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 18^th 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.

 

 

 

 

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

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.

 

 

 

 

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

 

 

 

 

 

 

What will the 0.25% Interest Rate do to the Falmouth Property Market?

 

I had an interesting chat with a landlord from Maenporth who owns a few properties in town. He popped his head in to my office as his wife was shopping in the area (and let’s be honest talking about the Falmouth Property Market is a lot more interesting than clothes shopping!). We had never spoken before (because he uses another agent in the town to manage his Falmouth properties) yet after reading our blog on the Falmouth Property Market, the landlord wanted to know my thoughts on how low interest rate would affect the long term Falmouth property market. I thought I would share these thoughts with you……

 

It has been three months since interest rates were cut to 0.25% by the Bank of England. The Bank believed Brexit could lead to a materially lower path of growth for the UK, especially for the manufacturing and construction industries. You see for the country as a whole, the manufacturing and construction industries are still performing well below the pre credit crunch levels of 2008/09. As a consequence the British economy remains highly susceptible to an 'economic shock'. This is particularly important in Falmouth, because even though we have had a number of local success stories in manufacturing and construction, a large number of people are employed in these sectors. In Falmouth, of the 9,988 people who have a job, 964 are in the manufacturing industry and 639 in Construction meaning (see note 1 below) 

 

 

9.7% of Falmouth workers are employed in Manufacturing

 

and 6.4% of Falmouth workers are in Construction

 

The other sector of the economy the Bank is worried about, and an equally important one to the Falmouth economy, is the Financial Services Industry. Financial Services in Falmouth employ 170 people, making up 1.7% of the Falmouth working population.

 

Together with a cut in interest rates, the Bank also announced an increase in the quantity of money via a new programme of Quantitative Easing to buy £70bn of Government and Private bonds. That is unlikely to do much to the Falmouth property market directly, but another measure also included in the recent announcement was £100bn of new funding to banks. This extra £100bn will help the High St banks pass on the base rate cut to people and businesses, meaning in theory the banks will have lots of cheap money to lend for mortgages. This relaxation on lending on the other hand could have a dramatic effect on the Falmouth property market. One hundred billion pounds is enough to buy half a million homes in the UK! (See note 2 below)

 

It will take until early in the New Year to find out the real direction of the Falmouth property market and the effects of Brexit on the economy as a whole. However, something bigger than Brexit and interest rates is the inherent undersupply of housing (something we have spoken about in our blog and the specific affect on Falmouth). The severe undersupply means that Falmouth property prices are likely to increase further in the medium to long term, even if there is a dip in the short term. This only confirms what every homeowner and landlord has known for decades .. investing in property is a long term project and as an investment vehicle, it will continue to outstrip other forms of investment due to the high demand for a roof over people’s heads and the low supply of new properties being built.

 

 

 

Reference Note

1.     Numbers relating to the people working are based on the 2011 census statistics.

2.     Half million houses is £100bn divided by the average value of a UK property at £260,000 and assuming a £200k mortgage

 

 

 

 

 

New House Building in Falmouth drops by 9.2% in the last year

Let me speak frankly, even with Brexit and the fact immigration numbers will now be reduced in the coming years, there is an unending and severe shortage of new housing being built in the Falmouth area (and the UK as a whole).  Even if there are short term confidence trembles fuelled by newspapers hungry for bad news, the ever growing population of Falmouth with its high demand for property versus curtailed supply of properties being built, this imbalance of supply/demand and the possibility of even lower interest rates will underpin the property market.

 

When the Tories were elected in 2015, Mr. Cameron vowed to build 1,000,000 new homes by 2020.  If we as a Country hit those levels of building, most academics stated the UK Housing market would balance itself as the increased supply of property would give a chance for the younger generation to buy their own home as opposed to rent.  However, the up-to-date building figures show that in the first three months of 2016 building starts were down.  Nationally, there were 35,530 house building starts in the first quarter, a long way off the 50,000 a quarter required to hit those ambitious targets.

 

Looking closer to home, over the last 12 months, new building in the Cornwall Council area has dropped.  In 2014/15, for every one thousand existing households in the area, an additional 8.04 homes were built.  For 2015/16, that figure is now only 7.3 homes built per thousand existing households.  Nationally, to meet that 1,000,000 new homes target, we need to be at 7.12 new homes per thousand, which means Cornwall Council is actually meeting the National target, the problem is the country is only building at a rate of 4.9 for every thousand exiting households – we can’t just rely on little old Cornwall Council to build for the rest of the Country.

 

To put those numbers into real chimney pots, over the last 12 months, in the Cornwall County Council area,

·        1,480 - Private Builders (e.g. New Homes Builders)

·        270 - Housing Association

·        Nil Local Authority

 

I am of the opinion Messer’s Cameron and Osborne focused their attention too much on the demand side of the housing equation, using the Help to Buy Scheme and low deposit mortgages to convert the ‘Generation Rent’ i.e. Falmouth ‘20 somethings’ who are set to rent for the rest of their lives to ‘Generation Buy’.  On the other side of the coin, I would strongly recommend the new Housing Minster, Gavin Barwell, should concentrate the Government’s efforts on the supply side of the equation.  There needs to be transformations to planning laws, massive scale releases of public land and more investment, as more inventive solutions are needed.

However, ultimately, responsibility has to rest on the shoulders of Theresa May.  Whilst our new PM has many plates to spin, evading on the housing crisis will only come at greater cost later on.  What a legacy it would be if it was Mrs. May who finally got to grips with the persistent and enduring shortage of homes to live in.  The PM has already referenced the ‘need to do far more to get more houses built’ and stop the decline of home ownership.  However, she has also ruled out any changes to the green belt policy – something I will talk about in a future up and coming article.  Hopefully these statistics will raise the alarm bells again and persuade both residents and Councilor’s in the Cornwall Council area that housing needs to be higher on its agenda.

9600 People Live In Every Square Mile Of Falmouth – Is Falmouth Over Crowded?

Falmouth is already in the clutches of a population crisis that has now started to affect the quality of life of those living in Falmouth. There are simply not enough homes in Falmouth to house the greater number of people wanting to live in the town.

 

 

 

The burden on public services is almost at breaking point with many parents unable to send their child to their first choice of primary or secondary school and the chances of getting a decent Dentist or GP Doctor Surgery next to nil. (Well that’s what the papers would say)

 

 Let’s look at real numbers......

 

To start with, the UK has roughly 1,065 people per square mile – the second highest in Europe. The total area of Falmouth itself is 2.339 square miles and there are 22,600 Falmouth residents, meaning …

9,600 people live in each square mile of Falmouth, it’s no wonder we appear to be bursting at the seams!

 

 

 

 

… but yet again, newspapers, politicians and property market bloggers quote big numbers to sell more newspapers, get elected or get people to read their blog (I recognise the irony!). A square mile is enormous, so the numbers look correspondingly large (and headline grabbing). Most people reading this will know what an ‘acre’ is, but those younger readers who don’t, it is an imperial unit of measurement for land and it is approximately 63 metres square.

 In Falmouth, only 13.82 people live in every acre of Falmouth … not as headline grabbing, but a lot closer to home and relative to everyday life, and if I am being honest, a figure that doesn’t seem that bad.

Yet, the issue at hand is, we need more homes building. In 2007, Tony Blair set a target that 240,000 homes a year needed to be built to keep up with the population growth, whilst the Tory’s new target since 2010 was a more modest 200,000 a year. However, since 2010, as a country, we have only been building between 140,000 and 150,000 houses a year. In 2016 the total housing deficit stands at 1.2 million homes. So where are we going to build these homes .. because we have no space! Or do we?

Well, let me tell you this fascinating piece of information I found out recently in an official England is the most densely populated major country within the EU.  

all the 20 million English homes cover only 1.1% of its land mass.

That is not a typo, only one point one per cent (1.1%) of land in England is covered by residential property. In more detail, of all the land in the Country -

Residential Houses and Flats 1.1%

Gardens 4.3%

Shops and Offices 0.7%

Highways (Roads and Paths) 2.3%

Railways 0.1%

Water (Rivers /Reservoirs) 2.6%

Industry, Military and other uses 1.4%

 This leaves  88.5% as Open Countryside (and if you think about it, add to that the gardens, which are green spaces, and the country is 92.8% green space)

As a country, we have plenty of space to build more homes for the younger generation and the five million more homes needed in the next 20 years would use only 0.25% of the country’s land. Now I am not advocating building massive housing estates and 20 storey concrete and glass behemoth apartment blocks next to local beauty spots such as Trebah, or Pendennis Point or Kimberley Park, but with some clever planning and joined up thinking, we really do need to think outside the box when it comes to how we are going to build and house our children and our children’s children in the coming 50 years in Falmouth. If anyone has their own ideas, I would love to hear from you.

Source:
1,065 people a square mile is from the Office of National Stats

Occupation Levels from Census

HM Government Report Technical Report of the UK National Ecosystem Assessment 2011

Population Density - Daily Mail Online

http://www.dailymail.co.uk/news/article-2530125/This-worryingly-crowded-isle-England-officially-Europes-densely-packed-country.html

Housing deficit figures mortgage solution

http://www.mortgagesolutions.co.uk/news/2016/07/15/uk-house-build-target-missed-huge-1-2-million/

 

 

 

 

  

 

 

 

 

 

 

Helston – more than worth a look for property investors?

 

In a property investment sense Helston is often overlooked in favour of the larger coastal towns like Falmouth, St Ives and Newquay. This may be because of the wider choice in general amenity as well as a greater opportunity to holiday as well as long term let properties in these coastal ‘hot spots’.

 

Let us not downplay Helston though. There is much to find appeal in this historic market town. It boasts the only military base of note in the County, one of the most popular theme parks in the region as well as a diverse local economy. The schools compare favourably in terms of performance, and it boasts on its doorstep an attractive coastal geography second to none. It is unsurprising therefore that in recent years canny corporates like Sainsbury’s, Tesco’s, Whitbread’s and latterly Premier Inn and Weatherspoon’s have all invested heavily to provide better amenity to the area. They clearly know something which the rest of us should take notice of?   

 

 

House prices have gone up over  the last decade, but increases have been more modest than say Falmouth which is only 10 miles away. Using Zoopla house price statistics for the last 12 months, the average house price in Helston was £246,744. This compared to a heady £312,937 for Falmouth. Looking at more than 800 property sales between the two towns, properties in Falmouth are 27% more expensive than buying in Helston! Although wider statistics don’t exist in the same way for rental properties, we have extrapolated  comparable rental returns from our portfolio of more than a 100 rentals between the two towns. The key statistics are that while prices are 27% more expensive in Falmouth, rental returns are  only 15% greater than in Helston. This would suggest that relative to the traditional investment hotspot of Falmouth, there is good value to be had in investing in Helston.

 

The rental market for two and three bedroom family homes is particularly buoyant. Recent experience have highlighted that several working families are chasing too few family properties. The driving force for this is the familiar tale that working class families on modest incomes, many with zero hour contracts struggle to find the deposits necessary to get a mortgage. Unless lending patterns change, long term letting for many Helston families will be a way of life.

 

Two bedroom properties in Furry Way and Nanscoba Place (see photos above)  currently on the market with Christophers Estate Agents are on for sale at around the £150,000 - 160,000 mark. They will return a rent of £600-625 per month. The equivalent in the Longfield area of Falmouth are on the market for closer to £200,000 and will return £700-725. The gross return in Helston is around 4.7% to 5 % versus 4.35% for Falmouth.

 

Just like the words of the song that celebrates this old town’s most famous day, as a property investor choosing to take the plunge you might just be Dancing here, prancing there,  jigging, jogging everywhere…..

 

What is the impact of Brexit on the property market?

 

 Shortly after this countries decision to exit the EU we wrote in The West Briton about the mass hysteria surrounding the result and its potential impact on the property market locally.  We likened the response to the children storybook character ‘Chicken Lickin’ whose prediction was that the sky would fall in. Although the fallout of the decision to leave, won’t be realised from several months or possibly even years, one thing is for sure - the sky hasn’t fallen and is unlikely to do so either.

 

People have continued to breathe, have a pint, watch Strictly, go on holiday and god forbid even buy and rent houses.

 

There are conflicting forces at play in the housing market. The target of building at least 300,000 houses nationally has not been met with barely more than 200,000 houses being built in the last few years.

 

Mortgage interest rates are at their historical lowest and this has meant that there are some favourable lending deals. This should translate to creating a pent up demand for housing, particularly in Cornwall where there is significant inward migration. However the conflict is in the restriction on lending and 'tough' affordability rules brought in by the EU. More 'responsible' lending has translated into a more restrictive lending regime. This has meant that low income families will find it hard to get on the housing ladder. The irony is that many of these tenants will continue to pay as much in rent as they would with a mortgage!

 

What of the local property market?

 

With sterling  lower than it has been for a decade, there might be some refuge for overseas investors buying on these shores. Similarly for those considering the relative merit of investing in the county as opposed to buying a property in France or Spain, the poor exchange might make them think twice. However given the numbers of these investors the impact either way is hardly likely to be earth shattering locally.

 

Zoopla property statistics for the last three months in Cornwall indicate an average fall in house prices of 0.35% with very little regional variation. With average house prices across the county at £240,000, this is barely a £700 drop off for each sale.

What is perhaps more interesting is the tail off in the number of sales in the last quarter. Of the 8245 house sales in Cornwall in the last year, only 1095 or a paltry 13% of these sales have come in the last three months. In Truro there were 111 house sales and in Falmouth there were only 48 house sales! In the previous quarter (which were slow too), there were 210 and 118 sales respectively for Truro and Falmouth.

 

What do these statistic tell us? Aside from the fact that your shiny suited estate agent was probably asking his mates to stand him a pint at the bar, it indicates that confidence in the property market was dented but not hammered. It clearly indicates that people were holding back from buying properties both before the Brexit referendum and in the months after. However those buyers that did enter the market weren’t exactly bagging themselves a bargain as house prices retained parity.

 

The rental market raced away as it usually does in the Summer months. As a growing agency we experienced early mornings, late nights and a constant frustration that supply of good quality rentals continues to keep up with supply. Hence if you can’t sell your house and realise your asset this way, look to rent it. Rental returns remain strong and there are some decent quality tenants looking to find a home.

 

The next quarter will be interesting. I wonder who is going to win Strictly, will Ross Poldark ever smile and will my estate agent friends actually buy a pint?

 

Property Investment Spot

 

 

                                      Round Ring Gardens Penryn

For Sale through Laskowski & Company at £186,500

 

Click on the link below for full Agents details

http://www.laskowskiandcompany.co.uk/property/699/2-bed-apartment-for-sale-in-penryn

 

This lovely coach-house style apartment was built in 2012 and forms part of the `Strawberry Fields` development

Providing light and spacious accommodation the apartment is well presented and provides two double bedrooms a modern open plan kitchen and sitting room and a pleasant south facing enclosed garden.

Centrally heated and double glazed with a carport and private entrance we believe the apartment will appeal to a discerning investor.

This apartment will achieve a rental figure in the region of £725pcm. This will provide a gross return on investment based on the asking price of 4.6%

 The powers that be at Zoopla suggest that this property has grown in value by 3% a year for the past three years….