Mid Sussex Unemployment Drops to 2.7% and its effect on the Mid Sussex Property Market.

It was late May 2016, The Right Hon. Member for Tatton, Mr George Osborne, published an official HM Treasury analysis stating UK house prices would be lower by at least 10% (and up to 18%) by the middle of 2018 compared with what is expected if the UK remained in the European Union. So, eight months on from the Referendum, are we beginning to show signs of that prophecy? The simple answer is yes and no.

Good barometers of the housing market are the share prices of the big UK builders. Much was made of Barratt’s share price dropping by 42.5% in the two weeks after Brexit, along with Taylor Wimpey’s equally eye watering drop in the same two weeks by 37.9%. Looking at the most recent set of data from the Land Registry, property values in Mid Sussex are 0.42% down month on month (and the month before that, they had barely grown with an increase of only 0.33%) – so is this the time to panic and run for the hills?

Doom and Gloom then? Well, let me consider the other side of the coin.

Well, as I have spoken about many times in my blog, it is dangerous to look at short term. I have mentioned in several recent articles, the heady days of the Mid Sussex property prices rising quicker than a thermometer in the desert sun between the years 2011 and late 2016 are long gone – and good riddance. Yet it might surprise you during those impressive years of house price growth, the growth wasn’t smooth and all upward. For example, Haywards Heath property values dropped by an eye watering 1.19% in May 2013 and 2.57% in April 2015 – and no one batted an eyelid then.

You see, property values in Haywards Heath are still 10.23% higher than a year ago, meaning the average value of a Haywards Heath property today is £474,950. Even the shares of those new home builders Barratt have increased by 43.3% since early July and Taylor Wimpey’s have increased by 37.3%. The Office for Budget Responsibility, the Government Spending Watchdog, recently revised down its forecast for house-price growth in the coming years - but only slightly.

The Mid Sussex housing market has been steadfast partly because, so far at least, the wider economy has performed better than expected since Brexit. There is a robust link between the unemployment rate and property prices, and a flimsier one with wage growth. Unemployment in the Mid Sussex District Council area stands at 2,000 people (2.7%), which is considerably better than a few years ago in 2012 when there were 2,800 people unemployed (3.8%) in the same council area. 

However, inflation is the only thing that does worry me. Looking at all the pundits, it will get to at least 3% (if not more) in the latter part of 2017 as the drop in Sterling in late 2016 renders our imports with higher prices. If that transpires then the Bank of England, whose target for inflation is 2%, may raise interest rates from 0.25% to 2%+. However, that won’t be so much of an issue as 81.6% of new mortgages in the UK in the last two years have been fixed-rate and who among us can remember 1992 with Interest rates of 15%!

Forget Brexit and yes inflation will be a thorn in the side – but the greatest risk to the Mid Sussex (and British) property market is that there are simply not enough properties being built thus keeping house prices artificially high. Good news for those on the property ladder, but not for those first-time buyers that aren’t! In the coming weeks in my articles on the Mid Sussex Property Market, I will discuss this matter further!

92 Burgess Hill Households Occupied by OAP Renters.

Recent statistics published by the Office of National Statistics show that there are 267,704 private rented households in the Country that are occupied by people aged 65 and older, meaning 4.39% of OAP’s are living in private rented property.

It got me thinking two things. How many of these OAP’s have always rented and how many have sold up and become a tenant?  In retirement, selling up could make financial sense to the mature generation in Mid Sussex, potentially allowing them to liquidate the equity of their main home to enhance their retirement income.  I wanted to know why these older people rent and whether there was opportunity for the buy to let landlords of Mid Sussex.

The Prudential published a survey recently that said nearly six out of ten OAP renters had never owned a home.  Two out of ten OAP renters were required to sell up because of debt, just about one in ten OAP renters sold their property to use the money to fund their retirement and the remaining one out ten OAP renters, rented for other reasons.

Funding retirement is important as the life expectancy of someone from Mid Sussex at age 65 (years) is 19.6 years for males and 22.1 years for females (interesting when compared to the National Average of 18.7 years for males and 21.1 years for females).  The burdens of financing a long retirement are being felt by many mature people of Mid Sussex. The state of play is not helped by rising living costs and ultra-low interest rates reducing returns for savers.

So let’s take Burgess Hill as an example.  Of the 3,212 households in Burgess Hill, whose head of the household is 65 or over, not surprisingly 2,708 of households were owned (84.31%) and 370 (11.52%) were in social housing.  However, the figure that fascinated me was the 92 (2.86%) households that were in privately rented properties.

Anecdotal evidence, by talking to both my team and other Mid Sussex property professionals is that this figure is rising.  More and more OAP’s are selling their large Mid Sussex homes and renting something more manageable, allowing them to release all of their equity from their old home.  This equity can be gifted to grandchildren (allowing them to get on the property ladder), invested in plans that produce a decent income and while living the life they want to live.

 

These Mid Sussex OAP renters know they have a fixed monthly expenditure and can budget accordingly with the peace of mind that their property maintenance and the upkeep of the buildings are included in the rent.  Many landlords will also include gardening in the rent! Renting is also more adaptable to the trials of being an OAP - the capability to move at short notice can be convenient for those moving into nursing homes, and it doesn't leave family members panicking to sell the property to fund care-home fees.

 

Mid Sussex landlords should seriously consider low maintenance semi-detached bungalows on decent bus routes and close to doctor’s surgeries as a potential investment strategy to broaden their portfolio.  Get it right and you will have a wonderful tenant, who if the property offers everything a mature tenant wants and needs, will pay top dollar in rent!

£6.53bn – The total value of all Haywards Heath Property Market.

“How much would it cost to buy all the properties in Haywards Heath?”

This fascinating question was posed by the 11-year-old son of one of my Haywards Heath landlords when they both popped into my offices before the Christmas break (doesn’t that seem an age away now!). I thought to myself, that over the Christmas break, I would sit down and calculate what the total value of all the properties in Haywards Heath are worth, and just for fun, work out how much they have gone up in value since his son was born back in the autumn of 2005.

In the last 11 years, since the autumn of 2005, the total value of Haywards Heath property has increased by 70% or £2.69 billion to a total of £6.53 billion. Interesting, when you consider the FTSE100 has only risen by 30.78% and inflation (i.e. the UK Retail Price Index) rose by 37% during the same 11 years.

When I delved deeper into the numbers, the average price currently being paid by Haywards Heath households stands at £413,917, but you know me, I wasn’t going to stop there, so I split the property market down into individual property types in Haywards Heath; the average numbers come out like this;

It got even more fascinating when I multiplied the total number of each type of property by the average value. Even though detached houses are so expensive, when you compare them with the much cheaper terraced/town houses and apartments, you can quite clearly see detached properties don’t fare much better in terms to total pound note value of the terraced/town houses and apartments;

 

So, what does this all mean for Haywards Heath?  Well as we enter the uncharted waters of 2017 and beyond, even though property values are already declining in certain parts of the previously over cooked Central London property market, the outlook in Haywards Heath remains relatively good as over the last five years, the local property market was a lot more sensible than central London’s.

Haywards Heath house values will remain resilient for several reasons. Firstly, demand for rental property remains strong with continued immigration and population growth.  Secondly, with 0.25 per cent interest rates, borrowing has never been so cheap and finally the simple lack of new house building in Haywards Heath not keeping up with current demand, let alone eating into years and years of under investment – means only one thing – yes it might be a bumpy ride over the next 12 to 24 months but, in the medium term, property ownership and property investment in Haywards Heath has always, and will always, ride out the storm.