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The Lockdown Landlords of Nottingham
Despite Government regulations that have been in place since the 26 March 2020, where face-to-face viewings were made illegal, Nottingham buy to let landlords have during that time been chomping at the bit to build their property empire by looking at buying additional properties for their Nottingham buy to let portfolio.
There are plenty of investors who think nothing of legally committing to buying a property ‘off plan’ before it’s built – yet over the last few weeks, it has become the norm in the second-hand Nottingham property market and they have now stolen a march and bagged some property bargains.
Normally, the face-to-face viewing is step one of the second-hand house buying process … yet now it’s becoming the ‘new normal’ that some Nottingham agents are carrying out semi-professional video viewings or 360-degree video tours. Even homeowners are getting in on the act and managing a Facetime or Zoom video viewing by walking around their house with their mobile phone.
Yet the Government announced on Wednesday, 13th May 2020 that the Estate & Letting Agency industry could reopen meaning people could view houses, visit agents and move home be they tenants, buyers, landlords or home sellers. This is all subject to general and specific social distancing rules, specific hygiene regulations and suitable PPE being used.
What has been happening in the last few weeks in the Nottingham property market?
The average time between sale agreed and exchange/completion of contracts on a house sale (i.e. the keys and monies get sorted) is 17 to 19 weeks, which means buying today would mean you wouldn’t be getting your hands on the property until late September or October at the earliest.
Spring is the time when most properties come onto the market, yet as one would expect, the number of Nottingham properties coming onto the market has been somewhat reduced since lockdown as..
Only 208 Nottingham properties have been put up for sale in the last month
This reduction in supply of new properties coming onto the market, combined with this pent-up demand from both Nottingham landlords and the ‘Boris-Bounce’, could in fact be good news for the Nottingham property market let me explain…
Rightmove stated that people going to their website initially dropped by 40% at the start of lockdown, yet now has recovered with a near doubling of people searching for properties with gardens (for both sales and renting). For many Nottingham buy to let landlords (and in fact Nottingham homebuyers), now is the very best time to do research into the Nottingham property market. All the portals have access to 25 years of property sales with pictures, so you can compare and contrast what has happened to various different property types around Nottingham to spot those under-priced bargains, meaning you can get moving quickly after lockdown.
Rather than feeling trapped or powerless, this time can be used fruitfully by Nottingham buyers and Nottingham sellers to get their ducks in a row
One of the biggest barriers in April was mortgage lending. In the early days of the pandemic, most mortgage lenders removed many of their best deals and enormously restricted their capacity. Currently though, we are seeing a revitalisation in the mortgage market. In May with many mortgage products becoming accessible again for borrowers, and with many mortgage companies integrating more digital processes, (including Virtual Surveyor Mortgage Valuations in some cases), the mortgage market now has plenty of options available to those who are keen to borrow.
There is no doubt the Nottingham housing market got off to a sturdy start in 2020. With Brexit at least partly resolved, the ‘Boris-Bounce’ was starting to take off. With Nottingham house prices being robust and rental demand was high, the Nottingham property market was already in a good placed to deal with the subsequent Covid-19 issue.
I know there are a few doom mongers in the National Press spouting about a massive crash in the UK property market. There is a natural tendency for newspapers to latch onto the worst-case scenario in any economic forecast. Who can forget the country received similar projections in the lead-up to the 2016 Brexit vote with HMRC itself stating that UK house values would drop by at least 10% in the first 12 months should the UK vote for Brexit and 20% in two years!
With the rollercoaster of the stock market in recent months, investing one’s money into good old-fashioned bricks and mortar has started to seem a good place again.
Buying a property for investment means you have a tangible asset, something you can touch and feel (and understand). The returns from investing in property comes from both capital appreciation and income from the rent, and yes whilst property values can go up as well as down, successful buy to let landlords are inclined to take a long-term view on their property investments.
£579 per month
The average gross profit from a Nottingham terraced/town house
To give you an example of the current buy to let returns, the average Nottingham terraced/town house sells for £144,700, by taking the ‘The Mortgage Works’ BTL 5-year fixed rate of 1.64%, with only £1,794 in up-front fees, a 20-year repayment mortgage would cost you £439 per month or interest only mortgage would cost just £123 per month … considering the average rent for a terraced/town house in Nottingham is £700 per month … even before management, tax, maintenance and other associated costs, that’s a decent gross profit (the £577 gross profit is an illustrative example using the interest only mortgage and the capital element would need repaying at the end of the term).
Isn’t it funny the newspapers aren’t latching on to some reports to say the property market might go in the other direction? Remember – bad news sells newspapers!
So, should you wait to buy your Nottingham buy to let investment?
Before buying take into account factors like the strength of your financial future, your credit score and the current state of the property market and even more importantly, the state of the mortgage market. Look at the current interest rates, they have never been so low and deliberate the experts’ opinions and just as equally your own opinions as to whether Nottingham property values are on the rise, will stay the same or are likely to fall.
Interest rates are at record lows, meaning borrowing money is cheap money now, so it may be a good time to buy, as you will pay a reduced cost for the pleasure of borrowing money to buy that investment. Yet, if you waited and Nottingham property values are on the decline, it may be a good idea to wait, as you could end up getting a better deal on the same type of home, yet if that happens, access to the cheap finance might dry up (meaning you could save some of the purchase price, but the cost of borrowing could go up). It can be very hard to accurately predict what interest rates or property values will do, so these shouldn’t be deciding factors – but they are worth considering.
So, what will happen to the Nottingham (and UK) property market?
To be honest – nobody knows. What I do know is the Swine Flu in 2009 caused some volatility in the UK property market, but the market stabilised within months. Even in disaster scenarios such as the current one, property remains comparatively stable and will continue to be one of the best places to invest in.
Yes, we could see unemployment rise in the next 6 months (yet the Furlough Scheme has been extended until the autumn) and historically, it has been proved house price falls are not caused by high unemployment; yes GDP will drop drastically because of lockdown yet it could bounce back like it has in China; yes, the number of property transactions will drop, yet that will only really effect the pockets of Nottingham removal people, Nottingham solicitors & estate agents and the Chancellor of the Exchequer in lost stamp duty receipts; yes there is £82bn worth of property sales on ice during this lockdown (some of which might not complete) .. it’s all ifs, buts and maybes.
Calamity changes things: with every predicament, humanity shifts to become more productive – it’s the way it’s always been
The national debt at the end of the Napoleonic Wars of 1815 in today’s money was an eye watering £4,421,000,000,000 (£4.42 trillion) and even with the eye watering borrowing to fund Covid-19, it stands at £1,821.3 trillion – we have been here before and we came out stronger.
The Bank of England failed in 1825, yet we recovered stronger, the Great Depression of the 1930’s cut the Stock Market by 90%, yet we recovered, WW2 took national debt to 200% of GDP like it had in the Napoleonic Wars in the early 1800’s – yet we recovered, the oil crisis quadrupled oil prices in the 1970’s – and we came back … the list goes on with hyper-inflation in the 1970s of 25%, mass unemployment in the 1980’s, Black Monday in 1987, Dot-com bubble in 2001 and the Credit Crunch in 2008/9.
With every economic crisis, the long-term effects of them make people look at their decision making differently
The simple fact is for decades, demand for homes has outstripped supply – hence why property values have remained so robust. People are living longer (71.1 years in 1960 and 81.1 years nowadays), the mass exodus of EU nationals has not taken place since Brexit and the birth rate has increased by 9.1% since the Millennium which means since 2000, the country has needed at least 240,000 households per year to satisfy the demand. On average, we have only built 150,000 households a year, meaning we have a shortfall of 90,000 households each year for 20 years .. a true shortfall of 1.8m households .. and until we start building anything over that 240,000 requirement … demand will always outstrip supply – and we all know what happens to prices when that happens!
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We are delighted that ROBINS ESTATES have been given the green light by the Housing Minister to recommence market appraisals and viewings, however, we realise that we also have a social responsibility beyond that of being your local estate agent and recognise that as a buyer or seller, you will have concerns given the current situation with COVID-19.
We want to reassure you that the team at ROBINS ESTATES will be following the Government’s health and safety guidelines thoroughly and ultimately will always ensure the wellbeing of our clients, our team, and our community comes first.
At the time of writing, it has been announced that restrictions around property viewings and transactions have been lifted. However, COVID-19 has not gone away and as yet there is no vaccine, so we will be carrying out our business in an extremely safe and highly-managed way to ensure our clients and staff are protected at all times.
We are awaiting an update on viewing guidelines from the Housing Minister, and once received we will ensure these guidelines are followed to the letter. In the meantime, we will be adhering to the following:
Social distancing (2 metres) will be observed, at all times. Our staff may remain outside the property whilst the viewing takes place.
If you would prefer to view a property virtually – we will also still offer this option.
Viewing Limits: All viewings will be limited to either one viewing per property per day OR viewings will be scheduled apart, for example, with a 15-minute delay between each viewing.
Time Limits: The time viewers spend inside a property will be limited to an absolute maximum of 10-30 minutes depending the size of the property.
Viewing Numbers: We will allow a maximum of two people inside a property along with the owner or member of our team only if social distancing will allow otherwise we will ask you to view the property and we wait for you by the front door.
Contactless Viewings: Vendors will be asked to leave cupboards and doors open so that viewers to the property do not need to touch them. Viewers will be asked not to touch surfaces unnecessarily.
PPE: Our team members will wear gloves, shoe covering and masks while conducting viewings. We request that viewers come prepared with PPE such as gloves and masks, we will provide shoe covering.
Health Declaration: Vendors and viewers will be required to sign a declaration, stating that they do not have any COVID-19 symptoms.
Currently there are no valuation guidelines. We will update you on this as soon as we have confirmation, however we expect the guidelines to be similar to viewings.
As soon as we receive further clarification on `valuations, market appraisals and viewings, we will provide further updates.
Guidance for Sellers
If your property is already on the market or is shortly coming to market, please reassure potential buyers by making sure your home is clean and safe to view.
Still deciding whether now is the right time to buy or sell?
The team at ROBINS ESTATES will be delighted to talk you through your options. We appreciate your circumstances may have changed or might be difficult right now, but we can help you talk it through in confidence.
Above all, please continue to stay safe.
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New Electrical Safety Regulations
Could cost each Nottingham Landlord £350+ in the next 11months
Nottingham Electricians are going to very busy in the next 11 months as they will have to test the electrics of every private rented property in Nottingham and potentially may have to install new fuse boards and wiring in some circumstances.
New regulations set out in the Housing and Planning Act 2016 gave the Secretary of State of Ministry of Housing, Communities and Local Government the authority to compel private landlords to test their fixed electrical systems. Currently, these responsibilities only apply to licensable Houses of Multiple Occupancy (where a house is split into individual rooms) yet these new rules will come into force for any new tenancy or renewal of any private rented home from the 1st July this year (2020).
All new tenancies from the 1st July 2020 will need to have had their electrics tested
The new IET electrical regulations enforce a duty on all private landlords to ensure that their electrical installation complies with the 18th edition (from 2018) of the IET wiring regulations. Therefore, any property built before the middle of 2018 will have electrics to 17th edition regulations (or a previous edition). It might not sound a lot, but the 18th edition regulations were a substantial update over the 17th edition which were published in 2008. Now, just because a rental property was built with its electrics up to the prevailing 15th, 16th or 17th regulations at the time of building, it doesn’t necessarily mean it will automatically fail this test.
A qualified electrician will need to test your rental property against the new 18th Regulations (as that is standard practice in the industry), which will cost in the region of £150 plus VAT for a small one bed flat through to £250/£350 plus VAT for a large 4 or 5 bed house (again these are ballpark figures). The Electrician won’t fail a property who complies with a previous regulation (e.g. 16th or 17th) unless there is a good reason to do so. No doubt there will be further clarification notes issued before the implementation date to sort this out – and I will keep you informed in this blog.
Electricians are telling me any property built after 16th Regulations came into force in 1991 (and they deem it to have failed the test) will probably require a new fuse board and other minor works at an average cost of around £355 per property, although it could be as low as £300 and up to £500 per property to upgrade, meaning…
The potential cost of upgrading every Nottingham buy to let Home to 18th edition regulations (if they all failed) could total £10,114,660
Some Nottingham landlords might think they can circumnavigate the regulations by renewing the fixed term every 6 months, yet the Government have protected against that by stating, irrespective of what tenancy is in place, all rental properties by the 1st April 2021 must have been tested against the 18th Regulations standard.
My concern is all 28,492 rental properties in Nottingham will need their electrics testing before the Spring of 2021 and that there are only 57 qualified electrician firms within a 1.5-mile radius of Nottingham to do all these tests and work
Nottingham landlords must give any new Nottingham tenant a copy of the inspection report before they start the tenancy. Also, Nottingham landlords must give a copy of the report to any prospective tenant who asks for it in writing within 28 days of a request during the tenancy itself.
Even with the coronavirus situation, only last week the Government indicated that Landlords should still make every effort to follow these new electrical safety regulations from the 1st of July, yet those same regulations also allow for situations where a landlord cannot carry out their obligations. To stay the right side of the law, they must demonstrate they have taken all reasonable steps to comply with the law. If they do that, they will not in breach of the new regulations (including the duty to comply with a remedial notice). My advice would be if a landlord could keep copies of all communications they have had with their tenants and with electricians as they tried to arrange the work, including any replies they have had, together with any other evidence they have on the electrics of their rental property.
The local authorities are tasked with policing this – and they too have the right to request to see copies of any Electrical Report and works done. They can force a landlord to comply with the legislation and also may issue a civil penalty up to a maximum of £30,000.
Remarkably, if the letting/managing agent doesn’t organise the Electrical reports, there is nothing in the legislation which allows a landlord to pass the blame onto their letting/managing agent. That means Nottingham landlords could be at significant risk from dishonest or badly organised letting agents who won’t/don’t sort the electrics out, so my advice to all Nottingham landlords is to speak to your letting/managing agent right now and plan ahead. Rest assured, we have had plans well in hand for our Nottingham landlords since last year, because I knew this legislation was on its way.
The regulations are obviously important for the safety of tenants and, in essence, these new laws and regulations will mean new accountabilities for the private rented landlords with not much time in which to get prepared and be compliant. If you are worried about these new rules or don’t have ultimate confidence in your current agent, then please do pick up the phone and let’s have an informal chat about how we can help you with this issue, you don’t want to fall the wrong side of the law do you?
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7.3% of Nottingham Workers Worked from Home Before Covid-19 – Wonder How Many More do Now?
Before the Covid-19 pandemic hit, 8,566 Nottingham people worked mainly from home, or about 7.3% of Nottingham’s 117,164 workforce (compared to the national average of 14.9%). Yet over the last few weeks many thousands more Nottingham workers have joined them in their spare rooms or at their kitchen or dining room tables.
Amongst warnings from the Government that some lockdown constraints could stay in place into 2021, businesses are dealing with an unexpected cultural shift in how many of us do our work. Talking to many Nottingham people who have been asked to work from home, for many it has been a pleasant success.
Working from home does have some negatives though. I have found myself still working at 8pm/9pm and beyond as I have forgotten to clock out and whilst many people might think working from home means doing less work, more often than not, the reverse is true for industrious and hardworking employees. When you don’t have that break of the commute to the office, the workday can blend into ones home life. Talking of commuting, the average British worker has a daily commute of 11.9 miles, whilst locally…
The average daily commute for a Nottingham worker is 8.4 miles
At least working from home, the commute is only to the dining room table or spare bedroom. Speaking to some friends of mine that are new to working from home, they said to me that they can feel out of the office-loop as they miss the ‘water-cooler’ moments or spur-of-the-moment brainstorming session over a brew, it’s tough to reproduce that from home.
Don’t forget to get into your garden (if you have one), stretch those legs. Ensure you are taking advantage of the daily exercise allowance. I see so many people walking around our neighbourhood daily who I haven’t seen before. Let’s hope they keep up the habit once lockdown is removed. You have to admit, it’s quite nice especially as there are far less cars on the road.
Nottingham workers commute 842,885 miles a day to work. That’s nearly twice to the moon and back – every day!
Some people find it difficult to adjust to working from home and feel guilty if they don’t reply to co-workers emails or phone calls straight away. My friends stated that they didn’t want their team-mates to wonder if they were taking it easy rather than pulling their weight. The best advice I can give from working with my team, is to over communicate, and I suggested (as I do to you) to tell their bosses and colleagues what they are doing and share their accomplishments using those video conferencing software packages.
The really hard part is having a dedicated space in your home. Attempt to set up a workspace and make it out of bounds to the rest of your household while you are working (although that is very difficult when you have children or your partner is having to work from home as well). Is there anything worse than being on an important call to your boss or a client, only to have a delivery driver knocking on the door or having your kids and dogs yelling and barking in the background? It’s a balancing act!
Interestingly, looking at the stats and this internment in Nottingham people’s homes could be a catalyst for people wanting to move home later in the year be it for rent or for sale, thus giving a vital boost to the Nottingham property market. Would it surprise you that…
43,155 Nottingham households are either at full capacity or officially overcrowded?
The definition of full capacity is when the household has enough bedrooms for the occupants. The definition is set out in ‘The Allocations Code of Guidance’, which recommends that the 'bedroom standard' is adopted as a minimum measure of overcrowding.
This means one bedroom should be provided for
- each adult couple.
- any other adult aged 21 or over.
- two adolescents of the same sex aged 10 to 20.
- two children regardless of sex under the age of 10
That means 36.32% of Nottingham households do not have a spare bedroom for their occupants to work from
(compared to the national average of 16.64% of household)
Even worse, I suspect there are many Nottingham families with two teenage boys or two teenage girls, and guidance is suggesting they can share a bedroom – do they live in the real world? This means there are probably even more Nottingham households that are at full capacity or even more overcrowded than the stats suggest, meaning plenty of people will be working from dining room tables (if they have a dining room that is) and quite probably the kitchen table … a recipe for even more people wanting to move home later in the year.
So, I don’t know how many Nottingham people are working from home, yet looking at the newspapers the consensus is that it has at least doubled. For all the reasons mentioned in this article, this looks like we could have a pressure cooker scenario of demand for Nottingham property once the restrictions have been fully lifted.
Meanwhile, a message to all you new homeworkers in Nottingham. Working from home is a tough one. The best advice I can give is to change your way of thinking. I know many friends who are missing their offices right now, yet is office-working really so great? Consider the relentless risk of disturbance when you are trying to finish that important project, the recirculated air conditioning with its germs, the shortage of quiet meeting rooms and as I have already mentioned before, the drawn-out and expensive commute.
Try breaking the cycle of thinking that being at work - time is productive and not being at work - time is only leisure. The new way of thinking that accepts the concessions of home-working and discards the traditional 20th Century conventions of office working. Yes, the downside is that as humans we are very sociable creatures and we acutely feel the need to be in face to face contact with each other often, meaning lockdown is quite tough for many of us. Yet, if we are able to connect the positive prospects for the future working and the situation that Covid-19 offers us, then together as a society we should be able to find the right balance between working from home and coming together. In the meantime, be considerate of each other and keep safe we are all in this together and we will all overcome this together.
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What Will Be the Effect of Covid-19 on the Nottingham Property Market?
So now we are only a matter of nearly 6 weeks into lockdown, yet can you believe it I am still speaking with agents from all over the UK, and I do not jest, properties are still being sold and let even in these unprecedented times. Yet I would like to address the question I have been asked many times recently “What will be the effect of Covid-19 on the Nottingham property market in the short, medium and long term?”
These are obviously unchartered times, yet we can look back in history to give us clues and more recently, the bounce back that is happening in China (and their property market). The Covid-19 situation will touch all parts of the Nottingham and UK property market, and so in this article, I will be considering its impact on Nottingham property prices, transaction numbers (i.e. the number of people that move home), Nottingham buy to let landlords and finally tenants and the rents they pay.
The Three Issues with the Virus and the Property Market
The first issue has to be the lockdown itself. Limitations on society’s capability to go about their normal working life will hinder the house buying/selling process. The practical difficulties of moving home and expediting the property sale; from the viewing itself, the Energy Performance Certificate being carried out, the surveyor checking the property for the lender etc., are all issues. Yet the estate agency and legal industries are coming up with some innovative solutions, from virtual viewings to legally watertight delayed completions, where the old owners stay in the house under licence during the lockdown, and the move will take place after the lockdown period.
Secondly, the UK housing market has never liked ambiguity or uncertainty and this virus will play a part on people’s feelings and sentiment towards moving home (or not).
Thirdly and finally, there is the issue with the money people have, be that wages, whether they have a job (or not) and their overall affluence, on the back of the 29.4% stock market decrease in the last two months (correct at the time of writing this article).
The Background Economics
The economy drives everything including the housing market – and the overall measure of the economy is the Gross Domestic Product figure or the GDP (the GDP is basically the total value of all the goods and services created by the whole UK economy in one year and it currently stands at £2.15 trillion).
Looking at what has happened in China, most economists believe the UK will experience a short, yet sharp economic shrinkage in Q2 2020 with GDP set drop by 4% to 7% in the one quarter depending on the extent of the lockdown. Then GDP is expected to level out in Q3 2020, and then a significant ricochet (how significant depends who you listen to) in Q4 2020/Q1 2021.
Now putting politics aside, I have been impressed with Boris Johnson’s response with wide-ranging support for the UK economy and businesses, and whilst it’s far from perfect, help has been in the guise of the Bank of England reactivating its Contingent Term Repo Facility increasing liquidity and keeping the money markets going (important as that was what the issue was with the Credit Crunch), business grants and Government backed loans, together with telling lenders to take a compassionate line to those unable to make mortgage holidays and finally the furloughing of staff, thus allowing a quicker recovery in the economy.
What Will Happen to Nottingham Property Values?
There are a few doom-monger economists predicting Armageddon, yet I feel a lot of that is to get column inches in the newspapers. The Nottingham property market is less exposed than it was in the previous four historical property crashes in 1972, 1979, 1988 and 2008. This is because of the following reasons..
- Before each of the four crashes, there had been a significant upward spike in property values prior to the crash. We have not experienced that over the last 12 months.
- Mortgage interest as a percentage of household income (nationally) was a massive 32% in 1988, 18% in 2008 – yet now it stands at just under 8% (because interest rates are so low).
This is all assuming we don’t have high unemployment. Yet historically, it has been proved house price falls are not caused by high unemployment. It is in fact, that it happens the other way round, that a housing downturn can (not always) create unemployment - yet with the Government furloughing people – this shouldn’t be such so much of an issue.
The value of an average Nottingham home currently stands at £217,000
As I will explain in the next section, the biggest effect will be on transaction numbers, not on property values. I suspect in the summer there will be some Nottingham homeowners who will want to sell at all costs, and not care what price they achieve. Savvy property buyers will swoop on those properties and drive a hard bargain, meaning there will be some short-term localised reductions in what properties sell in the summer for those that want to sell at any cost.
Yet, these reductions will artificially amplify the property value indexes in a downward direction in the autumn (the ones the newspapers mention when they talk about property value changes) because they will be based on the very low levels of property transactions that will take place in the summer (because there is always a lag). Interestingly we have seen this many times over the years because just about every spring for the last 20 years, we have often seen negative or very subdued figures in the House Price Indexes in the months of January/February. This is because of the lack of property sales on the run up to Christmas a few months before. To give this all some context, property values in Nottingham are 39.6% higher than 10 years ago – and nobody was complaining about those. To give you an idea what that is in pound notes …
The average Nottingham home has risen in value by £61,500 in the last 10 years
The swiftness of recovery in the autumn/winter from that point will depend on the state of the wider economy. With the measures (mentioned above) implemented by the Government, household incomes should continue to remain steady, and whilst holidays and luxuries may be shelved for a year, those Nottingham people who have been locked up in their Nottingham homes for weeks on end, might just consider making that move later in 2020, taking advantage of the ultra-low interest rates. This in turn ought to encourage a return to sturdier levels of house-price growth in the medium term (2021/2 onwards).
The Number of People Moving Home in Nottingham Will Significantly Drop in 2020
I foresee the number of people moving home (i.e. the number of household transactions) in Nottingham will significantly drop in 2020. This will only really affect the pockets of Estate Agents (as they charge their fee when people move – so if less people are moving, they will earn less) and the people associated with house moving.
Even with virtual viewings and creative legal work, the number of property transactions will be considerably obstructed over the next couple of months. Interestingly, in the Chinese cities that removed the lockdown first (in the middle of March) I have read in the press the number of property transactions has already bounced back to around half of the medium-term average after only three weeks!
This was caused by people delaying their move because of the ‘B’ word (Brexit) over the last 12/18 months, which interestingly saw a massive upsurge with the Boris Bounce in December/January and February.
Worse case scenarios suggested by economists state transactions will drop to 20% of the normal 10 year average number of transactions until the end of Q3 2020, return to 65% by Q1 2021, increase to 100% by the end of Q2 2021 and then 120% in 2022, yet most sensible economists (and often those that stay out of the limelight and don’t go chasing headlines), believe transactions will reduce to 45% to 50% of the 10 year average until the end of Q3 2020, improve to 80% in Q4 2020 and 100% by Q2 2021 with potential for higher transactions numbers in the order of 110% to 130% in 2022.
It all sounds rather grim doesn’t it, until you dig deeper…
Remarkably, it must be stated the number of property transactions over the last 12 months in Nottingham are only at 71.2% of the 10-year Nottingham average … and this was before Covid-19
In the last 12 months, there have been 7,402 property transactions in Nottingham, compared to a 10-year average of 10,398 per year
Yet, let’s not forget, these predictions are from the 10-year long term average, and as it can quite clearly be seen, transaction levels are already at a low, even without Covid-19 and nobody was complaining about that apart from estate agents and removal vans!
With the number of Nottingham people moving being held back, I would anticipate seeing a build-up of supressed demand for Nottingham property from Covid-19, on top of the pent-up demand from Brexit, especially with many Nottingham families realising their Nottingham homes aren’t large enough to contain them as the lockdown experience will push many Nottingham households to move in late 2020 or possibly 2021 …and as every economics student knows, when demand outstrips supply (because we can’t all of a sudden build more houses), prices go up.
How Will This Affect Nottingham First Time Buyers, Those Trading up, Downsizers and Landlords & Tenants?
FIRST TIME BUYERS - I believe the banks will be a little more wary when lending money to first buyers with their need for large percentage mortgages. The demand for the Help-to-Buy Scheme has been increasing year-on-year, yet its pace of growth has been declining in the last couple years – I foresee demand accelerating in the later parts of 2020. There could be some good deals to be had from new homes builders looking to release cash in Q3 and Q4 later in the year? Maybe the Bank of Mum and Dad might be able to help, yet they too will be stretched, although they might be able to release equity down the generations to their children and grandchildren (see the downsizers section).
TRADING UP – Many Nottingham homeowners in their starter homes will be going stir-crazy in their smaller homes, and with interest rates at ultralow levels, some Nottingham homeowners might forgo holidays and entertaining, and consider putting their weight and finances into moving up market in Nottingham. That might also be easier, if the Nottingham downsizers start to move as well.
DOWNSIZERS – There are many Nottingham retired people, rattling around their large Nottingham home, with their children having flown the nest and possibly moved away years ago. These Nottingham people don’t need to move, and so are considered ‘optional home-movers’ – yet the Covid-19 crisis could be the catalyst to make them finally move to be nearer their family around the UK – releasing good sized Nottingham family homes onto the property market for the ‘Trading Uppers’ to buy.
LANDLORDS & TENANTS – I suspect there will not be many Nottingham tenants moving in the next three to four months. Tenants have the peace of mind with a cessation on evictions until the summer and buy-to-let mortgage payment holidays for buy-to-let landlords whose tenants are in financial difficulty (note the tenants have to give proof to their landlord that they are unable to pay with their applications to Universal Credit etc., etc.,). There might be small reductions in average rents, as some Nottingham landlords undertake to help their tenants in these chastened financial times, yet for most people, rents will continue to be paid, making no major impression on rental prices in 2020.
Let’s not forget, the level of average rents is directly related to tenants wages and I can’t see why this relationship between rents and tenants wages should break after Covid-19, so as wages are held back in the latter parts of 2020 the growth rents over the next year will be subdued. Finally, those Nottingham buy-to-let landlords sitting on cash might be able to bag a bargain in the summer from a desperate seller, before normality returns in Q3 and Q4 2020.
We are in unchartered territory, yet for the reasons explained in this article and, assuming there are no other seismic shocks in the coming weeks and months – in a few years’ time – this will be seen as a bump (albeit a rather big bump) - another part of the roller coaster ride of the UK and Nottingham property market.