Month: September 2017

16.3% Drop In Bourne People Moving Home In The Last 10 Years

16.3% Drop In Bourne People Moving Home In The Last 10 Years

Back in the early 2000’s, between 1m and 1.3m people moved each year in England and Wales, peaking at 1,349,306 home-moves (i.e. house sales) in 2002.  However, the ‘credit crunch’ hit in 2008 and the number of house sales fell to 624,994 in 2009.  Since then this has steadily recovered, albeit to a more ‘respectable’ 899,708 properties by 2016.  This means there are around 450,000 fewer house sales (house-moves) each year compared to the noughties.

The question is … why are there fewer house sales?

185 Eng and Wales Moving Graph FIXED

To answer that, we need to go back 50 years.  Inflation was high in the late 1960’s, 70’s and early 80’s.  To combat this, the Government raised interest rates to a high level in a bid to lower inflation.  Higher interest rates meant the householders monthly mortgage payments were higher, meaning mortgages took a large proportion of the homeowner’s household budget. However, this wasn’t all bad news since inflation tends to erode mortgage debt in ‘real spending power terms’.  Consequently, as wages grew (to keep up with inflation), this allowed home owners to get even bigger mortgages.  At the same time their mortgage debt was decreasing, therefore allowing them to move up the property ladder quicker.

Roll the clock on to the late 1990’s and the early Noughties, and things had changed.  UK interest rates tumbled as UK inflation dropped.  Lower interest rates and low inflation, especially in the five years 2000 to 2005, meant we saw double digit growth in the value of UK property.  This inevitably meant all the home owner’s equity grew significantly, meaning people could continue to move up the property ladder (even without the effects of inflation).

This snowball effect of significant numbers moving house continued into the mid noughties (2004 to 2007), as Banks and Building Society’s slackened their lending criteria. This meant home movers could borrow even more to move up the property ladder.

So, now it’s 2017 and things have changed yet again!

You would think that with ultra-low interest rates at 0.25% (a 320-year low) the number of people moving would be booming – wouldn’t you?  However, this has not been the case.  Less people are moving because:

(1) low wage growth of 1.1% per annum

(2) the tougher mortgage rules since 2014

(3) sporadic property price growth in the last few years

(4) high property values comparative to salaries

 What does this translate to in pure numbers locally?

 In 2007, 3,258 properties sold in the South Kesteven District Council area and last year, in 2016 only 2,727 properties sold – a drop of 16.30%.

Therefore, we have just over 530 less households moving in the Bourne and surrounding Council area each year.  Now of that number, it is recognised throughout the property industry around fourth fifths of them are homeowners with a mortgage. That means there are around 435 mortgaged households a year (fourth fifths of the figure of 530) in the Bourne and surrounding council area that would have moved 10 years ago, but won’t this year.

The reason they can’t/won’t move can be split down into different categories, explained in a recent report by the Council of Mortgage Lenders (CML). So, of those estimated 435 annual Bourne (and surrounding area) non-movers, based on that CML report –

 

  1. There are around 157 households a year that aren’t moving due to a fall in the number of mortgaged owner occupiers (e. demographics).

 

  1. I then estimate another 61 households a year are of the older generation mortgaged owner occupiers. As they are increasingly getting older, older people don’t tend to move, regardless of what is happening to the property market (e. lifestyle).

 

  1. Then, I estimate 26 households of our Bourne (and surrounding area) annual non-movers will mirror the rising number of high equity owner occupiers, who previously would have moved with a mortgage but now move as cash buyers (e. high house price growth).

 

  1. I believe there are 192 Bourne (and surrounding area) mortgaged homeowners that are unable to move because of the financing of the new mortgage or keeping within the new rules of mortgage affordability that came into play in 2014 (e. mortgage).

 

The first three above are beyond the Government or Bank of England control.  However could there be some influence exerted to help the non-movers because of financing the new mortgage and keeping within the new rules of mortgage affordability? If Bourne property values were lower, this would decrease the size of each step up the property ladder.  This would mean the opportunity cost of increasing their mortgage would reduce (i.e. opportunity cost = the step up in their mortgage payments between their existing and future new mortgage) and they would be able to move to more upmarket properties.

Then there is the mortgage rules, but before we all start demanding a relaxation in lending criteria for the banks, do we want to return to free and easy mortgages 125% Northern Rock footloose and fancy-free mortgage lending that seemed to be available in the mid 2000’s.

A heavy topic I’m sure you will agree but one which is worth discussion!

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Bourne’s New 3 Speed Property Market

Bourne’s New 3 Speed Property Market

“What’s happening to the Bourne Property Market” is a question we are asked repeatedly.  

Well, would it be a surprise to hear that our own research suggests that there isn’t just one big Bourne property market – but many small micro-property markets?

According to recent data released by the Office of National Statistics (ONS), we have discovered that at least three of these micro-property markets have emerged over the last 20+ years in the town.

For ease, we have named them the …

  1. lower’ Bourne Property Market.
  2. lower to middle’ Bourne Property Market.
  3. ‘middle’ Bourne Property Market.

The ‘lower’ and ‘lower to middle’ sectors of the Bourne property market have been fuelled over the last few years by two sets of buyers. The first set, making up the clear majority of those buyers, are cash rich landlord investors who are throwing themselves into the Bourne property market to take advantage of alluringly low prices and even lower interest rates.

The other set of buyers in the ‘lower’ and ‘lower to middle’ Bourne property market are the first-time buyers (FTB), although the FTB market is in a state of unparalleled deadlock as it’s been trampled into near-immobility and incapacity by the new 2014 stricter mortgage affordability regulations and also fewer mortgages with low deposits.

Some of you may be interested to know how we have classified the three sectors ..

  1. lower’ Bourne housing market – the bottom 10% (in terms of value) of properties sold
  2. lower to middle’ Bourne housing market – lower Quartile (or lowest 25% in terms of value) of properties sold
  3. middle’ Bourne housing market – which is the median in terms of value

…. and if one looks at the figures for South Kesteven District Council area you can see the three different sectors (lower, lower/middle and middle) have performed quite differently.

South Kesteven District Council Property Market – Sold Prices Price Paid in 1995 Price Paid in 2017 Percentage Uplift

1995 – 2017

Lower (Bottom 10%) £29,000 £104,950 261.90%
Lower to Middle (Lower Quartile) £37,000 £139,475 276.96%
Middle (The Median) £55,262 £218,836 296.00%

You can quite clearly see that it is the ‘middle’ market that has performed the best.

You might ask, what do all these different figures mean to homeowners and landlords alike?  Quite a lot – so let us explain.

The worst performing sector (with the lowest Percentage uplift) was the ‘lower’ housing market. Therefore, interestingly, if we applied the best percentage uplift figure (i.e. from the ‘middle’ market percentage uplift), to the ‘lower’ 1995 housing market figure, the 2017 figure of £104,950, would have been £114,840 instead – quite a difference you must agree?

Now, we have specifically not mentioned the upper reaches of the Bourne housing market for several reasons.  Firstly, the lower or middle market is where most of the buy to let investment landlords buy their property and where the majority of property transactions take place. Secondly, due to the unique and distinctive nature of Bourne’s up-market property scene (because every property is different and they don’t tend to sell as often as the lower to middle market), it is much more difficult to calculate what changes have occurred to property prices in that part of the Bourne property market – looking at the stats for the up-market Bourne property market from Land Registry, only 9 properties in Bourne (and a 5 mile radius around it) have sold for £1,000,000 or more since 1997.

So, what should every homeowner and buy to let landlord take from the information that there are many micro-property markets? Well, when you realise there isn’t just one Bourne Property Market, but many Bourne “micro-property markets”, you can spot trends and bag yourself some potential bargains.

If you would like more information about this article or on the current housing market in Bourne, please subscribe to the blog feature by clicking the tab on the side of the page or better still give us a call at the office on 01778 300069.