Clapham Property Values 0.2% higher than year ago – What’s the PLAN to fix the Clapham Property Market?

It’s been nearly 18 months since Sajid Javid, the Tory Government’s Housing Minister published the White Paper “Fixing the Broken UK Housing Market”, meanwhile Clapham property values continue to rise at 0.2% (year on year for the council area) and the number of new homes being constructed locally bumps along at a snail’s pace, creating a potential perfect storm for those looking to buy and sell.

The White Paper is important for the UK and Clapham people, as it will ensure we have long-term stability and longevity in property market as whole. Clapham home-owners and Clapham landlords need to be aware of these issues in the report to ensure they don’t lose out and ensure the local housing market is fit for purpose. The White Paper wanted more homes to be built in the next couple of decades, so it might seem counter-intuitive for existing home-owners and landlords to encourage more homes to be built and a change in the direction of housing provision – as this would appear to have a negative effect on their own property.

Yet the country needs a diversified and fluid property market to allow the economy as whole to grow and flourish ... which in turn will be a greater influence on whether prices go up or down in the long term. I am sure every homeowner or landlord in Clapham doesn’t want another housing crisis like we had in 1974, 1988 and most recently in 2008.

Now, as Sajid Javid has moved on to the Home Secretary role, the 17th Housing Minister in 20 years (poisoned chalice or journeyman’s cabinet post) James Brokenshire has been given the task of making this White Paper come alive. The White Paper had a well-defined notion of what the issues were.

The first of the four points brought up was to give local authorities powers to speed up house building and ensure developers complete new homes on time. Secondly, statutory methods demanding local authorities and builders build at higher densities (i.e. more houses per hectare) where appropriate. The other two points were incentives for smaller builders to take a larger share of the new homes market and help for people renting.

However, lets go back to the two initial points of planning and density.

(1) Planning

For planning to work, we need a robust Planning Dept. Looking at data from the Local Government’s Association, in Lambeth, the council is below the regional average, only spending £39.53 per person for the Planning Authority, compared the regional average of £45.52 per head – which will mean the planning department will be hard pressed to meet those targets.

However, 90% of planning applications are decided within the statutory 8-week initial period, above the regional average of 85% (see the graph below). I am slightly disappointed and also pleased with the numbers for our local authority when it comes to the planning and the budget allowed by our Politician to this vital service.

(2) Density of Population

113 people live in every hectare (or 2.471 acres) in Lambeth

It won’t surprise you that there are 303,086 Lambeth residents living in the urban conurbations of the authority, giving a density of 113 people per hectare (much lower than I initially thought).

I would agree with the Governments’ ambition to make more efficient use of land and avoid building homes at low densities where there is a shortage of land for meeting identified housing needs, ensuring that the density and form of development reflect the character, accessibility and infrastructure.

It’s all very good building lots of houses – but we need the infrastructure to go with it.

Talking to a lot of Clapham people, their biggest fear of all this building is a lack of infrastructure for those extra houses (the extra roads, doctors surgeries, schools etc.). I know most Clapham homeowners and landlords want more houses to be built to house their family and friends ... but irrespective of the density ... it’s the infrastructure that goes with the housing that is just as important ... and this is where I think the White Paper failed to go as far as I feel it should have done.

Interesting times ahead I believe!

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Nine Babies Born for Every New Home Built in the Past Five Years in Lambeth

9 babies have been born for every new home that has been built in Lambeth since 2012, deepening the Clapham housing shortage.

This discovery is an important foundation for my concerns about the future of the Clapham property market - when you consider the battle that todays twenty and thirty somethings face in order to buy their first home and get on the Clapham property ladder. This is particularly ironic as these Clapham youngsters’ are being born in an age when the number of new babies born to new homes was far lower.

This will mean the babies being born now, who will become the next generation’s first-time buyers will come up against even bigger competition from a greater number of their peers unless we move to long term fixes to the housing market, instead of the short term fixes that successive Governments have done since the 1980’s.

Looking at the most up to date data for the area covered by Lambeth Council, the numbers of properties-built versus the number of babies born together with the corresponding ratio of the two metrics …

It can be seen that in 2016, 10.79 babies had been born in Lambeth for every home that had been built in the five years to the end of 2016 (the most up to date data). Interestingly, that ratio nationally was 2.9 babies to every home built in the ‘50s and 2.4 in the ‘70s. I have seen the unaudited 2017 statistics and the picture isn’t any better! (I will share those when they are released later in the year).

Our children, and their children, will be placed in an unprecedented and unbelievably difficult position when wanting to buy their first home unless decisive action is taken. You see it doesn’t help that with life expectancy growing year on year, this too is also placing excessive pressure on homes to live in availability, with normal population growth nationally (the number of babies born less the number of people passing away) accumulative by two people for every one home that was built since the start of this decade.

Owning one’s home is a measure many Brits to aspire to. The only long-term measure that will help is the building of more new homes on a scale not seen since the 50’s and 60’s, which means we would need to aim to at least double the number of homes we build annually.

In the meantime, what does this mean for Clapham landlords and homeowners? Well the demand for rental properties in Clapham in the short term will remain high and until the rate of building grows substantially, this means rents will remain strong and correspondingly, property values will remain robust.

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How Affordable is Property for Clapham’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 Clapham.

Looking at some recent statistics released by the Government, the ratio of the lower quartile house prices to lower quartile gross annual salaries in Lambeth London Borough Council has hit 15.25 to 1.

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

If we ordered every property in the Lambeth London Borough Council area by the value of those properties, the average value of the lower quartile properties (i.e. lowest 25%) would be £400,000. 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 £26,235 pa, thus dividing one with the other, we get the ratio of 15.25 to 1.

Assuming there is one wage earner in the house, the chances of a Clapham working family being able to afford to buy their own home, when it’s over fifteen 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. Lambeth London Borough 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.

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 Clapham 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 Clapham community hold their local politicians at Lambeth London Borough 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. Lambeth London Borough 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 Clapham house prices high and Clapham rents high.

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247 Clapham Landlords Plan to Expand Their Buy To Let Portfolios

A noteworthy number of buy to let landlords in Britain plan to buy more properties over the next year notwithstanding the frustrations, challenges and seismic changes in the private rented sector. According to Aldermore, the specialist Buy To Let lender, their research shows around 41% of portfolio buy to let landlord’s objective is to grow their buy to let portfolio (i.e. Portfolio landlords are landlords that own more than one property).

So, I thought, “Are Clapham landlords feeling the same?” If so, if these numbers were applied to the Clapham private rental market, what sort effect would it have on the Clapham property market as whole?

Talking to the landlords I deal with, most are feeling quite optimistic about the future of the Clapham rental market and the prospect it presents notwithstanding the doom and gloom prophecies that the property market will shrink. Many of those Clapham landlords who are looking to enlarge their portfolio are doing so because they still see the Clapham rental market as a decent investment opportunity.

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With top of the range Bank and Building Society Savings Accounts only reaching 1.5% a year, the rollercoaster ride of Crypto currency and the yo-yoing of the Stock Market, the simple fact is, with rental yields in Clapham far outstripping current savings rates, the short term prospect of a minor drop in property prices isn’t putting off Clapham landlords.

The art to buying a Clapham buy to let investment is to buy the profit on the purchase price, not the anticipation of the future sale price.

No matter what the historical economy has thrown at us, with the global meltdown in 2008/9, dotcom crash of 2000, ERM in 1992, the three day week, oil crisis and hyperinflation in the 1970’s (the list goes on) ... the housing market has always bounced back stronger in the long term. That’s the point ... long term. Investing in buy to let is a long-term strategy. The simple fact is, over the long term with the increasing demand for rental properties, predominantly among Millennials as many cannot afford to get on the property ladder, and with councils not building enough properties of any kind, many youngsters are having to resort the private rental market for their accommodation needs.

So, what of the numbers involved in Clapham?

There are 277 landlords that own just one buy to let (BTL) property in Clapham (or SW14 to be precise) and 603 Clapham landlords, who are portfolio landlords. Between those 603 Clapham portfolio BTL landlords, they own a total of 1,265 Clapham BTL properties and they can be split down into the size of landlord portfolio in the graph below…

If I apply the Aldermore figures that means 247 Clapham landlords have plans to expand their BTL portfolio in the coming year or so.

However, the Aldermore Research also showed that 8% of private landlords intended to reduce the number of properties they own. They put this down to continuing Government intervention in the housing market (as many landlords mentioned too many limitations and higher taxation) while some believed that tenants are excessively protected to the disadvantage of the landlord.

I would say there is no repudiating that the buy to let market has taken a bit of a beating, thanks to a plethora of Government regulation, new mortgage underwriting rules in 2014 and George Osborne’s tax changes. Yet there still remains an overall consciousness of optimism among the vast majority of Clapham buy to let landlords. Despite these latest changes, many landlords still view buy to let as a good investment, as long as you buy right and expand your portfolio taking into account the second rule of buy to let … assess your position on the ‘buy to let seesaw’ of capital growth and yield.

If you want to buy right and assess your own portfolio on the yield/capital growth seesaw ... drop me a note. I don’t bite and the opinion I give, whether you are landlord of mine or not as the case may be, is given freely, without obligation or cost. The choice is yours. Thank you for reading this article. To read others, please visit my Clapham Property Blog.

I hope you enjoyed reading. If you are keen to take things further, be it to start from scratch, or do something a bit more interesting with your current portfolio... Start the conversation on email. I'd love to meet you in person of course at this month's Clapham Property Meet, so do come along. Click here for tickets and more info.

Extra Funding Is Required for Affordable Homes in Clapham

In my blog about the Clapham Property Market I mostly only talk about two of the three main sectors of the local property market, the ‘private rented sector’ and the ‘owner occupier sector’. However, as I often stress when talking to my clients, one cannot forget the third sector, that being the ‘social housing sector’ (or council housing as some people call it).

In previous articles, I have spoken at length about the crisis in supply of property in Clapham (i.e. not enough property is being built), but in this article I want to talk about the other crisis – that of affordability. It is not just about the pure number of houses being built but also the equilibrium of tenure (ownership vs rented) and therein, the affordability of housing, which needs to be considered carefully for an efficient and effectual housing market.

An efficient and effectual housing market is in everyone’s interests, including Clapham homeowners and Clapham landlords, so let me explain ..

An average of only 508 Affordable Homes per year have been built by London Borough of Lambeth Council in the last 9 years

The requirement for the provision of subsidised housing has been recognised since Victorian times. Even though private rents have not kept up with inflation since 2005 (meaning tenants are better off) it’s still a fact there are substantial numbers of low-income households in Clapham devoid of the money to allow them a decent standard of housing.

Usually, property in the social housing sector has had rents set at around half the going market rate and affordable shared home ownership has been the main source of new affordable housing yet, irrespective of the tenure, the local authority is simply not coming up with the numbers required. If the local authority isn’t building or finding these affordable homes, these Clapham tenants still need housing, and some tenants at the lower end of the market are falling foul of rogue landlords. Not good news for tenants and the vast majority of law abiding and decent Clapham landlords who are tarnished by the actions of those few rogue landlords, especially as I believe everyone has the right to a safe and decent home.

Be it Tory’s, Labour, SNP, Lib Dems, Greens etc, everyone needs to put party politics aside and start building enough homes and ensure that housing is affordable. Even though 2017 was one of the best years for new home building in the last decade (217,000 home built in 2017) overall new home building has been in decline for many years from the heady days of the early 1970s, when an average of 350,000 new homes were being built a year. As you can see from the graph, we simply aren’t building enough ‘affordable’ homes in the area.

The blame cannot all be placed at the feet of the local authority as Council budgets nationally, according to Full-Fact, are 26% lower than they have been since 2010.

So, what does this mean for Clapham homeowners? Well, an undersupply of affordable homes will artificially keep rents and property prices high. That might sound good in the short term, but a large proportion of my Clapham landlords find their children are also priced out of the housing market. Also, whilst your Clapham home might be slightly higher in value, due to this lack of supply of homes at the bottom end of the market, as most people move up the market when they do move, the one you want to buy will be priced even higher.

Problems at the lower end of the property market will affect the middle and upper parts. There is no getting away from the fact that the Clapham housing market is all interlinked .. it’s not called the Property ‘Ladder’ for nothing!

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Clapham Property Market – Asking Prices Down 5% in the Last 12 Months

The average asking price of property in Clapham dropped by 5% or £43,919 compared to a year ago, taking the current average asking price to £830,517 compared with £874,436 this time last year.

The overall drop in asking prices is being put down to sellers being more realistic with their pricing and looking to benefit from the impending mortgage interest rate rises later in 2018. This is great news for first, second and third time buyers in Clapham starting their property hunting in the usually active spring market this year facing the opportunity of paying less for the property of their dreams. Even better news is that whilst first time buyers also have to pay less for their property, they also have the bonus of the Chancellor stopping Stamp Duty being paid by first time buyers!

Looking at the different sectors of the Clapham property market, splitting it down into property types, one can see what is happening to each sector of the market with regard to their average asking prices now compared to a year ago. Firstly, looking at the Pound note amounts…

Interestingly, when one looks at the percentages, the most movement in average asking price pressure is in the detached property type sector.

Now, I must stress this overall drop in the asking prices of Clapham property doesn’t necessarily mean the value of Clapham property is going down by the same amount.

Only time will tell if the current levels of Clapham asking prices is a correction of optimistic house sellers after a couple of months of enthusiastic asking price rises in the lead up to Christmas, or is it an initial sign that property values are slipping. To judge what is really happening to the Clapham property market, I believe these asking prices must be viewed in conjunction with both the values achieved and the length of time it takes to sell the property.

Also, these figures are averages, so it might also mean less expensive types of Clapham semi’s or Clapham apartments, are on the market now, this dragging the average down, compared to a year ago.

One thought I would like to share with the Clapham homeowners and landlords wanting to sell their property, is the fact they need to be aware of the competition of other people selling their homes. One factor that could be contributing to a subdued demand for local property is the progressively strained buyer mortgage affordability (i.e. banks telling people they can only afford so much on a mortgage), meaning more and more buyers are hitting their maximum on the amount they are able to borrow on a mortgage sooner than they thought.

So, what does this all mean, especially for buy to let landlords in Clapham? During these months of flux, there could be some property bargains to be had. Lower asking prices mean you are buying in better yields and potential capital growth at the same time. Many Clapham landlords pick the phone up or email me with Rightmove links, asking my opinion on the BTL potential of property. I don’t charge for that service, so if you don’t want to miss out on such opinion, follow what they do and make contact ... I don’t bite!

I hope you enjoyed reading. If you are keen to take things further, be it to start from scratch, or do something a bit more interesting with your current portfolio... Start the conversation on email. I'd love to meet you in person of course at this month's Clapham Property Meet, so do come along. Click here for tickets and more info.

£2,188 pcm – The Average Clapham Rent

The rents paid by Clapham tenants are now standing at £2,188 per calendar month (PCM), a rise of 2.25% year on year and 0.45% higher month on month.

However, this attention-grabbing monthly rent figure masks stark differences in the various different parts of the Clapham rental market. Demand in Clapham for high quality family homes with two or three bedrooms in good catchment areas for schools remains really robust due to tenants wanting access to the schools. Other influencing factors that make certain areas popular are the proximity to transport links. However, I have noticed a drop in demand (and thus rents achieved) for property where the landlord hasn’t kept the property fresh; in terms of decoration, carpets, replacement windows and poor heating.

So, what does all this mean for Clapham landlords and tenants?

With the new tax rules for landlords, many believed that the number of rental properties would narrow throughout 2017, as landlords sold up their Buy to let properties and looked to invest their money elsewhere, but evidently this hasn’t happened (yet). Feasibly Clapham landlords are re-mortgaging their Clapham buy to let properties instead, as they still believe it’s a safer investment than looking, say at the stock market?

However, demand remained strong in 2017 for Clapham private rental properties, meaning the rents being achieved were at a decent level for landlords. Keeping your outgoings low is also an important consideration and so I looked on a well-known financial services comparison site this morning and found a High Street bank offering a 5-year fixed rate for Buy to let landlords with a 40% deposit/equity for 2.17% … I can remember (as I am sure many of my readers of this blog can) when mortgage rates were at 15% - this is cheap money!

Looking at property values in Clapham, over the last 12 months and specifically at the lower of the market where buy to let landlords tend to buy their rental properties. Flats/apartments have risen in value by 1% whilst terraced properties have risen by 0.64%.

Some Clapham landlords have seen the yields they are achieving remain squeezed.

However, most landlords can start to feel assured that as capital growth in Clapham remains at a more realistic figure (good for long term stability in the property market) and long-term rents are on the rise, the overall corresponding annual return on investment (Annual ROI being annual capital + annual yield) has stabilised in all areas and is now starting to grow.

With additional people seeing renting as a long-term option, even with the challenges of the new tax regime, Clapham landlords, with the support of a good advice and opinion, should continue to see renting as a good investment vehicle.

I hope you enjoyed reading. If you are keen to take things further, be it to start from scratch, or do something a bit more interesting with your current portfolio... Start the conversation on email. I'd love to meet you in person of course at this month's Clapham Property Meet, so do come along. Click here for tickets and more info.