Will There Be a ‘Boris Bounce’ For the Carlisle Property Market?

The Halifax announced in early January that there was a Boris Bounce in the national property market as they stated national property values soared 1.7% in December 2019 – the biggest rise since the 1.9% month on month rise in February 2007 (a few months before the Global Financial Crisis aka the Credit Crunch).

Get the flags out – all hail Boris as the Conservatives gain their landslide general election triumph – the Boris Bounce is here … or is it?

The Halifax (as well as the Land Registry and other house price indexes) use data of property that has sold and completed (completion being when monies and keys of homes sold are transferred). The Halifax data was based on properties that completed in December 2019, and as anyone who has sold or bought a Carlisle property in the last 10 years knows, the time it takes from agreeing a buying price to handing over the money is many weeks. In fact, the average length of time between sale agreed and completion in the country is running at 19 weeks, meaning the figures mentioned by the Halifax are for sales agreed in July / August 2019. This growth relates to what was happening to the property market in Summer 2019.

One of the most important things for the property market is confidence. Interestingly, Rightmove reported a 28% surge in buyer enquiries between the 13th December and 18th December. In January, they had their busiest ever time. After a couple of years of Parliamentary hold-up, the confidence following this general election is unquestionably a much needed boost for the economy (and ultimately confidence), so much so, shares in the new homes builders Barratt jumped 14% and Persimmon 12% the day after the election, showing a property sector anticipation that the property market is about to move forward as suppressed demand for people moving home is liberated. 

Looking at the previous elections, I decided to look at what happened to property values in Carlisle in the 12 months after each election, with some interesting results.

So, with past experience, a general election generally has a good effect rather than a worse effect on the Carlisle property market.

Looking at the rest of 2020, my intuition tells me in the better areas of Carlisle, it will likely be a seller’s market, as they will have more influence to ask for higher asking prices from Carlisle property buyers that have placed plans to move on hold for far too long – and this could push up Carlisle property values more promptly in the short term.

Yet, as more Carlisle properties come on to the market in the usual spring rush, we could see Carlisle home buyers having more choice and thus, as supply increases yet demand remains the same, buyers will get more power to negotiate a better deal. Irrespective of that, there is still the all-encompassing issue that I have spoken about many times in my blog of not enough homes being built to keep up with the number required, meaning negotiating power and prices being inflated.

The bottom line is, the Carlisle housing market will get a slight boost from the general election. The threat of a Jeremy Corbyn government obstructed some Carlisle landlords to build their buy to let portfolio in the later parts of 2019, so as long as sellers remain realistic with their pricing and present their properties in the best light, 2020 in the Carlisle property market should be a year of ‘steady as she goes’.

P.S .One final thought – remember what I said about the Halifax price Index being 5/6 months behind the times – don’t be alarmed when they announce in the March/April/May a reduction in property values – like I said before – this will be the prices achieved in the later parts of 2019 i.e. not what is happening right now.

Carlisle Property Market … the Rollercoaster of the last Decade

Ah the 2010’s, the tens, the teens – I am not sure what we are supposed to call the decade that has just gone. No matter what it was called, the last decade was a tough one, so does it really matter that we never really got around to giving it a name? Some might say, whatever one calls it, coming to an end is the most fundamental job any teen (and I refer to all humans) could possibly do!

The last two decades have certainly been tumultuous. At least for this decade we have just started we can say, in a few decades time, things like “That style is so ’20s” and fellow humans will essentially know what you are talking about. If you come of age in this decade, you will be a ’20s child and we will discuss ’20s politics and ’20s style and all the things that hadn’t been created on the 31st December 2019; the time that two nameless decades ended and how finally there was something everyone in the UK could agree on: the name of the decade. Hey – it’s a start!

So, what has happened to the local Carlisle property market in the last nameless decade?

The average Carlisle property has risen in value from £161,100 to £169,600 in the last 10 years

… meaning each Carlisle homeowner has seen a profit of £16.35 per week for those last ten years. Rolling the clock back to the start of the last decade January 2010, and the economy (and housing market) were recovering from the Credit Crunch and the worldwide financial crisis. A decade on and things feel a little different. If you bought a Carlisle home over the past 10 years, things have certainly changed.

Carlisle property values rose 5.3% on average over the last decade yet taking inflation into account, they fell in real terms by 27.8 per cent.

Compare that to a 42.5% rise in the ‘80s, a 13.2% drop in the ‘90s and rise of 62.8% in the 2000s in real terms. So, in real terms after inflation, there has been a decrease in house prices in Carlisle in the past decade making homes today more affordable than a decade ago.

On average, 1.12 million homes were sold each year last decade, although that was 26.4% less than the decade before (the noughties) when an average of 1.52 million properties were sold annually.

So, what are the underlying issues in the Carlisle (and wider UK) property market when, in real terms, property is essentially cheaper than a decade ago?  Whilst the newspapers tell us first time buyers can’t get on the housing ladder and the housing market is in gridlock – what is the problem? Well I am a firm believer in the adage ‘bad news sells newspapers’ because the truth is something completely different as 32.7% of homes last year were bought by first time buyers compared with only 22.8% in 2009.

Yet, there are still issues; mainly a persistent lack of not building enough new homes which curtails the supply and choice of property; but stagnated wages, stiffer mortgage rules and homeowners not moving as much as previous generations are all contributing to the problem. In the UK, the number of homeowners who moved in 2019 was around 14% higher than in 2009, yet this was still just under 50% lower than the average for the noughties. It’s all up and down like a rollercoaster!

My thoughts for the future are based primarily on what will happen to interest rates. Throughout the last decade, the Bank of England base rate was 0.5% at the start and was cut to 0.25% in the Summer of 2016. Even with the increase to its current level of 0.75% in the Summer of 2019, it has made borrowing money on a mortgage very cheap indeed. Nonetheless, bank/mortgage rates will rise again and I am concerned about the effect upon the housing market. Now it won’t be as bad as previous times when mortgage rates went up in the 1970’s and 1980’s (with mass repossession) because the tougher mortgage rules introduced in April 2014 will have ensured borrowers were stress tested on their affordability if interest rates shot up.  Most borrowers have been stress tested on their affordability to mortgage rates of up to 6% – 6.5%, which would obviously squeeze household disposable incomes yet stop people losing their homes due to repossession. Whilst I am not giving advice, just personal opinion, if you are one of the 29.3% of homeowners who isn’t on a fixed rate – maybe you should seriously consider doing so?

The 2020’s will be an interesting decade – and if you want to be kept up to date with what is happening in the Carlisle (and wider UK) housing market – follow me and this blog to read similar articles to this one.

You’re Invited to a Property Investment Session

  Property continues to be a popular and profitable option for investment, however, with ever increasing changes to tax and legislation, it’s important that landlords and investors consider the implications these may have.      
Join residential and commercial property experts from
Armstrong Watson, Walton Goodland, Northwood and Burnetts as
we discuss the opportunities available and actions you need to take to
ensure compliance and maximise returns.

Our panel of experts will be on hand at the end of the session to answer
your questions.           Our speakers:      
Graham Poles, Tax Partner – Armstrong Watson
Scott McIver, Tax Consultancy Manager – Armstrong Watson

Graham and Scott will provide an overview of the tax changes affecting landlords from the 5th April and review the tax planning opportunities that exist to maximise your profits.

Stephen Sewell, Director – Walton Goodland
Compliance and sustainability: an assessment of the impact of these two
key components and their influence within successful commercial property
management, the delivery of investment growth and value added returns.

Gordon Adamson, Managing Director – Northwood Estate & Letting Agents
Gordon will provide an update on compliance affecting landlords in the private
rental sector and show why investing in residential property in Carlisle should
form a part of every investors strategy.

Helen Hayward, Partner & Head of Commercial Property – Burnetts
Taking (some of) the pain out of managing your property portfolio: Helen will
provide some top tips for the property investor to manage the legal process,
keep you compliant and maximise your return, no matter how big or small your
portfolio.      
 Please RSVP 
 by return to rsvp@armstrongwatson.co.uk
or call Lizzie Mitchell on 01228 690100 with any dietary requirements
 

82 Carlisle Landlords each risk a £5,000 fine in Spring 2020

Washing Machine Energy Ratings for Houses was the phrase one Carlisle landlord told me a few years ago when we were talking about the colour bar chart graphs that every property has had for over 10 years now. Now these weren’t brought in to use the whole palate of ink in people’s printers, but to increase the energy efficiency of the UK’s housing stock.  The vast majority of Carlisle landlords are, by now, acquainted with the legislation that came into force on the 1st of April 2018, that means all new and renewed private tenancy agreements must have an Energy Performance Certificate (EPC) rating of E or above, otherwise it would be illegal to rent the property out (EPC ratings go A to G – A being the best and G the worst).

Yet, from 1st April 2020, those rules will be extended to also cover existing Carlisle tenancies, meaning that under the new legislation, properties with an EPC rating of F or G will be classed as unrentable – meaning it will be illegal to rent the property and the landlord will be liable for a fine of £5,000.

It will be illegal for any landlord to let any Carlisle Rental property with an EPC rating of F & G from April 2020

Back in 2018, there was a loophole for Carlisle landlords of F & G rated rental homes on new tenancies, where they did not need to upgrade the property for five years if it cost them money (called the ‘no cost to landlord’ exemption rule) – yet back in April 2019 this exemption to improve rental properties was removed – so they too are included in these new rules.

Therefore, this means that Carlisle landlords must use their own cash to cover the cost of improving their Carlisle property to at least an EPC band E, and we aren’t talking about an insignificant number here….

82 Carlisle (CA2) properties will be illegal to rent out from the 1st April 2020

.. as they have energy ratings of F and G.

Now this requirement to upgrade the property is subject to a spending cap of £3,500 (including VAT) for each rental property, as landlords only need to spend what they need to, to improve their Carlisle property to EPC rating E.

In cases where a Carlisle landlord is unable to improve their Carlisle property to EPC rating E within the £3,500 cap, then they still need to spend their hard earned cash and carry out the most appropriate measures which can be installed up to the £3,500 cap, and then register an exemption (with 3 quotes from 3 contractors) for their property on the basis that all relevant improvements have been installed and the property remains below an E.

Carlisle homes such as some F rated flats on Salisbury Road and North Street or some F rated terraced houses on Grasmere Street, Blackwell Road and Montreal St will all be illegal to rent out by April

If you are a self-managing Carlisle landlord or a landlord with another Carlisle agent, then feel free to pick up the phone and chat through any concerns with regard to these new regulations, how to read a EPC graph, how to find the EPC rating of your home, in fact anything – call me. The last thing you need is a £5,000 fine on top of the £3,500 improvement bill.

One final thought though – it might be wise for Carlisle landlords who have had their rental properties for a while now to get a new EPC carried out on their property (something we can help with irrespective of whether you are a landlord of ours or not) as recent research has also acknowledged that some early EPC’s understated the thermal efficiency of solid walls.  As countless Carlisle rental properties are pre 1925, which is when most (not all) new properties were built with cavity walls, the Dept for Business, Energy and Business Strategy have now recalibrated EPC’s to give a truer result. This probably means that some solid wall properties, Victorian and Edwardian terraced houses and converted flats, presently rated F under an EPC will no longer demand any improvement works and certainly less building work may be required in the case of a G rated rental property.

OK ‘Carlisle’ Boomer

Carlisle House Prices Have Risen by 151% as a Proportion of Household Income Since 1980

Have the Baby Boomers (people between the ages of 55yo to 75yo) messed things up for the Millennials in terms of getting on the Carlisle property ladder? They bought their own council houses in the 80’s and 90’s, meaning there are no affordable homes for today’s youngsters, thus driving up the demand for rental homes and the price of homes (making them unaffordable). So, I decided to look at the figures, which do not make for good reading.

In 1980, the average Carlisle household income was just under £6,000 per annum and the average Carlisle house price was £14,250; whilst today, the average Carlisle household income is £28,912 per annum, yet the average household value is £172,400, meaning…

the average value of a Carlisle home was 2.38 times more than the average household income in 1980 compared to today, where it is 5.96 times a Carlisle household income

 … it’s no wonder then that Millennials are pointing the finger at Baby Boomers!

And the problems don’t just stop there. Not only do the newspapers state there is a housing crisis of affordability, but also a crisis of the availability of homes for people to live in. The political parties using housing as a ‘vote getter’ mentioned stats such as in 1981 there were 5.1 million council houses and today that stands at 1.6 million. This is important because, as a substantial number of people will never be able to afford to buy, social housing plays a significant role in homing them.

It all looks rather damning and the phrase ‘OK Boomer’ looks quite apt.

(The phrase ‘OK Boomer’ become fashionable as it started as a way of showing Baby Boomers that things were “easier in the past”, yet now it has become just a way for younger people to discredit the views of older people).

Well, checking the stats, the political parties seemed to forget the number of housing associations homes (which are also social housing) has risen from 0.4m to 2.6m homes in that time, therefore, whilst there is a drop in social housing, it’s a net figure of 2.3m fewer social-rented houses, instead of the 3.5m in the paragraph above.

Baby Boomers simply did the best they could with the circumstances given – it’s not like that these older generations have been conspiring in the food aisles of Sainsburys or M&S on how to mess things up for the next generation. There are fundamental underlying problems in British society that means things are difficult for our younger people – it’s everyone’s responsibility to solve those underlying problems – we can’t just blame the Baby Boomers. Millennials aren’t morally superior to Baby Boomers just because they didn’t grow up in the same era of economic growth and house price inflation.

What some people seem to forget is whilst Carlisle property values were lower, so were salaries. The true cost of affordability is the mortgage payments. Assuming an average property was purchased in 1980 and again in 2020, using a 95% mortgage at the prevailing mortgage rate of 17.8% in 1980 and the current 1.65%, today in Carlisle the mortgage accounts for 27.6% of the household income (assuming a single income) compared to 40.6% in 1980.

Things were much tougher for homeowners in 1980….

The issue here is something much deeper. Baby Boomers say it is the Millennials’ own fault they can’t afford to buy their own home because they spend all their money on three holidays, avocado on toast, going out down the pub 3 times a week and buying the latest iPhone or suchlike whilst Millennials accuse the Baby Boomer generation for ruining the housing market ‘per se’ by being selfish. Both are right and both are wrong.

In my own involvement with friends and family, many Carlisle Baby Boomers are trying their best to help out their now grown up children with a deposit. They are fully aware of current Carlisle house prices compared to when they bought their own homes.

I am not a fan of attaching labels, be it Millennials, Baby Boomer or Gen-X. It’s really a point of attitude and behaviour and circumstance rather than the date of your birth. Every generation has had its fair share of feast and famine and whilst I appreciate the irony of the title of this article, let’s stop labelling people and making assumptions, everyone needs to understand each generation’s issues and be more ungrudging to each other.

How is the “Exodus” of Eastern Europeans Affecting the Carlisle Property Market?

I was having a thought-provoking conversation with a Carlisle buy-to-let landlord a few weeks ago about everything to do with property, Brexit and how the reported voluntary repatriation of Eastern Europeans had affected the property market in Carlisle.  It transpired some of his Carlisle tenants, who had been in his property for over 10 years were returning to Poland.  He was particularly disappointed as he told me they were some of the best, if not the best, tenants he had ever had.

In 2004, eight Eastern European countries joined the European Union and by 2015, EU net migration from those Eastern European Accession states (also known as the EU8), there was a net migration of an additional 42,000 EU8 adults per year coming into the UK, which equated for our local area of Carlisle an additional 60 adults per year coming into the area in 2015 alone.

Yet by 2018, net migration had reversed and that saw 21 more EU8 citizens leave than arrive to live in Carlisle

… and in the last set of figures released for year up to the Summer of 2019, net EU8 migration for Carlisle was a net loss of 10 EU8 people for the year.  These are not huge numbers, considering ..

EU8 citizens only make up 1.48% of the population in Carlisle

Yes, at the last count there were 1,588 EU8 European citizens living in our local area out of a population of 107,524.

It’s fascinating that 35.7% of the EU8 citizens that came across to the UK after 2004 were degree level educated compared to the 3.18% of adult citizens born in the UK, yet of all the EU8 citizens in the country, 65.9% of are in private rented accommodation, 9.6% in social housing and 24.5% are home owners.

It is certain that migration of Eastern Europeans, especially in the early years of 2004 to 2010, made a huge impact on the Carlisle rental property market – yet as time has gone on, families have started to put roots down and bring children into the world.  Carlisle landlords buying all the rental properties for this new demand meant house prices for homeowners bounced back particular well after the global financial crisis / credit crunch of 2008/9.

Again, looking at the figures, a good proportion of EU8 citizens have become homeowners and even landlords.

Yes, there is small number of Carlisle EU8 citizens leaving as they have had the dilemma on whether they should stay or go, and some families, using the wealth that they have built up whilst working in the Country have returned to their home country or other EU member states.  Decisions like that are not easily made and often tainted with dejection and disappointment – yet again, looking at the numbers, this is very much the minority.  As an agent, we are seeing European people (not just EU8 countries) come and European people go, and it was like that before 2016 and to answer the question … we believe we have a case of ‘bad news’ selling newspapers yet again.

Of course if one of your star tenants leaves your Carlisle rental property and then you read an article about mass migration in one the red top newspapers or Daily Mail, it is going to worry you (like it did my Carlisle landlord friend), yet with the information we shared with him – it has put his mind at rest (and the best part – we were able to find him a new tenant within the week – who ironically also came from Europe to live and work in the UK!).

To conclude, hopefully the end is in sight with Brexit, it would be a huge loss for the Country to see its embedded and settled European community depart as it must be quite melancholic for our fellow Europeans to even have to deliberate such a life changing move.  All I can say is I think we are all eagerly anticipating the ‘B-word’ situation becoming stable again so that all of us, wherever we originate from, can reasonably plan our future in our sceptered isle.