Solihull Tenants Pay 38.9% of their Salary in rent

I had the most interesting chat with a local Solihull landlord the other day about my thoughts on the Solihull property market. The subject of the affordability of renting in Solihull came up in conversation and how that would affect tenant demand. Everyone wants a roof over their head, and since the Second World War, owning one’s home has been an aspiration of many Brits.  However, with rents at record highs many are struggling to save enough for a house deposit.

Let’s be honest, it’s easy to get stuck in a cycle of paying the rent and bills and not saving, but even saving just a small amount each month will sooner or later add up.  George Osborne announced such schemes as the upcoming Help to Buy ISA, where the Government will top up a first time buyers deposit.

Therefore, I thought I would do some research into the Solihull property market and share with you my findings.  Solihull tenants spend on average just over a third of their salary to have a roof over their head.  According to my latest monthly research, the average cost of renting a home in Solihull is £1,056 per month.  When the average annual salary of a Solihull worker stands at £32,503 per year, that means the average Solihull tenant is paying 38.9% of their salary in rent.  

You see one the reasons for rents being so high is property prices being high.  As I have mentioned before, there is a severe lack of new properties being built in Solihull.  It’s the classic demand vs supply scenario where demand has increased, but the number of houses being built hasn’t increased at the same level.  Also Solihull people aren’t moving home as often as they did in the 80’s and 90’s, meaning there are fewer properties on the market to buy.  If you recall, a few weeks ago I said back in Spring 2008, there were over 1,240 properties for sale in Solihull and since then this has steadily declined year on year, so now there are only 356 for sale in the town.

So, the planners in Solihull haven’t allowed enough properties to be built in the town and existing Solihull homeowners are not moving home as much as they used to, thus creating a double hit on the number of properties to buy.  This is a long term thing and the continuing diminishing supply of housing has been happening for a number of decades and there simply aren’t enough properties in Solihull to match demand, these are the reasons houses prices in Solihull have remained quite buoyant, even though economically, over the last 5 years it was one of the worst on record for the country and the East Midlands region as a whole.

With fewer people able to save up the deposit required by mortgage lenders, more and more people are continuing to rent.  This delay in moving up the property ladder has driven rents across the UK up as more people were seeking rental properties.

 It is often said that more people in central Europe rent for longer or never own their own property. The last two census in 2001 and 2011 show that proportionally the percentage of people who own their own home in Britain is slowly reducing and as a country, we are becoming more and more like Germany. That isn’t a bad thing as Germany is considered to have a more successful economy, one of the main stays often quoted is because they have a much more flexible and mobile workforce, (which renting certainly gives) and from that they have a higher personal income than in the UK.      

Therefore, if we are turning into a more European model and the youngsters of Solihull and the Country have changed their attitudes, demand for rental properties will only and can only go from strength to strength, good news for Solihull tenants as wages will start to rise and good news for Solihull landlords, especially as property values in Solihull are now 4.9% higher than year ago!

Solihull Property Market Crisis as New House Building slumps by 84.52%

One of the key factors that influences the price of anything is the demand for and supply of the item that is being bought and sold. When it comes to property, demand can change overnight, but it takes a lot longer to build new properties and increase the supply.

The Conservatives have pledged to build over 1 million homes by 2020. I am of the opinion that as a country, irrespective of which party, we have not built enough homes for decades, and if the gap between the number of ‘new’ households and the number of new homes being built continues to widen, we are in danger of not being able to house our children or grand children. I believe this country has gone beyond the need for another grand statement of ambition by yet another Housing Minister. Surely it’s time to give Solihull families back the hope of a secure home, be that rented or owned? As a town, we need to make sure Westminster is held accountable, to ensure there is a comprehensive plan, with enough investment, that can actually get these homes built.

To give you an idea of the sorts of numbers we are talking about, in the Solihull Metropolitan Borough Council area in 2005, 550 properties were built. In 2006 that number peaked at 840 and a year later in 2007, was still at 680. By 2014, the figure had dropped by a massive 84.52% to 130 properties built.

The outcome of too few homes being built in Solihull means the working people of the town are being priced out of buying their first home and renters are not getting the quality they deserve for their money. The local authority isn't building the estates they were and housing associations are having their budgets tightened year on year, meaning they have less money to spend on building new properties. I know of many Solihull youngsters, who are living with their parents for longer because they cannot afford to get onto the housing ladder and growing families are unable to buy the bigger homes they need.

I talk to many Solihull business people and they tell me they need a flexible and mobile workforce, but the high cost of moving home and lack of decent and affordable housing are barriers to attracting and retaining employees. Furthermore, building new homes is a powerful source of growth, creating jobs across the county and supporting hundreds of Solihull businesses. It is true that landlords have taken up the mantle and over the last 15 years have bought a large number of properties. The Government need to be thankful to all those Solihull landlords, who own the 5,242 rental properties in the town. Most local landlords only have a handful of rented properties (to aid their retirement), and without them, I honestly don’t know who would house all the extra people in Solihull!

Moving forward, those Solihull landlords have new legislation to be aware of, with the introduction of the deregulation act this year including for example: the introduction of right to rent checks and serving of serving notice to vacate as well as carbon monoxide detector requirements.  Many of these new rules came in to play from the 1^st October 2015 there is of course also the planned phased change in the tax relief on buy to let properties.

More than ever, the days of buying any old property in Solihull and being set for life are gone. Now, it’s all about ensuring you stay the right side of the law, buying the right property (and that might mean even selling some to buy others), so you build the right portfolio for you as a landlord. Talking to your agent to get the right advice, is now even more important than ever.  A further source of information and where you will find other articles similar to this one on the Solihull property market, is the Solihull Property Blog http://solihullpropertyblog.blogspot.co.uk/

How EU Migration has changed the Solihull Property Market

The argument of migration and what it does, or doesn't do, for the country’s economic well-being is something that has been hotly contested over the last few years and more so recently. In my article today, I want to talk about what it has done for the Solihull Property market.

Before we look at Solihull though, let us look at some interesting figures for the country as a whole. Between 2001 and 2011 971,144 EU citizens came to the UK to live and of those, 171,164 of them (17.68%) have bought their own home. It might surprise people that only 5.07% of EU migrants managed to secure a council house. However, 676,091 (69.62%) of them went into the private rental sector.  This increase in population from the EU has no doubt added great stress to the UK housing market.

Looking at the figures, the housing market as a whole is undoubtedly affected by migration but it has been the private rented housing sector, especially in those areas where migrants come together that is affected the most.  Indeed I have seen that many EU migrants often compete for such housing not with UK tenants but with other EU migrants. In 2001, 3.68 million rented a property from a landlord in the UK.  Ten years later in 2011, whilst EU migration added an additional 676,091 people renting a property from a landlord, there were actually an additional 4.14 million people who became tenants and were not EU migrants, but predominately British!

As a landlord it is really important to gauge the potential demand for your rental property, especially if you are a landlord who buys property in areas popular with the Eastern European EU migrants.  To gauge the level of EU migration (and thus demand), one of the best ways to calculate the growth of migrants is to calculate the number of people who ask for a National Insurance number (which EU members are able to obtain).

Interestingly in Solihull, migration has stayed quite static over the last few years. For example, in 2006 there were 612 migrant National Insurance Cards (NIC) issued and the year after, in 2007, 688 NIC cards were issued.  In 2014 this was 660 NIC’s. However, if the pattern of other migrations since WW2 continues, over time there will be an increasing demand for owner occupied property, which may affect the market in certain areas of high migrant concentration. On the other hand over time some households move into the larger housing market, reducing concentrations and pressures.

In essence, migration has affected the Solihull property market; it couldn't fail to because of the additional 5,410 working age migrants that have moved into the Solihull area since 2005. However, it has not been the main influence on the market. Property values in Solihull today are only 8.41% higher than they were in 2005. According to the Office of National Statistics, rents for tenants in the West Midlands have only grown on average by 0.75% a year since 2005.... I would say if it wasn't for the migrants, we would be in a far worse position when it came to the Solihull property market. This was backed up by the then Home Secretary Theresa May back in 2012 - more than a third of all new housing demand in Britain is caused by inward migration and there is evidence that without the demand caused by such immigration, house prices would be 10% lower over a 20 year period.

If you want to know more about the Solihull property market, please pop into property lounge for a drink, chat and to meet the lovely time. 

Could your Solihull property save you from Pension oblivion?

If you were born in the early 1970s or late 1960s, if you haven’t started to think about it yet, retirement is closer than you think. In fact the number of years you have left to work is less than the number of years you have worked. The basic state pension is worth £115.95 a week for a single person in 2015/16 (or £6,029 a year) and £231.90 a week for a couple (£12,118 a year) as long as your partner has paid their stamp (although there are certain get of jail cards if they haven’t).

As a household, could you live on just over £12k a year?

Could the property you are living in, in Solihull save you from the breadline poverty when you reach retirement? You see, a regular income is vital in retirement and the bricks and mortar you own could provide a way for you to finance life when you retire.

If you are in your 30’s, instead of saddling yourself with bigger and bigger mortgages, going from your first time buyer flat, to a terraced, to the semi and then the large detached house, you could instead keep your terraced or small semi, turning it into a buy to let property, let the rent pay the mortgage and then rely on capital growth to provide you with a lump sum when you retire.  One of the biggest plus points of buy to let is what is known as leverage, say you have a deposit of 25% and the value of the property rises by 3% a year, your gains in fact multiply to 12%.  However, if property prices drop 'leverage' can be catastrophic, as losses will also be multiplied. Property values have dropped a number of times in the last 50 years, but they always seem to bounce back ... property must be seen as a long term investment.

Let me explain how leverage could work for you. If you had bought a Solihull house in spring of 1983 for £30,000, using a 75% mortgage and 25% deposit (meaning your deposit would be £7,500). Today that Solihull property would have risen in value to £188,567, a rise of 528.6%. However when you look at the growth on just your deposit, the rise is even better ... instead of 528.6%, we see a rise of 2414% (remember that the mortgage will have been paid off).

However, buy to let is not all about capital growth and in retirement, income is more important than capital growth, as rent is the key to a steady income.

So surely the best strategy is to buy those Solihull properties with the high rents. These are called high yield properties in the buy to let world because the monthly return is so much greater. So surely they are the best in Solihull? Possibly, the properties that offer these higher yields (in the order of 6% to 9% per year) tend to be in areas such as Olton, Lode Lane and Hobbs Moat, historically they haven’t offered such good capital growth when compared to the town average and tend to attract tenants that have a greater propensity to be high maintenance.

If a high maintenance rental portfolio isn’t for you, another strategy could be to buy a property with relatively smaller rental returns of 4% to 5% per year (i.e. lower yields), but in a more up market area such as Dorridge. Properties such as these tend to suffer from less void periods (i.e. when there is no tenant in the property paying you rent) and historically have had better long term capital growth when compared to the town average.

Every landlord is different and every property is different, I can only suggest that you do your homework.

As regular readers will know, I am happy to share my knowledge and experience of the Solihull property market, high yields, high capital growth, what to buy, what not to buy and where to buy in the Solihull Property market can always be found on the Solihull Property Blog http://solihullpropertyblog.blogspot.co.uk/