Beast from the East, Russia, Facebook, Brexit, Trump, House prices up, House prices down … the Press is full of column inches on Brit’s favourite subjects of politics, scandal, weather and not forgetting (and I appreciate the irony of this!) the property market. As an agent belonging a national group of letting and estate agents, talking to my fellow property professionals from around the UK, the one thing that is immediately apparent is the UK does not have one property market. It is a hodgepodge patchwork (almost like a fly’s eye) of lots of small property markets all performing in different ways.

… And that made me think … is there just one Peterborough Property Market or many?

I like to keep an eye on the property market in Peterborough on a daily basis because it enables me to give the best advice and opinion on what (or not) to buy in Peterborough, be that a buy-to-let property for a Peterborough landlord or an owner occupier house for a home owner.  So, I thought, how could I scientifically split the Peterborough housing market into segments, so I could see which part of the market was performing the best and the worst.

I decided the best way was to split the Peterborough property market into four equal size price bands (into terms of households for sale). Each price band would have around 25% of the property in Peterborough, from the lowest in value (the Lowest Quartile or 25%) all the way through to the highest 25% in terms of value, the Upper Quartile.  Looking at the market, I have calculated that these are the price bands in Peterborough are as follows:

• Lowest Quartile (lowest 25% in terms of value) … Up to £140,000
• Lower/Middle Quartile (25% to 50% Quartile in terms of value) … £140,000 to £180,000
• Middle/Upper Quartile (50% to 75% Quartile in terms of value) … £180,000 to £240,000
• Upper Quartile (highest 25% in terms of value) … £240,000 Upwards

So, having split the Peterborough Property Market approximately into four equal sizes, the results in terms what price band has sold (subject to contract or stc) the most is quite enlightening –The best performing price range in Peterborough is the middle market. Interestingly for Peterborough landlords, the lower market is also selling well, meaning there are plenty of Peterborough landlords buying properties to add to their buy to let portfolios. As I would expect, the upper quartile (the top 25%) is finding things toughest. Even though the number of first time buyers did increase in 2017, it was from a low base and the vast majority of 20 something’s cannot buy, so need a roof over their head (hence the need to rent somewhere).

It is a fact that British (and Peterborough’s) housing markets have ridden the storms of Oil crisis in the 1970’s, the 1980’s depression, Black Monday in the 1990’s, and latterly the Credit Crunch together with the various house price crashes of 1973, 1987 and 2008. No matter what happens to us Brexit or anything else … unless the Government starts to build hundreds of thousands extra houses each year, demand will always outstrip supply … so maybe a time for Peterborough landlord investors to bag a bargain?

Want to know where those Peterborough buy to let bargains are?  Give me a call or drop me an email because irrespective of which agent you use, myself or any of the other excellent agents in Peterborough, I am a local landlord too…so I have my own thoughts and opinion on what (and not) to buy locally … and I am always happy to share them with you.

The value of all the homes in Peterborough has risen by more than 262% in the past two decades, to £12.358bn, meaning its worth more than the stock listed company Standard Life Aberdeen, which is worth £11.134bn.

Those Peterborough homeowners and Buy-to-Let landlords who bought their homes twenty or more years ago have come out on top, adding thousands and thousands of pounds to the value of their own Peterborough homes as the younger generation in Peterborough continue to be priced out of the market.  This is even more remarkable because, in those twenty years, we had the years of 2008 and 2009 following the global financial crisis, where we saw a short term drop in Peterborough house prices of between 15% and 20% (depending on the type of property). And although there have been a number of consecutive years of growth in property values recently in Peterborough it hasn’t been anywhere near the levels seen in the early 2000’s.

Twenty years ago, the total value of Peterborough property was worth £3.412bn. Over those twenty years, total property values have increased by £8.946bn, meaning today, the total value of all the properties in Peterborough is worth £12.358bn. Even more remarkable, when you consider the FTSE100 has only risen by 40.84% in the same time frame. Also, when I compared it with inflation, i.e. the UK Retail Price Index, inflation had risen by 72.2% during the same twenty years.

So, what does this all mean for Peterborough?  Well as we enter the unchartered waters of 2018 and beyond, even though property values are already declining in certain parts of the previously over cooked central London property market, the outlook in Peterborough remains relatively good as over the last five years, the local property market has been a lot more sensible than central London’s.

Peterborough house values will remain resilient for several reasons. Firstly, demand for rental property remains strong with persistent immigration and population growth.  Secondly, with 0.25% interest rates, borrowing has never been so cheap and finally, the simple lack of new house building in Peterborough. Not even keeping up with current demand, let alone eating into years and years of under investment mean only one thing – yes it might be a bumpy ride over the next 12 to 24 months but, in the medium term, property ownership and property investment in Peterborough has and always will, out ride out the storm.

In the coming weeks, I will continue to look in greater detail at my thoughts for the 2018 Peterborough Property Market along with the latest news and views for Peterborough Landlords and Investors.

As always these current and previous articles can be found at www.justlets.com/news

A little bit of good news this week on the Peterborough Property Market as recently released data shows that the number of first time buyers taking out their first mortgage in 2017 increased more than in any other year since the global financial crisis in 2009. The data shows there were 1,009 first time buyers in Peterborough, the largest number since 2006.

I expect in 2018 that this increase of first time buyers will level out and maybe dip slightly as, nationally, figures demonstrate that first time buyer’s average household income was £40,691 and this represented 17.3% of their take home pay. Although, it might surprise readers that it is actually cheaper to buy than it is to rent at the ‘starter home’ end of the housing market. Many of you can remember mortgage rates at 12% … even 15%. Today, at the time of writing this article, I found on the open market, 189 first time buyer mortgages at 95% (meaning only a 5% deposit was required) with 3 year fixed rates from a reputable High Street bank at 2.49% … they even did a 3 year fixed rate 100% mortgage for 2.89%!

Interestingly, looking at the other end of the market, the buy-to-let investment in Peterborough was subdued, with only 207 buy-to-let properties being purchased with a mortgage. However, I must stress, whilst there is no hard and fast data on the total numbers of landlords buying buy-to-let, as HM Treasury believes only 30% to 40% of buy-to-let property is bought with a mortgage. This means there would have been further cash only buy-to-let purchases in Peterborough – it’s just that the data isn’t available at such a granular level.

In terms of the level of mortgage debt in Peterborough, looking specifically at the PE1 to PE5 postcodes, you can see there has been a steady rise in borrowing over the last few years.

This is pleasing to see, as new mortgage debt is created by first time buyers, buy-to-let landlords and home movers themselves, that is being roughly equalled by the amount being paid off with mature mortgaged homeowners in their 50’s and 60’s finally paying off their mortgage.

So, what does all this mean for the Peterborough Property Market?  Well, the stats paint a picture, but they don’t inform us of the whole story. The upper end of the Peterborough property market has been weighed down by the indecision around the Brexit negotiations and rise in stamp duty in 2014, when made it considerably more expensive to buy a home costing more than £1m. The middle part of the Peterborough property market has been affected by issues of mortgage affordability and lack of good properties to buy, as selling prices have reached the limit of what buyers can afford under existing mortgage regulations. The lower to middle Peterborough property market was hit by tax changes for buy-to-let landlords, although this has been offset by the increase in first time buyers.

If you are in the market and selling now and want to ensure you get your Peterborough property sold, the bottom line is you have to be 100% realistic with your pricing from day one and you might not get as much as you did say a year ago (but the one you want to buy will be less – swings and roundabouts?). I know it’s not comfortable hearing that your Peterborough home isn’t worth as much as you thought, but Peterborough buyers are now unbelievably discerning.

So, if you are thinking of selling your Peterborough property in the coming months, don’t ask the agent out a few days before you want to put the property on the market, get them out now and ask them what you need to do to ensure you get maximum value in the shortest possible time.

As our families grow bigger the need for more space, be that bedrooms or reception rooms, has grown with it. Also, as our older generation lives longer and nursing home bills continue to rise quicker than a rocket on the 5^th of November  (the average nursing home bill in the area being £752 per week) many families are bringing two households into one larger one.

So, should you move somewhere larger, or extend your Peterborough property to make it large enough for you and your family? In some circumstances the choice has been made for you. If you live in an apartment with no garden, there isn’t much of an opportunity of making it larger. But if you have a house with a garden or an attic with sufficient headroom, extending your home becomes a real prospect.

Even if it makes more sense to extend or move, the choice hangs on a number of different dynamics – your future plans, money (both saved and access to finance), in what way you are emotionally attached to your home, the particular area of Peterborough you live in and finally, the type/style of house you prefer.

Interestingly, the average British home is 968 sq.ft, which as you can see from the table, is in the middle of developed nations when it comes to the size of a property. Of the 1.11m homes sold in 2016 in England and Wales, the average floor area of the houses was 1,119 sq.ft – that’s about an eighth the size of an Olympic sized swimming pool. Apartments averaged 530 sq.ft that’s just over ten times bigger than an average garden shed. Looking at apartments and houses together, the average size of properties sold in England and Wales 968 sq.ft  – are slightly smaller than the European average, and much smaller than households in the US.

So back to the question in hand.. extending does mean you will have a lot of inconvenience whilst the work is being carried out. The location of your Peterborough property, the quality of construction, what type of room(s) you want to add, your plot, neighbouring building lines, planning regulations and the overall demand for your type of Peterborough home, will make a vast difference to the financial repercussions of extending versus moving.

A medium-sized 270 sq.ft single storey extension (say around 17ft x 16ft) will add on average £43,075 to the value of a property in Peterborough

It’s important to note the end result of the extension needs to be a sensible and realistic home. A two bed semi-detached house extended to a four bedrooms with no lawn or driveway, or a home with outsized reception rooms downstairs and miniscule bedrooms upstairs, could be problematic if  and when you come to sell your home in the future. Irrespective of whether your strategy is to live in your extended home for a long time, you will want to side-step outlaying a lot of money on costly building work that will make it tougher to sell.

In terms of what it would cost to build an extension, you can expect to pay on average between £140 to £200 per sq.ft, depending whether the extension is a single or double storey extension and other factors including finish and type of extension (note – I have seen it cost a lot more than these figures – so please speak with a builder) … So taking a mid line figure, that same 270 sq.ft extension on your Peterborough home would cost on average £55,080.

However, moving means there are substantial costs incurred – Estate Agency fees, Removal Van, Survey Fees, Legal fees and Stamp Duty on the property you are buying. Neither option is the obvious choice and comparing the costs of extending your Peterborough home to that of moving is not a stress-free undertaking.

How realistic each option is will probably come down to one thing .. your mortgage provider. You will need a considerable sum of equity in your Peterborough home before you can think of increasing your mortgage more, because most lenders will require you to have at least 10% to 20% equity left in your property after the extension or move has been done.

The best advice I can give .. don’t assume anything …. get advice and opinion from builders, mortgage brokers, architects, mortgage people and of course… an agent. Look at your options and make an educated decision with all the superficial and objective facts in front of you.

According to the National House Building Council (NHBC), more than 17,300 new homes were registered to be built in the East last year, an increase of 8.7% on 2016 levels of 15,900 dwellings. Great news when you consider it is one of the highest number of new builds in the region since the pre-recession levels of the Credit Crunch and the uncertainty of Brexit and the General Election.

So, when a landlord recently asked me why the brand-new property she was considering buying was a lot more expensive compared to a second-hand/existing property of similar type, accommodation, location and structure I thought this would make a fascinating topic to do some homework on … homework I want to share with the homeowners and landlords of Peterborough.

You might believe that the difference between purchasing a new build home against purchasing a second-hand/existing home is just individual preference. Some buyers/tenants like the ostentatious trendy modern feel of a new home, whilst others like a home that has stood the test of time.

So, what is the right answer? Well, I am going to be looking at some statistics that shows there is a real difference in the Peterborough City Council area’s property market when in to comes to new vs existing homes and the price paid. Looking at the average price paid for existing (second-hand) versus a brand new home since 1996, one can see from the graph it makes interesting reading.

On this second graph, one can see the percentage difference in average price paid between new and existing…

Yet possibly nothing is ever that easy, as there are issues with these statistics.

The overall average for the whole Peterborough City Council area for the ‘new build premium’ (new build premium being the additional price a buyer pays for buying a new property compared to a second-hand one) over the last 21 years has been 33.3%. These statistics actually show that it is problematic to compare like with like because it is impossible to completely separate all the different factors of type, accommodation, location and structure etc.

One would have to have a mirror image second-hand Peterborough home and a duplicate new build right next door to each other, then calculate out which Peterborough house buyers or Peterborough buy to let landlords would pay more for? Perhaps if everything was the same (all things being equal), there might not be any difference in what buyers would be prepared to pay… but then again, it’s like new cars versus cars that have a few hundred miles on the clock … there is always a difference on the forecourt … because things are never wholly equal.

What I do know is that my statistics of the Peterborough property market show that new build Peterborough apartments are worth more to people than their second-hand equivalents, whilst the difference is negligible between new build Peterborough detached houses and second-hand Peterborough detached houses.

However, I believe the really important lesson in all these statistics is the fact that ‘new build premium’ for new-build versus buying a second-hand property increases in a buoyant market and reduces in a tougher market.  So, if you want to buy new and the only consideration is money … try buying in a tougher challenging property market.

That got your attention … didn’t it!

But before we start, what is Generation X, let alone Generation Z, Millennials, Baby Boomers  … these are phrases banded around about the different life stages (or sub-components) of our society. But when terminologies like this are used as often and habitually as these phrases (i.e. Gen X this, Millennial that etc.), it appears particularly vital we have some practical idea of what these terms actually mean. The fact is that everyone uses these phrases, but often, like myself, they are not exactly sure where the lines are drawn …until now…

So, for clarity …

Generation Z:              Born after 1996

Millennials:                 Born 1977 to 1995

Generation X:              Born 1965 to 1976

Baby Boomers:            Born 1946 to 1964

Silent Generation:       Born 1945 and before

My research shows there are 15,344 households in Peterborough owned by Peterborough Baby Boomers (born 1946 to 1964) and Peterborough’s Silent Generation (born 1945 and before). It also shows there are 35,941 Generation X’s of Peterborough (Peterborough people born between 1965 to 1976). Looking at demographics, homeownership statistics and current life expectancy, around two-thirds of those Peterborough 35,941 Generation X’s have parents and grandparents who own those 15,344 Peterborough properties.

… and they will profit from one of the biggest inheritance explosions of any post-war generation to the tune of £3.474bn of Peterborough property or £144,911 each but they will have to wait until their early 60’s to get it!

However, it’s the Millennials that are in line for an even bigger inheritance windfall.

There are 28,807 Millennials in Peterborough and my research shows around two thirds of them are set to inherit the 19,098 Peterborough Generation X’s properties. Those Generation X’s Peterborough homes are worth £4.324bn meaning, on average, each Millennial will inherit £225,031; but not until at least 2040 to 2060!

While the Peterborough Millennials have done far less well in amassing their own savings and assets, they are more likely to take advantage of an inheritance boom in the years to come. This will probably be very welcome news for those Peterborough Millennials, including some from poorer upbringings who in the past would have been unlikely to receive gifts and legacies.

However, inheritance is not the magic weapon that will get the Millennials on to the Peterborough housing ladder or tackle growing wealth cracks in UK society, as the inheritance is unlikely to be made available when they are trying to buy their first home…but before all you Peterborough Millennials start running up debts, over 50% of females and around 35% of men are going to have to pay for nursing home care. Interestingly, I read recently that a quarter of people who have to pay for their care, run out of money.

So, if you are a Peterborough Millennial there potentially will be nothing left for you.

Of course, most parents want to give their children an inheritance, the consideration that what you have worked genuinely hard for over your working life won’t go to your children to help them through their lives is a really awful one … maybe that is why I am seeing a lot of Peterborough grandparents doing something meaningful, and helping their grandchildren, the Millennials, with the deposit for their first house.

One solution to the housing crisis in Peterborough (and the UK as a whole) is if grandparents, where they are able to, help financially with the deposit for a house. Buying is cheaper than renting – we have proved it many times in these articles … so, it’s not a case of not affording the mortgage, the issue is raising the 5% to 10% mortgage deposit for these Millennials.

Maybe families should be distributing a part of the family wealth now (in the form of helping with house deposits) as opposed to waiting to the end… it will make so much more of a difference to everyone in the long run.

Just a thought?

Yes, I said ‘rentirement’, not retirement … rentirement and it relates to the 1,722 (and growing) Peterborough people, who don’t own their own Peterborough home but rent their home, privately from a buy to let landlord and who are currently in their 50’s and early to mid-60’s.

The truth is that these Peterborough people are prospectively soon to retire with little more than their state pension of £155.95 per week, probably with a small private pension of a couple of hundred pounds a month, meaning the average Peterborough retiree can expect to retire on about £200 a week once they retire at 67.

The average rent in Peterborough is £669 a month, so a lot of the retirement “income” will be taken up in rent, meaning the remainder will have to be paid for out their savings or the taxpayer will have to stump up the bill (and with life expectancy currently in the mid to late 80’s, that is quite a big bill …  a total of £276,484,320

over the next 20 years to be paid from the tenant’s savings or the taxpayers coffers to be precise!

You might say it’s not fair for Peterborough tax payers to pick up the bill and that these mature Peterborough renters should start saving thousands of pounds a year now to be able to afford their rent in retirement.  However, in many circumstances, the reason these people are privately renting in the first place is that they were never able to find the money for a mortgage deposit on their home in the first place, or didn’t earn enough to qualify for a mortgage …and now as they approach retirement with hope of a nice council bungalow, that hope is diminishing because of the council house sell off in the 1980’s!

For a change, the Peterborough 30 to 40 somethings will be better off, as their parents are more likely to be homeowners and cascade their equity down the line when their parents pass away.  For example, that is what is happening in Europe where renting is common, the majority of people rent in their 20’s, 30’s and 40’s, but by the time they hit 50’s and 60’s (and retirement), they will invest the money they have inherited from their parents passing away and buy their own home.

So, what does this all mean for buy to let landlords in Peterborough?

Have you noticed how the new homes builders don’t build bungalows anymore … in fact some would said the ‘bungalow storey’ is over.  The waning in the number of bungalows being built has more to do with supply than demand.  The fact is that for new homes builders there is more money in constructing houses than there is in constructing bungalows.  Bungalows are voracious when it comes to land they need as because bungalow has a larger footprint for the same amount of square meterage as a two/three storey house due to the fact they are on one level instead of two or three.

That means, as demand will continue to rise for bungalows supply will remain the same.  We all know what happens when demand outs strips supply … prices (i.e. rents) for bungalows will inevitably go up.