Tuesday, 27 July 2021

Why Savvy Warrington Buy-to-Let Landlords Don’t Use 10-Year Mortgages

I know of many Warrington buy-to-let landlords who fell into property investing by accident. Many didn’t want to sell their family home when the Warrington housing market crashed in the Credit Crunch of 2009/10, yet still needed to move (often for work). They thought they would keep their Warrington family home in case they ever moved back to Warrington. Yet by keeping it, it couldn’t remain empty (there was still a mortgage to pay on it), so they ended up renting their home out.

And that was the start of many Warrington buy-to-let landlord's journeys!

Many of you Warrington landlords reading this have had your fair share of problems, from tenants doing a midnight flit, rent arrears and troublesome tenants, yet also had your rewards.

The average Warrington landlord in the last ten years has seen their investment rise by an average of £81,900 and has earned in rent (before costs) £69,440.

Many of you reading this have started to learn about investing and creating a property portfolio by buying additional Warrington homes to rent. The average Warrington buy-to-let landlord now owns 3.38 properties that generate an impressive passive monthly income with the bonus of growing their household net-worth through growth in the value of their buy-to-let portfolio.

With the average Warrington buy-to-let landlord in the 56-to-58-year age range, one thing I learned about savvy buy-to-let investing, the shrewd Warrington landlords tend to want longer-term mortgages.

Taking longer-term mortgages reduces the risk to the landlord.

It sounds counterintuitive, yet it comes down to leverage. Let me explain that whilst leverage is formidable in buy-to-let, it is also quite risky.

Before I explain why some readers might not know what leverage is and how it relates to mortgages and buy-to-let, two-thirds of landlords are debt-free, yet those landlords who have come into the property investment games in the last 10 or 20 years have had to use borrowed money (mortgages) to finance their deals. Therefore, by putting down a small amount of say 20% and borrowing the other 80%, if you calculated your return on an investment base only the money that you put into the deal, then that is what is called leverage (i.e. using borrowed money as a funding source when investing in property and generate greater returns on borrowed money).
You would think, as, say a typical 55-year-old Warrington landlord, you would want to be only taking a mortgage out for however long you intend to work (say ten years at most) – meaning your portfolio would be all bought and paid for by the time you retire. Yet the clever buy-to-let Warrington landlords I talk to don’t see their portfolio as having to be paid off (and mortgage-free) by the time they retire. They have understood how to utilise and administer their mortgage debt rationally to enhance their returns without taking on unwarranted risk.

By taking a short-term mortgage of say ten years, compared to a 25-year mortgage, during those ten years, your monthly mortgage payments will be particularly high (because the longer the mortgage term, the smaller the monthly payments will be).

Also, you can pay off a 25-year mortgage in 10 years, but you cannot pay off a 10-year mortgage in 25 years.

Longer mortgage terms mean lower monthly mortgage payments, which in turn means greater cash flow and more elasticity within your rental portfolio. Now to some Warrington landlords, possessing their rental properties debt-free is very important. Yet, I would still seriously consider taking the 25-year buy-to-let mortgage and make additional payments every month to help you to pay the mortgage off early …

Therefore, if for example, you have a bad couple of months without any rent coming in or unexpected bills, you can return to making the mandatory lower monthly mortgage payments without getting your property repossessed.

So, by taking on the longer-term mortgage, you decrease your risk because it has the lower required payments.

Let me give you an example - if our Warrington landlord wanted to buy a Warrington terraced house property for say £152,100 and put down a 25% deposit of £38,025, the best buy-to-let deal I found online on the day of writing this article was a 1.79% Santander 5-year fixed-rate buy-to-let mortgage.

Looking at the mortgage payments per month when comparing the mortgage terms; on the 10-year mortgage, the mortgage payment would be £1,048.11 per month. Therefore, our landlord would have to top up from personal savings to make up the monthly mortgage payments. Whilst if they choose the 25-year mortgage, the mortgage payment would be £481.85 per month. This would mean our landlord would be in profit from day one.

Some might say though the longer term means more interest payments, as it's 25 years and not 10 years. Yet, at today's low interest rates, that would only mean an additional £18,781 in interest payments spread over 15 years – not much in the grand scheme of things.

Therefore, by taking the longer-term mortgage, as a savvy Warrington landlord, you are 'cash flow positive’, meaning you can build a reserve fund for every one of your rental properties to enable you to deal with any unforeseen voids and repairs.

The best way to deal with a buy-to-let property is to see it as a small mini-business, and as with all businesses, you need to grow your income and reduce your expenses whilst in the background provide a decent rate of return for your investment.

The greater the amount of mortgage debt you carry, the greater your monthly mortgage payments, and the simple fact is, the shorter the mortgage term, the higher the monthly mortgage payments. So, if you take on a sensible level of mortgage debt and be ‘cash flow positive’, you can profit from much better returns without taking on excessive risk.

These are my thoughts -please share yours.

P.S. Before I go, I have to say this to cover my proverbial. My comments are only a very brief commentary on the issues raised and should not be relied on as financial advice and that no liability is accepted for such reliance, and that anyone needing such advice should consult a qualified financial adviser or other authorised person.

Don't forget to visit the links below to view my previous blog articles from the Warrington Property blog and check out our social media sites.

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Friday, 23 July 2021

How Long Does It Take to Get a Mortgage?

Buying a property in Warrington can be a lengthy process simply because the process involves many factors. One of those factors is the time it takes to get a mortgage.

There’s no hard and fast rule as to how long it will take, but as a general rule of thumb you can expect to wait around 18 to 40 days after submitting your mortgage application before receiving a formal mortgage offer.

How Long Does it Take to Get a Mortgage in Principle?

You can get a mortgage in principle in a matter of minutes, and this will allow you to start viewing properties in the Warrington area within your budget and put in an offer on a property.

It’s important to note that a mortgage in principle shouldn’t be taken as gospel, and there are no guarantees that you’ll be offered that mortgage when it comes to the full application.

However, it does give you a good indication of what you should be able to borrow based on some general information you provide.

The mortgage in principle can be obtained so quickly because it doesn’t look into your finances in great detail, just a rough overview. That’s why, until you have your formal mortgage offer, you cannot fully rely on the mortgage in principle, as a formal mortgage offer will dig much deeper into your finances.

How Can I Speed the Mortgage Process up?

The key to getting your mortgage offer in a timely fashion is preparation. Lenders will need lots of information from you and will require evidence to support your application.

Typically, this will include:

  • Valid ID to prove your identity. A passport is ideal.
  • Proof of address. A utility bill or council tax bill is sufficient.
  • 3 months of bank statements. This is so lenders can assess your spending habits and get a clearer picture of how much you can afford to pay each month.
  • 3 to 6 months of payslips. This is to prove your monthly income and factor in any contractual overtime or bonuses too. If you’re self-employed, you’ll need to show your accounts and tax returns.
  • Proof of your deposit. A bank statement showing the funds in your account will be needed, and if any of the money has been gifted you may need a letter from the person who has gifted it.
  • Details of the property you are buying.
  • Details of the estate agent you are buying the property through.
  • Details of your solicitor or conveyancer who will be handling the transaction.

What Can Slow the Mortgage Application Down?

If you’re unable to provide any of the information required in a timely manner, then this can be a big factor in slowing your mortgage application down. Therefore, before you even start the process it’s wise to have as much of this information to hand as possible.

Also, your credit history can play a part in how quickly the process is completed. Generally speaking, the more complex your history, the longer the mortgage process will take.
What Happens After the Mortgage Application has Been Submitted?

The lender will arrange to have a property valuation carried out. This is simply to determine if the price of the property is fair and if it’s suitable for a mortgage.

It’s important not to confuse the lender’s property valuation with a survey, which is something that is carried out separately and paid for by you, as the buyer.

Most lenders will require a survey to be carried out as a condition of offering a mortgage. You can pay for a full buildings survey or a homebuyer’s report.

The homebuyer’s report looks at the property in more detail than the lender’s valuation and takes into account any current and potential issues with the property. If the report is satisfactory then it’s likely that a lender will approve a mortgage application without the need for a full buildings survey.

The full buildings survey is a more detailed survey of a property than the homebuyer’s report. It looks at structural safety, maintenance costs and repair costs. It’s more expensive than a homebuyer’s report and it may be carried out immediately or following a homebuyer’s report that has raised concerns.

Once the lender has received the survey(s) and is satisfied with them, they’ll be in a position to make a formal mortgage offer.

How Long Does It Take to Receive the Mortgage Offer?

Once the lender has completed their checks and is satisfied with the survey carried out, you can expect to receive a formal mortgage offer in as little as a few days, and no more than 2 to 3 weeks.

How Long Does a Mortgage Offer Last?

A mortgage offer will typically last for up to 6 months. Some lenders may put a completion deadline on the offer instead of a fixed time limit, but it’s dependent on the individual lender.

If the transaction isn’t completed in time, or you’re quickly approaching the deadline then you can contact the lender to try and get an extension on the offer to avoid starting the whole process again from scratch.

Hamlet Homes Warrington are your local property experts for the Warrington area. Call us on 01925 235 338 or email manoj@hamletwarrington.co.uk to chat with a member of our friendly and experienced team.

If you are looking for an agent that is well established, professional and communicative, whether you’re buying, selling or looking for an investment opportunity, then contact us to find out how we can get the best out of the Warrington property market.

Email me on manoj@hamletwarrington.co.uk or call on 01925 235 338 – we are based on the Warrington Business Park, Long Lane, WA2 8TX. There is plenty of free parking and the kettle is always on.

Don't forget to visit the links below to view back dated deals and Warrington Property News.

Hamlet Homes Warrington, your local Estate Agent
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Hamlet Homes Warrington LinkedIn Page
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Monday, 19 July 2021

Warrington Homeowners Profit by £45,750 in Last 5 Years

Investing in property has historically been a sound investment, yet alternative investments (like Cryptocurrency) have been gaining traction over the last five years. So, should we all ditch buying our own home and buy Bitcoin?

Cryptocurrency with such names as Bitcoin and Ethereum are being bandied about as the new investment vehicle everyone should be investing in. But is Crypto a sound investment or just an ‘end of the seaside pier one arm bandit’ speculation?

Well to start, I need to discuss the difference between investing and speculation.

I have always seen investing as making a thorough detailed evaluation (and you are realistically sure your principal lump sum is relatively safe), you then have an opportunity to make a profit. Whilst speculating is all about putting your money into an asset that has ambiguous protection of your principal lump sum … and you have an opportunity to make a large profit but also the potential to make a huge loss.

In a nutshell, investment should be as interesting as watching paint dry and speculating should be as exciting as putting all your money on red on the roulette wheel.

So, let’s see what has happened to both Cryptocurrency and Warrington property in the last five years.

The average Warrington home five years ago was worth £196,900, today it’s worth £242,650.

We now ask, what would have been the return if you had invested the same amount in Bitcoin?

If you had invested £196,900 into Bitcoin in 2016, it would be worth £10,002,500 today.

What about the return if you had invested the same amount in Ethereum?

If you had invested £196,900 into Ethereum in 2016, it would be worth £32,514,100 today.

Yet only In June, when China placed stringent controls on how its population can use Cryptocurrency, Bitcoin dropped in value by 30% in one day. Also, this year, we saw another fall in Bitcoin when Elon Musk tweeted that Tesla were banning the acceptance of Bitcoins to buy its cars.

Can you imagine the value of your Warrington home dropping in value by £74,008 in just one day because of one tweet?

So, if Cryptocurrency is speculation and extremely high risk, surely buying your Warrington home is an excellent investment?

It is my opinion that purchasing a home to live in is a massive financial choice that can give you peace of mind and a lovely place to live, yet it is not an investment. I know this is going to sound strange coming from someone in the Warrington property industry, but whilst I know it’s common for people to think of their Warrington home as an investment, I believe nothing could be further from the truth.

I am not suggesting every 20 and 30 something should avoid homeownership, but if you are edging towards buying a Warrington home because you think you are making a savvy investing choice, think again.

The concept that the home you live in can be an investment comes from the statistic that, historically, property values increase. We all know someone, our Mum and Dad or Grandparents for example, who purchased their Warrington home in the 1950’s or 1970’s for the price of an Xbox and it’s now worth more than you make in ten years in salary.

Yet, I believe, it’s not an investment only because it goes up in value.

Between 1989 and today, Warrington property values, after removing inflation, have gone up by 50.37% … sounds great until you realise that is only 1.57% growth per annum (after inflation).

Sounds rubbish, doesn’t it?

But guess what? Does it really matter?

Even though your Warrington home’s value has outperformed inflation, there are other reasons your Warrington home is not an investment.

A real investment needs more than the outlook of an increase in value.

A home has a more important primary purpose.

Possibly the specific biggest reason why your Warrington home is not an investment is because its prime purpose is providing a roof over the heads of you and your family. One of the most rudimentary issues that makes an investment an investment, is your capability to decide the timing of your possession of the investment.

A true investment requires you to buy it and sell it at times (and under situations) that are probable to exploit your investment return, yet since your Warrington home is your family’s shelter, you will have hardly any power over the sale and purchase of your Warrington home from an investment perspective.

The absence of ‘real’ control over the timing of buying and selling our Warrington homes (and note I use the word home and not house) has had a significant harmful effect on property as an investment.

In all my years in the property profession, I have seen numerous Warrington people buy houses at the top of the market (1988 and 2008) because that was the time that they required a home for their family, but those same people became stuck, having to sell their homes a few years later because of personal circumstances, albeit for a loss.

Then I have seen other Warrington people buy at the bottom of the market (1993 and 2011) because that was the time that they also required a home for their family, and those same people had to sell their homes a few years later due to personal circumstances, albeit for a huge profit. Are the second set of people more savvy investors? No, it was just good or bad timing, and that is not uncommon when it comes to buying homes, and so has to, in my opinion, exclude a home as an investment.

A Warrington home cannot be an investment if you never plan to sell it … and not buy another home.

While it is fact that Warrington homes usually increase in value, there is only a partial opportunity to tap into that growth. The best way to sell your Warrington home is after it has experienced a massive amount of value increase, sell at the top of the market, move into rented accommodation, then buy at the bottom of the market. Nevertheless, how do you know when it is the top and bottom of the property market (and moving home is considered the third most stressful thing you can do after death and divorce)?

That doesn’t sound like an investment to me, does it to you?

Ok, most people sell and buy another home, so when you do sell your Warrington home, you will have to use the profit you have made from the sale of your original Warrington home to purchase the next home as you will be moving from one home to another. This means your profit (equity) is trapped profit.

The only time that doesn’t happen is when you either trade down to a less expensive home, or move into rented accommodation, yet both scenarios are quite rare occurrences.

Using your Warrington home as a bank account?

In the early 2000’s, many banks and building societies were encouraging homeowners to re-mortgage their homes as property values rose by 15%+ a year. By extending the term of the mortgage, you could easily borrow £20k, £30k+ for fancy holidays and new cars and the monthly mortgage payments would be lower – that was like free cash!

Known as equity-stripping, a lot of Warrington homeowners found out the hard way during the Credit Crunch that they had in fact bought themselves negative equity when property values crashed. That left them powerless to re-mortgage to lower the monthly payments when the interest rates dropped in 2009, yet unable to sell to move to a less expensive property because of the negative equity. Finally, to add insult to injury, as the mortgage term had constantly been pushed into the future, they had the prospect of having to pay their mortgages until their late 60’s/early 70’s.

Bitcoin doesn’t need a boiler replacing every ten years.

Every homeowner knows it costs money to maintain their home. Replacement windows, soffits, roof, carpets, kitchens, bathrooms, boilers, flat roofs – the list goes on. Over the 25 years of a mortgage, that can add up to many tens of thousands of pounds, yet one can justify those costs since your home is providing you shelter. But that gets back to the original principle - a home is a shelter, and not really an investment.

But isn’t renting out a property an investment?

The solid fact is that your Warrington home, the home that you live in, basically won’t provide any form of cashflow when you are a homeowner, unless you move out and rent the whole house to someone else. That is called a buy-to-let investment – of course that is an investment and I know many Warrington buy-to-let landlords who make a decent living at renting out their rental properties.

Yet, that wasn’t the point of the question I asked originally – “is buying a home, for you and your family to live in, a good investment?”

Of course, you could take in a lodger or rent rooms out as an Airbnb, and this will help you pay your mortgage, Council Tax and other costs associated with homeownership, so it can be worth it for many. However, an “Englishman’s home is his castle” is quite apt and most of us aren’t good with sharing it with strangers.

What do we buy homes for then?

To conclude, I believe the principal reason why so many Warrington people consider their home (not house) to be an investment is because we are all obsessed about how much our home is worth.

We are all guilty of checking out Rightmove when a property on our street comes up for sale. Yes, we are nosey by looking at the pictures, yet the most important thing is what price they’re asking and how it compares to our home. Our home is our biggest tax-free asset and especially when it goes up in value, which it certainly has done for the last nine or ten years, it certainly can feel like an investment then.

However, during the five property crashes that we’ve had since World War II, not only did property values not increase, but they fell. Some dropped dramatically. For homeowners in that position, not only was their home not an investment, but it had become a huge liability.

Thank you for taking the time and trouble in reading this article. I must stress that I’m talking about our own homes as an investment and not buy-to-let investment which is a completely different animal and certainly is an investment, if done correctly.

One final thought - for those of you buying and selling Cryptocurrency – enjoy your roller coaster. For me, the thing about property is this; you can touch it, you can feel it, there is something reassuring about a 9-inch red brick and tiled roof. It’s home, it’s where you bring up your family, it’s where memories are made and the best investment you can make in life is with them, your family … and for that - it is a priceless and enduring investment.

These are my thoughts, please tell me what yours are.

Don't forget to visit the links below to view my previous blog articles from the Warrington Property blog and check out our social media sites.

Hamlet Homes Warrington, your local Estate Agent
Follow my Warrington Property Market Blog
Hamlet Homes Warrington LinkedIn Page
Hamlet Homes Estate Agents Warrington Facebook Page
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Friday, 16 July 2021

Moving to Warrington: Pain Free Packing Tips

When you ask most people what’s been the most stressful thing they’ve gone through, many of them will put ‘moving house’ up there with changing jobs or having a new baby. Not only do you have the long process of trying to find a house to suit your needs, there’s months of paperwork and phone calls with solicitors, switching your utility suppliers to a new house, and sorting out things like new schools for the children. This is all before the actual moving day, where you may find yourself running around trying to cram things into boxes.

One thing that can help with the stress of moving is being organised, and this is especially important when it comes to packing. If you don’t want to be dashing around on the morning of the move, follow these tips for pain-free packing and a smooth move.

Declutter first

A new home means a fresh start, so in the weeks before the move, spend time decluttering and deciding what you really want to take with you. Garages, sheds and lofts can be real clutter zones after you’ve lived in a house for a few years, so you may want to get a skip or hire a van when you clear them out, making it easy to get rid of junk.

Try not to send too much to landfill. Charity shops will usually be grateful for donations, and some will even collect larger items such as furniture. Once you’ve had a big declutter, the job of packing will seem much less daunting.

Buy supplies

Having the right supplies is important, so make sure you have:
  • Plenty of strong boxes
  • Tape and tape guns
  • Labels and permanent markers
  • Bubble wrap
  • Strong bin bags
You can buy packing boxes online, or pick them up free from Freecycle or Facebook, as you’ll often find local people who’ve just moved and who want to get rid of their boxes.

Start early and pack things professionally

The earlier you start packing, the better the job you’ll do. Most people have things in their house they don’t use often, from decorative items to books, so start with these items that you won’t mind putting away for a while.

To pack properly, you should:
  • Find the right size box and assemble it with plenty of tape
  • Decide whether it will be used for fragile items, and if so, line it with bubble wrap
  • Put the heaviest items in first, then lighter items on top, wrapping in bubble wrap if needed
  • Don’t overfill boxes. If you have heavy items, pack them in a lot of small boxes rather than one very heavy, bulky box
  • Seal the top using plenty of tape
  • Clearly label the box with the name of the room and a brief description of the contents
  • Make sure the box is clearly labelled ‘fragile’ if your removal company need to take extra care

Pack a suitcase each and an essentials box

A few days before the move, pack a suitcase for each member of the family with the clothes they wear most often, not forgetting school and work uniforms, and then start gathering essentials together in a big plastic box. This box will contain the items you’ll need on the day of the move, from paperwork and toys to teabags and a kettle, so you don’t need to unpack boxes the minute you arrive.

Once you know which essentials to keep handy, you can go from room to room and pack up, using the same tips as before. The aim is that by the night before the move, the only things you’ll have left unpacked will be bedding, a few clothes, and some kitchen essentials.

The day of the move

When you’re getting ready on the day of the move, you can pack as you go. For example, bedding can be rolled up and placed in thick bin bags, ready to go to the new house. It’s worth having a couple of extra boxes made up so that you can throw in any odd bits and bobs as the removal company do their job.

It’s always recommended to hire a professional removal team, as they’ll make moving day so much easier. If you’ve packed everything properly, then it should be a smooth process to get everything in the van and ready to go. If you really don’t like the thought of packing, then you may choose to use a professional packing service, where everything is packed up for you a couple of days before the move, saving you time and stress.

If you are planning on moving to the Warrington area soon, why not telephone us or call in. We’ll be happy to advise you on our available properties in the area. Contact us on 01925 235 338 for more information.

If you are looking for an agent that is well established, professional and communicative, whether you’re buying, selling or looking for an investment opportunity, then contact us to find out how we can get the best out of the Warrington property market.

Email me on manoj@hamletwarrington.co.uk or call on 01925 235 338 – we are based on the Warrington Business Park, Long Lane, WA2 8TX. There is plenty of free parking and the kettle is always on.

Don't forget to visit the links below to view back dated deals and Warrington Property News.

Hamlet Homes Warrington, your local Estate Agent
Follow my Warrington Property Market Blog
Hamlet Homes Warrington LinkedIn Page
Hamlet Homes Estate Agents Warrington Facebook Page
Hamlet Homes Estate Agents Warrington Twitter Page

Tuesday, 13 July 2021

£415,755 – ‘Wood’ You Pay That for a Warrington Semi-Detached House?

The value of an average Warrington semi-detached house has increased in value by £25,906 in the last 12 months, an increase in value of 13.21%.

Yet the costs of building a Warrington home have shot up even more in the last 12 months, meaning the price of Warrington new homes and any building works you do to your Warrington home in the coming months and years could be a lot higher.

The British house building profession is experiencing a building materials supply problem. Everything from cement to bricks, timber and roof tiles, plastic guttering, copper wire and pipe to insulation, even kitchen sinks have become scarce – and when people can find them, they are costly.

For example, looking at the timber industry, three-quarters of the UK's building timber comes from abroad, so lockdowns around Europe put a restraint on the timber processing industries of Sweden, Lithuania and Latvia throughout 2020. In addition, building material supply chains were interrupted due to the lockdowns imposed by their governments, resulting in many sawmills in those countries restricting shift work to comply with their country’s social distancing rules. Some mills even stopped all work for eight weeks last year, meaning they were incapable of cutting, milling or treating timber, causing their existing stocks of building wood to run dry.

Yet, whilst we were all in lockdown, everyone started doing DIY projects, so the public demand for building timber in the UK remained high, giving little opportunity for UK sawmills (let alone North-eastern Europe) to catch up and restock to the levels previously held before the pandemic.

Building timber costs 112% more than a year ago, steel RSJ’s are a lot more expensive because iron ore has gone up 120.1% whilst aluminium is up 56.8%, and copper is up 59.7%.

All the blame cannot be laid at the feet of the virus and lockdown. The ‘B’ word caused issues with supply at the start of the year. Building materials are a worldwide supply chain issue; this Spring’s Suez boat crisis, when many boats were diverted around Africa (as the length of time the blockage was going to last was unknown) exacerbated the problem. All this has combined to make the cost of sending a 40ft container from China to Tilbury Docks £7,576 today, compared to £1,195 just before the crisis. Also, supplies of sand and cement are particularly low with massive demand from the large £98bn High Speed 2 (HS2) rail project. All this combined is affecting many building projects, big and small, across the UK.

If an average Warrington semi-detached house had risen by the price of building timber in the last 12
months, today it would be worth £415,755, not the current £222,017.

RSJ (steel joists) take twenty weeks to arrive, compared with the typical five weeks, whilst plasterboard is being rationed with weeks of delays for the ‘good stuff’ and MDF wood, usually takes seven days to arrive; now it takes over a month. Roof battens need to be ordered a month in advance, whilst pre-lockdown they were commonly held in stock by every building merchant.

Demand for building materials has increased so quickly because many British homeowners are driving the explosion. Those people in safe jobs with little opportunity to spend money on foreign holidays and fancy restaurants decided to invest in their property and gardens. According to the Bank of England, this craving for home improvement has particularly exploded since the mature generation started to be double jabbed (their savings accounts have increased by £180bn during the pandemic).

As I have explained in previous articles, these increases in the price of raw material will fuel inflation, possibly affecting interest rates upward. An increase in interest rates will make a material difference to the value of Warrington property. To what extent? Please read my previous articles on the Warrington property market.

Please do share your stories of issues with builders and building materials over the last 15 months in the comments. I appreciate any stories you can provide to help others in Warrington.

Friday, 9 July 2021

7 Exclusive Tips for First Time Home Owners in Warrington

It’s great news that you have become a first-time homeowner and have got the keys to your new place, but it’s likely you may be unsure of a few things. After all, buying a home was never top of the school curriculum, was it?

So, we at Hamlet Homes Warrington have used our experience and knowledge to put together seven tips for first-time homeowners.

Tip Number One

Rest! We know this sounds a bit daft, but you’ve gone through the process of buying your first home and it may well all have been a bit stressful. So, give yourself a break. Time to think about how amazing it is that you have the keys and you’re now a homeowner. By doing this, you’ll give yourself time to think and to plan things like decorating.

Tip Number Two

Get to know everything. Seriously, you’re in a new house but do you know how to turn the heating on? Do you know where the stopcock is and what it actually does?

You will also want to make sure you have the best broadband connection, what day is bin day and where your water, gas and electricity meters are located!

All too often, we see people get in a muddle a little down the line not because they have done anything wrong, but because they are not sure what’s what. Take time to find things out!

Tip Number Three

Lock it up, code it right. You’ve moved to a home that you can call your own. Now is the time to change the locks and the security code for the alarm. Yes, this can seem a little negative when you’re still in the champagne-quaffing stage of being a new homeowner, but safety first!

You may not know who has a key or who used to pop by now and then or look after the property when the previous householders were out – so who might still have access?

Tip Number Four

Clean it up! Do a deep clean throughout your new home. That includes skirting boards, behind radiators, door frames and behind appliances! Once you’ve done this, it will instantly feel more like your home, and you can be reassured that everything is dirt free. Obviously, before you do this, get the kettle out and the teabags!

Tip Number Five

Home in on security. Security must be a priority, even if you live in a nice leafy area. These days many people choose to have video camera doorbells and CCTV cameras high on a wall. It’s amazing what you can do with your phones now, and soon you could be checking parcel deliveries at the touch of a button.

Ask in local Facebook groups or ask friends and colleagues for recommendations as there are different systems out there that could be useful.

Tip Number Six

Community is the buzzword at the moment, and by that we simply mean the people who live near you – your neighbours! It’s good to be sociable but think of the added benefits. Neighbours will know the local playgroups, the best pubs and restaurants, trusted traders, garages, and convenience shops, so it’s advantageous to get to know the people around you.

Tip Number Seven

This might seem dull perhaps, but make sure you sort your paperwork and filing out. You may well have lots of paperwork from your move, whether that’s directly related to the house, or associated documents like insurance or utilities paperwork. It may seem like a chore when all you want to do is enjoy your new place, but it will pay off in the long run.

When you’ve bought your first home, you want to get on and enjoy it, of course you do, but think long term!

First time buyer but not found your perfect home yet? We are always happy to help. Call us on 01925 235 338 or email manoj@hamletwarrington.co.uk to chat with a member of our friendly and experienced team.

If you are looking for an agent that is well established, professional and communicative, whether you’re buying, selling or looking for an investment opportunity, then contact us to find out how we can get the best out of the Warrington property market.

Email me on manoj@hamletwarrington.co.uk or call on 01925 235 338 – we are based on the Warrington Business Park, Long Lane, WA2 8TX. There is plenty of free parking and the kettle is always on.

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Monday, 5 July 2021

Is Warrington Heading Towards a House Price Crash?

Warrington house prices dropped by 1.4% last month, according to the Land Registry. This means the annual rate of house price growth in Warrington has eased to 8.8%, a drop from the 10.9% yearly rate experienced only a few months ago. Don't get me wrong, this is still decent growth in local house prices in anyone's eyes, yet the 'pedal to the metal' growth rates seen only a few months ago do appear to be easing.

Looking at the national figures, many people were concerned the UK property market was overheating as spring saw annual growth of 9.9%, the highest rate of house price growth documented since June 2007 (when national house prices were rising by 10.8% pa). It was only a matter of a few months later the Credit Crunch hit, and the value of the average UK home plummeted from £190,032 to £154,452 in 18 months, a drop of 18.7%.

Government economic measures such as the Furlough Scheme and the Stamp Duty Holiday have so far shielded the Warrington property market from the worst economic recession since 1709.

So, the question is, can this growth in Warrington house prices continue, or is this the start of a house price crash?

One thing is for sure, looking at the number of For Sale boards going up and turning to sold just as quick, shows this market is not maintainable for the long term. Most of the Warrington people looking to move home have brought forward their home-moves from 2022/3 to this year because of the Stamp Duty Holiday and the lifestyle choice of wanting a bigger garden/office space at home.

Nonetheless, the doom-mongers in the press say there will be a second wave of house sellers that will flood the Warrington property market in the autumn and winter when furlough ends. They believe many of the 3.4m people still on furlough will be made redundant when furlough finishes at the end of September 2021 forcing them to move home.

This was the catalyst for the house price slump in 2008/9 mentioned above, when many Warrington homeowners dumped their homes onto the Warrington housing market.

After all, many Warrington homeowners lost their jobs and had mortgages paying 6% to 7% in interest payments.

However, the devil is always in the detail. The industry groups with the highest take-up rates of furlough are the hospitality (public houses) sector, where 70% of staff are furloughed. 65% of hotel staff are furloughed, and 44% people in the creative arts and entertainment industry are furloughed. Most employees in these sectors are in their 20's and early 30's and are tenants, not homeowners. This is going to be more of an issue for landlords than homeowners.

And of those furloughed homeowners who do unfortunately get made redundant later in the year, looking at the last four most recent house price crashes, buyers were wrestling with significant declines in mortgage affordability. For example, back in 1988, average mortgage rates were 13.9% before that crash and in 2007 (the Credit Crunch crash) 6.5%. Whilst today, they are under 2%, meaning the mortgages are a lot more affordable, and most Warrington homeowners who get made redundant will be able to ride out the storm better.

But surely, if Warrington house prices are rising, won’t Warrington homes become unaffordable?

Well, with low-interest rates, this means Warrington homes are still relatively affordable. In 1989, the house price to earnings ratio was 5.4 to 1 (i.e. the average house was 5.4 times the average UK salary), whilst today that stands at 8.8 to 1. It’s no wonder some people are concerned there will be a house price crash (as there was in 2008 when that ratio hit 7.5 to 1).

However, it doesn't matter what the house price to earnings ratio is .... it is what percentage of your income is required to pay your mortgage.

In 1989, 74.6% of your income was required to service an 80% loan to value mortgage on an average UK home (i.e. you borrowed 80% of the value of your house on a mortgage). In the 1990s that percentage dropped yet rose steadily over the next decade and a half, so by the time we got to 2008, that was an equally eye-watering figure of 61.6% of your income to service an 80% mortgage.

Today, it's only 35.9% of your income to service an 80% mortgage because of low interest rates.

So, if the issue is not the affordability of houses, what is the problem for Warrington homeowners?

Interest rates!

Bank of England interest rates will affect what people pay on their mortgage (higher interest rates normally mean higher mortgage payments). Interest rates are used to reduce inflation, so if inflation rises, interest rates also rise to bring inflation back under control.

UK inflation has just gone through the 2% barrier, and I believe by the end of this year or early next, it will touch 4% or 5%. In normal circumstances, this would trigger the Government (or now the Bank of England) to raise interest rates. Yet, we had a similar scenario in the late 1980s/early 1990s with a spike in inflation to 8.5% due to a shortage of raw materials and labour, but this was soon sorted out, and inflation dropped quite quickly thereafter.

In the coming year, a shortage of raw materials might be an issue. If there is a shortage of raw materials (supply problems are being found in key items such as timber, concrete, aggregates and steel), this will fuel construction and manufacturing costs upwards.

Next, will there be a shortage of labour? Some say it won’t be an issue (as unemployment will be higher), yet there are certain sectors of the economy that have an imbalance of trained staff of specialised jobs or people not wanting work in that type of job in the first place.

For example, many hospitality and dining establishments are reporting a shortage of staff because they were often filled with hard-working European migrants. I have read reports of London restaurants advertising for chefs and waiting staff, who would have received 1000+ enquiries for such jobs pre-pandemic to only be receiving applications that could be counted on two hands this summer. The hospitality and dining sector was hit harder than most, having to stop trading during the three lockdowns and working under firm restrictions. This led to the majority of staff being placed on furlough (as mentioned above, 7 in 10 are still on furlough), which has prompted some to ride out the pandemic in their own Country.

The question is – will they return? If not, to entice them back restaurants will have to increase the wages they pay to attract the staff, which in turn will mean they will have to put their prices up (i.e. inflation). If businesses have to put their wages up and the cost of raw materials continues to rise, prices for everything will rise, and at this point, higher interest rates will kick in.

But how will increased interest rates affect the Warrington property market?

Thankfully, 91% of all new mortgages being written are fixed interest rate mortgages and 78% of all existing UK mortgages are fixed-rate (compared to 32.8% in the credit crunch) ... meaning we won’t have so many houses being dumped on the housing market like we did in the Credit Crunch, because on a fixed rate mortgage, if interest rates rise - mortgages don’t follow suit.

And that’s the key … unemployment combined with high-interest rates caused many Warrington homeowners to put their property onto the market in 2008/9. Tied in with curtailed demand for property, because it was really difficult to get a mortgage (that’s why it was called the credit crunch) ... we had an oversupply and subdued demand of Warrington homes - causing house prices to drop by 16% to 19% depending on what type of property you owned.

So, a good bellwether and indicator on what will (or will not) happen to Warrington property prices is the number of properties for sale at any one time.

There are only 178 properties available to buy in Warrington today, low when compared to the 14-year average of 822 properties for sale in the town, whilst at the height of the Credit Crunch, there were 1,878 properties for sale at one point in Warrington.

As we look to the future, if you want a crystal ball of what will happen to the Warrington property market ... you won’t go that far wrong by getting yourself on the property portals and seeing how many properties are for sale.

These are my thoughts ... what are yours?

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