Warrington Property Blog: August 2017

Thursday, 24 August 2017

Supply and Demand Issues mean Warrington Property Values Rise by 3% in the Last 12 Months

The most recent set of data from the Land Registry has stated that property values in Warrington and the surrounding area were 3.08% higher than 12 months ago and 13.54% higher than January 2015.

Despite the uncertainty over Brexit as Warrington (and most of the UK’s) property values continue their medium and long-term upward trajectory. As economics is about supply and demand, the story behind the Warrington property market can also be seen from those two sides of the story.

SUPPLY

Looking at the supply issues of the Warrington property market, putting aside the short-term dearth of property on the market, one of the main reasons of this sustained house price growth has been down to of the lack of building new homes.

The draconian planning laws, that over the last 70 years (starting with The Town and Country Planning Act 1947) has meant the amount of land built on in the UK today, only stands at 1.8% (no, that’s not a typo – its one point eight percent) and that is made up of 1.1% with residential property and 0.7% for commercial property. Now I am not advocating building modern ugly carbuncles and high-rise flats in the Cotswolds, nor blot the landscape with the building of massive out of place ugly 1,000 home housing estates around the beautiful countryside of such villages as High Legh, Lowton and Lymm.

The facts are, with the restrictions on building homes for people to live in, because of these 70-year-old restrictive planning regulations, homes that the youngsters of Warrington badly need, aren’t being built. Adding fuel to that fire, there has been a large dose of nimby-ism and landowners deliberately sitting on land, which has kept land values high and from that keeps house prices high.

DEMAND

Looking at the demand side of the equation, one might have thought property values would drop because of Brexit and buyers uncertainty. However, certain commenters now believe property values might rise because of Brexit. Many people are risk adverse, especially with their hard-earned savings. The stock market is at an all-time high (ready to pop again?) and many people don’t trust the money markets. The thing about property is its tangible, bricks and mortar, you can touch it and you can easily understand it.

The Brits have historically put their faith in bricks and mortar, which they expect to rise in value, in numerical terms, at least. Nationally, the value of property has risen by 635.4% since 1984 whilst the stock market has risen by a very similar 593.1%. However, the stock market has had a roller coaster of a ride to get to those figures. For example, in the dot com bubble of the early 2000’s, the FTSE100 dropped 126.3% in two years and it dropped again by 44.6% in 9 months in 2007… the worst drop Warrington saw in property values was just 20.94% in the 2008/9 credit crunch.

Despite the slowdown in the rate of annual property value growth in Warrington to the current 3.08%, from the heady days of 9.23% annual increases seen in mid 2014, it can be argued the headline rate of Warrington property price inflation is holding up well, especially with the squeeze on real incomes, new taxation rules for landlords and the slight ambiguity around Brexit. With mortgage rates at an all-time low and tumbling unemployment, all these factors are largely continuing to help support property values in Warrington (and the UK).

For more thoughts on the Warrington Property Market, please visit the Warrington Property Market Blog.

You can always keep an eye on my blog for any properties I feel will make a good buy to let opportunity, or if you are after a second opinion then email me on manoj@hamletwarrington.co.uk or call on 01925 235338. If you are in the area, feel free to pop into the office – we are based on 6 Bankside, Crosfield St, WA1 1UP. 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.

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Thursday, 17 August 2017

Warrington Vs Morley. Which town should you invest in?

Well we are deep into the children’s summer holidays although we have hardly the typical summer weather this year.

I have had an increase in local Warrington home owners walking into the office, I believe this is because we have the Summer Beach Fair on Bank Park situated just opposite our office.

I had an interesting chat with a Mike, the reason why he stood out to me is because he has never invested before and he must have named several towns he was looking to invest in. Mike is a local guy and knows Warrington well. For some reason he was talking about towns in the North East of the country that seemed to be investable to him.

I am a firm believe that this is a long term strategy usually something to add to the pension pot. So why start your BTL Empire in a town you do not know and miles away. The beauty about investing in bricks and mortar is you can physically hold it and see it unlike stocks and shares.

The town Mike was looking at is Morley just outside of Leeds, now both Warrington and Morley are of similar size and, taking into account the surrounding villages, have similar average property values.

Now the average property value in Morley is £172,350 and in Warrington it is £159,040, however the rents are slightly different in each town Morley has an average rent of £624 whilst in Warrington the average rent is £574. This gives both towns an almost identical average yield of 4.3% I have done a little research to compare the two seemingly similar towns in more depth.

Investing in property is all about what you buy the property for. You make your money with your buying value, rather than your eventual sale value.

Over the last year, property values in Warrington from June 2016 to June 2017 have risen by 10% on detached houses 12% in Terraced (the most popular rental properties in Warrington). In Morley Detached houses rose by 7% and terrace houses rose by 8%.

This means if you are considering buying now, our town of Warrington is still a great place to invest especially as you can achieve a similar yield on a property without a bigger deposit! And the capital growth is just as competitive.

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

Thursday, 10 August 2017

Warrington’s 6,574 Mortgage Time-Bombs

According to my research, of the 70,510 properties in Warrington, 30,433 of those properties have mortgages on them. 91.1% of those mortgaged properties are made up of owner-occupiers and the rest are buy-to-let landlords (with a mortgage).

But this is the concerning part. 6,574 of those Warrington mortgages are interest only.

Each year between 2017 and 2022, 79 of those households with interest only mortgages will mature, and of those, 20 households a year will either have a shortfall or no way of paying the mortgage off. Now that might not sound a lot – but it is still someone’s home that is potentially at risk.

Theoretically this is an enormous problem for anyone in this situation as their home is at risk of repossession if they don’t have some means to repay these mortgages at the end of the term, with the typical term being 25 to 35 years. Banks and Building Societies are under no obligation to lengthen the term of the mortgage and, when deciding whether they are prepared to do so or not, will look at it in the same way as someone coming to them for a new mortgage.

Endowment Mortgages

Back in the 1970s and 1980s, when endowment mortgages were all the rage, having an endowment meant you were taking out an interest only mortgage and then paying into an endowment policy which would pay the mortgage off (plus hopefully leave some profit) at the end of the 25/35-year term. There were advantages to that type of mortgage as the monthly repayments were lower than with a traditional capital repayment and interest mortgage. Only the interest, rather than any capital, is paid to the mortgage company - but the full debt must be cleared at the end of the 25/35-year term.

Historically plenty of Warrington homeowners bought an endowment policy to run alongside their interest only mortgage. However, because the endowment policy was a stock market linked investment plan and the stock market poorly performed between 1999 and 2003 (when the FTSE dropped 49.72%), the endowments of many of these homeowners didn’t cover the shortfall. Indeed, it left them significantly in debt!

Nonetheless, in the mid 2000s, when the word endowment had become a dirty word, the banks still sold ‘interest only’ mortgages. However, this time with no savings plan, endowment or investment product to pay the mortgage off at the end of the term. It was a case of ‘we’ll sort that nearer the time’ as property prices were on the rampage in an upwards direction!

Thankfully, the proportion of interest only mortgages sold started to decline after the Credit Crunch, as you can see looking at the graph below, from a peak of 43.81% of all mortgages to the current 8.71%.

The Future of Mortgaged Properties

Increasing the length of the mortgage to obtain more time to raise the money has gradually become more difficult since the introduction of stricter lending criteria in 2014, with many mature borrowers considered too old for a mortgage extension.

Warrington people who took out interest only mortgages years ago and don’t have a strategy to pay back the mortgage face a ticking time bomb. It would either be a choice of hastily scraping the money together to pay off their mortgage, selling their property, or the possibility of repossession (which to be frank, is a disturbing prospect).

I want to stress to all existing and future homeowners who use mortgages to go in to them with your eyes open.

You must understand, whilst the banks and building societies could do more to help, you too have personal responsibility in understanding what you are signing yourself up to. It’s not just the monthly repayments, but the whole picture in the short and long term.

Many of you reading my blog ask why I say these things. I want to share my thoughts and opinions on the real issues affecting the Warrington property market, warts and all. If you want fluffy clouds and rose tinted glasses articles – then my articles are not for you. However, if you want someone to tell you the real story about the Warrington property market, be it good, bad or indifferent, then maybe you should start reading my blog regularly.

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

Thursday, 3 August 2017

Ask Andy – ‘What do I need as a Warrington tenant to pass references?’

Question:

‘Hi Andy,

I want to move out of my parents’ house for the first time and into a rented house, but because it’s my first time renting that I’ll struggle with references with landlords and agents. What do agents and landlords want from references and what do I need to pass references?

Thanks,

John’

Andy’s Answer:

First of all, good luck in finding a new home! There are many parts to references but hopefully I can put your mind at ease.

I would say there are four main components to references: affordability, credit checks, income references and landlord references. Obviously if you have never rented a property before then you won’t have a landlord, so this part wouldn’t apply to you at the moment.

Agents and landlords should also check your eligibility to reside in the UK with what’s called a ‘right to rent’ check. This is pretty simple and you can use a range of documents to show this – the simplest being a passport/identification card and visa if applicable.

Affordability

The standard test for affordability is that your annual income must be 30x the monthly rent. For example, a property which is £500pcm would require an income of £15,000 per annum. If you were moving in with someone else, the income between you per year would have to reach that total. This is to ensure that the rent is affordable for you.

Credit Checks

A credit check is normally conducted to check that you have no history of unsatisfied county court judgements (CCJs), insolvency voluntary agreements (IVAs) or bankruptcies.

Dependant on the landlord and on the agent, if an applicant has a CCJ, they may accept your application subject to some criteria – the total is under a certain amount, it isn’t for unpaid rent, even if you have been making regular payments towards the debt and can substantiate that, etc.

In some cases, some agents/landlords will accept a failed credit check with a guarantor. However, in most cases, the guarantor must be a homeowner, pass the same affordability and income references as a tenant and then sign a deed of guarantee for the tenancy.

Income References

Your income references link in to the affordability checks.

If you are employed, your annual income will be checked, your contract length (whether you are permanent or temporary staff and to ensure your contract runs for at least the term of the tenancy). Your employer will also most likely be asked whether they consider you to be a trustworthy individual.

If you are self employed, to pass references you will normally need at least 12 months worth of accounts. Providing your accountants’ details is normally required in conjunction with bank statements and self assessments to evidence your income.

For those applicants who are in receipt of benefits, they will need to produce awards letters to evidence that part of their income.

While this is not an extensive list of applicant’s situations, these are the most common ones.

Landlord References

Landlord references are normally comprised of the following questions:

· Start date of tenancy, length of tenancy and end date of tenancy (if notice has been given)

· Rent during the tenancy

· Were there any rent arrears during the tenancy

· Were there any late payments/issues with rent payments

· Were there any damages during the tenancy/general condition of the property during the tenancy

· Would you rent to this tenant again

· Any other comments

This appears like a lot of information, but your agent or landlord should be able to talk through their specific requirements with you and help you in your applications. I wish you the best of luck house hunting!

If you have any further questions, feel free to drop me an email or give me a call. Email me on andy@hamletwarrington.co.uk or call on 01925 235338. If you are in the area, feel free to pop into the office – we are based on 6 Bankside, Crosfield St, WA1 1UP. 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.