£16m a year black hole in the Burgess Hill Property Market - Is Buy to Let Immoral? (Part 2)

An Englishman’s Home is His Castle as Maggie Thatcher lauded - everyone should own their own home. In 1971, around 50% of people owned their own home and, as the baby-boomers got better jobs and pay, that proportion of homeowners rose to 69% by 2001. Homeownership was here to stay as many baby boomers assumed it’s very much a cultural thing here in Britain to own your own home.

But on the back of TV programmes like Homes under the Hammer, these same baby boomers started to jump on the band wagon of Burgess Hill buy to let properties as an investment. Burgess Hill first time buyers were in competition with Burgess Hill landlords to buy these smaller starter homes, pushing house prices up in the 2000’s (as mentioned in Part One) beyond the reach of first time buyers. Alas, it is not as simple as that. Many factors come into play, such as economics, the banks and government policy. But are Burgess Hill landlords fanning the flames of the Burgess Hill housing crisis bonfire?

I believe that the landlords of the 1,272 Burgess Hill rental properties are not exploitive and are in fact, making many positive contributions to Burgess Hill and the people of Burgess Hill. Like I have said before, Burgess Hill (and the rest of the UK) isn’t building enough properties to keep up the demand; with high birth rate, job mobility, growing population and longer life expectancy.

According to the Barker Review, for the UK to standstill and meet current demand, the country needs to be building 8.7 new households each and every year for every 1,000 households already built. Nationally, we are currently running at 5.07 per thousand and in the early part of this decade were running at 4.1 to 4.3 per thousand.

It doesn’t sound a lot of difference, so let us look at what this means for Burgess Hill.

For Burgess Hill to meet its obligation on the building of new homes, Burgess Hill would need to build 107 households each year. Yet, we are missing that figure by around 45 households a year.

For the Government to buy the land and build those additional 45 households, it would need to spend £16,888,231 a year in Burgess Hill alone. Add up all the additional households required over the whole of the UK and the Government would need to spend £23.31bn each year! The Country hasn’t got that sort of money!

With these problems, it is the property developers who are buying the old run-down houses and office blocks which are deemed uninhabitable by the local authority, and turning them into new attractive homes to either be rented privately to Burgess Hill families or Burgess Hill people who need council housing because the local authority hasn’t got enough properties to go around.

The bottom line is that, as the population grows, there aren’t enough properties being built for everyone to have a roof over their head. Rogue landlords need to be put out of business, whilst tenants should expect a more regulated rental market, with greater security for tenants, where they can rely on good landlords providing them high standards from their safe and modernised home. As in Europe, where most people rent rather than buy, it doesn’t matter who owns the house – all people want is a clean, decent roof over their head at a reasonable rent.

So only you, the reader, can decide if buy to let is immoral, but first let me ask this question - if the private buy to let landlords had not taken up the slack and provided a roof over these people’s heads over the last decade, where would these tenants be living now?

Burgess Hill’s private renting set to hit 1,794 households by 2021 - Is Buy to Let immoral? (Part 1)

Can we blame the 55 to 70-year-old Burgess Hill citizens for the current housing crisis in the town?

Also known as the ‘Baby Boomer Generation’, these Burgess Hill people were born after the end of the Second World War as the country saw a massive rise in births as they slowly recovered from the economic hardships experienced during wartime.

Throughout the 1970’s and 1980’s, they experienced (whilst in their 20’s, 30’s and 40’s) an unparalleled level of economic growth and prosperity throughout their working lifetime on the back of improved education, government subsidies, escalating property prices and technological developments. They have emerged as a successful and prosperous generation.

Yet some have suggested these Burgess Hill baby boomers have (and are) making too much money to the detriment of their children, creating a ‘generational economic imbalance’, where mature people benefit from house-price growth while their children are forced either to pay massive rents or pay large mortgages.

Between 2001 and today, average earnings rose by 65%,

but average Burgess Hill house prices rose by 124.9%.

The issue of housing is particularly acute with the generation called the Millennials, who are young people born between the mid 1980’s and the late 1990’s. These 18 to 30 years, moulded by the computer and internet revolution, are finding as they enter early adult life, very hard to buy a property, as these ‘greedy’ landlords are buying up all the property to rent out back to them at exorbitant rents. It’s no wonder these Millennials are lashing out at buy to let landlords, as they are seen as the greedy, immoral, wicked people who are cashing in on a social despair.

Like all things in life, we must look to the past, to appreciate where we are now.

The three biggest influencing factors on the Burgess Hill (and UK) property market in the latter half of the 20^th Century were, firstly, the mass building of Council Housing in the 1950’s and 60’s. Secondly, for the Tory’s to sell most of those Council Houses off in the 1980’s and finally 15% interest rates in the early 1990’s which resulted in many houses being repossessed. It was these major factors that underpinned the housing crisis we have today in Burgess Hill.

To start with, in 1995 the USA relaxed its lending rules by rewriting the Community Reinvestment Act. This Act saw a relaxation on the Bank’s lending criteria’s as there was pressure on these banks to lend on mortgages in low wage neighbourhoods, as the viewpoint in the USA was that anyone (even someone on the minimum wage) any working class person should be able to buy a home.  Unsurprisingly, the UK followed suit in the early 2000’s, as Banks and Building Society’s relaxed their lending criteria and brought to the market 100% mortgages, even Northern Rock started lending every man and his dog 125% mortgages.

So when we roll the clock forward to today, and we can observe those very same footloose banks from the early/mid 2000’s (that lent 125% with a just note from your Mum and a couple of breakfast cereal tokens), ironically reciting the Bank of England backed hymn-sheet of responsible-lending. On every first time buyer mortgage application, they are now looking at every line on the 20-something’s banks statements, asking if they are spending too much on socialising and holidays. No wonder these Millennials are afraid to ask for a mortgage (as more often than not after all that – the answer is negative).

Conversely, you have unregulated Buy to Let mortgages. As long as you have a 25% deposit, have a pulse, pass a few very basic yardsticks and have a reasonable job, the banks will literally throw money at you. I mean Virgin Money is offering 2.99% fixed for 3 years – so cheap!

So, in Part Two next week, I will continue this emotive article and show you some very interesting findings on why young people aren’t buying property anymore (and it’s not what you think!).

Burgess Hill Property Market Sees An Unpredicted Autumn Boost of 175%.

Well, it doesn’t seem like two minutes ago that it was Christmas – and now it’s all over! One cold December morning, after arranging the office’s Christmas cards I thought I would nip out for a quick festive coffee in Quench in Burgess Hill high street.  I met an old client of mine in Quench and we got talking about the Burgess Hill property market. I had just completed my research for my next blog article and I would like to share with you the parts of the conversation relating to the Burgess Hill property market.

He asked me what my thoughts were about the last half of the year in regard to the Burgess Hill property market and if there were any great buy to let deals around. In reply I said that, in my view, shrugging off the uncertainty of the initial post Brexit vote, I have seen an increase in supply and a rise in the number of properties selling at the lower to middle end of the market, meaning both first time buyers and buy to let landlords have been returning in the last few months – proof the market is beginning to bounce back.

So let’s look at the numbers;

In November 2016, according to the three main property portals (Rightmove, Zoopla and OnTheMarket) there were a total of 231 properties for sale in Burgess Hill (within 2 miles of the centre of Burgess Hill to be exact). In November 2015, there were only 84 properties for sale, a rise of 175%.

When I split it down into bedrooms (note things like building plots and part commercial/part residential etc. won’t be in these figures so the numbers below wont exactly match up to those in the above paragraph).

	# Properties on the market in Nov 2015	# Properties on the market in Nov 2016	Per cent Change
5+ Bedrooms	16	19	+19%
4 Bedrooms	29	86	+197%
3 Bedrooms	21	70	+233%
2 Bedrooms	13	43	+231%
1 Bedroom	4	13	+225%

 

Then when I looked at type of properties, it got even more interesting;

Type of Property	# Properties on the market in Nov 2015	# Properties on the market in Nov 2016	Per cent Change
Detached	41	105	+156%
Semi	17	70	+312%
Terraced	6	13	+117%
Flat	11	35	+218%

As the number of Burgess Hill properties put up for sale has soared by 175%, homeowners have become more realistic about how much their homes are worth. This increase in homeowners wanting to sell suggests there is renewed confidence in the Burgess Hill property market and there are also signs that people are being more realistic about pricing their property.

As you can see, there has been a significant uplift in flats and semi-detached properties, which means there is greater choice for first time buyers and landlords. So with a combination of realistic pricing and more properties on the market – both first time buyers and landlords alike might be able to pick up a few bargains!