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Is This a Good Time to Buy Your First Home in Nottingham?
Should you wait to buy your first home in Nottingham or buy now? What sort of mortgages are available? What sort of deposit is required? These are questions all Nottingham buyers are asking at the moment, yet this week I would like to focus on Nottingham first time buyers and what it means directly and indirectly to Nottingham homeowners looking to move up the Nottingham property ladder and Nottingham buy to let landlords.
Well quite frankly, to answer that question it’s contingent on what Nottingham property you are looking to move into and even more significantly, how long you are hoping to live in that property.
We have many armchair economists and even professional economists predicting Armageddon when it comes to the property market, yet the Nottingham (and UK) property market is essentially very sound. Don’t forget the Chancellor himself, George Osborne warned that if we voted to leave the EU two things would happen. Firstly, the UK property market would crash and property values would drop by 18% in the two years after the vote. Secondly, there would be an ‘economic shock’ to the country’s economy that would increase the cost of mortgages (through increased interest rates as there would be a run on the Pound). UK GDP rose by £132bn in the two years after the referendum and interest rates actually dropped locally, with regard to property values …
Nottingham house prices rose by 11.1% in the 2 years following the Brexit vote
Lloyds have predicted an enormous 30% fall in property prices over the next 36 months whilst Savills have suggested a short dip of 5% during the summer, based on very low transactions numbers, with property prices bouncing back to be just over 15% higher in 5 years’ time. This assumes that the UK plc economic downturn is short & sharp, and that no substantial gap opens up between supply and demand in the property market (i.e. everyone doesn’t dump their property market all at the same time).
Nottingham Property Values after the 2008 Credit Crunch crisis plummeted 10.6% between 2008 and the end of 2009
Yet, the circumstances of the 2008/9 property crash were fundamentally different to today. Many ‘armchair economists’ assume there will be a re-run of the 2008/9 and 1988 property crashes in the coming 12 months in terms of house value falls. Yet, dissimilar to the last recession, this dip has not been led by previous years of strong property price growth like the other two crashes. House prices in many parts of the UK have been down in the last 12 months.
You would think Nottingham first-time buyers who have already saved their deposit could grab a bargain in the coming months, you would believe they would have less competition in the market because of landlords holding back buying additional rental properties. This is because of the press speculation that rent arrears are sky high from tenants who are unable to pay their rent. Yet evidence from many professional bodies in the private rental sector state rent arrears across the whole of the Country are appearing to be very low indeed, despite Covid-19.
Interestingly, the firm Yomdel who handles ‘web live chat’ and ‘phone support’ for thousands of estate and letting agents have reported national activity is higher than the two months of the Boris Bounce (in January and February 2020). The number of new buyer enquiries for the last two weeks is double (108.9% higher to be precise) than the 2019 yearly rolling average. New landlord enquiries are 32.1% higher than the 2019 average and tenants are 150.1% higher than the 2019 average ... these are all great signs and go against the doom monger economists.
My best advice to all Nottingham property buyers is, be they second time buyers, first time buyers, landlords … whatever number buyers, they should buy with a medium-term view of future Nottingham property values, instead of an expectation of always looking to making a quick few pounds flipping a property (i.e. selling it quickly).
Let’s not forget that mortgage interest rates are another important factor: they are at a 325-year low, so borrowing money has never been so inexpensive. If you know you are going to be living in your first (or second) Nottingham home for five years and you want the peace of mind of knowing precisely what your mortgage payments will be, then it’s very attractive. At the time of writing, Barclays are offering any first-time buyer a 95% mortgage on a 5-year fixed rate of 2.95%. The average value of an average terraced house in Nottingham is £144,700 and so with the 5% deposit of £7,000 on a 35-year term the …
Mortgage payments on a typical Nottingham terraced house would only be £526 per month (i.e. much cheaper than renting)
Many lenders are lending money even if you are on furlough, yet you may find you won’t be able to borrow as much pre Covid-19. Interestingly, some mortgage companies will even take into account total income, where your employer is topping up the Government’s furloughed amount, whilst other lenders will consider mortgage applications on a case-by-case basis. The best advice I can give is, don’t assume what you can or can’t borrow. Speak to a whole of market mortgage broker, to see what is possible – not what your friend on Facebook tells you, what you can or can’t borrow.
You only need to put down a 5% deposit for the property you would like to buy
If you think about it, it’s inconsequential if Nottingham property values drop or not, or if they do drop whether they bounce back quickly (or not as the case maybe) because it’s impossible to know the bottom of the property market. I would say if you find the right Nottingham property for you, at the price that feels right, that will be your home together and you are going live in that Nottingham property for the next five to ten years, it’s not a bad time to be buying. It is like waiting for the next piece of tech – there will always be a better model or an assumed better time. We are talking about your home here – a home for you and your partner and family, be that your kids, dog, cat, pet or favourite pot plant because …
Spending money on rent is all wasted money – at least when you buy your own home, you start to pay your mortgage off from day 1
So many first-time buyers use the Bank of Mum and Dad to help with their deposit, yet I have spoken to many parents who wouldn’t want to interfere in their mature children’s life and subsidise day to day expenditure, yet are embarrassed to offer their help with the deposit. If you don’t ask …you don’t get!
Hope you enjoyed this article and if you need any assistance from us, give us a call on 0115 8240235.
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June 2020 Market Update
It might be tempting to believe that the pandemic has been destructive and all-consuming on all fronts, especially in relation to the property market, which virtually ground to a halt a few weeks ago.
But we British are a resilient lot! Our compliant “keep calm and carry on” mentality has meant that we have/continue to do our bit to protect our community, without losing our focus on those other things in life that are important to us. Our home comes close to the top of the list, along with family, relationships, job, pets, well-being and general prosperity.
While some businesses, for example a coffee shop or an airline, will eventually start to trade again from where they left off, the property market is one type of business where the latent demand has accumulated during lockdown like a catapult being stretched. It is now at the point of being released and we are expecting intense activity over the summer.
In fact, recent research revealed that some 15% of home movers have been prompted to do so as a result of a change of plan due to the pandemic. During lockdown some people found that working from home suits them quite well, but they would prefer not to use their broom cupboard as an office. And if they are no longer expecting to commute to work, why are they paying a premium to live in a property near the station, especially if the broadband quality could be better elsehwere? Perhaps time spent during May’s warm and sunny weather has sparked an interest in gardening too?
Certainly, we are already seeing a surge of interest from Londoners rethinking their lives and deciding that Nottingham is no longer regarded as just a commuter City, but a fabulous place to settle for both home and work. Unlike other scenarios that might adversely affect the property market, we have a good balance of supply and demand, interest rates are incredibly low, and banks are keen to lend. So although sales might be down perhaps 25% this year, the consensus is that the rebound is likely to be strong.
The dynamics of the market may be changing, but we as estate agents a ready for the challenge. Whilst we are of course highly respectful of the guidelines for safe property viewings, our focus remains on offering sincere, straight-talking and sound property-related advice to our customers. The pandemic might have changed society, but, as we emerge from our confinement, our vision remains the same - we help people move, whatever the circumstances.
If you feel moved to move, why not call us on 0115 8240235 for an initial chat? You might be pleasantly surprised.
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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?