Friday 24 June 2016

58.4% Crawley Voters voted to leave the EU – What now for the 31,594 Crawley Landlords and Homeowners?


 



It’s 5.50am 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 like a stone 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 25,303 Crawley homeowners especially the 15,839 of those Crawley 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.

Crawley Property Values
Crawley 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 Crawley have risen by 2054.5%

(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 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 Crawley landlords of the 4,701 Crawley 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 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 Crawley property? It might have a short term wobble… but in the long term -it’s safe as houses regardless.

Thursday 23 June 2016

5% Yield in Pound Hill - just.....

This two bedroom maisonette in leafy Pound Hill has been listed by local agent Blakemore & Sons.  Its not just the sales prices that have been increasing over the last couple of years but the rental prices have increased too which would help achieve a yield of 5%.

You can view the details by clicking here http://www.rightmove.co.uk/property-for-sale/property-54688723.html

Sought after Pound Hill has always been the favoured area of town at the top of most tenants wishlists.  Easy access to the M23 junction and the mainline railway station at Three Bridges make it ideal for commuters whilst young families are drawn to the area because of the high standards and ratings of the local schools.  Investors should be aware that being a leasehold property there will be service charges & ground rent payable on the property.  It should also be noted that an investor will be paying a stamp duty of £8250 whilst a first time buyer need only pay £1800. 
2 bedroom maisonette in Javelin Court, Pound Hill
 

Wednesday 22 June 2016

£7,400 boost for first time buyers



There’s a whole legion of wannabe Crawley first-time buyers keen to get on the property ladder and they now have a 3% price advantage over the previously quicker responding army of Crawley landlords with cash at the ready. Since the start of April, buy to let landlords have had to pay an additional 3% stamp duty so whilst demand from some Crawley buy to let landlords has dropped away, in the interim, it offers Crawley first time buyers (FTB’s) a chance to fill the vacuum with less competition from cash rich landlords (over two thirds of BTL properties were purchased without a mortgage in the last 7 years) who could bid more and complete quicker.

Looking at the average value of a terraced house in Crawley currently standing at £247,100, that means if our Crawley FTB went up against a Crawley landlord, the landlord would have to pay an additional £7,413 in stamp duty. Early antidotal evidence from fellow property professionals in the town is suggesting landlords are reducing their offers slightly on Crawley properties to reflect the extra stamp duty.  

Whilst on the face of it, it appears landlords are being punished by No.11 Downing Street, I actually believe this increase in stamp duty for landlords is a good thing for the Crawley property market as a whole.

Since 2011/12, the Crawley property market has performed very well indeed. Over the last 12 months, £455,975,352 has been spent buying 1,624 Crawley properties.  Figures from the Land Registry have just been released and month on month in our council area, property values are 1% higher, yet 9.3% higher year on year. These figures are nowhere near the heady days of 2003 (February to be exact), when Crawley property prices rose by 23.6% in 12 months.
 
2 bedroom house for sale in Coronet Close with Moore & Partners
So as property values in Crawley (and the UK as whole) start to stablise and come back to some kind of balance, I am beginning to see savvy landlords view the Crawley property market in a different light. Even with the Spring rush, gone are the days where you could make limitless money on anything that had a door, a few windows and roof. This stamp duty change has made more and more landlords, after reading the Crawley Property Market Blog www.mycrawleyhome.com take advice on what or not to buy and what to pay, meaning Crawley landlords are being more calculated with their Crawley BTL purchases. I am also seeing a variance between relatively brisk current price momentum and softer expectations in terms of property value growth in Crawley, this in part reflects amplified uncertainty about the short term economic outlook (eg Brexit, Issues in the Far East etc).

Now I know a lot of Crawley landlords brought forward their BTL purchases to beat the stamp duty deadline. However, it is probable that hunger from Crawley investors will return for the right Crawley property later in the year, especially if it’s at the right price and offers a decent yield. However, in the meantime, Crawley FTB’s could and should, in the short term, make hay whilst the sun shines plug the gap and grab a bargain!