The Autumn Statement 2015

So today the chancellor George Osborne released the Autumn Statement - everyone was braced for impact since the last couple of times he opened his mouth the entire of the property industry was given a swift and hefty kick in the pants - and today appeared to bear more of the same.

The biggest gasps can be heard quite clearly from Landlords who have just learned that in order to buy a property after April 2016 they will be relieved of an additional 3% of Stamp Duty Land Tax on their purchase price, save for properties below the £40,000 mark (I can tell you there are slim pickings for even a damp studio apartment anywhere south of Luton in that price bracket). It's worth noting that this doesn't impact current property, but only new purchases specifically for Buy To Let purposes.

Add to this the removal of the current 45% mortgage rate relief for Buy To Let Landlords and you can bet your bottom quid that rents will be set to rise, and some Landlords will be inclined to say sod this for a game of soldiers and start binning their stock.

The opinions on this sway wildly from the satisfied cackle of the 35 year old first time buyer who can't afford to move out from under Mum & Dad, to the dismayed and angry jeers from Landlords who stand to lose a great deal, in some cases a whole lifestyle built around generating a healthy income stream to support relative financial freedom.

The other aspects to consider in this budget statement are the promises to build more homes (*yawn* - heard it!), the changes to social housing, benefits, universal credit, the U-turn on tax credit cuts (but the potential rises in Council Tax swoop in to save the day - or not). The 'middle class' stand to be better off with a rise in the 40% tax rate threshold, a rise in the personal tax allowance, and changes to inheritance tax thresholds, which all paint quite a refreshingly sunny outlook if you're generally doing OK in life, but woe betide you if you're struggling or at the bottom of the stack - it's going to get even more ugly, and there's 4 more years of cuts to come.

Allow me to explain.

When compared to the rest of the UK, the percentage of citizens in Hertfordshire who are priced out of buying AND renting is comparatively very low, with many gainfully employed and approximately 80% of the housing stock is owned or mortgaged, with around 10-12% privately rented, but it would be a very grave mistake indeed to settle into any sense of smug satisfaction that this won't transpose itself into problems on your doorstep.

The government is boasting in this statement (through the masterful and sensuous massage of figures and facts) that they have really reined in spending and that's put us in a position where we've got a few quid to slosh about on some new starter homes and begrudgingly build on old government land, a bit of money for sports and recreation, a little bit of cash to plug a few holes here and there - all sounds dandy.

The issue though is that when you take measures which strip the most disadvantaged and vulnerable in society of the little funding they have, those people have to sink or swim - so where they cannot buy, they must rent, where they cannot rent, they must approach the local authority to house them, and when that is not possible they must either become homeless or relocate - the issue here is that the problem doesn't just go away, we as a society still have to pay for it.

Now you're going to team up this watershed of effectively cutting loose the poor and letting them drift with a gentle plumping up of the 'middle mixers' of the country, but at the same time snatching away some of their vital income in the form of second homes and Buy To Let. Now this is interesting - and for more than one reason.  Many in my industry are saying George Osborne and the OBR (Office of Budget Responsibility) are buffoons, it's a bad idea - no, wait - a TERRIBLE idea, he doesn't know what he's doing, he's a clown, a nincompoop the whole thing is a sham purely designed to rip out the throat of the Buy To Let industry in an unceremoniously bloody fait accompli.

I can understand the rage - who wouldn't be appalled at losing an income stream that supports a certain lifestyle? Isn't this why people are so enamoured with Buy To Let? Landlords in the Private Sector quite rightly voice the opinion that they provide housing that Housing Associations do not or cannot provide for many people who cannot afford to buy their own home.  Again we return to the matter of affordability. There are some who argue that Landlords owning and continuing to buy all of the small housing stock creates a natural vacuum where there would otherwise be first time buyers - this is hotly rebuffed by the Private Rented Sector tycoons of course.

Part of the reality here is that in order to buy a property, people need to drastically change their lifestyle, and that is a big upheaval - you have to sacrifice a great deal to own a property and sometimes people are simply not prepared to do it, but does that mean they forfeit the right to be appalled by soaring house prices later? I'll throw that one to the floor to decide!

And tycoons of any variety haven't managed to escape the all-seeing-eye of George 'Lord Sauron' Osborne, as he's taken a neat little slice from dividend payments over £5000, restricted Non Dom status, increased insurance premium tax and tapered away the tax free allowances on pensions for those earning over £150,000 - the pinch may be more of a gentle squidge at this level as one can't upset all of ones old Eton chums by taxing them too much, but it's still there. Bless him for trying.

But when it comes to property, we're at the mercy of the common all garden Landlord. Private sector Landlords are faced with a choice over the next 12 months before the 3% Stamp Duty surcharge starts to pinch, swiftly followed by tax changes and possible interest rate rises - they can either go on a buying rampage and boost their stock with an aim of running a larger portfolio either privately or through a limited company setup, which will see a soaring demand for smaller properties, followed by an inevitable price boom, or they can start to shed stock and cash in on their asset, potentially consolidating bricks and mortar into their own home or a more modest portfolio of high performing stock - this could have the opposite effect of flooding the market with property which could make for a market correction unless handled very deftly.

This is where the battle will be fought, and if Landlords do not play their cards extremely carefully over the coming months, they could easily become the national scapegoat for a second housing crisis. A boom or tumble in small housing stock prices will have a knock-on effect over time on the equity of larger homes, and the meagre promise of 400,000 starter homes by 2020 really isn't going to make a dent in the problem - we haven't got enough property for those who need it, and the stock we do have is too expensive because wages haven't risen and we've had a six year lull in house building - that's what it really boils down to.

The most sensible course of action for any Landlord would be to conduct a rent review at the earliest available opportunity and maximise the profitability of their properties, serving rent increase notices where appropriate (only of course if ethical to do so) - an independent service that we can provide at Hawk & Chadwick. Landlords may also wish to consider quiet sales of 'fringe' properties to first time buyers before the rush really begins - when it happens it's going to be the Black Friday of the property industry, and there are bound to be casualties. Please don't be among them.

Hertfordshire Property Remains Strong

We're often asked to speculate on where the market is going and amongst the professionals we work with on a regular basis, as well as the public, we hear the same statement-and-question combo;

"House prices are still rising - how long can it go on for?!" with the subtle but unspoken implication that we're all on a runaway train headed for an outage in the tracks over a huge canyon - and here be beasties.

Let's examine the facts - worldwide population is growing by 2.5 new little people per second.  Just let that sink in for a moment and count 2.5 births per second. That's huge. Yes, the statistics of those who get to house-buying age and financial security will be a massively decreasing funnel, but that doesn't mean we can ignore it.

Couple this with the undeniable fact that London is one of the most desired domiciles in the world. I know it's sounds sensationally Clarkson-esque to say "in the world" (now you're imagining Clarkson doing it aren't you?) but the reality is, whether red or blue, left or right, rich or poor, the United Kingdom has created a financial, social, economical and cultural beacon which gains admiration in some small way like no other City on the planet - personally, I don't really care for the place, but that doesn't mean I can make a wholesale denial of the fact that everyone else bloody loves it.

So naturally, people from all locations, denominations, faiths, races, backgrounds and intentions want to be here, wether to experience it, profit from it, or whatever the motivation, people are coming here and we have to put them somewhere.

Now what happens when you have a rising population (let's ignore where that's coming from because that's not really the point) they all need somewhere to live. When you've got a certain amount of buildings that people can live in legally and for a set price, you create scarcity, and scarcity is one of the economic ingredients that drives prices.

Right now, it's quite simple - we do not have enough available housing to meet the huge demand, and especially in areas close to the jewel in the crown of the globe (according to so many people) where everyone wants to be - so what we have here is a situation where the price will continue to grow as long as there is a supply imbalance and a soaring demand.  Your faithful dear government have actually done a masterful job of controlling this by keeping a firm hand on the throttle by tweaking mortgage approvals, changing stamp duty, making tax changes - they're very clever people and there are a lot of them who have a heavily vested interest in making sure the housing market doesn't cause the rest of the economy to go belly-up.

So, sadly (if you're a first time buyer) or thankfully (if you're the top of the chain and retiring to Spain) the prices are steadily marching upwards.  In Hertfordshire detached properties have risen from £602,498 in May to £631,167 in September. Flats have shifted up a gear from £187,493 to £196,415 in the same timeframe - when you look at stock levels, these are rising too after an uncertain year which has seen an increase in the number of service providers and a concerning drop in stock levels creating a fraught environment in the property sector locally.

The chart below is interactive (neat huh?) you can click on the legend at the bottom to remove different types, so for example you can compare flats to the overall average house price for Hertfordshire by 'switching off' the other columns.  Isn't technology awesome?!

So, come on then - the juicy bit - what does the Crystal Ball say about what's going to happen in the next year?

The situation remains stable - the prices are rising, but with impending tax changes for Landlords and murmurs of interest rate rises, we're already seeing some investors take the view that they will jettison some of their lower performing stock in the next 24 months. This could send a small ripple through the lower end of the market and unless handled carefully, the perfect storm could precipitate a tumble in prices.

This isn't going to be overnight though, and my feeling is that we're still on the upward curve. Just this week we've agreed an asking price deal on a property in deepest darkest Harpenden, which goes to show that while demand remains strong, the buyers are out there and it's worth holding your nerve just for now, but if you're thinking of taking the leap, I wouldn't wait until next Christmas to make the decision. I'll be keeping a close tab on market performance, so check back here for regular updates.

If you're interested in hearing more about the new tax rules for Landlords, or you're interested in learning about how rising population numbers is something we all need to be concerned about, you might be interested in attending St Albans Property Network which is held on the third Wednesday of every month at St Michael's Manor Hotel. The next event is on Wednesday the 20th of January and we have some fantastic speakers lined up for the new year, including Stephen Bown from the charity 'Population Matters' and Kevin Griffiths of Keycrest Accounting.

St Albans rental market update November 2015

The St Albans rental market is a fascinating one to examine from time to time, and as with all markets things do change - there has been a notable dip in prices of property on the market for Sale in central London, as well as a drop in instructions nationwide due to various factors.

Some of our contemporaries both large and small have had to cull staff or urge existing team members to take second jobs pulling pints due to the lull in availability. But where does this leave the rental market?

Well, I don't like to work on hearsay and speculation and I always say you can't beat hard figures. With that in mind I had a look at the three major portals for some insights on what is happening out there to draw down some figures.

We used data from Zoopla this time as it seems to have a good selection of live figures to work from. Bearing in mind the data was clearly sampled at the time of writing and may be subject to change, Zoopla is showing the current snapshot of available property along with the prices and the current asking rents. Based on that data I have put together a little graph showing you the likely average yield on each type of property;

You must remember that this data is just a snapshot based on what is currently on the market and it's also based on asking prices, not the actual Sale Prices and the actual rent achieved so these numbers could go up or down.

Interestingly we had an anomaly in the data which was that Zoopla are only showing one "1 bed house" For Sale which was a 1 bed park home and the Sale price is very low when pitched up next to the average rent for a 1 bed house, hence the huge data spike - we pulled that out of the data and found two other properties for Sale on Rightmove which were 1 bed houses. The yield on 1 bed houses in this area should be topping out at around 4-5% max on a sunny day with the wind behind you so don't take the 7% shown in the chart as a sign that 1 bed houses in St Albans are the new hot ticket, although you may wish to investigate them as a potential purchase.

Removing one bed houses from the equation (the data is volatile as there are fewer of them) shows that 1 and 2 bed flats (represented in black on the chart) are the best investments, but once you move beyond two bedrooms, houses take the baton from the flats as a better bet for a greater yield in the 3 and 4 bed market.

This of course may differ depending on the location of the property and the type of tenant you want as a Landlord - a central flat with three bedrooms rented to young professionals or sharers may be a good bet as opposed to a three bed house out of town - we must judge each case on it's merit.

The average price you can expect to pay in St Albans based on data from the last 3 months is £494,088 and the current average value is settling in at around £523,979 which means the local agents are probably overcooking asking prices by about 6%. This is based on 225 sales which equates to 75 properties per month changing hands in the City. Values have increased by just 0.01% in that time but are rising steadily.

For more market updates, information and to find out what your home or investment might be worth, please call me on 01582 346 111 - we do have a Lettings team as well who are currently beating tenants back with a stick. Current record stands at letting a property in less that 14 hours - we're aiming to beat it.