Wednesday, 21 February 2018

Youngsters unable to buy their first home in Loughborough – Are the Baby Boomers and Landlords to Blame?

Talk to many Loughborough 20 something’s, where home ownership has looked but a vague dream, many of them have been vexatious towards the Baby Boomer generation and their pushover ‘easy go lucky’ walk through life; jealous of their free university education with grants, their eye watering property windfalls, their golden final salary pensions and their free bus passes.

If you had bought a property in Loughborough for say £15,000 in first quarter of 1977, today it would be worth £252,831, a windfall increase of 1585.5%.

But to blame the 60 and 70 year olds of Loughborough for that sort of rise seems a little unfair. With the value of the homes rising like rockets, I don't believe they can be censured or made liable for that. A few weeks ago, I discussed in my blog the number of people in the Loughborough area who have two or more spare bedrooms (meaning they are under-occupying the house). I see many mature members of Loughborough society, rattling around in large 4/5 bed houses where the kids have flown the nest years ago ... but should they be blamed?

We are all just human, and the mature members of UK society have just reacted to the inducements of our property and tax system. The mature generations who joined the property market party in the 1970’s and 1980’s were able to take out huge mortgages, protected in the knowledge that inflation would corrode the real value of the mortgage, while wage gains would boost their ability to repay.

Neither do I directly blame the multitude of Loughborough buy to let landlords, buying up their 10th or 11th property to add to their buy to let empire. They too, are humbly reacting to the peculiar historic inducements of the UK property market.

So, who is to blame?

Well, hyperinflation in the 1970’s meant the real value of people’s mortgages was wiped out (as mentioned above). Margaret Thatcher and Nigel Lawson are also good people to blame with Maggie selling off millions of council houses and Nigel Lawson’s delayed ending of the MIRAS tax relief in 1987; meaning he too can get his share of indignation. The Blair/Brown combo doubled stamp duty in 1997 and again in 2000, which, as a tax on property transactions, precludes a more efficient distribution of the current housing stock. The Government has had plenty of opportunity to change the draconian stamp duty rules to incentivise those mature Loughborough house movers to downsize.

However, I have started to see over the last few years a change in Government policy towards housing. The new breed of Loughborough buy to let landlords that have come about since the Millennium, have had their wings clipped over the last couple of years, with the introduction of new tax rules (meaning it is slightly more difficult to make money out of property unless you have all the national information and Loughborough property trends to hand).

It’s easy to think the only reason that hundreds of first time buyers have been priced out of the Loughborough housing market is because of these landlords. Yet, I believe landlords have been undervalued with the Loughborough homes they provide for Loughborough people. With first time buyers struggling to save for a deposit, if it weren’t for those landlords buying up those homes over the last 10/15 years, we would have a bigger housing crisis than we have today. Since the global financial crisis of 2008/9, local councils have had to cut services, so certainly didn’t have enough money to build new homes ... homes that were provided to Loughborough by these buy to let landlords.

One side of the argument is that 485 homes are being bought up by buy to let landlords each year in the Charnwood Borough Council area when otherwise they might have become available to other buyers, the other side of the argument is the current national average deposit is £51,800, which is, by far, the greatest barrier to those wanting to buy their first home. Those homes bought by local buy to let landlords are not left idle, as they equate to 3,394 of new homes for local people, most of whom who see renting as a better option because of the choice, the simplicity and the flexibility which renting brings.

In the 60’s/70’/80’s, the traditional thoughts that you were a failure unless you owned your own home have now all but disappeared, because if you ask many young people, they would probably say renting was the perfect option for them at certain times of their life. 

If you would like to discuss the Loughborough property market or chat about any potential investment please feel free to call us on 01509 260777 or email me

Wednesday, 14 February 2018

Loughborough Rents Set to Rise to £929 pm in Next 5 Years

It’s now been a good 12/18 months since annual rental price inflation in Loughborough peaked at 3.7%. Since then we have seen increasingly more humble rent increases. In fact, in certain parts of the Loughborough rental market over the autumn, the rental market saw some slight falls in rents. So, could this be the earliest indication that the trend of high rent increases seen over the last few years, may now be starting to buck that trend?

Well, possibly in the short term, but in the coming few years, it is my opinion Loughborough rents will regain their upward trend and continue to increase as demand for Loughborough rental property will outstrip supply, and this is why.

The only counterbalance to that improved rental growth would be to meaningfully increase rental stock (i.e. the number of rental properties in Loughborough). However, because of the Government’s new taxes on landlords being introduced between 2017 and 2021, that means buy-to-let has (and will) be less attractive in the short term for certain types of landlords (meaning less new properties will be bought to let out).

Interestingly, countless market experts assumed at the start of 2017, that the number of rental properties would in fact drop throughout the year. The assumption being as the new tax rules for landlords started to kick in, landlords looked to kick their tenants out, sell up and invest their capital elsewhere. (Although ironically that would lower supply of rental properties, decreasing the supply, meaning rents would increase again!).

Anecdotal evidence suggests, confirmed by my discussions with fellow property, accountancy and banking professionals in Loughborough, that Loughborough landlords are (instead of selling up on masse), actually either (1) re-mortgaging their Loughborough buy-to-let properties instead or (2) converting their rental portfolios into limited companies to side step the new taxation rules.

The sentiment of many Loughborough landlords is that property has always weathered the many stock market crashes and runs in the last 50 years. There is something inheritably understandable about bricks and mortar – compared to the voodoo magic of the stock market and other exotic investment vehicles like debentures and crypto-currency (e.g. BitCoin). 

Remarkably, there is some good news for tenants, as Tory’s recently published the draft Tenants’ Fee Bill, which is designed to prohibit the charging of tenants lettings fees on set up of the tenancy. However, looking at evidence in Scotland, I expect rents to rise to compensate landlords, thus hammering faithful tenants looking for long-term tenancy agreements the hardest. This growth will be on top of any usual organic rent growth.  It really is swings and roundabouts!

So, what does this all mean for landlords and tenants in Loughborough? In my considered opinion,

Rents in Loughborough over the next 5 years will rise by 9.9%, taking the average rent for a Loughborough property from £846 per month to £929 per month.

To put all that into perspective though, rents in Loughborough over the last 12 years have risen by 18.7%. In fact, that rise won’t be a straight-line growth either, because I have to take into account the national and local Loughborough economy, demand and supply of rental property, interest rates, Brexit and other external factors. Please see the graph for my projections

In the past, making money from Loughborough buy-to-let property was as easy as falling off a log. But with these new tax rules, new rental regulations and the overall changing dynamics of the Loughborough property market, as a Loughborough landlord, you are going to need work smarter and have every piece of information, advice and opinion to hand on the Loughborough, Regional and National property market’s, to enable you to continue to make money. 

If you would like to discuss the Loughborough property market or chat about any potential investment please feel free to call us on 01509 260777 or email me