New Prime Minister, Theresa May, has taken no time at all to comment on housing in the UK. Speaking in Birmingham, she said it was important to give people more opportunity: “It is why housing matters so much, and why we need to do far more to get more houses built. Because unless we deal with the housing deficit, we will see house prices keep on rising. Young people will find it even harder to afford their own home”.
I thought I would look at the Walsall property market numbers to highlight what sort of problems she faces.
Walsall house prices since the Millennium have risen by 162.1%, whilst average salaries have only grown by 57.6% over the same time frame. This has served to push home ownership further out of reach for many Walsall people as they have to battle against raising considerable deposits and meet sterner lending criteria, as a result of new mortgage regulations introduced in 2014/15. The private rental market in Walsall has grown throughout the last twenty years with buy-to-let investors purchasing a high proportion of newly built residential properties that were built and designed for the owner occupier sales markets. For example, in the Walsall North Constituency, roll the clock back 20 years and there were 35, 740 properties in the Constituency, whilst the most recent set of figures show there are 39, 242 properties – a growth of 3, 502 properties.
However, anecdotal evidence suggests that a large majority of those 3,502 properties were bought by investors, as over the same 20-year time frame, the number of rental properties has grown from 1,405 to 9,076 in the Constituency – a whopping rise of 8,301 properties.
Nevertheless, some say this historic growth in the Walsall rental market might start to change with the new tax rules for landlords introduced over the last seven or eight months. Yet the numbers tell another story. Across the board, mortgage borrowing climbed to a 9 year zenith in March this year as the traditional Easter rush corresponded with landlords hurrying to beat the new stamp duty changes. Buy-to-let landlords borrowed £7.1bn in March 2016 – the latest set of figures released – which was 163% up on the £2.7bn borrowed in March 2015.
However, I don’t think things will deteriorate in the Walsall investment market and these are the reasons why;
Firstly, what else are Walsall landlords going to invest in if it isn’t property… the stock market? Since the Millennium, the stock market has risen by an unimpressive total of 5.5%, compared to the 162.1% rise in Walsall property prices?
Secondly, its true the 3% stamp duty is the first blow on top of a number of other tax changes to be phased in between 2017 and 2021 and, if a sizeable number of landlords do take the decision to sell their portfolios, this will lead to a substantial amount of properties being put up for sale. Yet that might not be a bad thing, as I have mentioned in previous articles, there is a serious shortage of properties to buy at the moment in Walsall: the stock of property for sale being at a 6 year low.
Thirdly, if there are fewer rental properties in Walsall, as supply drops and demand remains the same, this will create a squeeze in the Walsall rental market and as a result rents will rise. In fact, I predict that even if landlords don’t sell up, rents will rise as Walsall landlords seek to compensate for increased costs and landlords will be attracted back to the market.
Mrs. May needs to look at the numbers closely before deciding how to tackle the nationwide housing issue! I’m sure we will see her in a hard hat and hi-viz jacket before long!
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