Local W4 market information for homeowners, Landlords & Investors.

Category: Property Market Research

Chiswick Landlords and Tenants : What does the Tenant Fee Banning order mean for you?

  • Tenant Fees set to banned within 12 to 18 months
  • Rents due to rise as those fees passed to Landlords
  • Landlords won’t be worse off – and neither will tenants or agents

 

With our new Chancellor of the Exchequer revealing a ban on tenant fees in his first Autumn Statement what does this actually mean for Chiswick tenants and Chiswick landlords?

 

The private rental sector in Chiswick forms an important part of the Chiswick housing market and the engagement from the chancellor in this Autumn Statement is a welcome sign that it is recognised as such. I have long supported the regulation of lettings agents which will ensconce and cement best practice across the rental industry and, I believe that measures to improve the situation of tenants should be introduced in a way that supports the growing professionalism of the sector. Over the last few years, there has been an increasing number of regulations and legislation governing private renting and it is important that the role of qualified, well trained and regulated lettings agents is understood.

 

Great News for Chiswick Tenants

 

So, let’s look at tenants .. this is great news for them, isn’t it? Well before you all crack open the Prosecco, read this …

 

Although I can see prohibiting letting agent fees being welcomed by Chiswick tenants, at least in the short term, they won’t realise that it will rebound back on them.

 

First up, it will take between 12 and 18 months to ban fees, as consultation needs to take place, then it will take an Act of Parliament to implement the change. A prohibition on agent fees may preclude tenants from receiving an invoice at the start of the tenancy, but the unescapable outcome will be an increase in the proportion of costs which will be met by landlords, which in turn will be passed on to tenants through higher rents.

 

Published at the same time as the Autumn Statement, hidden in the Office for Budget Responsibility’s Economic and Fiscal Outlook on the Autumn Statement (The Office for Budget Responsibility being created by Government in 2010 to provide independent and authoritative analysis of the UK’s public finances), it said …

 

“The Government has also announced its intention to ban additional fees charged by private letting agents. Specific details about timing and implementation remain outstanding, so we have not adjusted our forecast. Nevertheless, it is possible that a ban on fees would be passed through to higher private rents”

 

 

The charity Shelter and Scotland

 

Scotland banned Letting Fees in 2012. The charity Shelter have been a big voice in persuading and lobbying the Government since it managed to persuade the Scottish Parliament to ban fees in 2012. On all the TV and radio shows at the moment, they keep talking about their Independent Research, which they said showed that,

 

“renters, landlords and the industry as a whole had benefited from banning fees to renters in Scotland. It found that any negative side-effects of clarifying the ban on fees to renters in Scotland have been minimal for letting agencies, landlords and renters, and the sector remains healthy.”

 

Going on,

 

“Many industry insiders had predicted that abolishing fees would impact on rents for tenants, but our research show that this hasn’t been the case. The evidence showed that landlords in Scotland were no more likely to have increased rents since 2012 than landlords elsewhere in the UK. It found that where rents had risen more in Scotland than in other comparable parts of the UK in 2013, it was explained by economic factors and not related to the clarification of the law on letting fees”

 

.. yet the devil is in the detail….

 

Only recently Shelter were quoting this Research from December 2013 to say rents never went up following the tenant fee ban in Q4 2012. I have read that research and I agree with that research, but it was published three years ago, only 12 months after the ban was put into place.

 

I find it strange they don’t seem to mention what has happened to rents in Scotland in 2014, 2015 and 2016 .. because that tells us a completely different story!

 

What really happened in Scotland to rents?

 

I have carried out my research up to the end of Q3 2016 and this is the evidence I have found..

 

In Scotland, rents have risen, according the CityLets Index

by 15.3% between Q4 2012 and today

 

(CityLets being the equivalent of Rightmove North of the Border – so they know their onions and have plenty of comparable evidence to back up their numbers).

 

When I compared the same time frame, using Office of National Statistics figures for the English Regions between 2012 and 2016, this is what has happened to rents

 

  • North East 2.17% increase
  • North West 2.43% increase
  • Yorkshire and The Humber 3.21% increase
  • East Midlands 5.92% increase
  • West Midlands 5.52% increase
  • East of England 7.07% increase
  • South West 5.82% increase
  • South East 8.26% increase

 

  • London 10.55% increase

 

….and let me remind you about Scotland … 15.3% increase.

 

 

Are you really telling me the Scottish economy has outstripped London’s over the last 4 years? Is anyone suggesting Scottish wages and the Scottish Economy have boomed to such an extent in the last 4 years they are now the Powerhouse of the UK? .. because if they had, Nicola Sturgeon would have driven down the A1 within a blink of an eye, to demand immediate Independence.

 

So what will happen in the Chiswick Rental Market in the Short term?

 

Well nothing will happen in the next 12 to 18 months .. it’s business as usual!

 

… and the long term?

 

Rents will increase as the fees tenants have previously paid will be passed onto Landlords in the coming few years. Not immediately .. but they will.

 

As responsible letting agents, we all have a business to run. It takes, according to ARLA, (Association of Residential Letting Agents) on average 17 hours work by a letting agent to get a tenant into a property. We need to complete a whole host of checks prescribed by the Government; including a right to rent check, Anti Money Laundering checks, Legionella Risk Assessments, Gas Safety checks, Affordability Checks, Credit Checks, Smoke Alarm checks, Construction (Design & Management) Regulations 2007 checks, compliance with the Landlord and Tenant Act, registering the deposit so the tenants deposit is safe and carry out references to ensure the tenant has been a good tenant in previous rented properties etc……

 

All of which the vast majority of lettings agents take very seriously and are expected to know inside out making us the experts in our field. Yes, there are some awful agents who ruin the reputation for others, but isn’t that the case in most professions?

 

.. but business is business.

 

No landlord, no tenant and certainly no letting agent does work for free.

 

We, along with every other Chiswick letting agent will have to consider passing some of that cost onto my landlords in the future. Now of course, landlords would also be able to offset higher letting charges against tax, but I (as I am sure they) wouldn’t want them out of pocket, even after the extra tax relief.

 

So what does this all mean for the future?

 

The current application fee for a single person at my lettings agency is £150.00 and for a couple £200.00 .. meaning on average, the fee is around £175.00 per property.

 

I am part of a Group of 500+ Letting Agents, and recently we had to poll to find the average length of tenancy in our respective agencies. The Government says its 4 years, whilst the actual figure was nearer one year and eleven months, so let’s round that up to two years.

 

That means £175.00 needs to found in additional fees to the landlord, on average, every two years.

 

In Actual Pound Notes

 

In 2005, the average rent of a Chiswick Property was £1,957.00 per month and today it is £2,608.00 per month, a rise of only 33.3% (against an inflation rate (RPI) of 38.5%).

 

Using the UK average management rates of 10%, this means the landlord will be paying £3,129.60 per annum in management fees.

 

If the landlord is expected to cover the cost of that additional £175 every two years, rents will only need to rise by an additional 2% a year after 2018, on top of what they have annually grown by in the last 5 years.

 

So, if that were to happen in Chiswick, average rents would rise to £3,389.00 per month by 2022 and so the landlord would pay £4,067.00 per annum in management fees .. which would go towards covering the additional costs without having to raise the level of fees.

 

 

 

 

 

.. but that is bad news for Chiswick Tenants?

 

Yes it is…..If the average rent Chiswick tenants pay had risen in line with inflation since 2005, that £1,957.00 per month would have risen today to an average of £2,710.00 per month. (Remember, the average today is only £2,608.00per month) .. and even if inflation remains at 2% per year for the next six years, the average rent would be £2,945.00 per month by 2022 .. meaning even if landlords increase their rents to cover the costs tenants will be worse off, when we compare to the £3,389.00 per month figure to the £2,945.00 per month figure.

 

Conclusion

 

The banning of letting fees is good news for landlords and agents but not so good for tenants.

 

On the positive it removes the need for tenants to find lump sums of money when they move. That will mean tenants will have greater freedom to move home however they will be worse off in real terms compared to if rents had increased in line with inflation.

 

Landlords will be happy as their yield and return will increase with greater rents whilst not paying significantly more in fees to their lettings agency. Letting agents who used to charge fair application fees won’t be penalised as the rent rises will compensate them for any losses.

 

.. and the agents that charged the silly high application fees .. well that’s their problem. At least I know we can offer the same, if not a better service to both my landlords and tenants in the future in light of this announcement from Phillip Hammond.

 

 

 

 

 

 

 

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£29m paid in Stamp Duty by Chiswick Residents

“A pound saved is worth two pounds earned . . . after taxes” is what my dad used to say and it is tax I want to talk about today, in particular, property taxation .. Stamp Duty in fact.

 

Apart from some minor exemptions, Stamp Duty is paid by anyone buying a property over £125,000 in the UK. It presently raises £10.68bn a year for the HM Treasury (interesting when compared with £27.6bn in fuel duty, £10.69bn in alcohol duty and £9.48bn in tobacco duty).

 

In the latest set of data from HMRC, in the MP constituency that covers Chiswick, property buyers paid £29m stamp duty in one year alone – a lot of money in anyone’s eyes (although not as much as the £698m in income tax that all of us in the same area paid last year).

 

However, as you may know, George Osborne introduced an additional tax for landlords and from 1st April 2016 they had to pay an additional 3% stamp duty surcharge on top of the normal stamp duty rate when purchasing a buy to let property. There were tales of woe and Armageddon with a report by Deutsche Bank suggesting that the new surcharge could see house prices fall by as much as 20%.

 

HMRC data released in the Summer for Quarter 2 (Q2) of 2016 did seem to back up those fears as they published some worrying figures; only one in seven properties purchased was a second home or buy-to-let (in real numbers, only 30,300 of the 207,900 properties in Q2 were bought by landlords).

 

In previous articles, I spoke about the slump of property transactions after the 1st of April (as landlords rushed through their property purchases in March to beat the April deadline). In Q2 of 2016, £1.976bn was raised in Stamp Duty from Residential Property. Of that £1.976bn, £652m was paid by buy to let landlords (£424m in normal stamp duty and £228m in the additional 3% surcharge).

 

However, looking at Q3, the numbers have improved significantly. Of the 235,000 property sales, nearly one in four of them (56,100 to be precise) were bought by buy to let landlords and of the £2.208bn in stamp duty, £864m was paid in ‘normal’ stamp duty by BTL landlords and an impressive £442m paid by those same landlords in the additional stamp duty surcharge.

 

The statistics suggest buy to let investors have thankfully not been deterred by the stamp duty surcharge introduced in April this year. The figures also show that 65.4% of “buy to let” purchases cost less than £250,000, 23.7% of properties were in the £250k to £500k range and 10.9% (or 6,100 additional properties) of buy to let properties bought cost over £500k – interestingly nearly one in four (22.2%) of £500k properties purchased in Q3 were buy to let properties.

 

 

 

It just goes to back up what I stated a few weeks ago when I suggested that many investors had rushed to make purchases before 31st March, making figures in the following months (Q2) artificially low when the 3% supplement was introduced, but in Q3 the number of buy to let properties purchased increased by 85%.

 

It just goes to show you shouldn’t believe everything you read in the newspapers! I can assure you the Chiswick property market is doing just fine.

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Average Rent Paid by Tenants in Chiswick rise to £2,608 per month

Back in the Spring, there was a surge in Chiswick landlords buying buy to let property in Chiswick as they tried to beat George Osborne’s new stamp duty changes which kicked in on the 1st April 2016. To give you an idea of the sort of numbers we are talking about, below are the property statistics for sales either side of the deadline in W4.

 

Jan 2016 – 48 properties sold

Feb 2016 – 47 properties sold

March 2016 – 114 properties sold

April 2016 – 30 properties sold

May 2016 – 33 properties sold

 

Normally, the number of sales in the Spring months is very similar, irrespective of the month. However, as one can see, this year was a completely different picture as landlords moved their purchases forward to beat the stamp duty increase. You would think that even with a basic knowledge of supply and demand economics, rents would be affected in a downwards direction?

 

However, there appears to be no apparent effect on the levels of rent being asked in Chiswick – and more importantly achieved – and this direction of rents is not likely to inverse any time soon, particularly as legislation planned for 2017 might reduce rental stock and push property values ever upward. The decline of buy to let mortgage interest tax relief will make some properties lossmaking, forcing landlords to pass on costs to tenants in the form of higher rents just to stay afloat. Even those who can still operate may be deterred from making further investments, reducing rental stock at a time of severe property shortage.

 

.. but it’s not all bad news for tenants. Whilst average rents in Chiswick since 2005 have increased by 33.3%, inflation has been 38.5% over the same time frame, meaning Chiswick tenants are 5.2% better off in real terms when it comes to their rent (which is a sizeable chunk of most people’s monthly household budgets)

 

Year Average Rent in Chiswick per month
2005 1957
2006 2006
2007 2066
2008 2151
2009 2189
2010 2176
2011 2258
2012 2359
2013 2437
2014 2474
2015 2557
2016 2608

 

 

I found it particularly interesting looking at the rent rises over the last five years in Chiswick, as it was five years ago we started to see the very early green shoots of growth of the Chiswick economy. As a whole, following the Credit crunch (2011), rents in Chiswick have risen by an average of 3.6% a year – fascinating don’t you think?

 

The view I am trying to portray is that while renting is often portrayed as the unfavorable alternative to home ownership, many young Chiswick professionals like renting as it gives them adaptability with their life. Rents will continue to rise which is good news for landlords as buy to let is an investment but, as can be seen from the statistics, tenants have also had a good deal with below inflation increases in rents in the past. It’s a win-win situation for everyone although on a very personal note, it’s imperative in the future that tenants are not thwarted from saving for a deposit by excessive rental hikes – there has to be a balance.

 

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Chiswick Housing Crisis? Only 5.4% of Chiswick Homes Are For Sale

The Chiswick Property Market continues to disregard the end of the world prophecies of a post Brexit fallout with a return to business as usual after the summer break.

 

The challenge every Chiswick property buyer has faced over the last few years is a lack of choice – there simply hasn’t been much to choose from when buying (be it for investment or owner occupation). Levels are still well down on what would be considered healthy levels from earlier in this decade, as there is still a substantial demand/supply imbalance. Until we start to see consistent and steady increases in properties coming on to the market in Chiswick, the market is likely to see upward pressure on property values continue.

 

However, there may be hope for first time buyers, with homeowners looking to move upmarket and buy to let landlords looking for their next investment, the Chiswick property supply crisis just might be starting to ease, as the number of new properties coming onto the market in Chiswick has increased.

 

For example, last month W4 saw 203 new properties coming on to the market, not bad when you consider in the last year the figure has been as low as the 110’s. With the average Chiswick property value hitting a record high, reaching almost £1,104,200 according to my research, this shortage of properties on the market over the last two years has contributed to this ‘fuller’ average property figure, but there is a glimmer of hope that the Chiswick’s supply crisis may be starting to ease.

 

As I write this article, 5.4% of Chiswick properties are up for sale. In terms of actual chimney pots, that equates to 885 properties on the market in Chiswick (within 1 miles of the centre of Chiswick) – which, when compared to only a year ago when that figure stood at 673, is a serious increase in the number of properties available to buy. Split down into the type of property, it makes even more fascinating reading…

  • Detached Properties in Chiswick – 56 on the market a year ago compared to 30 on the market now – a decrease of 46%
  • Semi Detached Properties in Chiswick – 55 on the market a year ago compared to 75 on the market now – an increase of 36%
  • Terraced Properties in Chiswick – 91 on the market a year ago compared to 150 on the market now – an increase of 65%
  • Flats / Apartments Properties in Chiswick – 410 on the market a year ago compared to 551 on the market now – an increase of 34%

 

With realistically priced properties flying off the shelves and this increase in new properties (especially semis and terraces), this is evidence of strength in the Chiswick housing market that many didn’t expect. Many believed that the Chiswick property market wasn’t going to be strong enough post Brexit – as what was a sellers’ market before the Brexit vote and Buyers’ market in the early months after it, may now be somewhere in between and the market might just be coming back into balance.

 

However, all this will mean property values won’t continue to grow at the same extent they have been over the last 12 to 18 months, and in some months (especially on the run up to Christmas and early in the New Year), values might dip slightly. This won’t be down to Brexit but a re-balancing of the Chiswick Property Market – which is good news for everyone.

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Private Renting set to grow by 2,400 Chiswick households by 2025

I was having a most interesting chat the other day with a Chiswick landlord in Rhythm & Brews Cafe over a warm beverage looking at some properties. As I am sure you are aware, I am always happy to cast my eye over any potential buy to let purchase in Chiswick, be that you emailing me a Rightmove link, a brochure in the post or even treading the carpet and seeing it together. I don’t charge for that, and you don’t even need to be a client of mine. We got talking about the Chiswick Property Market and this landlord brought up the subject of a report he had read from the Royal Institution of Chartered Surveyors (RICS) and PricewaterhouseCoopers (PwC) that stated almost 1.8m new rental homes are needed by 2025 to keep up with current demand from tenants. He wanted to know what this meant for Chiswick.

Well my blog reading friends, some commentators said last Winter that buy to let was about to die, what with the new stamp duty changes and how mortgage tax relief will be calculated. Others even said 500,000 rental properties would flood the market nationally in the 12 months after the new Stamp Duty rules came into force on the 1st April 2016 as landlords left the rental market. Well, all I can say is, I wish all the landlords of those half a million properties would hurry up and put them on the market – because I have plenty of other potential landlords wanting to buy them!

Back to the matter in hand.. if the RICS and PwC are indeed correct, what does this mean for Chiswick? The fact is, as a country, we are facing a precarious rental shortage and need to get Chiswick building in a way that benefits a cross-section of Chiswick society, not just the fortunate few. I call on the Prime Minister to drop the higher stamp duty tax on buy to let purchases to ease the pressure on the rental market.

Of the 19,700 households in Chiswick, currently 12,500 tenants live in 5,600 private rented properties. If we apportion those 1.8m households equally around the Country, that means in nine years’ time, the number of rental properties in Chiswick needs to rise by 2,400 (i.e. 42.8%) .. taking the total number of rented properties in the city to 8,000.

That means Chiswick landlords need to buy around 300 properties a year between now and 2025 to meet that demand – because according to my calculations, an additional 5,400 people will want to live in all those ‘additional’ Chiswick rental properties – so why is the government penalising landlords?

Thankfully the new housing minister Gavin Barwell detached Teresa May’s new administration from the Cameron/Osborne laser-like focus of just home ownership to solve our housing issues, saying “we need to build more homes for every single type of person needing a home and not focus on one single tenure”. The private rented sector became a stooge under David Cameron’s watch and still, with increasingly unaffordable Chiswick house prices, the majority of new Chiswick households will be relying on the rental sector in the future to house them. I can only say Westminster must put in place the measures that will allow the rental sector to flourish. Any restrictions on the supply of rental property will push up rents (bad news for tenants), thus side-lining those members of Chiswick society who are already struggling. Let’s hope this new Government continues to see the contribution landlords give to the country as a whole.

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12.6% of Chiswick People live in Shared Households

I had an interesting chat the other day with a Chiswick landlord. He said he had been chatting with an architect friend of his who said back in the mid 2000’s, the developments he was asked to draw were a balance of one and two bed properties, compared to today where the majority of the buildings he is designing are more towards two and sometimes three bedrooms. Now of course, this was all anecdotal but it made me think if similar things were happening in the Chiswick property market?

 

This is a really important point as I explained to this landlord, as knowing when and where the demand of tenants is going to come from in the coming decade is just as important as knowing the supply side of the buy to let equation, in relation to the number of properties built in Chiswick, Chiswick property prices, Chiswick yields and Chiswick rents.

 

In 2001, there were 84,000 households with a population of 212,300 in the Hounslow Council area. By 2011, that had grown to 94,900 households and a population of 254,000.

 

.. meaning, between 2001 and 2011, whilst the number of households in the Hounslow Council area grew by 12.99%, the population grew by 19.60%

 

Nothing surprising there then. But, as my readers will know, there is always a but! My analysis of the 2011 Census results, using the most recent in-depth data on household formation (eg ‘one person households’, ‘couples/ family households’ or ‘couple + other adults households and multi -adult households’), has displayed a sudden and unexpected break with the trends of the whole of the 20th Century. There has been a seismic change in household formation in Chiswick between 2001 and 2011.

Between 2001 and 2011, the population of Chiswick grew, as did the number of Chiswick properties (because of new home building). However, the growth rate of new properties built in Chiswick was much lower than expected though, but still the population has grown by what was expected, meaning the average household size was larger than anticipated in Chiswick. In fact, average household size (ie the number of people in each property) in 2011 was almost exactly the same as in 2001, the first time for at least 100 years it had not fallen between censuses. (Since 1911, household size has decreased by around 20% every decade).

Looking at figures specifically for Chiswick (W4) itself,

  • One person households – 35.7%
  • Couples/family households – 51.7%
  • Couple + other adults/multi-adult households – 12.6%

This decline was reflected in large scale shifts in the mix of household types. In particular, there were far more “couple + other adults households and multi -adult households” than expected (12.6% is quite a lot of households). It can be put down to two things; increased international migration and changes to household formation. A particularly important reason for the difference can probably be attributed to the evidence that migrants initially form fewer households (ie two couples share one property) than those who have lived in the UK all their lives. Also, changes to household formation patterns amongst the rest of the population, including adult children living longer with their parents and more young adults living in shared accommodation (as can be seen in the growth of HMO properties (Homes of Multiple Occupation).

 

So, what does all this mean for Chiswick Homeowners and Landlords? Quite a lot in fact. There has been a subtle shift to slightly larger households in the last decade, meaning smart landlords might be tempted to buy slightly larger properties to rent out – again good news for homeowners who will get top dollar for their home as they sell on. But now with Brexit, household formation might swing the other way in the next decade? Who knows? Watch this space!

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What is really happening in the Chiswick Property Market?

Well its been a few months since Brexit and as we settle into the Autumn with Great British Bake Off, Strictly and the Football season … the newspapers are returning to their mixed messages of good news, bad news and indifferent news about the Brit’s favourite subject after the weather … the property market.

The thing is the UK does not have one housing market. Instead, it is a patchwork of mini property markets all performing in a different way. At one end of scale is Kensington and Chelsea, which has seen average prices drop in the last twelve months by 6.2% whilst in the London region as a whole, house prices are 12.6% higher. But what about Chiswick?

Property prices in Chiswick are 11.7% higher than a year ago

and 0.3% lower than last month.

So what does this mean for Chiswick landlords and homeowners? Not that much unless you are buying or selling in reality. Most sellers are buyers anyway, so if the one you are buying has gone down, yours has gone down.  Everything is relative and what I would say is, if you look hard enough, there are even in this market, there are still some bargains to be had in Chiswick.

However, the most important question you should be asking though is not only is what happening to property prices, but exactly which price band is selling? I like to keep an eye on the property market in Chiswick on a daily basis because it enables me to give the best advice and opinion on what (or not) to buy in Chiswick.

If you look at Chiswick and split the property market into four equalled sized price bands. Each price band would have around 25% of the property in Chiswick, from the lowest in value band (the bottom 25%) all the way through to the highest 25% band (in terms of value).

  • Nil to £550 144 properties for sale and 58 sold (stc) i.e. 28% sold
  • £550 to £800 156 properties for sale and 65 sold (stc) i.e. 29% sold
  • £800 to £1.5m 147 properties for sale and 58 sold (stc) i.e. 28% sold
  • £1.5m + 142 properties for sale and 19 sold (stc) i.e. 11% sold

Fascinating don’t you think that it is the lower to middle Chiswick market that is doing the best?

The next nine months’ activity will be crucial in understanding which way the market will go this year after Brexit … but, Brexit or no Brexit, people will always need a roof over their head and that is why the property market has ridden the storms of oil crisis’ in the 1970’s, the 1980’s depression, Black Monday in the 1990’s, and latterly the credit crunch together with the various house price crashes of 1973, 1987 and 2008.

And why? Because of Britain’s chronic lack of housing will prop up house prices and prevent a post spike crash. … there is always a silver lining when it comes to the property market!

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What will the 0.25% Interest Rate do to the Chiswick Property Market?

I had an interesting chat with a Bedford Park landlord in No197 Chiswick fire station bar & restaurant last week who owns a few properties in the area. We had never spoken before (because she uses another agent in the borough to manage her Chiswick properties) yet after reading my blog on the Chiswick Property Market for awhile, the landlord wanted to know my thoughts on how the recent interest rate cut would affect the Chiswick property market and I would also like to share these thoughts with you……

 

Well it’s been a few weeks now since interest rates were cut to 0.25% by the Bank of England as the Bank believed Brexit could lead to a materially lower path of growth for the UK, especially for the manufacturing and construction industries. You see for the country as a whole, the manufacturing and construction industries are still performing well below the pre credit crunch levels of 2008/09, so the British economy remains highly susceptible to an economic shock. This is especially important in Chiswick, because even though we have had a number of local success stories in manufacturing and construction, a large number of people are employed in these sectors. In the W4 postcode area, of the 24,829 people who have a job, 915 are in the manufacturing industry and 935 in Construction meaning

 

3.7% of workers are employed in the Manufacturing

sector and 3.8% of workers are in Construction

 

The other sector of the economy the Bank is worried about, and an equally important one to the area’s economy, is the Financial Services industry. Financial Services in the W4 postcode area employ 1,851 people, making up 7.5% of the working population.

 

Together with a cut in interest rates, the Bank also announced an increase in the quantity of money via a new programme of Quantitative Easing to buy £70bn of Government and Private bonds. Now that won’t do much to the Chiswick property market directly, but another measure also included in the recent announcement was £100bn of new funding to banks. This extra £100bn will help the High St banks pass on the base rate cut to people and businesses, meaning the banks will have lots of cheap money to lend for mortgages .. which will have a huge effect on the Chiswick property market (as that £100bn would be enough to buy half a million homes in the UK).

 

It will take until early in the New Year to find out the real direction of the Chiswick property market and the effects of Brexit on the economy as a whole, the subsequent recent interest rate cuts and the availability of cheap mortgages. However, something bigger than Brexit and interest rates is the inherent undersupply of housing (something I have spoken about many times in my blog and the specific affect on Chiswick). The severe undersupply means that Chiswick property prices are likely to increase further in the medium to long term, even if there is a dip in the short term. This only confirms what every homeowner and landlord has known for decades .. investing in property is a long term project and as an investment vehicle, it will continue to outstrip other forms of investment due to the high demand for a roof over people’s heads and the low supply of new properties being built.

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Post Brexit – Chiswick Property Prices set to drop £38,100 in the next 12 months?

Even the most sane person in Britain has to admit the Brexit vote will, in one shape or another, affect the UK Property market. Excluding central London which is another world, most commentators are saying prices will be affected by around 10%. So looking at the commentators’ thoughts in more detail, property values in Chiswick will be 10% lower than they would have been if we hadn’t voted to leave the EU.

 

As the average value of a property in the Hounslow Council area is £381,000, this means property values are set to drop for the average Chiswick property by £38,100 … batten down the hatches .. soup kitchens and mega recession here we come ..it’s going to get rough.

 

.. but before we all go into panic mode in Chiswick .. the devil is always in the detail

 

Look at the phrase again, and I have highlighted the relevant part “Property values in Chiswick will be 10% lower than they would have been if we hadn’t voted to leave the EU”

 

Property values today, according to the Land Registry are 12.1% higher than a year ago in the Hounslow Council area. The 12 months before that they rose by 11.75% and the 12 months before that, they rose by 6.3%. If we hadn’t voted to leave, I believe on these figures, we could have safely assumed Chiswick House prices would have been 12% higher by the Summer of 2017.

 

and that’s the point, we won’t see a house price crash in Chiswick, it’s just that house prices in a years time will only be 2% higher than they are now (ie 12% less the 10% lower figure because of Brexit). Let’s look at the historic figures and how that compares to today’s figures for the Hounslow Council area and Chiswick as a whole.

 

Average Value of a property 20 years ago                               £ 71,600

Average Value of a property 10 years ago                                £233,700

Average Value of a property 2 years ago                                  £304,100

Average Value of a property 1 year ago                                    £339,800

Average Value of a property today                                            £381,000

Projected Value of a property in 12 months’ time                 £388,600

 

Therefore, I believe the average value of a Chiswick property will be £7,600 higher in 12 months’ time than today.

 

That’s not to say Chiswick property prices might not dip slightly in the run up to Christmas (in fact they always have done just about every year since the year 2000 and most of those were boom years) .. but in

12 months time this is my considered opinion of where Chiswick property values will be.. and looking at the historic prices, even if I (and many other property market commentators) are wrong and they drop 10% from TODAY’S figure .. in the whole scheme of things, we have been through a Credit Crunch, Black Monday and 15% interest rates over the last 20 to 30 years .. and still Chiswick house prices have always bounced back.

 

Whilst the UK’s vote for Brexit has created an uncertainty in the Chiswick housing market, there is no need to panic and prospective buyers should merely use common sense about their purchases.

I always say to people to be prudent and if you are taking out a mortgage, at some stage during the life of that mortgage, circumstances will be difficult. We won’t have a 2008 Credit crunch fire sale of properties because after the Mortgage Market Review which took place in the Spring of 2013, mortgage borrowers are not as highly leveraged this time around.  As a result of this, with any luck there will not be too many distressed sales, which cause widespread price reductions.

 

.. and Chiswick landlords? They have recently been thrashed by Osborne’s tax changes, but yields could rise if Chiswick house prices fall/stablise and rents grow, and this might also make it easier to obtain mortgages, as the income would cover more of the interest cost. If prices were to level or come down that could help Chiswick landlords add to their portfolio, as rental demand for Chiswick property is expected to stay strong as more people find it more and more difficult to obtain mortgages.

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New House Building in Chiswick slumps by 26.3% in the last year

Let me speak frankly, even with Brexit and the fact immigration numbers will now be reduced in the coming years, there is an unending and severe shortage of new housing being built in the Chiswick area (and the UK as a whole). Even if there are short term confidence trembles fueled by newspapers hungry for bad news, the ever growing population of Chiswick with its high demand for property versus curtailed supply of properties being built, this imbalance of supply/demand and the possibility of even lower interest rates will underpin the property market.

 

When the Tories were elected in 2015, Mr. Cameron vowed to build 1,000,000 new homes by 2020. If we as a Country hit those levels of building, most academics stated the UK Housing market would balance itself as the increased supply of property would give a chance for the younger generation to buy their own home as opposed to rent. However, the up-to-date building figures show that in the first three months of 2016 building starts were down. Nationally, there were 35,530 house building starts in the first quarter, a long way off the 50,000 a quarter required to hit those ambitious targets.

 

Looking closer to home, over the last 12 months, new building in the London Borough of Hounslow area has slumped. In 2014/15, for every one thousand existing households in the area, an additional 8.36 homes were built. For 2015/16, that figure is now only 6.16 homes built per thousand existing households. Nationally, to meet that 1,000,000 new homes target, we need to be at 7.12 new homes per thousand.

 

To put those numbers into real chimney pots, over the last 12 months, in the London Borough of Hounslow area,

 

  • 460 Private Builders (e.g. New Homes Builders)
  • 100 Housing Association
  • 90 Local Authority

 

These new house building numbers are down to the fact that not enough is being done to fix the broken Chiswick housing market. We are still only seeing 650 new homes being built per year in the London Borough of Hounslow area, when we need at least 751 a year to even stand still!

 

I am of the opinion Messer’s Cameron and Osborne focused their attention too much on the demand side of the housing equation, using the Help to Buy scheme and low deposit mortgages to convert the ‘Generation Rent’ i.e. Chiswick ‘20 somethings’ who are set to rent for the rest of their lives to ‘Generation Buy’. On the other side of the coin, I would strongly recommend the new Housing Minster, Gavin Barwell, should concentrate the Government’s efforts on the supply side of the equation. There needs to be transformations to planning laws, massive scale releases of public land and more investment, as more inventive solutions are needed.

 

However, ultimately, responsibility has to rest on the shoulders of Theresa May. Whilst our new PM has many plates to spin, evading on the housing crisis will only come at greater cost later on. What a legacy it would be if it was Mrs. May who finally got to grips with the persistent and enduring shortage of homes to live in. The PM has already referenced the ‘need to do far more to get more houses built’ and stop the decline of home ownership. However, she has also ruled out any changes to the green belt policy – something I will talk about in a future up and coming article. Hopefully these statistics will raise the alarm bells again and persuade both residents and Councilor’s in the London Borough of Hounslow area that housing needs to be higher on its agenda.

 

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