Friday 30 December 2016

Falmouth Property Market in 2017 and Beyond


 
 




Just like the leaves on the trees, Christmas has gone and the New Year is virtually upon us. Speak to any local agent and they will tell you the Falmouth property market has a confident feel to it. With the underlying fundamentals of a continued lack of properties being built, a shortage of properties (both in terms of quantity and quality) coming to the market and the continued low mortgage rate environment, the motivation of buyers in general is strong.

 

There are a few potential hurdles coming towards us in the coming months that could affect the Falmouth (and UK) property market. Mrs. May has yet to get her teeth into Brexit negotiations and the jury is still out in respect of the knock-on effect ‘across the pond’ of Donald Trump as the choice of next US President. It has often been said that the US sneezes and we catch a cold…. the questions on everyone’s lips is… is it a cold we are in for or something far worse? Do we need to batten down the hatches or will a flu jab do?

 

Property ownership, whether it’s for yourself as a homeowner or buy to let landlord, is a long-term investment. In fact, focusing on buy to let, a number of landlords who own property in Falmouth have made contact with us recently asking for our thoughts on the future of the buy to let market in Falmouth.  Well, as the Politician Edmund Burke said in the 18th century, "Those who don't know history are destined to repeat it." .. . it is a wise man who delves into the past to get a glimpse of the future.

 

Since the Millennium, the housing market has had everything thrown at it. The recent Brexit, last year’s General Election, the near melt down of the World Economy with the Credit Crunch, The Dot Com boom and bust, the housing market crisis in 2008, the housing boom of 2001 to 2004 ... the list goes on. Here is a graph (courtesy of the Land Registry) of average Property values since the Millennium in the Cornwall.
 

 
 
 
 

 



Even though we had the Dot Com bubble burst in 2000, two years later in January 2002, property values in the Cornwall had risen from £69,500 (in Jan 2000) to £96,900 ... and kept rising to November 2007, when they peaked at £217,000. Then we had the Credit Crunch and property prices continued to fall until February 2009, where they averaged £179,800 ... but look where they are now…  £210,900!

 

The point I am trying to get across is long term future property values are more helpful to landlord investors than the month by month headline grabbing micro movements in the property market.  Look at the graph and you will see the growth in property values is an upward trend BUT, the average darts about as each month goes by.  So don’t watch the property indexes and panic if values drop next month or the month afterwards, because even in the glory days of 2001 to 2004 and 2012 to 2014, without fail, values always dropped slightly around Christmas, but people will always need a roof over their heads, and if they can’t buy and the council aren’t building anymore  … only buy to let landlords can meet that demand. That’s you folk that read this.

 

Falmouth landlords are being hit in the pocket with the new up and coming taxation rules and yes we might have a bumpy ride on the run up to Christmas (because of the points raised earlier), Brexit or no Brexit, but the trend will be a slow and steady upward momentum of property values, demand for rental properties and yields in the Falmouth property market into 2017 and beyond.

 
 

 
 

Friday 23 December 2016

What is really happening in the Falmouth Property Market?


 
Well its been a few months since Brexit and the pattern of life has taken its usual form. We know the winners of TV favourites The Great British Bake Off, Strictly Come Dancing and I’m a (sort of ) Celebrity get me out of here!  Andy Murray wins a BBC Sports Personality of the Year again, and sorry Arsenal fans.... we already know they you are not going to win the Premier League title (again!). The newspapers are returning to their mixed messages of good news, bad news and indifferent news about the Brit’s favourite subject after the weather ... the property market.



The thing is, the UK does not have one housing market. Instead, it is a patchwork of mini property markets all performing in a different way. At one end of scale is Kensington and Chelsea, which has seen average prices drop in the last twelve months by 6.2% whilst in our South West region, house prices are 8% higher (12 months to October). But what about Falmouth?

Property prices in Falmouth are 0.3% lower than a year ago

and 2.7% lower than last month.

So what does this mean for Falmouth landlords and homeowners? Not that much unless you are buying or selling in reality. Most sellers are buyers anyway, so if the one you are buying has gone down, yours has gone down.  If you look hard enough, even in this market, there are still some relative bargains to be had in Falmouth.

However, the most important question you should be asking though is not only is what happening to property prices, but exactly which price band is selling? I like to keep an eye on the property market in Falmouth on a daily basis because it enables me to give the best advice and opinion on what (or not) to buy in Falmouth.

If you look at Falmouth and split the property market into four equalled sized price bands. Each price band would have around 25% of the property in Falmouth, from the lowest in value band (the bottom 25%) all the way through to the highest 25% band (in terms of value).

·        Nil to £160k                       44 properties for sale and 25 sold (stc) i.e. 36% sold

·        £160k to £270k                 48 properties for sale and 59 sold (stc) i.e. 55% sold

·        £270k to £375k                 47 properties for sale and 36 sold (stc) i.e. 43% sold        

·        £375k +                              52 properties for sale and 35 sold (stc) i.e. 40% sold



Fascinating don’t you think that it is the middle Falmouth market that is doing the best and the bottom end doing the worst? Is there any logic to this? We know that the first-time buyer market is fragile locally because of incomes. Are we to surmise too that the traditional buy to let landlords who buy at the lower end have held off buying too? Most certainly.

The next nine months’ activity will be crucial in understanding which way the market will go this year after Brexit ... but, Brexit or no Brexit, people will always need a roof over their head and that is why the property market has ridden the storms of oil crisis’ in the 1970’s, the 1980’s depression, Black Monday in the 1990’s, and latterly the credit crunch together with the various house price crashes of 1973, 1987 and 2008.

Why? Given Britain’s chronic lack of housing demand will prop up house prices and prevent a post spike crash. There is always a silver lining when it comes to the property market!

Notes –

·        House Price changes from the HM Land Registry Statistics for this area.

·        Price Bands – Using Data on what is for sale and SSTC on Rightmove

Thursday 22 December 2016

Merry Christmas and Happy New Year

 
Merry Christmas to all our landlord clients and those that read our blog.
 
We have three further articles lined up over the next couple of weeks.
 
Fingers crossed for a prosperous New Year.
 
 
 
 

Friday 9 December 2016

2322 Falmouth Savers batten down the hatches with low interest rates set to continue into the 2020’s





You might ask, what has the plight of the Falmouth savers to do with the Falmouth Property Market … everything in fact.  Read the newspapers, and every financial wizard is stating that with the decision of the Bank of England’s Monetary Policy Committee in early August to cut the Bank of England base rate to an all time low of 0.25 per cent, savers should prepare themselves for interest rates to stay low well into the early 2020’s.

 
... This isn’t some made up story to capture the headlines of newspaper editors. The yield on 10-year Government bonds has been between 0.61 and 1.5 per cent during this year. This indicates that the money markets currently believe that the Bank of England’s base rate will, on average over the next ten years, be below 1.5% rate they are buying the 10 year bonds at (because they would lose money if the average was over 0.61%). UK Interest rates are going to be low for a long time.

 
For those who have saved throughout their working lives and are looking for ways to maximise their savings, tying their money into property could prove advantageous. As a saver, I did a search of the internet and the best savings rate I could find in recently was a 5 year fixed rate at 2.5% a year with Weatherbys Bank . Your £200,000 nest egg would earn you £5,000 a year – not much! However, on the other side of the fence, growth in Falmouth house prices and buy to let yields have made property investment in Falmouth an appealing option for many. According to research, based on Zoopla house price figures...

 

Average Yield over the last five years for

Falmouth Buy to let property has been 4.6% a year

 

… and average Property Values in over the same period have risen by 18.34%!
 
Using these averages, the Falmouth landlord’s property would be worth £236,680 and they would have received a total of £46,000 in rent – making the total return £282,680. Meanwhile, whilst our 2,322 Falmouth Saver’s, using the average savings rates for the last 5 years, even if they had reinvested the interest, their £200,000 would only be £221,184. The graphical illustration below starkly illustrates the choice and potential difference between sticking your money in a savings pot or inventing in buy to let property.


 

There are risks as well as benefits to buy to let though. We tell it like it is, and investing in buy to let means locking up capital in a property that may fall in value. Another option would be stock market income based investment funds, which are paying around 5%, especially if put your nest egg into a tax free Stocks and Shares ISA.

The other argument is that you cannot buy an unloved ‘stock market income based investment fund’ and set about renovating it and adding value yourself. The investment fund isn’t something that you can touch and feel; it isn’t something tangible…. it isn’t bricks and mortar. This is why, my fellow Falmouth homeowners and Falmouth landlords, is why the love affair of the British and Property will continue.
 
Reference
 
Scottish Widows Savings Survey 2014 – 12% of the population have £50k or more in Savings ie ideal BTL landlords. 55% of population have between £1 and £50k – but most of those 55% savings were under £1000… so the figure in the headline is 12% of your Adult population of your town/city. I specifically removed Children from the figures
 
Average Yield using the Lend Invest Index for your postcode area
 
Growth % in 5 years using the Zoopla AVM model
 
200,000 would only be £221,184 – figures using average Building Society rates since 2011