Will the Election cure the issues within the Derby property market?

With the General Election almost upon us, all the parties are trying to woo voters with policies that will attract those important votes come the 7^th May 2015. 

There are 30,724 tenants of voting age in Derby living in private rented accommodation. In a tight election, their votes could be crucial.

Labour’s motivation to keep the private rental sector rents in line with inflation is pretty straightforward; cap rents and extend tenancy terms whilst the Conservatives are focussing on a ‘Right to Buy’ solution.

Since the turn of the Millennium, there has been a significant change in the proportion of people who own their own home in Derby. In 2001, 69.23% of homes in Derby were owner occupied, today the figure is 61.37%, a significant decline in such a short time.  Buy to let landlords can find tenants because young people say they cannot afford a deposit to buy unless they inherit money or are given a loan from the ‘Bank of Mum and Dad’ …but wasn’t that the way how most people got on to the property ladder; 10, 20 even 30 years ago or you just got on and went without and saved up?

In Derby, only 38.08% of 25 to 34 year olds have a mortgage. When you compare Derby against the national average of 35.93%, it just shows how different parts of the country have different housing markets. However, the really interesting fact is that if you roll the clock back to 1991 and nationally, 67% of 25 to 34 year olds had a mortgage.

After WW2, the supply of properties being built kept up with demand as millions of council homes were built. Also private house building increased in the 1950’s, but especially in the 1960’s and 1970’s, and as the Country  got more prosperous it meant that by 1971, there were more home owners than renters. However, since the 1970’s, the population has grown but the number of new properties being built hasn’t kept up at the same rate, the result is that there have been huge rises of property prices in the early ‘70s, the late 80s and more recently between 1999 and 2004. Interestingly, since the early 1970’s, out of the 34 richest countries in the world, the UK has seen highest property prices rises.

95% mortgages have been available to first time buyers since late 2009, but with property prices rising by 153% since 1997 in Derby, as property prices have been rising and first time buyers have been saving, the amount they have to save is continually rising at the same time. The stress on saving even for that kind of deposit, coupled with the new stricter mortgage rules introduced in 2014, means that most 20/30 something’s in Derby are renting instead of buying. Yet at the same time, don’t blame the landlords for this. For every mortgage approved for a landlord last year, three were approved for first time buyers!

The issue quite simply comes back down to a lack of new homes being built. In Derby, only 984 properties a year are being built whilst the population is rising by 2,250 a year. The supply of new homes has been limited by planning laws, local councils not having the money to build council houses, hard-hitting green belt limitations, and our old friend nimbyism (Not in my back yard!).  In fact, I read the Lyons Housing Review Report a few months ago, and in it, it said that at least 243,000 properties a year need to build to keep up with the number of new households being formed in the UK. In 2014, the country only built 109,000!  

With a rising population and net migration, especially from the EU, the mismatch between demand and supply is why we have the problem. Until politician’s have the backbone to realise the Country needs a lot more decent homes built, the problem will just get worse.

In the meantime, demand for rental property will continue to grow because people need a roof over their head at the end of the day ......fact.

Just who are the Renters in Derby?

Speaking to a Bank Manager the other day in Derby, we got talking about the state of the Derby property market and whether we, as a country, are turning more and more to the European style of property ownership, where it is the norm to rent as a opposed to automatically buying once you have a good job etc.

Even though a recent report by the Halifax stated homeownership remains a goal for 85% of twenty to forty five year olds, there is information emerging that attitudes in the UK towards renting your own home as opposed to owning it have softened, showing more and more, that renting is being seen as a life style choice.  In fact it is recognised in learned circles that the cycle of renting is also repeated by the fact that people who grow up primarily in rented accommodation are themselves more likely to rent than buy.

Many people think that the UK should lose its fixation with homeownership and that people would be happier as a result. If this pattern were to continue, then this would suggest that the people entering the housing market are less likely to want to own a home, and are more likely to remain  ‘Renters for Life’, irrespective of changing market conditions, leading to a longer term shift in the home ownership make-up of the country.

The biggest barrier often mentioned to buying a house is the claim that they are not buying property at the moment because of a lack of sufficient wages and by the high level of deposits but like we said a few weeks ago, in Derby, a single person on the average Derby salary of £26,241pa, assuming they had a reasonable credit history they would be showered with lenders offering them a 95% mortgage (a reasonable credit history means they haven’t defaulted on loans, paid all their bills on time nor got any County Court Judgements. Just because you missed just one credit card payment won’t mean you have messed up your credit score and your ability to get a mortgage)  and they would only need to find £4,500 as a deposit to buy a decent terraced house in Rosehill. ..it comes down to the perceived capability of the youngsters in Derby to buy nowadays.

Interestingly, when I looked at the Derby figures, the average Derby tenant has a younger profile than the England and Welsh average, as can be seen from the graph below. What interested me as well was the relatively large number of people renting over the age of 50! I know we have a large number of mature tenants at our agency, but I always thought that was the exception to the rule. Obviously not! - and that is good news for landlords as they make excellent tenants!

So what does all this mean for Derby landlords and future Derby landlords? I honestly believe there is a difference between the hope and perceived capability of the younger generation to buy a home. Although homeownership is seen as advantageous by a majority, many tenants admitted in the Halifax report they are not taking the steps they need to purchase their own home.

As the local authority aren’t building any properties in Derby, people still need a roof over the head, and that is why, as I mentioned a few weeks ago in the Derby Property Blog, the demand for rental properties will only continue to steadily rise in the coming decade. If want to know where the Derby Property market is heading and where you should (and shouldn’t buy), maybe the one place you should visit is the Derby Property Blog or send me an email!

Derby v London.. it's like being in a different country!

I had an interesting conversation with a local Derby accountant the other day. He is quite an observant chap - I know this because I have known him for a few years, but I suppose you have to be to be an accountant! Anyway, he mentioned a few things he had noticed recently in Derby, one that Derby property prices had gone up in the last few years but nowhere near the growth levels that were being achieved in central London, and secondly, that he thought the number of for sale boards in Derby - and more importantly ones with sold slips on them - had increased over the last couple of years.

The rate of house price inflation in Derby continues to slow with growth of 4.6% in the 12 months to February compared to 5.5% just over six months ago, according to the latest Land Registry data. However, there is considerable local variation with house price growth ranging from 1.6% in Leicester, to 8.3% in Northamptonshire over the last 12 months.

Whilst Derby hasn’t seen the 20%+ per year in house price growth of London over the last couple of years, Derby has seen a sharp uplift in the number of properties sold throughout 2014 as base line demand for housing grows, which suggests there is substance to the recent pick-up in house price growth in the City. Since the Second World War in the UK, when the number of properties sold has grown, property values grew soon after. The 7% uplift in property transactions in Derby in 2014, compared to 2013, indicates the most significant recovery in house market activity in Derby (outside London) since 2007.

When you compare Derby with London, you could be looking at two different countries. In London, its mid/late teens house price to earnings ratios are impacting demand; i.e. the average property value is often 15 or 17 times the average wage in London.. in fact, in Knightsbridge the ratio can be 30 to 1.  However, the number of people wanting to sell has dropped considerably, meaning that falling sales volumes combined with a general slowdown in activity in the run up to the General Election are resulting in lower mortgage approvals for home purchase.

Transactions are a great indicator for house prices. The acceleration in house price growth in London in the last two years was preceded by three years of rising transactions. A similar pattern is being registered in the Derby area, as pent up demand returns to the market supported by low mortgage rates and an improving economic outlook.

But before you get the Champagne out, while the uplift in activity is welcome news, the number of Derby property sales in 2014 is still 58.8% lower than the level seen in 2007 and property values are 11% below the 2007 levels. The ongoing housing recovery is far from broad based and remains focused on middle to higher value areas within Derby where households have equity and find it easier to access mortgage finance.

If you want to know more about the Derby Property Market, please to not hesitate to contact me! Mobile, office, text, e-mail, carrier pigeon - I'm not bothered!

Have we got a dual speed property market in Derby?

Even with the General Election on the horizon, property values in Derby are still 0.42% higher than they were 3 months ago, the diversion and ambiguity of an election typically makes house sellers who need to sell, price their property more realistically - although this only lasts a couple of months!

Looking specifically at it from a Derby landlord’s point of view, the Derby properties favoured by investors are in short supply in many parts of the city because of a number of factors. One of the factors has been that we seen the number of first time buyers coming to buy their first home increase over the last 12 months in Derby.  Another factor has been the fact that the banks have been pushing ‘let to buy’ - yes ‘let to buy’ is different to ’buy to let’! - to homeowners (more of ‘let to buy’ in an up and coming article). Next, because of the banks, who are chasing low risk landlords with high deposits with very low mortgage rates - and the low risk landlords with high deposits tend to be attracted to the safer modern two and three bed town houses and semis in Derby.

As I mentioned a few weeks back, the pension rules are changing which means buy to let landlords can use some, or all, of their pension pot to buy a property.  It shouldn’t be forgotten there are tax implications taking more than a quarter of your pension pot out (see the article from a couple of weeks ago), so whilst many pension pots may not be able to fund a suitably big enough tax free lump sum to buy the property outright, for most it will provide enough for the 25% deposit required by most BTL mortgage providers. It shouldn’t be forgotten landlords that the interest paid on the mortgage is tax deductible against the rent, thus lowering your income tax paid.

In the last 12 months, I have noticed a particular uplift in interest from ‘50 something’ Derby people wanting to become landlords for the first time. In Derby, the highest returns for the lowest investment are at the lower end of the market e.g. the classic Victorian terraced house. Unfortunately Victorian terraced houses, with two bedrooms are coming to the market in smaller numbers than the larger four bedroom ones in  top end sectors of the Derby property market.

When looking at the actual numbers, in the latter part of the Summer of 2014 in Derby, in one month alone 589 two bed houses were on the market in Derby. However, in January this year, a notoriously excellent bumper month for properties coming on to the market, there were only 440 two bed houses on the market in Derby to choose from. Today, that figure stands at only 360..whilst the number of four and five beds has increased significantly...  interesting don’t you think?

At that lower end of the property market in Derby, where first time buyers and landlord investors compete with each other to buy those smaller properties, I believe throughout 2015, there will be a slow and steady tipping of the scales between supply and demand. In fact, from what I am seeing and hearing, early anecdotal evidence has suggested over the last few months (although we will need to look at figures later in the Spring once we have the data from The Land Registry), we are beginning to see a polarised Derby property market, where we have high demand but low supply at the bottom end of the property market, yet high supply but lower demand at the top of market.. and that can only mean one thing ... prices will go up quicker on the smaller properties than the larger ones in Derby, thus narrowing the gap for people looking to move up market!

Rent Guarantee. It's a No-Brainer!

When a landlord invests in property, insurance is an area some end up neglecting. The kind of cover that a standard home policy deals with is often inadequate for the requirements of landlords. This is because they need a policy that deals with all sorts of potential issues to do with tenancies, third party damage and so on.

Landlords are aware that the usual landlord insurance policies will provide them with protection against such events as damage caused by a tenant as well as rent lost when a property is inhabitable following a valid insurance claim. However, these policies will not stretch as far as actually covering the rent when a tenant simply fails to pay up.

It is very realistic that there are occasions when a tenant simply fails to pay, be it out of malevolence, financial incompetence or a sudden change for the worse in their financial circumstances that they might not even tell the landlord about. Landlords without a rent guarantee insurance policy may be in for a shock. Those who do have such cover can rest easy. It is at this point where a landlord can make a claim on their rent guarantee policy and ensure their rental income is safe. The insurer can then chase up the tenant for the shortfall. For those landlords who don't, the implications can be awful, especially if there is a mortgage on the property and the rent is relied upon to help make the necessary loan repayments.


One of the great benefits of having Rent Guarantee insurance in place is that the policies often include Legal Expenses cover necessary for potential evictions. Lengthy court cases take up  time, energy and can stifle cash flow. However, your Rent Guarantee insurance can cover the legal costs and help reduce the process.

Indeed, with disputes often ending up in court, it is not just the repayment of the missing rental money that becomes an issue. Legal costs can be prohibitive for landlords if they are unable to get the money without recourse to such measures, so it will be reassuring to know that rent guarantee insurance can also take care of this, particularly as legal fees will be much harder to pay for those whose budgets are hit by non-payment.

There is always a chance landlords will be hit by non-payment. How much better it would be to have a policy in place that will help mitigate losses, as well as ensuring legal costs are covered to prevent a catch-22 situation occurring where an investor is too cash-strapped by the loss of income to pay for the legal action needed to recover unpaid rent.


Professional Properties offer two types of Rent Guarantee protection. Firstly, we offer the a policy that will recover rent if the tenant fails to pay. The policy includes such benefits as Nil Excess; Payable until vacant possession; Cover limit of £2,500; Total claims limit of £50,000; Full legal expense cover.

An alternative is our RentOnTime product which guarantees to pay your rent, on time, every month, whether your tenant pays on time. The great advantage of this is that the payment of rent is not retrospective, it is immediate.

If you wish to discuss either of the products in more detail, then please do not hesitate to contact me directly on 07977 235545 or our lettings office in Derby on 01332 366171.

Government plans to allow subletting.. What effect on landlords?

George Osborne's Budget seemed to be aimed at homeowners and first-time buyers - but hidden in the small print is a change of rules for renters. And it could be a big deal. Renters sometimes face strict rules on sub-letting, which can create a sticky situation if one tenant suddenly needs to leave.

But could this be about to change? In the 2015 Budget, the Government outlined plans to make it easier to sub-let rooms. In particular, it plans to ban landlords from introducing rules preventing us from sub-letting on a short-term basis. This could be on the cards for longer-term tenancies as well.

Almost buried on page 51 of the Budget Red Book the Chancellor gives a very brief outline of his intention to prevent the Private Rental Sector from stopping tenants being able to sublet.

This document states:

“Support for the sharing economy 1.193

The government wants to ensure that Britain is the global centre for the sharing economy, enabling individuals and businesses to make the most of their assets, resources, time and skills through a range of online platforms. This Budget therefore announces a comprehensive package of measures that will break down barriers, create opportunities for sharing, and unlock the potential of this dynamic and growing area. Building on the recommendations of the independent review of the sharing economy, the government will:

Make it easier for individuals to sub-let a room through its intention to legislate to prevent the use of clauses in private fixed-term residential tenancy agreements that expressly rule out sub-letting or otherwise sharing space on a short-term basis, and consider extending this prohibition to statutory periodic tenancies.”

The government hasn’t given any further details about the proposal which could mean anything from letting spare rooms in rental properties to giving tenants the power to sub-let entire properties to third parties.

Residential Landlords Association (RLA) chairman Alan Ward described the move as a “nightmare in the making” and said it smacked of “back of the fag packet” policy making".

Key questions remained unanswered such as who will be responsible for a property if the tenant sub-letting leaves the house but the tenant they are sub-letting to stays? Similarly, given the Government wants landlords to check the immigration status of their tenants, who would be responsible for checking the status where sub-letting occurs?

Eviction specialist firm Landlord Action said the move would be “catastrophic for the rental industry”.

Founder Paul Shamplina has repeatedly warned about the increase in subletting scams in the private rented sector.

“We have never seen so many subletting cases going to court because of unscrupulous tenants trying to cream a profit from a property they have rented,” he said. “We experience continual problems with tenants taking out tenancy agreements and then, in some instances, not even moving into the property themselves, but putting up partitions and subletting to as many people as possible. They draw up separate agreements and trick sub-tenants into thinking they are the landlord. By the time landlords find out, damage to properties from over-crowding can run into thousands, and the tenant who holds the legitimate tenancy agreement is nowhere to be found.”

Sub-letting also throws up problems from an insurance point of view. Pricing for landlord insurance policies is based on the tenant type, among other factors, with insurers attributing higher risk for certain types of tenant.

“It will be difficult for a landlord to disclose the details of their tenants, and answer the risk question accurately if they no longer have the final say on who occupies their property” said Steve Jones, director of Rentguard Insurance. “The real problem would come if underwriters decide to charge the higher rate to everyone to factor in the likelihood of damage cause by tenant’s sub-letting the property.”

Problems may also arise as tenants are unlikely to professionally reference those they sublet to and may as a result know very little about them, their lifestyle, background and ability to regularly pay the rent.

So, it remains to be seen if the government will rethink this move after the backlash it has faced from the private rented sector, as at the moment it is hard to see who this new ruling actually benefits.

Keeping reading my blog for further updates.

Rents paid by tenants In Derby are on the rise…

With Easter almost upon us and considering we are a quarter of the way through 2015, I was talking to landlord from Allestree the other day about what is happening to the level of rents that are being achieved in the Derby property market.

In terms of rents in Derby, it appears that rents being achieved for new rentals (i.e. when the tenant moves out and new tenant moves in) have risen by 4% in the last 12 months on top of the range modern semis, yet remained static for older Victorian terraced houses. However, landlords with existing tenants, irrespective of age, are not increasing their rents, as most landlords prefer to keep their existing tenant paying the same rent and have the peace of mind that their tenant remains, paying the rent thus reducing the risk of a void period.

It must be remembered rents dropped by 7.8% over 2008/9, due to oversupply in the rental market in 2009.) A lot of the people who couldn’t sell their property in Derby in 2008/9 when the Credit Crunch hit in 2008, decided to let their house out instead of selling at a loss. In fact, the number of houses on the market in Derby dropped by 62.5% between March 2008 and March 2010, a lot of which came on to the rental market in Derby. However, looking at the longer term though, tenants have had it good  because since the turn of the Millennium, average wages have grown by 46%, but rents outside London have only grown by 36% rental growth over this period.

I told the landlord that there is a lack of new rental properties in Derby coming on the market, in fact according to the Office of National Statistics, there are only 81 new rental properties are coming to the market each month in Derby but the population of Derby is rising by 225 people a month – something will have to give soon! This is compounded by the fact a number of landlords are looking to sell their rental properties in the coming months, as the property market in Derby has improved. This further compounded as tenants in existing rental properties appear to be staying in properties for longer periods of time.

Looking at the rents charged in Derby, historic evidence in the UK suggests private market rents have moved in line with general inflation. Government figures only go back as far as the year 2000, but looking at other countries with similar housing markets (America, Australia, Ireland and Holland) the fact is rents paid by tenants tend to rise in line or just ahead of inflation.

As short term wage growth in Derby has eased off recently, rising by only 1.3% in the last 12 months, taking average salaries in Derby to £26,241p.a, with the tax breaks announced by The Chancellor in the Budget, I believe, even though rents have kept pace with inflation in the past, renting as an option has become more affordable, and is increasingly seen as a lifestyle choice. With returning economic growth and expected increases in the rate of growth of wages, above inflation rental growth could rise.

If you want a chat about the local Derby property market, pop in for a coffee or email me via the link below!