years with buy-to-let investors purchasing a high proportion of newly built residential properties that were built and designed for the owner occupier sales markets.  For example, in the Liverpool Riverside Constituency, roll the clock back 20 years and there were 40,965 properties in the Constituency, whilst the most recent set of figures show there are 52,273 properties – a growth of 11,308 properties.

However, anecdotal evidence suggests that a large majority of those 11,308 were bought by Liverpool buy-to-let landlords, as over the same 20-year time frame, the number of rental properties has grown from 4,212 to 19,094 in the Constituency – a rise of 14,882 properties.

100% increase in Property Values in Liverpool since the Millennium - Graph

Nevertheless, some say this historic growth of the Liverpool rental market might start to change with the new tax rules for landlords introduced by Mr. Osborne over the last seven or eight months. Yet the numbers tell another story. Across the board, mortgage borrowing climbed to a 9 year zenith in March this year as the British property markets traditional Easter rush corresponded with landlords hurrying to beat George Osborne’s new stamp duty changes – buy-to-let landlords borrowed £7.1bn in March 2016 (the latest set of figures released) which was 163% up on the £2.7bn borrowed in the previous March.

You see, from my point of view, I don’t think things will get worse in the buy-to-let market in Liverpool and these are the reasons why I believe that:

Firstly, what else are Liverpool landlords going to invest in if it isn’t property – the stock market? Since the Millennium, the stock market has risen by an unimpressive total of 5.54%, quite different to the 100.8% rise in Liverpool property prices?

Secondly, its true the 3% stamp duty is the first blow on top of a number of other tax changes to be phased in between 2017 and 2021, such as landlords facing a constraint in their ability to offset mortgage interest and, if sizeable numbers of landlords do take the decision to sell their portfolios, this will lead to a substantial amount of second hand properties being put up for sale. Yet that might not be a bad thing, as I have mentioned in previous articles there is a serious shortage of properties to buy at the moment in Liverpool: the stock of property for sale being at a six year all time low.

.. Thirdly, if there are fewer rental properties in Liverpool, as supply drops and demand remains the same (although ask any letting agent in Liverpool and they will say demand is constantly rising) this will create a squeeze in the Liverpool rental market and as a result rents will rise. In fact, I predict even if landlords don’t sell up, Liverpool rents will rise as Liverpool landlords seek to compensate for increased costs, which means more landlords will be attracted back.

For more thoughts on the Liverpool Property market to read articles like this, you might find the Liverpool Property Market blog of interest www.liverpoolpropertyblog.com

27 Jun

Property Deals – Brexit

Due to the decision on Thursday for the UK to leave the European Union, I have decided to leave a week before posting any properties that I feel would make a good investment.

I do feel that there will be small dip in value and that there will be some good investments to be purchased but as I always say, property investment is long term and overtime this small dip will reverse and turn in to a sizeable increase.

If I leave it a week, then we can see the adjustment in the market.

24 Jun

41.8% of Liverpool Voters voted to leave the EU – What now for the 171892 Liverpool Landlords and Homeowners?

41.8% of Liverpool Voters voted to leave the EU – What now for the 171892 Liverpool Landlords and Homeowners
It’s 7.00am as I start to type this article and David Dimbleby has just announced the UK will be leaving the EU as the final votes are counted. As most of the polls suggested a Remain Vote, it came as a surprise to most people, including the City. The Pound has dropped 6% this morning after the City Whiz kids got their predictions wrong and MP’s from the Remain camp are using words like “challenging times ahead”.

.. and now the vote has been made .. what next for the 120531 Liverpool homeowners especially the 66214 of those Liverpool homeowners with a mortgage?

The Chancellor in the campaign suggested property prices would drop by 18%. Using Treasury estimates, their method of calculating this was tenuous at best, but focused around the abrupt and hasty increase in UK interest rates, which in turn would raise the cost of mortgages, and therefore lower demand for property, causing a drop in property prices.… and I would say, yes .. that will probably happen.

Liverpool Property Values

Liverpool Property values will probably drop in the coming 12 to 18 months – but by 18% – I am sorry I find that a little pessimistic and believe that figure was rhetoric to get homeowners and landlords to vote in a particular way. But the UK property market is quite a monster.

Since the last In/Out EU Referendum in June 1975, property values in Liverpool have risen by 1598.2%

(That isn’t a typo) and whilst property prices did drop nationally by 18.7% between the peak of 2007 and bottom of the market in 2009, when one compares property values today in the country, compared to that all-time high of 2007, (the period before the financial crisis of the Credit Crunch of 2008/9) .. they are still up 10.14% higher.

Another Credit Crunch?

And so, notwithstanding the Credit Crunch, the worst global economic outlook since the 1930s and the recession it brought us, a matter of a few years later, the Government were panicking in 2012/3/4 that the housing market was a runaway train.

Now the same Credit Crunch doom-mongers and Sooth-Sayers that predicted soup kitchens in 2008/9 are predicting Brexit meltdown. Bad news sells newspapers. Stock markets may rise, stock markets may fall, yet the British public continued to buy property in 2009/10 and beyond. Aspiring first time buyers and buy to let landlords dusted themselves down, took a deep breath and carried on buying… because us Brit’s love our Bricks and Mortar .. we need a roof over our head.

However, as mentioned previously, if the value of the pound drops, in the past UK Interest Rates have risen to reverse that drop. However, whilst a cheaper pound will make your pint of Sangria a little more expensive on your Spanish holiday this year and make your brand new BMW pricer .. it will make British export cheaper! Which is great for the economy.

Interest rates

… and what of interest rates? Since 2009, interest rates have been at 0.5% and lots of people have become accustomed to those sorts of levels. So what if interest rates rise .. end of the world? Interest rates in the 1986/88 property boom were on average 9.25%, the 1990’s they were on average around 6.5% and uber-boom years (when UK property values were rising by 20% a year for three or four straight years across the UK) .. 4.5%. Many of you reading this who are in their 50’s and older will remember interest rates at 15%.

But I suspect interest rates won’t rise that much anyway, as Mark Carney (Chief of the Bank Of England) knows, raising interest rates causes deflation – which is the last thing the British economy needs at the moment. In fact they have been printing money (aka Quantitative Easing) for the last few years (which causes inflation) to the tune of £375bn a month. A bit of inflation because the pound has slipped on the money markets (not too much mind you) might be a good thing?

.. because whilst property values might drop in the country, they will bounce back. It’s only a paper loss.. because it only becomes real if you sell. And if you have to sell, again as most people move up market when they sell, whilst your property might have dropped by 5% or 10%, the one you want to buy would have dropped by the same 5% to 10% .. and here is the best part – (and work your sums out) you would actually be better off because the more expensive property you would be purchasing would have come down in value (in actual pound notes) than the one you are selling.

The Liverpool landlords of the 4,701 Liverpool buy to let properties have nothing to fear neither, nor do the 11,612 tenants living in their properties.

Buy to let is a long term investment. I think there might even be some buy to let bargains in the coming months as some people, irrespective of evidence, panic.  Even if we pull up the drawbridge at Dover and immigration stopped today, the British population will still increase at a rate that will exceed the current property building level. Britain is building 139,600 properties a year, but needs according to the eminent ‘Barker Review of Housing Supply Report’, the country needs to build about 250,000 properties a year to even stand still, and as the the birth rate is increasing, the population is living longer and just under a quarter of all UK households now are occupied by a single person demand is only going up whilst supply is stifled. Greater demand than supply equals higher prices. That is definitely a fact.

So, what will happen next?

Well, there are many challenges ahead. The country has spoken and we are now in unchartered territory – but we have been through a couple of World Wars, an Oil Crisis, Black Monday, Black Wednesday, 15% interest rates and a Credit Crunch … and we survived!

And the value of your Liverpool property? It might have a short term wobble… but in the long term -it’s safe as houses regardless.

41.8% of Liverpool Voters voted to leave the EU – What now for the 171892 Liverpool Landlords and Homeowners graph

23 Jun

57.6% of Liverpool Tenants are White Collar Middle Class

57.6% of Liverpool Tenants are White Collar Middle ClassWith Liverpool youngsters not able to buy their own property, my research would suggests the progressively important role the private rented sector has been playing in housing people in need of a roof over their head, especially at a time of increasing affordability problems for first time buyers and growing difficulties faced by social housing providers (local authorities and housing associations) in their ability to secure funding from Westminster and then compete against the likes of the Morris Homes & Bellways of this world to buy highly priced building land.

Renting isn’t like it was in the 1960’s and 70’s, where tenants couldn’t wait to leave their rack-rent landlords, charging sky-high rents for properties with Second World War wood chip wallpaper, no central heating and drafty windows. Since 1997 with the introduction of buy to let mortgages and a new breed of Liverpool landlord, the private rented sector in Liverpool has offered increasingly high quality accommodation for younger Liverpool households.

So whilst I knew in my own mind that the type and class of tenant has improved over the last 20 years, I had nothing to back that up … until now. According to some detailed statistics from Durham University just released, for the Liverpool City Council area, the current situation regarding social status of tenants shows some very interesting points. Using the well known Demographic ABC1 grade classifications which refers to the social grade definitions (which describe, measure and classify people of different social grade and income and earnings levels, for market research, social commentary, lifestyle statistics, and statistical research and analysis) this is what I found out.

NRS social grade

Of the 72,178 tenants who live in a private rented property in the Liverpool City Council area, 14.59% (or 10,160) of those tenants are classified in the AB category (AB Category being Higher and intermediate managerial / administrative / professional occupations), compared to 18.06% owner occupiers who own their property without a mortgage or 2.31% who rent their property from the local authority. Fascinating don’t you think?

Looking at the C1’s (C1’s being the Supervisory, clerical and junior managerial / administrative / professional occupations), of the already mentioned 72,178 tenants in the area, an impressive 31,307 of them are considered to be in the C1 category (or 43.04%). Again, when compared with the owner occupiers who own their property without a mortgage, that figure stands at 29.35%   and 14.44% who rent their property from the local authority.  So, if we use the conventional measurements recorded by the white-collar “ABC1” i.e. middle class ….

This means 57.64% of tenants are considered middle class in Liverpool

I could go through all of the social categories through to ‘E’, but I humbly don’t want to bore you with too many numbers. The fact is that private tenants are moving up the social ladder and whilst back in the 1960’s and 70’s, the private rented sector in Liverpool (and the rest of the UK) has customarily been viewed as a temporary tenure for 20 somethings before they bought a property, the increase in renting in Liverpool, which I have talked about many times in the Liverpool Property Market Blog may be a reflection of increasing difficulty for this group in accessing other tenures, but may also be a reflection that people nowadays choose to rent long term instead?

Liverpool Landlords need to be aware that tenants now demand more from their properties, the agent and their landlord and whilst affordability for first-time buyers and tighter controls on lending may mean that potential first-time buyers are in the private rented sector for longer, they will still pay ‘top dollar’ rent for a ‘top dollar’ property.

For more articles like this …please visit the Liverpool Property Market Blog www.liverpoolpropertyblog.com