With Burgess Hill Annual Property Values 1.4% Higher, This is My 2018 Forecast.

Looking at the newspapers between Christmas and New Year, it seemed that this year’s sport in the column inches was to predict the future of the British housing market. So to go along with that, these are my thoughts on the Mid Sussex property market, using Burgess Hill as an example.

With the average 5-year fixed rate mortgage at 1.98% (down from 3.47% in 2014) and 2-year fixed rate at 1.47% (down from 2.37% in 2014), mortgage interest rates offered by lenders are at an all-time low (even with the slight increase on the Bank of England base rate a few months ago). Added to this, there has been a low unemployment rate of 2.3% in Mid Sussex, which has contributed to maintain a decent level demand for property in 2017. Interestingly an impressive 503 Burgess Hill properties were sold in last 12 months, whilst the number of properties for sale in the town has remained limited, therefore providing support for Burgess Hill house prices. This means that Burgess Hill property values are 1.4% higher than a year ago.

However, moving into 2018, there will be greater pressures on people’s incomes as inflation starts to eat into real wage packet growth, which will wield a snowballing strain on consumer confidence. Interestingly though, information from the website Rightmove suggested over a third of property it had on its books in October and November had their asking prices reduced, the highest percentage of asking price reductions in the same time frame, over five years. Still, a lot of that could have been house-sellers being overly optimistic with their initial pricing.

In terms of what will happen to Burgess Hill property values in the next 12 months, a lot will be contingent on the type of Brexit we have and the impact on the whole of the UK economy. A lot of people will talk about the Central London property market in the coming year, and if the banking and finance sectors are negatively affected with a poor Brexit deal, then the London market is likely to see more of an impact.

Nevertheless, the bottom line is Burgess Hill homeowners and Burgess Hill landlords should be aware of what happens in the rollercoaster housing market of Central London, but not panic if prices do drop suddenly there in 2018. Over the last 8 years, the Central London property market has been in a world of its own (Central London house prices have grown by 89.6% in those last 8 years, whilst in Burgess Hill, they have only risen by 48.1%). So we might see a heavy correction in the Capital, whilst more locally, something a little more subdued.

Hindsight is always better than foresight and predicting anything economic is all well and good when you know what is around the corner. As the UK economy and the UK housing market are intertwined, it all depends on how we deal as a country with the Brexit issue. However, we have been through the global financial crisis reasonably intact, I am sure we can get through this together as well?

Oh, and house prices in Burgess Hill over the next 12 months? I believe they will end up between 0.4% lower and 1% higher, although it will probably be a bumpy ride to get to those sorts of figures.

Youngsters unable to buy their first home in Mid Sussex – Are the Baby Boomers and Landlords to Blame?

Talk to many Mid Sussex 20 something’s, where home ownership has looked but a vague dream, many of them have been vexatious towards the Baby Boomer generation and their pushover ‘easy go lucky’ walk through life; jealous of their free university education with grants, their eye watering property windfalls, their golden final salary pensions and their free bus passes.

If you had bought a property in Burgess Hill for example, say for £18,000 in first quarter of 1977, today it would be worth £395,589, a windfall increase of 2097.7%.

But to blame the 60 and 70 year olds of Mid Sussex for that sort of rise seems a little unfair, with the value of the homes rising like rocket, I don't believe they can be censured or made liable for that. A few weeks ago, I discussed in my blog the number of people in the Mid Sussex who have two or more spare bedrooms (meaning they are under-occupying the house). I see many mature members of Mid Sussex society, rattling around in large 4/5 bed houses where the kids have flown the nest years ago; but should they be blamed?

We are all just human, and the mature members of UK society have just reacted to the inducements of our property and tax system. The mature generations who joined the property market party in the 1970’s and 1980’s were able to take out huge mortgages, protected in the knowledge that inflation would corrode the real value of the mortgage, while wage gains would boost their ability to repay.

Neither do I directly blame the multitude of Mid Sussex buy to let landlords, buying up their 10th or 11th property to add to their buy to let empire. They too, are humbly reacting to the peculiar historic inducements of the UK property market.

So, who is to blame?

Well, hyperinflation in the 1970’s meant the real value of people’s mortgages was whipped out (as mentioned above). Margaret Thatcher and Nigel Lawson are also good people to blame with Maggie selling off millions of council houses and Nigel Lawson’s delayed ending of the MIRAS tax relief in 1987; meaning he too can get his share of indignation. The Blair/Brown combo doubled stamp duty in 1997 and again in 2000, which, as a tax on property transactions, precludes a more efficient distribution of the current housing stock. The Government has had plenty of opportunity to change the draconian stamp duty rules to incentivise those mature Mid Sussex house movers to downsize.

However, I have started to see over the last few years a change in Government policy towards housing. The new breed of Mid Sussex buy to let landlords that have come about since the Millennium, have had their wings clipped over the last couple of years, with the introduction of new tax rules (meaning it is slightly more difficult to make money out of property unless you have all the national information and Mid Sussex property trends to hand).

It’s easy to think the only reason that hundreds of first time buyers have been priced out of the Mid Sussex housing market is because of these landlords. Yet, I believe landlords have been undervalued with the homes they provide for people. With first time buyers struggling to save for a deposit, if it weren’t for those landlords buying up those homes over the last 10/15 years, we would have a bigger housing crisis than we have today. Since the global financial crisis of 2008/9, local councils have had to cut services, so certainly didn’t have enough money to build new homes; homes that were provided in Mid Sussex by these buy to let landlords.

One side of the argument is that 380 homes are being bought up by buy to let landlords each year in the Mid Sussex District Council area when otherwise they might have become available to other buyers, the other side of the argument is the current national average deposit is £51,800, which is, by far, the greatest barrier to those wanting to buy their first home. Those homes bought by local buy to let landlords are not left idle, as they equate to 2,659 of new homes for local people, most of whom who see renting as a better option because of the choice, the simplicity and the flexibility which renting brings.

In the 60’s/70’/80’s, the traditional thoughts that you were a failure unless you owned your own home have now all but disappeared, because if you ask many young people, they would probably say renting was the perfect option for them at certain times of their life.

My thoughts on the future of the Mid Sussex Buy-To-Let Market.

I was recently reading a report by the Home website which suggested that hordes of landlords are selling their buy-to-let investments due to increasing burdens on them in the buy-to-let market. Their findings suggest the number of new properties that came onto the market nationally (for sale) jumped by 11% across the UK as a result.

Those increasing burdens include new tax rules coming in over the next 3 to 4 years and the announcement that all self-managing landlords (i.e. landlords that don’t use a letting agent to look after their buy-to-let property) will soon need to register with a compulsory redress scheme to resolve tenant arguments and disputes; as Westminster wants to heighten standards in the Private Rented Sector. 

Interestingly I was chatting with a self-managed landlord from Hurstpierpoint, when I was out socially over the festive period, who didn’t realise the other recent legislations that have hit the Private Rented sector, including the ‘Right to Rent’ regulations which came in to operation last year. Landlords have to certify their tenants have the legal right to live in the UK. This includes checking and taking copies of their tenant’s passport or visa before the tenancy is signed. Of course, if you use a letting agent to manage your property, they will usually sort this for you (as they will with the redress scheme when that is implemented).

If you are a self-managed landlord though, the consequences are severe because if you let a property to a tenant who is living in the UK illegally, you will be fined up to £3,000. That same Hurstpierpoint landlord popped into my offices in the New Year, and I checked all his paperwork and ensured he was on the right side of the law going forward – and I offer the same to any landlord in the Mid Sussex area if you want me to cast my eye over your buy to let matters.

But what of all these extra properties being dumped onto the market in Mid Sussex? I chose to look at Burgess Hill, and I looked at the records the number of properties on the market there now, as opposed to a year ago, the numbers tell an interesting story;

 

Overall, Burgess Hill doesn’t match the national trend, with the number of properties on the market only rising by 3% in the last year.  It was particularly interesting to see the number of flats increase by 10%, yet the number of semis on the market drop by 2%.

However, speaking with my team and other property professionals in the area, the majority of that movement in the number of properties and the types of properties on the market isn’t down to landlords dumping their properties on the market. The whole property market has changed in the last 12 months, with the majority of the change in the number and type of properties for sale due to the owner-occupier market, not landlords (a subject I will write about soon in my Mid Sussex Property Market blog later this spring). You see, for the last ten years, each month there has always been a small number of Mid Sussex landlords who have been releasing their monies from their buy to let properties - as is the nature of all investments!

Nationally, the number of rental properties coming on to the market to rent fell by 16% in Q4 2017 compared to Q4 2016, but that isn’t because there are 16% less rental properties to rent – it’s because tenants are staying in their rental properties longer meaning less are coming on the market to be RE-LET.

Nevertheless, some Mid Sussex landlords will want to release the equity held in their buy to let properties in 2018. All I suggest is that you speak with your letting agent first, as putting a rental property on the open market often spooks the tenants to hand in their notice days after you put it on the market (because they don’t like the uncertainty and also believe they will become homeless!). This means you have an empty property, costing you money with no rent coming in.  However, some letting agents who specialise in portfolio management have select lists of landlords that will buy with sitting tenants in. If you have a portfolio in Mid Sussex and are considering selling some or all of them – drop me a line as I might have a portfolio landlord for you (with the peace of mind that you won’t have any rental voids).