Solihull Buy to Let sees returns of 8.76% in 2015

I was talking recently with one of my out of town landlords who was back in Solihull visiting his family.  He was brought up in Solihull and he went to Tudor Grange School back in the 1970’s and is now a University Lecturer in central London.  To enhance his retirement, he has a small portfolio of four properties in the town and wanted my advice on where to buy the next property in Solihull (as he lives in a college owned flat and anyway, would never dream of buying where he lives in Kensington (where the average value of a flat is £1.62m and a town house £4.1m.  Eye-watering to say the least!!).

Before I could advise him, I reminded him that the most important thing when considering investing in a Solihull property is finding a property with decent rental yields for income returns, yet at the same time, it must have the potential for capital growth from rising house prices over time.  Approaching the third month in the year, Solihull landlords will be under more pressure to find the best permutation of yields and capital growth, as extra stamp duty charges for buying properties and a squeeze on mortgage interest tax relief will raise their costs.

However, before we look at yield and capital growth, one important consideration that often many landlords tend to overlook, is the propensity of how likely the rent will increase.  Interestingly, the average rent of a Solihull property currently stands at approximately £929 per month, which is a rise of 0.3% compared to twelve months ago (although it must be noted this rise in rents is for new tenancies and not existing tenants).

Looking at capital growth, the average value of a Solihull property currently stands at approximately £331,000, meaning the average yield stands at 3.37% per annum, which on the face of it, many landlords would find disappointing.  That is the problem with averages, so if I were to look at a two bedroom houses in Solihull, the average value is £196,200, whilst the average rent for a two bedroom house is £729 per month, giving a yield of 4.46%.   However, if that wasn't high enough, there are some landlords in Solihull who own particular properties where they may have had to do a good deal of refurbishment, that are achieving nearly double that yield, again it comes down to your attitude to risk and reward.

Ultimately investors want to be making gains from both rent and house price growth.   When combined, the rental yield and capital growth gives you the return on investment, which is what I told our landlord from Kensington. Return on investment is everything. So, looking at Solihull, property values have risen in the last year by 4.3%, which means the current annual return on investment in Solihull for a typical two bedroom house is 8.76% a year.

Whether you are a soon to be new landlord or existing seasoned landlord in Solihull, you might be interested in a blog about the Solihull Property market, where you will find similar articles to this one about what is happening in the Solihull Property market http://solihullpropertyblog.blogspot.co.uk/.

Solihull Landlords count the cost of a Tory Election win

Can you remember 10.05pm on Thursday, 7^th May 2015 ... with the shock news that BBC Exit Polls suggested the Conservatives would be returned with majority? The middle classes in Solihull exhaled a huge sigh of relief, as Solihull landlords, faced with rent controls from Red Ed and the Labour Party, now had something to cheer about. The Tory’s were always considered to be a political party that accepted the importance of the rental market, fully supported its development while properly targeting the lawbreaker landlords renting out below standard rental accommodation.

Since May George Osborne has announced future rises in stamp duty for buy to let landlords and a change in the interest relief on buy to let mortgages, causing some people have to question that loyalty. However, things could have been a lot worse for Solihull landlords as previous ideas included making landlord’s pay more tax by increasing capital gains tax rates to the landlord’s own income tax levels. If Landlords would had to pay capital gains tax of 40% to 45% on any uplift in value, I can tell you here and now, that would have made investing in property a non starter for almost everyone.

However, I will admit that the loss of the higher rate tax relief of mortgages will mean that investing in a number of properties may not stack up financially. The new rules are likely to slow demand in the Solihull housing market, which is isn't necessarily bad news for landlords, as this could mean less competition from 'amateur' landlords. Just a thought, making Solihull landlords think twice and run their numbers more cautiously is not such a bad thing.

So looking at some of the numbers, the November figures have just been released and they show a growth of property values in Solihull of 0.8% over the month of November. That figure doesn’t surprise me due to the time of year. It’s quite dangerous to look at one month in isolation, so looking at a more medium term view, over the last 12 months, property values in Solihull have risen by 4.3%, not bad when you consider inflation is running at -0.1%.

However, regular readers of the Solihull Property Blog know my passion for looking deeper into the stats. The really interesting information is the value growth, but what types of property are actually selling in Solihull?  Looking at all the properties sold, as recorded by the Land Registry, within 2 miles of the centre of Solihull in September 2015 (this data always runs a couple of months behind the house price data) compared to September 2007 (a couple of months before the credit crunch started to bite and the subsequent property crash).

	Sept 2007	Sept 2015	Difference
Detached in Solihull	29	33	+14%
Semis in Solihull	33	29	-12%
Terraced Houses in Solihull	18	12	-33%
Apartments / Flats in Solihull	31	27	-13%

Now I have mentioned in previous articles that the numbers of properties selling in the town has certainly dropped post 2008, but what amazed me were the drop in the number of semis, terraces and apartments selling in Solihull compared to the sales of detached properties, which rose slightly.

Less properties are selling than last decade in Solihull and the types of properties selling have changed interesting times ahead for the Solihull Property market!

Therefore, all I can say to the landlords of Solihull is do your homework, make sure the numbers do stack up, take advice and opinion from professionals and above all, for those of you planning to add to your portfolio, buy the right property at the right price. 

42.4% of Solihull tenants in the private rented sector are on Housing Benefit

“What does the ideal Solihull tenant look like?”, asked one of my landlords from Copt Heath the other day, to which he carried on before I could reply, “Let me guess, a professional couple, both in their 30’s, flawlessly tidy, pays their rent early, doesn't complain or fuss, who has no plans to move and cheerfully accepts annual rent rises”.

Before I can answer that question properly, I have always believed all a landlord wants (and expects) of their tenants is to pay their rent on time and look after the property as if it were their own. In return, the landlord provides a property that is warm, clean, damp free and comfortable whilst also rectifying any issues with the property (such as repairs) quickly and without fuss. 

Back to the tenants, who I have found tend to fall into several groups... 20 something professionals; young and middle aged families; corporate tenants (i.e. an employer finds their employee a house to live in); students; older singles/couples and lastly housing benefit claimants. Whichever category they fall into, they all come with different needs and wants. So, choosing who best suits your Solihull property and avoiding problem tenants is a big factor in making property investment a successful venture.

Bearing these groups in mind, one topic that I am often asked is should a landlord accept tenants on housing benefit?

It might interest the landlords of Solihull that of the 7,795 private rented properties in the local council area, 42.4% of the tenants of those properties are on some form of housing benefit, according to the Office for National Statistics.

(3,310 properties to be exact). I do know of several landlords who have suffered late rent payments with tenants on benefit, especially since 2008, when local authorities started paying housing benefit to the tenants rather than directly to the landlords. However you cannot ignore the fact that housing benefit tenants make up a significant proportion of the Solihull rental population. My professional opinion is that the final decision of accepting such tenants lies solely with the landlord but it must be remembered that you cannot tar every tenant with the same brush and to approach each decision independently (I will always give you a balanced opinion if you should ever seek it).

Interestingly, it might surprise some readers of the Solihull Property blog, when we compare Solihull to the national picture, Solihull’s housing benefit claimants are higher proportionally to the national average of private tenants claim housing benefit. Nationally, 39.2% of the tenants of the 3,891,467 rental properties in Great Britain claim some form of housing benefit (specifically 1,526,915 properties).

Now, let us look at the occupations of Solihull tenants, which makes for even more fascinating reading. Of the 7,795 privately rented properties in the Solihull area, 5,918 head tenants (the head tenant being classified as the head of the household) are in employment (the other 1,877 rental property head tenants either being retired, long term sick, students or job seekers).
Splitting those 5,918 head tenants down into their relevant professions, 3,021 of them are managers, directors, senior officials, professional or technical professions, 567 in administrative and secretarial occupations, 572 in skilled trades, 546 in the caring, leisure and other service occupations, 376 sales and customer service occupations, 372 process, plant and machine operatives and finally, 464 in elementary occupations.

The one anecdote I have always known, but until I did my research, never had anything to back it up with, was the high proportion of professionals and skilled tradespeople renting property in Solihull! Maybe in future articles, I will look deeper into the corporate tenant market, young and middle aged families, students and older persons rental markets.... but in the meantime, if you want more news, views and commentary about the Solihull property market, there are many similar articles like this on the Solihull Property Blog http://solihullpropertyblog.blogspot.co.uk/.

What does this year have in store for the Solihull Property Market?

Solihull house prices up or Solihull house prices down? ... and if so, by how much? Those of you who read the Solihull Property Blog will know I am not the sort of person who pulls punches or fails to give a forthright and straight talking opinion – so here are my thoughts for the 41,098 Solihull homeowners and landlords.

The average Solihull property is 4.9% higher today than it was a year ago, which doesn’t sound a lot, but when you consider inflation is currently running at -0.1% (ie consumer/retail prices are dropping) and average salary growth is only around 2.5% pa, this is bad news for first time buyers as property affordability continues to decrease. I was also reading in The Times the other day that wage inflation i.e. salary growth, is showing signs of weakening.

Some commentators have said the higher stamp duty taxes announced a few weeks ago in the Autumn Statement for buy to let landlords, as well as concerns over first time buyer affordability and the outlook of UK interest rate rises in 2016, will really dampen the property market. I hope you all read my previous article about what the new stamp duty rule changes would really mean for Solihull landlords, as I believe the real issue in the Solihull property market is the shortage of property to buy, as people either worry there will be no suitable house to move to, or cannot afford to upgrade. 

However, on the supply side, Mr Osborne said in his Autumn Statement that he will change the planning laws to ensure the government meets the pledge made at the General Election last year, of 200,000 new homes a year.  All I can say is, good luck George in hitting those numbers!

Why? Because houses take years to build, not months.  So, with George and his fabled house building aside, where does that leave the 2016 property market in Solihull?

Whilst Mr Osborne builds his properties (and let’s be honest - a week doesn’t go by without him being filmed on a building site with a hi-vis jacket and hard hat building a house here and there!), let us look at the shortage of properties for sale. Back in November 2011, 682 properties were for sale in Solihull, today that figure is 321. On the face of it, this means there is less choice for Solihull buyers – but it does also mean, with a restricted supply of properties for sale, the property prices are kept high for Solihull house sellers.

This does mean that it is a sellers’ market, back in November 2011, the average property in Solihull took 109 days to find a buyer, latest figures state this has dropped to 69 days an improvement of 37% in how long it takes to find a buyer. However, when you delve even deeper, the best performing type of property today in Solihull is the 3 bed, which only takes 42 days to find a buyer (on average) compared to the 1 bed, which takes 91 days. It just goes to show, even though the average has improved since 2011, how varied that change has been!

So, back to the question everyone is asking .... What will happen to property values in Solihull in 2016?  I am going to suggest they will rise between 3% and 4% ... nothing out of the ordinary, but unless something cataclysmic happens in the world, 2016 will be like 2015!