Is there a two speed Solihull property market?

Even with the General Election on the horizon, property values in Solihull are still 0.31% higher than they were 3 months ago. The diversion and ambiguity of an election typically makes house sellers who need to sell, price their property more realistically (although this generally only lasts a couple of months). Looking specifically at it from a Solihull landlord’s point of view, the Solihull properties favoured by investors are in short supply in many parts of the town because of a number of factors.

Firstly, there’s been an increase in first time buyers coming to buy their first home over the last 12 months and secondly, to continue to keep their risk profile as low as possible, the banks have also been chasing landlords with high deposits (by offering very enticing mortgage rates on smaller loans). These type of landlords tend to be attracted to the modern two and three bed town houses and semis in Solihull.

As I mentioned a few weeks back, the pension rules are changing, which means buy-to-let landlords can use some, or all, of their pension pot to buy a property (if they are happy to overlook the tax implications) so whilst many pension pots may not be able to fund a suitably big enough tax free lump sum to buy the property outright, for most it will provide enough for the 25% deposit (required by most BTL mortgage providers). It also shouldn’t be forgotten that, for landlords, the interest paid on the mortgage is tax deductible against the rent, thus lowering your income tax paid.

In the last 12 months, I have noticed a particular uplift in interest from ‘50 something’ Solihull people wanting to become landlords for the first time. In Solihull, the highest returns for the lowest investment are at the lower end of the market eg the classic Victorian terraced house/apartments . Unfortunately Victorian terraced houses/apartments , with two bedrooms are coming to the market in smaller numbers than the larger four beds in top end sectors of the Solihull property market. When looking at the numbers, in the later part of the Summer of 2014 in Solihull, in one month alone 150 two bed properties were on the market in Solihull. However, in January this year, a notoriously excellent bumper month for properties coming on to the market, there were only 110 two beds to choose from. Today, that figure stands at only 101 ..whilst the number of four and five beds has increased significantly!

At that lower end of the price brackets, (ie where first time buyers and landlord investors compete with each other to buy those smaller properties) I believe, throughout 2015, there will be a steady decrease in supply and likewise an increase in demand. This could lead to a polarised Solihull property market, as more properties become available at the top of market, there may not be so much demand .. and that can only mean one thing ... prices will go up quicker on the smaller properties than the larger ones in Solihull, thus narrowing the gap for people looking to move up market!

If want a chat about the Solihull property market please email me on jane.morcom@centrickproperty.co.uk  

“The way it works in Solihull is that you have to rent where you want to live, or buy where you don’t want to live”

I had a really interesting chat with some of my tenants the other day on renewal of their tenancy agreement. They are a lovely couple in their early thirties and I know they have decent jobs in Solihull. They have been tenants of ours for quite a while, so I know them quite well.  We got talking and I enquired if they ever thought of buying a property for themselves, to which they replied back with the title of this article.

After the end of the Second World War, just over a quarter of the UK population owned their own home, the rest rented from private landlords or the local Council. If someone told you in the 1970’s and 1980’s that they rented, they were considered a second class citizen. Everyone wanted to own their own home .. it was the done thing.   We think that home ownership will inevitably happen, but it won't.

It all changed in the 1970’s, when two things happened. Firstly, the number of people who owned their own home broke through the 50% barrier in 1971 and by 1981 it was at 57%. Tied in with that, the average house prices in Solihull were doubling at one point every four years in the 1970’s so property and profit started to feed off each other.

To put that growth in context, if we were to look at property prices in Solihull, in 1930, the average Solihull property was worth £676. Around the 70’s, this was around £13,500. Still quite reasonable. However, by 1980, this had already gone up to £27,000 and by 2006, average prices had rocketed up to £234,521. So, where are we today? The average property value in Solihull currently stands at an eye-watering £327,700.

We could blame Maggie Thatcher for making home ownership the ultimate goal, but we now need to consider whether we should start to love renting again. Some blame the banks and yes - obtaining a 95% mortgage is hard work, but nowhere near impossible. A typical Solihull first time buyer would only need to save £7,000 for a deposit and fees and they could buy a very decent property. For example, you could buy a property in Kingshurst in Solihull, and it would be cheaper each month in mortgage payments than renting.

People might say on the surveys they want to buy, when it comes down to it. If you have been living in a top of the range large property in Monkspath, but the bank will only lend you enough to buy a smaller property in Kingshurst, you may not wish to make the move. Don’t get me wrong, Kingshurst isn’t bad at all, but it isn’t exactly Monkspath if we are being fair?

With tenant demand only going in one direction; it’s why more and more people are getting into buy to let in Solihull. You must take advice on your pension from a Independent Financial Advisor (there are plenty in Solihull) and you must take advice from people who know what to buy (and not to buy) in Solihull to ensure you get the best from your investment. 

Your pension could now buy a Buy to Let property in Solihull

In a recent article, I mentioned that pension rules are changing this April. It certainly created a few emails, with people asking questions about it. Therefore, this week, I want to look a little deeper into the subject of your pension and the Solihull property market. George Osborne, in last years’ Budget, announced pension reforms that have now come in to effect, which will give people with pensions unprecedented access to their pension pot and the freedom to look for alternatives. In a nutshell, after the 6th of April, anyone aged over 55 will be allowed to withdraw all or part of their pension pot and spend it as they wish. Until now, you were allowed to take out a quarter of it and were forced to buy an annuity policy with the rest.

However, there are always two sides to a story; good and bad. Let me tell you the bad news first. There are some hefty tax implications by taking money from your pension pot. As before, as per the old rules, the first 25% can still be withdrawn from the pension pot tax free but, here is the sting in the tail, if you take more than a quarter of your pot (25%), anything above that initial 25% level will be taxed as income. So if you took the whole lot out, the first 25% will be tax free but the remaining 75% will be taxed at your income tax rate of 20%, 40% (or even 45% if you earn over £150,000 a year) .

.. and now the good news!

Under the old scheme, if you bought an annuity, when you died your annuity normally died as well. You would have no asset to pass on to your family.  But, by taking a hit in income tax now,  by purchasing a property, you could buy an asset that you can pass on to your family when you die! (Or the cats home if they aren’t nice to you!). Evidently there are some risks involved, however - according to the Office of National Statistics, the life expectancy of a 65 year old male in Solihull is 19 years and 2 months (its only 17years 9 months in Central Birmingham) and if we were to roll the clock back 19 years 2 months to January 1996, property values in Solihull have risen by 176.9% to today… so you wouldn’t have had that with your pension!

So, where next? It totally depends which strategy you are going to look at, one strategy is to look to achieve relatively small rental returns (ie low yields) in an up market area which has decent capital growth or, alternatively, another strategy is to buy properties in not so good areas known to produce a high returns (ie high yields) but low capital growth (ie how much the value of the property goes up). Now, I am not financial advisor, so cannot offer financial advice on what the best thing for you with your pension is. However, I can share my knowledge and experience of the Solihull property market, what to buy, what not to buy and where to buy etc etc.

Look at this ground floor apartment in Dickens Heath.

A fabulous two bedroom apartment in the desirable location of Dickens Heath has just popped up on the market. Take a look at the property for yourselves here: http://www.zoopla.co.uk/for-sale/details/36400881

The property briefly consists of two bedrooms, good sized kitchen and lounge and one allocated parking space. 

Dickens Heath is an extremely popular area packed with local amenities, has easy access to Solihull and has a great village atmosphere. This apartment would be ideal for investors who are looking for properties located in idea locations, which will be popular on the rental market and also achieve a good rental income.  The apartment will also attract tenants that are looking to live a short drive from Solihull town centre and live in the sought after area of Dickens Heath. 

This property is currently on the market with ourselves with a current asking price of £165,000. With a property of this standard you are looking at a rental income of approximately £650pcm. This would give you a yield of around 4.7%. What’s not to love about this property?

If you would like to discuss buy to let properties further or would like advice on investing please contact me on: jane.morcom@centrickproperty.co.uk

Number of Rental Properties in Solihull set to rise to 11,200 by 2021

I was having an interesting chat the other day with a couple of solicitors at a Solihull business networking event, when the subject of a lack of property for first time buyers came into the conversation.  I followed the chat up with an email with my research; the results of which I would like to share with you.

At the time of the last census in 2011, 3,401,675 properties in England were privately rented, of which it is estimated, over 1.25 million were owned by private landlords. The rapid growth of buy-to-let is hugely controversial, especially as only ten years before that, there were only 1,798,864 properties under private renting in England. Buy to let landlords have been held responsible for forcing up property prices and preventing our younger generations from being able to buy.

They may be asset rich thanks to recently rising property values, but let us not make the landlords the ‘bad guys’ they could easily be. Despite all these benefits enjoyed by private landlords, let us not forget the good they have done, especially in Solihull.

Property values today in Solihull are still 0.6% below the 2007 property boom levels, yet inflation has risen by 26% in the same time frame, so in real terms, properties today are 26.6% CHEAPER than they were in 2007. Just think how low they would be without landlords buying all those rental properties in the city. Interest rates are at an all time low and first time buyers only need to save a £7,000 deposit to secure a lovely 3 bed semi in Sheldon or South Yardley with a 95% mortgage. Forget what the papers say, first time buyers can borrow money relatively easily on a 95% mortgage and nine times out of ten, it’s cheaper to buy than rent. So why aren’t people buying?

The number of people choosing to rent, either for lifestyle or economic reasons, has grown over the last 15 years. I also believe they will continue to grow for some time to come (as does every report on the subject). In fact I would go as far to predict the number of rental properties in Solihull will have risen from the 7,795 properties recorded in 2011 to 11,200 by 2021. Sounds fanciful? Well in 2001, there were only 2,951 privately rented properties in Solihull.

It is a fact that we as a country are more and more turning into a European model when it comes to homeownership, where the norm is renting for the first ten years, as opposed to the norm from the 1960’s to 1990’s, where first time buyers were encouraged to buy as soon as they got a job.

Tenants, in particular, will also feel the benefit from potential changes in the market. The likelihood of interest rate increases in late 2015, existing economic conditions, combined with the uncertainty of new Government manifestos following the General Election in May will result in low demand for people to buy yet also put a dampening effect on increases in rent. As long as landlords buy the right sort of property, that allows for a reasonable yield, decent capital growth, everyone will be a winner. If want a chat about what would make the best sort  a property that would offer that in Solihull, then please email me on jane.morcom@centrickproperty.co.uk 

One bedroom apartment in Solihull, now sold.

A great update on lovely spring morning. The one bedroom apartment located in Solihull has now been sold. Another great investment opportunity with a great rental yield and income.