Hadley Taylor Blog
At Hadley Taylor we like to keep our clients updated on the latest local property news and opinion.
10 October 2017
Is the property pendulum swinging in favour of hard pressed Millennials?
The age group most active in the property market is the over 65’s. Most of this generation can be classed as Baby Boomers. This is the generation sitting on most of the UK’s property wealth. Most of them have paid off their mortgage and many of them now use their home as a giant equity release cash machine to fund their retirement. They have benefitted from several property booms since the 1960’s and their good fortune is unlikely to be repeated. They also enjoyed free university education, tax relief on their mortgage payments and final salary pension schemes, all of which have been consigned to history. Many Baby Boomers have gone one stage further, entering the property market as landlords in the buy to let market and have done very nicely there too.
By contrast the group least likely to be active in the property market are the 18 to 35 year olds. Transactions within this age group have declined by 21% during the last 12 months alone. This is due to spiralling property prices, high levels of student debt, more stringent mortgage rules, weak wage inflation and high property taxes.
There is some hope on the horizon for the Millennials though. During the next 12 months average UK property prices are unlikely to increase by more than 2%. In other words wages should soon increase faster than property prices for the first time in many years and this will give younger people a chance to get on the housing ladder or move up the ladder as the case may be.
We will also start to see some Baby Boomer buy to let investors selling off their rental properties in light of weaker capital growth, the prospect of higher interest rates, tax changes on mortgage relief and increased regulation of the rental sector.
For the older generation the news of weaker property price inflation will come as something of a shock because they have headed into retirement high on the crack cocaine of rising house prices and owe most of their wealth to successive property booms. Could it be that the pendulum is at last swinging in favour of the young?
7 September 2017
Do wind farms affect house prices?
Whether you love them or loath them wind farms are here to stay for the time being but what impact do they have on house prices?
There is a whole debate as to whether wind turbines are an efficient way of generating electricity and another can of worms to be opened as to whether they are as environmentally friendly as we are led to believe. What I want to focus on is whether their presence will down value your biggest financial asset.
The London School of Economics thinks they do down value your home by up to 12% if you live within 2km of a wind turbine. Here are some reasons why this might be the case.
First there are certain health concerns about living near a wind turbine. There is a phenomenon known as “shadow flicker” which causes certain health problems if you live too near a turbine. Thankfully there are regulations about how near to residential properties a turbine can be located and mitigating measures can be taken to prevent the problem if it arises so this is not a big deal.
Noise pollution is a slightly bigger concern but again there are regulations around the proximity of turbines to residential areas. There have been, however, a number of court cases won against turbine operators on the basis of noise pollution.
The visual impact of land based and offshore wind farms is one of the biggest drags on property prices. Nobody wants to see a wind turbine from their home or for that matter from their holiday let and there is little doubt that values have fallen in areas where there are lots of turbines. Many sea views have been transformed into semi-industrial marine landscapes.
The biggest problem though is cable corridors and sub stations because for every wind farm there is an enormous amount of infrastructure required to turn the energy into electricity on the grid. Each cable corridor can be up to 50km long and 200m wide and can use up to 100 acres of land. Sub stations are by far the worst blot on the landscape as they can be seen for several miles particularly on the flat lands of Norfolk. Flooding is now a threat in rural areas where millions of tons of concrete used in the construction of sub-stations has caused run off issues.
So before you buy your next home, check first for wind turbines and for any future plans for wind farms in the area.
15 August 2017
Why are online only estate agents so expensive?
The unique selling point of an online only estate agent is that they are cheaper than a full service high street agent. But is that really the case?
The market leading online only estate agent would have us believe that they don’t charge anything at all. Behind the subterfuge of their TV advertising campaign it is clear of course that they do charge you a fee if not a commission. Thankfully the Advertising Standards Authority is on to this dishonest use of wording and the agent in question has been wrapped over the knuckles. The fee they do charge is £849 plus VAT outside of London and more if you are selling inside London. However, this only gets you their basic entry level service. If you want accompanied viewings, floor plans, photographs and the rest you will have to pay them a lot more. In fact it’s a bit like flying on Ryanair and having to pay extra to be seated next to your 12 year old child.
The key thing here is what do you actually get for your money because the agent in question will bank your fee regardless of whether they sell your house or not and regardless of how much they sell your house for, whereas a traditional agent will only expect to be paid if they sell your house and will do their best to get you the very best price for your house because they are incentivised to do so. The question is how much expertise can you buy for £849? Anyone who has worked in business or in a professional capacity will know straight away that the answer to that question is not a lot of expertise can be bought for £849.
In fact how much expertise is there to be found in an entire building full of call centre workers on little more than minimum wage? Certainly a lot less than a handful of members of the Norwich and District Association of Estate Agents.
The main reason why online estate agents prove to be very expensive when compared to going down the traditional route is that if they undersell your biggest asset by even 1% you will have lost a lot of money and would have achieved a much better financial outcome using a proper estate agent in the first place.
If in doubt, ask a proper estate agent to visit you in your home and ask them what service they provide and how it compares with that provided by an online only agent.
18 July 2017
How to find your dream home in a shrinking market
Anyone searching for their next home will have discovered that family houses are in very short supply. This is a nationwide problem and not just a local phenomenon. For example, there are only 35 detached family houses available for sale in NR4 and a mere 10 detached family houses available for sale in NR2. In previous years we would have seen at least double this number of houses on the market for sale.
With this shortage of housing stock unlikely to change in a hurry what can buyers do to improve their chances of finding their dream house?
First buyers need to be in a proceedable position. If buyers have a property to sell or haven’t even put their house on the market then they will go to the back of the queue for any property that is remotely desirable. Buyers need to have done their homework so that they know what they want, where their search area is going to be and how much they are likely to have to pay. This involves a fair degree of objectivity because we all think our house is nicer and more valuable when compared to other properties.
The next thing to do is to speak to all the agents who sell houses in your search area that are similar to the sort of house you are looking for. This doesn’t mean just emailing them and hoping for the best. It means phoning them or visiting them and talking to someone who seems to know what you are looking for and where to find it. According to a recent Which survey, less than half of buyers found the home they ended up with on the internet. This means that most of the rest found their dream home by talking to their local property expert.
If you want to buy a desirable property in a favoured location such as the Golden Triangle, Cringleford or the North Norfolk Coast then be prepared to pay a premium for it. Good residential areas hold their value so you will always see a good return on your investment even if you think the price is a bit steep to start with. Last but not least, be decisive. Buyers who dither and pontificate nearly always fail to get what they want. Buyers who endlessly trawl through sold price archives and do all the maths about each potential property’s true value nearly always end up still living with the in-laws a year down the line.
Most importantly, always talk to an expert and not to a call centre in Milton Keynes.
June 8th 2017
Don’t you just love elections?
The property market relies on confidence and stability more than any other sector. Elections and referendums cause instability and hesitation and that is why estate agents like to see the back of them. There is no doubt that buyers, and particularly sellers, have been holding back during the past few weeks and this is not helpful if we want a dynamic property market which stimulates economic growth and supports a fluid jobs market. Our political classes have, in recent years, been determined to line up as many elections and referendums as they possible could. What with the Scottish independence referendum, the 2015 general election, the EU referendum, the local elections and now this year’s general election I think we are all rather punch drunk and in need of a rest from constant debating, campaigning and voting.
This year’s general election wouldn’t be so bad if it really was a “snap” election but 9 weeks of campaigning is hardly snap in my book. What the property market needs now is a sustained period of stability so that buyers and sellers can plan their next move with confidence well into the future without the fear that the government of the day will upset the apple cart. All we need now is for some little upstart north of the border deciding she wants another independence referendum because she didn’t like the result of the first one or worse still another EU referendum. With the SNP losing ground in Scotland a second independence referendum, thankfully, seems less likely.
Waking this morning we will all discover what our next government is going to look like and regardless of who we voted for, I’m sure we all hoped we could all breathe an enormous sigh of relief and get on with business as usual. However, the political classes and the electorate have decided that instability is the new norm so consumers and businesses will just have to get used to the new climate of uncertainty and make their own plans regardless. All the political parties have promised to build more houses. This is nonsense of course because governments don’t build houses at all. Houses are built by developers and housing associations and these organisations will only build houses if they believe that the government of the day is capable of delivering the right economic environment to make those developments pay. Thankfully Norwich remains a highly desirable place for professionals from all over the UK to move to for work opportunities and a better quality of life. So if you have something to sell we certainly have a buyer for it.
April 1st 2017
Have we had the best of house price inflation for the time being?
Property prices across the country are rising at a much slower rate than they have for the past five years. During the last 12 months house prices have risen by just 4% according to Nationwide and during the last three months they have stayed level with no increase at all. Having said this, there are some regions, such as the North East, that have still experienced strong growth and some regions, such as London, that have seen price falls.
Whilst house prices are not about to fall significantly, it is fair to say that we will see modest growth in prices until 2019. There are, as usual, many different reasons for this change in tempo. First, we seem to have hit an affordability ceiling with prices rising and wages struggling to keep pace while the cost of living has increased. Ultra-low interest rates have prolonged the strength of the market but with rates at a historic low, buyers have realised that the next direction for interest rates is up.
Uncertainty over our ability to negotiate a good Brexit deal will persist for at least two years and this will no doubt have an effect on confidence.
Slower price inflation will of course be great news for millions of people who are trying to get on the housing ladder for the first time or who are trying to move on to something bigger. Wages will now have a few years to catch up with property prices and this can only be a good thing.
Some landlords will be adversely affected by slower price growth. Professional landlords with multiple properties who are in the market for the long haul tend to focus on yield rather than growth and this sector will take slower price growth in their stride. However, there are plenty of small time landlords who don’t really understand yield and instead focus more on capital growth for their profit and it is this group who will be bailing out of buy to let investments during the next few years.
Thankfully we still have strong demand for quality housing stock in mature neighbourhoods. Norwich is relatively well insulated from rapid changes in property prices and the city remains a great destination for professionals seeking career progression and quality of life.
March 1st 2017
Period houses vs new build
There are advantages to buying new build and there are also advantages to buying a period house. New builds are easy. You buy them, move in and order take out. Period houses often have issues that need sorting out before you can feel comfortable and the issues will never stop coming your way while you live in them. New builds are much more efficient to heat whereas period houses leak energy from every crevice and it’s hard to make them more efficient.
Property moves with the fashion of the times and although new build is still very popular, the more discerning buyer is turning once again to period properties in mature neighbourhoods. This trend is due to many different reasons. New build is having a very bad press at the moment with at least one major house builder rushing the completion of thousands of new homes that are now deemed unfit to live in because of the significant number of defects. From a pure investment point of view, period house appreciate more than new build so don’t expect your new house to go up in value at the same rate as other more mature properties in the same area. Period houses may be harder to keep warm but they offer bigger room dimensions, higher ceilings and what few new builds provide and that’s character. Period houses generally have a bigger plot and there is more fresh air between you and your neighbours unlike most new builds which seem to be built with just a few feet between properties.
Very occasionally I see a new build which has quality, space and character but these examples are all individually designed contemporary homes built at great expense in the countryside away from amenities and any sense of community.
Period houses are located where most people want to live, near schools, shops, work and social life. New builds are generally located out of town so families need at least two cars to be able to do anything at all. New build developments are also often located within earshot of noisy main roads which diminishes any enjoyment of the limited outside space.
There is no doubt that period houses are harder work and you will need to wear a jumper indoors in the winter but they reward their owners with superior space, location, character and financial return.
February 15th 2017
Is buy-to-let dead?
A recent survey of buy-to-let landlords found that 25% of them have either just sold up or are considering selling in the near future.
In April the tax laws will change for many buy-to-let landlords. Instead of being able to claim full tax relief on mortgage payments, high rate tax payers will begin to see their margins squeezed over the next few years as their tax relief is reduced, thus making their return that much less.
Stamp duty also changed last year on the purchase of any residential property other than primary residences. An extra 3% tax is now payable over and above standard rate stamp duty and this makes investment purchases that much more costly. Some landlords will try to get around this one by forming limited companies to buy further properties but there are costs attached to this as well. Institutional landlords who already buy property within a limited company structure will not be affected by the new tax surcharge. Some investors are moving into commercial or mixed use properties where this 3% surcharge does not apply but investors should be aware of the difficulty in obtaining lending on commercial property.
During the last five years landlords have relied on capital growth to supplement their profits but here too there will be a change as house price inflation slows for the remainder of this year and into next year.
New lending rules which came into effect in the New Year, that restrict the amount that landlords can borrow, will cause a problem for any landlord who wants to re-mortgage, if they can’t meet the new stricter criteria. Landlords may be forced to sell up if they can’t re-mortgage or have to move onto a less competitive variable interest rate.
Rents have risen significantly in recent years but according to landlord referencing group, Homelet, rents will rise at a much slower rate this year and next.
Interest rates have been at an all-time low since 2008 and this has created historically cheap borrowing for landlords. Unless the Bank of England is prepared to see inflation sail through its own 2% target, Mark Carney will surely have to start raising interest rates this year. This will alter the business model for many buy to let landlords with a mortgage.
All these factors make buy-to-let a much less attractive investment vehicle moving forward. Big landlords with multiple properties who have seen it all before will no double carry on regardless. Smaller investors, many of whom are merely trying to build up a retirement nest egg, might do better looking at alternative investments such as bonds, ISAS and pensions linked to stocks and shares.