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!

Solihull Landlords could be fined £477,000 per year

“Who would want to move to Solihull in weather like this?” a landlord said to me as we shook hands outside his property the other day. It was windy, cold and had been raining most of the day, it was a late appointment at 6.30 pm. I will admit, as I had been out of the office all day, I was looking forward to getting home at a reasonable time, putting the fire on and watching telly, but as this landlord works in Birmingham this was the earliest he could do. 

It turned out he had been self-managing the property over the last few years, but was worried that he was not able to keep up with all the new legislation that had been introduced recently. He was particularly concerned about the ‘Right to Rent’ legislation.  As his tenant had handed in their notice recently, on this new tenancy he called us for our opinion he decided to call the experts and ask us our advice on marketing for a new tenant.

For those Solihull landlords that don’t know, landlords will need to check the immigration status of any new tenants moving into properties from February 2016 or face a £3,000 fine. It is called the 'Right to Rent' rules. However, tenants should also be aware that as well as traditional landlords, tenants who sublet rooms and homeowners who take in lodgers, must also check the right of prospective tenants to reside in the UK, this is in line with the more stringent rules brought in with the new immigration Act 2014.

This landlord wanted to know how much of a real issue ‘Right to Rent’ in Solihull was. I was able to tell him, the last available figures (from a couple of years ago) show that 159 people (whom were registered as non-UK born short-term residents) moved into private rented accommodation in the Solihull Borough Council area in one year alone. If all of those people weren’t supposed to be in the UK, that would be a fine of £477,000 to the landlords of the town.

It doesn’t sound a lot when you think there are 123,187 residents in Solihull borough area, and of those, 112,291 people (or 91.15%) were born in the UK.  However, Solihull is a cosmopolitan town and the country of birth of the residents in the borough area can be split down as follows:

·         UK                                                                          91.15%

·         Ireland                                                                    1.36%

·         Europe                                                                    1.44%

·         Africa                                                                     1.41%

·         Middle East and Asia                                             3.89%

·         Americas and Caribbean                                        0.57%

·         Australia and Pacific region                                   0.16% 

It has to be acknowledged that landlords can also run the risk of being accused of discrimination under the 2010 Equality Act if they are not careful. This is a real minefield for landlords, especially when you consider that not all of the 1,774 Europeans in the area necessarily have the right to live in the UK either.

In a nutshell, Solihull landlords will need to check and retain copies of certain documents that show a potential tenant has the right to live in the UK. These include....

·         UK Passport

·         EEA Passport/Identity card

·         Visa

·         Travel document or Permanent Residence Card showing indefinite leave to remain

·         Biometric ‘residence permit’ issued by the Home Office

·         Paperwork from Home Office stating their Immigration status

·         Certificate of registration or naturalisation as a British citizen.

Let’s hope this will prevent dishonest landlords who repeatedly fail to carry out ‘Right to Rent’ checks. As failing to comply will be a criminal offence and could mean facing imprisonment. That is why more and more landlords are asking agents to manage their properties, so they can stay the right side of the law.

So what did this landlord do?

Well after our chat, he asked us to find a tenant and manage the property for him - he had been reading the Solihull property blog for a while and because of the knowledge we impart to the landlords of Solihull, if realised that we obviously know what we are talking about.  Even better news for him, I was able to get him an additional £50 per month for his property within a week. Now, he has peace of mind, we will keep him the right side of the law and put a stop to midnight phone calls complaining about dripping taps, it was a win-win situation for everyone.

Will the young people of Solihull ever own their own home?

I had the most interesting chat with a mature couple (in their early/mid 50’s) from Catherine-De-Barnes the other day, whilst viewing one of our rental properties nearby. They were viewing with their son, who wanted his parent’s parental blessing. Now I know that isn't the norm, but in this case the parents were going to act as guarantor. We got chatting about the Solihull property market and how they had bought their first property in the town just after they got married in the late 1980’s when they were in their early/mid 20’s. Anyway, we got chatting about how the youngsters of the UK seem to rent more than buy nowadays and from that the conversation covered a number of similar topics. I want to share the highlights of that conversation with you this week.

Their son, like many 20 to 30 year olds in Solihull, desperately wants to own his own property and the parents said he had read an article in the Telegraph recently comparing house prices to earnings for the 20-30 age group today have to spend more of their salary in mortgage payments than any previous generation. The demand for private rental sector accommodation in Solihull is huge. There are in fact 5,242 private rental properties in Solihull at the last count, a considerable amount when you take into account that there are 2,859 council houses in the town. However, let us not forget 41,098 properties are owner occupied (19,556 with a mortgage).

We must acknowledge that private renting does not have the stigma it had a few decades ago and it might just surprise people that even though us Brit’s class ourselves as a nation of homeowners, roll the clock back 100 years and over 75% of people rented their own home (and it was all from private landlords as council housing only started to come in with the ‘homes for hero’s’ after the first World War). It might also surprise you to learn that at the time of the 1971 census, still more people rented than owned their own home.

I have proved time and time again, when looking at the affordability issue, that it is in fact cheaper to buy a property than rent, when one looks at starter homes for first time buyers. 95% mortgages have been available to first time buyers for over four years, whilst better properties in better condition in better areas can be found, terraced houses can be bought for as little as around £110,000 in the Acocks Green area of Solihull (meaning a modest deposit of £5,500 would be required).

When we discussed affordability, I was able to tell them that at the time they bought their first house in Solihull in 1988, the ratio of house prices to salary was 5.34 to 1 in Solihull ... and here was the surprise for both of us, today’s ratio is only 5.23 to 1!

I said I believed there had been a change in cultural attitude towards renting property in Britain and that this quiet revolution was likely to be permanent. In the 60’s, 70’s and 80’s, saving for the deposit and buying a house was the be-all and end-all. Youngsters today have far much more disposal income today than people had in the Callaghan and Thatcher years, but choose to spend it upgrading their mobile phones every 12 months, the newest tablet or PC, a newest 50” plasma LCD TV and two sun drenched holidays a year, than go without and save for a deposit.

Yes, there are horror stories of tenants living in rat infested properties with landlords who charge massive rents and don’t repair their properties. But that is very much the exception as most tenants rent homes of a quality they couldn’t ever to afford to buy. Twenty years ago, if you said you rented a property, you were considered the lowest of the low ... but now it’s the norm.

So with mortgage affordability being well within the bounds of most first time buyers, the level of deposit required for a 95% being surprisingly modest (starting off at £5,500 in Solihull as mentioned above) until we change our attitudes, the UK housing market is slowly but surely turning into a more European model, where people rent for long periods of their life, then eventually inherit their parents properties and subsequently become homeowners themselves, albeit later in life.

Hence, I cannot see the demand for decent, high quality rental properties ever dropping in the next 10 to 20 years, but only ever increasing as the population continues to soar. Just make sure you by the right property, at the price, in the right location. 

Solihull House Price Monopoly: How do Prices vary?

As we go into January and deal with the lull after the Christmas holiday – if there isn't anything on the telly, it wouldn't be unusual to find me enjoying a good game of Monopoly. Buying and renting property – a busman’s holiday you might say! The game was originally invented at the turn of the 20^th Century (1903 to be precise) interestingly the game was initially called ‘The Landlord’s Game’!  After a few years in the wilderness, the game was renamed Monopoly the game we know and love today.

So whether you are a home-owner or landlord in Solihull, what would a Monopoly board look like today in the town? Property prices over the last 80 years have certainly increased beyond all recognition, so looking at the original board, I have substituted some of the original streets with the most expensive and least expensive locations in Solihull today.

I have focused on the B91 postcode, looking at the brown roads on the board, the ‘new’ Old Kent Road in Solihull today would be Caldwell Grove, with an average value £144,250 (per property) and White chapel Road would be Wharf Lane, which would be worth £155,000. What about the posh dark blue roads, Park Lane and Mayfair? Again, looking at B91, Park Lane would be Blythe Way at £951,300 and Mayfair would be Lovelace Avenue at £986,100. Also, I can’t forget the train stations (my favourite), and over the last 12 months, the average price that property within a quarter mile of the station sold for was £365,750.

So that got me thinking, what you would have had to have paid for a property in Solihull back in 1935, when ‘Monopoly’ was born?

• ·         The average Solihull detached house today is worth £504,080 would have set you back 912 Pounds and 7 old pence.
• ·         The average Solihull semi-detached house today is worth £264,200 would have set you back 478 Pounds and 4 old pence.
• ·         The average Solihull terraced / town house today is worth £233,145 would have set you back 421 Pounds 16 shillings and 7 old pence.
• ·         The average Solihull apartment today is worth £192,240 would have set you back 347 Pounds 16 shillings and 5 old pence.

Interesting and a bit of fun… but underlying all this is one important fact. Property investing is a long game, which has seen impressive rises over the last 80 years. In my previous articles I have talked about what is happening on a month by month or year by year basis; if you are going to invest in the Solihull property market, you should consider the Solihull property you buy to be a medium to long term investment, because buy to let is exactly that – you buy a property in order to rent it out to tenants.

I reminded a soon to be first time landlord from Elmdon Heath the other week, buy to let in Solihull (as in other parts of the Country) is very different from owning your own home. When you become a Solihull landlord, you are in essence running a small business – one with important legal responsibilities. I write the Solihull Property Blog, where it has an extensive library of articles like this one, where I talk about what is happening in the Solihull property market, what to buy (and sometimes not) in Solihull and everything else that is important to know as a Solihull landlord. Please visit the Solihull Property Blog http://solihullpropertyblog.blogspot.co.uk/.

Values of Solihull Terraced Houses smash through the £265/sqft barrier

The Council of Mortgage Lenders (CML) latest snapshot of the buy to let mortgage market shows us that buy to let landlords haven’t been put off by the Chancellors new tax relief staged changes announcements, which is good news for both the sales and lettings market.

Last month, the CML stated £1.4billion was borrowed by UK landlords to purchase 10,500 buy to let properties, up 26.5% from the same month in 2014, when only 8,300 properties were bought with a buy to let mortgage. If we look back two years, the number of buy to let mortgages used for purchasing (again not re-mortgaging) is 36.4% higher! Even more interesting has been the fact that the average amount borrowed has risen as well. The average buy to let mortgage last month was £133,330, up from £128,480 a year ago.

In Solihull, I am speaking to more and more landlords, be they seasoned professional landlords or more recently first time landlords, as they read reports that the Solihull rental market is doing reasonably well, with rents and property values rising.  Interestingly, one landlord recently asked how much he should be paying per square foot (more of that in a second).

The first thing you have to decide is whether you want great capital growth or great rental yield, as every knowledgeable landlord knows, you can’t have both. Over the last twenty years, property values in Solihull have risen by 152.58%, compared to Greater London’s 436.2%. This has proved that capital growth increases faster in the more expensive South, but your investment money doesn’t go very far, meaning there won’t be as much rental yield from a 1 bed flat in Chelsea (2% per year at best with a fair wind) as a 2 bed semi in Solihull. However, whilst the figure of 152.58% is an average for the area, certain areas of Solihull have seen capital growth much higher than that and others areas much worse (we have talked about those in previous articles).

If you recall in an earlier article, my research reveals that Solihull apartments tend to generate a better yield than houses, probably because several sharers can afford to pay more than a single family. But houses tend to appreciate in value more rapidly and may well be easier to sell, simply because there are fewer being built.

So what should you be buying in Solihull, and more importantly, how much?

• ·         The average apartments in the town are currently selling for approximately £267 per square foot.
• ·         Terraced houses in Solihull are currently obtaining, on average, £233,900 or £268 per square foot,
• ·         An average semi in Solihull is selling for £264,600 (and achieving £270 per square foot). 

These are of course averages, but it gives you a good place to start. In the coming weeks, I will look at rents being achieved on Solihull houses and apartments, and the yields that can be obtained, depending how many bedrooms there are.