Housing Supply and Demand Fundamentals;

 

Property prices were at the forefront of the EU debate in the run-up to the referendum, with the former Chancellor George Osborne claiming that the value of homes in the UK could fall by as much as 18% following a Brexit vote. Based on the average price of a home in the UK, this equates to a fall in value by more than £50,000! A scare tactic we think, and rather bold given that there is this rather severe housing shortage.

 

The office for national statistics recently forecast that the number of households will rise by 23% to 28 million by 2039. This is equivalent to a rise of 5.3million, or 210,000 households a year.

 

Let’s just think re those statistics, 210,000 households per year, and we then get an understanding of the housing crisis facing Theresa May and her new government.

 

The growth in households outpaces the growth of the population, which is expected to increase by 16% over the same period. The balance of the increase is due to a rising number of households as the country trends towards smaller household sizes.

 

The strongest growth rates are expected in London but outside London and the South East growth hotspots include Corby (39% increase in households by 2039), Charnwood in Leicestershire (31%) and Leicester (29%); these are amongst the highest in the country.

 

This just shows the level of DEMAND for housing, and the scale of the challenge for the house building industry. Please note that last year there were just 160,000 new homes built. The Government’s target is 200,000 new homes a year and according to a new report from the House of Lords Economic Affairs Committee 300,000 new homes a year are needed just to meet the existing demand for housing in this country.

 

You would think housing output would therefore be rising in 2016 but this has fallen in every month this year apart from February, and the signs are that development levels could fall even further in the coming months given Brexit uncertainty.

 

Overall, the UK has missed its house building targets by a staggering 1,199,180 since 2004, recent figures from Yorkshire Building Society revealed.

 

From an investor’s perspective the signs are clear; DEMAND far outweighs supply and basic economics dictates that this will lead to increasing prices; be it house prices or rental values; both having a long term positive impact on investor’s returns. Meanwhile SUPPLY seems constrained and likely to remain increasingly so throughout 2016.

 

Good, solid returns in the Peterborough and Kettering ‘Buy to Let’ market:

With average net returns of 6% +, we focus our attention this week on the busy Peterborough and Kettering markets.

 

We have a great deal of experience in these areas and both enjoy strong rental demand. Combine this with current and future infrastructure we foresee good potential capital appreciation which makes them an attractive area for investment.

 

If you are a first time or experienced investor and would like to discuss these or indeed any other property you might be considering, please do contact us.

 

PETERBOROUGH

 

Breymere Road, Hampton, Peterborough

Rightmove Link: http://www.rightmove.co.uk/property-for-sale/property-41603292.html

Breymere     Breymerekit

An excellent modern apartment in a very sought after location with strong demand from professional city tenants. If secured for around £120,000, we’d expect to achieve a monthly rental of £725.00 giving an excellent potential return of nearly 7.25%!

 

Old Baily Road, Hampton Vale, Peterborough

Rightmove Link: http://www.rightmove.co.uk/property-for-sale/property-42340413.html

OldBaily     OldBailykit

Nice looking apartment block and again a sought after location attracting a more professional tenant. Assume a purchase of around £122,000, we’d achieve a rental of at least £700.00 giving another potential attractive return of 6.89%

 

Lornas Field, Hampton, Peterborough

Rightmove Link: http://www.rightmove.co.uk/property-for-sale/property-41329782.html

Lornasb2l      Lornasb2lk

We currently manage a few properties in this area and we’ve always had a good stream of quality tenants. This property does look as if it needs some minor updating but assume a purchase can be secured for say £150,000 we’d achieve a rental of £725pcm seeing a potential yield of nearly 6%

 

KETTERING

 

Redgrave Close, Kettering

Rightmove Link: http://www.rightmove.co.uk/property-for-sale/property-59143631.html

Redgrave      RedgraveL

A well presented modern house in a popular area of Kettering and close to amenities, business and schools. Secured for £145,000, this property would rent for £695-725pcm and with it just short of a potential 6% net yield.

 

Nelson Street, Kettering

Rightmove Link: http://www.rightmove.co.uk/property-for-sale/property-58189583.html

Nelson      NelsonKit

Traditional town centre property, close to all amenities and always a solid renter. Seemingly good value and maybe worth an offer but if secured for the asking price of £139,995, we’d achieve a monthly rental of £695.00 with a net return of 5.8%

 

OAKHAM

 

Dawson Court, Oakham

Rightmove Link: http://www.rightmove.co.uk/property-for-sale/property-57842399.html

Dawson      DawsonKit

This 4 bedroom property has just caught our eye. It’s a modern 4 bedroom house in a small development in Oakham town centre. An ideal buy to let opportunity with strong tenant demand and good capital growth potential. Advertised with an attractive asking price of £150,000, we’d let this property for £750pcm giving an excellent return for Oakham of nearly 6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PROPERTY POST BREXIT:

The result was a shock, the shock waves have spread. Everyone has an opinion or an educated guess on what will be the repercussions, here are ours;

 

STOCK MARKET: The stock market has seen exceptional volatility. This reinforces the case for real estate investment, property is not a volatile asset class, in times of uncertainty there tends to be a flight of capital to tangible assets like property which provide long term income stability. Real estate is an attractive asset class in times of volatility.

 

CURRENCY: The £ has devalued considerably against both the Euro and $. The result is that property in the UK, as of today, is 20-30% cheaper than it was last week for international investors. The UK market is attractive to international investors.

 

INTERNATIONAL INVESTMENT: Given the above favourable forex discount, international investors will continue to buy property both in London and in the wider UK market. Our reputation as an aspirational, cultural, and educational centre is unchanged. Our rule of law and our strong title of property ownership still prevail. All these factors are unaffected by Brexit. The dramatic drop in the value of the UK pound will alert many shrewd international property investors. The long term attraction of UK residential market remains unchanged. 

 

WILL INTERNATIONAL INVESTORS THINK IT RISKY TO INVEST IN UK PROPERTY? We would argue not. Indeed, whilst there is uncertainty and challenges in the UK now, it is very obvious there will also be significant challenges in the rest of the European bloc; and indeed the UK may be a good diversification of assets outside of Europe. 

 

THE ECONOMY: In the longer term, it is our view that the trajectory of the UK and the global economy will not be influenced significantly by this vote. Early indications are that the fall in the pound’s value, as well as the stock market, could very well lead to a technical recession, higher unemployment, which in turn may result in a cut in interest rates and possibly even further quantitative easing. Property will benefit from QE and continued low or lower interest rates.

 

HOUSE PRICES WILL NOT CRASH: There may be some small weakness in prices over the next 3-6 months. However, this will be from forced sellers and not widespread. We have low interest rates, good mortgage availability and an on going shortage of new supply; all factors which will prevent a crash. The general housing shortage means that prices will rise in the medium to long term. Short term opportunity, medium to long term remains sound.

 

HOUSE PRICES IN THE MEDIUM TERM: Longer term housing market demand will continue to increase until we actually leave the EU, as immigration is likely to continue especially in the run up to any potential tightening of border controls. As house building is still low compared to the UK’s needs, pressure on prices from an increasing population will continue. 

 

NUMBER OF TRANSACTIONS: The number of transactions will be low; people who were thinking of buying are likely to put their plans on hold until at least September to see how EU and UK politicians react to the result. Transaction levels in London will certainly drop; the capital has always been far more politically sensitive than the rest of the UK.

 

THE LETTINGS MARKET: This should become stronger as more potential homeowners decide to rent instead of buy, swelling tenant demand. At the same time as the Government has tightened up on Buy to let rules; such that the supply/demand imbalance becomes even greater and new housing supply will likely fall. This will mean rents will increase over the next 12 and 24 months. Strong lettings market with rising rents.

 

INTEREST RATES: There seem to be 2 differing views; either they go down as the Bank of England offers support stimulus and tries to minimise any drop off of economic activity; indeed the Governor has said as much himself. Or those that believe rates need go up as a weaker currency brings about inflation. Our view is that rates will remain unchanged or fall, but are unlikely to go up in the next 6-12 months. Low interest rates to continue. 

 

NEW HOUSING SUPPLY: There will be less supply, making it much harder for the government to achieve its target of building 1m new homes by 2020. This will add to the supply-demand imbalance, placing upward pressure on house prices and rental values in the longer term. Supply constrained.

 

CONCLUSION: There will be plenty of challenges in the short term, and certainly a 12+month period of uncertainty.

 

We would strongly urge investors to look through this period of uncertainty and focus on the long-term opportunity.

 

Like it or loathe it, we have every reason to be confident about the long-term success of the property market. We are an economic powerhouse and we will continue to be a magnet for investment.

 

The investment opportunities in Rutland, Lincolnshire, Northamptonshire and Leicestershire are compelling. Please do talk to our staff in Kettering, Oakham or Stamford to receive our recommendations.

Buy to Let update;

The chancellor’s aim was to take some heat out of the property market by introducing new tax measures on the buy to let sector.

 

This strategy already seems to be working with a lull in the market now after the initial rush by investors to complete their purchases at the end of March before increased stamp duty.

 

This is a lull in transactional volume, not a drop in prices.

 

So to remind ourselves of the key changes;

 

  • Stamp duty Surcharge of 3% on any investment or second property
  • Plans to cut tax relief on mortgage interest
  • Bank of England consulting on new affordability checks despite the fact interest rates are at all time lows.
  • Interest cover ratios (the means of working out how much an investor can borrow) are calculated at a stressed interest rate. This is so that any shock of interest rate rises can be absorbed. The recommended rate is 5.5%+ and there may be a push to increase the interest cover ratio from a minimum of 125% to 145%.

 

So what does all this mean to the investor?

 

  • It means that typically higher deposits will need to be paid (as loan sizes are constrained).
  • It means that investors are more likely to generate a positive cash flow in areas where values are lower and yields higher.
  • It means a shift from London and the South East to Midlands and North of England
  • It means for many that they will not be investing near their homes, but needing to invest further away.

It is therefore imperative that the right advice is sought and the right managing agent is selected.

 

Importantly for the East Midlands and the local markets we cover in Leicestershire, Northamptonshire, Lincolnshire and Rutland; it will mean new investors and investment into the region.

 

Investors from London and the South East are increasingly focusing on more affordable areas to ensure their cash flow on property investment remains positive. Any properties that are well located, in decent condition and priced at £150,000 or less are likely to see strong investor demand.

 

Please do speak to any of our team to discuss buy to let opportunities further and hear what we are recommending in the local markets.

‘Buy to Let’ recommendations for this week:

Here’s our pick of ‘buy to let’ recommendations for this week. As always, we try to focus on properties with a mix of good yield (for the area), potential long term capital growth and of course within locations where we know that rental demand is strong. If you are a first time or experienced investor and would like to discuss any of these or indeed any other property you might be considering, please do contact us.

 

1. Carnegie Road, Wittering, Nr Stamford.

rightmove link;-  http://www.rightmove.co.uk/property-for-sale/property-58474643.html

carnegie

This property looks in good order throughout and being located between Stamford and Peterborough, will always offer a good, solid rental return as well as a steady level of capital growth.

Asking Price: £135,000

Potential Rent: £575pcm  

Yield: 5.11%

 

 

2. Ladywell, Oakham, Rutland.

rightmove link;-  http://www.rightmove.co.uk/property-for-sale/property-38657610.html

Ladywell1

A well presented flat in a very popular location close to the town centre. Tenant currently in situ but the rental demand for this property will always be strong. This area has also proved to deliver steady capital growth over the years.

Asking Price: £117,500

Current Rent Paid: £495pcm

Current Yield: 5.06%

 

 

3. Coltsfoot Drive, Bourne, Lincolnshire

rightmove link;-  http://www.rightmove.co.uk/property-for-sale/property-54111319.html

colt

You’ll have to be quick on this one as it’s a repossession and an offer has already been submitted. Good location, great rental potential and an opportunity to purchase below market value!

Possible Purchase Price: £160,000

Potential Rent: £725pcm minimum

Potential Yield: 5.44%

 

 

 

 

Pick of this weeks ‘buy to let’ opportunities:

Here’s our pick of this weeks ‘buy to let’ opportunities currently for sale locally. As always, we try to focus on properties with a mix of good yield (for the area), potential long term capital growth and of course within locations where we know that rental demand is strong. If you are a first time or experienced investor and would like to discuss any of these or indeed any other property you might be considering, please do contact us.

 

1. Grampian Way, Oakham, Rutland

http://www.rightmove.co.uk/property-for-sale/property-58125428.html

GrampianWay

A great property in seemingly excellent condition and an ideal buy to let investment. Close to both primary and secondary schools and within easy reach of the town centre this property will always enjoy strong rental demand.

Asking Price: £158,950

Potential Rent: £575/95pcm

Yield: 4.34%

 

2. Burley Road, Langham, Rutland

http://www.rightmove.co.uk/property-for-sale/property-41648424.html

brigginswalk

This lovely looking cottage in located in one of Rutland’s most popular villages and having just been completely refurbished could be a great property investment. The village has great amenities and is close to Oakham itself.

Asking Price: £134,950

Potential Rent: £525pcm

Yield: 4.67%

 

3. Nelson Street, Kettering, Northamptonshire.

http://www.rightmove.co.uk/property-for-sale/property-41445039.html?premiumA=true

Nelson St

A well presented terraced house in a popular location within easy reach of the town centre, main line railway station and amenities. Good value and this property will appeal to a more professional tenant.

Asking Price: £125,000

Potential Rent: £625pcm

Yield: 6%

 

4. Willow Road, Stamford, Lincolnshire

http://www.rightmove.co.uk/property-for-sale/property-53099776.html

Willow

A modern terraced house in a highly sought after location within Stamford and an excellent buy to let opportunity given the demand for professional lets in this area. Not a bad return also for Stamford!

Asking Price: £129,995

Potential Rent: £500pcm

Yield: 4.6% 

 

 

 

Our ‘buy to let’ recommendations for this week:

1. Drift Avenue, Stamford.

http://www.rightmove.co.uk/property-for-sale/property-53064880.html

 

 

Drift

A good, solid rental investment given its location in being close to the college, hospital and an easy walk into town. Currently tenanted and so immediate income coming in. £595pcm sees a fair return for the area of 4.53%

 

2. Wreake Walk, Oakham

http://www.rightmove.co.uk/property-for-sale/property-59167220.html

 

wreake

Another ideal ‘buy to let’ investment, again popular with both young families and professionals as close to primary schooling and an easy walk to the town, railway station and other amenities. The selling agents describes the property as having recently undergone refurbishment so should be ‘ready to go’. A monthly rental of £595 would see a return of 4.53%. 

.

3. Lamberts Place, Stamford

https://www.taylorwimpey.co.uk/find-your-home/england/lincolnshire/stamford/lamberts-place

.

Lamberts

 

This new development has just recently been released and is generating a lot of interest from property investors. We’ve appraised the whole development and current returns range between 4 – 5%. The rental demand for these properties will be extremely high and long term capital gain, as with all Stamford properties, will prove to be strong.

Investment within this particular development is highly recommended.  

 

We always keep an eye on the local markets for attractive ‘buy to let’ investments available for sale with the areas estate agents. We try to focus on properties with a mixture of good yield (for the area), potential long term capital growth and of course within areas where we know that rental demand is strong. If you’re a first time or experienced investor and would like to discuss any of these or indeed any other property you might be considering, please do contact us. 

 

 

Reasons to invest in East Midlands property and not London:

The East Midland property market benefits from:

 

  • Fewer international investors seeking a safe haven (who have driven up prices disproportionately in London)
  • Fewer buy to let investors relative to the housing stock
  • Greater affordability; most importantly
  • Less affected by international factors; foreign exchange prices, international economics all affect London more than the regions
  • More strongly related to the UK economy; more solid foundations.
  • Wage growth and decreasing unemployment:
  • Government stimulus: help to buy scheme set to continue to 2020

May be the growth in house prices in the East Midlands has been slower than in London but it is more sustainable growth which is a good thing. This is why we and other respected commentators expect price rises of around 20% by 2020.

 

Combine that with an annual recurring rental yield of 7% gross or 5% net and top it up with some expected rental growth of 2-3% per year and you can see why we recommend ‘buy to let’ in the East Midlands.

 

map-of-uk

 

Do contact us in one of our offices in Kettering, Northamptonshire OR Oakham, Rutland OR Stamford, Lincolnshire to discuss investment opportunities in these areas and the wider area.

Congratulations to the Foxes:

Leicester City FC’s unprecedented Premier League title win could bring a £150m boost to the club, a new report has claimed.

 

th16N75O92

 

The Foxes were crowned champions for the first time in their 132-year history last night (2 May 2016) after Tottenham Hotspur drew 2-2 with Chelsea at Stamford Bridge.

 

According to sports and entertainment market research group Repucom, the victory will bring in Premier League prize money, Champions League participation fees and increased match day revenues from ticket and corporate sales.

 

Spencer Nolan, head of consulting at Repucom UK and Ireland, also predicted that European football would bolster Leicester’s global fan base. “While it is too early to really evaluate the rapidly growing fan bases we are starting to see across Asia for example, social media provides us an opportunity to start to quantify this surge,” he said. Cash generated from sponsorships are also likely to increase along with revenue from match days.

 

Leicester’s mayor Sir Peter Soulsby hailed the Foxes’ Premier League victory. He said: “What a team, what a triumph, what a day. The whole of Leicester is bursting with pride thanks to our fantastic football team, and our congratulations go out to all concerned. Over the past year Leicester City FC has shown the world what can be achieved through great teamwork, determination and self-belief. Under the magnificent leadership of Claudio Ranieri, the fearless Foxes have fought battle after battle, defying all odds and refusing to give in. They are an inspiration to us all.”

 

It is positive for the city, for the region and for the economy of the region, with the inevitable knock on effect of attracting interest and investment to the area, and subsequently a positive impact on house prices.

This weeks ‘buy to let’ suggestions…

 

1. Somerby Close, Stamford.

http://www.rightmove.co.uk/property-for-sale/property-59163755.html

Somerby

This property has just come to the market and caught our eye immediately! In a good location close to schools and amenities and not too far from the town and judging by the agents description and photographs is ready to go straight to the rental market. We’d expect to achieve £650pcm and based on an asking price purchase would see a potential net yield of 5.06% which is a great return for Stamford.

 

2. Lale Walk, Wittering.

http://www.rightmove.co.uk/property-for-sale/property-41381676.html

lale

Located between Stamford and Peterborough and we’ve always strong demand for rental properties here. The property does seem good value for money given its apparent condition will prove to be an ideal buy to let investment. We’d expect a monthly rental of £595 and based on an asking price purchase would offer a net 4.86% return.

 

3. Kestrel Road, Oakham

http://www.rightmove.co.uk/property-for-sale/property-41485926.html?premiumA=true

kestrel

Improved modern semi detached house in a highly sought after development close to Oakham town centre and a haven for ‘professional’ tenants. Not the greatest return at 4.37% based upon an asking price purchase and a monthly rental of £650 but if you could be successful with an offer this will improve but nether less an area that will always see good long term gain.

 

At Osprey Lettings, we always keep an eye on the local markets for attractive ‘buy to let’ investments available for sale with the areas estate agents. We try to focus on properties with a mixture of good yield (for the area), potential long term capital growth and of course within areas where we know that rental demand is strong. If you’re a first time or experienced investor and would like to discuss any of these or indeed any other property you might be considering, please do contact us. 

 

 

Your Residential Letting and Property Management Specialist

   

 
Cookie Policy Privacy Policy Terms and Conditions Disclaimer