Is the reported 20% plus increase in the North East house prices too good to be true?

Well let me start straight away by saying a great rule to live your life by,  is to    remember that if something looks too good to be true. IT NORMALLY IS!

According to the Office of National Statistics, North East house prices have grown by 24% in just one month! Recently released data from the government’s official statistics body show  prices in the region rising from £98,524 in March to £121,879 in April, an increase of £23,355.    This increase however is not reflected nationally.   UK house prices have in contrast  fallen £100,000 lower in just four weeks – slumping from £292,000 in March to just £209,000 four weeks later, with London property values falling by 13% – a drop of £66,963.

However sadly the real reason for these outstanding results is  not as exciting as these figures would suggest. I believe they simply reflect the changes in the way the Office of National Statistics are now calculating average house prices.  They are simply giving less weighting to “extreme valued property” which  previously were clearly skewing figures. 

Various industry personnel have commented on the change and as a business owner myself I am still cautious and to a certain extent, unsure in my own mind of the implications of Brexit on our local and national economies and of course in particular, our housing market. So in reality, it is purely down to a technical change with no impact on the real value of our homes. So sorry to burst the bubble. 

Although as a final point, I think it is only fair to point out that this does not mean that the North East housing market isn’t as strong as it’s been in years. The ONS changes are in my opinion, very sensible and as our region tends to have fewer ultra-expensive properties than other parts of the county, they are being beneficial to the North East, by reflecting more accurately the value of our homes, compared to the rest of the country.  I hope this helps to clarify the situation.  

If you would like to discuss investing in the Durham property market or require any advice, help or assistance with the lettings, or management of your existing rental property or portfolio in the North East, please feel free to call me at my Durham Office on 0191 212 6970 or e-mail me on john@acornproperties.co.uk

Durham, do the statistics stack up? Is it the right time to buy or not?

I do love the headlines people are using to gain the attention of their readers. In one particular online property report there were two separate articles. The first claimed “Property Prices Tumble ahead of the Referendum. Bad news I thought, but surely there is bound to be some uncertainty as both parties (by omission rather than admission), have identified that this situation has never occurred before and therefore realistically no one actually knows! I read further and then the whole terrible horror story quickly unfurled! Prices have actually dropped by .03% and it definitely says that this could “possibly be attributed to the forthcoming referendum”! Well there you have it shock horror, but it did get me reading, so at least I know the real factsJ.

It also got me thinking about whether it is a good time to buy in the Durham area, so I thought I would look up a few statistics myself as I have noticed a small increase in interest in the sales market that we have been experiencing recently. What I did was compare the Durham area (County Durham) as a whole and compared the average house price against the average salary for the same period. I also thought it would be worth looking at the period of 2007/8 -2014/15 (sadly the latest national statistics currently available, although the financial year for that period ended 5th April 2015).

The average salary in Durham in 2007/8 was £18,805 and the average house price across the county was £105,000. This means that the average house price was 4.6 times the average Salary. If we fast forward to 2014/15 the average salary has increased by 13% to £21,330 yet the average house price had only grown by 3% to £108,000 meaning that the ratio had dropped from 4.6 to 4.1.  Prices are beginning to rise so now is still an excellent time to look for pastures new or additional investment property so if you are thinking about a move or investment, strike whilst the irons hot there are still some bargains here in the North East.

We are getting a lot of enquiries, interest and sales from southern investors so don’t miss out if you are local. These people have done their homework and you get a lot more for your money in the North East than you can in London and the South East. If you want to know more or would just like to have an initial exploratory chat whether it is a residential home or a buy to let investment, just call me (John Henderson), at my Durham office 0191 212 6970 and I would be happy to advise and help you.  I am surmising you will never guess what the second article was about. J.

 

E U Update: June 2016. What a month! (And it’s not even over yet)!

Well June 2016 has definitely been a busy, engaging, exciting (and disappointing one)!

We have had so far, the EU Referendum, European Championship Football, the start of Wimbledon, in fact there is so much going on I have stopped listening to the Archers, I wonder how they are getting on in Ambridge with their latest story line?

Sadly we watched in disbelief as the news unfolded in the middle of the EU referendum canvassing, as Jo Cox MP was murdered in her West Yorkshire constituency in what has been described in the press as a “politically motivated killing!”

We then had the referendum and those who believe in democracy accepted (or were delighted), with what most have described as an unexpected result. Whilst those who claim are truly democratic but didn’t win, are blaming everyone but themselves and demanding another referendum.

On that interesting point, in the last few days, I have seen on social media, two further demands for a referendum. One because an historian was ultimately unhappy with the outcome of the battle of Hastings in 1066 and the best one (in my opinion), for the lady (or gentleman), I cannot honestly remember whichJ), who demanded a re-draw with the Euro lottery because they hadn’t won the jackpot!  To be honest I think the last two are more plausible than the first one!

Finally Scotland who voted in their own referendum to be part of the democratic United Kingdom now don’t like the result of the EU referendum even though they voted in favour of staying AND THEIR VOTES (BOTH FOR AND AGAINST)! Counted towards the final total. It appears (if the media is ever to be trusted), they now want another Scottish referendum as they want to be more independent leaving the UK to be more in control (and hopefully accept money) but be ruled by BrusselsJ!  This has resulted in a number of major house builders worried about the current uncertainty of the housing market (God knows why we are currently in need of at least 500,000 additional properties just to service the current market), to put in bid to rebuild Hadrian’s Wall J!

At least we had a glimmer of pleasure and hope over last weekend when Glastonbury in all its muddy glory, gave us Adele and Coldplay headlining but for my best enjoyment, ELO were amazing! I really had forgotten how many hit songs they had made in their 46 year reign.  Even Monday 27th got us off to a great start with Marcus Willis (No.23 in the UK and No. 772 in the World) beat Ricardas Berancis from Lithuania ranked 718 places higher in the World at No. 53!  His reward a match against Roger Federer in the next round “Legend”!

Then back to the euros and yes well played Iceland (the country not the shop)! And for the second time in a week we find ourselves out of Europe! With this also came the resignation and retirement of Roy Hodgson the England Manager.

So what’s the state of play today? 28th June 2016.

Well as well as Roy Hodgson, our prime minister has also resigned, the conservative party are in turmoil! However not to be outdone the Labour leader spent Sunday watching most of his shadow cabinet resign (approximately at a rate of one every hour). This brought great humour to the benches of Westminster on Monday at Prime Minsters question time when David Cameron stood up and addressing Jeremy Corbin on the opposite bench quipped “Well I thought I had had a bad day!”

Whatever happens, the current political and financial situations are going to remain unsteady until the ship is settled and the course is set. There will be issues in the London Property Market as that (at the top which filters down), is heavily influenced by foreign investment. Although the market had already started to slow down several months ago and that meant that increased prices have started to spill out to the suburbs and beyond.

It really does not appear to be as bad as the papers and television would have you believe. Yes the pound dropped 50 points (but made up 47 of them before closing)! They don’t tell you that do they! Why not? Simples, because it is not sensational and won’t sell newspapers. We have had blips like this in recent times in 2010, 2013 in fact any general election, referendum or major political event does this and there will always be something to worry about. For Goodness sake you think you have worries I support Newcastle United!

It is in our DNA as a nation to work hard and succeed, the markets are jumpy and will return. Keep the faith, work hard and reap the benefits. That’s what I and my company are going to do and we are very happy! Good luck.

If you would like to discuss investing in the Durham property market or require any advice, help or assistance with the lettings, or management of your existing rental property or portfolio, please feel free to call me at my Durham Office on 0191 212 6970 or e-mail me on john@acornproperties.co.uk

 

A simple Masterclass for budding property investors

So you are looking to invest in a property but not sure which one to go for and why?

Most people will look to buy an investment property scan the horizon for a buy to let, then look at the return and how much work you need to do and then make a decision. I would like to offer you an alternative (or additional) way of going about the business of property investment.

Rather than simply being property led, why not look at the market you wish to tap into and once you have identified that, then you can search suitable properties in that group.

Equally once you have mastered this simple concept you can then look at possible properties, cross reference them with this simple and effective concept and add value and knowledge of the potential markets into your purchasing equation to get a fuller and more complete buying decision. It will also impress your lenders that you understand the business of property investment better than the average “punter”.

I tend to categorise the market into 6 areas and we will look at the pros and cons of each sector so you have the correct information to use in your decision making process. Whereas it would be impossible to highlight all the issues and obstacles, I have outlined some basic questions that need asking. Always consult with a local specialist in both the area and the market sector you are considering investing in. After all, you wouldn’t go to physiotherapist to treat your toothache would you!

The sectors we will address today are;

  • Student
  • HMO’s
  • The single tenant.
  • The first time couple or two first time sharers (friends, brothers / sisters)
  • Families
  • Pets

Students:

This is one of the most intricate market sectors so we will spend a little more time on this first option. This is normally the first time that people start the renting process and again frequently they have already spent the first year in Halls of residence and most likely they will be sharing with friends so you could be looking at anything from 2 to 12 sharers. The golden rules here are;

  • Make sure there are universities in the local vicinity and that you are buying student accommodation in a student area. It is unlikely that students will be welcomed in a residential area and vice versa so make sure your property is fit for purpose and has (if possible) a successful history of being rented out to students.
  • Base the number of occupiers on the number of bedrooms. This could have a direct effect on HMO and licence implications so “Caveat Emptor” (Buyer Beware)!
  • Three or more unrelated sharers are known as a House of Multiple occupancy (HMO) and there are a set of criteria available on line or from your local council so please make sure that the property complies, especially if you are taking the property on with either tenants already in or about to enter when the property is legally yours. Five or more unrelated tenants sharing over three floors is a licensable HMO. Licenses are non-transferable so ensure you can obtain a fit and proper person certificate otherwise you are not legally allowed to hold a licence. The local authority will have all the relevant information you require.
  • Student lets unlike professional ones, are normally pre-let. i.e. we start to view (and let) properties for the forthcoming academic year (Sept 2017 – July 2018), in November 2016. This is great news as you can in theory, let your property up to 10 months before it comes vacant! I know of no better way of mitigating voids, but always remember to plan in any maintenance needs before agreeing a move in date. Also many student tenancies in the North East will start in July although the academic year normally starts in September. This means that you receive a full 12 months’ rent, the tenants have somewhere to store their possessions (rather than take them all home and bring them back three months later) and you only get 9 months wear and tear in a 12 month contract!
  • ALWAYS wherever possible, get a financial guarantor for each tenant and ALWAYS credit reference them. Fail to plan and you have planned to fail. If you get 4 sharers all with guarantors then they are jointly and severally liable therefore your rent is much safer than renting by the room. There are other tips to help and I am happy to discuss these with potential landlords.
  • The larger the number of rooms, normally the greater the return on your investment (R.O.I.) and conversely, the greater the risk. Study the area, look at the trends and talk to your local property specialist who can help often with valuable information.
    • I would advise checking if there are any “Article 4 directives” or “Selective Licensing directives” either current or pending in the area you are considering, as that too can seriously affect your potential calculated returns.
  • Finally what sort of students are you looking to attract. Whereas there is a popular misconception that students live in run down properties (normally as that’s what we did in our day)! Whereas in reality most students have never rented before, their only experience of living in a house is with their parents. Most (especially the better off students, who not only have the money but also the best financial guarantors), are used to an excellent standard of accommodation and their parents want them to be as comfortable and as safe as possible. In Newcastle a typical rent can range from £65 p.p.p.w. to £100 p.p.p.w. plus bills. In Durham it ranges from £90 – £130 p.p.p.w. and normally includes bills. The most frequently asked question in 2015 was “Does it have a dishwasher”?

HMO’s

House of multiple occupancy are not just for students, professional people moving into a new area who cannot afford to live alone could join together to rent (junior doctors, recently qualified students, nurses etc.). The rules on HMO are virtually identical however Students do not pay council tax, professionals do. Should you decide to rent by the room with shared facilities, most authorities will put the onus on the payment of council tax on the landlord not the tenant so please check what your local authority’s policy on this matter is.

Again the more sharers normally the higher the yield (R.O.I.) and again (unfortunately), the greater the risk and professionals are unlikely to share with more than four per household and normally two to three are the magical figures. With this sector the higher the number of rooms the lower your target audience. The more flexible you are the greater your chances of success will be. Also if your potential property is on the edge of a student area it may appeal to both students and professionals so here you have doubled your potential market and therefore your chances of letting your property out. Finally professionals often don’t want to live like students so the higher the standard of your property the more desirable it becomes and often (but not always), the more rent you can charge.

The single tenant.

Quite often this type of tenant has rented before, they have moved to a new area and they are financially more secure and able to shoulder the burden of a higher rent than sharers. These are often young professionals moving into a new area for reasons of work (solicitors, accountants, doctors, IT professionals etc.). The wear and tear factor should be less with a single occupant, although in an ever changing work environment where redundancy is no longer the exception, often it may be prudent (wherever possible) to get a financial guarantor. This is particularly relevant with first time positions where the salary may be good but there is no financial history as they are just starting out in the professional world. Often if moving into a new area (or country) these people if they can afford it will prefer a two bedrooms so they can have family or friends to visit whilst they are in your area.

The first time professional couple or sharers;

The profile here is generally either friends who are remaining in an area after university or couples that have decided to live together for the first time at the start of their relationship. As the first three sectors, these are not necessarily long term tenants although there are exceptions.  These tenants generally will have rented previously and unless an established couple, probably not with each other before. There will be dynamics that will evolve and change (who wears the trousers and who is the spokesman/woman). Although this is potentially the most volatile of all the sectors on paper, this is very rarely the case as there are many other facets of a relationship and should it survive and flourish, then providing they are in a well maintained and pleasantly situated property that is normally the least of their worries.

Families:

The types of properties required here are normally two, three or four bed properties, often within a commuter belt or rural setting.

You can normally divide this sector into two main types. Those families who cannot afford to buy (in the most normally due to either a low income, or inability to save for a deposit due to high family financial commitments). The other division are families who are moving into an area (normally for work reasons) who want to test the area before buying or families who currently cannot afford to buy but are saving up to do so the second type are more lightly to be shorter term lets than the first. Providing it is the right property in the right area (often driven by school accessibility and catchment areas), with the first type you could get a long let 3-5 years whereas with the second type it is more likely going to be a year possibly two dependant on the work contract or availability on the sales market. Due to financial constraints (unless the children are very young), there are normally two incomes for this type of property so this can represent a stable market although rental prices are unlikely to be as  high as the young professional, student or executive market as they tend to be more city centre based. The upside here is that as the properties will be predominately out of city centre the purchase prices should be lower and therefore yields may be as good as if not better overall.

Pets:

A great favourite with the previous sector due in the most to children and again much more likely to be with properties in a semi or rural location. This can add to wear and tear and generally speaking not a great love of landlords (unless they too are animal lovers).  It is however a potentially lucrative market as most landlords are reluctant to risk any potential additional wear and tear, So if you will consider pets (always get full details, size, type, age etc. and always specify on the tenancy (i.e. one Yorkshire Terrier Ethel 6 years old) and always include a pet clause in your tenancy. This makes it difficult for tenants to get additional animals during the tenancy as clearly they do not have permission to do so as it is not stated on the agreement.  My company tends to mitigate this issue by increasing the deposit (which is returned in full if the property is left in good condition).  If a tenant is reluctant to pay an additional premium on a fully returnable deposit, then that could be viewed as they are worried that they may not get their money back. If that is the case, you could argue if they do not trust their own pets why should you?

I do hope you have found this article interesting, informative and thought provoking. No one piece is ever complete and this is simply designed to get you thinking more in depth about your own investments.  If you would like to discuss investing in the Durham property market or require any advice, help or assistance with the lettings, or management of your existing rental property or portfolio, please feel free to call me at my Durham Office on 0191 212 6970 or e-mail me on john@acornproperties.co.uk

 

Where to buy in the North East?

 

People are always asking me which is the best place to buy and whereas it is lovely to be looked on as a specialist, that does bring with itself a certain degree of responsibility as well as common sense. The list of questions to ask at this stage are phenomenal, but just so you get a flavour;

Are you buying to live in, or to rent out?  Where do you work?  And if applicable, where does your partner work and where do your children go to school?  As you can see, the list is endless and to answer all of your questions, this article would be bigger than the full set of Encyclopaedia Britannica.  However I have some basic details that might just give you some clues as to which would suit your needs best.

For the purpose of this exercise, I am comparing specific post codes Newcastle (NE1) with Durham (DH1) and the statistical information for this article was gathered in February 2016.  I am also in addition, looking at some of the statistics that the government uses to give you a flavour of the area also. So the latest information on employment shows that the highest area of employment was the South East Region (77.9%) with the lowest being Northern Ireland with 68.8% however the unemployment for the same period shows the highest area of unemployment  was this area (north East) with 7.9% and the lowest again was the South East with 3.7%.  However the general pattern for all regions is flat of gently decreasing, which is at least comforting as it is now going in the right direction.

In DH1, the average price over the last 12 months was £211,368 and the current average value of all property types (flat, apartment, terraced, semi and detached etc.) is £212,497 and there have been 528 sales in the past 12 months. The average salary across this post code is £28,499 and dividing the average current value by the average salary this shows a ratio of average price versus average Salary 7.46 times salary

IN NE1 (which is a smaller area), there have only been 93 sales in the same period with an average value of £151,689 although the current average value across the same range in February 2016 is £163,450 which shows that prices are rising slightly quicker here currently although the average values are less than Durham’s.  The average salary is very slightly higher at £29,138 with a ratio of 5.61 times salary.

It may help you to use these ratios when making your own mind up using your salary and the prices of the houses you are looking at.  Good Luck!

If you would like to discuss investing in the Durham property market or require any advice, help or assistance with the lettings, or management of your existing rental property or portfolio, please feel free to call me at my Durham Office on 0191 212 6970 or e-mail me on john@acornproperties.co.uk

 

 

Which are the best Semi-detached properties to buy in DH1?

I have recently in response to a specific request,  studied the facts and figures on one of the top property portals in the UK and the reading is quite interesting and definitely worth looking at if you are looking to buy in a semi-detached property in DH1 with a view to renting it out.  I was recently asked by a potential investor, “What is the best semi-detached property to buy in the DH1 postcode, a two bed or a three bed?

Oh if only it was that simple! The first question I posed was “What is the most important factor that you are trying to achieve”? Capital growth or rental yield (GROI).  They had actually not considered this aspect so we did some detailed analysis to help them and of course to help and advise other clients like yourself.

Since 2010 there have been over four hundred 3 bedroom semi-detached properties marketed on this portal with prices ranging from £340,000 down to £165,000 and this has resulted in 142 sales showing an average selling price in 2010 of £178,000 which has risen to £183,650, showing a capital growth of only 3% in 5 years.  Average rents in 2015 at these properties was £681.41p showing a gross return on investment (GROI, sometimes referred to as yield), of 4%.  Perhaps one of the most interesting points uncovered during this exercise was that there were 31 sales in 2010 in this group of properties versus 70 in 2015 showing that market is indeed beginning to move with an increase of 126% however the interest is not increasing the actual price for 3 bed semi’s as mentioned earlier the increase in sales price is only 3% since 2010. There has been a substantial increase in the numbers of properties but little in actual selling prices.

Looking at the market in two bed Semi-detached properties, since 2010 there has been just over 200 properties (around half the number of three bed semis) marketed on Rightmove.  The average price in 2010 was £119,600 increasing to £ 134,050 in 2015 showing a capital growth of 12% four times that of the three bed semi’s over the same period.  The average rent in 2015 for two bed semis was in giving a GROI of and in 2015 the average rent for a two bed property in DH1 was £511.67 showing a gross return on investment of 5%.  Again the rate of sale has increased from 2010 to 2015 by 70% reinforcing my earlier comment that the market is distinctly more buoyant in 2015 but the added activity has not had a huge influence on price although significantly more in the 2 bed semi sector

In conclusion I believe the figures speak for themselves and the two bed semis definitely win in both terms of capital growth over their 3 bed rivals.  If this was a question you were considering then I hope I have answered it comprehensively for you.

If you would like to discuss investing in the Durham property market or require any advice, help or assistance with the lettings, or management of your existing rental property or portfolio, please feel free to call me at my Durham Office on 0191 212 6970 or e-mail me on john@acornproperties.co.uk

 

Is it still worth investing in the student market in Durham?

Recently I was discussing the situation of the Durham student market places with an investor who has owned (and still continues to do so), student property in the Viaduct area of Durham City and in particular I would like to highlight one of the favourite streets in this area, East Atherton Street.

Naturally very few investors in the North East of England have had an easy ride with the dramatic drop in property prices since 2009. However you may be surprised to find that the market is anything but depressed in Durham. It is true that the property prices have reduced but Durham is a popular student destination and rents have increased substantially over the last seven years, redressing the balance for property owners.

You may be interested to note that in 2009 East Atherton (on average) was achieving £70pppw when the average house price before the recession hit was £263000 giving a yield (GROI) on a typical 5 bed house of 7%.

There have only been two properties sold since 2010 with an average price of £232,000, however rents have increased from an average of £70 Per Person Per Week in 2009 to £98PPPW in 2015 so if you take the same example of a typical five bed property the gross return on investment has risen quite dramatically to 11%.  To be fair a lot of landlords are offering all-inclusive packages but the tenants I spoke to were paying very close to the £98PPPW excluding bills and that had increased substantially from the previous year, which would indicate that this information is correct.

However a word of caution and a firm reality check is needed at this point. I am sure you will agree, these figures are outstanding and indeed they are the exception to the rule. If you compare the interest rates in 2009 to now there is a significant difference and Gross Return on investment is really the same as a balance sheet in finance, it is simply a snapshot in time and does not truly reflect the full picture. The current Bank rate is .05% and has been so since 2009. If you can achieve a true 5% yield then that represents ten times the bank rate and should be considered attractive.

Property Investment is a complicated game and you need to understand the market so you make the right decisions. Please make sure you have a good financial advisor and a knowledgeable broker / lender who can work for you!  Not them.  If you invest you need to make good informed decisions so the more information you have, the better the decision you should be able to make.

If you would like to discuss investing in the Durham property market or require any advice, help or assistance with the lettings, or management of your existing rental property or portfolio, please feel free to call me at my Durham Office on 0191 212 6970 or e-mail me on john@acornproperties.co.uk