The value of an average TS15 terraced house has increased in value by £17,361 in the last 12 months, an increase in value of 8.64%.

Yet the costs of building a TS15 home have shot up even more in the last 12 months, meaning the price of TS15 new homes and any building works you do to your TS15 home in the coming months and years could be a lot higher.

The British house building profession is experiencing a building materials supply problem. Everything from cement to bricks, timber and roof tiles, plastic guttering, copper wire and pipe to insulation, even kitchen sinks have become scarce – and when people can find them, they are costly.

For example, looking at the timber industry, three-quarters of the UK’s building timber comes from abroad, so lockdowns around Europe put a restraint on the timber processing industries of Sweden, Lithuania and Latvia throughout 2020. In addition, building material supply chains were interrupted due to the lockdowns imposed by their governments, resulting in many sawmills in those countries restricting shift work to comply with their country’s social distancing rules. Some mills even stopped all work for eight weeks last year, meaning they were incapable of cutting, milling or treating timber, causing their existing stocks of building wood to run dry.

Yet, whilst we were all in lockdown, everyone started doing DIY projects, so the public demand for building timber in the UK remained high, giving little opportunity for UK sawmills (let alone North-eastern Europe) to catch up and restock to the levels previously held before the pandemic.

Building timber costs 112% more than a year ago, steel RSJ’s are a lot more expensive because iron ore has gone up 120.1% whilst aluminium is up 56.8%, and copper is up 59.7%.

All the blame cannot be laid at the feet of the virus and lockdown. The ‘B’ word caused issues with supply at the start of the year. Building materials are a worldwide supply chain issue; this Spring’s Suez boat crisis, when many boats were diverted around Africa (as the length of time the blockage was going to last was unknown) exacerbated the problem. All this has combined to make the cost of sending a 40ft container from China to Tilbury Docks £7,576 today, compared to £1,195 just before the crisis. Also, supplies of sand and cement are particularly low with massive demand from the large £98bn High Speed 2 (HS2) rail project. All this combined is affecting many building projects, big and small, across the UK.

If an average TS15 terraced house had risen by the price of building timber in the last 12 months, today it would be worth £425,981, not the current £218,295.

RSJ (steel joists) take twenty weeks to arrive, compared with the typical five weeks, whilst plasterboard is being rationed with weeks of delays for the ‘good stuff’ and MDF wood, usually takes seven days to arrive; now it takes over a month. Roof battens need to be ordered a month in advance, whilst pre-lockdown they were commonly held in stock by every building merchant.

Demand for building materials has increased so quickly because many British homeowners are driving the explosion. Those people in safe jobs with little opportunity to spend money on foreign holidays and fancy restaurants decided to invest in their property and gardens. According to the Bank of England, this craving for home improvement has particularly exploded since the mature generation started to be double jabbed (their savings accounts have increased by £180bn during the pandemic).

As I have explained in previous articles, these increases in the price of raw material will fuel inflation, possibly affecting interest rates upward. An increase in interest rates will make a material difference to the value of TS15 property. To what extent? Please read my previous articles on the TS15 property market.

Please do share your stories of issues with builders and building materials over the last 15 months in the comments. I appreciate any stories you can provide to help others in TS15.

TS9 house prices rose by 0.4% last month, according to the Land Registry. This means the annual rate of house price growth in TS9 has increased to 14.4%.

Looking at the national figures, many people were concerned the UK property market was overheating as spring saw annual growth of 9.9%, the highest rate of house price growth documented since June 2007 (when national house prices were rising by 10.8% pa). It was only a matter of a few months later the Credit Crunch hit, and the value of the average UK home plummeted from £190,032 to £154,452 in 18 months, a drop of 18.7%.

Government economic measures such as the Furlough Scheme and the Stamp Duty Holiday have so far shielded the TS9 property market from the worst economic recession since 1709.

So, the question is, can this growth in TS9 house prices continue, or is this the start of a house price crash?

One thing is for sure, looking at the number of For Sale boards going up and turning to sold just as quick, shows this market is not maintainable for the long term. Most of the TS9 people looking to move home have brought forward their home-moves from 2022/3 to this year because of the Stamp Duty Holiday and the lifestyle choice of wanting a bigger garden/office space at home.

Nonetheless, the doom-mongers in the press say there will be a second wave of house sellers that will flood the TS9 property market in the autumn and winter when furlough ends. They believe many of the 3.4m people still on furlough will be made redundant when furlough finishes at the end of September 2021 forcing them to move home.

This was the catalyst for the house price slump in 2008/9 mentioned above, when many TS9 homeowners dumped their homes onto the TS9 housing market.

After all, many TS9 homeowners lost their jobs and had mortgages paying 6% to 7% in interest payments.

However, the devil is always in the detail. The industry groups with the highest take-up rates of furlough are the hospitality (public houses) sector, where 70% of staff are furloughed. 65% of hotel staff are furloughed, and 44% people in the creative arts and entertainment industry are furloughed. Most employees in these sectors are in their 20’s and early 30’s and are tenants, not homeowners. This is going to be more of an issue for landlords than homeowners.

And of those furloughed homeowners who do unfortunately get made redundant later in the year, looking at the last four most recent house price crashes, buyers were wrestling with significant declines in mortgage affordability. For example, back in 1988, average mortgage rates were 13.9% before that crash and in 2007 (the Credit Crunch crash) 6.5%. Whilst today, they are under 2%, meaning the mortgages are a lot more affordable, and most TS9 homeowners who get made redundant will be able to ride out the storm better.

But surely, if TS9 house prices are rising, won’t TS9 homes become unaffordable?

Well, with low-interest rates, this means TS9 homes are still relatively affordable. In 1989, the house price to earnings ratio was 5.4 to 1 (i.e. the average house was 5.4 times the average UK salary), whilst today that stands at 8.8 to 1. It’s no wonder some people are concerned there will be a house price crash (as there was in 2008 when that ratio hit 7.5 to 1).

However, it doesn’t matter what the house price to earnings ratio is …. it is what percentage of your income is required to pay your mortgage.

In 1989, 74.6% of your income was required to service an 80% loan to value mortgage on an average UK home (i.e. you borrowed 80% of the value of your house on a mortgage). In the 1990s that percentage dropped yet rose steadily over the next decade and a half, so by the time we got to 2008, that was an equally eye-watering figure of 61.6% of your income to service an 80% mortgage.

Today, it’s only 35.9% of your income to service an 80% mortgage because of low interest rates.

So, if the issue is not the affordability of houses, what is the problem for TS9 homeowners?

Interest rates!

Bank of England interest rates will affect what people pay on their mortgage (higher interest rates normally mean higher mortgage payments). Interest rates are used to reduce inflation, so if inflation rises, interest rates also rise to bring inflation back under control.

UK inflation has just gone through the 2% barrier, and I believe by the end of this year or early next, it will touch 4% or 5%. In normal circumstances, this would trigger the Government (or now the Bank of England) to raise interest rates. Yet, we had a similar scenario in the late 1980s/early 1990s with a spike in inflation to 8.5% due to a shortage of raw materials and labour, but this was soon sorted out, and inflation dropped quite quickly thereafter.

In the coming year, a shortage of raw materials might be an issue. If there is a shortage of raw materials (supply problems are being found in key items such as timber, concrete, aggregates and steel), this will fuel construction and manufacturing costs upwards.

Next, will there be a shortage of labour? Some say it won’t be an issue (as unemployment will be higher), yet there are certain sectors of the economy that have an imbalance of trained staff of specialised jobs or people not wanting work in that type of job in the first place.

For example, many hospitality and dining establishments are reporting a shortage of staff because they were often filled with hard-working European migrants. I have read reports of London restaurants advertising for chefs and waiting staff, who would have received 1000+ enquiries for such jobs pre-pandemic to only be receiving applications that could be counted on two hands this summer. The hospitality and dining sector was hit harder than most, having to stop trading during the three lockdowns and working under firm restrictions. This led to the majority of staff being placed on furlough (as mentioned above, 7 in 10 are still on furlough), which has prompted some to ride out the pandemic in their own Country.

The question is – will they return? If not, to entice them back restaurants will have to increase the wages they pay to attract the staff, which in turn will mean they will have to put their prices up (i.e. inflation). If businesses have to put their wages up and the cost of raw materials continues to rise, prices for everything will rise, and at this point, higher interest rates will kick in.

But how will increased interest rates affect the TS9 property market?

Thankfully, 91% of all new mortgages being written are fixed interest rate mortgages and 78% of all existing UK mortgages are fixed-rate (compared to 32.8% in the credit crunch) … meaning we won’t have so many houses being dumped on the housing market like we did in the Credit Crunch, because on a fixed rate mortgage, if interest rates rise – mortgages don’t follow suit.

And that’s the key … unemployment combined with high-interest rates caused many TS9 homeowners to put their property onto the market in 2008/9. Tied in with curtailed demand for property, because it was really difficult to get a mortgage (that’s why it was called the credit crunch) … we had an oversupply and subdued demand of TS9 homes – causing house prices to drop by 16% to 19% depending on what type of property you owned.

So, a good bellwether and indicator on what will (or will not) happen to TS9 property prices is the number of properties for sale at any one time.

There are only 69 properties available to buy in TS9 today, low when compared to the 14-year average of 117 properties for sale in the area, whilst at the height of the Credit Crunch, there were 247 properties for sale at one point in TS9.

As we look to the future, if you want a crystal ball of what will happen to the TS9 property market … you won’t go that far wrong by getting yourself on the property portals and seeing how many properties are for sale.

These are my thoughts … what are yours?

There is no getting away from the fact that the rise in the number of buy-to-let properties in TS15 has been nothing short of astonishing over the last twenty years. As a result, many in the press have said Britain is a broken nation, with many twenty and thirty-somethings unable to buy their first home. The press has named this group ‘Generation Rent.’

TS15 landlords have been accused of scooping up all the smaller TS15 properties for their buy-to-let property empires. Others blamed the Government (of both persuasions) for pouring petrol on the buy-to-let fire for giving landlords an unfair advantage with the way buy-to-let has been taxed in the past. Many have said these landlords have priced out TS15’s ‘Generation Rent’. Many say they are rogues, and you can see why there is little sympathy for landlords, especially as …

TS15 landlords receive £6,557,712 a year in rent – easy money or what?

So, as we come out of lockdown, I want to make a stand for TS15 landlords and talk about the great work they have been doing during the pandemic.

Since lockdown, it has been (almost) illegal to evict a tenant from private rented property. Yet, in the last few weeks, this ‘ban on evictions’ has begun to be eased, making some commentators forecast a ‘tsunami of homelessness’ as landlords ready themselves to kick out the tenants who cannot pay their rent.

You might say they can afford it, yet I need to highlight an often-untold story in the massive numbers of TS15 landlords who have co-operated with their TS15 tenants to evade eviction.

The personal finances of some TS15 landlords and tenants have been ruthlessly strained during the last 16 months — something that is going to have ramifications on the back pockets of both landlords and tenants, as well as the attraction of being a buy-to-let landlord (more of that later).

61 TS15 tenants are in arrears with their rent to the tune of £120,771.

That’s money these landlords need to pay their mortgages with and even to live off themselves.

The eviction ban was imposed in March 2020 and the Government has expected private landlords to stand the cost of their tenants’ rent if they could no longer pay. It was estimated over 1 in 5 landlords with mortgages had requested a mortgage payment holiday in 2020. Thankfully, that now stands at 1 in 100 as most TS15 landlords with shortfalls in rent have been using their own personal savings to cover the mortgage payments.

I have seen so many landlords giving their TS15 tenants rent breaks and discounts to help them through these times. However, most landlords I talk to acknowledge that it is better to have a tenant paying something rather than a tenant paying nothing, hoping that total rent will start flowing as the economy recovers.

Going into the pandemic, 1 in 25 TS15 tenants were in arrears, yet that now stands at 1 in 11.

So, are we going to see lots of evictions? I would go as far as to rebuff the idea that we will see a rush to the courts of landlords to obtain possession orders now the eviction ban has been lifted. I have always viewed evictions as a last resort.

Before the pandemic, it took about 12 months for courts to hear rental repossession cases, so this backlog will be nearer two years (if not more). Nonetheless, the threat of a County Court Judgement (CCJ) often makes tenants pay up as it will demolish their credit rating, making it very challenging for them to rent another home.

I feel for those TS15 tenants under furlough or reduced hours as they have the quandary of wanting to reduce their outgoings by moving to a cheaper rental property, yet whose rental deposits will be sacrificed to cover their rent arrears. However, some have said that because house prices have exploded during the last 16 months, TS15 landlords should write off their tenants’ arrears as a goodwill gesture.

The issue is, 108 TS15 landlords only have a single property for rent, so the arrears would have to be funded by their personal savings.

For them, the pandemic experience could be the incentive to sell up for good.

A National Residential Landlords Association survey found around a third of all landlords were now more likely to sell their buy-to-let properties altogether or sell some of them. This would mean fewer properties for tenants to rent, thus driving up the rent.

According to government and industry data, evidence suggests that a tenant who rents a property directly through a landlord and not through a letting agent is between two and three times more likely to go into arrears of 2 months or more. Is this because tenants know that private landlords who advertise directly for tenants on Gumtree and other platforms don’t carry out the checks letting agents do on them?

Many of those landlords are switching the management of their property to an agent, and for those landlords sticking with self-management of their property, there is circumstantial

evidence they are starting to become a lot pickier when starting new tenancies. Even though illegal, spurning tenants on benefits is woefully all too common. I also worry there could be a stigma about renting properties to self-employed people because of the erratic nature of their income.

Looking into the future, I envisage a growth in the use of ‘rent guarantor contracts’, whereby the tenant is called upon to provide a 3rd party person to pay the rent if the tenant doesn’t. These are pretty common for student lets and those on certain benefits, and it wouldn’t surprise me if these are used more often for self-employed tenants and regular professional lets.

That is why I believe TS15 landlords should be celebrated .. most of them have been saviours. These are my thoughts – what are yours?

And how new Gov’t rules will mean draughty low-eco TS9 homes will drop in value

‘It’s Not Easy Being Green’, was the song that Kermit sang on Sesame Street.

Yet now being green is a normal way of life for most of us. Walking or cycling places instead of taking the car, recycling and even shunning meat are some of the things most TS9 households are trying to do their ‘bit’ for going green.

Our conduct may have improved but when it comes to our TS9 homes, there is still a long way to go. It is estimated around a fifth of carbon emissions come from home energy usage (nearly three quarters from heating and lighting). The country is releasing 37% less carbon into the atmosphere than in 1990, yet we have legally binding targets to hit 100% by 2050 — and the Committee on Climate Change has stated the UK will need to eradicate greenhouse gas emissions from homes to meet that target.

Landlords were hit first because since April 2018, the Minimum Energy Efficiency Standards (MEES) regulations with regards to eco-friendliness of the rental properties have required all rental properties to have a minimum Energy Performance Certificate (EPC) rating of ‘E’ or above otherwise it is illegal to let out a property, bar a couple of exceptions. This has meant TS9 landlords have had to spend many thousands of pounds to improve their rental property’s EPC rating (an EPC rating of ‘A’ being the best eco rating through to a ‘G’ for the worst – just like washing machine or fridge ratings).

But new Government plans could hit TS9 homeowners in the pocket as well.

The Government is planning to force banks and building societies to penalise people wanting a mortgage of draughty low-eco homes with an energy performance certificate (EPC) rating of D or lower. For those properties not hitting the correct level of EPC rating, it is suggested some form of levy will be placed on the mortgage provider, who in turn will pass that on to the home buyers in the form of higher mortgage payments. Some are describing this charge as an ‘eco-mortgage levy’.

Just under 6 in 10 (57.6%) homes in Stockton-on-Tees Borough Council would be hit by this ‘eco-mortgage levy’, thus potentially reducing the value of those homes

Interesting when you compare this with the national average of 60.6%.

In real numbers, 45,216 homeowners and landlords in our local authority area would either struggle to get a mortgage from a bank or building society or it would cost them more because they were a ‘D’ rating on their EPC or below.

Looking at the stats broken down for Stockton-on-Tees Borough Council:

• 138 properties are classified as A on the EPC register

• 7,564 properties are classified as B on the EPC register

• 25,515 properties are classified as C on the EPC register

• 32,264 properties are classified as D on the EPC register

• 10,552 properties are classified as E on the EPC register

• 1,902 properties are classified as F on the EPC register

• 498 properties are classified as G on the EPC register

So, what can TS9 homeowners and landlords do to improve their EPC rating?

Well surprisingly, it need not cost a lot to improve the EPC rating of your TS9 home. One of the most inexpensive ways to help improve your TS9 home’s energy efficiency is low energy light bulbs with an estimated cost of just under £40 per UK property. Other efficiencies can be gained by insulating your hot water cylinder, draught proofing any single glazed windows, increasing your loft insulation and upgrading your central heating controls, all of which can be done for a total of around £750 to £850 per property.

If you want to know the EPC rating of your home, either google the phrase ‘EPC register’ or send me a message and I will find out for you.

Finally, as Kermit famously also said, “Life’s like a movie. Write your own ending”. If you are a TS9 homeowner or TS9 landlord, why not look at your property’s EPC rating and look at the recommendations. You are going to have to spend the money sometime, so why not do it now and enjoy lower energy bills and when you come to sell, you won’t be penalized … a win-win situation for you and the planet?

Would it surprise you even more when I said the ratio of house prices to wages are still lower today when compared to 1871? Yes, you read that correctly, as a proportion of average wages British house prices are 17.6% proportionally cheaper today than they were in 1871.

I wish to talk about the last 150 years of the British property market and later in the article, the TS15 property market. I will also touch on why before the 1900s, buying a home in TS15 was considerably more expensive than today and why that changed.

So, let’s look at some interesting stats to get us started:

• In 1871, each house was occupied by an average of 5.33 people (i.e. for every 100 houses, 533 people lived in them), whilst today that stands at 2.39 people per house

• In 1871, there were 4.5 million properties in the UK, whilst today that stands at 27.9 million

• In 1871, the weekly average wage was 13s 8½d (68p) and today £585.50

• In 1871, only 20% of people owned their own home, whilst today its stands at 65%

I stated in the first part of the article it was more expensive to buy in the latter parts of the 19th Century than today. It may only be of historical interest, but back in 1871, the ratio of average house prices to average wages was 10.5 to 1 (i.e. the average house was worth ten and half times the average person’s wage), whilst today it stands at 8.8 to 1.

Interestingly, for the next 45 years, that ratio went on a downward trend relative to wages and only stopped falling after WW1, where the average house was worth only 2.2 times the average wage. This made houses more affordable and set the foundations for the homeowning passion we Brits have today.

So why did this happen, what can we learn from it and what does it mean for TS15 homeowners and TS15 landlords?

There are three significant drivers that made property a lot more affordable between 1871 and 1911: the Victorians built more property, made them smaller and people’s wages rose significantly.

• In the 40 years between 1871 and 1911, the number of properties in the UK rose from 4.5 million to 8.9 million. To give you some perspective, there were 18 million properties in the UK in 1981. If the UK had grown by the same rate between 1981 and today that was experienced between 1871 and 1911, there would be 35.6 million households in the UK (and not the 27.9 million mentioned above).

• In 1871, the average plot size of a property was 0.23 acres, yet by 1911, that was down to 0.06 acres (or a plot of 72ft by 40ft). This came about from building smaller types of property (i.e. a change away from larger Georgian detached houses towards the infamous rows of Victorian terraces), and a downshift in the average size of houses within each category.

• The average value of property dropped by 26% between 1871 and 1911, whilst wages rose by 85% over the same time frame.

So, by 1911, the average TS15 property had dropped in value from £427 in 1871 to £317.

N.B. – you might have noticed I wrote £427 in a slightly different way in the title of the article. Up to 1971, a pound was split not into 100 pence but 240 pence. There were 12 pence in a shilling and 20 shillings (or 240 pence) in a pound. It was expressed in the form £sd and spoken as “pounds, shillings and pence”. I dropped that into the title as it’s the 50th anniversary this year of when the UK decimalised its currency (younger readers – do google the story – it’s a fascinating topic).

So back to the property market, and at the end of WW1, four in five people still rented, virtually all from private landlords. Politicians were concerned about the poor living standards of people’s homes, and this led to the ‘homes fit for heroes’ 1919 Housing Act which delivered subsidies for local councils to build council houses. The average value of a TS15 property in 1922 was £498.

The 1930’s – By 1930, the average value of a TS15 property stood at £630. With the country building a third of a million houses per annum, interest rates fixed at 2% and hardly any planning regulations, supply of property was outstripping demand, so the average TS15 home dropped ever so slightly in value to £582 by 1938.

The 1940’s – With the bombing of many towns and cities and house building being stopped because of the war, this created a perfect storm to increase house prices after the war. By 1947, the average TS15 home had risen in value to £1,946 because just as food was rationed during and after the war, so were building materials. Builders could spend no more than £350 on building materials for a new home (and that lasted until 1954).

The 1950’s – The ’50’s were all about building council houses – a quarter of a million of them each year. By 1959, the average TS15 home had risen steadily to £2,700.

The 1960’s – This decade saw even more houses being built in the UK, with an average of a third of a million houses a year being built. TS15 is full of 1960’s council houses and now even more owner-occupied housing, meaning by the end of the decade Britain had as many homeowners as renters. The average TS15 house had risen in value to £4,953 by 1969.

The 1970’s – We experienced the first boom and bust housing bubble in the early 1970’s with house prices rising by over 30% a year in the early years of the decade (so the current 10% a year is child’s play!) but prices dropped in 1974. They recovered quickly in the following years, not because of increased demand but due to hyperinflation, making the average TS15 house price rise to £25,185 by 1980.

The 1980’s – This was the decade of council tenants being able to buy their own homes, although not many people know it was an idea from Labor. They decided against the idea, but it was seized upon by the Tories, who made it the cornerstone of their 1979 election manifesto. The property market helped improve the economy, and by 1988, TS15 property values increased to £52,679 (only to drop by 32% a couple of years later).

The 1990’s – The housing market crash of the early 1990’s was painful for all, exacerbated by mortgage interest rates being raised to 15% on Black Wednesday (16 September 1992) and left there for 12 months. Unemployment went from 1.5m to 3m for the second time in ten years, and many of those homeowners who had taken out large mortgages in the late 1980’s housing boom could no longer afford the repayments because of the high interest rates, meaning repossessions went through the roof. The crash also made builders nervous, and they only built 150,000 houses on average a year in this decade. Yet, by the mid-1990’s, things started to improve. So much so, the average TS15 home was worth £98,753 by the turn of the millennium.

The 2000’s – The decade of cheap mortgages and the rise of Buy-to-Let, together with a severe drop in the number of new homes being built, contributed to the UK’s third big housing bubble since WW2. The average TS15 house price more than doubled to £264,453 by 2008, before the Credit Crunch brought the boom to an end, and a year later (2009), the average TS15 property had dropped to £234,886.

The 2010’s – The property market started to come back to life in the early 2010’s with property values steadily rising throughout the decade, yet builders were only building around 135,000 new homes a year. It also might surprise you that by 2015/6, the number of homeowners was starting to rise quite significantly, meaning today, as we enter the 2020’s decade, the average value of a TS15 property now stands at £320,627.

So, now we are back to 2021.

Yes, your Great-Great-Grandfather might have been able to buy their TS15 house for a shade under £427 in 1871. Taking inflation into account since 1871, that same TS15 house today would be £51,428.03, yet if his wages had increased by inflation at the same rate, the average wage today would be £81.91 per week, not the current £585.50 per week.

I appreciate there are plenty of other factors involved with this topic, such as the cost of renting, raising a deposit, changing lifestyles and the biggest point, the cost of borrowing money on a mortgage.

All this begs the question, what does the future hold for the TS15 property market?

It’s obvious since the mid-1980’s, house prices have sustained a period of impressive growth (even withstanding a couple of property crashes). The Bank of England has gone on record to say that much of the rise in average house values, comparative to wages, between 1985 and now can be seen because of a sustained, dramatic, and consistently unexpected decline in real interest rates and additionally concludes that: ‘An unexpected and persistent increase in the medium-term real interest rates will generate a fall in real house prices.’

Cheap mortgages and a lack of building have created this situation. So as long as interest rates don’t go back to their long-term average of the 5% to 7% range or the Government decides to increase building new homes to half a million a year (from the current 240,000 per year) … things will carry on as they are in the medium to long-term.

These are my thoughts. I would love to hear any stories of your family buying property in the late 19th Century or early 20th Century and what they paid for it, together with the affordability of TS15 property and the future of it.

… whilst possible new mortgage rules for homeowners would make it harder to sell their draughty old properties

As the UK has committed to a legally binding target to be carbon neutral by 2050, one of the biggest producers of greenhouse gasses are residential properties. To hit that target, every UK property will need to achieve a minimum grade of C on their Energy Performance Certificate (EPC) by 2035. The issue is two thirds of UK’s homes (around 19 million households) are rated D or below.

To help the country hit its targets, in 2018 and again in 2020, the EPC requirements altered for buy-to-let landlords, meaning they couldn’t rent their property unless it had a minimum energy rating of ‘E’ or above.

And now for homeowners, the Government are considering forcing banks and building societies to publish the average EPC rating for all the homes they lend money on and if the banks and building societies don’t hit the Government EPC targets, they will be fined (meaning those homeowners with low energy efficient properties will have to pay much more for their mortgages).

So, let’s look at these two issues, first regarding local landlords and their EPC’s, so you know what your lawful responsibilities are and what else landlords can expect in the future.

Since October 2008, all UK rental properties have required an EPC, yet from April 2018, the Minimum Energy Efficiency Standards (MEES) regulations with regards to EPCs have also required all rental properties with new tenancies and renewals to have a minimum EPC rating of ‘E’ or above. However, since April 2020, the MEES regulations have applied to all existing tenancies as well, meaning if your TS9 rental property doesn’t have a valid EPC rating of ‘E’ (or above), it is illegal to let out.

148 rental properties in Stockton-on-Tees are currently let out with a ‘F’ or ‘G’ EPC rating, making them illegal to rent out and each landlord liable for a £5,000 fine – they just don’t know it

The EPC lasts for 10 years and gives an energy rating of between A – very energy efficient to G – very energy inefficient. If you find yourself, as a TS9 landlord, with a rental property that has an EPC rating of below ‘E’, what are your options?

To start with, you have a responsibility by law to carry out the changes suggested in your EPC report to improve the energy rating of your property. The law states that landlords should spend up to a maximum of £3,500 on the energy efficiency improvements set out in the EPC. Yet, if by spending £3,500, that improves your EPC rating but doesn’t mean you reach the ‘E’ rating, whilst you will still be expected to improve the rental property and spend the money, you will be able to apply for a high-cost exemption via the PRS Exemptions Register and still let the property (even though you will have an EPC rating of F or G).

It must be noted that some properties are exempt from the MEES legislation. If your property is listed or protected and the improvements would unacceptably alter it, it is exempt from EPC requirements.

Once your EPC has been registered, it is then valid for ten years. Because the EPC regulations came into force in 2008, there will be some rental properties that had their initial EPC and not had it renewed on its 10th birthday. Now as a TS9 landlord, you do not need to get a new EPC if your EPC reaches its 10th birthday, unless that is, you are starting a new tenancy with new tenants. The issue is…

of 10,387 rental properties in Stockton-on-Tees, 2,295 of them have an EPC that is 10 years or older which has not been renewed

If you are a local landlord, your EPC is 10 years old (or older) and your tenant leaves, you will require a new EPC, because if you don’t, you will be fined £5,000. If all those buy-to-let landlords in our local authority area ignored that law, accumulatively they could be fined £11.4m.

Secondly, what about homeowners and the mortgage companies?

Under new legislation being considered, homeowners living in poorly insulated and draughty homes (meaning they would have a low EPC rating) could pay more for their mortgages and lose value from their homes under Government plans to prioritise mortgages on properties with high energy-efficiency ratings.

There are 12,669 properties in Stockton-on-Tees with a rating of ‘E’ or below

The Department of Business (DoB) wants to force mortgage providers to classify the energy ratings of their borrowers’ homes and put the average into a Government league table, which will be presented on the DoB’s website. Mortgage providers will then get time sensitive targets to improve their average EPC scores, punishable by fines, meaning this would increase the mortgage costs for those with low energy efficient homes.

Maybe it’s time you looked at your EPC certificate and find out how you can improve your rating? If you are a landlord or homeowner and would like to chat about your legal position or would like a copy of your EPC emailing to you, don’t hesitate to drop me a line and I will be more than happy to discuss your personal circumstances further without obligation.

So, is it right landlords should have to fork out to improve the energy performance of their rental property, yet they aren’t the ones benefiting? Also, should homeowners have to have higher mortgage payments in the future because they have a low energy-efficient home?

Let me know your thoughts.

All the signs are that the Yarm housing market is sat on good foundations, yet one key hazard could still scupper the market.

‘UK Property Prices Rising at Record Levels’ is the headline of many newspapers. In the last few weeks, the Halifax reported they had grown by 6.5% in the last 12 months, whilst the Nationwide said 7.1% and not to be outdone, the Government’s own Land Registry said 8.6%. Nothing new there then you might think, don’t UK house prices always increase?

Actually, they don’t, as many Yarm homeowners will remember 2009, when they dropped by 19%. Also, some more mature Yarm homeowners will remember the early 1990’s where house prices dropped just over 40% over 4 years (after the 1989 property crash). So, the increase in UK house prices over the last 12 months has mystified all the forecasts made by most economists as…

house prices were forecast to drop during the pandemic because during the previous six UK recessions experienced since WW2, house prices have always fallen sharply in real terms.

Yet 2020 was different with house price growth increasing at its highest rate since 2014 as the substantial Government support programmes (including Bounce Back Loans, grants and furlough) has mollified the hit to household incomes. Add to that the pent-up demand from the Boris Bounce, all the people working from home wanting an extra room for an office and therefore needing to move, plus the stamp duty tax holiday, with the cherry on the cake of 0.1% Bank of England interest rates keeping borrowing affordable. This has meant…

Yarm property values are 7.1% higher than a year ago.

Yet the affordability of property is a big issue going forward. By the time of the height of the last property boom in 2008, the national ratio of average property values to earnings had risen from 5.1 in 2000 to 8.8 (i.e. the average house price was 8.8 times the size of the UK’s average person’s annual earnings). We then had the property crash in the proceeding years, and the ratio dropped to around late six’s/early sevens. However, over the last few years, the ratio has been steadily rising and now with the recent growth in demand for property (the five reasons mentioned in the previous paragraph), the ratio has now smashed past nine. Looking locally…

the ratio of average property values to earnings in Yarm as a comparison was 3.1 in 2000, rising to 5.8 in 2008, dropping to 5.2 the year later when the Credit Crunch hit, and now currently stands at 4.9.

So, are we heading for another house price crash? Maybe, maybe not – because the House Price to Earnings ratio only tells us part of the story. Another indicator of the property market is mortgage affordability, which measures the proportion of mortgage payments to average incomes. For all mortgage holders, in 2015, this stood at 24.13% and today it is only just above the national long-term average of 25%, demonstrating that property is still affordable.

Yet, the life blood of the property market are first-time buyers. The long-term average percentage of income which goes on mortgage payments for first-time buyers is 33%. Just before the 1989 property market crash, this stood at 54%. Whilst just before the 2008 property crash, it reached 49%. Today, it stands at 31.7% (and the reason it’s so low even with record high property prices is low interest rates, because when mortgage interest rates are low, this permits people to afford larger mortgages, which enables them to bid up house prices).

So why aren’t more first-time buyers buying more homes? Well in fact they are buying more homes. At the turn of the Millennium, just over half of 25yo to 35yo were homeowners and by 2014, this had dropped to just a third, although since then it has increased to 41%. Now with the reintroduction of the Government backed 95% mortgages in April, this demand will continue further.

Once furlough ends, unemployment will doubtless rise in the following 12 months, yet the economy is more than likely to be in a boom phase, so by the spring/summer of 2022, the unemployment rate should start to fall.

So, does everything look great for the Yarm property market?

Before you get the Champagne out, there is a cloud on the horizon – the possibility of higher interest rates.

Undoubtedly, for the next few years, interest rates will not go up (and if they do – it will only be nominally). However, down the line it may be a different tale. Interest rates are used to control a number of economic factors, one being the currency and secondly inflation.

As many suggest, if we get an economic boom in the next 12 to 18 months, as we come out of lockdown, this will put upward pressure on the price of goods and services. Normally, when prices go up (inflation), to ensure that inflation doesn’t get out of control, interest rates are normally increased to dampen down the inflation.

So, will interest rates rise? Undoubtably they will. Yarm homeowners and buy-to-let landlords should seriously consider protecting themselves with fixed rate mortgages (yet 3 in 10 mortgagees are still on variable rate mortgages!). I believe we will see some inflation in the order of 3% to 5% in the coming 24 to 36 months, yet the interest rates won’t be enabled to bring it down. We had a similar case in the early 2010’s when we had a mis-match of demand and supply of goods, and inflation spiked to 5%, before returning back to its long term 2% average quite quickly thereafter.

The Chancellor will also encourage some inflation to reduce the ‘real’ cost of the Billions he has borrowed because of the pandemic, yet won’t want to see interest rates increase to take the cost of the borrowing upwards.

If you are considering moving home or buying/selling a buy-to-let property in Yarm in the next 12 to 18 months, and want a chat about your options, don’t hesitate to drop me a line.

Finally, these are interesting times ahead – I would love your thoughts on this matter. Please do share them in the comments.

 

In this three-minute read, we share four simple ways you can get your property ready for sale if you are thinking of moving when lockdown ends. And we share four things we’re doing to continue serving our clients and to keep everyone as safe as possible.

As the housing market resumes business there is some light beginning to be seen at the end of the tunnel. The messages we’ve all heard from medical officers across the UK is that if we stay very mindful of the threat of Coronavirus, we can eventually defeat this awful disease.

We can’t rush this, the lockdown is a phased process, and whilst we can conduct appointments we must do with a clear safety policy to protect our staff and customers.

The good news is there are some simple things you can do to get ahead and prepare, should you want to sell and move in the future.

By following these steps, you help give your agent the best chance of selling your property quickly, and for a price, you’re delighted with.

Four Steps to Prepare – Help Us

1)     Many of you have probably done this one already if you’ve had time on your hands. Declutter.

2)     Get any property related paperwork like warranties, guarantees, and manuals all in one easy to access place. Organize.

3)     There’s never been a better time to do those odd jobs around the home which need doing. Fix the squeaky door, clean the fascia, paint the spare room. Maintain.

4)     It’s spring clean time (ish) and having a fresh-smelling, a clean home is good for your mental and physical health – whether you are selling or not. Clean.

And while we’re on the subject of being clean.

Here are four things we will be introducing,

Virtual Viewings – We’re already doing them, and they will continue to be very popular with prospective buyers in the future. Contact us for more details.

Going Contactless – We’ll be advising sellers to leave doors, cupboards, and gates open where possible to reduce any risk during physical viewings.

Protecting Each Other – We will carry hand sanitizer and other forms of Personal Protective Equipment to every viewing.

Take a (very short) Vacation – We will be asking people to vacate their properties if there is a viewing. This could be to sit in their cars or go into the garden. We feel the use of virtual valuations will mean that prospective buyers having a physical viewing are seriously thinking about buying the property they are looking at.

We’re expecting the local property market to leap back into life with the pent-up demand.

Stay safe. We will get through this and conduct our business in a safe manner.

• Not enough properties coming to market to provide meaningful new seller asking prices this month
• Abrupt turnaround from best start to a year since 2016 to new sales now being almost impossible. Pre-lockdown sales agreed in the year to 23^rd March were 11% up on the same period last year
• Existing sellers stay on the market, with total available stock for sale down just 2.6% since lockdown
• Agents focus on holding together sales already agreed and explore virtual viewings and valuations to help keep activity bubbling
• What will it take to kick-start the market again once lockdown is eased?
  • Continuation of mortgage lending on the same terms as before the lockdown, aided by government incentives to encourage moving as a key part of the economic recovery
  • Forbearance by lenders to limit forced sales until employment levels recover
  • Social distancing measures may still be needed for some time to come, so safe viewing procedures will require innovation by the property industry

Given the lockdown and pausing of key activities in the housing market, statistics on the number of properties coming to market, new seller asking prices, and new sales agreed are not meaningful. You do not have a functioning market when buyers can’t buy and sellers can’t sell, and so the focus needs to be on what is required to help the market recover once the lockdown can safely be eased.

For the record, the average asking price of the daily dwindling number of properties coming to market in our reporting period from 8th March to 11th April saw a monthly price fall of 0.2% to £311,950, with the annual rate of increase from last April being 2.1%.

Visits to Rightmove fell by around 40% at the time of the lockdown announcement when the property was understandably not at the front of people’s minds but has now started to recover slowly across the last week. While demand has naturally been much lower than earlier in the year, current behavior on-site shows many homeowners researching their plans for the future. Rightmove’s recently relaunched sold prices section has recovered more quickly since the lockdown, with page views now running just 20% lower than usual levels.

Sales agreed and available stock for sale

The buoyant start to the year before the lockdown saw the number of sales agreed in the year to March 23rd up 11% compared to the same period last year, which was the best start to a year since 2016. Most sellers already on the market, and those with a sale already agreed, appear to be continuing with their plans to move once it has been deemed safe enough to do so. Available stock for sale is down only marginally, by 2.6%, and since the lockdown, the level of fall throughs is similar to what we would expect to see in a normal three week period.

What will it take to kick-start the market again?

The price of property coming to market was at an all-time high as we went into lockdown, fuelled by buyer demand outstripping supply, high levels of employment, and mortgage lenders competing to lend. The unprecedented government support for people and businesses will need to continue once the lockdown is eased, in order to facilitate a quick recovery on many fronts. For the housing market, the key drivers that we believe will need to be in place to support a return to a more normal level of activity are laid out below.

Low-interest rate lending with low deposits, plus government incentives

Buyer affordability is key to housing market activity, so mortgage lenders need to be in a position to be able to offer the same low-interest rates. Recovery could also be boosted by government incentives targeted at home movers such as stamp duty holidays, an extension of Help to Buy, and perhaps also the encouragement of mortgage lending. Lenders need to keep offering low deposit mortgages, which would help both the resale and new build sectors of the housing market.

Forbearance by lenders to limit forced sales until employment levels recover

It is vital that lenders show forbearance to those in arrears and do not rush to repossess, leading to forced sales. These would, in turn, put more severe downward pressure on property prices, depressing activity, and leading to damaging negative equity. Much will depend on future trends in employment rates, as most buyers need appropriate employment to get a mortgage or to keep up repayments on their existing mortgage. These are all important factors influencing market sentiment, and it’s currently hard to predict how that will fluctuate in the months ahead.

Innovation to help rebuild activity so sellers and buyers keep safe

To aid a quicker market recovery it’s very important that the property industry tries to keep some activity simmering on the back-burner during the lockdown. Then after the end of the full lockdown, it needs a plan to overcome potential buyers’ and sellers’ new-found caution, and to cope with the need to maintain social distancing during visits for marketing, viewing, valuing and surveying.

Agents’ views

Peter Woodthorpe, Director of Readings in Leicester, says: “The positive news so far is that we’ve had no sales fall through that were agreed before the lockdown. Some sellers and buyers are still proceeding on the basis of simultaneous exchange and completion while still adhering to government guidelines, for example where properties are currently unoccupied. At worst people are holding off to see what happens by the end of the lockdown, but not withdrawing from the transaction. Given the good start to the year, it’s possible that at some point in the future we may start again pretty much where we left off.”

For more information: https://www.rightmove.co.uk/news/house-price-index/

 

The UK ‘s mortgage market has changed profoundly in the last two weeks as the full effect of the Coronavirus has started to be felt. Lenders have been told to allow repayment holidays; moving home is virtually banned leaving swathes of home­ movers in limbo; thousands of mortgage products have been withdrawn and the bank base rate has been reduced to 0.1%, the lowest in history.

Not surprisingly, many clients have been making contact to ask questions regarding their mortgage.

Some questions you may have regarding your current mortgage position:

I have exchanged on a new property, but not moved in. What should I do?

The Government has stated that they do not want you to move during the lockdown unless it is in exceptional circumstances. If you can, therefore, delay your move then you should. Mortgage lenders are now extending the expiry date on offers by three months to hopefully allow more time, while many solicitors are adding new clauses into contracts in case purchases don’t progress.

I have completed on a new property, but not moved in. What should I do?

As with exchanges, the Government is requesting that moves don’t occur unless there is no option. If you do have to move, then take extra precautions to adhere to the social distancing rules.

Can I qualify for a repayment holiday?

All lenders are required by the Government to offer borrowers the opportunity to take a three-month payment holiday. This is true for all homeowners, Buy to Let mortgages and for clients who have used the Government’s Help to Buy scheme.
The repayment holiday is available to borrowers who are up-to-date on their mortgage payments and not already in arrears.

Should I take a repayment holiday?

We believe that over 1 million borrowers have already requested a holiday and if you are in a position where you will struggle to meet your monthly mortgage payments, then it is a sensible thing to do. You won’t need to go through a means test or demonstrate your income drop. There also isn’t a fee to pay. However, I would stress that this is not free money and that you will need to make up the missed payments in due course. Instead at the end of the three month holiday, you will n ed to agree higher repayments moving forward with your lender or extend the term of your mortgage. As such, taking a holiday will cost you more in the longer-term. My recommendation would, therefore, be to not take a holiday unless you really need to.

Also, if you are coming up to the end of term on your existing mortgage deal, then be aware that taking a repayment holiday could impact on whether or not you can qualify for a re-mortgage or a new deal with your existing lender. Please, therefore, talk to me first before applying.

It’s important that you don’t cancel your direct debit to the lender. Simply canceling the direct debit may cause issues later down the line when you come to the end of your payment holiday and could cause you to miss a mortgage payment in the future. A missed mortgage payment will show on your credit file.

I can’t get through to my Lender. What should I do?

All of the lenders have been swamped with calls from borrowers about repayment holidays at a time when they were also trying to move significant numbers of staff to remote working. Many have consequently struggled to cope, leading to long waiting times. I would, therefore, encourage you to wait a few days for things to quieten down and try again or alternatively look on the lender’s website. Most have detailed information on their response to COVID-19 and how to request a repayment holiday.

I am coming to the end of my current mortgage deal. Should I re-mortgage? A significant number of products, particularly trackers and those at higher loan to value’s, have been withdrawn by the lenders in recent days. However, over 10,000 products are still available and rates remain at historically very competitive levels. Funding may become more constrained in the future, so if you are within six months from the end of your current deal, please get in touch and I’ll talk you through the options available.

My income has dropped. How will this impact my ability to get a mortgage? All lenders look at your current income and any expected or known changes when they assess whether you can afford a mortgage. With access to a comprehensive range of lenders from across the market, I can help you find a mortgage that’s right for you and that is affordable based on your income and expenditure.

Your home may be repossessed if you do not keep up repayments on your mortgage.

The 2020/21 tax year started at the stroke of midnight between the 5th and 6th of April. While many individuals leave tax planning to the end of the tax year, you can look to maximize the benefits by using your personal tax allowances* and reliefs straight away. Please get in touch to take advantage of one or more of the following:

Income Tax

• The tax-free personal allowance remains unchanged at £12,500.
• Basic rate tax of 20% will be payable on income above the tax-free allowance and up to the higher rate threshold of £50,000.
• Additional rate income tax remains the same at 45% on income above £150,000.
• If you are married or in a civil partnership, you may be able to save money by structuring your finances as a couple to ensure you are using both spouse’s tax allowances. This could be an especially good idea if one spouse pays tax at a lower rate than the other.

ISA

• The Junior ISA allowance has risen to £9,000 from £4,368 for children under 18.
• The adult ISA allowance of £20,000 remains unchanged.
• If you are 16 or 17 this tax year (or have children of these ages), they can benefit from both the Junior ISA allowance and adult ISA allowance (cash only).

Pensions

•  Saving into a pension comes with great tax benefits. For a start, investments in your pension are free from Income Tax and Capital Gains Tax. Pension contributions up to your annual allowance will also receive an automatic 20% top-up from the taxman, and higher-rate and additional-rate taxpayers can claim back another 20% or 25% through their Self-Assessment.
• Because of these generous tax rules, there is a limit to the amount you can pay into your pension. Each year, you can contribute as much money as you earn, usually up to £40,000 (although these tapers down to £4,000 for higher earners).
• If you have not used your annual allowance in the last three years, you may also be able to make extra contributions by using carry forward.
• Minimum pension contributions (paid by employers and employees) through auto-enrolment remain 8% (3% employer and 5% employee) of band earnings.
• The lower limit of the qualifying earnings band will increase from £6,136 to £6,240. This means the first £6,240 of an individual’s earnings don’t count towards auto-enrolment contributions. The upper limit is £50,000.
• The Lifetime Allowance for pension savings has increased to £1,073,100.
• The State Pension has increased with the full allowance now £175.20.

Other Savings Allowances

• The Personal Savings Allowance, which gives you tax-free savings interest, remains £1,000 for basic rate tax-payers. This reduces to £500 for higher rate taxpayers and additional rate taxpayers do not get any allowance.
• The tax-free Dividend Allowance remains at £2,000 (although dividends received by pension funds and ISAs remain tax-free).

Venture Capital Trusts and Enterprise Investment Schemes

• Although only suitable for individuals with a higher appetite for risk, there is no change to the taxation of Venture Capital Trusts, so you can invest up to £200,000 and get up to 30% income tax relief.
• Similarly, the taxation of Enterprise Investment Schemes is unchanged, meaning you can invest up to £1 million and claim up to 30% income tax relief.

Inheritance Tax

• Each tax year you can make a range of tax-free gifts. These leave your estate immediately and won’t be taken into account when calculating your Inheritance Tax bill.
• All gifts to your husband, wife or civil partner (as long as the UK is their permanent home).
• Gifts of up to £3,000 each tax year, which can be carried over one year for a total of £6,000. This is useful if you did not use it in the 2019/20 tax year.
• Unlimited individual gifts of up to £250 per person. Although not to anyone who has already received a gift of your whole £3,000 annual exemption.
• Wedding gifts of up to £5,000 for a child, £2,500 for a grandchild or great-grandchild, or £1,000 to anybody else.
• Unlimited payments towards the living costs of a child under 18 or in full-time education, elderly dependant or ex-spouse.
• Unlimited gifts from surplus income that won’t affect your standard of living.
• The Residence Nil Rate Band has risen to £175,000 from £150,000.
• This can be added to the £325,000 Inheritance Tax allowance when a direct descendant inherits someone’s main house.

Capital Gains Tax

• The Capital Gains Tax allowance has increased to £12,300 from £12,000.
• Married couples and civil partners will continue to be able to combine their annual allowances.

Landlord Mortgages

• Landlords are no longer able to offset their mortgage interest payments against their rental income.
• There is now only a 20% tax credit saving from a landlord’s mortgage interest.

Yours sincerely

Christine Cowley

Financial Adviser

*This information is based on our current understanding of the rules for the 2020-21 tax year.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes that cannot be foreseen.

The value of investments and any income from them can go down as well as up and you may not get back the original amount invested.