Fitzrovia £99 million Mortgage Powder Keg

Eight years ago, in the summer of 2007, hardly anyone had heard of the term ‘credit crunch’, but now the expression has entered our daily language and even the Oxford Dictionary.  It took a few months throughout the autumn of 2007, before the crunch started to hit the Fitzrovia   Property market, but in November / December 2007, and for the following seventeen months, Fitzrovia   property values dropped each and every month like the proverbial stone. The Bank of England soon realised in the late summer of 2008 that the British economy was stalling under the continued pressure of the Credit Crunch. Therefore, between October 2008 and March 2009, interest rates dropped six times in six months from 5% to 0.5% to try and stimulate the British economy. 

Thankfully, after a period of stagnation, the Fitzrovia   property market started to recover slowly in 2010, but really took off strongly in late 2013 / early 2014 as property prices started to rocket. However, the heat was taken out of the market in late 2014/early 2015, with the new mortgage lending rules and some uncertainty, when some people had a dose of pre–election nerves.  

With the Conservatives having been re-elected in May, the Fitzrovia   property market regained its composure and in fact, there has been some ferocious competition among mortgage lenders, which has driven mortgage rates to record lows. Whilst I have no actual figures to back this up, I know an awful lot of long serving bank managers, mortgage arrangers and people in the finance industry, all of whom have told me on previous occasions when interest rates rose (1987, 1992, 1997 and 2003), it wasn’t the first rate rise that was the catalyst for many homeowners and landlords to remortgage but the second or third increase.  The reason being that it was only by the time of the third rate rise,  it started to hit the wallet.  However, the issue is, by the time of the second or third rate rise the best fixed rates, were in all instances, no longer available as they had been pulled by the banks months before.

But here is the good news for Fitzrovia   homeowners and landlords, over the last few months a mortgage price war has broken out between lenders, with many slashing the rates on their deals to the lowest they have ever offered.  I read that the well respected UK financial website Moneyfacts said only a couple of weeks ago, the average two year fixed rate mortgage has fallen from 3.6% twelve months ago to just under 2.8%.

Interestingly, according to the Council of Mortgage Lenders, the level of mortgage lending had soared to a seven year high in the UK.  So what about Fitzrovia?  In Fitzrovia, if you added up everyone’s mortgage, it would total £99.4 million.  Even more interesting is when we look at Fitzrovia   and split it down into the individual areas,

• W1T 1 - £15.2m,
• W1T 2 - £10.7m,
• W1T 3 - £20.3m,
• W1T 4 - £16.5m,
• W1T5 - £12m,
• W1T6 - £14.5m

Since 1971, the average interest rate has been 7.93%, making the current 0.5% very low.  So, if interest rates were to rise by only 2%, according to my research, the 839 Fitzrovia   homeowners, who have a variable rate mortgage would, combined, have to pay an approximate additional £1,128,600 a year in mortgage payments.  That means every Fitzrovia   homeowner with a variable rate mortgage, will on average have to pay an additional £1,345 a year or £112 a month in interest payments.

I know over the last couple of posts, I have talked about mortgages a lot however, I am not a mortgage arranger but a letting / estate agent and as regular readers know, I always talk about what I consider to be the most important issues when it comes to the Fitzrovia   Property market and at the moment, in my humble opinion, this is the most important thing!

Buy to let is all about maximising your investment, increasing income and reducing costs.  I give advice, opinions, thoughts, concerns, worries, expectations and fears about the Fitzrovia   Property market in my blog on the Fitzrovia   Property Blog.  If you are interested in the Fitzrovia   Property Market, you might learn something by visiting the blog. http://fitzroviapropertynews.com

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Fitzrovia Property Values 3.2% higher than year ago

Fitzrovia property values fell slightly by 0.1% last month, meaning they are 3.2% higher than 12 months ago. Even though the values dropped slightly, overall, I expect future property price growth to remain firm, built on the foundations of an improving labour market, strengthening economy and very low mortgage rates. In fact, talking to a number of other agents in the city, mortgage arrangers and solicitors (all of whom have their direct finger on the pulse of the Fitzrovia property market), the steady long term growth in Fitzrovia property prices tied in by strong demand conditions so far this summer, alongside an underlying lack of supply and the continued low mortgage rate environment, means the slow but steady upward momentum of the Fitzrovia property market is likely to continue in the second half of 2015.

However, there are a couple points I wish to highlight as all my blog readers will know, I like to give a balanced and honest opinion of what is happening in the Fitzrovia property market.  The two main points being low interest rates and a lack of supply of property.

Interest rates first - Mark Carney (Chief of the Bank of England) said in a speech a few weeks ago at Lincoln Cathedral, the Bank will be seriously considering raising interest rates around Christmas time. An upward movement in interest rates will temper demand and result in a marked slowdown in house price growth. Mr Carney said that only six out of ten people that had a mortgage (57% to exact) had a variable rate mortgage, compared with more than one in seven (73% to be exact) in the Summer of 2012. Now I am not a mortgage arranger and cannot give advice, but rates are only going on one direction, so whether you are a landlord or homeowner, this might be a time to consider fixing your mortgage rate?  Don’t say I didn’t warn you!

Tie this in with the stricter mortgage lending rules which were introduced in 2014, which affected people’s ability to have larger mortgages, this means homeowners will need to be realistic in their pricing if they want to sell. Reading other recent reports though, property owners have continued to pay off mortgages at a faster rate while mortgage rates have been low. Therefore, when mortgage rates rise, the affect on home movers sentiment which, given the shortage of supply, would result in a marked slowdown in the rate of house price growth.

Shortage of Supply – As I have mentioned in previous articles, the number of houses on the market in Fitzrovia is at an all time low. One reason is the large number of buy to let landlords who have bought Fitzrovia property over the past fifteen years. Unlike first time buyers who tend to move on after a few years, landlords tend to keep their properties long term, meaning there are less properties coming onto the market ... thus restricting supply and sales. In fact over the last four months, only 660 properties in the Camden London Borough Council area have changed hands and sold, compared to 944 in the same time frame in 2014, a not so insignificant drop of 30.08%. 

If you are planning on investing in the Fitzrovia property market, or just want to know more, things to consider for a successful buy to let investment, one source of information is the Fitzrovia Property Blog fitzroviapropertynews.com 

Marylebone - Studio apartment with 3.5% return

Good morning folks, on my morning travels today, I came across this lovely property.  They don't come up that often in this block as there are not many in there plus the location is ideal!

http://www.rightmove.co.uk/property-for-sale/property-53035307.html

This particular apartment is really nicely presented as well, which will appeal to the rental market. Tenants may only be renting, but they still want a lovely home!

The asking price for this property is £575,000 and I would expect to achieve in the region of £390 pw rent for it, which would potentially generate you an annual yield of 3.5% before any charges etc. Whilst this may not be as high as some of the properties that I have blogged about in the past, it's not always about the high yields, if it’s a nice area, you are pretty much guaranteed not to have any lasting void periods, which means more secure income! Another thing is also the capital growth, this property sold just over two years ago for £455,000, so if this apartment sells at it's asking price, potentially, it could have increased in value by 26%! Way above the Marylebone average of 22%.

If you would like to know more about buying a property to let, feel free to come in for a chat, my office is on Cleveland Street and my door is always open or email me benjamin.draper@martinco.com

Studio Apartment for investment in the heart of Fitzrovia

http://www.rightmove.co.uk/property-for-sale/property-34881774.html

This duplex studio apartment caught my eye this morning. The property is being marketed at a price of £550.00, and is an ideal investment opportunity.

The property is ideally located for local transport links with Goodge St, Warren St, plus Gt Portland street tube stations all within 0.3 mile walking distance.

So if we take a quick look at the figures, if you purchase this property at £550,000 and then rent it out at £385 per week this will provide you with a yield of 3.6%. So this property is well worth a look!

There seems to be a good demand for rental properties of this type in Fitzrovia at the moment. For every property of this type, size, location and price there are at least 10 suitable tenants waiting. IF you would like any advice on buying a property for Let, feel free to give me a call 020 7255 9966

Regards

Ben

PS It is always a good idea to get a second opinion.

Fitzrovia – More people rent than have a mortgage

Many people think the British obsession with owning your home started with Thatcher in the early 1980’s, when she allowed council tenants to buy their council houses, under the right to buy scheme. However, the growth actually started just after the Second World War. Looking at the country as a whole, in 1951, 30% of residential property were owner occupied, then every ten years that rose incrementally to 39% by 1961, 51% by 1971, 58% by 1981, 68.07% by 2001 but after that, it dropped to 63.4% by 2011 and continues to drop today.

After leaving home, early/mid twenties young adults tend to start to settle down and move out of the family home into their own home.  After a couple of years, they will have a choice of either buying their first house (albeit with mortgage) or decide to privately rent for the long term (because the Council House waiting list is measured in decades at the moment!). The ratio of people owning a house with a mortgage verses privately renting is an extremely important guide to what people are doing about their housing needs and what their attitude to renting vs buying is.

This is a really important change in the way we live, as I explained to a local Fitzrovia landlord the other day, knowing when and where the demand of tenants is going to come from in the coming decade is just as important as the knowing supply side of the buy to let equation, in relation to number of properties built in the district, Fitzrovia property prices and Fitzrovia rents.

In the Westminster City and Camden Council areas as whole, there are 69,438 households that are privately rented via a landlord or letting agency verses 29,878 households that are owned with a mortgage.  However, when we look deeper (as the devil is always in the detail), 13,462 of those 29,878 households are 35 to 49 year old’s and 7,583 are households of 50 to 64 year olds. I would expect all the 50+ years to be paying their mortgage off as they enter retirement as I would with some of the people in their mid/late 40’s. 

Meanwhile, at the other end, in the 25 to 34 age range (the age most people bought their first home in the 1970’s/80’s/90’s) only 5,849 of the 34,771 households occupied by those 25 and 34 year olds are owner occupiers with mortgages, because 28,922 households are privately rented. This means only 16.8% of 25 to 34 years have bought their house (with a mortgage). Twenty years ago, that would have a much higher percentage of homeowners (between 75% to 85%).

It can be seen that as the older generation pay their mortgages off as they start to get to retirement and the younger generation aren’t jumping on the property ladder like they were 20 or 30 years ago, the private rental sector will take up the slack, as more and more people will want a roof over their head, but won’t buy one but rent one. With Local Authorities and Housing Associations not building houses anywhere near like they the number of houses that they were in the 1950’s, 60’ and 70’s, the private landlord appears to have good demand for their rental properties for many decades to come.

This will create a polarisation in the housing market between those, mostly older, households who own outright and those, mostly younger, households who rent. Our housing market is very much turning into European model. However, all is not lost, the younger generation will inherit their parents properties, which in turn will enable them to buy, albeit later in life.

If you are a landlord or thinking of become a landlord, and would like to read more articles like this and other information on the Fitzrovia Property Market, then please visit the Fitzrovia Property Blog  Fitzroviapropertynews.com