Half of Peterborough Homeowners Move Again Within 7 Years and 41 Weeks – Why?

In Britain, there are 27,071,500 households, of which 17,044,450 are owned, which are worth a total of £3,925,865,212,950 (£3.92 trillion). Over the last 5 years, an average of 86,096 properties sell each month, meaning just over a million UK households move home per year. Therefore, the average British homeowner moves every 16 years 5 months.

These statistics refute a common hypothesis that British neighbourhoods are becoming more fleeting and transitory. On the face of it, they appear to show that, once you have succeeded to buy a property you can call home, there isn’t much motivation to move again.

So, aren’t people moving home so much?

Could it be put down to a certain sense of complacency or apathy to moving home? Whereas we might love our home in Peterborough, most of you (including myself) still want to ‘better our lives’ with a bigger house, better area etc, which typically requires us to climb up the Peterborough property ladder.

Yet with Peterborough house prices having risen by 178.8% in the last 20 years, the cost of going up the next rung on the Peterborough property ladder is prohibitive.

Everyone harks back to the 1980’s, when we had an upbeat booming property market as a backcloth, Brits moved home every eight years; so now with the average at just over 16 years this equates to each British homeowner moving around three to four times in their adult lifetime. Maybe we should all call our homes ‘Dunroamin’ and be done with it!

Or does it? 

We have all heard the phrase ‘lies, damn lies and statistics’ … well the stats mentioned above hide some amazing features of the British property market. When homeowners get into their 50’s and 60’s, their tendency to move home drops like a stone. The average length of time a homeowner without a mortgage moves home is 24 years and 7 months (and just under 7 out of ten outright homeowners i.e. without a mortgage are 65 years old or older). 

Yet, homeowners with a mortgage move on average every 10 years and 11 weeks.

So, whilst I cannot determine who has a mortgage and who doesn’t, I can look at how quickly people move home in Peterborough.  I have looked at the last 50 property sales in Peterborough, and I have found some interesting findings.

On average Peterborough homeowner only move every 14 years and 44 weeks.

Nothing interesting about that you might say, when compared to the national average … yet the devil is in the detail.

There appears to be a two-speed Peterborough property market … look at the top 25% of Peterborough home movers, and then the next slice … these Peterborough people are moving home really quickly, yet the gap for the next two slices widens tremendously.

  • Top 25% quickest Peterborough home movers move every 4 years & 4 weeks
  • The next 25% quickest Peterborough home movers move every 11 years & 12 weeks
  • The next 25% quickest Peterborough home movers move every 18 years & 30 weeks
  • Whilst top 25% slowest Peterborough home movers only move every 25 years

When looking at the properties that fall into the later bands (i.e. the ones that don’t move/sell so often), they tend to be the larger properties where the homeowners have lived for 25/30 years plus.

The lesson we all should learn is that once people get into their 50’s and 60’s, their propensity to move home drops considerably. This means the properties on the lower rungs of the Peterborough property ladder do appear to sell quickly (as they are occupied by younger homeowners) yet once Peterborough people get older, their tendency to move diminishes. This puts a roadblock on the younger generation wanting to buy the larger Peterborough properties these mature homeowners live in.

What is holding the older generation back from selling and downsizing to free up homes for families that desperately need them? Some of it will be apathy, some of it will be holding on to the home that they brought their family up in, yet the bottom line is…

46.5% of the homes owned in Britain have two or more spare bedrooms.

As a nation, we need to rethink how we can encourage older homeowners to sell their large homes to release them to the younger families that desperately need them. Some suggest tax breaks, yet the Government won’t be in the mood to give huge tax breaks as the measures to protect the economy over the last 12 months will ultimately need to be paid back.

One thing I do know, we as a Country have seen (and will continue to see) a lot of demographic change together with an increasing elderly population, so it’s not just about how many homes we build, but whether we are building the right kind of homes the older generation will want to move into.

Interesting times ahead for the Peterborough property market!

If you have a Peterborough property to sell or let in the coming weeks, months or years and would like to know how this and other factors will affect you and your property … without obligation, don’t hesitate to give me a call or drop me line.

Peterborough Property Market: Is it Time to Stamp Out Stamp Duty?

Most people pay Stamp Duty Tax when they buy a property, house, apartment or other land and buildings over a particular price in the UK. The Chancellor, Rishi Sunak (quickly followed suit by the Welsh and Scottish Governments), announced last July that Stamp Duty was partially being suspended on all English property transactions up to £500,000 (£250,000 in Wales and Scotland) – a Stamp Duty Holiday.

That meant only 1 in 8 English buyers would pay any Stamp Duty Tax on their home purchase (if it was over £500,000), saving any buyer up to £15,000 in tax on the purchase. The problem is the property needs to have been purchased and bought by the 31st March 2021. Complete the transaction a day later, and those buyers will have to pay Stamp Duty.

The issue is local authorities are snowed under with local search requests, mortgage companies and conveyancing staff are working from home, so property transactions are taking much, much longer. This means many Peterborough (and UK) buyers who have currently sold (subject to contract) will miss out on the stamp duty saving.

Most (not all) estate agents have been warning the buyers and sellers in their property chains that some deals might not make the 31st March 2021 deadline and pleasingly, most people aren’t moving because of the Stamp Duty Holiday (they are moving because they need extra space because of the pandemic). However, it only takes one person in the chain not to be ‘singing off the same hymn sheet’ for the whole chain to collapse … so keep in touch with your estate agent.

A campaign by one of the national newspapers and an online petition to extend the stamp duty holiday has meant the topic could be debated in Parliament in the next few weeks, after 100,000 home buyers and sellers signed that petition, asking for an additional six-month Stamp Duty Holiday. The home buyers and sellers are worried the property market will collapse after March 31st when the Stamp Duty Holiday is removed.

The last time British home buyers were conscious of upcoming Stamp Duty changes, it distorted the number of properties sold. The bigger question though is, did it change the overall number of people moving home?

In November 2015, the then Chancellor, George Osborne, announced in his Autumn Statement that buy to let landlords would have to pay an additional 3% in Stamp Duty (over and above owner occupiers) for all property bought after the 1st April 2016. As shown in the graph below, this caused a surge in property buying (which we have seen since this summer with the Stamp Duty Holiday), with many Peterborough buy to let landlords completing their property purchase in March 2016, as they dashed to complete their property purchase before the tax increase.

In the 3 years of 2015/6/7, the average number of Peterborough properties sold (transactions) per month was 281 per month, yet in the month before stamp duty was changed in March 2016, transactions rose to 537, an uplift of 91.3% from the average or an extra 256 transactions in that month alone. Yet, look at the months of April and May, the property transactions numbers slumped, meaning in those two months combined, there were 144 less transactions.

So, if the Stamp Duty Holiday isn’t extended, what will that mean for the UK and Peterborough property market?

London and the South East seem to be particularly exposed to the removal of the Stamp Duty Tax break because it has such a high proportion of property priced between £300,000 and £500,000. These areas benefit from the highest tax savings relative to house price.

Yet, with the average value of a Peterborough home at £215,700, the stamp duty cost if the sale is delayed after the 31st March 2021 is £1,814 – a figure that shouldn’t break the bank

So, if the Stamp Duty Holiday isn’t extended – it might not be such the nightmare scenario as some people believe.

My advice to all buyers and sellers is to be constantly talking to your estate agent, your solicitor and your mortgage broker. With your estate agent to ascertain if they have asked every person (or asked the other agents in the chain to ask the question), “What if we don’t meet the stamp duty deadline?” With your mortgage broker and solicitor to give them all the information they need to ensure there are no delays with any information they request from you.

One final thought, some mortgage providers allow insurance policies to be purchased by your solicitor in case your searches (from the local authority aren’t back in time) … the cost of those will be much lower than the cost of the stamp duty … again, speak with your solicitor. Irrespective of whether you are a client of mine or not, if you would like a chat about anything mentioned in this article, don’t hesitate to contact me.

How Will the Brexit Deal Affect Peterborough House Prices and Your Mortgage Payments?

Christmas Eve brought the news that Boris Johnson had conclusively agreed on a Brexit deal for the UK with the European Union. This gave optimism that the economic turmoil of leaving the EU would be radically reduced, yet what will this ‘trade deal’ do to the value of your Peterborough home and the mortgage payments you will have to make?

Since the summer, the Peterborough property market has been booming, yet many commentators have cautioned that the momentum cannot last. With unemployment and the end of Stamp Duty Holiday on 31st March, the Halifax reported last week that they believed UK house prices would drop by at least 2% (and in some areas 5%) in 2021.

I find it fascinating the Peterborough property market has defied the doom and gloom swamping the wider British economy in the last seven months. The Peterborough property market has profited from the large swell in demand from better-off existing Peterborough households trying to buy larger Peterborough houses (as they are required to work from home) together with the added benefit of saving money from the Stamp Duty Holiday.

Peterborough house prices are 0.3% higher than a year ago, making our local authority area the 363rd best performing (of the 396 local authorities) in the UK.

With the Brexit deal being voted through in the Commons on the 30th December, many say this will boost the property market just as the Government-backed measures supporting the property market come to an end. Yet, in the face of rising unemployment due to the pandemic, the Brexit deal may do little more than avoid uncertainty for the Peterborough housing market.

What will happen to Peterborough house prices?

The Peterborough property market in 2019 was held back because of the uncertainty of the Brexit deal. In January 2020, we saw the demand released in the fabled ‘Boris Bounce’, only for buyer and seller activity to fall off a cliff in March during the first lockdown. It then took off like a rocket once lockdown was lifted. UK house prices are 4.19% higher today, year on year (although some areas are breaking the mould, like Aberdeen whose house prices have dropped by 5.1% and at the other end of the scale, Worcester’s house prices have increased by 11.9% year on year). A lot of that growth in UK property prices has been fuelled by buyers spending their stamp duty savings on the purchase price of their new home. Yet, it cannot be ignored.

Of the 103,800 workers in Peterborough, 5,700 are still on furlough (although roughly 40% of those people are still only on part-time furlough).

When the furlough scheme ends in April 2021, unemployment is likely to rise to in excess of 11%, whilst the protection for the homeowners utilising mortgage holidays will finish. 

Piloting the rocky shoreline of the recession is more important than any Brexit deal for Peterborough homeowners, buy-to-let landlords, buyers and sellers.

In April, the market will also be dealing with the end of the Stamp Duty Holiday, which is due to come to an abrupt halt on the 1st April 2021. Consequently, we will continue to see the house price index’s show growth in the first half of 2021. They will then recede as the  prices of Peterborough homes purchased after the 1st April 2021 reflect the lower price paid (because buyers would have had to pay for their stamp duty again). Therefore, probably by the end of 2021, the Halifax may be correct, and Peterborough house prices will be 2% to 5% lower than they are today, simply because of the stamp duty.

What will happen to mortgage rates?

The real benefit from the Brexit deal is that there will be no tariffs on most goods coming into the UK. 52% of all goods imported into the UK are from the EU (totalling £374bn per annum). The UK Government were planning to add between 2% and 10% tariffs under World Trade Organisation rules on the vast majority of those goods. Price increases because of those tariffs would have fuelled inflation, meaning the Bank of England would have to increase interest rates. Although 77.2% of British mortgages are on fixed rates (paying an average of 2.16%), eventually those increased Bank of England rates would have fed through into higher mortgage payments. To show you how vital low interest rates are …

the average Peterborough homeowners’ mortgage is £327.26 pm, owing an average of £133,424.

Yet if interest rates rose only 1.5%, Peterborough homeowners’ monthly mortgage payments would rise to £494.04pm, and if interest rates were at their 50-year average, then the mortgages payments would be an eye-watering £962.13pm (note all mortgage payment figures mentioned above are only for the interest element of the mortgage- the capital repayment element would be additional and variable depending on the length of mortgage).

As I have mentioned many times in the articles I have written about the Peterborough property market, low interest rates are vital to ensure we don’t have a property market crash. That’s not to say just because they are at an all-time low of 0.1% to aid the economy that there won’t be some form of realignment of property prices later in the year (as mentioned above). Yet low interest rates mean people can still pay their mortgages, so there won’t be panic selling. That would mean there won’t be a flood of property come to the market (like there was in the 1988 and 2008 property crashes when interest rates were much higher), suggesting property prices should remain a lot more stable.

No Deal Brexit – The Prediction For Peterborough House Prices

Roll the clock back to April 2020, and major financial economists and property market commenters were sounding the alarm. The very best-case scenario was a 5% drop in property values by the end of the year, and most were in the 10% to 15% range. They forewarned the Covid-19 stimulated recession would trim tens of thousands of pounds off the value of Peterborough homes.

Yet the Peterborough property market seemed not to get the memo on that, and now as we find ourselves at the end of 2020 and the worst of lockdown restrictions appear to be passed, vaccinations on the way and economy starting to grow, Peterborough property prices seem to be doing quite well.

What happened to the Peterborough house price crash that wasn’t?

Before I answer that, it reminded me of what the Treasury said in 2016 about a leave vote on the Brexit referendum. The considered opinion of the Treasury was house prices would drop by 18% if the Country voted to leave the EU, so let us see what that would have done to Peterborough house prices if that had taken place and then what exactly has happened in the last four and half years …

 Average Value
2016
Predicted Drop By The Treasury because
of Brexit
Average Value
Today
Uplift in Value
in Last 4.5 Years
% Increase Since
Brexit Vote
Peterborough
Detached
£282,400£231,600£313,500£31,10012.0%
Peterborough
Semi
£179,000£146,800£196,900£17,9009.0%
Peterborough
Terraced/ Town House
£145,200£119,100£155,700£10,5008.2%
Peterborough
Apartments
£108,100£88,600£120,300£12,20010.3%

So why has the Peterborough property market not matched the

property pundits twice in the last five years or so?

Well for most of us, owning a property is about having somewhere to live rather than an investment (an Englishman’s home is his castle??). Nevertheless, once a homeowner is on the proverbial ‘property ladder’, it cannot be denied that it is eternally beneficial to know, as a homeowner, that you have made a healthy investment in your home and that the value will rise to alleviate the ache of trading up market — or down market when you retire.

Those Peterborough homeowners who own detached homes would have made an average of £31,100 profit, a rise of 12.0% or a weekly profit of £119.62 — calculated between the price they would have paid in the summer of 2016 and the price they would sell for today. Looking at the weekly profit for all property types in Peterborough since the Brexit vote …

  1. Peterborough detached homes weekly profit of £119.62 per week
  2. Peterborough semi-detached homes weekly profit of £68.85 per week
  3. Peterborough terraced homes/town houses weekly profit of £40.38 per week
  4. Peterborough apartments weekly profit of £46.92 per week

Whilst it is no surprise the property market boom was inspired by the Chancellor’s Stamp Duty holiday, this is not exclusively the Chancellor’s achievement. The three ‘D’s have been with us throughout 2020, Covid or no Covid (Debt, Divorce and Death), together with a huge shift in the way Peterborough homeowners see their homes.  With us cooped up during the lockdown and working from our dining room tables, the want and need of Peterborough people to have a home with an extra bedroom to work from, together with a garden, has been one of the most challenging this year… hence the rise in demand.

So, what of 2021? It’s true that the country will have high unemployment, yet at the same time, we have ultra-low interest rates and for the last 20 years, on average we have only built 150,000 households per year as a nation, but needed 300,000 per year to keep up with immigration, people living longer and changes in the way households are made up (compared to the Millennium).

Many people can predict what will happen – yet none of us really know what will actually happen to the Peterborough property market in 2021.

Covid was a black swan event and the fallout from that, I believe, has changed Peterborough peoples’ lives and their lifestyles, especially how they see their home. Instead of making predictions, nothing can get away from property market fundamentals, which have driven price booms on the back of high demand for homes and low supply (i.e. properties coming onto the market) and price crashes on the back of over-supply and low demand. Only time will tell if, in 2021, the Peterborough property market will see a flood of properties coming to the market because of debt or the demand for larger homes continues to rise unabated.

Please let me know your thoughts on the matter.

Will the Peterborough Property Market Crash in 2021?

… and the three reasons why it will not be the catastrophic scenario some are predicting

In the last few months, the Peterborough (and UK) property market has resisted and flouted every economist’s prediction. With the economy a shadow of its former self, unemployment set to hit 11.9%, the Government on track to borrow nearly half a trillion pounds to pay for Coronavirus support packages etc., all of this has had no effect on Peterborough homeowner’s enthusiasm or capability to want to move home. It highlights the influence of both the emotional impact of lockdown and the enticing appeal of saving thousands of pounds on your Stamp Duty Tax bill.

For the last few months, the Peterborough property market has been akin to a surfer, riding an unexpectedly large wave. The question is, will the surfer crash down (i.e. the property market) onto the rocks or will it calmly arrive at the beach unscathed? Well looking at house prices firstly…

UK house prices are 4.7% higher than they were 12 months ago according to the Land Registry, whilst in Peterborough they are 1.9% lower

Looking at the data over the country, things overall are looking good for property prices. Yet it must be remembered the Land Registry data is on completed house sales and is always a couple of months behind, so this data is for house sales up to September that were agreed in the spring. Also, it does not take into account the prices being paid today on Peterborough homes (as they will only show in statistics the Spring and Summer of 2021 when the sale completes).

Peterborough house prices will inevitably ease in 2021

Anecdotal evidence over the last few months has suggested buyers are using their Stamp Duty savings on the price they are prepared to pay for the Peterborough home of their dreams, so when the Stamp Duty holiday finishes in Spring 2021, we will see a reduction in the price Peterborough properties sell for, as buyers will now have to hold back some of their cash to pay the Stamp Duty tax.

Mortgage approvals at a 13 year high

A better statistic to judge the property market is by the number of mortgage approvals. As the vast majority of house buyers need a mortgage, that is another good place to look at the numbers as they are much more up to date than the Land Registry figures. The Bank of England recently stated 97,500 mortgages were approved last month, up from the long-term average of just over 65,400 per month. This was the highest number of mortgage approvals since September 2007, and a whole third higher than mortgage approvals in February 2020 when we had the Boris Bounce in the property market.

As a country, we are due to smash through 2019’s 524,000 total number of mortgage approvals this month, despite the fact that the property market was closed for nearly three months in the spring. It’s vital to remember, that mortgage approvals do not equate to people moving home, as many of you reading this can attest to … property sales do fall through.

I do have apprehensions that many Peterborough people, buying and selling their Peterborough homes and in a chain, may not be able to realise the move before the Stamp Duty rules change at the end of March 2021, as there is a massive backlog with mortgage lenders, local authorities’ and the searches, chartered surveyors surveying the property and solicitors with the legal work, all combining to slow down the house selling and buying machine.

If you are in chain at the moment, you must constantly be talking to all the parties involved and ensuring everything is focused on getting the sale complete by the end of March. You have a responsibility to get information requested back in hours, not weeks … because if you don’t, you might not get your Peterborough home move through before the end of the Stamp Duty holiday, and without that discount, someone in your chain may pull out of the sale altogether and the chain will break. 

The number of people moving home in Peterborough is anticipated to drop sharply after the Stamp Duty holiday ends at the end of March 2021

And that is probably going to be the biggest impact on the Peterborough property market in 2021. Yes, there will be a slight readjustment in the prices paid after March 2021 (as mentioned above) yet, a reduction in the number of people selling their Peterborough home does not inevitably lead to a house price crash.

Yes, there will be a number of people who have to sell in 2021 because they have lost their jobs (i.e. ‘forced sales’). In the last two ‘Property Market Crashes’ of 1988 and 2008, there were a large number of forced sales in a short period of time (because business owners had to sell their home as their business had gone bankrupt because of the Credit Crunch, as well as people who had lost their job), increasing the supply of properties coming to the market in 1988 and 2008.

This in turn pushed Peterborough house prices down as the property market was flooded with lots of property to sell in a short period of time. Yet this time, we have had the cushion/parachute of Bounce Back Loans, Furlough and Mortgage Holidays over the last 9 months.

Also, another important factor about the last property market crashes were the levels of interest rates and the amount borrowed.  

Interest rates are the key to the future of the Peterborough property market

In 1988, mortgage interest rates were an eye watering 11.5% and 6% in 2008, meaning mortgages were much more expensive compared to the 0.1% rate we have today. Also, with 77.2% of mortgagees with fixed rate mortgages, and only 1 in 21 mortgages owing more than 90% of the value of their home (and 1 in 303 mortgagees owing more than 95% of the value of their home), negative equity should not be so much an issue like it was in 1988.

This means most Peterborough homeowners are in a much better place to weather the storm of 2021, than they were in 1988 and 2008

I foresee many Peterborough sellers will simply wait until activity in the Peterborough property market picks up again before placing their property on to the market. This means fewer properties will be placed onto the market for sale in the later part of 2021, meaning Peterborough house prices will tend to hold up. The people that will be affected by less properties coming onto the market will be estate agents, solicitors and home removals people.

I also believe there will be ‘interesting investment opportunities’ to be had for Peterborough buy to let in the latter half of 2021 with the potential changes in Capital Gains Tax regulations, although those won’t go on the open market, so do keep your ear to the ground and build relationships with all the letting agents in Peterborough so you get to hear of the property portfolios coming up for sale (as they tend to sell ‘off market’). Again, if that’s something that interests you – do drop me a line.

So, where is the Peterborough property market heading in 2021?

Well, the Peterborough property market (aka our “surfer”) has seen house price growth of 46.2% since 2009 … and this has been fuelled on the back of…

  1. Ultra-low interest rates mean money is cheap to borrow and so mortgage payments are low. With the Bank of England pumping £150bn into the economy in November with Quantitative Easing (QE) to add to the £725bn they already spent on QE since 2009 – interest rates will continue to stay low for some time.
  2. There has been an increase in the demand for housing with annual net migration of 214,400 since 2009 (meaning 96,700 additional households per year have been required since 2009 just to house those people – a total of 1,063,700 households).
  3. The average age of death has risen by 2.1 years since 2008 in the UK. People living longer, delays property from being released back onto the property ladder. For every extra year of life the average Brit lives, an extra 290,850 households are required in the UK.

None of these things have changed because of Covid.

As a country, we have only built on average 165,100 homes a year since 2009. Supply and demand show that whilst we will probably have a turbulent choppy ride on the 2021 wave (because of the economy) our surfer (aka the property market), with long term demand for housing outstripping supply since the 1980’s, will continue to ride the wave (probably not as large as it has been in 2020) as the ultimate long-term outlook for the property market in Peterborough looks good.

All this means demand for decent, private rented Peterborough property will be good as long as the property ticks all the boxes of the tenants. If you are a Peterborough landlord, whether you are a client of mine or not, feel free to drop me a line to pick my brain on the future of the buy to let market in Peterborough.

Peterborough Landlords and Second Homeowners Will Probably Save Money from the Proposed New Capital Gains Tax changes

If the proposals were adopted in full, some Peterborough landlords would pay £8,000 less Capital Gains Tax than they would currently

The government borrowed £394bn this financial year (April ‘20 to April ‘21). This figure does not include the cost of November lockdowns and support measures, which means the final bill will probably be over half a trillion pounds. Ultimately these billions will need to be paid back to cover the cost of Coronavirus.

The Office of Tax Simplification (OTS) published a report for tax reform and, as was predicted by many in the press, the Government Dept suggested the Chancellor contemplate readjusting current Capital Gains Taxation (CGT) rates with a person’s own Income Tax rates. This would mean increasing the rate of CGT for selling a buy to let property from 28% to 40% for high-rate taxpayers and 45% for additional rate taxpayers. To add salt to the wound, the OTS is suggesting cutting the £12,300 annual CGT allowance.

This has led to many Peterborough buy-to-let landlords contacting me in the last few weeks, wondering if this is the time to exit the Peterborough buy to let property market, especially as they have been hit by growing levels of rental legislation and higher taxes.

With tax bills about to go through the roof, is this the time to leave the Peterborough buy to let property market?

Yet, like all things, the devil is in the detail as Peterborough 2nd homeowners and Peterborough landlords may well finish up having lower CGT tax bills with these new taxation proposals, even though the CGT restructurings are being introduced to raise the much-needed cash for the Government.

Apart from the suggested cut of the annual CGT allowance and increase in the CGT percentage rates, the OTS report also proposed reintroducing rebasing and indexation. In layman’s terms, the OTS are suggesting all gains made before 2000 would not be taxable (rebasing) and any capital gains would be calibrated to account for inflation.

So, what would that actually look like for a Peterborough landlord? Let us assume we have a Peterborough landlord who bought a Peterborough buy to let property in 2000.

Under the current CGT rules

  1. The average value of a Peterborough property in 2000 was £74,100
  2. Today, that same Peterborough property has increased in value to £223,200
  3. Meaning a profit of £149,100
  4. As our Peterborough landlord is a high-rate taxpayer (earning £60,000 a year), their CGT bill after the annual allowance would be £38,304

Under the new proposed CGT rules

Under the new proposals, the CGT payable (assuming the CGT rate of 40% and a lower annual allowance of £5,000), the same Peterborough landlord would only pay £30,165 – a saving of over £8,000.

And the savings don’t stop there. Remember, under the new OTS proposals, all capital gains made before 2000 would also be tax-free.

However, let us not forget the responsibility of the OTS is to report on tax simplification opportunities, not to set Government taxation policy. None of us have a crystal ball on what Rishi Sunak will do with CGT on buy to let property or second homes. Although, as time has always taught us with investments, often the worse thing to do is to make impulsive decisions on what MAY happen.

You have to remember, CGT only gets charged when you sell or transfer your investments, and most people use their rental investments to provide their income. If you did sell up, the best 90-day building society accounts are obtaining 0.8% pa, the stock market is a rollercoaster (good luck with that) and Government 10-year bonds are paying a princely 0.324% pa … where else are you going to invest to get the income Peterborough property investments provide?

Property is an asset you can touch, feel and ultimately understand. Maybe, this is the time (if you haven’t already) to take portfolio advice on your Peterborough buy to let investments? Many Peterborough landlords do so, whether they use our agency, another Peterborough agency or you manage your property yourself. The service is free of charge, we don’t need to meet face to face as we can do it over Zoom and it’s all without obligation. I promise to tell you what you need to hear – not what you want to hear … what do you have to lose?

As Peterborough First-time Buyers are Being Locked Out of the Peterborough Property Market – Rents Have Risen by 4.1%

With the banks reducing the number of low deposit mortgages (i.e. deposit of 10% and below) since Covid-19 hit in the spring, this has meant that the number of Peterborough first-time buyers has been decreasing quickly, meaning many of those would-be Peterborough buyers wanting to make the first step on the Peterborough property ladder will stay in the Peterborough rental sector.

This has caused demand to grow amongst Peterborough renters for larger homes to ride out Covid, as they hunker down for the long haul to wait for normality to return to the property market. This has caused

Peterborough rents to rise from £665 to the current £692 per month over the last 12 months, an increase of 4.1%.

Interestingly, the opposite is happening in Central London, where the rents tenants are having to pay have dropped by 3.8% in the last 12 months, as demand has dropped like a stone. It appears Central London tenants are looking to move out to the suburbs, in search of bigger homes, gardens and green open spaces. For example, the average rent for a 1-bed apartment in St. John’s Wood currently stands at a very reasonable £1,817 per month whilst a 2-bed apartment in Kensington and Chelsea is currently at an average bargain rent of £3,715 per month (yes, they might be low compared to last year, yet for us in Peterborough, that still seems like a lot of money!). Also, there has been further downward pressure on Central London rents, as many Airbnb landlords have dumped their short-term holiday let properties onto the long-term rental market as the tourism in the capital has dwindled because of the pandemic.

This has been the sharpest drop in Central London rents since the summer of 2009, when the property market was still stumbling from the Credit Crunch.

This means there is a reverse of the trend of the 2010’s (2010 to 2018 to be exact), when initially the London property market was shooting up whilst the rest of the country was in the doldrums. Then, when the rest of the UK did start to rise slowly in 2013, London kicked on even further like a rocket … yet now it appears the opposite is happening.

Getting back to Peterborough, according to the Land Registry property values currently stand 0.8% higher than a year ago; this is split down as follows:

  1. Detached Peterborough homes 1.2% higher
  2. Semi-detached Peterborough homes 1.7% higher
  3. Townhouse/terraced Peterborough homes 1.0% higher
  4. Peterborough apartments/flats 2.3% lower

Yet, do remember, these figures do NOT take into account the prices paid by desperate Peterborough buyers this summer, often paying top dollar to secure the property. This will only filter through in the figures released in the spring.

So, why are the banks curtailing the number of low deposit mortgages, meaning that first-time buyers must find a much larger down payment before they are able to buy their first Peterborough property?

The reason is the banks are fearful of a house price crash in 2021 (although if you recall I wrote about that a few weeks ago and the reasons why that is less likely to happen). They too are afraid of the frothy nature of the property market since the end of the first lockdown in late spring. The bank is lending its own money to buyers and no mortgage lender wants to be holding an enormous amount of these types of high percentage mortgages if house prices fall in 2021, because the bank would be saddled with negative equity and repossession on their hands (and we all know what that did to the housing market in the late 1980’s and early 1990’s as repossessions rocketed).

This can quite clearly be seen in the pricing and availability of low deposit mortgages. As the Bank of England has reduced its base rate to 0.1%, in the last 12 months 10% deposit mortgages rates have actually increased from 2% to 2.8%. Also, when lenders have been offering 10% mortgages throughout the summer, borrowers have had only a 24-hour window to commit before the lender withdraws the mortgage product from the market because of over subscription. As with all economics, if demand is greater than supply, the price goes up. That extra 0.8% doesn’t sound a lot until you realise a first-time buyer would have to pay an additional £167 per month in interest payments on a 10% deposit mortgage, assuming they borrowed £250,000.

However, it’s not all doom and gloom for first-time buyers as there are embryonic signs that the 10% deposit mortgage market could gradually be returning to normal, as I have recently heard some lenders taking up to a week for their 10% deposit mortgage offers to run out. Fingers crossed!

So, what does all this mean for Peterborough landlords? Those Peterborough landlords with properties with gardens and larger rooms will be seeing increased demand. The ability to have pets in the rental property is also an advantage, and depending on the property, can add a decent premium to the rent that can be charged.

One final thought though for all homebuyers in Peterborough, be aware it’s going to be very challenging to get your house purchase through in time to meet the 31st March 2021 stamp duty holiday cut off if you are starting the process in November. Make sure your lender and solicitor have the capacity to meet that deadline and when you are asked for information, you drop everything to provide it. The odd days’ delay here and there will mean the difference between you getting the keys for your new Peterborough home before the end of March 2021 and saving thousands of pounds in Stamp Duty Tax … or feeling a fool from the 1st April 2021 and having to pay the tax!

Each Peterborough landlord could be hit by a £23,829 bill

…and the 5 ways on how all Peterborough landlords can escape the worst of the coronavirus downturn on their Peterborough rental property.

With the second lockdown starting on the 5th November 2020, does this mean Peterborough landlords can wave goodbye to their Peterborough buy-to-let investment and see it go up in smoke on the bonfire of buy-to-let dreams, like a Guy Fawkes puppet?

With many Peterborough tenants at risk of losing their jobs after the furlough scheme ends next March and as the reverberations of the coronavirus recession hit this winter, what does this all mean for Peterborough landlords and what can they do to mitigate the risks?

Since the spring, most Peterborough tenants and buy-to-let landlords have been protected from the coronavirus crisis thanks to the banks with their mortgage payment holidays and job support schemes.

Before the second lockdown was announced on the 31st October, it was expected, that as the furlough and mortgage payment holidays were due to finish on Halloween, there would be some serious fallout from those schemes finishing. One silver lining from the lockdown (if you can call it that) is that mortgage payment holidays and furlough have been extended, yet does all that just kick the can down the road?

The question is, what can Peterborough landlords do to mitigate the financial risk on their Peterborough buy-to-let investment?

  1. Help Your Peterborough Tenants Get the Financial Support They Are Entitled To 

Billions of pounds are being spent by the Government to help those people whose income has been hit by coronavirus. The better Peterborough letting agents and self-managing landlords are supporting, guiding and helping those Peterborough tenants in financial difficulty to gain a better understanding of the Universal Credit (UC) processes, systems and payment levels, to enable their tenants to pay the rent and ultimately indirectly, help their Peterborough landlord. Also, if you are a Peterborough tenant, and that support isn’t given when you ask, don’t forget Peterborough City Council do hold special cash reserves for discretionary housing payments, which can be utilised to close the gap in rent between what UC pays and your current rental commitments. Also, the Government’s Money Advice Service and Citizens Advice are a good online resource for you to find out what you are entitled to.

2. Adopting, Adapting & Improving Your Peterborough Buy-to-Let Property

Demand for gardens or office space means Peterborough landlords will need to think outside the box. Those Peterborough homes with tenants sharing (e.g. HMO’s and shared houses) might need to price their pre-coronavirus 4 bed sharing house to say maybe a 3 bed sharing house plus a work/office room and, if you haven’t already, installing a top of the range, fast and dependable internet connection could be the thing that swings it. Outdoor space and gardens are really high on Peterborough housebound tenant’s wish lists, in fact I have come across some Peterborough tenants demanding that new rental properties have a landscaped garden or those that bought a dog or cat for company during the first lockdown, are looking for their Peterborough landlords to relax their ‘no pets policy’.

3. Hold On to Your Good Peterborough Tenants

Those Peterborough buy-to-let landlords with decent tenants, who find themselves in financial dire straits should consider attempting to keep them, even if their own monetary circumstances mean they have to decrease their rent somewhat over the short term. Now of course, I would expect tenants need to prove their circumstances, yet if their plight was real, surely it would be a wise choice to reduce the rent by perhaps £50 a month and support your tenants? You know they are taking great care of your Peterborough rental property and rather than risk the issue of advertising your empty buy-to-let property  – particularly when there is no assurance you will achieve your existing rent and ultimately risk drawn-out void periods with no rent coming in at all. What I would suggest therefore,  in such circumstances, is that you create a new Assured Shorthold Tenancy agreement with a longer term with your existing tenant at a lower rent – a temporary measure but with peace of mind for both parties which can then be reviewed once that tenancy is up for renewal

4. Carry out Firmer Checks on Your Prospective Peterborough Tenants 

Many private Peterborough landlords and a few slipshod Peterborough letting agents tenant checks are somewhat lacking in their depth. Trust me, there is tenant referencing … and then there is ‘proper’ forensic tenant referencing. As certain parts of the British economy have been hit harder than others, Peterborough landlords must consider when choosing their new tenants, the type of work they do or who their employer may be, to enable them to decide on their future capacity to meet their rental commitments

5. Rent Guarantee Insurance for Your Peterborough Rental 

There are still insurance companies offering landlord rent guarantee insurance if your tenants become unable to pay the rent. Many insurance firms removed these insurance products in the first lockdown, yet some have returned to the insurance market although insurance premiums have gone up in price. Remember to check the small print of the insurance, although you will get a lower insurance premium if you can show stringent tenant referencing (as per the previous point). 

6. The Nuclear Option – Eviction

Peterborough landlords need to be conscious that, should their tenancy run into trouble, the Government have changed the rules when it comes to eviction during the coronavirus pandemic. Going into the first lockdown, there was already a backlog in the courts and now, just before going into the second lockdown, bailiffs have been instructed not to enter rental properties in high risk Tier-2 and Tier-3 Covid-19 areas.

Eviction really does have to be the very last option. Negotiation or arbitration will nearly always deliver quicker and improved outcomes for both parties. Peterborough landlords who do come to mutually agreeable arrangements with their tenants by briefly reducing the rent, or allowing payment holidays with legally enforceable pay back schedules should ensure they get the agreed terms in writing and run by a solicitor or their agent (feel free to drop me a note if you need advice).

However, if eviction is required, it doesn’t mean the tenant gets off ‘scot free’. Evicted tenants, depending on their circumstances, will either be placed temporarily into an inexpensive B&B, asked to move in with family or given one of the local authorities temporary accommodation properties, with the goal to then move them into long term council accommodation (as the chances of obtaining private rented accommodation would be slim with agent’s heightened reference checks – more of that at the end).

The Potential Cost of Evicting a Problem Peterborough Tenant

The average rent for a Peterborough property currently stands at £692 per calendar month.

Thankfully, evictions are very rare. Last year before lockdown, tenants from 201.4 rental properties were evicted each working day in the UK … but if yours was one of those, that is still a potentially large cost.

Working on the basis that most evictions from the first rent not being paid, through to eviction, refurbishment of the kitchen, bathroom, carpets and décor (because often these do need sorting/replacing) were taking on average between eight to nine months before coronavirus hit, (plus the mortgage payments), this means a Peterborough landlord could be hit by a £23,829 bill, broken down as follows:

Missing rent (8½ months)£5,882
New kitchen£3,629
Bathroom£2,020
Carpets£2,405
Redecorate£1,834
Agents fees£618
Legal fees & court fees£3,500
Mortgage payments£3,941
Total£23,829

What that would be now is anyone’s guess – yet it could be a lot more.

This is why it is so important to get the best tenant from day one. Many Peterborough tenants, who know they wouldn’t pass the references of letting agents, are attracted to those private landlords who don’t use a letting agency, as they know their referencing checks are not as strict and may be a softer touch. That’s not to say going with a letting agent is a guarantee you won’t need to evict; it just means the chances are much, much smaller. Like anything in life – it’s a choice. Whether you are a Peterborough landlord who uses a letting agent or not and feels their reference checks are not to the standard or level you might hope or if you want a chat

Peterborough’s ‘Generation Rent’ to Become ‘Generation Buy’?

Boris Johnson has attracted both praise and horror in equal measure with a new plan for 95% mortgages to help beleaguered first time buyers to get on the property ladder, but would that expose UK taxpayers to too much risk? In this article I discuss the implications of what that would mean both nationally and locally in Peterborough.

With the Peterborough property market taking off due to the stamp duty holiday introduced in the summer, Boris Johnson announced at the recent Tory Conference a plan to offer first time buyers long-term low interest rate 95% mortgages (meaning they would only need to raise a 5% deposit). Yet when someone borrows more than 75%, the banks normally take out insurance in case the buyer defaults and the bank lose money if the property gets repossessed.

When the economy is good, the risk is low – so the insurance premiums are also low for the banks – meaning they are happy to lend high percentage loans. Yet, nobody could deny we are entering a period of uncertainty in the coming 12/18 months, meaning the insurance premiums for the banks have gone through the roof.

Mortgage companies have avoided riskier high percentage first time buyer mortgages since the start of the Coronavirus predicament. At the end of February 2020, there were just under 400 95% loan-to-value mortgage products accessible for first time buyers, yet today that figure stands at just 26.

Another reason for removing the number of 95% mortgages was that the demand for lower percentage loans exploded after lockdown was lifted, and with many mortgage staff still working from home, the banks and building societies focused their attention on getting those (less risky) mortgages sorted first. Therefore, they removed the higher percentage loans from their books, so they weren’t swamped with too much work … so, one must ask, should the Government take on the risk from mortgage providers in the form of a guarantee from the Government — sparking concern among economists the Government is already burdened with debt – does it need anymore?

Yet taxpayers have been funding a similar scheme for years. The Help to Buy scheme, which allows first time buyers to buy a home with a 5% deposit (and the Government guaranteeing between 20% to 40% of the loan) has been in operation since 2013. Taxpayers are already guaranteeing £16.049bn of loans for 224,133 first time buyers, and when we look closer to home locally, since 2013 …

2,106 first time buyers in Peterborough have used the Help to Buy scheme to help buy their home, relying on the Government to guarantee them on average £40,106

That means in Peterborough alone, £84,463,236 is at risk if those Peterborough homeowners’ default on those pre-existing Help to Buy Loans … yet the default rate is quite low.

So, should the Prime Minister be playing with the housing market? Ought he instead allow open market forces to be applied to the property market, allowing it to find its own normal and leave the mortgage providers to decide on mortgages based on risk, because all the Prime Minister will potentially achieve is a synthetic rise in property values?

Some in fact have argued it would be better to spend that public money on delivering affordable rental properties?

However, isn’t it better in the long run for the country as a whole that British people own their home rather than rent because the Government will have rent to pay for those tenants when they retire if they are on the basic (low) state pension?

Personally, I don’t disagree with the initiative, yet all I am querying is, what are the Peterborough first time buyers going to be able to buy? The Peterborough property market is already quite drawn-out, as ultra-low interest rates have augmented the gap between the first home and the second home, the second home to the third and so on and so forth, so is this initiative fashioning a massive demand that will inflate property prices up the Peterborough property ladder still further and ultimately lead to even more frustration down the line?

However, could this be the very thing that saves the Peterborough property market in 2021?

Firstly, with the stamp duty holiday due to finish by the end of March, there are suspicions the property market will stall. And secondly, the very popular Help to Buy scheme mentioned above also finishes at the end of March 2021. This boost instead of fuelling house price inflation could stabilise the property market.

In fact, the Government are hoping the property market will help power us out of recession. The early signs are good as the Peterborough housing market has exploded as a result of the stamp duty holiday introduced in the summer. It certainly needs to as the country’s GDP only grew by 2.1% in August, down from 6.4% in July, 9.1% in June and 2.7% in May.

As a country, our GDP is still 9.2% below the levels seen pre-Covid. With the property market doing well, the country remains on course to leave recession in Q3, yet with the impending triple peril of rising unemployment (after furlough), further lockdown restrictions and a messy end to the Brexit transition period does this mean we are potentially in for an interesting ride?

Only time will tell if ‘Generation Buy’ will help save the property market, the economy and ultimately Boris? In the meantime, I think it will be a safe bet that people still need homes to live in … and irrespective of what happens to the property market, with that simple fact, the winners in all of this will be Peterborough buy to let landlords.

Tell me your thoughts on this …

Peterborough 2nd and 3rd Time Buyers Finding it Tougher (and slower) to Move up the Peterborough Property Ladder.

Post lockdown, the need for Peterborough families who want bigger homes has meant Peterborough homebuyers must now pay considerably more to trade up to that larger home…

One thing that has come out of lockdown has been the inexorable movement of Peterborough households wanting to upsize to a larger home. Often considered to be first time buyer properties, the smaller 1st step on the property ladder one and two bedroom properties are selling quite well, yet demand for those properties on the 2nd and 3rd step rungs on the Peterborough property ladder (i.e. the three or four bedroom homes) has been even greater.

This demand has been driven by Peterborough buyers looking for more living space, especially those looking for an area or room to work from home (be that a bedroom, reception room or even an outbuilding converted into a study).

The average asking price of a 3 bed Peterborough home is £215,700, whilst for a 4 bed Peterborough home it stands at £329,500

As you can see, quite a jump for an extra bedroom! The heightened contest for 2nd and 3rd step Peterborough homes for that extra bedroom has pushed demand to a record in October for those looking to take the next step up the ladder. Historically, as a family and its household income grow, the need for more space has permanently been the No.1 reason for moving home, yet now there is a new need for additional space to facilitate people working from home. This means not only do we have growing families wanting larger Peterborough homes, there are also the people needing the same larger homes for space for a home office. Therefore, looking at the current stats, as you can see, the Peterborough property market is doing quite well…

47.5% of all 3 bed and 44.5% of all 4 bed homes in Peterborough are sold (subject to contract)

Roll the clock back to pre-Covid and ask any Peterborough homeowner who had enough bedrooms for their children if they wanted an additional bedroom, and most homeowners would say that was very much a ‘nice to have’, yet not a ‘must have’. With us all being cooped-up over the spring this year, demand for additional rooms is at a high, with those presently looking for their next larger Peterborough home are probably going to find that only offers close to (if not sometimes over) the asking price will be accepted.

Even though no properties sold during lockdown, putting the Peterborough (and UK) property market on hold for many months, many more people buying their next Peterborough home will have more than made up for it since lockdown was lifted as the portals have stated if the UK property market remains at its existing trajectory, then the number of properties sold YTD by the end of October 2020 will be greater than YTD October 2019.

Yet all these properties sold are causing another issue. Just because a property becomes Sold Subject to Contract (SSTC) doesn’t mean the property is actually “sold”. Before going into Covid, it was taking approximately 19 weeks between agreeing a sale price (and instructing lawyers) to completing the sale. Yet, because we are nationally running at 140% to 150% of properties SSTC (than where we normally are at this time of year), many of my estate agents colleagues are having to manage expectations with buyers and sellers, and tell them that the date they are going to move will take a little longer.

The elephant in the room is that the temporary stamp duty holiday ends on the 31st March 2021

It sounds an age away, yet trust me, nothing could be further from the truth.  Adding an extra month for the additional homes in the bottleneck means even if the sale of your Peterborough home was agreed today, that would take us to the 3rd week in March … that’s cutting it very close for the stamp duty holiday.

It is so fundamental for buyers and sellers of Peterborough homes to work meticulously with their estate agent, solicitor and mortgage lender. For example, there are less staff in the local authorities to do the local searches, bank staff are working from home meaning mortgages are taking much longer to get approved, and conveyancer/solicitors are snowed under with work. Therefore, if you get a document that needs filling in, are asked to provide documents, pay disbursements or questions need answering, do it immediately and without delay. A day here and day there will snowball and could mean you miss the stamp Duty holiday … and that could cost you thousands and thousands of pounds.

The bottom line is that we haven’t seen this sort of pressure on the UK property market since 1987, when dual-MIRAS was abolished. Now, as we are slowly starting to come out of Covid, with many legal and banking staff working remotely or still on furlough, the perfect storm has occurred with unprecedented demand from buyers looking to move post lockdown. The best advice I can give is, as soon as you put your property onto the market, find a solicitor that has the capacity to work with you, then instruct that solicitor to start work immediately to prepare the paperwork, so once you have a buyer, things can move more smoothly and quickly. The last thing you want is to lose out on saving thousands of pounds by missing the stamp duty holiday by a whisker.