Rents reach a record high an April survey says

A recent survey by Letting Agency Network LSL Property Services has advised that the average rent paid by tenants in England and Wales reached a record monthly high of £692.00 in April.  This is an increase of 0.8% compared with the previous month and was 4.4% higher than a year earlier. 

This very much accords with the reports I am receiving from the Scottish rental market in general and Dundee and the near surrounding area in particular.  With first time buyers still not being able to get on the property ladder but still requiring to move or set up on their own there is an increasing tenant demand for properties.  Following a recent discussion with a property investor client I would reiterate that I think this situation is a win win for property investors.  At this stage buyers can purchase properties at a good price and achieve a good rental yield.  At the point that rental demand starts dropping, the main reason for which would be the banks starting to support first time buyers getting on the property ladder, then you will see substantial capital appreciation and increasing ability to resell your property for a higher price than at which you purchased it.

I would remind you of the Property Investor Seminar on 23 June 2011.  To register please e-mail Lesley Rorrison – lesley.rorrison@blackadders.co.uk.

I will continue to report on trends.

Lindsay Darroch
Head of Property Services

End to housing market boom or bust

I very much welcomed the Joseph Rowntree Foundation’s recent call for an urgent and fundamental reform of the housing market following the failure of policy makers to learn the lessons from previous boom and bust cycles, which have lead to the UK having one of the most persistently volatile housing markets in the world. Julia Unwin, Chief Executive of the JRF said “Since the 1970s there have been four boom and bust cycles in the housing market.  This persistent instability distorts housing choices, inhibits house building and drives arrears and possession rates, putting people at greater risk and creating wealth and equality between the generations.”

Readers of previous blogs will know my calls to the UK and Scottish Governments to tweak the Stamp Duty and Capital Gains Tax legislation, in particular with a view to dealing with people who sell on properties, other than their sole or main residence, in a period of seven years.  I also believe that putting the housing market on a solid footing requires in the first instance help for first time buyers and some form of first time buyer fund should also be created. 

The JRF housing market taskforce have recommended:-

  • An increase in the supply of housing
  • Reform of both Stamp Duty and Council Tax and a better safety net for homeowners based on shared responsibility between lenders, borrowers and the Government.

I think the recommendations are very sensible and I would urge the Government to recognise these and do all they can to get the UK housing market in  on a firm footing.  This will reap untold benefits for the economy as a whole.

Lindsay Darroch
Head of Property Services

Now is the time to buy – lenders tell first time buyers

The Clydesdale Bank and Yorkshire Bank have carried out research of the UK housing market over the last four months and are indicating that now is the time for first time buyers to get on the property ladder.  In November 2006, a first home in Scotland cost on average £110,174 – this is now £113,351. The results from this survey are very interesting as I also believe that with prices now below peak levels and sellers willing to do deals, this is a great time for first time buyers to get on the property market.

The issue of first time buyers formed the basis of a conversation I was having with a client the other week.  People have often asked me about house prices and how wealth is generated via the property market.  While things recently got out of kilter and central Government did not control the market the way they should have – see previous blogs re capital gains tax controls and also extra taxes on house sales, the general pattern of wealth creation in the property market is as follows:-

First time buyer buys property – valued £100,000 with a 5% deposit i.e. borrowing £95,000

The first time buyer stays in the property for on average 7 years.  During this time as well as repaying part of the mortgage, the owner’s salary increases allowing increased savings and borrowings plus the value of the property slightly increases – this increases the deposit for future purchases.

The buyer moves up the property ladder buying another property with a higher value, higher mortgage but larger deposit. The same process repeats itself – mortgage repayment, increased savings, house value increases.

Once again after an average of 7 years they move up the property ladder again higher price, higher mortgage but increased deposit.

They stay in that property for a further 20 years and in that time there may have been another upward move.  They now have their mortgage paid off, their house value has increased and they are looking to downsize. They are now able to purchase a property in cash putting aside a lump sum to assist with their old age and as part of their wealth generation.

This is a very simple model but it shows the importance of first time buyers coming into the market and shows that over the long term, property is a very safe bet and that people should be encouraged to own their own home.  As mentioned, in a normal market we need 40% of purchasers to be first time buyers to make sure that the market moves at a normal rate, creating wealth and keeping things moving.  We need the Scottish and UK Governments to work with lenders to assist first time buyers get on the market.

Lindsay Darroch
Head of Property Services

Property Investment – The Way Forward

As readers of previous blogs will know, I am a great advocate of property investment. Results of a recent National Association of Estate Agents survey has shown that property ownership in the UK has dropped to 58% with the remaining 42% made up of rental properties. The 42% is divided between social housing and private landlords with the private landlord split showing considerable growth and now exceeding the social housing percentage. With more lenders re-entering the buy to let mortgage market and no real sign of easing up for first time buyers, I think this could be the right time for people who are wishing to invest in property. I have already noticed an increase in the large institutional investors and my feeling is that there is certainly a window of opportunity in 2011. I think Dundee is particularly well suited for property investors given its relatively low entrance prices, high number of students, and also strong rental tendencies of the local population. With this in mind I am hosting a property investment seminar on Thursday 23 June, 12 – 2.30 pm. This will include an overview of the property investment market and advice from experts on property management and mortgages with access to some exclusive buy to let products. Afterwards there will be a chance to chat over a coffee and a sandwich. As numbers are limited I would be grateful if you could contact my colleague Lesley Rorrison on Tel. 01382 229222 or by e-mail at lesley.rorrison@blackadders.co.uk to register your place. I look forward to seeing you on the day.

Lindsay Darroch
Head of Property Services

Property Market Showing Signs of Recovery

I was interested to see a survey from findaproperty.com which is based on data from over 400,000 homes across the country.  This showed that the average asking price for a property in March was up over £1,500 on the previous month.  The survey showed that prices rose 0.3% in January and 0.5% in February.  This suggests that the market is picking up speed after the traditional Winter lull.   In March, for Scotland as whole, the average house price was £151,307 – up 1.2%.   I think this is a positive sign.  Listings for the Dundee and Angus areas are still below last year, however,  my feeling is that the market will continue to pick up momentum with listings continuing to increase and I think we will continue to see a steady increase in market momentum.

Lindsay Darroch
Head of Property Services