Harlow’s ‘Generation Rent’ to grow by 772 households by 2021

“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 Esquires Coffee shop in the Water Gardens in the town. 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 landlords leave the rental market. Have you heard the phrase ‘Bad news sells newspapers’? Let me explain why buy to let in Harlow is only going in one direction – and not the direction the papers say they are going.

According to Sheffield University, buy to let landlords 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 57.1% in Harlow) by 2032, while the rate of private sector renting will increase to 35% (interestingly, in Harlow it stands at 10.9% today).

Therefore, the demand for rental accommodation in Harlow will grow by 772 households in the next five years ... and these are the reasons why, irrespective of the distractions set out in the newspapers

Harlow 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 and 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 Harlow ... and they still need a roof over their heads!

Currently, 9,107 people live in private rented accommodation in Harlow

These are big numbers and a sizeable chunk of the electorate. So whilst it appears Harlow “Generation Rent” youngsters will continue to rent and to not to buy for the reasons set out above, Harlow buy-to-let landlords will be lifted by the projections of greater rental demand. Harlow 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. You see, with the new rules on tax, more and more landlords will be looking to move away from the previous honeypot of central London, because its higher prices meant lower rental yields. With the new tax rules and central London’s cooling of house price inflation, more and more landlords will look further afield, including Harlow (interestingly, I have already been chatting to a few central London landlords after they read the Harlow Property Blog).

So, by 2021, the number of rental properties in Harlow will rise to 5,307

This prediction in growth of the Harlow 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 Harlow. The balance of capital growth and yield, especially in this low interest rate world we live in, means Harlow landlords need to do more homework to ensure the investment in property gives the desired returns. One place for Harlow landlords and homeowners to visit for such information is the Harlow Property Market Blog.

The Harlow Property Market and The Euro 2016 Football Tournament

With the Referendum on EU membership out of the way, our households can concentrate on something European that doesn’t involve party political broadcasts or politician’s treating us all like children – the Euro 2016 Football Tournament. Harlow is home to all different backgrounds and nationalities so if you're not lucky enough to be jetting off to France for the UEFA Euro 2016 football tournament, have no fear! For a bit of fun (although there is a serious side to this – you know there would be with me!) I have taken a look at which European people live in Harlow so I know who to soak up the best atmosphere with!

During my research some interesting numbers appear. Going into the Euro 2016 tournament, France were 3/1 favourite’s, then Germany 7/2, third Spain 11/2, then England 9/1, Italy 16/1, Poland 50/1, Romania and Wales at 100/1, Ireland at 150/1 and Northern Ireland 500/1 (although Leicester were 5000/1 at the start of last season).

Of the 92,163 residents of the Harlow Constituency for Westminster, of the Home Nations going into the competition, 80,401 of them are from England, 561 from Wales, 216 from Northern Ireland and 883 from Ireland, although I do feel sorry for the 900 Scots who didn’t get into the finals. Now interestingly, looking at the Mainland Europeans residents in the Harlow Constituency, it might not surprise you that they make up 3.42% of the population as a whole in the Westminster area.

However, even more fascinating, of those 3.42% European’s residents, 1.17% are from Western Europe because EU residents from Eastern Europe - i.e. the Accession Countries to the EU between 2003 to 2007 (Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Slovakia, Slovenia, Bulgaria and Romania) - only make up 2.25% of the population of the Harlow Constituency.

Broken down into the relevant football teams, there are in the Harlow Constituency …  

89 French people

302 Germans

233 Italians

114 Spanish

1,028 Poles

153 Romanians

… I feel sorry for the Spanish football supporters in Harlow!

But what does this have to do with the Harlow property market? Quite a lot in fact. Many of these European people were economic migrants, especially those from Eastern Europe. A lot of people’s concerns over migration are exaggerated as this EU migration has acted to fill gaps in skills and labour supply during growth periods of the mid 2000’s and subsequently over the last five years in Harlow, EU migrants have done little to displace native workers but do the jobs us Brits don’t often want to do. There is no preferential treatment for council housing in Harlow, so EU migrants have in fact increased demand for privately rented accommodation in Harlow. 

This has meant, as demand for housing in Harlow has remained strong, Harlow landlords have continued to buy properties to rent out to keep up with this demand. Therefore, the value of every homeowner’s property in Harlow has been kept high because of the demand from these Harlow landlords buying starter homes to rent out, releasing existing homeowners to go up the property ladder – benefiting everyone in the chain.

However, rents have remained relatively subdued, in Harlow rents are only 18.3% higher than they were in 2005, not bad when you consider we have had 38.52% inflation in the UK economy as a whole over the same 11 years.

EU migration has meant existing homeowners, landlords and the economy as a whole in Harlow (and the UK) have benefitted from better economic conditions, property prices not slumping whilst rents have been kept in check by wage inflation. Now I wonder who will win the footy? Back to the TV!

£240,000 inheritance - Is buying Harlow Property still the best place for my windfall?

I had an interesting email from someone in Harlow a few weeks ago that I want to share with you (don’t worry I asked his permission to share this with you all). In a nutshell, the gentleman lives in Little Parndon, he is in his mid 60’s and still working. He has a decent pension, so that when he does retire in a couple of years’ time, it will give him a comfortable life. He had recently inherited £240,000 from an elderly aunt. One option he told me was put it into a savings account. The best he could find was a 2 year bond with the Post Office which paid 1.9%; meaning he would get £4,560 in interest a year. One of his other options was to buy a property in Harlow to rent out and he wanted to know my thoughts on what he should buy, but he had concerns as he didn’t want to take a mortgage out at his time of life. He was also worried about all the tax changes he had read about in the papers for landlords.

Notwithstanding the war on Harlow landlords being waged by George Osborne, the attraction of bricks and mortar endures for many. As our man is a cash buyer, he would not have to deal with the intricate cut to mortgage interest tax relief that will diminish, or even eradicate, the profits of many Harlow landlords. It’s true he would face the extra 3% in stamp duty to buy a second property, but with some good negotiation techniques, that could soon be mitigated.

I told him that buying a Harlow buy to let property is all about the total return on investment. True, he could put the money in the Post Office bond and receive his interest of £4,560 a year or, as he rightly suggested, invest in property in Harlow. The average yield (yield being the equivalent of the interest rate on the property) at the moment in Harlow is 3.72% per annum, meaning our potential F.T.L (First Time Landlord) should be able to, depending on what he bought in the town, earn before costs £8,928 a year. (However, I told him there are plenty of landlords in Harlow earning half as much again (if not more), if he was willing to consider more specialist investment types of properties – again, if you want to know where – look at my blog or drop me an email).

The bottom line is that the success of investing in Harlow buy to let property versus a savings account with the Post Office (or whatever Bank or Building Society is offering the best rate) will depend on the performance of those

assets. Unlike with a savings account, with property the capital you invested can also go up (and yes, it can go down as well – more of that in second). Property values in Harlow have risen in the last twelve months by 9.5% meaning, that if our chap had bought a year ago, not only would he have received the £8,928 in rent, but also seen an uplift of £22,800 …meaning his overall return for the year would have been £31,728 (not bad when compared to the Post Office!).

..  but the doom mongers amongst you will say, property values can go down, as they did in 2008, and in 1988 and 1979. Yes, but after 1979 prices had bounced back to their ’79 levels by 1984 and went on to grow an additional 58% in the following four years. Then again, they dropped in 1988 and did take 13 years to reach back to those ’88 figures, but the following six years (between 2001 and 2007) they then increased by an additional 66%. Now, according to the Land Registry, average property values in Essex currently stand 11.56% above the January 2008 level, and anecdotal evidence suggests that in the nicer parts of Harlow, we are well above these sorts of levels. Therefore, all this talk of property crashes is unfounded.

… and what would that £240,000 get you in Harlow? A decent 3 bed end terrace near Staple Tye or a very nice 2 bed terrace in savoy Wood or Church Langley .. in fact, the world is your oyster. But which Oyster? Well, my blog reading friends, if you want to read similar articles like this and what I consider to be the very best of buy to let deals in Harlow, irrespective of which agent is selling it, then you need to visit the Harlow Property Blog  

What would Brexit mean to the 19,400 Harlow Property owners?

I don’t know about you, but I find if you read the Daily Mail, there are only three topics that make the blood boil of ‘Middle England’. Bureaucracy from Brussels, House Prices and the late Princess of Wales. Ignoring the late Princess if I can for this article, but if we as a country were to unshackle ourselves from chains of Brussels (the first topic), could we inadvertently effect the second topic and make UK house values drop?

If you read all the newspapers, the Brexit debate seems to be focused solely on central London. Many commentators have said Brexit would mean central London would have a lower standing in the world, meaning less people would be employed in Central London, with the implication of lower wages, fewer jobs etc., in Central London ... but we are in Harlow, not Marylebone, Mayfair or any part of Zone 1 London.

Now on the run up to the vote on the 23rd of June, I predict the ‘in’ camp will start to scare homeowners with forecasts of negative equity, and the ‘out’ camp will appeal the 20 somethings, who have been priced out of the property market with the prospect of a new era of inexpensive housing, should the fears of central London estate agents and developers, who believe the bottom will fall out of the market if we do leave, become real. The only reason the Mayfair’s, Knightsbridge’s, and Kensington’s of central London are attractive to foreign buyers are political and economic steadiness, an open and honest legal system and a lively cultural life. None of that is threatened by Brexit.

... But again, we are in Harlow and central London is 30 miles away. We are hometown to Harlow RFC, Raytheon and Chloe Rogers, and whilst the central London property market exploded after 2009, that explosion really and honestly didn’t affect the Harlow property market. So, putting central London aside, what would an ‘in’ or ‘out’ vote really mean for the 19,400 property owners of Harlow?

Initially, over the coming months, on the run up to referendum, I believe it will be like the run up to last year’s General Election. With the short-term uncertainty in the country, quite often, big decisions are put on ice and people are less likely to make big money purchases i.e. buy a property. However, in the four months up to last year’s Election, property values in Harlow increased by 2.51%, not bad for a country that thought it would get a hung parliament! So that argument doesn’t hold much weight with me.

Post vote, should the UK opt to leave Brussels, there would be a much more noteworthy impact. I believe that a vote to stay in the EU would see the Harlow property market return to a status quo very quickly, but the contrasting result could lead to some changes. The principal menace to the Harlow (and UK) housing market could be variation (in an upwards direction) in interest rates as a result of a Brexit, which could theoretically see the cost of mortgages grow swiftly, pricing many out of the market … but then two thirds of landlords buy without a mortgage, so that won’t affect them. Also, according to the Bank of England, 80.33% of all new mortgages taken out in 2015 were fixed rate. Looking at all mortgages as a whole, according to the Bank of England, 44% of all UK mortgagees have a fixed rate mortgage, but 56% don’t, so if you aren’t on a fixed rate ... talk to your mortgage broker now, because they can only go in one direction!

So in reality, if I really knew what will happen, I wouldn’t be a letting / estate agent in Harlow, but a City Whiz Kid in London earning millions. However, I suspect whatever decision the electorate of Harlow and the country as a whole makes, over the long term it won’t have a major effect on the Harlow property market. We have seen off ‘the end of the world’ credit crunch of 2008/9 and subsequent property crash, the 1988 Nigel Lawson induced post dual-MIRAS property crash, the 1979 Winter of Discontent property crash, the 1974 oil crisis that stimulated another property crash ... hell, we can even go back nearly a century with the 1926 post General Strike slump in property prices...

Today, property prices are 256.85% higher than 21 years ago in Harlow and are 10% higher than 12 months ago. So, make your own decision on 23rd of June 2016 safe in knowledge that whatever the result, there might be some short term volatility in the Harlow property market, but in the long term (and property investment is a long term strategy) there aren’t enough houses in Harlow to live in either to buy or rent … and until the Government allow more properties to be built – the Harlow property market, will be just fine ... even if it has a little blip in the summer, there could be some property bargains on the run up to Christmas to be had!

For more advice and opinion on the Harlow property market, even where those buy to let bargains could be found now ... visit the Harlow Property Blog