Month: June 2018

How Affordable is Property for Bourne’s Average Working Families?

How Affordable is Property for Bourne’s Average Working Families?

The simple fact is we are not building enough properties.

If the supply of new properties is limited and demand continues to soar with heightened divorce rates, i.e. one household becoming two, people living longer and continued immigration, this means the values of those existing properties continues to remain high and out of reach for a lot of people, especially the blue collar working families of Bourne.
Looking at some recent statistics released by the Government, the ratio of the lower quartile house prices to lower quartile gross annual salaries in South Kesteven District Council has hit 8.73 to 1.

What does that mean exactly and why does it matter to Bourne landlords and homeowners?

If we ordered every property in the South Kesteven District Council area by the value of those properties, the average value of the lower quartile properties (i.e. lowest 25%) would be £148,000. If we then did the same, and ordered everyone’s salary in the same council area, the average of the lowest quartile (lowest 25%), the average salary of the lowest 25% is £16,958 pa, thus dividing one with the other, we get the ratio of 8.73 to 1.
Assuming there is one wage earner in the house, the chances of a Bourne working family being able to afford to buy their own home, when it’s over eight times their annual salary, is very slim indeed.

The existing affordability crisis of people wanting to buy their own home is the unavoidable outcome of the decade on decade failure to build enough homes to keep up with demand. Nevertheless, improving affordability is not a case of just constructing more homes. South Kesteven District Council needs to ensure more properties are not only built, but built in the right locations and of the right type and at the right price to ensure the needs of these lower income working families are met, because at the moment, they presently have few options apart from the private rental sector.
Looking at the historic nature of the ratio, it can clearly be seen in the graph below that this has been an issue since the early to mid 2000’s.

bourne218 graph1
However, if one looks at the historic data, those on the bottom rung of the ladder (those in the lower quartile of wage earners) used to be housed by the local authority instead of buying. However, the vast majority of council houses were sold off in the 1980’s, meaning there are much fewer council houses today to house this generation.

Many of the lower quartile working class families were given a lifeline to buy their own homes in middle 2000’s, with 100% mortgages, but the with the credit crunch in 2009, that rug (of 100% mortgages) was rudely pulled from under their feet. You see it is cheaper to buy than rent … it’s the finding of the 5% deposit that is the challenging issue for these Bourne working class families. So unless the Government allow 100% mortgages back, the fact is, demand for rental properties will outstrip supply.

In the long term, to alleviate that, I would suggest the Bourne community hold their local politicians at South Kesteven District Council to account for the actions they could take to ensure the affordability of housing and the extent to which they work with private developers and housing associations and aggressively use the planning tools at their disposal to safeguard the local community getting the new households we need. South Kesteven District Council could make certain parcels of residential building land for private rented development only, eliminating the opportunity of the land being bought to develop large executive homes, which do not solve the current problem.
Yet in the short term, all this means is demand for rental properties will continue to grow, keeping Bourne house prices high and Bourne rents high.

If you’d like to know how we can help with no obligation, get in touch at the Boston branch today on the details below.
new lewis
Lewis Thorogood, Branch Manager, Bourne
Call: 01778 300 069
Email: bournesales@hillclark.co.uk

 

Bourne Council Tax Payers Stung by 51.5% above Inflation Rise

Bourne Council Tax Payers Stung by 51.5% above Inflation Rise

Buying and selling a home in Bourne isn’t the easiest or cheapest thing you will ever do.

Estate Agent fees, Solicitors fees, Survey fees, Mortgage fees, Removal Van … the costs just mount up throughout every step of the move. Last week, a Bourne landlord asked me whether the Council Tax Band made a difference to a property’s appeal, be it tenanted or to owner occupiers, when it comes to being sold on the open market and whether extensions or improvements made a difference to the tax banding?

Well, like I said, the first point you should always be aware of is what Council Tax Band your new house or apartment will fall under. Being aware of this before you buy/move will help when planning month by month for life in your home (or investment). But what exactly are Council Tax Bands, and how do they affect landlords/tenants/homebuyers?

How much Council Tax you pay depends on two variables. The first is which Council Tax Band your property is in. A property is placed into a specific band depending upon what the value of the property was in April 1991 – the date when the tax band system was applied. In a nutshell, what your property is worth today has no relevance whatsoever to your banding.

Council Tax Bands have a letter of the alphabet and range from bands A-H.

The Council Tax Band values are:
Band A – up to £40,000
Band B – £40,001 to £52,000
Band C – £52,001 to £68,000
Band D – £68,001 to £88,000
Band E – £88,001 to £120,000
Band F – £120,001 to £160,000
Band G – £160,001 to £320,000
Band H – more than £320,000

So, for example, if a property sold for £110,000 in April 1991 but is now worth £350,000 it will remain in Band E – NOT Band H), as this was the value when the bands were set in 1991. For new homes, the same thing applies: they are valued based on the 1991 market value. This safeguards that all homes and all buyers are treated equally and consistently. The second factor that determines how much Council Tax you pay is what each individual local authority decides each band will pay in Council Tax. (So for example, a householder/tenant in Leeds in a Band E property will pay a different amount in Council Tax each year to someone in Swindon or North London in Band E).

Interestingly, the average current level of Council tax paid by Bourne people stands at £1,161 per annum, up from £403 in 1993 (although if it had risen by inflation in those 25 years .. today that should only be £766) … meaning Council Tax has outstripped inflation by 51.5%. So unless the local authority changes its majority political party, the only way you can change the amount you pay in Council Tax is your banding i.e. you physically move to a higher or lower band.

bourne209graph

Contrary to what most people think, extensions and improvements do not change the Council Tax Band and existing householders/tenants only have to pay the same Council Tax as they would have without any extensions and improvements. However, the Valuation Office (The Government’s Property Valuers) do reserve the right to re-value the extended property if the property gets sold. If you are a potential buyer, you should be aware of this review as it could change the amount of Council Tax you pay after the purchase. If a higher band is necessary, the new band will be based on what the extended property would have been expected to sell for in 1991. However, this does not necessarily mean that the banding will jump one band, as this is contingent on the extent of the changes and whether the property falls towards the top or bottom of its existing band. More often than not – it isn’t an issue and the banding stays the same.

In terms of which band the property is in, this can be challenged. In my experience in the Bourne property market the only issue is one where there is an anomaly with the banding, when one property is in a different band to all the others in the street. This is much rarer than it used to be, as most such anomalies have been found and rectified. Anyone can check the banding of any property by going to Google and typing in “Check My Council Tax Banding”. I do need to mention a thoughtful warning though. Challenging your Council Tax Band is not something to do on a whim for one simple fact – you cannot request your band to be lowered, only ‘reassessed’, which means your band could be moved up as well as down. I have even heard of neighbouring properties band’s being increased by someone appealing, although this is the exception. If you have any questions don’t hesitate to drop me a line.