Wednesday 29 October 2014

As mindsets change, where does that leave the Derby rental market?

Following my article last month on property values up to July, I am pleased to say that Derby house prices edged up by a further 0.7% in August. As a result, the annual pace of house price growth is Derby up to 5.5% from 4.4% in July. We need to go back to March 2010 to see such a high growth, as house price growth continues to outpace earnings by a wide margin, with average wage growth running at less than 1% in recent months.

I am not an estate agent, but know most of the estate agents in town well and they say new buyer enquiries have moderated somewhat in recent months, and the prospect of interest rate increases together with subdued wage growth may temper demand in the year to come. The demand should be there as the brightening economic outlook and consumer sentiment remains buoyant thanks to declining inflation and sustained decreases in unemployment down in Derby to one of its lowest rates of 2.6% (or 4197 people)

Nevertheless, Derby housing affordability does not appear stretched by historic standards, in part due to the low level of mortgage rates. The cost of servicing a typical mortgage remains close to the long run average of 30% of take home pay and it has been proved time and time again to be cheaper than renting. A lovely three bed semi can be yours in Derby in one of the top areas for £130,000, meaning if you could save the £6,500 deposit, it would be cheaper to rent than buy. So why are first time buyers buying their first house instead of renting?

It comes down choice and lifestyle of the tenants. In many cases renting provides the flexibility some people, especially young people, want and need. For others home ownership is top priority but when there is no social pressure to buy and you can ring the landlord and sort out any issue , why would someone want to buy. Youngsters find it harder to save for the deposit when Apple launch their latest iPhone each six months or the next 50 inch LCD TV needs buying. Renting is a choice and we are developing a more European mindset it would seem.

Therefore, my message to Derby landlords is renting is here to stay for the medium to long term, whilst the outlook in the short term for the Derby and East Midlands housing market remains uncertain. The number of mortgage approvals fell by almost 20% between January and May, suggesting that activity was cooling. However, there was a modest rebound in June and it is unclear how much of the slowdown was due to the introduction of Mortgage Market Review rather than an underlying loss of momentum.

It’s all about buying a property that will attract the right sort of tenants, a good balance of yield and capital growth and when you do come to sell it in ten or twenty years, it will sell whatever the market is doing at the time. As I don’t sell property, I can give you my honest opinion on any property. Many landlords send me Rightmove links to property, asking my advice. 

You can too if you want .. its no trouble at all, but I will warn you, I will always tell you what you need to hear, not want you want to hear!!  simonj@professionalproperties.co.uk



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Tuesday 21 October 2014

Are there any poor estate agents in Derby?

My friends often call me an estate agent, but then I remind them that whilst a lot of estate agents do both property sales and lettings, we are a letting agent only and always plan to be.

By specialising in lettings, it enables me and team to get the job done right. In a recent article, when we spoke about the difference between Derby and Nottingham property markets and their prices, one landlord who popped his head round our door in St. James Street to chat about the Derby property market got talking about how he thought there were less for sale boards in Derby than there were ten, even fifteen years ago.

All the newspapers talk about is a crisis of a lack of properties. Building new property is not like the Mars bar factory that can keep the machines going an extra couple of hours to make more Mars bars. The Government says 200,000 properties need to be built each year for the next ten years. For Derby to take its share of that would mean we would have to build 1,904 properties each year for the next ten years.. yet in the last ten years, in Derby, we have only built on average 986 properties per year.
People in popular areas say they want more properties for their children and are usually in favour of more homes being built, as long as they are not in their local area!
Increasing supply of houses leads to more congestion, crowded amenities and loss of greenbelt. Then, and here is the big reason, those homeowners have a vested interest to keep the building low because an increased supply reduces the value of their existing home.

Finally, a lack of council houses since Mrs T. encouraged the sale of council housing after she was elected in 1979, the number of new social housing to replace them, has been very low.

However, getting back to the point, it’s a simple fact that since the 2007 crash, the number of properties that are selling in Derby has dramatically reduced. Look at the graph and you will see in the late 1990’s (what most say was a normal market), around 350 properties a month were selling each month in Derby. In the first half of the 2000’s decade, when we had a rising market, around 450 properties were changing hands each month in Derby. In 2008, the year of the property crash that dropped to 240 per month and hasn’t grown that much since, although we started to see a rise in 2014.

Hence those poor old estate agents aren’t selling as many properties! It must be tough for the little dears!

If you would like to discuss my thoughts on the rental market, feel free to pop through the door of our offices on St. James Street or send me an email to: simonj@professionalproperties.co.uk!



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Monday 13 October 2014

In Derby, semi’s account for 38% of property sales. Is that good?

Derby attracts all sorts of property hunters seeking a home in our city and strikes a wonderful balance between old and new. Fortunately, just about every accommodation preference can be catered for, from highly desirable detached houses on the South West and North West areas of Mickleover, Allestree and Littleover, which are perfect for families, as well as popular 1930’s bay front semi detached houses, imposing late Victorian terraced houses and modern luxury apartments dotted around the City.

However, with newspapers and the media giving mixed messages on what is exactly happening in the City, let us have a look at what has happened over the last 12 months, in particular, what type of property is actually selling.

Between August 2013 and August 2014, 3421 of the 102,271 properties in Derby actually sold. The best performing type of property was, surprisingly, the detached house. With an average sale price of £225,824; over 1,010 of them sold, representing 29.5% of the property sold in Derby (which when you consider only 23.4% of Derby property is detached, this means detached houses have done well).

In very close second are terraced houses. They represented 27.7% of the sales but terraces only make up 23.6% of the property .. again good news for all terraced house owners.

Of the 40,097 semi detached houses in Derby, 1298 changed hands in the year, showing that whilst 39.2% of property in Derby are semis, they only, but very respectably, represented 37.9% of the sales.

However, it is the flats/apartments that seem to have performed the worst. Whilst there are 14,212 apartments in Derby (representing 13.8% of the housing stock), only 165 changed hands in the year, representing only 4.82% of the sales.

What does this mean for the property owners of Derby? It means that there is a two tone property market place in Derby. Most homeowners start with a terraced, aspire to move to semi detached houses, then as finances  allow, they move to a detached property. The majority of apartments, especially in the city centre, were purchased by landlords to rent out to tenants, so they have no need/want to trade up on the property ladder.

There are a small number of homeowners who are still in negative equity, and in some cases, property values of some Derby apartments sold at the height of the boom, are still 15% to 20% lower than what was paid for them in that 2007 boom.

However, on average, general Derby property values are only 8% off those 2007 property boom. We are seeing some good sales and if you look hard enough, you may chance upon a "hidden property gem" in the most unlikely of places..

If you would like to discuss anything further then please pop in and see me, send me an email or call me directly on 07977 235545.


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Tuesday 7 October 2014

Onward and upward for the house price trend in Derby.

Last weekend I was asked to comment on Derby house prices at a property talk in Mickleover to a group of local landlords and investors. I did the research so I thought I would use it in this article!

In Derby, property prices are still 7% below the level that was achieved in the 2007 property boom (before it went pop in early 2008 with the credit crunch).  If Derby people sold their properties today, bearing in mind that the cost of living has increased by 19% over the last seven years too, the money they would get from the property would actually be 26%  lower (19% cost of living  + 7% below the 2007 boom), than if they’d sold in 2007.

Average Derby house prices are in a constant state of microflux. Over the last seventeen months, the trend has been in an upward  direction. The price of a typical Derby home increased by just 0.9% in July (yet dropped 0.6% in June and even stranger, still increased in May by 1% ).

Looking at monthly figures can be dangerous, so, I always look at the Land Registry  figures too which shows that the annual rate of Derby house price growth moderated in July to 4.1% from 4.4% in June.

The slowdown was not entirely unexpected, given mounting evidence of a moderation in activity in recent months.  Mortgage approvals declined by almost a fifth between January and May, and there has also been some softening in forward looking indicators, such as new buyer enquiries. But on the other side, with the labour market strengthening, landlords are looking for a home for their savings, mortgage rates are expected to remain low and with consumer confidence rising activity is likely to recover in the months ahead.

Rightmove have recently released some data on Derby and the immediate area, and they make fascinating reading. The peak of the property market last decade in Derby is recognised as November/December 2007. Whilst property values are still 7% lower than that boom, homeowner’s asking prices are 0.3% higher than the 2007 boom.  Therefore, there is an argument to say, some (not all) Derby asking prices are a little high but the price the properties are actually selling for, is a decent and reasonable figure. Remember, price is the amount someone is prepared to pay and not necessarily what someone thinks it is worth!

It all comes down to doing your homework, asking questions of the agent and the owners. Find out their motivation for selling and see if you can ‘bag that bargain’. Trust me, they are still out there. As we are not an estate agent, I can look at the whole of the market and give you an honest opinion on the investment potential of any property up with any agent. In fact, very soon, I will be starting to put on what I consider the best buy to let deals there are on to the ‘Derby Property Blog’;

If you would like to discuss anything further then please pop in and see me, send me an email or call me directly on 07977 235545.


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