Thursday 30 June 2016

£240,000 inheritance - Is buying Harlow Property still the best place for my windfall?

I had an interesting email from someone in Harlow a few weeks ago that I want to share with you (don’t worry I asked his permission to share this with you all). In a nutshell, the gentleman lives in Little Parndon, he is in his mid 60’s and still working. He has a decent pension, so that when he does retire in a couple of years’ time, it will give him a comfortable life. He had recently inherited £240,000 from an elderly aunt. One option he told me was put it into a savings account. The best he could find was a 2 year bond with the Post Office which paid 1.9%; meaning he would get £4,560 in interest a year. One of his other options was to buy a property in Harlow to rent out and he wanted to know my thoughts on what he should buy, but he had concerns as he didn’t want to take a mortgage out at his time of life. He was also worried about all the tax changes he had read about in the papers for landlords.

Notwithstanding the war on Harlow landlords being waged by George Osborne, the attraction of bricks and mortar endures for many. As our man is a cash buyer, he would not have to deal with the intricate cut to mortgage interest tax relief that will diminish, or even eradicate, the profits of many Harlow landlords. It’s true he would face the extra 3% in stamp duty to buy a second property, but with some good negotiation techniques, that could soon be mitigated.

I told him that buying a Harlow buy to let property is all about the total return on investment. True, he could put the money in the Post Office bond and receive his interest of £4,560 a year or, as he rightly suggested, invest in property in Harlow. The average yield (yield being the equivalent of the interest rate on the property) at the moment in Harlow is 3.72% per annum, meaning our potential F.T.L (First Time Landlord) should be able to, depending on what he bought in the town, earn before costs £8,928 a year. (However, I told him there are plenty of landlords in Harlow earning half as much again (if not more), if he was willing to consider more specialist investment types of properties – again, if you want to know where – look at my blog or drop me an email).

The bottom line is that the success of investing in Harlow buy to let property versus a savings account with the Post Office (or whatever Bank or Building Society is offering the best rate) will depend on the performance of those
assets. Unlike with a savings account, with property the capital you invested can also go up (and yes, it can go down as well – more of that in second). Property values in Harlow have risen in the last twelve months by 9.5% meaning, that if our chap had bought a year ago, not only would he have received the £8,928 in rent, but also seen an uplift of £22,800 …meaning his overall return for the year would have been £31,728 (not bad when compared to the Post Office!).

..  but the doom mongers amongst you will say, property values can go down, as they did in 2008, and in 1988 and 1979. Yes, but after 1979 prices had bounced back to their ’79 levels by 1984 and went on to grow an additional 58% in the following four years. Then again, they dropped in 1988 and did take 13 years to reach back to those ’88 figures, but the following six years (between 2001 and 2007) they then increased by an additional 66%. Now, according to the Land Registry, average property values in Essex currently stand 11.56% above the January 2008 level, and anecdotal evidence suggests that in the nicer parts of Harlow, we are well above these sorts of levels. Therefore, all this talk of property crashes is unfounded.

… and what would that £240,000 get you in Harlow? A decent 3 bed end terrace near Staple Tye or a very nice 2 bed terrace in savoy Wood or Church Langley .. in fact, the world is your oyster. But which Oyster? Well, my blog reading friends, if you want to read similar articles like this and what I consider to be the very best of buy to let deals in Harlow, irrespective of which agent is selling it, then you need to visit the Harlow Property Blog  

Saturday 18 June 2016

What would Brexit mean to the 19,400 Harlow Property owners?

I don’t know about you, but I find if you read the Daily Mail, there are only three topics that make the blood boil of ‘Middle England’. Bureaucracy from Brussels, House Prices and the late Princess of Wales. Ignoring the late Princess if I can for this article, but if we as a country were to unshackle ourselves from chains of Brussels (the first topic), could we inadvertently effect the second topic and make UK house values drop?

If you read all the newspapers, the Brexit debate seems to be focused solely on central London. Many commentators have said Brexit would mean central London would have a lower standing in the world, meaning less people would be employed in Central London, with the implication of lower wages, fewer jobs etc., in Central London ... but we are in Harlow, not Marylebone, Mayfair or any part of Zone 1 London.

Now on the run up to the vote on the 23rd of June, I predict the ‘in’ camp will start to scare homeowners with forecasts of negative equity, and the ‘out’ camp will appeal the 20 somethings, who have been priced out of the property market with the prospect of a new era of inexpensive housing, should the fears of central London estate agents and developers, who believe the bottom will fall out of the market if we do leave, become real. The only reason the Mayfair’s, Knightsbridge’s, and Kensington’s of central London are attractive to foreign buyers are political and economic steadiness, an open and honest legal system and a lively cultural life. None of that is threatened by Brexit.

... But again, we are in Harlow and central London is 30 miles away. We are hometown to Harlow RFC, Raytheon and Chloe Rogers, and whilst the central London property market exploded after 2009, that explosion really and honestly didn’t affect the Harlow property market. So, putting central London aside, what would an ‘in’ or ‘out’ vote really mean for the 19,400 property owners of Harlow?

Initially, over the coming months, on the run up to referendum, I believe it will be like the run up to last year’s General Election. With the short-term uncertainty in the country, quite often, big decisions are put on ice and people are less likely to make big money purchases i.e. buy a property. However, in the four months up to last year’s Election, property values in Harlow increased by 2.51%, not bad for a country that thought it would get a hung parliament! So that argument doesn’t hold much weight with me.

Post vote, should the UK opt to leave Brussels, there would be a much more noteworthy impact. I believe that a vote to stay in the EU would see the Harlow property market return to a status quo very quickly, but the contrasting result could lead to some changes. The principal menace to the Harlow (and UK) housing market could be variation (in an upwards direction) in interest rates as a result of a Brexit, which could theoretically see the cost of mortgages grow swiftly, pricing many out of the market … but then two thirds of landlords buy without a mortgage, so that won’t affect them. Also, according to the Bank of England, 80.33% of all new mortgages taken out in 2015 were fixed rate. Looking at all mortgages as a whole, according to the Bank of England, 44% of all UK mortgagees have a fixed rate mortgage, but 56% don’t, so if you aren’t on a fixed rate ... talk to your mortgage broker now, because they can only go in one direction!

So in reality, if I really knew what will happen, I wouldn’t be a letting / estate agent in Harlow, but a City Whiz Kid in London earning millions. However, I suspect whatever decision the electorate of Harlow and the country as a whole makes, over the long term it won’t have a major effect on the Harlow property market. We have seen off ‘the end of the world’ credit crunch of 2008/9 and subsequent property crash, the 1988 Nigel Lawson induced post dual-MIRAS property crash, the 1979 Winter of Discontent property crash, the 1974 oil crisis that stimulated another property crash ... hell, we can even go back nearly a century with the 1926 post General Strike slump in property prices...

Today, property prices are 256.85% higher than 21 years ago in Harlow and are 10% higher than 12 months ago. So, make your own decision on 23rd of June 2016 safe in knowledge that whatever the result, there might be some short term volatility in the Harlow property market, but in the long term (and property investment is a long term strategy) there aren’t enough houses in Harlow to live in either to buy or rent … and until the Government allow more properties to be built – the Harlow property market, will be just fine ... even if it has a little blip in the summer, there could be some property bargains on the run up to Christmas to be had!

For more advice and opinion on the Harlow property market, even where those buy to let bargains could be found now ... visit the Harlow Property Blog 

Monday 6 June 2016

9.5% rise in Harlow Property Values adds weight to the town’s Housing Crisis

Harlow’s continuing housing shortage is putting the town’s (and the Country’s) repute as a nation of homeowners ‘under threat’, as the number of houses being built continues to be woefully inadequate in meeting the ever demanding needs of the growing population in the town.   In fact, I was talking to my parents the other day at a family get together; the subject of the Harlow Property market came up in the conversation (as I am sure it does at many family parties in Harlow) after the weather and politics. My parents said It used to be that if you went out to work and did the right thing, you would expect that relatively quickly over the course of your career you would be buying a house, you would go on holiday every year, you would save for a pension.   But now things seem to have changed?

Back in the Autumn, George Osborne, used the Autumn Statement to double the housing budget to £2bn a year from April 2018 in an attempt to increase supply and deliver 100,000 new homes each year until 2020.  The Chancellor also introduced a series of initiatives to help get first time buyers on the housing ladder, including the contentious Help to Buy Scheme and extending Right to Buy from not just Council tenants, but to Housing Association tenants as well.

Now that does all sound rather good, but the Country is only building 137,490 properties a year (split down 114,250 built by private builders, 21,560 built by Housing Associations and and a paltry 1,680 council houses).    If you look at the graph (courtesy of ONS), you will see nationally, the last time the country was building 230,000 houses a year was in the 1960’s.

How George is going to almost double house building overnight, I don’t know, because using the analogy of a greengrocers; if people want to buy more apples (i.e. houses) in a greengrocers’ shop, giving them more money (i.e. with the Help to Buy scheme) when there's not enough apples in the first place doesn't really help.

Looking at the Harlow house building figures, in the local authority area as a whole, only 200 properties were built in the last 12 months, split down into 140 privately built properties and 160 housing association with not one council house being built.   This is simply not enough and the shortage of supply has meant Harlow property values have continued to rise, meaning they are 9.5% higher than 12 months ago, rising 1.1% in the last month alone.

I was taught at school (all those years ago!), that’s it’s all about supply and demand, this economics game.   The demand for Harlow property has been particularly strong for properties in the good areas of the town and it is my considered opinion that it is likely to continue this year, driven by growing demand among buyers (both Harlow homebuyers and Harlow landlords alike). You see Harlow’s economy is quite varied, meaning activity is expected to remain relatively strong into the early Summer of 2016, especially as some Harlow buy to let landlords try to complete purchases ahead of the introduction of new stamp duty rules in April.

.. and of supply, well we have spoken about the lack of new building in the town holding things back, but there is another issue relating to supply.   Of the existing properties already built, the concern is the number of properties on the market and for sale.   The number of properties for sale last month in Harlow was 234, whilst 12 months ago, that figure was 364 whilst three years ago it stood at 615… a massive drop!

With demand for Harlow property rising, minimal new homes being built and less properties coming onto the market, that can only mean one thing ... now is a good time to be a homeowner or landlord in Harlow.   For more articles like this, please visit the Harlow Property Market Blog