What will the General Election do to 6,180 Falmouth Home Owners?

 

There are 9895 households in Falmouth. Of these 3,585 homes are owned without a mortgage and 2,595 homes have a mortgage on them.

Many homeowners have made contact asking what the General Election will do to the Falmouth property market?  The best way to tell the future is to look at the past.

 I have looked over the last five general elections and analysed in detail what happened to the property market on the lead up to and after each one. Some very interesting information came to light.

 Of the last five general elections (1997, 2001, 2005, 2010 and 2015), the two elections that weren’t certain were the last two (2010 with the coalition and 2015 with the largely unexpected Tory majority).

Therefore, I wanted to compare what happened in 1997, 2001 and 2005 when Tony Blair was almost guaranteed to be elected/re-elected against the last more close-run elections of 2010 and 2015 ... in terms of the number of houses sold and the prices achieved.

Look at the first graph below comparing the number of properties sold and the dates of the general elections

 

It is clear, looking at the number of monthly transactions (the blue line), that there is a certain rhythm or seasonality to the housing market. That rhythm/seasonality has not changed since 1995 (seasonality meaning the periodic fluctuations that occur regularly based on a season) For instance you can see how the number of properties sold dips around Christmas, rises in Spring and Summer and drops again at the end of the year.

To remove that seasonality, I have introduced the red line. The red line is a 12 month ‘moving average’ trend line which enables us to look at the ‘de-seasonalised’ housing transaction numbers.

The yellow arrows denote the times of the general elections.

It is clear to see that after the 1997, 2001 and 2005 elections, there was significant uplift in the number of households sold, whilst in 2010 and 2015, there was slight drop in house transactions (i.e. number of properties sold).

In plain English, it seems to follow that a landslide or clear election result, tends to translate to a more confident market and one where properties sell quicker and in greater volume. Anything less than a clear victory appears to result in a less confident post-election sales environment.

Next, I wanted to consider what happened to property prices. In the graph below, I have used that same 12-month average, housing transactions numbers (in red) and yellow arrows for the dates of the general elections but this time compared that to what happened to property values (pink line).

 

There is no discernible pattern of increasing house prices in the 12 months following an election. In 1997 and 2001 they did. In 2005 they plateaued. In 2010 they fell away. In 2017 they raced away. The wider economics are more at play perhaps than the politics.

What one can read into both graphs is that while an election might help you sell (more transactions taking place), it does not necessarily mean you will sell for more. 

So finally, what does this mean for the landlords of the 2,054 private rented properties in Falmouth?

Well, as I have discussed in previous articles (and just as relevant for homeowners as well) property value growth in Falmouth will be a little more subdued in the next few years for reasons other than the general election.

The growth of rents has taken a very slight hit in the last few months as there has been a slight over supply of some types of rental property in Falmouth. Much of this is due to the seasonal nature of the rental market in Falmouth particularly between November and the beginning of March. During those times Falmouth landlords need to be realistic with their market rents.  Once the winter let season finishes and holidaymakers arrive for Easter those displaced tenants fuel the demand and upward rental cycle until the reverse happens at the end of the season. Twas ever thus here in this part of Cornwall

In the long term, as the younger generation still choose to rent rather than buy ... the prospects, even with the changes in taxation, mean investing in buy-to-let still looks a good bet. Look at the pink line since 1995. At the risk of sounding like a broken record.. where else are you going to place your money – stock, shares, savings accounts or bricks and mortar? Naturally you can gauge our response to that as Landlords ourselves!

 

If you want to read more about the Falmouth property market – then please visit the Falmouth Property Guru for informed comment and articles not about us or our business but issues and items that we believe are relevant for our fellow Landlords.

Should you still be investing in Falmouth Buy To Let?

If I were a buy to let Landlord in Falmouth today, I might feel a little bruised by the assault made on my wallet after being ransacked (and continuing to be so) over the last 12 months by HM Treasury’s tax changes on buy to let. To add insult to injury, Brexit has caused a tempering of the Falmouth property market with property prices not increasing at the levels we have seen in the last few years.

 

Could we indeed see a very slight drop in property prices this year?

 

Falmouth Town Councils bid to introduce (after mid-June) licencing of properties without an existing history of HMO letting in Falmouth is surely likely to have an impact on values of student let properties for example. This is because new Landlords will be cautious over buying a property that does not have a history of HMO letting. It is not a given that they will be granted a licence and will therefore hold off buying properties for HMO letting. Conversely a property with a history of letting might appear to be an even more valuable asset, if the granting of licences is restricted. Watch this space! 

 

https://www.cornwall.gov.uk/housing/private-sector-housing/house-in-multiple-occupation/article-4-directive/

 

There are some positives of falling house prices.

 

If Falmouth property prices do drop, this might encourage first time buyers back into the market. This will help the development of sales chains. After all property sales are reliant on new entrants at the bottom end of the market to feed the chain above. Putting it simply for many, we cannot buy unless we sell first.

If prices cool, yields will rise. This in turn will also make it easier to obtain a buy to let mortgage. If property values come down enough, that might persuade landlords to add to their portfolio. These are likely to be marginal things for landlords but nonetheless positive.

Rental demand in Falmouth will remain solid. This is reinforced by a growing sense of the way many young people view their ‘property futures’.

 I have just come back from a visit to my relations after a family get together. I was speaking to a young couple, both are in their mid/late twenties, both have decent jobs, and they rent. They are perhaps typical of ‘generation rent’. Conversations about the possibility of one day being able to buy their own homes bores them. Not because they don’t harbour a desire to be a homeowner but because they see the dream as a hopeless one too distant to contemplate.

 Firstly, they don’t want to put cash into property, they would rather spend it on living and socialising, by going on nice holidays and buying the latest tech and gadgets. They want the flexibility to live where they choose and finally, they don’t like the idea of paying for repairs. All their friends feel the same. Looking through the lenses of a forty something should I be surprised that buying a house is just not top of the list for these youngsters?

Falmouth - Accommodation Type and the Number of Occupiers
Owned outright - Falmouth	Owned with a mortgage - Falmouth	Shared ownership (part owned and part rented) - Falmouth	Social rented (aka Council Housing) -  Falmouth	Private rented - Falmouth	Living rent free - Falmouth
6,628	7,227	137	3,237	5,171	284
29.2%	31.9%	0.6%	14.3%	22.8%	1.3%

 

With nearly 23% of Falmouth people already in rented accommodation (and set to grow) now might just be a good time to buy property in Falmouth. After all what else are you going to invest in?  Give your money to the stock market run by sharp suited city whizz kids? A holiday of a lifetime in North Korea perhaps?  Maybe a donation to your favourite political party?

 

Nothing out there is as good as bricks and mortar!

 

 

 

OAP Renters make for good tenants!

 

Recent statistics published by the Office of National Statistics show that there are 267,704 private rented households in the Country that are occupied by people aged 65 and older. This means 4.39% of OAP’s are living in private rented property. There are of course many more than are living in council rented or private housing association rentals.

 

It got me thinking two things. How many of these OAP’s have always rented and how many have sold up and become a tenant?  In retirement, selling up could make financial sense; after all it potentially allows them to liquidate the equity of their main home to enhance their retirement income.  I wanted to know why these older people rent and whether there was opportunity for the buy to let landlords of Falmouth? This was particularly important since our experience of retired private renters is that they make fantastic tenants.

 

The Prudential published a survey recently that said nearly six out of ten OAP renters had never owned a home.  Two out of ten OAP renters were required to sell up because of debt, just about one in ten OAP renters sold their property to use the money to fund their retirement and the remaining one out ten OAP renters, rented for other reasons.

 

Funding retirement is important as the life expectancy of someone from Falmouth at age 65 (years) is 19.4 years for males and 21.4 years for females (interesting when compared to the National Average of 18.7 years for males and 21.1 years for females).  The burdens of financing a long retirement are being felt by many mature people of Falmouth.  The state of play is not helped by rising living costs and ultra-low interest rates reducing returns for savers.

 

So, what of Falmouth?  Of the 3,028 households in Falmouth, whose head of the household is 65 or over, not surprisingly 2,338 of households were owned (77.21%) and 478 (15.79%) were in social housing.  However, the figure that fascinated me was the 131 (4.33%) households that were in privately rented properties.

 

Although a small figure, anecdotal evidence from talking to my team and other Falmouth property professionals suggests this figure is rising.  Putting it plainly more and more Falmouth OAP’s are considering selling their homes and renting something more manageable, allowing them to release their equity.  This equity can be gifted to grandchildren (allowing them to get on the property ladder), invested in plans that produce a decent income at the same time as allowing them to live the life they want to live. With early planning it reduces the reality of money earned during a lifetime of working going to the state to fund a care home. 

 

These Falmouth OAP renters know they have a fixed monthly expenditure and can budget accordingly with the peace of mind that their property maintenance and the upkeep of the buildings are included in the rent.  Many landlords will also include gardening in the rent!


Falmouth landlords should seriously consider low maintenance semi-detached bungalows or apartments close to doctor’s surgeries, bus routes and amenity as a potential investment strategy to broaden their portfolio.  Get it right and you will have a wonderful tenant!