What does 2016 have in store for the Milton Keynes Property Market?

Milton Keynes house prices up or Milton Keynes house prices down? ... and if so, by how much? Those of you who read the Milton Keynes Property Blog will know I am not the sort of person who pulls punches nor someone who ever fails to give a forthright and straight talking opinion – so here are my thoughts for the 35,450 Milton Keynes homeowners and landlords.

The average Milton Keynes property is 10.6% higher today than it was a year ago, which doesn’t sound a lot, but when you consider inflation is currently running at -0.1% (ie consumer/retail prices are dropping) and average salary growth is only around 2.5% pa, this is bad news for first time buyers as property affordability continues to decrease (although I was reading in The Times the other day that wage inflation (ie salary growth) is showing signs of weakening).

Some commentators have said the higher stamp duty taxes announced a few weeks ago in the Autumn Statement for buy to let landlords, concerns over first time buyer affordability and the outlook of UK interest rate rises in 2016 will really dampen the property market. I hope you all read my previous article about what the new stamp duty rule changes would REALLY mean for Milton Keynes landlords in my blog, but I believe the real issue in the Milton Keynes property market is the shortage of property to buy, as people either worry there will be no suitable house to move to, or cannot afford to upgrade. However, on the supply side, Mr Osborne said in his Autumn Statement that he will change the planning laws to ensure the government meets the pledge made at the General Election (back in May) of 200,000 new homes a year.  All I can say is .. good luck George hitting those numbers!

Why? Because houses take years to build .. not months .. so George and his fabled house building aside .... where does that leave us in Milton Keynes in 2016?

Well, talking of supply ... whilst Mr Osborne builds his properties (and let’s be honest - a week doesn’t go by without him being filmed on a building site with a high viz jacket and hard hat building a house here and there!), let us look at the shortage of properties for sale. Back in December 2011, 2,596 properties were for sale in Milton Keynes .. today that figure is 1,098. On the face of it, this means there is less choice for Milton Keynes buyers – but it also means with a restricted supply of properties for sale .. it keeps property prices high for Milton Keynes house sellers.

Everything isn’t all doom and gloom though ... again back in December 2011, the average property in Milton Keynes took 106 days to find a buyer .. latest figures state this has dropped to 55 days .. a drop of 48% in how long it takes to find a buyer. However, when you delve even deeper, the best performing type of property today in Milton Keynes is the 3 bed, which only takes 40 days to find a buyer (on average) compared to the 1 bed, which takes 69 days. It just goes to show, even though the average has dropped since 2011, how varied that change has been!

 

So, back to the question everyone is asking .... What will happen to property values in Milton Keynes in 2016?  I am going to suggest they will rise between 9% and 10% ... nothing out of the ordinary, but unless something cataclysmic happens in the world, 2016 will be like 2015! For more thoughts, opinions and views on the Milton Keynes property market .. visit the Milton Keynes Property Blog

Milton Keynes Landlords could be fined £1,476,000 per year

“Who would want to move to Milton Keynes in weather like this?”, was what one landlord said to me as we shook hands outside his property, the other afternoon. It was windy, cold, it had been raining most of the day and it was the last appointment of the day at 4.45pm. I will admit, as I had been out of the office all day, I was looking forward to getting home, putting the fire on, and watching telly with a big mug of tea.. but this landlord lived in neighbouring Luton and this was the earliest he could do. 

It turned out he had been self-managing the property himself over the last few years, but was worried with all the new legislation that had been introduced recently. He was particularly concerned about the up and coming ‘Right to Rent’ legislation, so as his tenant had handed in their notice recently, on this new tenancy he called us for our opinion.

For those Milton Keynes landlords that don’t know, landlords will need to check the immigration status of any new tenants moving into properties from February 2016 or face a £3,000 fine. It is called the 'Right to Rent' rules. However, tenants should also be aware that as well as traditional landlords, tenants who sub let rooms and homeowners who take in lodgers, must also check the right of prospective tenants to reside in the UK.

Our landlord from Luton wanted to know how much of a real issue was ‘Right to Rent’ in Milton Keynes. I was able to tell him, the last available figures (from a couple of years ago) show that 492 people (whom were registered as Non-UK Born Short-term Residents) moved into private rented accommodation in the Milton Keynes Borough Council area in one year alone. If all of those people weren’t supposed to be in the UK, that would be a fine of £1,476,000 to the landlords of the town.

It doesn’t sound a lot when you think there are 171,750 residents in Milton Keynes Borough Council area, and of those, 134,417 people (or 78.26%) were born in the UK. But Milton Keynes is a cosmopolitan town as the country of birth of the residents in the Milton Keynes Borough Council area can be split down as follows:

·         UK                                                                          78.26%

·         Ireland                                                                    0.74%

·         Europe                                                                   5.83%

·         Africa                                                                      6.61%

·         Middle East and Asia                                           7.01%

·         Americas and Caribbean                                    1.25%

·         Australia and Pacific region                               0.26% 

 

However, it must also be recognised that landlords, by checking up on tenants, could potentially be accused of discrimination under the Equality Act. This is a real minefield for landlords, especially when you consider that not all of the 10,010 Europeans in the area necessarily have the right to live in the UK either.

 

 

In a nutshell, Milton Keynes landlords will need to check and retain copies of certain documents that show a potential tenant has the right to live in the UK. These include ....

·         UK Passport

·         EEA Passport/Identity card

·         Travel document or Permanent Residence Card showing indefinite leave to remain

·         Paperwork from Home Office stating their Immigration status

·         Certificate of registration or naturalisation as a British citizen.

 

I hope the new law will target dishonest landlords who repeatedly fail to carry out Right to Rent checks by making it a criminal offence. This means they could face imprisonment for failing to check on their tenants. That is why more and more landlords are asking agents to manage their properties, so they can stay the right side of the law.

So what did our landlord do?

Well after our chat, he asked us to find a tenant and manage the property for him - he had been reading the Milton Keynes Property Blog for a while and because of the knowledge we impart to the landlords of Milton Keynes, we obviously know what we are talking about.  Even better news for him, even though this would cost him agency fees, I was able to get him an additional £60 per month for his property (when we found him a tenant one week later). Now, together with the peace of mind we will keep him the right side of the law and put a stop to midnight phone calls complaining about dripping taps, it was a win-win situation for everyone.

Will the young people of Milton Keynes ever own their own home?

I had the most interesting chat with a mature couple (in their early/mid 50’s) from Loughton the other day, whilst viewing one of our rental properties. The property wasn’t for them, but their son, who wanted a second viewing with his parents to get the parental blessing. Now I know that isn’t the norm, but in this case the parents were going to act as guarantor. We got chatting about the Milton Keynes property market and how they had bought their first property in the town just after they got married in the late 1980’s when they were in their early/mid 20’s. Anyway, we got chatting about how the youngsters of the UK seem to rent more than buy nowadays and from that the conversation covered a number of similar topics. I want to share the highlights of that conversation with you today.

Their son, like many 20 to 30 year olds in Milton Keynes, desperately wants to own his own property and the parents said he had read in the Telegraph recently, when you compare house prices to earnings, the current 20 to 30 something’s generation have to spend more of their salary in mortgage payments than any previous generation. The demand for private rental sector accommodation in Milton Keynes is huge. There are in fact 12,700 private rental properties in Milton Keynes at the last count, impressive when you consider there are 6,923 council houses in the town. However, let us not forget 35,450 properties are owner occupied (23,945 with a mortgage).

Let us all be honest, private renting doesn’t have the stigma it had a few decades ago and it might surprise people that even though us Brit’s class ourselves as a nation of homeowners, roll the clock back 100 years and over 75% of people rented their own home (and it was all from private landlords as council housing only started to come in with the ‘homes for hero’s’ after the first World War). It might also surprise you to learn that at the time of the 1971 census, still more people rented than owned their own home.

Looking at the affordability issue, I have proved time and time again, it is in fact cheaper to buy a property than rent, when one looks at starter homes for first time buyers. 95% mortgages have been available to first time buyers for over four years and whilst you could certainly find better properties in better condition in better areas, apartments can be bought for as little as the early £80,000’s in the Walnut Tree area of Milton Keynes (meaning a modest deposit of just under £4,200 would be required).

When it came to affordability, I was able to tell them that when they bought their first house in Milton Keynes in 1988, the ratio of house prices to salary was 7.54 to 1 in Milton Keynes ... and here was the surprise for both of us, today’s ratio is only 6.53 to 1!

I said I believed there had been a cultural attitude change towards renting property in Britain and that this quiet revolution was likely to be permanent. In the 60’s, 70’s and 80’s, saving for the deposit was everything and buying a house was everything. Youngsters today have far much more disposal income today than people had in the Callaghan and Thatcher years, but choose to spend it upgrading their mobile phones every 12 months, the newest tablet or PC, a newest 50” plasma LCD TV and two sun drenched holidays a year, than go without and save for a deposit.

Yes, there are horror stories of tenants living in rat infested properties with landlords who charge massive rents and don’t repair their properties. But that is very much the exception as most tenants rent homes of a quality they couldn’t ever to afford to buy. Twenty years ago, if you said you rented a property, you were considered the lowest of the low ... but now it’s the norm.

So with mortgage affordability being well within the bounds of most first time buyers, the level of deposit required for a 95% being surprisingly modest (starting off at c.£4,200 in Milton Keynes as mentioned above) until we change our attitudes, the UK housing market is slowly but surely turning into a more European model, where people rent for long periods of their life, then eventually inherit their parents properties and subsequently become homeowners themselves, albeit later in life.

Hence, I cannot see the demand for decent, high quality rental properties ever dropping in the next 10 to 20 years, but only ever increasing as the population continues to soar. Just make sure you by the right property, at the price, in the right location. One source of information on such matters would be the Milton Keynes Property Blog ...

Has George killed the buy to let market in Milton Keynes?

Well George Osborne, in his Autumn statement last week, caused Milton Keynes landlords to ask whether buy to let is a viable investment option, when he announced that landlords, when buying another buy to let property from April 2016 will have to pay an additional 3% stamp duty on top of the standard rate. So for example, on a £100,000 terraced, the stamp duty goes from nil to £3,000. It becomes quite stark when you look at the middle to upper market, so it means that the stamp duty bill for a £285,000 buy to let home will rise from the current £4,250 to £12,800 from April next year. 

Some say property in Milton Keynes will be worth less because potential landlords will not be willing to pay as much for them, and if house builders or existing homeowners don't feel they are going to get as much for them , then there is less motivation to build / sell them?... and the person we can blame for this is George himself. Back in 2012, he choose to utilise the British housing market to kick start the UK economy, with  subsidies, Funding for Lending and Help to Buy. However, whilst that helped the Tory’s get back into power in 2015, some say this impressive growth in the UK property market has been at the expense of pricing out youngsters wanting to buy their first home.

Others say this is the straw that breaks the camel’s back as over the next four years Landlords will slowly lose the ability to offset all their mortgage interest against tax on rental income, after changes announced in the Summer Budget. At the moment, landlords can claim tax relief on buy to let mortgage monthly interest repayments at the top level of tax they pay (ie 40% or 45%). However, over the next four years this will reduced slowly to the basic rate of tax – currently 20%.

Surely this is the end of Buy to Let in Milton Keynes? Probably.. but before we all run to hills panicking .. let me give you another thought.

Stamp Duty rules were changed in December 2014. Before then, landlords were eagerly buying up properties under the ‘old slab style Stamp Duty’ system. For example, the stamp duty bill on that £285,000 property was lower on the old slab style duty (pre Dec 2014), at £8,550, yet it isn’t a million miles away from new £12,800 stamp duty bill. Interestingly though, George has left a legal loophole in the new rules, because when it comes to selling up, they can offset purchase costs against any eventual capital gains tax, including stamp duty.

I believe that total returns from buy to let will continue to outpace other investments, such as the stock market, gilts, bonds and even pensions. Also, the best part about investing in property is that it is bricks and mortar. You can touch it, you can feel it, and it isn’t controlled by some City whiz kid in Canary Wharf .. the British understand property and that goes a long way!

Buy to let has enough impetus behind it that prospective landlords will continue to buy even with a larger stamp duty bill. Milton Keynes landlords will need to be savvy with what property they buy to ensure the extra stamp duty costs are mitigated.   Buying buy to let property is a long term venture. In the past, it didn’t matter what property you bought in Milton Keynes or at what price – you would always make money. Now with these extra taxes, the adage of ‘any old Milton Keynes house will make money’ has gone out the window.   You wouldn’t dream of investing in the stock market without at least looking in the newspapers or taking advice and opinion from others, so why would you take the same advice and opinion about buying a buy to let property in Milton Keynes?

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?