I was having a lazy Saturday morning, reading through the newspapers at my favourite Blueberries coffee shop in Bexhill. I find the most interesting bits are their commentaries on the British Housing Market. Some talk about property prices, whilst others discuss the younger generation grappling to get a foot-hold on the property ladder with difficulties of saving up for the deposit. Others feature articles about the severe lack of new homes being built (which is especially true in Bexhill!). A group of people that don’t often get any column inches however are those existing homeowners who can’t move! Continue reading “23.4% Drop in Bexhill People Moving Home in the Last 10 Years”
My thoughts to the landlords and homeowners of Bexhill…
The tightrope of being a Bexhill buy-to-let landlord is a balancing act many do well at. Talking to several Bexhill landlords, they are very conscious of their tenants’ capacity and ability to pay the rent and their own need to raise rents on their rental properties (as Government figure shows ‘real pay’ has dropped 1% in the last six months). Evidence does however suggest many landlords feel more assured than they were in the spring about pursuing higher rents on their Bexhill buy-to-let properties. Continue reading “Slowing Bexhill Property Market? Yes and No!”
Recently I was having a chat with one of my second cousins at a big family get-together. The last time I had seen them their children were in their early teens. Now their children are all grown up, have partners, dogs and children. Wow – how time flies!
So, I got talking over a glass of lemonade with my 2nd cousins and a couple of their children, about the times of 15% interest rates and how the more mature members of our family had to endure the 3 day week, 20% inflation and the threat of nuclear annihilation in 4 minutes … so, foolishly, I said what with all the opportunities youngsters had to day, they had never had it so good! Continue reading “The Unfairness of the Bexhill Baby Boomer’s £3,403,330,000 Windfall? (Part 1)”
As the dust starts to settle on the various unread General Election party manifestos, with their ‘bran-bucket’ made up numbers, life goes back to normal as political rhetoric on social media is replaced with pictures of cats and people’s lunch. Joking aside though, all the political parties promised so much on the housing front in their manifestos, should they be elected at the General Election. In hindsight, irrespective of which party, they seldom deliver on those promises. Continue reading “Bexhill Property Market and Mysterious Politics of the General Election”
50 years ago, in 1967, the first human heart transplant was performed by Dr Christian Barnard in South Africa. In the same year Sweden switched from driving on the left-hand side to the right-hand side of the road. The average value of a Bexhill property was £3,664, interest rates were at 5.5% and The Beatles released one of my favourite albums – their Sgt Peppers album … but what the hell has that to do with the Bexhill property market today?? Quite a lot actually … so with my CD Player turned up loud – let me explain my friends!
I have been doing some research on the current attitude of Bexhill first-time buyers. First-time buyers are so important for both landlords and homeowners. If first-time buyers aren’t buying, they still need a roof over their heads, so they rent (good news for landlords). If they buy, demand for Bexhill property goes up for starter homes and that enables other Bexhill homeowners to move up the property ladder.
In November 2015, George Osborne disclosed plans to restrain the buy-to-let (BTL) market, implying its growing attractiveness was leaving aspiring first time buyers contesting with landlords for the restricted number of properties on the market. One of things he brought in was that tax relief on BTL mortgages would be capped, starting in April 2017.
In November 2015, George Osborne disclosed plans to restrain the buy-to-let (BTL) market, implying its growing attractiveness was leaving aspiring first time buyers contesting with landlords for the restricted number of properties on the market. One of things he brought in was that tax relief on BTL mortgages would be capped, starting in April 2017. Before April 2017, a private landlord could claim tax relief from their interest on their BTL mortgage at the rate they paid income tax – (i.e. 20% basic /40% higher rate and 45% additional rate).
So, for example, let’s say we have a Bexhill landlord, a high rate tax payer who has a BTL investment where the rent is £900 a month and the mortgage is £600 per month. In the tax year just gone (16/17), assuming no other costs or allowable items …
- Annual rental income £10,800.
- Taxable rental income would be £3600 after tax relief from mortgage relief
- Meaning they would pay £1,440 in income tax on the rental income
And assuming no other changes … the landlord would have income tax liability’s (at the time of writing May 2017) in the tax years of …
- (17/18) £1,800
- (18/19) £2,160
- (19/20) £2,520
- (20/21) £2,880
Landlords who are higher rate tax payers are going to have be a lot smarter with their BTL investments and ensure they are maximising their rental properties full rental capability. However, there is another option for landlords.
The Bexhill landlords who own the 3,489 Rental properties
in the town could set up a Limited Company and sell their
property personally to that Limited Company
In fact, looking at the Numbers from Companies House – many landlords are doing this. In the UK, there are 93,262 Buy To Let Limited Companies, and since the announcement in November 2015 – the numbers have seen a massive rise.
- Q2 2015 / Q3 2015 – 4,193 Buy to Let Limited Companies Set Up
- Q4 2015 / Q1 2016 – 5,403 Buy to Let Limited Companies Set Up
- Q2 2016 / Q3 2016 – 3,007 Buy to Let Limited Companies Set Up
- Q4 2016 / Q1 2017 – 7,149 Buy to Let Limited Companies Set Up
So, by selling their buy to let investments to their own limited company, owned 100% by them, these landlords could then offset the costs of running their BTL’s as an ‘allowable expense’ – effectively writing off the cost of 100% of their mortgage outgoings, wear and tear and upkeep, letting agent’s fees etc.
I am undeniably seeing more Bexhill landlords approach me for my thoughts on setting up a BTL limited company, so should you make the change to a limited company?
In fact, I have done some extensive research with companies house in the 15 months (1st January 2016 to 31st March 2017 and 136 Buy To Let Limited Companies have been set up in the TN postcode alone).
Well if you are looking to hold your BTL investments for a long time it could be very favourable to take the short-term pain of putting your BTL’s in a limited company for a long-term gain. You see, there are huge tax advantages to swapping property ownership into a limited company but there are some big costs that go with the privilege.
On a more positive note, what I have seen though by incorporating (setting up the Limited Company) is landlords can roll up all their little buy to let mortgages into one big loan, often meaning they obtain a lower interest rate and the ability to advance new purchase capital. Finally, if the tax liability is too high to swap to a limited company, some savvy buy to let investors are leaving their existing portfolios in their personal name whilst purchasing any new investment through a limited company? Just an idea (not advice!).
It’s vital that landlords get the very best guidance and information from tax consultants with the right qualifications, experience and insurance. Whatever you do, always get the opinions from these tax consultants in writing and you shouldn’t hurry into making any hasty decisions. The modifications to BTL tax relief are being progressively eased in over the next three years so there is no need to be unnerved and rush into any decisions before finding out the specifics as they relate precisely to your personal situation, because with decent tax planning (from a tax consultant) and good rental / BTL portfolio management (which I can help you with) … whatever you do – let’s keep you the right side of the line!
Investing in Bexhill buy to let property is different from investing in the stock market or depositing your hard-earned cash in the Building Society. When you invest your money in the Building Society, this is considered by many as the safe option but the returns you can achieve are awfully low (the best 2-year bond rate from Nationwide is a whopping 0.75% a year!). Another investment is the Stock Market, which can give good returns, but unless you are on the phone every day to your Stockbroker, most people invest in stock market funds, making the investment quite hands off and one always has the feeling of not being in control.
However, with buy to let, things can be more hands on. One of the things many landlords like is the tactile nature of property – the fact that you can touch the bricks and mortar. It is this factor that attracts many of Bexhill’s landlords – they are making their own decisions rather than entrusting them to city whizz kids in Canary Wharf playing roulette with their savings.
I always say investing in property is a long-term game. When you invest in the property market, you can earn from your investment in two ways. When a property increases in value over time, it is known as ‘capital growth’. Capital growth, also known as capital appreciation, has been strong in recent times in Bexhill, but the value of property does go up as well as down just like shares do but the initial purchase price rarely decreases. Rental income is what the tenant pays you – hopefully this will also grow over time. If you divide the annual rent into the value (or purchase price) of the property, this is your yield, or annual return. So, over the last 5 years, an average Bexhill property has risen by £54,600 (equivalent to £29.92 a day), taking it to a current average value of £280,900. Yields range from 5% a year and can reach double digits’ percentages (although to achieve those sorts of returns, the risks are higher).
However, something I haven’t spoken of before is the more specialist area of flipping property to make money. (flipping – buying a property, carrying out some minor cosmetics and re selling it quickly). I have seen several investors recently who have made decent returns from this strategy. For example:
- One Bexhill Investor paid £160,000 for a 3 bed terrace on Windsor Road in December 2014. It appears some cosmetic work was done to the property and it was resold a few months ago (November 2016) for £225,000 … 40.63% return before costs (or compound annual return equivalent of 19.24% AER) http://www.rightmove.co.uk/house-prices/detailMatching.html?prop=61778042&sale=4689049&country=england
- Another Bexhill Investor flipped a 2 bed terrace on Sidley Street, paying £133,000 in March 2015 and selling it again after some doing some cosmetic works, sold it for £169,500 a few months ago (November 2016) … 26.97% return before costs (or equivalent 15.30% AER) http://www.rightmove.co.uk/house-prices/detailMatching.html?prop=56840608&sale=89139900&country=england
This demonstrates how the Bexhill property market has not only provided very strong returns for the average investor over the last five years but how it has permitted a group of motivated buy to let Bexhill landlords and investors to become particularly wealthy.
As my article mentioned a few weeks ago, more and more Bexhill people may be giving up on owning their own home and are instead accepting long term renting whilst buy to let lending continues to go from strength to strength. If you want to know what (and what would not) make a decent buy to let property in Bexhill, then one place for such information would be the Bexhill Property Blog at www.bexhillpropertyblog.com
Bexhill faces a predicament. The population is growing and the provision of new housing isn’t keeping up.
With the average age of a Bexhill person being 47.2 years (compared to the South East average of 40.0 years old and the national average of 39.4 years of age), the population of Bexhill is growing at an alarming rate. This is due to an amalgamation of longer life expectancy, a fairly high birth rate (compared to previous decades) and high net immigration, all of which contribute to housing shortages and increasing house prices.
My colleagues and myself work closely with Durham University and they have kindly produced some statistics specifically for the Rother District Council area. Known as the UK’s leading authority for such statistics, their population projections make some startling reading.
I remembered that a few days before Easter, I got chatting with one of my out of town landlords who was back in Bexhill visiting his family. Brought up in Bexhill, he went to the Battle Abbey School back in the 1970’s and is now a University lecturer in central London. To enhance his retirement, he has a small portfolio of four properties in the town and wanted my advice on where to buy the next property in Bexhill (as he lives in a college owned flat and anyway, would never dream of buying where he lives in Kensington)
Before I could advise him, I reminded him that the most important thing when considering investing in property is finding a Bexhill property with decent rental yields for income returns, yet at the same time, it must have the potential for capital growth from rising house prices over time. Going into 2016, Bexhill landlords will be under more pressure to find the best permutation of yields and capital growth, as extra stamp duty charges for buying properties and a squeeze on mortgage interest relief will raise their costs.
However, (you knew there would be a however) before we look at yield and capital growth, one important consideration that often many landlords tend to overlook, is the propensity of how likely the rent will increase. Interestingly, the average rent of a Bexhill property currently stands at £1,003 per month, which is a rise of 6.0% compared to twelve months ago (although it must be noted this rise in rents is for new tenancies and not existing tenants).
Anyway, back to yield and capital growth, the average value of a Bexhill property currently stands at £262,500, meaning the average yield stands at 4.59% per annum, which on the face of it, many landlords would find disappointing. That is the problem with averages, so if I were to look at say 1 bed flats in Bexhill which are the sort of properties a lot of landlords buy, in Bexhill, the average value of a 1 bed flat is £110,000, whilst the average rent for a 1 bed flat is £495 per month, giving a yield of 5.40%. However, if that wasn’t high enough, there are landlords in Bexhill who own some specialist properties with specialist tenancies, that are achieving nearly double that yield – again it comes down to your attitude to risk and reward (give me a call if you wanted a chat about those sorts of properties)
Ultimately investors want to be making gains from both rent and house price growth. When combined, the rental yield and capital growth gives you the return on investment, and that is what I told our University friend from Kensington. Return on investment is everything. So, looking at property values in Bexhill have risen in the last year by 7.1%, which means the current annual return on investment in Bexhill for a typical 1 bed flat is 12.23% a year which isn’t bad.
Whether you are a soon to be new landlord or existing seasoned landlord in Bexhill, you might be interested in a blog about the Bexhill property market, where you will find similar articles to this one about what is happening in the Bexhill property market at www.bexhillpropertyblog.com and to answer the question on what he should buy, well on the same blog, once or twice a week, I post what I consider to be the best buy to let deals in Bexhill, irrespective of which agent it is being marketed with. Maybe you should visit the blog as well?
“The growth of the private rented sector, and the arrival of an investor class of buy to let landlords within it, is an issue that won’t be going away anytime soon, no matter what you read in the Daily Mail”, I said, as I chatted over a coffee with a landlord client of mine at Blueberries Coffee Shop on Endwell Road in Bexhill-On-Sea. Whether you are a landlord of mine (or not as the case maybe), I am always happy to look over any properties you are thinking of buying for buy to let purposes and more so over a coffee!
Some commentators are saying buy-to-let is about to die, with the new stamp duty changes and how mortgage tax relief will be calculated. Some say 500,000 rental properties will flood the market nationally in the next 12 months as investors leave the rental market. Have you heard the phrase ‘Bad news sells newspapers’? Let me explain why buy-to-let in Bexhill is only going in one direction – and not the direction the papers say they are going.
According to Sheffield University, buy-to-let investors will continue fuelling the growth of the private rented sector in the coming decades. By their estimates (and they are considered a centre of excellence on the topic), the rate of homeownership nationally will fall to 50% (today it is 87.4% in the Bexhill area) by 2032, while the rate of private sector renting will increase to 35% (interestingly, in the Bexhill area it stands at 17.1% today).
Therefore, the demand for rental accommodation in Bexhill and the TN39/40 postcode area will grow by 720 households in the next five years … and these are the reasons why, irrespective of the distractions set out in the newspapers
Bexhill property values over the last six years have risen a lot more than average wages/salaries, meaning as homeownership and mortgage availability is dependent on your ability to pay has served to push home ownership further out of reach for many, at a time when the stock of council houses has actually withered. (Nationally, the number of council houses in the last ten years has dropped from 3.16m to 2.18m households – a drop of 31.1%).
Now it’s true the Tory’s efforts to fix the deficiency of affordable housing have focused on those who want to buy a home, ranging from Help to Buy, their much vaunted Help to Buy ISA and Starter Homes Scheme, an initiative offering a 20% discount for first time buyers … but if you are unable to save for the deposit, none of this means anything to the ‘20 something’s’ of Bexhill and they still need a roof over their heads!
Currently, 7,437 people live in private rented accommodation in Bexhill and TN39/40 area
So whilst it appears Bexhill “Generation Rent” youngsters will continue to rent and to not to buy for the reasons set out above, Bexhill buy-to-let landlords will be lifted by the projections of greater rental demand. Bexhill and the area around it still offers the prospect of strong economic growth forecasts and has a reputation as a lively and desirable place to live.
So, by 2021, the number of rental properties in Bexhill and TN39/40 will rise to 4,950
This prediction in growth of the Bexhill rental market is even on the back of the government clamping down on tax reliefs for landlords. The point is this, gone are the days of making guaranteed returns on BTL property. For the last 20 to 30 years, irrespective of which property you bought, making decent money on buy to let property was like shooting fish in a barrel – anyone could do it – but not now. You must take a more considered approach to your existing and future portfolio, especially in Bexhill. The balance of capital growth and yield, especially in this low interest rate world we live in, means Bexhill landlords need to do more homework to ensure the investment in property gives the desired returns. One place for Bexhill landlords and homeowners to visit for such information is the Bexhill Property Market Blog at www.bexhillpropertyblog.com