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.

58.7% of Solihull Tenants are White Collar Middle Class

With Solihull youngsters not able to buy their own property, my research suggests there is a progressively more important role that the private rented sector has been playing in housing people in need of a roof over their head. Especially at a time of increasing affordability problems for first time buyers and growing difficulties faced by social housing providers (local authorities and housing associations) in their ability to secure funding from Westminster and then compete against the likes of the Crest Homes  and David Wilson Homes of this world to buy highly priced building land.

Renting isn’t like it was in the 60’s and 70’s, where tenants couldn’t wait to leave their rack-rent landlords, charging sky-high rents for properties with second world war wood chip wallpaper, no central heating and drafty windows. Since 1997 with the introduction of buy to let mortgages and a new breed of Solihull landlord, the private rented sector in Solihull offers increasingly better quality accommodation for younger Solihull households.

So whilst I knew in my own mind that the type and class of tenant has improved over the last 20 years, I had nothing to back that up ... until now. According to some detailed statistics from Durham University just released, for the Solihull Metropolitan Borough Council area, the current situation regarding social status of tenants shows some very interesting points. Using the well known Demographic ABC1 grade classifications which refers to the social grade definitions.

Of the 12,277 tenants who live in a private rented property in the Solihull Metropolitan Borough Council area, 25.98% of those tenants are classified in the AB category (AB Category being higher and intermediate managerial / administrative / professional occupations), compared to 31.55% owner occupiers who own their property without a mortgage or 3.49% who rent their property from the local authority.

Looking at the C1’s (C1’s being the supervisory, clerical and junior managerial / administrative / professional occupations), of the already mentioned 12,277 tenants in the area, an impressive 4,028 of them are considered to be in the C1 category. Again, when compared with the owner occupiers who own their property without a mortgage, that figure stands at 32.22% and 18.53% who rent their property from the local authority.  So, if we use the conventional measurements recorded by the white-collar “ABC1” i.e. middle class ….This means 58.79% of tenants are considered middle class in Solihull.

I could go through all of the social categories through to ‘E’, but I don’t want to bore you with too many numbers. The fact is that private tenants are moving up the social ladder and whilst back in the 60’s and 70’s, the private rented sector in Solihull (and the rest of the UK) has customarily been viewed as a temporary tenure for 20 somethings before they bought a property, the increase in renting in Solihull may be a reflection of increasing difficulty for this group in accessing other tenures, but may also be a reflection that people nowadays choose to rent long term instead?

Solihull Landlords need to be aware that tenants now demand more from their properties, the agent and their landlord and whilst affordability for first-time buyers and tighter controls on lending may mean that potential first-time buyers are in the private rented sector for longer, they will still pay ‘top dollar’ rent for a ‘top dollar’ property.

962 Solihull Properties lie empty– An injustice for the 8,268 people on the Solihull Council House Waiting List?

Easy problems should have easy solutions  - shouldn’t they?

Problems like Solihull’s housing crisis, where we have a rudimentary numerical problem of too few homes for too many people ... the answer is clearly to build more property in Solihull  but that, unfortunately for those desperately seeking to purchase or let a property, takes a lot of time and huge amounts of money. So what about other solutions?

The most recent set of figures from 2015 state that there are 962 empty homes in the Solihull Metropolitan Borough Council area. So it begs the question, why not put them back into the system and help ease the Solihull housing crisis? There are reportedly 8,268 Solihull households on the Council House list waiting for council houses. Surely, we can undoubtedly all agree that property left empty for years isn’t morally right with the burgeoning Council House waiting list, also not to mention the issue of homelessness.

But a different story emerges when you look deeper into the numbers. Of those 962 homes lying empty, only 114 properties were empty for more than six months. The local authority has to report a property being empty, even if it’s only for a week. So many of the Solihull properties are either awaiting new homeowners or, in the case of rental properties, new tenants. Also most certainly, some properties are being refurbished and renovated, while other properties have homeowners who are anxious to sell but cannot find a buyer.

And this is perhaps even more interesting. Of the 114 long-term vacant properties (those empty more than six months), 104 belong to the council. However, before we all go Council-bashing, there is evidence that suggests these empty council houses may be in need of so much restoration that it’s not worth the Council’s while to do and are in the roughest parts of the council estates, they are properties that even the Council find difficult to fill.

The fact is that the number of genuinely long term empty properties is only a tiny drop in the ocean of the 86,056 properties in the area covered by Solihull Metropolitan Borough Council and even if every one of those empty homes were filled with tenants tomorrow, it would only meet a small fraction of Solihull housing needs.

So what does this mean for all the homeowners and landlords of Solihull? Well it means with demand being so high for rental properties, the certainty of the rental market growing is inevitable because young people cannot buy and councils don’t have the money to build new council houses. This in turn bolsters property prices as landlords continue to buy at the lower end of the market which in turn sustains the rest of the market as those sellers move up the property ladder, releasing others in turn to buy on again.

These are interesting times in the Solihull property market!

Brexit and Solihull Property market – 20% more properties on the market

April Fools Day was no joke for some landlords, as they rushed their buy to let property purchases through to complete by the end of March, in order to beat the extra 3% stamp duty George Osborne was imposing on second homes after the 31^st March 2016. Speaking to fellow property professionals in Solihull we have all noticed following the increase in sales going through in March, demand to buy in April and May from landlords has eased.

Then we have the Brexit issue, which is also having a tempering effect on the Solihull property market and whilst an exit will have an effect, it won’t be the end of the world as some commentators are suggesting. In an article I wrote previously, I wrote about the growth rate of Solihull property values and whilst the rate of growth is slowing, Solihull property values are still 6.4% higher year on year. Albeit the growth rate month on month has started to moderate when compared to the heady days of 2014 and 2015. Interestingly a very recent members survey of the Royal Institution of Chartered Surveyors states that only 17% of members believed property values would increase over the next Quarter compared to 44% at the end of 2015.

In the B92 postcode, which mainly comprises of Olton, Elmdon, Bickenhill and Hampton-in-Arden, there were 224 properties for sale in December. In January, February and March, 261 properties came onto the market in the postcode district, meaning by end of the first Quarter, there were 271 properties available for homeowners and landlords alike to buy in B92.These figures are mirrored in neighboring postcodes throughout the Solihull area.

I believe this easing of the Solihull property market is a good thing, as investment landlords won’t have to over the odds to secure a property because of the reduced competition. You would expect this easing to be bad news for the 101,762 Solihull homeowners but nothing could be further from the truth. The majority of homeowners that move, move up market, (i.e. from a flat to terrace/town house, then a semi and then detached), so whilst last year you will have achieved an excellent figure for your property, you will have had to have pay an even higher price to secure the one you wanted to buy. This illustrates the swings and roundabouts of the Solihull Property Market!

However, all the signals suggest that whatever the aftermath of the approaching EU referendum, in the long term the disparity between demand for Solihull property and the supply will still exercise a sturdy and definitive influence on the Solihull property market. It would surprise me that if by 2021, whichever way we vote in late June, assuming we don’t have another credit crunch or issues like a major world conflict, property prices will be between 20% to 22% higher than they are today.