Harlow Property Values increase by 1.54% ... good or bad news?

“How's the Harlow housing market doing?” asked an upbeat Harlow landlord last week.  “Quite strange”, I replied. Our landlord was perplexed! Let me explain...

Even the Brexit vote has not hindered Harlow’s steady rise in property value, as Harlow property values went up 1.54% last month alone, leaving Harlow values 16.7% higher than a year ago. An increase in demand from buyers and an uninspiring level of supply (i.e. the number of properties on the market) has driven up the value of the Harlow’s housing.

...And that is where the issue is. With Brexit, the coalition of the 2010-15, a double-dip recession and post credit crunch fallout – I was perplexed that the Harlow property market (and values) has remained so strong, still 24.6% higher than 20 months ago. That is until you start to look into the real reasons why we find ourselves in such a great place.

The Harlow (and the UK) housing market is built on the foundations of basic economic rules that any GCSE Economics student should understand. However, at a time when, as a country, we seem eager to uncouple ourselves from all manner of proven facts, anything is up for grabs.

Even the wary RICS said throughout the UK, most of its Chartered Surveyors anticipated house prices to increase in the next six months, which seems contradictory given economic cautions from Mr Hammond and HM Treasury. Even though inflation will rise to around 2% to 3% in 2017 and perhaps a little more in 2018 because of Sterling’s devaluation, together with a high probability of a decelerating GDP and a slight rise in unemployment, how can the RICS and most of my landlords be so confident about the value of our homes?

Well, look from where we are starting. Nationally, a base of low unemployment, low inflation and preposterously low interest rates, while in Harlow, the local economy is doing quite well for itself. Confidence also plays a part. Confidence can supersede basic economic facts for a short time at least, which is why actual property market changes tend to be more exaggerated, as confidence can turn both positive and negative very quickly. The fact is, there is a long-term relationship between property values, wages and unemployment. For example, looking at the graph below, you can quite clearly see the ratio of property values to earnings is nowhere near as high as it reached in 2008 and currently is in the middle of the range for the last 30 years. As a country, we are in a good place.

 

By April 2017, Article 50 will be invoked. This will bring additional political tomfooleries and economic ups and downs. With both purchasers and vendors predisposed by the 24-hour news cycle, which let’s face it, gets more haphazard by the day, it is likely to prove a challenging couple of years … and yes, Harlow property values might drop slightly in 2017, but based on what we know of the UK plc now, the UK and Harlow property values are not projected to move that much over 2017 or 2018.  Going into the next two years, we are in much better financial shape as a country compared to the last two crashes of 1987 and 2008.

 

But, on the other side of the coin, what we also know is that we don't know much about the form of our economic future or indeed many other facets of our lives. Confidence will continue to be the key player in the Harlow housing market for a while longer - yet this may spur some much needed second-hand market activity? Now, where is my crystal ball?

 

£13m paid in Stamp Duty by Harlow Residents

 

“A pound saved is worth two pounds earned . . . after taxes” is what my Grandfather used to say. He loved his irony, yet was always a wise man, and it is tax I want to talk about today, in particular, property taxation .. Stamp Duty in fact.

Apart from some minor exemptions, Stamp Duty is paid by anyone buying a property over £125,000 in the UK. It presently raises £10.68bn a year for the HM Treasury (interesting when compared with £27.6bn in fuel duty, £10.69bn in alcohol duty and £9.48bn in tobacco duty).

 In the latest set of data from HMRC, in the MP constituency that covers Harlow, property buyers paid £13m stamp duty in one year alone – a lot of money in anyone’s eyes (although not as much as the £196m in income tax that all of us in the same area paid last year).

 

However, as you may know, George Osborne introduced an additional tax for landlords and from 1^st April 2016 they had to pay an additional 3% stamp duty surcharge on top of the normal stamp duty rate when purchasing a buy to let property. There were tales of woe and Armageddon with a report by Deutsche Bank suggesting that the new surcharge could see house prices fall by as much as 20%.

 HMRC data released in the Summer for Quarter 2 (Q2) of 2016 did seem to back up those fears as they published some worrying figures; only one in seven properties purchased was a second home or buy-to-let (in real numbers, only 30,300 of the 207,900 properties in Q2 were bought by landlords).

 In previous articles, I spoke about the slump of property transactions after the 1^st of April (as landlords rushed through their property purchases in March to beat the April deadline). In Q2 of 2016, £1.976bn was raised in Stamp Duty from Residential Property. Of that £1.976bn, £652m was paid by buy to let landlords (£424m in normal stamp duty and £228m in the additional 3% surcharge).

 However, looking at Q3, the numbers have improved significantly. Of the 235,000 property sales, nearly one in four of them (56,100 to be precise) were bought by buy to let landlords and of the £2.208bn in stamp duty, £864m was paid in ‘normal’ stamp duty by BTL landlords and an impressive £442m paid by those same landlords in the additional stamp duty surcharge.

 The statistics suggest buy to let investors have thankfully not been deterred by the stamp duty surcharge introduced in April this year. The figures also show that 65.4% of "buy to let" purchases cost less than £250,000, 23.7% of properties were in the £250k to £500k range and 10.9% (or 6,100 additional properties) of buy to let properties bought cost over £500k – interestingly nearly one in four (22.2%) of £500k properties purchased in Q3 were buy to let properties.

 It just goes to back up what I stated a few weeks ago when I suggested that many investors had rushed to make purchases before 31^st March, making figures in the following months (Q2) artificially low when the 3% supplement was introduced, but in Q3 the number of buy to let properties purchased increased by 85%.

 It just goes to show you shouldn’t believe everything you read in the newspapers! I can assure you the Harlow property market is doing just fine.

For more thoughts on the Harlow Property Market like this... visit the Harlow Property Market Blog

http://harlowproperty.blogspot.co.uk/

 

 

Harlow First Time Buyers Are Paying 15.5% More Than 12 Months Ago

Figures just released by the Bank of England, show that for the first half of 2016, £128.73bn was lent by UK banks to buy UK property - impressive when you consider only £106.7bn was lent in the first half of 2015. Even more interesting, was that most of the difference was in Q2, as £68.12bn was lent by UK banks in new mortgages for house purchase, which is the highest it has been for two years. Looking locally, in Harlow last quarter, £301.1m was loaned on CM19 properties alone!

Even though the Bank won’t be releasing the Q3 figures until December 2016, as I discussed a few weeks ago, HMRC have published their own preliminary data to suggest Q3 will be even better, with a massive growth of buy-to-let landlords to the housing market in that time frame. Fascinating, as it seems to fly in the face of the popular narrative – that the uncertainty surrounding Brexit would negatively impact buyer sentiment.

And it’s not just buy-to-let landlords that seem to be flourishing. I am finding that first-time buyers are also a lot more confident too. Low, and now negative, inflation has had a tangible impact on household finances and first-time buyers feel more secure in their jobs. Couple with a low interest rate environment and you have all the ingredients for a strengthening property market. To back that up with numbers, of the £68.12bn of mortgages lent in the Quarter (Q2), £14.9bn was lent to first-time buyers (the highest proportion of that overall lending for over two years at 21.99%).

 When I looked at the data for Harlow Council area, the average price paid by first-time buyers (FTB’S) was £227,500, which is a rise of 0.93% from last month and a rise of 15.56% to twelve months ago. The Land Registry then categorise the remaining buyers into cash buyers or those buying with a mortgage. The average price paid by cash buyers was £233,225, a rise of 0.72% from last month and a rise of 15.29% to twelve months ago, whilst buyers with mortgages (but not FTB’s), the average price paid by them was £254,521, a rise of 0.97% from last month and a rise of 15.59% to twelve months ago.

 

 

 

What surprised me with these figures was how close the property prices, values and percentages were to each other. It just goes to show the combination of low mortgage rates and a stable job market will continue to have a positive effect on the Harlow and UK market.  And that is why, while there is undoubtedly more cautiousness in the market at present than a year or so ago (among borrowers and mortgage companies alike) - mortgage rates are so competitive that they are inducing people to commit to a home purchase.

It seems the great Brexit uncertainty was over hyped, and house price growth as well as mortgage approvals, could pick up pace into 2017.

For more thoughts on the Harlow Property Market like this .. visit the Harlow Property Market Blog http://harlowproperty.blogspot.co.uk/

 

 

Harlow Housing Crisis? Only 1.2% of Harlow Homes Are For Sale

Harlow Housing Crisis? Only 1.2% of Harlow Homes Are For Sale

The Harlow Property Market continues to disregard the end of the world prophecies of a post Brexit fallout with a return to business as usual after the summer break.

The challenge every Harlow property buyer has faced over the last few years is a lack of choice – there simply hasn't been much to choose from when buying (be it for investment or owner occupation). Levels are still well down on what would be considered healthy levels from earlier in this decade, as there is still a substantial demand/supply imbalance. Until we start to see consistent and steady increases in properties coming on to the market in Harlow, the market is likely to see upward pressure on property values continue.

However, there may be hope for first time buyers, with homeowners looking to move upmarket and buy to let landlords looking for their next investment, the Harlow property supply crisis just might be starting to ease, as the number of new properties coming onto the market in Harlow has increased.

For example, last month CM17 saw 72 new properties coming on to the market, not bad when you consider at one point during the year it was as low as early 30’s. With the average Harlow property value hitting a record high, reaching almost £313,000 according to my research, this shortage of properties on the market over the last two years has contributed to this ‘fuller' average property figure, but there is a glimmer of hope that the Harlow's supply crisis may be starting to ease.

As I write this article, 1.23% of Harlow properties are up for sale. In terms of actual chimney pots, that equates to 350 properties on the market in Harlow (within 3 miles of the centre of Harlow) – which, when compared to only a year ago when that figure stood at 245, is a serious increase in the number of properties available to buy. Split down into the type of property, it makes even more fascinating reading...

 

·         Detached Properties in Harlow  - 105 on the market a year ago compared to 105 on the market now – no change

·         Semi Detached Properties in Harlow - 35 on the market a year ago compared to 88 on the market now - an increase of 151%

·         Terraced Properties in Harlow - 48 on the market a year ago compared to 92 on the market now - an increase of 92%

·         Flats / Apartments Properties in Harlow  - 40 on the market a year ago compared to 52 on the market now - an increase of 30%

With realistically priced properties flying off the shelves and this increase in new properties (especially semis and terraces), this is evidence of strength in the Harlow housing market that many didn't expect. Many believed that the Harlow property market wasn't going to be strong enough post Brexit - as what was a sellers' market before the Brexit vote and Buyers' market in the early months after it, may now be somewhere in between and the market might just be coming back into balance.

However, all this will mean property values won't continue to grow at the same extent they have been over the last 12 to 18 months, and in some months (especially on the run up to Christmas and early in the New Year), values might dip slightly. This won't be down to Brexit but a re-balancing of the Harlow Property Market – which is good news for everyone.

For more thoughts on the Harlow Property Market, please visit the Harlow Property Blog http://harlowproperty.blogspot.co.uk/

Private Renting set to grow by 1,600 Harlow households by 2025

Private Renting set to grow by 1,600 Harlow households by 2025

I was having a most interesting chat the other day with a Harlow landlord when we were looking at a property. As I am sure you are aware, I am always happy to cast my eye over any potential buy to let purchase in Harlow, be that you emailing me a Rightmove link, a brochure in the post or even treading the carpet and seeing it together. I don't charge for that, and you don't even need to be a client of mine. We got talking about the Harlow Property Market and this landlord brought up the subject of a report he had read from the Royal Institution of Chartered Surveyors (RICS) and PricewaterhouseCoopers (PwC) that stated almost 1.8m new rental homes are needed by 2025 to keep up with current demand from tenants. He wanted to know what this meant for Harlow.

Well my blog reading friends, some commentators said last Winter that buy to let was about to die, what with the new stamp duty changes and how mortgage tax relief will be calculated. Others even said 500,000 rental properties would flood the market nationally in the 12 months after the new Stamp Duty rules came into force on the 1st April 2016 as landlords left the rental market. Well, all I can say is, I wish all the landlords of those half a million properties would hurry up and put them on the market – because I have plenty of other potential landlords wanting to buy them!

Back to the matter in hand.. if the RICS and PwC are indeed correct, what does this mean for Harlow? The fact is, as a country, we are facing a precarious rental shortage and need to get Harlow building in a way that benefits a cross-section of Harlow society, not just the fortunate few. I call on the Prime Minister to drop the higher stamp duty tax on buy to let purchases to ease the pressure on the rental market.

Of the 34,700 households in Harlow, currently 9,100 tenants live in 3,800 private rented properties. If we apportion those 1.8m households equally around the Country, that means in nine years’ time, the number of rental properties in Harlow needs to rise by 1,600 (i.e. 42.8%) .. taking the total number of rented properties in the city to 5,400.

That means Harlow landlords need to buy around 200 properties a year between now and 2025 to meet that demand – because according to my calculations, an additional 3,900 people will want to live in all those 'additional' Harlow rental properties – so why is the government penalising landlords?

Thankfully the new housing minister Gavin Barwell detached Teresa May's new administration from the Cameron/Osborne laser-like focus of just home ownership to solve our housing issues, saying "we need to build more homes for every single type of person needing a home and not focus on one single tenure". The private rented sector became a stooge under David Cameron's watch and still, with increasingly unaffordable Harlow house prices, the majority of new Harlow households will be relying on the rental sector in the future to house them. I can only say Westminster must put in place the measures that will allow the rental sector to flourish. Any restrictions on the supply of rental property will push up rents (bad news for tenants), thus side-lining those members of Harlow society who are already struggling. Let's hope this new Government continues to see the contribution landlords give to the country as a whole.

Back in the Spring, there was a surge in Harlow landlords buying buy to let property in Harlow as they tried to beat George Osborne’s new stamp duty changes which kicked in on the 1^st April 2016. To give you an idea of the sort of numbers we are talking about, below are the property statistics for sales either side of the deadline in CM19.

 

Jan 2016 – 21 properties sold

Feb 2016 – 14 properties sold

March 2016 – 36 properties sold

April 2016 – 10 properties sold

May 2016 – 13 properties sold

 

Normally, the number of sales in the Spring months is very similar, irrespective of the month. However, as one can see, this year was a completely different picture as landlords moved their purchases forward to beat the stamp duty increase. You would think that even with a basic knowledge of supply and demand economics, rents would be affected in a downwards direction?

 

However, there appears to be no apparent effect on the levels of rent being asked in Harlow - and more importantly achieved - and this direction of rents is not likely to inverse any time soon, particularly as legislation planned for 2017 might reduce rental stock and push property values ever upward. The decline of buy to let mortgage interest tax relief will make some properties lossmaking, forcing landlords to pass on costs to tenants in the form of higher rents just to stay afloat. Even those who can still operate may be deterred from making further investments, reducing rental stock at a time of severe property shortage.

 … but it’s not all bad news for tenants. Whilst average rents in Harlow since 2005 have increased by 18.6%, inflation has been 38.5% over the same time frame, meaning Harlow tenants are 19.9% better off in real terms when it comes to their rent (which is a sizeable chunk of most people’s monthly household budgets)

 

Year	Average Rent in Harlow per month
2005	974
2006	1001
2007	1022
2008	1051
2009	1057
2010	1043
2011	1060
2012	1079
2013	1087
2014	1097
2015	1123
2016	1155

 

 

I found it particularly interesting looking at the rent rises over the last five years in Harlow, as it was five years ago we started to see the very early green shoots of growth of the Harlow economy.  As a whole, following the Credit crunch (2011), rents in Harlow have risen by an average of 1.9% a year – fascinating don’t you think?

 

The view I am trying to portray is that while renting is often portrayed as the unfavorable alternative to home ownership, many young Harlow professionals like renting as it gives them adaptability with their life. Rents will continue to rise which is good news for landlords as buy to let is an investment but, as can be seen from the statistics, tenants have also had a good deal with below inflation increases in rents in the past. It’s a win-win situation for everyone although on a very personal note, it’s imperative in the future that tenants are not thwarted from saving for a deposit by excessive rental hikes – there has to be a balance.

 

For more thoughts and opinions on the Harlow Property Market, if you are a Harlow Homeowner or Harlow landlord, please visit the Harlow Property Blog http://harlowproperty.blogspot.co.uk/

 

House Prices in Harlow rise by more than 22% in the last 18 months

Over the last month, the Harlow property market has seen some interesting movement in house prices, as property values in the Harlow Council area rose by 1.5% in the last month, to leave annual price growth at 16.2%. These compare well to the national figures where property prices across the UK saw a monthly uplift of 0.42%, meaning the annual property values across the Country are 8.3% higher, this is all despite the constraining factors of Stamp Duty changes in the spring and more recently our friend Brexit.

Looking at the figures for the last 18 months makes even more fascinating reading, whereby house prices are 22.3% higher, again thought provoking when compared to the national average figure of 13.6% higher.

However, it gets more remarkable when we look at how the different sectors of the Harlow market are performing. Over the last 18 months, in the Harlow Council area, the best performing type of property was the detached, which outperformed the area average by 1.64% whilst the worst performing type was the apartment, which under-performed the area average by 2.26%.

 Now the difference doesn’t sound that much, but remember two things, this is only over eighteen months and the gap of 3.9% (the difference between the detached at +1.64% and apartments at -2.26%) converts into a few thousand pounds disparity, when you consider the average price paid for a detached property in Harlow itself over the last 12 months was £478,700 and the average price paid for a Harlow apartment was £168,900 over the same time frame.

 I know all the Harlow landlords and homeowners will want to know how each of the property types have performed, so this is what has happened to property prices over the last 18 months in the area...

·         Overall Average          +22.3%

·         Detached                     +24.3%

·         Semi Detached            +24.1%

·         Terraced                     +22.7%

·         Apartments                 +19.5%

 

 

So what does all this mean to Harlow homeowners and Harlow landlords and what does the future hold? 

 

When I looked at the month-by-month figures for the area, you can quite clearly see there is a slight tempering of the Harlow property market over these last few months. I have mentioned in previous articles that the number of properties on the market in Harlow has increased this summer, something that hasn’t happened since 2008. Greater choice for buyers means, using simple supply and demand economics, that top prices won’t be achieved on every Harlow property. You see, some of that growth in Harlow property values throughout early 2016 may have come about because of a surge in house purchase activity, an indirect result of the increase in stamp duty on second homes from April, thus providing a temporary boost to prices.

 

However, it may be possible the recent pattern of robust employment growth, growing real earnings and low borrowing costs will tilt the demand/supply seesaw in favour of sellers and exert upward pressure on prices once again in the quarters ahead.

 

 

...And Harlow property values, assuming that everything goes well with Brexit, I believe in twelve months’ time we should see values in the order of 6% to 10% higher.

Asking Prices of Harlow Property up 4% since December

I had an interesting question the other day from a homeowner in Latton Bush who asked me the difference between asking prices and values and why it mattered. When it comes to selling property, there must be agreement between the purchaser (buyer) and seller (vendor) for a property sale to take place. The value a buyer applies to a property can massively differ from the value a seller or mortgage company places upon it. The seller, the buyer and the mortgage company must find an agreeable value to assign to a property so the sale can proceed.

In many of my articles about the Harlow property market, I talk about values, i.e. what property in Harlow actually sells for, but I haven’t spoken about asking prices for while. Now asking prices are important as they are one of the four key matters a potential buyer will judge your property on (the others being location, bedrooms and type). Price yourself too high and you will put off buyers. So let’s take a look at the Harlow numbers.

Over the last 12 months asking prices (i.e. the price advertised in the paper and on Rightmove) in Harlow have increased by 25%, taking the average asking price in Harlow to £570,800 (up from £456,300 twelve months ago).

Interestingly though, when we look at, say detached and terraced property, a slightly different picture appears. Twelve months ago, the average asking price for a detached house in Harlow was £742,300 and today its £837,700 (a rise of 13%); whilst over the same 12-month period, the average asking price of a terraced property was £234,300 a year ago, and today its £296,700 (a rise of 27%).

However, my research shows that the supply of property for sale in Harlow is beginning to increase. In December 2015, there were 245 on the market in Harlow today there are 284 properties on the market (up 16%). This will mean homeowners looking to sell will need to be conscious of how their property compares against others on the Harlow property market. The Harlow property market still has substantial momentum and sufficient demand remains to provoke more modest asking price rises. This noteworthy increase in supply since Christmas is currently providing more choice for buyers and is tempering asking price rises - and here is the devil in the detail - only 4% of the overall 25% annual figure (mentioned in para 3) has appeared since December.

… And here is the second point to make. Asking prices are one thing, but what a property sells for (i.e. value) is a completely different matter. These are the average prices achieved (i.e. what they sold for or the average value) for property in Harlow over the last 12 months...

Overall Average £270,900

Detached             £478,100

Terraced             £240,100

You can quite clearly see, there is a difference between what people are asking for property and what it is selling for. The underlying fundamentals of low interest mortgages and tight supply remain prevalent in the Harlow property market however, the number one lesson has to be this ... if you want to sell, be realistic with your pricing.