Thursday, 29 September 2016

Asking Prices of Harlow Property up 4% since December

I had an interesting question the other day from a homeowner in Latton Bush who asked me the difference between asking prices and values and why it mattered. When it comes to selling property, there must be agreement between the purchaser (buyer) and seller (vendor) for a property sale to take place. The value a buyer applies to a property can massively differ from the value a seller or mortgage company places upon it. The seller, the buyer and the mortgage company must find an agreeable value to assign to a property so the sale can proceed.

In many of my articles about the Harlow property market, I talk about values, i.e. what property in Harlow actually sells for, but I haven’t spoken about asking prices for while. Now asking prices are important as they are one of the four key matters a potential buyer will judge your property on (the others being location, bedrooms and type). Price yourself too high and you will put off buyers. So let’s take a look at the Harlow numbers.

Over the last 12 months asking prices (i.e. the price advertised in the paper and on Rightmove) in Harlow have increased by 25%, taking the average asking price in Harlow to £570,800 (up from £456,300 twelve months ago).

Interestingly though, when we look at, say detached and terraced property, a slightly different picture appears. Twelve months ago, the average asking price for a detached house in Harlow was £742,300 and today its £837,700 (a rise of 13%); whilst over the same 12-month period, the average asking price of a terraced property was £234,300 a year ago, and today its £296,700 (a rise of 27%).

However, my research shows that the supply of property for sale in Harlow is beginning to increase. In December 2015, there were 245 on the market in Harlow today there are 284 properties on the market (up 16%). This will mean homeowners looking to sell will need to be conscious of how their property compares against others on the Harlow property market. The Harlow property market still has substantial momentum and sufficient demand remains to provoke more modest asking price rises. This noteworthy increase in supply since Christmas is currently providing more choice for buyers and is tempering asking price rises - and here is the devil in the detail - only 4% of the overall 25% annual figure (mentioned in para 3) has appeared since December.

… And here is the second point to make. Asking prices are one thing, but what a property sells for (i.e. value) is a completely different matter. These are the average prices achieved (i.e. what they sold for or the average value) for property in Harlow over the last 12 months...

Overall Average £270,900
Detached             £478,100
Terraced             £240,100

You can quite clearly see, there is a difference between what people are asking for property and what it is selling for. The underlying fundamentals of low interest mortgages and tight supply remain prevalent in the Harlow property market however, the number one lesson has to be this ... if you want to sell, be realistic with your pricing.

Wednesday, 14 September 2016

167% increase in Property Values in Harlow since the Millennium

Harlow house prices since the Millennium have risen by 167.8%, whilst average salaries in Harlow have only grown by 51.27% over the same time frame. This has served to push homeownership further out of reach for many Harlow people as they have to battle against raising considerable deposits and meet sterner lending criteria, as a result of new mortgage regulations introduced in 2014/5.  The private rental market in Harlow has grown throughout the last twenty years with buy-to-let investors purchasing a high proportion of newly built residential properties that were built and designed for the owner occupier sales markets.  For example, in the Harlow Constituency, roll the clock back 20 years and there were 33,725 properties in the Constituency, whilst the most recent set of figures show there are 38,878 properties - a growth of 5,153 properties.

However, anecdotal evidence suggests that a large number of those 5,153 were bought by Harlow buy-to-let landlords, as over the same 20-year time frame, the number of rental properties has grown from 2,801 to 4,180 in the Constituency - a rise of 1,379 properties.

Nevertheless, some say this historic growth of the Harlow rental market might start to change with the new tax rules for landlords introduced by Mr. Osborne over the last seven or eight months. Yet the numbers tell another story. Across the board, mortgage borrowing climbed to a 9 year zenith in March this year as the British property markets traditional Easter rush corresponded with landlords

hurrying to beat George Osborne’s new stamp duty changes – buy-to-let landlords borrowed £7.1bn in March 2016 (the latest set of figures released) which was 163% up on the £2.7bn borrowed in the previous March.

You see, from my point of view, I don’t think things will get worse in the buy-to-let market in Harlow and these are the reasons why I believe that:

Firstly, what else are Harlow landlords going to invest in if it isn’t property - the stock market? Since the Millennium, the stock market has risen by an unimpressive total of 5.54%, quite different to the 167.8% rise in Harlow property prices?

Secondly, its true the 3% stamp duty is the first blow on top of a number of other tax changes to be phased in between 2017 and 2021, such as landlords facing a constraint in their ability to offset mortgage interest and, if sizeable numbers of landlords do take the decision to sell their portfolios, this will lead to a substantial amount of second hand properties being put up for sale. Yet that might not be a bad thing, as I have mentioned in previous articles there is a serous shortage of properties to buy at the moment in Harlow: the stock of property for sale being at a six year all time low.

.. Thirdly, if there are fewer rental properties in Harlow, as supply drops and demand remains the same (although ask any letting agent in Harlow and they will say demand is constantly rising) this will create a squeeze in the Harlow rental market and as a result rents will rise. In fact, I predict even if landlords don’t sell up, Harlow rents will rise as Harlow landlords seek to compensate for increased costs, which means more landlords will be attracted back.

Wednesday, 7 September 2016

30.6% Of Harlow Homes Are One Person Households

I was having an interesting chat with a Harlow buy to let landlord the other day when the subject of size of households came up in conversation.  For those of you who read my Brexit article published on the morning after the referendum, one of the reasons on why I thought the Harlow property market would, in the medium to long term, be OK, was the fact that the size of households in the 21st Century was getting smaller – which would create demand for Harlow Property and therefore keep property prices from dropping.

Looking at the stats going back to the early 1960’s, when the average number of people in a home was exactly 3, it has steadily over the years dropped by a fifth to today’s figure of 2.4 people per household. Doesn’t sound a lot, but if the population remained at the same level for the next 50 years and the we had the same 20% drop in household size, the UK would need to build an additional 5.28 million properties ( or 105,769 per year) .. When you consider the Country is only building 139,800 properties a year ... it doesn’t leave much for people living longer and immigration. Looking closer to home...

In the Harlow Council area, the average number of occupants per household is 2.4 people

When we look at the current picture nationally and split it down into tenure types (i.e. owned, council houses and private renting, a fascinating picture appears.

The vast majority of homeowners who don’t have a mortgage are occupied by one or two people (81% in fact), although this can be explained as residents being older, with some members of the family having moved out, or a pensioner living alone.  People living on their own are more likely to live in a Council house
(43%) and the largest households (those with 4 or more people living in them are homeowners with a mortgage – but again, that can be explained as homeowners with families tend to need a mortgage to buy. What surprised me was the even spread of private rented households and how that sector of population are so evenly spread across the occupant range – in fact that sector is the closest to the national average, even though they only represent a sixth of the population.

When we look at the Harlow Council figures for all tenures (Owned, Council and Private Rented) a slightly different picture appears...

1 person households in Harlow
2 person households in Harlow
3 person households In Harlow
4 person households in Harlow
5+ person households in Harlow

But it gets even more interesting when we focus on just private rental properties in Harlow, as it is the rental market in Harlow that really fascinates me. When I analysed those Harlow Council private rental household composition figures, a slightly different picture appears. Of the 3,474 Private rental properties in the Harlow Council area,

  • 27.8% of Private Rental Properties are 1 person Households
  • 27.8% of Private Rental Properties are 2 person Households
  • 20.9% of Private Rental Properties are 3 person Households
  • 12.2% of Private Rental Properties are 4 person Households
  • 6.6% of Private Rental Properties are 5+ person Households

As you can see, Harlow is not too dissimilar from the national picture but there is story to tell. If you are considering future buy to let purchases in the coming 12 to 18 months, I would seriously consider looking at 2 bed apartments/houses. Even with the numbers stated, there are simply not enough 2 bed apartments/houses to meet the demand. They have to be in the right part of Harlow and priced realistically, but they will always let and when you need to sell, irrespective of market conditions at the time, will always be the target of buyers. To read more articles on the Harlow Property Market and where I consider best buy to let deals are in Harlow, please visit the Harlow Property Market Blog