103 properties have come up for let in the last 31 days in Solihull...

Following on from my recent article about rental values since the recession, (where I’d found that rental values in the city are around 5.6% higher than they were in 2008) I’ve now looked into the forecasts for the next 12-24 months, to decipher if and when landlords should consider price increases on their rental portfolios.

As with all parts of the economy, the rental market is all about supply and demand. On the supply side, 103 rental properties have come up for let in the last 31 days in Solihull. This sounds like a reasonable amount - until you consider there are around 5,242 rental properties in the area. Therefore, only around 2% of the rental stock is coming onto the market each month (the UK average is about 5%).  

So, could it be that the reason for this lack of new rental properties coming on the market is that professional tenants seem to be staying in their properties longer?

With a lack of supply, newer tenants have to pay more to secure the property they want. Poorly maintained homes, which may still retain 70’s décor and green bathroom suites have seen their rents drop. However, swish apartments with all the mod cons and new-build semis are still being snapped up – and tenants are willing to pay for the privilege. In fact, these types of homes have seen rents rise by 1% in a month, which just goes to show that good quality property will always rent the fastest.

Interestingly, looking at property values, the Land Registry has just released their latest set of data. For the most current figures, property values actually remained static in the month, although they are around 3.2% higher than they were a year ago.  When one looks at the regional picture, the West Midlands average rose by 0.2% for the same period.

Looking forward, after considering all the statistics, I still expect sale prices in Solihull to rise by 3% to 5% over the coming 12 months.  Similarly, unless something drastic happens in the economy, the demand for rental property is unlikely to fall any time soon and therefore rental prices will follow suit.

Therefore, if you are a landlord, or are considering becoming one, it would be my advice to spend a little money on redecorating your buy-to-let and / or buying some new furniture to beat the competition. If your property is already in good nick, now might be the time to consider a rent rise – although I’d think carefully before doing so if you’ve got reliable tenants! An extra £25 per month isn’t worth the hassle if you’re replacing great tenants for poor ones.

If you would like further information on the Solihull property market or investing, please email me on jane.morcom@centrickproperty.co.uk . 

What will happen to prices in the second half of 2015?

After the shock of the Conservatives returning to power with a majority at Westminster, all the potential issues and possible uncertainties of a hung parliament has lifted the cloud from the Solihull property market.  There seems to be new signs of life for house prices after a subdued six months.

Against the back drop of Labour’s election promises of rent controls and three year tenancies, some Solihull buy-to-let landlords were waiting to see how these new policies would be implemented before they committed themselves to buying more property for their portfolio. Now that uncertainty has been removed, the long term picture is more positive.

So, with all that uncertainty now removed, where will prices go next?  Well, with inflation at zero and with the money markets happy that David Cameron is still at No.10, the Bank of England has no reason to raise interest rates until 2016 at the earliest. As mortgage rates are at their lowest levels since 2010, landlords with large deposits will now be wooed by the mortgage companies in the coming months with low rates.

Also, over the last few years landlords have benefitted from a booming Solihull job market. Unemployment in the borough has dropped to 1.2% and whilst 894 people were claiming unemployment benefit a year ago, the figure is now around 571. With more jobs and better pay, tenants have been given better spending power and are therefore more willing to pay for good quality Solihull properties, pushing everything northwards.

Some landlords might be nervous about the Tory’s plans for the housing market in the next five years in terms of demand for their rental properties. One of those schemes (which is in the news a lot at the moment) is for Housing Association tenants to have the ‘Right To Buy’ their property. Tenants such as these were never in the private rented sector to start with and therefore will actually increase the supply of properties in the housing stock in decades to come. On the other hand, the government’s ‘Help to Buy Scheme’ has only helped 36 (yes 36!) owners purchase a property since April 2013. Considering 2,358 properties have changed hands in the last year alone in Solihull, I don’t think this scheme made a huge difference to our local property market.

Arguably, the biggest influence, when it comes to tenant demand of rental property going forward, comes from the shift in the mindset and attitudes towards renting itself. Twenty years ago, renters were seen as second class citizens. In Solihull, as in the rest of the UK (apart from Central London), renting continues to offer good value for money for tenants.  If you are an existing landlord in Solihull or thinking of becoming one, then I must suggest you out seek specialist advice and opinion. Like many agents in Solihull, we will happily give you our opinion on the current state of the market and the advantages/disadvantages to investing in the Solihull property market if you pop into our offices. 

Are landlords going to suffer from post-election Blues in Solihull?

With the election now well and truly behind us and the stability of Downing Street secure, average wages are beginning to grow faster than inflation. This is good news for the Solihull housing market, as some buyers may be willing or able to pay higher prices (given the more certain political outlook and attractive inexpensive mortgage rates). However, sellers who think they have the upper hand, due to the lack of property for sale, should be aware that we should start to see an increase in the number of people putting their properties on to the market, giving buyers some extra negotiating power.

At the last election in May 2010, there were 634 properties for sale in Solihull and by October 2010, this had risen to 816, an impressive rise of 29% in five months. An increase in the supply of properties coming on to the market could tip the balance in the demand and supply economics seesaw, thus potentially denting prices. However, as most sellers are also buyers and confidence is high, this means we should see a slight price rise throughout the summer, as demand will continue to outstrip supply.

I mentioned a few weeks ago that property values (i.e. what properties were actually selling for) had dropped by 1.7% in March 2015. Now, new data has been released from Rightmove about April’s asking prices of property in Solihull. It shows that pre-election nerves finally came home to roost in the final weeks of electioneering, with the average price of property coming to market only increasing by a very modest 0.3% (April is normally one of the best months of the year for house price growth).

I am sure our local MP, Julian Knight, would agree that the biggest issue is the lack of new properties being built in Solihull. The Conservative manifesto pledged to build 200,000 discounted starter homes for first-time buyers in the next five years. Seems like quite a lot, so will this solve the problem? Well, if we get our fair share (a big if), that would mean only 74 properties being built in Solihull each year for the next five years, which is not much when you consider there are 40,975 properties in the borough.

Generally, housing is not a normally a big issue for Conservative voters and because London is an increasingly Labour city where the biggest housing issues are found by a country mile, housing supply will likely remain on the ‘to do list’ but it may not get recognition it deserves. Until another political party gets back into power, nothing will seismically change in the property market, thus demand for housing will continue to outstrip supply, meaning property values will increase (good news for landlords). However, as rents tend to go up and down with tenant wages, in the long term, rents are still only 5.65% higher than they were in 2008 (good news for tenants)... with renting everyone wins! 

Solihull Buy To Let – Should you look further afield?

I was at a recent business networking event in Solihull, when a landlord (who it transpired had a couple of Buy to let properties) bent my ear on where the next hot spot town or city is to invest his money in and where the best rental yields are. Now it can be tempting to just look at Solihull when growing a buy to let property portfolio, but there can be big differences in the amount of rental income you receive and how much your property will appreciate by considering other locations in the country.

Now regular readers of my articles of the Solihull Property Blog know of my love of the ‘buy to let seesaw’. On one side of the seesaw is yield and the other capital growth. Landlords should be looking for a high rental yield so that they can comfortably cover any mortgage payments and make some profit from the income return, but you also want the property to rise in value over time so you can get some capital growth when you come to sell. However, high yielding property in say such areas as Kingshurst in Solihull, (so the seesaw arm with yield on it goes up on one side), will suffer from low capital growth (so the other arm with capital growth on the seesaw goes down).  The relationship works in reverse as well, so in such upmarket areas as Knowle, properties offer good capital growth, but at the expense of a decent yield.  

The North East and North West of the UK are landlord magnets for great yields. The average yield in Solihull today is 4.96%, which when you compare with say Hartlepool in the North East, which achieves 7.73% or  9.43% in the Anfield area of Liverpool, doesn’t look too healthy. Now of course, these are only averages and some of my Solihull landlords are achieving 6% to 6.5% on some of their Solihull properties, but at the expense of capital growth. Anyway, after wasting a tank full of petrol up the A1 to Teeside or the M1 to Home of the ‘The Reds’,  that Liverpool property, would have dropped in value by 2.2% in the last 12 months and the Hartlepool property would have dropped by 1.4%.

When you compare the long term house price growth, it gets even worse. Looking at the graph, Since 1995, property values in Solihull have risen by 124.94%,compared with Hartlepool at 21.02% and Liverpool  at 90.11% – it just shows you shouldn’t always chase the yield because of the poor increases in property values in those two places. As I always like to explain to landlords when they either email me, pick up the phone or pop into my offices for a coffee (both my own and even landlords who use other agents (you are all welcome at ours), together with soon to be FTL’s (first time landlords)), a decent yield is important, but when you come to sell your buy to let property it would also be nice to make a decent profit. Any profit you can make when you come to sell it, on a buy to let property is known as the ‘capital gain’ ie capital growth.

At the end of the day, as a Solihull landlord, you want to be making gains from both your rent and house price growth, particularly when you want to sell, because when combined, the rental yield and capital growth, that gives you the real return on your investment. Finally though, do you know Hartlepool and Liverpool as well you know Solihull? Do you know where the good and bad areas are in both those places? Are you happy that it would require you to take a day out of work if there was an issue with your property in the North?  If you can’ t answer yes to all three questions, then maybe you should be considering a closer to home? 

How much of a minefield is the Solihull buy-to-let market?

The buy to let sector in Solihull (and in fact the whole of the Midlands) is doing very well at the moment, but, we warned, it can be a minefield. I could regale you with many stories where investors have got it tremendously wrong, like some modern apartments on the Waterside development in Dickens Heath, that were sold for an eye watering £335,000 in 2008, only to be selling last year for £227,500, a drop of over 32%. It is interesting to note that at that time in 2008 for £335,000, you could have bought a lovely three-bed semi in Knowle or a three-bed detached in Hockley Heath. In hindsight, an apartment for the same price as a decent semi, or nice modern detached house doesn’t quite stack up. 

So what should you buy in our part of the world? One option is Houses of Multiple Occupation (HMOs). Whilst they can be profitable, chiefly in the student market with Birmingham University students, they can make things much more complex and costly, especially with the need for HMO licences etc. Mortgage rates on buy-to-let are really low at the moment and for the right property and person you can get rates below 3.9% if you put down a decent deposit of 25% (although, the best rates are saved for deposits of 40% and higher). As I type this, you can get a 5-year fixed rate buy to let mortgage from the Post Office for 3.65%. It’s also worth remembering that a higher deposit will also ensure you have plenty of equity in the property if the property market stagnates in the future. The important thing to remember is the amount you can borrow is driven by the rental income, so it is vital you can identify a property with a decent yield that lets easily.

Finally though, if are investing so much time and money in building wealth for you and your family, it is equally important for you to identify ways to protect it. Do not forget, if you spend years building a successful property empire in Solihull, when you pop your clogs, your family could face an inheritance tax bill of 40%, which they would have to pay within six months of the death. In a buoyant market, selling in six months is not an issue, but what if the market was like it was in Solihull between 2008 and 2012, when things took seasons to sell, not weeks?! Quite apart from losing nearly half of the assets you built for your family to the tax man, if they had to sell some of your portfolio - possibly at a discount because the taxman wanted his money so quick - it might be wise to consider some life insurance that will offer protection against inheritance tax.

Whilst there are plenty of good advisors in Solihull that can help you with mortgage brokering and life insurance (we aren’t exactly one of those, since our specialty is property), what we can help with is choosing the right property to buy. It’s in our interest to do so, because if we offer the best advice and opinion and you make a decent profit, you might consider (although there is no obligation) to trust us to manage the property too. If you fancy hearing more, email me at jane.morcom@centrickproperty.co.uk .

A slowdown in property sales? Yet house prices are likely to rise again.

Property values in Solihull fell by 1.7% in March. This follows several months of sluggish activity in the property market in the run up to the Election, putting the average price of a property in Solihull at £316,600, 4.5% higher than in March 2014. Despite the not so insignificant fall in March, the figures showed property values in Solihull were still higher in the first quarter of 2015 than in the last quarter of 2014.

Interestingly, the Council of Mortgage Lenders and Estate Agent trade bodies over the last few months have reported seeing a fall in mortgage lending and enquiries from prospective homebuyers. This is important because it comes amid an overall fall in housing market activity. Data from the Land Registry said completed house sales in Solihull in the three months to January 2015, (the most up-to-date figures available) fell by 25.51% compared to the same three month period up to January 2014 (a whole quarter!).

However, I believe that the slowdown in property sales in Solihull is supporting property values, as there is a shortage of houses coming onto the market. Even though in the whole of the first quarter of 2015, property value increases may seem subdued when compared to 2014, let us remember, property values are still rising well above the level of inflation. 

As I have said many times before, the population in Solihull is growing at a much higher rate than the number of properties being built. This increasing demand for a roof over people’s head, which is outpacing the supply of new houses being built in Solihull, is creating a severe imbalance in the housing market, thus making homeownership an ever increasingly distant dream for many potential first time buyers.

In fact, I still maintain the view that house prices are likely to rise by around 3 to 5% in Solihull in 2015, even after taking into account this blip at the start of the year. The reason being is that the rise reflects both strong economic conditions and steady market conditions with (and this is the most important factor) very low numbers of properties on the market. 

Many Buy to Let landlords know that investing in the Solihull property market is a long-term strategy of 10, 20 even 30 years. Governments come and go, but unless Solihull Metropolitan Borough Council start to build hundreds of new properties a year to make up for the shocking lack of supply, Solihull people will always want a roof over their head, and irrespective of which party is in power, if there aren’t any council houses, a demand for rental properties will always remain.

As my existing landlord clients will testify, whether you manage your property yourself, or another agent manages your properties, everyone is always made to feel welcome when they pop in for a coffee at our offices on Solihull high street to discuss anything to do with the property market and how Solihull compares with its closest rival towns. I don’t bite, I don’t do hard sell, I will just give you my honest and straight talking opinion. However, if you are too busy to pop into town, you could always visit my Property Blog www.solihullpropertyblog.com for advice, intelligent commentary and analysis of the Solihull Property market.

An ideal investment property in Solihull...

I have been browsing the property market this morning and have noticed the above property appear on the market. This is a great opportunity for any landlords looking to invest in property. I highly recommend seeing this property for yourself! http://www.zoopla.co.uk/for-sale/details/37066394

This two bedroom, second floor apartment consists of a secure entrance, lounge/ diner, kitchen, en-suite, family bathroom and allocated parking. 

Ideally located within a close proximity to Solihull town centre, with great transport links to Solihull and Birmingham City Centre, this property would be great for business professionals working in the City Centre, wanting to be close to the centre however far enough away to escape the hustle and bustle. 

This property is currently on the market with ourselves with an asking price of £175,000. A property of this standard would achieve an approximate rental income of £700pcm, giving an approximate yield of 4.8%.

If you would like to discuss Buy to Let properties further or would like advise on investing in the Solihull property market, please email me Jane.morcom@centrickproperty.co.uk