50 Years Of The Crawley Property Market

50 years ago, in 1967, the average value of a Crawley property was £4,372 and interest rates were at 5.5% so how does that compare to the Crawley property market of today??

I have been doing some research on the current attitude of Crawley first-time buyers who are so important for both landlords and homeowners.  If first-time buyers aren’t buying, they rent (good news for landlords). If they buy, demand for Crawley property goes up for starter homes and that enables other Crawley homeowners to move up the property ladder.

First-time buyers are the life blood of the property market. They are, however the most susceptible to interest rate rises and the affordability of mortgages.  With that in mind, let us see what is happening to them…

The average value of a Crawley property is currently standing at £329,649 and UK interest rates at 0.25%.  As each year goes by, it appears the age of the everlasting mortgage has started to emerge, prompted by these first-time buyers, eager to get a foot on the housing ladder. I was reading a report a few days ago where some mortgage companies confessed that the battle to gain big returns from the property market has led to mortgages that will take considerably longer than the customary 25 years to pay off.

Over the last ten years, Crawley property prices have continued to rise more than wages, therefore, first-time buyers are looking for bigger loans, therefore the only way repayments can remain reasonable is by increasing the term of the loan.

Over the last few years, it has been commonplace for first-time buyer mortgages to be 30 and 35 years in length as the ‘Bank of Mum and Dad’ have been helping with the deposit. Now, some high street banks are offering mortgage terms of 40 years. This means first-time buyers could be paying until their mid 60’s.  So, a 50-year mortgage does not seem as far-fetched now as it would have been back in the 1970’s. After all life expectancy for a male then was exactly 69 years and today its 79 years and 5 months!

However, some commenters have said there are worries the mortgage companies are lending money over such a long term, they threaten leaving some first-time buyers with a generation of debt if the house price bubble bursts.  Interestingly, when I looked at what had happened to average property values in Crawley over the last 50 years, there have been bubbles. First-time buyers should take heart, since as a county we have always recovered from it a few years later.

What if interest rates rise? Well looking at historic UK interest rates, the current rate of 0.25% is at a 300-year low. Mortgages will never be cheaper. I would however, seriously consider fixing the rate to cushion any future potential interest rate rises (since they can only go in one direction when they do change). If Crawley first-time buyers see buying a home as a long-term decision, based on the last 50 years, they should be just fine!

Crawley Buy-To-Let Predictions up to 2037

On several occasions over the last few months, in my Crawley Property Blog, I predicted that the rate of rental inflation (i.e. how much rents are rising by) had eased over the last year. At the same time I felt that in some parts of the UK rents had actually dropped for the first time in over eight years. Recent research backs up this prediction.

Rents in Crawley for new tenancies fell by 0.4% in the last 12 months (i.e. not existing tenants experiencing rental increases from their existing landlord). When we compare that current rate with the historical rental inflation in Crawley, an interesting pattern emerges ..

·         2016 - Rental Inflation in Crawley was 5.1%

·         2015 - Rental Inflation in Crawley was 9.4%

·         2014 - Rental Inflation in Crawley was 3.2%

The reason behind this change depends on which side of the demand/supply equation you are looking from. On the demand side (from the tenants point of view) there is the uncertainty of Brexit and the fact that salaries are not keeping up with inflation for the first time in three years. Critically this means tenants have less disposable income to pay their rent. As an aside, it is interesting to note that nationally, rent accounts for 29% of a tenant’s take home pay (Denton House).

On the supply side of the equation (landlords point of view) Brexit also creates uncertainty. However, the biggest issue was a massive upsurge of new rental properties coming on to the market in late 2016, caused by George Osborne’s new 3% stamp duty tax for landlords in the first part of 2016. This meant a lot of new rental properties were ‘dropped’ on to the rental market all at the same time. The greater choice of rental properties for tenants curtailed rental growth/inflation. A slight softening of Crawley property prices has compounded this.  Figures from The Bank of England suggested that first time buyers rose over the last 12 months as some were more inclined to buy instead of rent. Together, these factors played a part in the ongoing moderation of rental growth.

The lead up to the General Election in May didn’t help: after all people don’t like doubt and uncertainty. So now that we have a mandate for going forward over the next 5 years hopefully that has removed any stumbling blocks stopping tenants making the decision to move home.

Whether it be ‘hard’ or ‘soft’ Brexit negotiations (and with the Election result the Tory’s might have to be ‘softer’ on those negotiations) the simple fact is, we aren’t building enough properties for us to live in. Both in Crawley, the South East and the wider UK, long-term population trends imply that rents will soon be growing faster than inflation again. Look at the projections by the Office of National Statistics.

Tenants will still require a vibrant and growing rental sector to deliver them housing options in a timely manner. As the population grows in Crawley, and wider afield, any restriction to the supply of rental properties (brought about by poor returns for landlords) cannot be in the long-term best interest of tenants. Simply put rents must go up!

The fact is that I see this as a short-term blip and rents will continue to grow in the coming years. With rents only accounting for 29% of a tenants’ disposable income, the ability for most tenants to absorb a rent increase does exist.

Council House Waiting List in Crawley Drops by 49.4% in last 5 years

Should you buy or rent a house? Buying your own home can be expensive but could save you money over the years. Renting a property through a letting agent or private landlord offers less autonomy to live by your own rules, with more flexibility if you need to move.

Yet, there is third way that many people seem to forget, yet it plays an important role in the housing of Crawley people. Collectively known as social housing, it is affordable housing, which is let by either Crawley Borough Council or a housing association to those considered to be in specific need, at rents below those characteristic in the private rental market.

In Crawley, there are 10,229 social housing households, which represent 23.8% of all the households in Crawley. There are a further 1,324 families in the Crawley Borough Council area on their waiting list, which is similar to the figures in the late 1990’s. The numbers peaked in 2011, when it stood at 2,618 families, so today’s numbers represent a drop of 49.4%.

Nevertheless, this doesn't necessarily mean that more families are being supplied with their own council house or housing association property. Six years ago, Westminster gave local authorities the authority to limit entitlement for social housing, quite conspicuously dismissing those that did not have an association or link to the locality.

Interestingly, the rents in the social rented segment have also been growing at a faster rate than they have for private tenants. In the Crawley Borough Council area, the average rent in 1998 for a council house/housing association property was £202.76 a month, whilst today its £464.84, a rise of 129% in 19 years.

When comparing social housing rents against private rents, the stats don’t go back to the late 1990’s for private renting, so to ensure we compare like for like, we can only go back to 2005. Over the last 12 years, private rents have increased nationally by a net figure of 19.7%, whilst rents for social housing have increased by 59.1%.

So, what does this all mean for the homeowners, landlords and tenants of Crawley?

Rents in the private rental sector in Crawley will increase sharply during the next five years. Even though the council house waiting list has decreased, the number of new council and housing association properties being built is at a 70 year low. The government crusade against buy-to-let landlords together with the increased taxation and the banning of tenant fees to agents will restrict the supply of private rental property, which in turn using simple supply and demand economics, will mean private rents will rise – making buy to let investment a good choice of investment again (irrespective of the increased fees and taxation laid at the door of landlords).  It will also mean property values will remain strong and stable as the number of people moving to a new house (and selling their old property) will continue to remain restricted and hence, due to lack of choice and supply, buyers will have to pay decent money for any property they wish to buy.

Interesting times ahead for the Crawley Property Market!