The Unfairness of the Burgess Hill Baby Boomer’s £2,463,940,000 Windfall? (Part 1).

Recently I was having a chat with one of my second cousins at a big family get-together. The last time I had seen them their children were in their early teens. Now their children are all grown up, have partners, dogs and children. Wow – how time flies!

So, I got talking over a glass of lemonade with my 2nd cousins and a couple of their children, about the times of 15% interest rates and how the more mature members of our family had to endure the 3 day week, 20% inflation and the threat of nuclear annihilation in 4 minutes. Foolishly, I said what with all the opportunities youngsters had today, they had never had it so good!

Trust one of my cousin’s children to have gained some financial/economics qualifications before going to Law School, as they debated with me the genuine economic predicament of Millennials and how a combination of student debt, unemployment, global proliferation, EU migration and rising house values is reducing the salaries and outlook of masses of the UK’s younger generation, causing an unparalleled disparity of wealth between the generations. So of course I asked why that was.

They said Millennials were paying the price for the UK’s most spectacular bookkeeping catastrophe to date (bigger than the Bank bailout after the Credit Crunch). Back in the 1950’s and 1960’s, nobody predicted us Brit’s would live as long as we do today, and in such abundant numbers. The OAP pensions that were promised in the past (be that Government State Pension or Company Final Salary Schemes) which appeared to be nothing fancy at the time, are now burdensomely over-lavish, and that is hurting the Millennials of today and will do so for years to come.

Bringing it back to property, the young 2nd cousin once removed ‘soon to be’ lawyer, stated that baby boomers born between 1945 and 1965 have been big recipients of the vast rising house prices over the 1970’s/80’s/90’s and 2000’s. Add to that their decent pensions, meaning cumulatively, their wealth has grown exponentially through no skill of their own.

This disparity of wealth between the older and younger generations could have unparalleled consequences for the living standards of younger Millennials. So Houston - Mid Sussex – do we have a problem?

Well my Mid Sussex Property Blog readers, you know I like a challenge. I can’t disagree with some of what the younger family member said, but there are always two sides to every story, so I thought I would do some homework on the matter.

I decided to look at Burgess Hill as an example. Since 1990, the average value of a property in Burgess Hill has risen from £89,500 to its current level of £368,700. As there are a total of 8,825 homeowners aged over 50 in Burgess Hill; that means there has been a £2.46bn windfall for those Burgess Hill homeowners fortunate enough to own their own homes during the property boom of the 1990s and early 2000’s.

I must admit that the growth in property values in the 1990’s and 2000’s certainly helped many of Burgess Hill’s baby boomers. The figures do appear to put into reverse gear the perceived wisdom that each generation gets wealthier than the previous one. So with all this wealth, the figures do back up the youngsters’ argument that Millennials are being priced out of home ownership.

Or do they?

Next week, I will carry on this discussion where I will give the Baby Boomer’s defence to the prosecution’s case!

Council House Waiting List in Mid Sussex Drops by 73.1% in last 2 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 Mid Sussex people. Collectively known as social housing, it is affordable housing, which is let by either Mid Sussex District Council or a housing association to those considered to be in specific need, at rents below those characteristic in the private rental market.

In Burgess Hill for example, there are 1,246 social housing households, which represent 10.11% of all the households in Burgess Hill. There are a further 1,420 families in the Mid Sussex District Council area on their waiting list, which is similar to the figures in the late 1990’s. The numbers peaked in 2014, when it stood at 5,281 families, so today’s numbers represent a drop of 73.1%.

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 England, the average rent in 1998 for a council house/housing association property was £183.08 a month, whilst today its £381.03, a rise of 108% 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 Mid Sussex?

Rents in the private rental sector in Mid Sussex 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 Mid Sussex Property Market!

45.3 miles – The average distance people go to escape living in Burgess Hill.

“How far do Burgess Hill people go to move to a new house?” This was an intriguing question asked by one of my clients the other week. Readers of my property blog will know I love a challenge, especially when it comes to talking about the Mid Sussex Property Market!

For the majority, the response is not very far. It is much more common for homeowners and tenants in Great Britain to move across town than to the next town or county. Until now, it’s been hard to say how many homeowners and tenants moved from (and to) relatively far away to buy or rent their new home. However, I carried out some research and requested some statistics from the Royal Mail. What came back was fascinating!

Using statistics for the 12 months up to the middle of autumn 2016, 366 households moved out of Burgess Hill (RH15), moving an average distance of 45.32 miles - the equivalent of moving from Burgess Hill to Ashford (as the crow flies).  The greatest distance travelled was 685 miles – that’s more than 26 marathons (when someone moved to the Shetland Isles).

Considering there were 479 property sales in RH15 in the year and countless tenant moves, the numbers seems consistent – once you find a town you like, you tend to want to settle down and if you do move, you might only move to a different neighborhood, or for better transport links or, to be closer to the school you want to get your children into, but the likelihood is you won’t travel far.

I then turned my attention to people moving into Burgess Hill. Using the same statistics for the 12 months up to the middle of autumn 2016, 371 households moved into Burgess Hill (RH15), moving an average distance of 35.05 miles - the equivalent of moving from Maidstone to Burgess Hill (again as the crow flies). The greatest distance travelled was 457 miles – that’s more than 17.5 marathons (when someone moved from Ellon in Scotland to Burgess Hill).

I have looked at the data of every person moving into Burgess Hill and these have been plotted on a map of the UK. Looking at the map below, it shows exactly where most people come from, when moving into Burgess Hill. As you can see, there are a high proportion of people moving from London and the South.

So, what does all this mean for the landlords and homeowners of Mid Sussex?

When an agent markets a property to let or to buy, it is vital to know the tenant or property buyer well, that the properties they are letting/selling fit those tenants/buyers, so they almost sell themselves. These days that means not only knowing how many bedrooms, reception rooms etc., a property offers but the budget buyers and tenants want to spend on a property in that area as well as where they come from.

The estate and lettings industry loves the mantra “location, location, location”. I say it might be helpful to factor in where (and how) far people are moving from, so the property can be sold or let more easily. Many say knowledge is power and whilst I do enjoy writing my blog on the Mid Sussex property market, I also use the information to help my clients buy, let and sell well. So for example, the information gained for this article, will enable my team and I to be more efficient in where to direct our marketing resources to ensure we maximise our clients’ properties sale-ability or rent-ability.

1 in 6 Haywards Heath Properties are Leasehold.

There are 23.36 million properties in England and Wales with 64% being owner occupied and 36% being rented either from a private landlord, local authority or housing association.

Over nine out of ten of those English and Welsh owner-occupied properties are a whole house or bungalow. Now, most people would assume they would be freehold - however, of those renting nearly half of rental properties, 44% to be precise, lived in other leasehold apartments and flats.

It might be wise to quickly explain the difference between freehold and leasehold. When someone owns the freehold of a property they own it outright, including the land it is built on, whilst with a leasehold property the leaseholder owns the property for the length of their lease agreement. Leaseholders must pay the person who owns land (the freeholder) ground rent and other fees. When the leasehold ends, ownership returns to the freeholder although the leaseholder can extend the lease or they can buy the freeholder out, but there are rules and regulations with regards doing that.

Therefore, it would be safe to assume that houses are freehold and flats are leasehold wouldn’t it? Not necessarily! Most houses are freehold but some might be leasehold - usually through shared-ownership schemes – but more and more new homes builders are selling houses as leasehold as well. The protection of the law afforded to leaseholders who own a flat is massive, but sadly lacking to leasehold houses sold privately.

Looking specifically at the figures for Haywards Heath, at the last count in RH16 there were 15,912 properties. Since 1995, 17,076 properties in RH16 have changed hands and have been sold. Looking further at those 17,076 transactions in RH16 since 1995, using data from Land Registry and solicitors practice My-Home-Move, 18.30% have been leasehold (higher than the national average of 15%).

 

However, I am concerned about a few new homes builders selling new houses (not flats - houses) as leasehold. There has been a growing (yet small) trend for new-build houses to be sold as leasehold in recent years. While not all house builders use this model, those that do maintain it helps make developments financially viable.

The issue comes when builders sell the freehold separately to an investment company without informing the lease holder – which they are legally allowed to do without telling the leaseholder. In England and Wales, the "right of first refusal" to buy the freehold is written in law to leaseholders of flats i.e. the freeholder must offer it to the leaseholders of all the flats of the building first), but not leaseholders of houses.

This is the point I am trying to get across. If you are buying a new home and it’s a house (i.e. not a flat) – please check very carefully indeed whether its freehold or leasehold. If it is leasehold, whilst you do have rights, they are not as strong as for those people buying a leasehold flat. I appreciate I am only talking about a very small percentage of the property market, but potentially this could end up costing thousands of pounds to those affected.