The Milton Keynes Property Market and £1,300,000,000,000,000,000 in loose change

The 5^th of March 2009 was the date Mervyn King, the then Bank of England Governor, slashed UK interest rates to the unparalleled figure of 0.5%. In just under five months, starting on 8^th October 2008, the rate had come down from 4.5% to that low figure, all in an attempt to ensure the British economy survived the worldwide credit crunch. Now as we deck the halls with bows of holly nobody expected that, over six years later, rates would still be at that low level.

In the summer, people were predicting a rise in the New Year, yet now, some forecast it may remain the same for years to come the due to the issues in China. Now, I am not some City Whiz kid with a hotline to Mr Carney at Threadneedle Street, but merely a humble letting agent from Milton Keynes, so I can not profess to know what will happen to interest rates. However, what I do know, speaking to my Milton Keynes friends and Milton Keynes landlords is that these low interest rates have hit savers really hard.

If you added up everyone’s bank and building society savings in the UK, they would add up to £1,300,000,000,000,000,000 (that’s £1.3 trillion), most of which is earning a pittance in interest.  That is why more and more 40 and 50 year old Milton Keynes landlords have been investing some of that cash into Milton Keynes bricks and mortar, as they search for a low risk investment opportunity.

Buying a Milton Keynes buy to let property isn’t risk free, but there are certainly things you can do to mitigate and lower one’s exposure to risk. You see by buying a rental property, it potentially offers an enigmatically decent proposition in terms of being able to obtain attractive returns that beat inflation and savings accounts, yet without taking the levels of risk associated with stock markets.

The UK residential property market has long been the safest form of collateral for lenders of all varieties. Against a backdrop of a greatly changing economic environment, Milton Keynes house prices have been extraordinarily robust, increasing by over 2148.0% between 1974 and today. Some will say there have been significant property price falls, namely in 1975, 1988 and 2008, yet each time after this has been followed by an upturn in property values. For the record, the stock markets in the same time frame only rose by 432.5%!

.. and that is the best thing about buy to let property. Unlike the stock market, with its unfathomable equities, shares and bonds, that nobody really understands (as they are controlled by some faceless whizz kid in Canary Wharf!) with a buy to let property, landlords can take control and understand their investment .. in fact you can touch and feel the bricks and mortar investment.

..  but before you go out and buy any old Milton Keynes property, plenty of landlords still get it wrong. You have to be aware of your legal responsibilities when it comes to tenant safety, tenants deposits, energy certificates and in the new year, landlords will have the added responsibility of checking the immigration status of prospective tenants. Get it wrong and big fines and even prison is an option – but that’s why many agents use a letting agent to manage their property for them.

Next, you have to buy the right property at the right price. Recently I have seen some really heart breaking situations in Milton Keynes and the immediate area, of people paying way too much for a property, only to lose out when they came to sell. One example that comes to mind is that of a property owner in one of those apartments in The Hub on Rillaton Walk, a bustling and highly sought after development ideally suited to commuters or those who enjoy easy access to restaurants and bars as well as shopping and the commercial district of Milton Keynes .. a decent two bed apartment, 59 sq metres inside (635 sq ft in old money) sold in June 2008 for £239,950. In the summer, it only obtained £206,000, a drop of 14.15% or 2.14% a year - a very disappointing result.

I cannot stress enough the importance of doing your homework. One source of information and advice is the Milton Keynes Property Blog where I have similar articles to this about the Milton Keynes property market and what I consider to be the best buy to let deals around at any one time in the town, irrespective of which agent it is on the market with. If you haven’t visited and you are interested in the local property market in Milton Keynes .. you are missing out!

 

Milton Keynes vs Luton– Clash of the Property Market Titans

Many landlords have been asking me my thoughts on the Milton Keynes property market recently and in particular, what is happening to property values. My calculations show property values in Milton Keynes quite interestingly grew in the month of September by 1.9%.  When one looks at the annual growth, Milton Keynes values are 9.1% higher (when comparing Sept 14 to Sept 15), impressive when you consider the annual growth of property values was only 8.4% per annum in August.  On the other hand, there are signs that the fundamental growth of property values in Milton Keynes has now peaked, despite those average property values being above levels recorded in 2007 (just before the 2008 crash).

Whilst the Milton Keynes headline rate appears to be better, i.e. the year on year (Sept 14 to Sept 15) growth rate of 9.1% is obviously better than the 8.4% in August 14 to August 15), this rise of Milton Keynes property values masks the underlying truth in what is really happening to local property values in the town.  Throughout 2015, property values have been yo-yo like on a month by month basis, being quite volatile in nature.  For example:

·         September 2015               1.2% rise

·         August 2015                       0.1% rise

·         July 2015                              1.0% rise

·         June 2015                            0.3% drop

·         May 2015                             0.5% rise

·         April 2015                            0.7% rise

·         March 2015                         1.0% rise

This is in part due to seasonal factors, as well as mortgage approvals increasing over June and July and then falling by over 15% in August, according to the Council of Mortgage Lenders (CML).

The outlook for the Milton Keynes property market remains positive against the foundations of low mortgage rates and growing consumer confidence. However, I do have to question the recent CML mortgage data and whether that raises issues over whether the rate of growth since the Tory’s were re-elected in the early summer can continue? However, on a positive note, Milton Keynes property values are still running ahead of salaries and average property values are 8.2% above the levels recorded in 2007.

Talking to fellow property professionals in the town, demand for property has been showing signs of moderating in the final few months of 2015, which in turn will lead to a slight slowdown in the pace of house price growth in the run up to the festive season. You see, it is really important not to read too much into one month’s (September’s) headline figures.

Readers might be interested to note that before the 2008 property crash, all the UK region’s housing markets tended to move up and down in tandem like the Milton Keynes Synchronised Swimming team at the Wolverton Swimming and Fitness Swimming Pool!  Since then though, the Greater London property market took off like a rocket in 2009/10, whilst the rest of the UK only really started to grow in 2012/13 and even then that growth was a lot more modest than the Capital’s.  Looking closer to home, it can even be different in neighbouring towns, areas and cities, so whilst Milton Keynes property values are 9.1% higher than a year ago (as mentioned above), Luton property values are 14.2% higher than a year ago.

I cannot stress enough the importance of doing your homework.  One source of information and advice is the Milton Keynes Property Blog where I have similar articles to this about the Milton Keynes property market and what I consider to be the best buy to let deals around at any one time in the town, irrespective of which agent it is on the market with.  If you haven’t visited and you are interested in the local property market in Milton Keynes….. you are missing out!

Values of Milton Keynes Terraced Houses smash through the £230/sqft barrier

The Council of Mortgage Lenders (CML) latest snapshot of the buy to let mortgage market shows us that buy to let landlords haven’t been put off by the Chancellors announcements on the way buy to let’s are taxed.

Last month, the CML stated £1.4billion was borrowed by UK landlords to purchase 10,500 buy to let properties, up 26.5% from the same month in 2014, when only 8,300 properties were bought with a buy to let mortgage. Go back two years and the number of buy to let mortgages used for purchasing (again not re-mortgaging) is 36.4% higher! Even more interesting has been the fact that the average amount borrowed has risen as well. The average buy to let mortgage last month was £133,330, up from £128,480 a year ago.

In Milton Keynes, I am speaking to more and more landlords, be they seasoned professional landlords or FTL’s (first time landlords), as they read reports that the Milton Keynes rental market is doing reasonably well, with rents and property values rising.  Interestingly, one landlord recently asked how much he should be paying per square foot (more of that in a second).

The first thing you have to decide is whether you want great capital growth or great rental yield, as every knowledgeable landlord knows, you can’t have both. Over the last twenty years, property values in Milton Keynes have risen by 256.69%, compared to Greater London’s 436.2%. This has proved that capital growth increases faster in the more expensive South, but your investment money doesn’t go very far, meaning there won’t be as much rental yield from a 1 bed flat in Chelsea (2% per year at best with a fair wind) as a 2 bed semi in Milton Keynes. However, whilst the figure of 256.69% is an average for the area, certain areas of Milton Keynes have seen capital growth much higher than that and others areas much worse (we have talked about those in previous articles).

If you recall in an earlier article, my research reveals that Milton Keynes apartments tend to generate a better yield than houses, probably because several sharers can afford to pay more than a single family. But houses tend to appreciate in value more rapidly and may well be easier to sell, simply because there are fewer being built.

So what should you be buying in Milton Keynes, and more importantly, how much?

·         The average apartments in the town are currently selling for approximately £250 per square foot.

·         Terraced houses in Milton Keynes are currently obtaining, on average, £197,500 or £235 per square foot,

·         An average semi in Milton Keynes is selling for £227,500 (and achieving £257 per square foot). 

Now these are of course averages, but it gives you a good place to start from. In the coming weeks, I will look at rents being achieved on Milton Keynes houses and apartments, and the yields that can be obtained, depending how many bedrooms there are. In the meantime, if you would like to read more articles like this, then can I suggest you visit the Milton Keynes Property Blog? 

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