92.9% of Solihull Homeowners are over 35 - The affect of their Brexit vote on the Solihull Property Market

Well it’s been four weeks since the referendum vote and we have had a chance to reflect on the momentous decision that the British public took. Many of you read the article I wrote on the morning of the results. I had gone to bed the night before with a draft of my remain article at the ready, to be presented, just after 5am, with the declaration by the BBC saying we were leaving the EU. I don’t think any of us were expecting that.

In this article I would like to move on from that initial article and start to look at the clearer picture as the dust settles on the UK, but more importantly, the Solihull Property Market.

In case you weren’t aware, the residents of the Solihull Metropolitan Borough Council area went against the National mood and voted as follows:

Solihull Metropolitan Borough Council          Remain Votes  53,466             (43.8% of the vote)

Solihull Metropolitan Borough Council          Leave Votes     68,484             (56.2% of the vote)

Solihull Metropolitan Borough Council Turnout        76%

I have been reading there is some evidence to indicate younger voters were vastly more likely to vote remain than their parents and grandparents and, whilst the polling industry's techniques may have been widely criticised, many surveys seem to suggest there was a correlation between age and likelihood to support leaving the EU.

Interestingly, the average age of a Solihull resident is 41.3 years old, which is above the national average of 39.3, which might go some way to back up the way Solihull voted? What I do know is that putting aside whether you were a remain or leave voter, the vote to leave has initially created uncertainty and the last thing the British property market needs is uncertainty (with previous episodes of uncertainty in the UK economy – UK house prices have tended to go down).  However, there is evidence that in the local business environment that suggests there are new business opportunities opening up as countries take advantage of the exchange rate and with the prospect of EU restrictions being lifted, so maybe this uncertainty is unfounded.

Interestingly, when we look at the Homeownership rates in the Solihull Metropolitan Borough Council area, of the 64,083 properties that are owned in the Solihull Metropolitan Borough Council area (Owned being owned outright, owned with a mortgage or shared ownership), the age range paints a noteworthy picture.

Age 16 to 34 homeowners      4,559    or        7.1%  (Nationally 9.6%)

Age 35 to 49 homeowners    18,248    or      28.5%  (Nationally 29.2%)

Age 50 to 64 homeowners    19,742    or      30.8%  (Nationally 30.7%)

Aged 65+ homeowners          21,534    or      33.6%  (Nationally 30.5%)

So, looking at these figures, and the high proportion of older homeowners, you might think all the Solihull Metropolitan Borough Council area homeowners would vote remain to keep house prices stable and younger people would vote out so house prices come down- so they could afford to buy?

But there's a risk in oversimplifying this. The sample of the polling firms are in the thousands whilst the country voted in its millions. Other demographic influences have been at play in the way people voted, as early evidence is starting to suggest that class, level of education, the levels of immigration and ethnic diversity had an influence on the way the various parts of the UK voted.

So what I suggest is this – Don’t assume everyone over the age of 50 voted ‘Leave’ and don’t assume most 20 somethings backed ‘Remain’; because many didn't!

22% increase in Property Values in Solihull since the Millennium

Solihull house prices since the Millennium have risen by 122.38%, whilst average salaries in Solihull have only grown by 51.27% over the same time frame. This has served to push homeownership further out of reach for many Solihull people as they have to battle against raising considerable deposits and meeting stricter lending criteria, as a result of new mortgage regulations introduced in 2014/5.  The private rental market in Solihull has grown throughout the last twenty years with buy-to-let investors purchasing a high proportion of newly built residential properties that were built and designed for the owner occupier sales markets.  For example, in Solihull, roll the clock back 20 years and there were 38,631 properties in the constituency, whilst the most recent set of figures show there are 50,798 properties - a growth of 12,167 properties. Of these 12,167 properties evidence indicates that over this 20-year period the number of rental properties has grown from 1,553 to 5,242 in the constituency - a rise of 3,689 properties.

Nevertheless, some say this historic growth of the Solihull rental market might start to change with the new tax rules for landlords introduced by Mr. Osborne over the last seven or eight months. Yet the numbers tell another story. Across the board, mortgage borrowing climbed to a 9 year zenith in March this year as the British property markets traditional Easter rush corresponded with landlords hurrying to beat George Osborne’s new stamp duty changes – buy-to-let landlords borrowed £7.1bn in March 2016 (the latest set of figures released) which was 163% up on the £2.7bn borrowed in the previous March.

I don’t think things will get worse in the buy-to-let market in Solihull for the following:

Firstly, what else are Solihull landlords going to invest in if it isn't property - the stock market? Since the millennium, the stock market has risen by an unimpressive total of 5.54%, quite different to the 122.38% rise in Solihull property prices?

Secondly, although the 3% stamp duty is the first blow on top of a number of other tax changes to be phased in between 2017 and 2021, others include a constraint on landlords in their ability to offset mortgage interest.  If a sizeable number of landlords do take the decision to sell their portfolios, this will lead to a substantial amount of second hand properties being put up for sale; which might not be a bad thing, as I have mentioned in previous articles, there is a serious shortage of properties to buy at the moment in Solihull: the stock of property for sale being at a six-year all-time low.  So an influx of sales properties will be a positive for the Solihull property market.

Thirdly, if there are fewer rental properties in Solihull, as supply drops and demand remains the same this will create a squeeze in the Solihull rental market and as a result rents will rise. In fact, I predict even if landlords don’t sell up, Solihull rents will rise as Solihull landlords seek to compensate for increased costs, which means more landlords will be attracted back.

The Solihull Property Market and The Euro 2016 Football Tournament

With the Referendum on EU membership out of the way, our households can concentrate on something European that doesn’t involve party political broadcasts – the Euro 2016 Football Tournament.  Don’t despair I’m not going to mention Iceland! Solihull is home to all different backgrounds and nationalities so if you're not lucky enough to be jetting off to France for the UEFA Euro 2016 football tournament, have no fear! For a bit of fun. I have taken a look at which European people live in Solihull so I know who to soak up the best atmosphere with!

During my research some interesting numbers appear. Going into the Euro 2016 tournament, France were 3/1 favorite’s, then Germany 7/2, third Spain 11/2, then England 9/1, Italy 16/1, Poland 50/1, Romania and Wales at 100/1, Ireland at 150/1 and Northern Ireland 500/1.

Of the 98,817 residents of the Solihull Constituency, of the Home Nations going into the competition, 86,999 of them are from England, 1,157 from Wales, 404 from Northern Ireland and 1,471 from Ireland, although I do feel sorry for the 1,001 Scots who didn’t get into the finals. Now interestingly, looking at the Mainland Europeans residents in the Solihull Constituency, it might not surprise you that they make up 1.26% of the population as a whole in the West Midlands area.

However, even more fascinating, of those 1.26% European’s residents, 0.75% are from Western Europe because EU residents from Eastern Europe Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Slovakia, Slovenia, Bulgaria and Romania) - only make up 0.51% of the population of the Solihull Constituency.

Broken down into the relevant football teams, there are in the Solihull Constituency …  

-108 French

-242 Germans

-116 Italians

-64 Spanish

-252 Polish

-39 Romanians

But what does this have to do with the Solihull property market? Quite a lot in fact. Many of these European people were economic migrants, especially those from Eastern Europe. There is no preferential treatment for council housing in Solihull, so EU migrants have in fact increased demand for privately rented accommodation in Solihull. 

This has meant, as demand for housing in Solihull has remained strong, Solihull landlords have continued to buy properties to rent out to keep up with this demand. Therefore, the value of every homeowner’s property in Solihull has been kept high because of the demand from these Solihull landlords buying starter homes to rent out, releasing existing homeowners to go up the property ladder – benefitting everyone in the chain.
In Solihull rents are 15.1% higher than they were in 2005, not bad when you consider we have had 38.52% inflation in the UK economy as a whole over the same 11 years.

EU migration has meant existing homeowners, landlords and the economy as a whole in Solihull (and the UK) have benefitted from better economic conditions, property prices not slumping whilst rents have been kept in check by wage inflation.

Asking Prices of Solihull Property down 4% in the last year

I had an interesting question the other day from a homeowner in Shirley who asked me the difference between asking prices and values. When it comes to selling property, there must be agreement between the purchaser (buyer) and seller (vendor) for a property sale to take place. The value a buyer applies to a property can massively differ from the value a seller or mortgage company places upon it. The seller, the buyer and the mortgage company must agree a value to a property so the sale can proceed.

In many of my articles about the Solihull property market, I write about values, i.e. what property in Solihull actually sells for, but I haven’t written about asking prices for a while. Now asking prices are important as they are one of the four key criteria a potential buyer will judge your property on (others being location, bedrooms and type). Price too high and you will put buyers off.

If we take a look at the Solihull numbers: over the last 12 months asking prices in the B91 area the asking prices have decreased by 4%, taking the average asking price to £442,600 (down from £460,600 twelve months ago).

When we look at semi-detached and terraced property, a slightly different picture appears. Twelve months ago, the average asking price for a semi-detached house in Solihull was £372,000 and today its £364,800 (a drop of 2%).  Over the same 12-month period, the average asking price of a terraced property was £240,700 a year ago and today its £267,900 (a rise of 11%).

In December 2015, there were 185 on the market in Solihull today there are 173 properties on the market (down 6%). This will mean homeowners looking to sell will need to be very aware of how their property compares to others on the Solihull property market. The Solihull property market still has substantial momentum and sufficient demand remains. This significant decrease in supply since Christmas has meant there is less choice for buyers.

These are the average prices achieved (i.e. what they sold for or the average value) for property in Solihull over the last 12 months...it is interesting to note that the average detached achieved price is £517,900 so when looking at the average achieved this does suggest that it is the semi and terraced market that is more active than the detached which accounts for the lower overall achieved average price.

·         Overall Average          £364,680

·         Semi-detached            £322,243

·         Terraced                     £255,800

You can quite clearly see, in some cases, there is a difference between what people are asking for property and what it is selling for. The underlying fundamentals of low interest mortgages and tight supply remain prevalent in the Solihull property market however, the number one lesson has to be this ... if you want to sell, be realistic with your pricing.