Milton Keynes Buy To let –Freehold House or Leasehold Flat?

Well my Milton Keynes Property Blog reading friends, as seems to be all the rage with Jeremy Corben asking the PM questions emailed in to him at Prime Minster Question Times, I too wish to answer a question emailed into me from a potential Milton Keynes landlord last week. Nice chap, lives in Shenley Brook End, and it turns out, after having a coffee with him, he works in IT, has a spare bit of cash (now the kids have flown the nest) and wanted to buy his first buy to let property.

His main question was ... Do I buy a freehold house or a leasehold flat in Milton Keynes?

Most people will say freehold every time, because you own the land. However, it’s not as simple as that (it never would be would it!). The definitive answer though is to research what Milton Keynes tenants want in the area of Milton Keynes they want! The tenant is ultimately your customer, and, if they don't want to rent what you decide is best to buy, then you are not going to have a successful BTL investment. So starting with the tenant in mind and working backwards from there, you won’t go far wrong. In a nutshell, find the demand before you think about creating the supply.

Leasehold flats and apartments in Milton Keynes are excellent in some respects as they offer the landlord certain advantages, including the fact a flat can be initially cheaper to buy. Yields can be quite good, offering better cash flow. The building will already be insured and yes there is a service charge, but it’s still for a service at the end of the day and that cost is spread between many others (i.e. when your freehold house roof goes, its falls 100% on your shoulders) and one of my favourites is that there is often no garden to maintain or blown down fences to replace!

However, some Milton Keynes leasehold flats can suffer from poor capital growth. Some leasehold properties have no cap on the level of the service charge and it may get out of control. The length of the lease will significantly affect value if not renewed before it gets too short. Thankfully there’s not many, but some Milton Keynes apartments/flats have burdensome clauses. Finally, with leases, there can be sub-letting issues – which means you can’t let them out.

So what do the numbers look like? Well since 2003, the average freehold property in Milton Keynes (detached, semis and terraced) has risen from £152,931 to £293,362, a rise of 92% whilst the average Milton Keynes leasehold property (flats and apartments) has gone up in value from £78,655 to £150,983, a similar rise of 92%. 

I was really interested to note that of the 15,930 rental properties in the Milton Keynes Council area that the Office of National Statistics believe are either let privately or through a letting agency, 4,748 of them (or 29.8%) are apartments. However, there are only 15,264 apartments in the whole council area (be they owned, council rented or privately rented), which represents 15.5% of the whole housing stock in the area. This really intrigued me that, quite obviously, there is a high proportion of Milton Keynes’s leasehold apartments/flats rented to tenants compared to detached, semi’s or terraced. Fascinating don’t you think?

Every Milton Keynes apartment block, every terraced house or semi is different. Like I said at the start, the definitive answer though is to research what Milton Keynes tenants want in the area of Milton Keynes they want. Demand for town centre apartments, near the nightlife and transport links can be popular and can offer the Milton Keynes landlord very good yields with minimal voids. However, Milton Keynes terraced houses and semis, whilst not always offering the best yields (although sometimes they can), they do offer the Milton Keynes landlord decent capital growth.

My advice to the prospective landlord as it is to you is do your homework.  One such website, which only talks about the Milton Keynes buy to let Property Market, is the Milton Keynes Property Blog. Another source of info many Milton Keynes landlords use is me! What many Milton Keynes landlords do, irrespective of whether you are a landlord of ours, a landlord with another agent or a DIY landlord, if you see any property in Milton Keynes, that catches your eye as a potential buy to let property, be it a terraced house, semi or flat ... email me and I will email you back with my thoughts (although I will tell you what you need to hear .. not want to hear!)

Milton Keynes Tenants pay 38.4% of their salary in rent

I had the most interesting chat with a local Milton Keynes landlord the other day about my thoughts on the Milton Keynes property market. The subject of the affordability of renting in Milton Keynes came up in conversation and how that would affect tenant demand. Everyone wants a roof over their head, and since the Second World War, owning one’s home has been an aspiration of many Brits.  However, with rents at record highs, many are struggling to save enough for a house deposit.

Let’s be honest, it’s easy to get stuck in a cycle of paying the rent and bills and not saving, but even saving just a small amount each month will sooner or later add up.  George Osborne announced such schemes as the upcoming Help to Buy ISA, where the Government will top up a first time buyers deposit.

Therefore, I thought I would do some research into the Milton Keynes property market and share with you my findings.  Milton Keynes tenants spend on average just over a third of their salary to have a roof over their head.  According to my latest monthly research, the average cost of renting a home in Milton Keynes is £1,134 per month.  When the average annual salary of a Milton Keynes worker stands at £35,394 per year, that means the average Milton Keynes tenant is paying 38.4% of their salary in rent.  I doubt there is much left to save for a deposit towards a house after that, and that my Milton Keynes Property Blog reading friends is such a shame for the youngsters of Milton Keynes.

You see one the reasons for rents being so high is property prices being high.  As I have mentioned before, there is a severe lack of new properties being built in Milton Keynes.  It’s the classic demand vs supply scenario, where demand has increased, but the number of houses being built hasn’t increased at the same level.  Also, Milton Keynes people aren’t moving home as often as they did in the 80’s and 90’s, meaning there are fewer properties on the market to buy.  If you recall, a few weeks ago I said back in Spring 2008, there were over 3,700 properties for sale in Milton Keynes and since then this has steadily declined year on year, so now there are only 1,162 for sale in the town.

So, the planners in Milton Keynes haven’t allowed enough properties to be built in the town and existing Milton Keynes homeowners are not moving home as much as they used to, thus creating a double hit on the number of properties to buy.  This is a long term thing and the continuing diminishing supply of housing has been happening for a number of decades and there simply aren’t enough properties in Milton Keynes to match demand, these are the reasons houses prices in Milton Keynes have remained quite buoyant, even though economically, over the last 5 years, it was one of the worst on record for the country and the South East region as a whole.

However, things might not be all doom and gloom as originally thought, as a recent Halifax Survey  (their Generation Rent 2015 Survey) suggested  more and more people may be long term, if not lifelong tenants. In fact there is evidence in the report to suggest that the perception of how difficult it is to get on the housing ladder is vastly different between parents and people aged 20 to 45.  It seems from this survey that the state of the UK economy has shifted priorities quite significantly in quite a short space of time.  With fewer people able to save up the deposit required by mortgage lenders, more and more people are continuing to rent.  This delay in moving up the property ladder has driven rents across the UK up as more people were seeking rental properties .

 It is often said that more people in central Europe rent for longer or never own their own property. The last two census in 2001 and 2011 show that proportionally the percentage of people who own their own home in Britain is slowly reducing and, as a country, we are becoming more and more like Germany.   That isn’t a bad thing as Germany is considered to have a more successful economy, one of the main stays, often quoted,  is because they have a much more flexible and mobile workforce, (which renting certainly gives) and from that, they have a higher personal income than in the UK.      

Therefore, if we are turning into a more European model and the youngsters of Milton Keynes and the Country have changed their attitudes, demand for rental properties will only and can only go from strength to strength, good news for Milton Keynes tenants as wages will start to rise and good news for Milton Keynes landlords, especially as property values in Milton Keynes are now 8.5% higher than year ago!

Milton Keynes House owners desert the housing market with an 8 year low

Even though the housing market is in an upbeat state in many parts of the UK, getting on the property ladder is still challenging for many and regarded as unattainable by some.  However, that goal has become even worse recently in Milton Keynes as the number of houses available to buy is at an 8 year all time low.

Back in Spring 2008, there were over 3,700 properties for sale in Milton Keynes and since then this has steadily declined year on year, so now there are only 1,162 for sale in the town.  This continuing diminishing supply of housing has been happening over those years for a while and there simply aren’t enough properties in Milton Keynes to match demand.

According to a recent report by the National Association of Estate Agents, that said, “There are now 11 house hunters fighting after every available house which isn’t sustainable.”   What that means is Milton Keynes youngsters, who are looking to buy their first home, are finding themselves being squeezed out by the competition.  However, in the meantime, nobody wants to live with parents until they are in their 30’s, so that in turn creates demand for more rental properties, which means landlords have a greater demand for more rental properties so are buying more, resulting in even less smaller properties for the youngsters to buy, it’s a vicious circle.   

Talking to fellow agents, mortgage arrangers, surveyors and solicitors in the town, all of whom have extensive dealings in the Milton Keynes property market like myself, most of us agree the movement in the Milton Keynes market is taking place in the middle to upper market, higher up the property ladder and it’s second and third steppers pushing through the properties that are being bought and sold.

That has meant as people tend to move less in the middle to upper market, the number of the properties actually selling has drastically reduced over the last couple of years.

When we look at the individual areas of the town, it paints an interesting picture.

• MK2 -  Central Bletchley, Fenny Stratford, Water Eaton 22 properties sold in May 2015 (with an average value of £ 164,799), whilst over the Summer months of 2014, the number of properties selling in this postcode was always in the mid/late 20’s.
• MK3 - Far Bletchley, Old Bletchley, Newton Leys, West Bletchley23 properties sold in May 2015 (with an average value of £208,471), whilst over the Autumn months of 2014, the number of properties selling in this postcode reached into the early 60’s.
• MK4 -  Emerson Valley, Furzton, Kingsmead, Oxley Park, Shenley Brook End, Tattenhoe, Tattenhoe Park, Westcroft, Whaddon, 30 properties sold in May 2015 (with an average value of £310,014), whilst over the Summer months of 2014, the number of properties selling in this postcode reached into the early 70’s.
• MK5 - Crownhill, Grange Farm, Oakhill, Loughton, Medbourne, Shenley Brook End, Shenley Church End, Shenley Lodge 15 properties sold in May 2015 (the most recent set of figures from the HM Land Registry), whilst over the Summer months of 2014, the number of properties selling in this postcode was always between 22 and 25 per month. (Interestingly the average value of those properties was £279,786).
• MK6 -  Ashland, Beanhill, Coffee Hall, Eaglestone, Fishermead, Leadenhall, Netherfield, Oldbrook, Peartree Bridge, Springfield, Tinkers Bridge, Woughton on the Green, Woughton Park, Simpson, 21 properties sold in May 2015 (with an average value of £192,928), whilst over the Summer months of 2014, the number of properties selling in this postcode reached into the late 20’s.
• MK10 - Broughton, Kingston, Middleton, Monkston, Oakgrove 43 properties sold in May 2015 (with an average value of £ 308,684), whilst over the Summer months of 2014, the number of properties selling in this postcode remained in the mid 60’s.

So what does this all mean for homeowners and landlords alike in Milton Keynes?  Demand for Milton Keynes property is fairly good, especially at the lower end of the market.  However, with fewer properties coming up for sale, it means property prices are proving reasonably stable too.

You see I believe a more stable, consistent Milton Keynes property market, with less people seeing property as an easy way to make a quick buck (as many did in the early 2000’s when prices were rising at nearly 20% a year so people were buying and selling every other minute), but a property market that has a steady growth of property values in Milton Keynes, year on year, without the massive peaks and troughs we saw in the late 1980’s and mid/late 2000’s might just be the thing that the Milton Keynes property market needs in the long term.

For more insights, comments and facts on the Milton Keynes Property market please visit the Milton Keynes Property Blog ,where you will find many similar articles to this.

Could your Milton Keynes property save you from Pension oblivion?

If you were born in the early 1970’s or late 1960’s, if you haven’t started to think about it yet, retirement is closer than you think. In fact the number of years you have left to work is less than the number of years you have worked. The basic state pension is worth £115.95 a week for a single person in 2015/16 (or £6,029 a year) and £231.90 a week for a couple (£12,118 a year) as long as your partner has paid their stamp (although there are certain get of jail cards if they haven’t). 

As a household, could you live on just over £12k a year?

However, could the property you are living in in Milton Keynes save you from poverty when you reach retirement? You see, a regular income is vital in retirement, and the bricks and mortar you own in Milton Keynes could provide a way for you to finance life when you retire.

If you are in your 30’s, instead of saddling yourself with bigger and bigger mortgages, going from your first time buyer flat, to a terraced, to the semi and then the large detached house, you could instead keep your terraced or small semi, turning it into buy a buy to let property, let the rent pay the mortgage and then rely on capital growth to provide you with a lump sum when you sell the property and retire.  One of the biggest plus points of buy to let is what is known as leverage. Let me explain ... say you have a deposit of 25% and the value of the property rises by 3% a year, your gains in fact multiply to 12%.  However, if property prices drop, 'leverage' can be catastrophic, as losses will also be multiplied. Property values have dropped a number of times in the last 50 years, but they always seem to bounce back ... property must be seen as a long term investment.

Let me explain how leverage could work for you. If you had bought a Milton Keynes house in Spring of 1983 for £40,000, using a 75% mortgage and 25% deposit, (meaning your deposit would be £10,000). Today, that Milton Keynes property would have risen in value to £289,516, a rise of 623.8%. However, when you look at the growth on just your deposit, the rise is even better ... instead of 623.8%, we see a rise of 2795% (remembering that the mortgage would have been paid off).

However, buy to let is not all about capital growth and in retirement, income is more important than capital growth, as rent is the key to a steady income.

So surely the best strategy is to buy those Milton Keynes properties with the high rents (when compared to the value of the property). These are called high yield properties in the buy to let world because the monthly return is so much greater. So surely they are the best in Milton Keynes? Possibly, but the properties that offer these higher yields (in the order of 5% to 6% per year) tend to be in such areas as Netherfield or Fishermead in Milton Keynes, historically they haven’t offered such good capital growth when compared to the town average, have a higher tendency for void periods and such properties tend to attract tenants that have a greater propensity to be high maintenance.

Therefore, if a high maintenance rental portfolio wasn’t for you, another strategy could be buy a property with relatively smaller rental returns of 3% to 4% per year (i.e. lower yields), but in a more up market area such as Loughton. Properties such as these tend to suffer from less void periods (i.e. when there is no tenant in the property paying you rent) and they historically have had better long term capital growth when compared to the town average.

Every landlord is different and every property is different. All I suggest to you is do your homework.

As regular readers will know, I am happy to share my knowledge and experience of the Milton Keynes property market, high yields, high capital growth, what to buy, what not to buy and where to buy in the Milton Keynes Property market can always be found on the Milton Keynes Property Blog

Milton Keynes tenants feel the squeeze as rents continue to rise

As my regular readers know, my passion is talking about Milton Keynes property. As a property agent I like to comment on the Milton Keynes property market, which I hope will be of interest to both homeowners and buy to let landlords alike. However, this week, I want to highlight the plight of the tenants of Milton Keynes as more and more of their wages are being taken up by ever increasing rents.

The cost of renting a home in Milton Keynes has broken through the £1000 a month barrier as the average rent for a property in the town, now stands at £1087 per month, and whilst this was a drop of 0.6% last month, rents for new lets are 7% higher than they were 12 months ago.

House price inflation has certainly eased in Milton Keynes from the heady days of 2014, but still with retail price inflation (for goods and services) reducing to 0% any increase in property values, no matter how small, means in real terms property is still getting more expensive. Meanwhile, many tenants have given up saving for a mortgage deposit as rents continue to take more and more of their wage packets leaving nothing to save for a deposit. That means, more and more tenants are deciding to rent for the long term and therefore the desire for decent high quality rental properties continues to exceed the available rental stock.

I would go as far as to suggest that rents are an ideal barometer to the state of the local economy as a whole and strongly believe that the recent increase in Milton Keynes rents are a sign that the Milton Keynes economy is picking up. 

This means Milton Keynes landlords are continuing to capitalise on the Milton Keynes property market. The most recent Land Registry data suggests the annual property price rises in the town have eased over 2015, leaving property values 9.13% higher than 12 months ago, so as property price growth is easing off, with the increased rents, rental yields are strengthening for the first time in years to compensate. The mortgage market has become more stable after the mad months of May and June after the Tory’s got back into No.10  and so, everything is set to be good news for landlords; even with the Chancellors change of tax rules in the coming years for buy to let mortgages.

You can get some amazingly low mortgage rate deals at the moment, so with mortgage rates so low and returns still extraordinarily attractive, there’s rarely been a better time to invest in rental properties.

However,  (you knew there would be a however!),  it’s all about buying the right property at the right price. Not all property types are seeing equal rises in rents and capital growth.  Different parts of the town, different types of properties are experiencing quite different changes.  For example, the average length of time the 31 Milton Keynes properties up for rent between £250 to £500 per month is an eye watering 259 days, whilst the average length of time the 194 properties at £500 to £1000 per month is 38 days and 158 properties that fall into the £1000 to £2000 per month price bracket is 74 days.

When you start comparing different parts of Milton Keynes, the numbers are even stranger!  The bottom line is that you must take advice and opinion. One source of advice and opinion is the Milton Keynes Property Blog. In the Milton Keynes Property Blog, you will see many more articles like this, discussions and even what I consider to be the best buy to let deals around, irrespective of which agent is selling it.

Whether you are a landlord, ‘Homes Under the Hammer’ addict or just a homeowner who is interested in what is happening to the local property market, then please visit the Milton Keynes property Blog

Milton Keynes Property Market - Asking Prices Drop But Values Rise

Those of you who regularly read my weekly articles in the Milton Keynes Property Blog will know I like to keep abreast of the Milton Keynes property market. Something attracted my attention this week about the local property market, something I wanted to share with my many readers.

Over the last month, there appears to have been an anomaly in the local property market, whereby asking prices in the town have dropped, yet property values have increased.  The average asking price of a Milton Keynes property, according to Rightmove, fell 1.2% this month yet the average value of a Milton Keynes property rose by 0.9%.

So how does this relate in monetary terms?  This anomaly has driven the average asking price of a Milton Keynes property down slightly to £283,600 whilst the average value is now £260,600.

So why the difference? Technically an ‘asking price’ can be any price that a homeowner wants to place his or her property on the market for. Unfortunately, many times this is done without research and can result in overpriced properties that don't sell. As the Summer months are normally slightly quieter those left on the market wanting to sell often temper their asking prices in these months to try and generate interest in their property.

On the other side of the coin, the property ‘value’ is the price that a willing buyer is prepared to pay and a willing seller is prepared to sell at.   Therefore, in a nutshell, Milton Keynes property values are continuing to rise and those homeowners in Milton Keynes who have properties on the market, last month on average, reduced their asking prices .. great news for property owners and buyers alike!

In previous articles, I have spoken about the continued fundamental shortage of property coming on to the market compared to buyer demand. That is especially true for homeowners wanting to upgrade to a better house/better location.  I can appreciate Milton Keynes home owners are reluctant to put their own property on the market speculatively and wait for the right property to become available and some high demand locations can suffer from a property stalemate.

Most homeowners don’t want to sell and have nothing to buy.

But that’s the beauty of the much maligned English and Welsh house buying process. You can find a purchaser for your property, then ask them to wait. By agreeing a sale (subject to contract) before you try to buy sounds concerning to many, but with fewer properties for sale you need to have a buyer for your property or you will be treated as a less serious buyer yourself. If you cannot find the right home for you, you can slow the deal with your purchaser until it comes along. If nothing suitable does comes along and you lose your buyer then the worst outcome is that you have to find another purchaser or take your property off the market and stay put for now and as long as you mention this at the start they must not commit to any costs until you have agreed your onward purchase.

However, for the landlord/buy to let investors, these potential problems are nothing further from the truth. As I write this article, there are over 240 flats for sale, 244 terraced houses and 160 semis for sale in Milton Keynes.  Landlord/Buy to let investors can normally pick up some bargains in the Autumn months, as sellers who are selling their homes often have a pressing need to sell by this time.

The types of houses a Milton Keynes landlord typically buys, are not the same types as the homeowners wanting to move to a posher area of the town as they are attracted by larger semis and detached properties. The best types of properties for buy to let are the smaller flats, terraced and semis (not the big detached ones). There are in fact too many of these smaller properties for sale .. just look at the numbers of properties for sale (mentioned in the previous paragraph).

If you are a landlord or thinking of become one for the first time, and you want to read more articles like this about the Milton Keynes Property Market together with regular postings on what I consider the best buy to let deals in Milton Keynes, out of the hundreds of properties on the market,  irrespective of which agent is selling it, then you might like to visit the Milton Keynes Property Blog.

Interest rates set to rise – How will that affect the Milton Keynes property market?

A couple of weeks ago, I mentioned in this blog about how the Bank of England has been indicating recently that UK interest rates will be going up in the not too distant future. Therefore, if you are one of the 23,945 homeowners in Milton Keynes, who own your own home with a mortgage, then you need to consider your options and start to budget for an interest rate rise. However, if you are a landlord, who owns one of the 11,899 rental properties in the town, whilst your exposure to interest rate rises is lower, it is most certainly something you should be aware of.

Since the spring of 2009, British interest rates have been at a record low of 0.5%. It’s not a case of if, but when, they will rise. Some people think it will be before Christmas, although I am of the opinion, it will early in the New Year around Easter time, when they do rise. I also expect those rises will be slow, steady and limited. It depends on what is happens to UK wage rises, UK inflation and the general state of the British economy. Nevertheless, as much most of us in Milton Keynes would love to pull the shutters and stick two fingers up to the world, we have to recognise we are part of a global economy and global economic worries still exist to prevent an abrupt and instantaneous rate rise.

Those Milton Keynes landlords, who do have a mortgage, need to realise that as interest rates rise, their monthly mortgage costs rise. It’s easy to say you will look at your mortgage next month, then before you know it, Christmas will be here!  Don’t forget, mortgage lenders have always removed the juicy low rate mortgage deals a few months before interest rate rise. Speak to a qualified mortgage arranger, there are lots of them in Milton Keynes and seriously consider fixing your mortgage rate now.  You didn’t buy your Milton Keynes buy to let property for it to become a millstone around your neck. It’s all about mitigating your costs and maximising your income to make your Milton Keynes buy to let property the investment you want it to be.

However, on the other side of the coin, two in three landlords who have bought property since 2007, have done so without a mortgage. A rise in interest rates might be a good thing. Let me give you some background first, then I’ll explain why. Milton Keynes landlords have see their return on investment for their Milton Keynes buy to let property, over the last couple of years, perform very well indeed with Milton Keynes property values rising by 36.58% since the Spring of 2009. However, when rates do rise, whilst more expensive mortgage rates will ease the demand for borrowing, on the other hand, it may temper house price growth, making the property market more competitive... and therefore, we should see the return of some bargain property buys in Milton Keynes!

Finally though, can I ask all Milton Keynes homeowners and Milton Keynes landlords, who have a mortgage that isn’t fixed, they need to recognise that rates will rise throughout 2016 to 2018 and will continue to move steadily upwards towards more viable and feasible long term levels.  I am not qualified to give that advice and this is my personal opinion, so please speak to a qualified mortgage arranger and, if appropriate, fix your mortgage before interest rates rise. Don’t say I didn’t warn you!

In the meantime, if you are a landlord looking for a bargain now, don’t despair ... there are plenty out there, if you know where to look! One place is Rightmove, another Zoopla and another OnTheMarket. However, sometimes, you can’t see the wood for the trees. At the time of writing, Rightmove had 1,082 properties for sale in Milton Keynes, Zoopla 785 properties for sale in the town and OnTheMarket 148 properties ... where do you start? A lot of savvy Milton Keynes landlords like to visit the Milton Keynes Property Blog , where, irrespective of which agent is selling it, I regularly post what I consider out of the hundreds of properties on the market, to be the best buy to let deal in Milton Keynes.