The 10,090 Crawley Savers batten down the hatches with low interest rates set to continue into the 2020’s

You might ask, what has the plight of the Crawley savers to do with the Crawley Property Market … everything in fact.  Read the newspapers, and every financial wizard is stating that with the decision of the Bank of England’s Monetary Policy Committee in early August to cut the Bank of England base rate to an all time low of 0.25 per cent, savers should prepare themselves for interest rates to stay low well into the early 2020’s.

... And this isn’t some made up story to capture the headlines of newspaper editors. The yield (posh word for interest rate or return) on 10-year Government bonds is currently 0.61 per cent. This indicates that the money markets believe that the Bank of England’s base rate will, on average over the next ten years, be below the 0.61% rate they are buying the 10 year bonds at (because they would loose money if the average was over 0.61%). UK Interest rates are going to be low for a long time.

For those who have saved throughout their working lives and are looking for ways to maximise their savings, tying their money into property could prove advantageous. You see as a saver, I did a search of the internet and the best savings rate I could find was a 5 year fixed rate at 2.5% a year with Weatherbys Bank. Your £200,000 nest egg would earn you £5,000 a year – not much. However, on the other side of the fence, growth in Crawley house prices and princely buy to let yields have made property investment in Crawley an appealing option for many. According to my research, the...

Average Yield over the last five years for

Crawley Buy to let property has been 4.8% a year

… and average Property Values in over the same period have risen by 33.0%.

Using these averages, the Crawley landlord’s property would be worth £266,000 and they would have received a total of £48,000 in rent – making the total return £314,000. Meanwhile, whilst our 10,090 Crawley Saver’s, using the average savings rates for the last 5 years, even if they had reinvested the interest, their £200,000 would only be £221,184.

 

There are risks as well as benefits to buy to let though. As my blog readers know, I tell it like it is and investing in buy to let means locking up capital in a property that may fall in value. Another option would be stock market income based investment funds, which are paying around 5%, especially if put your nest egg into a tax free Stocks and Shares ISA. Although you can only add £15,240 a year into an ISA, but you would also have the ability to sell up quickly if you want ... but one last thought…

The other side of the coin is that you cannot buy an unloved ‘stock market income based investment fund’ and set about renovating it and adding value yourself. The investment fund isn’t something that you can touch and feel, isn’t something tangible, isn’t something physical, isn’t something concrete, it isn’t bricks and mortar ... and that is why my fellow Crawley homeowners and Crawley landlords, the love affair of the British and Property will continue.

If you are considering becoming a new buy to let landlord in Crawley, what do you know about the Crawley property market? Do what many established landlords do and visit the Crawley Property Blog where there is a catalogue of articles like this.

What will the 0.25% Interest Rate do to the Crawley Property Market?

Construction site in Crawley Town Centre

I had an interesting chat with a Worth landlord who owns a few properties in the town. He popped his head in to my office as his wife was shopping in the area (and let’s be honest talking about the Crawley Property Market is a lot more interesting than clothes shopping!). We had never spoken before (because he uses another agent in the town to manage his Crawley properties) yet after reading my blog on the Crawley Property Market for awhile, the landlord wanted to know my thoughts on how the recent interest rate cut would affect the Crawley property market and I would also like to share these thoughts with you……

Well it’s been a few weeks now since interest rates were cut to 0.25% by the Bank of England as the Bank believed Brexit could lead to a materially lower path of growth for the UK, especially for the manufacturing and construction industries. You see for the country as a whole, the manufacturing and construction industries are still performing well below the pre credit crunch levels of 2008/09, so the British economy remains highly susceptible to an economic shock. This is especially important in Crawley, because even though we have had a number of local success stories in manufacturing and construction, a large number of people are employed in these sectors. In Crawley, of the 55,690 people who have a job, 3,636 are in the manufacturing industry and 3,448 in Construction meaning

6.5% of Crawley workers are employed in the Manufacturing
sector and 6.2% of Crawley workers are in Construction

The other sector of the economy the Bank is worried about, and an equally important one to the Crawley economy, is the Financial Services industry. Financial Services in Crawley employ 2,818 people, making up 5.1% of the Crawley working population.

Together with a cut in interest rates, the Bank also announced an increase in the quantity of money via a new programme of Quantitative Easing to buy £70bn of Government and Private bonds. Now that won’t do much to the Crawley property market directly, but another measure also included in the recent announcement was £100bn of new funding to banks. This extra £100bn will help the High St banks pass on the base rate cut to people and businesses, meaning the banks will have lots of cheap money to lend for mortgages .. which will have a huge effect on the Crawley property market (as that £100bn would be enough to buy half a million homes in the UK).

It will take until early in the New Year to find out the real direction of the Crawley property market and the effects of Brexit on the economy as a whole, the subsequent recent interest rate cuts and the availability of cheap mortgages. However, something bigger than Brexit and interest rates is the inherent undersupply of housing (something I have spoken about many times in my blog and the specific affect on Crawley). The severe undersupply means that Crawley property prices are likely to increase further in the medium to long term, even if there is a dip in the short term. This only confirms what every homeowner and landlord has known for decades .. investing in property is a long term project and as an investment vehicle, it will continue to outstrip other forms of investment due to the high demand for a roof over people’s heads and the low supply of new properties being built.

What is really happening in the Crawley Property Market?

Well its been a few months since Brexit and as we settle into the Autumn with Great British Bake Off, Strictly and the Football season ... the newspapers are returning to their mixed messages of good news, bad news and indifferent news about the Brit’s favourite subject after the weather ... the property market.

The thing is the UK does not have one housing market. Instead, it is a patchwork of mini property markets all performing in a different way. At one end of scale is Kensington and Chelsea, which has seen average prices drop in the last twelve months by 6.2% whilst in our South East region, house prices are 12.3% higher. But what about Crawley?

Property prices in Crawley are 12.8% higher than a year ago

and 0.1% higher than last month.

So what does this mean for Crawley landlords and homeowners? Not that much unless you are buying or selling in reality. Most sellers are buyers anyway, so if the one you are buying has gone up, yours has gone up.  Everything is relative and what I would say is, if you look hard enough, there are even in this market, there are still some bargains to be had in Crawley.

However, the most important question you should be asking though is not only is what happening to property prices, but exactly which price band is selling? I like to keep an eye on the property market in Crawley on a daily basis because it enables me to give the best advice and opinion on what (or not) to buy in Crawley.

If you look at Crawley and split the property market into four equalled sized price bands. Each price band would have around 25% of the property in Crawley, from the lowest in value band (the bottom 25%) all the way through to the highest 25% band (in terms of value).

·         Nil to £240k                        111 properties for sale and 185 sold (stc) i.e. 62% sold

·         £240k to £300k                  115 properties for sale and 186 sold (stc) i.e. 61% sold

·         £300k to £375k                  107 properties for sale and 145 sold (stc) i.e. 57% sold   

·         £375k +                                125 properties for sale and 113 sold (stc) i.e. 47% sold

Fascinating don’t you think that it is the lower to middle Crawley market that is doing the best?

The next nine months’ activity will be crucial in understanding which way the market will go this year after Brexit ... but, Brexit or no Brexit, people will always need a roof over their head and that is why the property market has ridden the storms of oil crisis’ in the 1970’s, the 1980’s depression, Black Monday in the 1990’s, and latterly the credit crunch together with the various house price crashes of 1973, 1987 and 2008.

And why? Because of Britain’s chronic lack of housing will prop up house prices and prevent a post spike crash. ... there is always a silver lining when it comes to the property market!