New Home Building in Salisbury and Wiltshire over the last 10 years

Should you, as a landlord for buy to let or for personal occupation, buy a brand-new home?

Well, let’s start by looking at the numbers …

Over the last 10 years, 9,860 new homes have been built in the Wiltshire area

 That is a lot of bricks and mortar! Roll the clock back twenty years in the Salisbury property market, and there were two distinct camps of property buyers – folks who would only contemplate living in period character properties with their original fireplaces and beams, and those people who preferred the low maintenance of a new home. Old period homes were ridiculed as money pits by new-home aficionados, while new-home owners were accused of buying boring boxes, all vanilla, all the same, homogenous and bland.

However, it’s not as black and white as that anymore – or not as I see it in Salisbury. New homebuilders are now trying to change their cookie-cutter uniform rows of suburban boxes into developments that are as individual as the families that love in them, thus increasing their appeal. Nonetheless, whether you choose a stone cottage, archetypal Victorian semi or terrace, 1970’s/80’s functional home or a untouched new home, whatever home you buy, it can result in supplementary costs that are often not taken into math’s when buying by potential homeowners or buy to let landlords.

So looking at the numbers in greater detail, let’s see what type of new homes people have been buying in Salisbury and the wider local authority area .

I thought the mix of what was built/bought locally over the last 10 years when compared to the national figures was fascinating … it’s interesting (but not surprising) to see a greater proportion of detached homes built locally and fewer flats being built, when compared to the national averages. This is because of the nature of the Salisbury area, its position in the country, the availability of building land, planning restrictions by Wiltshire Council and the price of building land.

So, should you buy a new home (because a lot of people locally have over the last ten years)?

Well if you are considering new, take care when buying one, as often the show home isn’t the actual property you end up buying. It’s like visiting the car showroom and falling in love with the model in the showroom (which is spec’d up to an inch of its life) – only to get the base model when handed the keys. Look out for things like curtain rails, tv aerials (or lack of them), kitchen appliances, carpets and curtains … and outside – make sure you aren’t unwittingly buying a square piece of earth instead of the manicured landscaped gardens.

New homes are a lot more efficient on energy consumption compared to the old drafty, high fuel bill Victorian semis, as their owners can testify. Older properties will have maintenance issues, with 100yo brickwork and roofs that might need replacement and extra insulation, rotten wooden windows and a dodgy central heating boiler (all sounding rather a strain on your bank balance if you weren’t aware). The point I am trying to get across is open your eyes and don’t assume .. ask questions and get a surveyor to make a detailed inspection of the property so you know what you are getting yourself into.

Next, I also wanted to break down the new home stats to each individual year in our local area to see if there was a pattern to when people bought a new home. As you can see, there was a drop in new homes selling after the start of the Credit Crunch (2008) but since then; the general trend has been better! Looking at the much larger second hand housing market in Salisbury over the same 10 years, the coloration between the new homes market and second market has been quite strong – which shows the new home builders don’t make (or break) the Salisbury housing market – just follow it (although with the planned building locally in the next 10/20 years – who knows if that will continue to be the case?).

So, should you buy brand-new or second hand? If price is your sole motivator, then new homes are always CHEAPER when the economy is bad. However, in normal and good housing market conditions, you will pay a ‘new build premium’. The Royal Institute of Chartered Surveyors admits that this can be as high as 10% extra, when compared to a similar second hand property – so be aware of that (it’s like paying extra for a new car and losing a bit (or a lot) of money as soon as you drive off the forecourt). Although, it’s not always about pure pound notes.

Older houses are bigger (more room) yet take more money to heat. Older houses have bigger gardens (to enjoy) – but you will spend more time tending to them. Older houses are in more established areas (with more facilities), whilst everyone is starting afresh on new homes. It all comes down to personal opinion. One final thought though, at least with new homes there is no gazumping or no upward chain to ruin any sale completion dates …

The choice as they say … is yours!

 

Additional 1,378 Salisbury Rented Homes Required by 2027

I have been doing some research, looking both at National and Regional reports on the demand and supply of property and people together with future projections on the economy, population and family demographics with some interesting results.  According to the Office of National Statistics, in the last financial year nationally, private renting grew by 74,000 households, whilst the owner occupied dwelling stock increased by 101,000 and social (aka council and housing association) stock increased by 12,000 dwellings.

It was the private rental figures that caught my eye.  With eight or nine years of recovery since the Credit Crunch, economic recovery and continuing low interest rates have done little to setback the mounting need for rented housing.  In fact, with house price inflation pushing upwards much quicker than wage growth, this has meant to make owning one’s home even more out of reach for many Millennials, all at a time when the number of council/social housing has shrunk by just over 2.5% since 2003, making more households move into private renting.

There are 7,321 people living in 3,215 privately rented

properties in Salisbury.

In the next nine years, looking at the future population growth statistics for the Salisbury area and making careful and moderate calculations of what proportion of those extra people due to live in Salisbury will rent as opposed to buy, in the next ten years, 3,138 people (adults and children combined) will require a private rented property to live in.

Therefore, the number of Private Rented homes in Salisbury will need to rise by 1,378 households over the next nine years,

That’s 153 additional Salisbury properties per year that will need to be bought by Salisbury landlords, for the next nine years to meet that demand.

… and remember, I am being conservative (with a small ‘c’) with those calculations, as demand for privately rented homes in Salisbury could still rise more abruptly than I have predicted as I would ask if Theresa May’s policies of building 400,000 affordable homes (which would syphon in this 5-year Parliamentary term is rather optimistic, if not fanciful?

So, one has to ask wonder if it was wise to introduce a buy to let stamp duty surcharge of 3% and the constraint on mortgage tax relief could curtail and hold back the ability of private landlords to expand their portfolios?

Well a lot of landlords are taking on these new hurdles to buy to let and working smarter.  Buying the property at the right price and using an agent to negotiate on your behalf (we do this all the time) … and the 3% stamp duty level isn’t an issue.  Incorporating your property portfolio into a Limited Company is also a way to circumnavigate the issues of mortgage tax relief (although there are other hurdles that need to be navigated on that tack), but just look at the growth of proportion of Buy to Let properties in the Country since the Summer of 2016 … something tells me smart Landlords are seeing these challenges as just that … challenges which can be overcome by working smarter.

I have a steady stream of Salisbury landlords every week asking me my opinion on the future of the Salisbury property market and their individual future strategy and, whether you are a landlord of mine or not, if you ever want to send me an email or pop into my office to chat on how you could navigate these new Buy to Let waters … it will be good to speak to you (because you wouldn’t want other landlords to have an advantage over you – would you?).

Will the Salisbury Property Market Crash?

And if it does … who will be the winners and losers?

Those Salisbury people wanting property values to drop would be those 30 or 40 something’s, sitting on a sizeable amount of equity and hoping to trade up (because the percentage drop of your current ‘cheaper’ property will be much less than the same percentage drop of the more expensive propertyand trading up is all about the difference). If you have children planning to buy their first home or you are a 20 something wanting to buy your first home – you want them to drop. Also, landlords looking to add to their portfolio will want to bag a bargain (or two) and they would love a drop!

Yet, if you have recently bought a Salisbury property with a gigantic mortgage, you’ll want Salisbury property values to rise. If you are retired and are preparing to downsize, you will also want Salisbury property values to rise (because you will have more cash left over after the move). Also, if you, a landlord looking to sell your portfolio or a Salisbury home owner, who has remortgaged to raise money for other projects (meaning you have very little equity), you will want Salisbury property values to rise to enable you to put a bigger deposit down on the next purchase.

So, before I discuss my thoughts on the future, it’s important to look at the past…

The last property crash, caused by the Global Financial Crisis, was between Q3 2007 and Q3 2009 … when property values in Wiltshire dropped 13.77%

…taking an average property from £227,133 in September 2007 to £195,849 by September 2009 … and since then – property values have over the medium-term risen (as can be seen on the graph).

So … what is happening now?

The simple fact is people in the UK are moving less (and hence buying and selling less). Estate agents up and down the land are blaming “Brexit” for this but the reality is that the problems in the British housing market are a lot greater than measly old Brexit!

There is a direct link between how people feel about the property market (sentiment) and the actual performance of the property market. However, the question of whether people’s sentiment moves as a result of changes in the property market, or whether changes in the property market drive sentiment is a question that baffles most economists – you see if someone feels assured about their financial situation (job, money etc.) and the future of property, they are more likely to feel assured to spend their hard-earned earnings on property and buy and if you think about it … vice versa. So, I believe Brexit isn’t the issue  – it’s just the “go to” excuse people are using. Humans don’t like uncertainty, and Brexit itself is causing uncertainty – it is, after all, the great unknown.

So, is it the flux of global politics? Politics are causing hesitation in the posh £5m+ markets of Mayfair and other high value Monopoly board pieces – but certainly not in sleepy old Salisbury (I don’t think Salisbury is too high up on the house buying list of all these Saudi Prince’s and Russian Oligarchs) … no the issues are much closer to home.

So, coming back to reality, one the biggest driving factors in the current state of play in housing market has been the part Buy To let landlords have played in the last 15 years. Making money as buy to let landlord in these golden years was as easy as falling off a log – but not anymore! Landlords had been getting off quite lightly when it came to their tax position, but with Osborne changing the taxation rules on buy to let … things have become a little more difficult for landlords.

Landlords have been hit with a supplementary rate of stamp duty, meaning they pay 3% more stamp duty than first time buyers. High rate taxpayers in the past have been able to offset the interest payments from their buy to let mortgages against their self-assessment tax bills – at their marginal rate. Between now and 2020 … this is being reduced in small steps, so they will only be able to claim back relief at the basic rate of tax. The bottom line is that it will be much tougher for investors to make money on buy to let. Tied in with this, the mortgage rules were changed a few years ago, meaning it’s also become slightly tougher to obtain buy to let mortgages (although if I’m being honest – they need too).

And what of Salisbury first time buyers? Well, I was chatting recently to a colleague about the Salisbury Property Market, and I mentioned that last year was the best year for over decade for first time buyers. For the last 30 years, buy to let investors have constantly had more purchasing power than first time buyers, as they were older and more established, together with their tax breaks. Yet, now as many amateur landlords are having second thoughts in staying in buy to let, this has given first time buyers a chance to get on to the property ladder.

What will happen to Salisbury property values? The simple fact is we don’t have the conditions that caused the crash in 2007 (i.e. sub-prime lending in the US, causing banks not to lend to each other, thus stalling the global economy as a whole). Assuming everyone is sensible on the Brexit negotiations, the biggest issue is interest rates.  As long as interest rates remain comparatively low (and don’t get me wrong – I think we could stand Bank of England base interest rates at 1.5% to 2.5% and still be OK, then the thought of a massive property market crash still looks improbable.

Yet correspondingly, I cannot see Salisbury property values rising quickly either.

The double-digit growth years in property values between 1999 and 2004 are well gone. A lot of that growth was caused by an explosion of buy to let landlords buying property to accommodate the influx of EU migrants in those years.  Mark Carney at the Bank of England can’t make interest rates any lower, so it’s difficult to envisage how credit conditions can get any easier!

Balance of probabilities … Salisbury property values will hover either side of inflation over the next five years, but if we did have another crash, what exactly would that mean to Salisbury homeowners – if they dropped by the same percentage amount, as they did in the last crash?

If Salisbury property prices dropped today by the same percentage as they did locally in the Global Financial Crisis back in 2007/9 … we would only be returning to the property values being achieved in July 2015 … and nobody was complaining about those!

Therefore, looking at the number of people who have bought homes in the area since July 2015, that would affect approximately only 17% of local home owners and landlords … and only a small percentage would actually lose – because you only lose money if they decide to move (and come to think of it, some of those sellers would fall into the category mentioned above that would relish a price drop!). So, really not many people would lose out.

Interesting don’t you think?

38% Drop in Properties For Sale Today in Salisbury Compared to 10 Years Ago

There is good news for Salisbury buy to let landlords as ‘top of the range’ well-presented properties are getting really decent rents compared to a year ago however, this rise in rents is thwarting many potential first time buyers from saving for both a deposit and money for a rainy day. On top of this, there is also a shortage of Salisbury homes coming on the market thus adding fuel to the slowdown and affecting not just Salisbury first time buyers but also those going up the housing ladder.

Whilst it is true that the Government’s initiatives, targeted at improving the supply of homes built and helping first time buyers obtaining necessary funding, are starting to work (albeit slowly), I also believe that to boost more existing home-owners and their properties onto the market, we as a Country, need to see a better focus placed on those looking to downsize (i.e. the mature generation).

If we took away some hurdles to home owners downsizing, such as removing stamp duty for those downsizers (as was done for first time buyers last year), together with encouraging even more first-time buyers with 100% mortgages to buy the smaller properties, this would in turn release more mid-range properties onto the market, which subsequently would encourage more mature homeowners to downsize from their bigger properties to buy those mid-range properties – thus completing the circle.

Looking at the most recent set of data from the Land Registry for Salisbury (the SP1 postcode in particular), the figures show the indifferent nature of the current Salisbury property market.

Only 192 Salisbury (SP1) Homes changed hands in the last 6 months

Salisbury property values and transactions continue to be sluggish, and the monthly peaks and troughs of house prices and properties changing hands doesn’t mask the deficiency of suitable realistically priced property coming onto the Salisbury property market, meaning the housing market is slowly becoming inaccessible to some would-be home owners.

Looking at what each property type is selling for in SP1 (note the data from the Land Registry is always 4/5 months behind) makes interesting reading ….

One must remember these are the average prices paid, so it only takes a run of a few expensive or cheaper property types (as can be seen with the variance in the Semi Detached and Terraced in the table) to affect the figures..

Looking at the numbers of properties for sale … I looked at my research for early Summer 2008, and at that time, 436 properties were on the market for sale in Salisbury.. and when I did my research on this article today, just 271 properties for sale.. a drop of 38%.

The Government needs to seriously consider the supply and demand of the UK property market as a whole to ensure it doesn’t seize up. It needs to do that with bold and forward-thinking plans but, in the meantime, people still need a roof over their head, so as local authorities don’t have the cash to build new houses anymore, it’s the job of Salisbury landlords to take up the slack. I must stress though, I have noticed a distinct ‘flight to quality’ by Salisbury tenants, who are prepared to pay top dollar for an exceptional home to rent.  If you want to know what tenants are looking for and what type of things you as a Salisbury landlord need to do to maximise your rental returns – drop me a line.

Salisbury Property Values 4.3% higher than year ago – What’s the PLAN to fix the Salisbury Property Market?

It’s been nearly 18 months since Sajid Javid, the Tory Government’s Housing Minister published the White Paper “Fixing the Broken UK Housing Market”, meanwhile Salisbury property values continue to rise at 4.3% (year on year for the council area) and the number of new homes being constructed locally bumps along at a snail’s pace, creating a potential perfect storm for those looking to buy and sell.

The White Paper is important for the UK and Salisbury people, as it will ensure we have long-term stability and longevity in property market as whole. Salisbury home-owners and Salisbury landlords need to be aware of these issues in the report to ensure they don’t lose out and ensure the local housing market is fit for purpose. The White Paper wanted more homes to be built in the next couple of decades, so it might seem counter-intuitive for existing home-owners and landlords to encourage more homes to be built and a change in the direction of housing provision – as this would appear to have a negative effect on their own property.

Yet the country needs a diversified and fluid property market to allow the economy as whole to grow and flourish … which in turn will be a greater influence on whether prices go up or down in the long term. I am sure every homeowner or landlord in Salisbury doesn’t want another housing crisis like we had in 1974, 1988 and most recently in 2008.

Now, as Sajid Javid has moved on to the Home Secretary role, the 17th Housing Minister in 20 years (poisoned chalice or journeyman’s cabinet post) James Brokenshire has been given the task of making this White Paper come alive. The White Paper had a well-defined notion of what the issues were.

The first of the four points brought up was to give local authorities powers to speed up house building and ensure developers complete new homes on time. Secondly, statutory methods demanding local authorities and builders build at higher densities (i.e. more houses per hectare) where appropriate. The other two points were incentives for smaller builders to take a larger share of the new homes market and help for people renting.

However, lets go back to the two initial points of planning and density.

(1) Planning

For planning to work, we need a robust Planning Dept. Looking at data from the Local Government’s Association, in Wiltshire, the council is below the regional average, only spending £32.57 per person for the Planning Authority, compared the regional average of £37.42 per head – which will mean the planning department will be hard pressed to meet those targets.

Also, 96% of planning applications are decided within the statutory 8-week initial period, above the regional average of 82% (see the graph below).  I am slightly disappointed and also pleased with the numbers for our local authority when it comes to the planning and the budget allowed by our Politician to this vital service.

(2) Density of Population

1.4 people live in every hectare (or 2.471 acres) in Wiltshire

It won’t surprise you that 247,262 of 470,981 Wiltshire residents live in the urban conurbations of the authority, giving a density of 13.1 people per hectare (again – much lower than I initially thought), whilst the villages have a density of 0.7 people per hectare.

I would agree with the Governments’ ambition to make more efficient use of land and avoid building homes at low densities where there is a shortage of land for meeting identified housing needs, ensuring that the density and form of development reflect the character, accessibility and infrastructure.

It’s all very good building lots of houses – but we need the infrastructure to go with it.

Talking to a lot of Salisbury people, their biggest fear of all this building is a lack of infrastructure for those extra houses (the extra roads, doctors surgeries, schools etc.). I know most Salisbury homeowners and landlords want more houses to be built to house their family and friends … but irrespective of the density … it’s the infrastructure that goes with the housing that is just as important … and this is where I think the White Paper failed to go as far as I feel it should have done.

Interesting times ahead I believe!

 

Nearly Three Babies Born for Every New Home Built in the Past Five Years in Wiltshire

Nearly 3.1 babies have been born for every new home that has been built in Wiltshire since 2012, deepening the Salisbury housing shortage.

This discovery is an important foundation for my concerns about the future of the Salisbury property market – when you consider the battle that todays twenty and thirty somethings face in order to buy their first home and get on the Salisbury property ladder. This is particularly ironic as these Salisbury youngsters’ are being born in an age when the number of new babies born to new homes was far lower.

This will mean the babies being born now, who will become the next generation’s first-time buyers will come up against even bigger competition from a greater number of their peers unless we move to long term fixes to the housing market, instead of the short term fixes that successive Governments have done since the 1980’s.

Looking at the most up to date data for the area covered by Wiltshire Council, the numbers of properties-built versus the number of babies born together with the corresponding ratio of the two metrics …

It can be seen that in 2016, 2.55 babies had been born in Wiltshire for every home that had been built in the five years to the end of 2016 (the most up to date data). Interestingly, that ratio nationally was 2.9 babies to every home built in the ‘50s and 2.4 in the ‘70s. I have seen the unaudited 2017 statistics and the picture isn’t any better! (I will share those when they are released later in the year).

Our children, and their children, will be placed in an unprecedented and unbelievably difficult position when wanting to buy their first home unless decisive action is taken. You see it doesn’t help that with life expectancy growing year on year, this too is also placing excessive pressure on homes to live in availability, with normal population growth nationally (the number of babies born less the number of people passing away) accumulative by two people for every one home that was built since the start of this decade.

Owning one’s home is a measure many Brits to aspire to. The only long-term measure that will help is the building of more new homes on a scale not seen since the 50’s and 60’s, which means we would need to aim to at least double the number of homes we build annually.

In the meantime, what does this mean for Salisbury landlords and homeowners? Well the demand for rental properties in Salisbury in the short term will remain high and until the rate of building grows substantially, this means rents will remain strong and correspondingly, property values will remain robust.

 

How Affordable is Property for Average Working Families in Salisbury?

The simple fact is we are not building enough properties. If the supply of new properties is limited and demand continues to soar with heightened divorce rates, i.e. one household becoming two, people living longer and continued immigration, this means the values of those existing properties continues to remain high and out of reach for a lot of people, especially the blue collar working families of Salisbury.

Looking at some recent statistics released by the Government, the ratio of the lower quartile house prices to lower quartile gross annual salaries in Wiltshire Council has hit 9.75 to 1.

What does that mean exactly and why does it matter to Salisbury landlords and homeowners?

If we ordered every property in the Wiltshire Council area by the value of those properties, the average value of the lower quartile properties (i.e. lowest 25%) would be £194,995. If we then did the same, and ordered everyone’s salary in the same council area, the average of the lowest quartile (lowest 25%), the average salary of the lowest 25% is £19,998 pa, thus dividing one with the other, we get the ratio of 9.75 to 1.

Assuming there is one wage earner in the house, the chances of a Salisbury working family being able to afford to buy their own home, when it’s just under ten times their annual salary, is very slim indeed. The existing affordability crisis of people wanting to buy their own home is the unavoidable outcome of the decade on decade failure to build enough homes to keep up with demand. Nevertheless, improving affordability is not a case of just constructing more homes. Wiltshire Council needs to ensure more properties are not only built, but built in the right locations and of the right type and at the right price to ensure the needs of these lower income working families are met, because at the moment, they presently have few options apart from the private rental sector.

Looking at the historic nature of the ratio, it can clearly be seen in the graph below that this has been an issue since the mid 2000’s.  Previous figures from the late 90’s to mid 2000’s (Salisbury District Council) were significantly lower.

However, if one looks at the historic data, those on the bottom rung of the ladder (those in the lower quartile of wage earners) used to be housed by the local authority instead of buying. However, the vast majority of council houses were sold off in the 1980’s, meaning there are much fewer council houses today to house this generation.

Many of the lower quartile working class families were given a lifeline to buy their own homes in middle 2000’s, with 100% mortgages, but the with the credit crunch in 2009, that rug (of 100% mortgages) was rudely pulled from under their feet. You see it is cheaper to buy than rent … it’s the finding of the 5% deposit that is the challenging issue for these Salisbury working class families. So unless the Government allow 100% mortgages back, the fact is, demand for rental properties will outstrip supply.

In the long term, to alleviate that, I would suggest the Salisbury community hold their local politicians at Wiltshire Council to account for the actions they could take to ensure the affordability of housing and the extent to which they work with private developers and housing associations and aggressively use the planning tools at their disposal to safeguard the local community getting the new households we need. Wiltshire Council could make certain parcels of residential building land for private rented development only, eliminating the opportunity of the land being bought to develop large executive homes, which do not solve the current problem.

Yet in the short term, all this means is demand for rental properties will continue to grow, keeping Salisbury house prices high and Salisbury rents high.

515 Salisbury Landlords Plan to Expand Their Buy To Let Portfolios

A noteworthy number of buy to let landlords in Britain plan to buy more properties over the next year notwithstanding the frustrations, challenges and seismic changes in the private rented sector. According to Aldermore, the specialist Buy To Let lender, their research shows around 41% of portfolio buy to let landlord’s objective is to grow their buy to let portfolio (Portfolio landlords are landlords that own more than one property).

So, I thought, “Are Salisbury landlords feeling the same?” If so, if these numbers were applied to the Salisbury private rental market, what sort effect would it have on the Salisbury property market as whole?

Talking to the landlords I deal with, most are feeling quite optimistic about the future of the Salisbury rental market and the prospect it presents notwithstanding the doom and gloom prophecies that the property market will shrink. Many of those landlords who are looking to enlarge their portfolio are doing so because they still see the Salisbury rental market as a decent investment opportunity.

With top of the range Bank and Building Society Savings Accounts only reaching 1.5% a year, the rollercoaster ride of Crypto currency and the yo-yoing of the Stock Market, the simple fact is, with rental yields in Salisbury far outstripping current savings rates, the short term prospect of a minor drop in property prices isn’t putting off Salisbury landlords.

The art to buying a Salisbury buy to let investment is to buy the profit on the purchase price, not the anticipation of the future sale price.

No matter what the historical economy has thrown at us, with the global meltdown in 2008/9, dotcom crash of 2000, ERM in 1992, the three day week, oil crisis and hyperinflation in the 1970’s (the list goes on) … the housing market has always bounced back stronger in the long term. That’s the point … long term. Investing in buy to let is a long-term strategy. The simple fact is, over the long term with the increasing demand for rental properties, predominantly among Millennials as many cannot afford to get on the property ladder, and with councils not building enough properties of any kind, many youngsters are having to resort the private rental market for their accommodation needs.

So, what of the numbers involved in Salisbury?

There are 577 landlords that own just one buy to let (BTL) property in Salisbury and 1,257 Salisbury landlords, who are portfolio landlords. Between those 1,257 Salisbury portfolio BTL landlords, they own a total of 2,638 Salisbury BTL properties and they can be split down into the size of landlord portfolio in the graph below….

If I apply the Aldermore figures that means 515 Salisbury landlords have plans to expand their BTL portfolio in the coming year or so.

However, the Aldermore Research also showed that 8% of private landlords intended to reduce the number of properties they own. They put this down to continuing Government intervention in the housing market (as many landlords mentioned too many limitations and higher taxation) while some believed that tenants are excessively protected to the disadvantage of the landlord.

I would say there is no repudiating that the buy to let market has taken a bit of a beating, thanks to a plethora of Government regulation, new mortgage underwriting rules in 2014 and George Osborne’s tax changes. Yet there still remains an overall consciousness of optimism among the vast majority of Salisbury buy to let landlords. Despite these latest changes, many landlords still view buy to let as a good investment, as long as you buy right and expand your portfolio taking into account the second rule of buy to let … assess your position on the ‘buy to let seesaw’ of capital growth and yield.

If you want to buy right and assess your own portfolio on the yield/capital growth seesaw … drop me a note. I don’t bite and the opinion I give, whether you are landlord of mine or not as the case may be, is given freely, without obligation or cost. The choice is yours. Thank you for reading this article.

Extra Funding Is Required for Affordable Homes in Salisbury

In my blog about the Salisbury Property Market I mostly only talk about two of the three main sectors of the local property market, the ‘private rented sector’ and the ‘owner occupier sector’. However, as I often stress when talking to my clients, one cannot forget the third sector, that being the ‘social housing sector’ (or council housing as some people call it).

In previous articles, I have spoken at length about the crisis in supply of property in Salisbury (i.e. not enough property is being built), but in this article I want to talk about the other crisis – that of affordability. It is not just about the pure number of houses being built but also the equilibrium of tenure (ownership vs rented) and therein, the affordability of housing, which needs to be considered carefully for an efficient and effectual housing market.

An efficient and effectual housing market is in everyone’s interests, including Salisbury homeowners and Salisbury landlords, so let me explain ..

An average of only 618 Affordable Homes per year have been built by Wiltshire Council in the last 9 years

The requirement for the provision of subsidised housing has been recognised since Victorian times. Even though private rents have not kept up with inflation since 2005 (meaning tenants are better off) it’s still a fact there are substantial numbers of low-income households in Salisbury devoid of the money to allow them a decent standard of housing.

Usually, property in the social housing sector has had rents set at around half the going market rate and affordable shared home ownership has been the main source of new affordable housing yet, irrespective of the tenure, the local authority is simply not coming up with the numbers required. If the local authority isn’t building or finding these affordable homes, these Salisbury tenants still need housing, and some tenants at the lower end of the market are falling foul of rogue landlords. Not good news for tenants and the vast majority of law abiding and decent Salisbury landlords who are tarnished by the actions of those few rogue landlords, especially as I believe everyone has the right to a safe and decent home.

Be it Tory’s, Labour, SNP, Lib Dems, Greens etc, everyone needs to put party politics aside and start building enough homes and ensure that housing is affordable. Even though 2017 was one of the best years for new home building in the last decade (217,000 home built in 2017) overall new home building has been in decline for many years from the heady days of the early 1970s, when an average of 350,000 new homes were being built a year.  As you can see from the graph, we simply aren’t building enough ‘affordable’ homes in the area.

The blame cannot all be placed at the feet of the local authority as Council budgets nationally, according to Full-Fact, are 26% lower than they have been since 2010.

So, what does this mean for Salisbury homeowners? Well, an undersupply of affordable homes will artificially keep rents and property prices high. That might sound good in the short term, but a large proportion of my Salisbury landlords find their children are also priced out of the housing market. Also, whilst your Salisbury home might be slightly higher in value, due to this lack of supply of homes at the bottom end of the market, as most people move up the market when they do move, the one you want to buy will be priced even higher.

Problems at the lower end of the property market will affect the middle and upper parts. There is no getting away from the fact that the Salisbury housing market is all interlinked .. it’s not called the Property ‘Ladder’ for nothing!

Salisbury Property Market – Asking Prices Up 2.2% in the Last 12 Months

The average asking price of property in Salisbury increased by 2.2% or £7,187 compared to a year ago, with particularly good demand from landlords and home-movers in the first few months of the year. This takes the current average asking price to £338,504, compared with £331,317 this time last year.

The rise in asking prices is being aggravated by buyers jumping into action looking to benefit from potential stamp duty savings (especially first-time buyers) or beat impending mortgage interest rate rises later in 2018. Of the numerous Salisbury buyers starting their property hunting in the usually active spring market this year, many face paying even more than ever for the property of their dreams, although as I mentioned a few weeks ago, there are more properties for sale in Salisbury compared to 12 months ago.

Looking at the different sectors of the Salisbury property market, splitting it down into property types, one can see what is happening to each sector of the market with regard to their average asking prices now compared to a year ago. Firstly, looking at the Pound note amounts …

Interestingly, when one looks at the percentages, the most upward average asking price pressure is in the detached property type sectors, with both first-time-buyer and second-time-buyer properties at new Salisbury asking price highs.

Now, I must stress this growth in the asking prices of Salisbury property doesn’t mean the value of Salisbury property is going up by the same amount … nothing could be further from the truth.  Only time will tell if the current levels of Salisbury asking prices is a catch-up abnormality after a couple of months of restrained asking price rises in the first few months of 2018, or is it an initial sign that we are in for a better 2018 Salisbury Property market than all of us were expecting at the start of the year?

I believe these asking prices must be viewed with a pinch of salt, as it will be fascinating to see whether Salisbury properties actually sell at these higher asking prices. Just because house sellers (be they owner-occupiers or landlords liquidating their assets) are asking for more money it doesn’t mean buyers will be enthusiastic to part with their hard earned cash. Like my Mum and Dad used to say to me all those years ago, “You can ask … but you might not get”.

Also, Salisbury homeowners and landlords wanting to sell their property need to be aware of progressively strained buyer mortgage affordability and the more those sellers increase asking prices, the more buyers will hit their maximum on the amount they are able borrow on a mortgage.

However, those Salisbury buyers who need a mortgage (be they owner-occupier or landlord), will paradoxically benefit from lower mortgage payments before interest rates rise … maybe another reason for the uplift in the number first time buyers and landlords buying? Only time will tell!