Local property market information for the serious investor

Month: May 2017

Cardiff Flats Out Perform Property Market Average by 74%

According to the Land Registry’s latest House Price Index for Cardiff and the surrounding locality, the value of apartments/flats are rising at a faster rate than terraced/town houses, semi-detached properties and even detached property.

Values of apartments in Cardiff have increased by 3.24% over the past year, which is proportionally 74% more than the Cardiff average rise of 1.86%. The last time flats/apartments in Cardiff out performed all the other types of property, by such a gulf, was back in the summer of 2003. For comparison, the other property types performed as follows ..

  • Detached homes rose by 1.83%
  • Semi-detached homes rose by 1.09%
  • Terraced/Town-Houses rose by 1.56%

This moderately increasing rate of property value growth is opportune – but no one should confuse it with a strong and vigorous healthy Cardiff property market. Instead, it is somewhat an indicator of the long-lasting lack of property on the market. In fact, I have spoken about the lack of homes for sale in Cardiff on a number of occasions in my Cardiff Property Blog and whilst it isn’t as bad as it was 12 months ago – choice is quite limited for buyers.

The average property value in Cardiff

now stands at £234,000.

When split down into property types ..

  • Cardiff Apartments at £157,500
  • Cardiff Detached at £385,700
  • Cardiff Semi-Detached at £243,100
  • Cardiff Terraced/Town-House at £198,300

 

So why have Cardiff apartments performed so well, and is it just a Cardiff thing? When I scrutinised the figures for the rest of the UK, it appears that apartments are pacemakers in the clear majority of the country. Of the 379 local authority areas in the UK, the value of apartments is rising faster than detached, semi-detached and terraced houses in 320 of them.

So, should Cardiff apartment owners be getting out the Champagne? Well, I would keep it on ice as the Land Registry figures are notorious for short term fluctuations. It’s hard to have faith in the fact that Cardiff house values rose rapidly last month given that, in the last six months, the Land Registry has frequently made downward revisions to their first published House Price Index figures.

Thankfully, the bigger picture from the Council of Mortgage Lenders (CML) stated that home buying activity last month was up 2% over the same month in 2016 – not bad as we have had the Autumn, Winter and now Spring since Brexit. The CML stated first time buyer’s levels of affordability was being squeezed and that the average amount borrowed by those first-time buyers dropped slightly last month, but the overall amount borrowed (by all buyers) was an impressive 12% higher than the same month in 2016.

So, what next for the Cardiff Property market? I believe the uplift in the values of apartments is a short-term blip. The real issue is with the way wage growth might not keep up with inflation as the effects of 2016 exchange rate sucks in inflation (meaning real wage growth stagnates). This will mean buyer demand growth will be curtailed and with property values already so full, I believe a renewed hastening in house price growth is unlikely.

I believe we are starting to return to the housing market we saw in the mid 1990’s, Steady demand, steady supply – nothing silly when it comes to house price growth. Therefore, I believe, with what is happening around us – this isn’t a bad thing at all. HMS Cardiff Property Market…. “Nice and steady as she goes”, says the Captain

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Should the 34,513 home owning OAP’s of Cardiff be forced to downsize?

This was a question posed to me on social media a few weeks ago, after my article about our mature members of Cardiff society and the fact many retirees feel trapped in their homes. After working hard for many years and buying a home for themselves and their family, the children have subsequently flown the nest and now they are left to rattle round in a big house. Many feel trapped in their big homes (hence I dubbed these Cardiff home owning mature members of our society, ‘Generation Trapped’).

So, should we force OAP Cardiff homeowners to downsize?

Well in the original article, I suggested that we as a society should encourage, through building, tax breaks and social acceptance that it’s a good thing to downsize. But should the Government force OAP’s?

Well, one of the biggest reasons OAP’s move home is health (or lack of it)

Looking at the statistics for Cardiff, of the 34,513 Homeowners who are 65 years and older, whilst 16,841 of them described themselves in good or very good health, a sizeable 11,837 home owning OAPs described themselves as in fair health and 5,835 in bad or very bad health.

16.91% of Cardiff home owning OAP’s are in poor health

But if you look at Rightmove for the number of bungalows available, there are 73 available to buy and only 10 available to rent. And I suspect that many older homeowners wouldn’t feel comfortable with the idea of renting a retirement property after enjoying the security of owning their own home for most of their adult lives.

My intuition tells me the majority ‘would be’ Cardiff downsizers could certainly afford to move but are staying put in bigger family homes because they can’t find a suitable smaller property. The fact is there simply aren’t enough bungalows for the healthy older members of the Cardiff population and specialist retirement properties for the ones who aren’t in such good health … we need to build more appropriate houses in Cardiff.

The Government’s Housing White Paper, published a few weeks ago, could have solved so many problems with the UK housing market, including the issue of homing our aging population. Instead, it ended up feeling annoyingly ambiguous. Forcing our older generation to move with such measures as a punitive taxation (say a tax on wasted bedrooms for people who are retired) would be the wrong thing to do. Instead of the stick – maybe the Government could use the carrot tactics and offered tax breaks for downsizers. Who knows – but something has to happen?

… and come to think about it, isn’t the word ‘downsize’ such an awful word?  I prefer to use the word ‘decent-size’ instead of ‘down-size’- as the other phrase feels like they are lowering themselves, as though they are having to downgrade themselves in their retirement (and let’s be frank – no one likes to be downgraded).

The simple fact is we are living longer as a population and constantly growing with increased birth rates and immigration. So, what I would say to all the homeowners and property owning public of Cardiff is … more houses and apartments need to be built in the Cardiff  area, especially more specialist retirement properties and bungalows. The Government had a golden opportunity with the White Paper – and were sadly found lacking.

And a message to my Cardiff property investor readers whilst this issue gets sorted in the coming decade(s)  – maybe seriously consider doing up older bungalows – people will pay handsomely for them – be they for sale or even rent? Just a thought!

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12,744,582 People use Cardiff Central Train Station a year – How does that affect the Cardiff Property Market?

It might surprise you that it isn’t always the poshest villages around Cardiff or the swankiest Cardiff streets where properties sell and let the quickest. Quite often, it’s the ones that have the best transport links. I mean, there is a reason why one of the most popular property programmes on television is called Location, Location, Location!

As an agent in Cardiff, I am frequently confronted with queries about the Cardiff property market, and most days I am asked, “What is the best part of Cardiff and its villages to live in these days?”, chiefly from new-comers.  Now the answer is different for each person – a lot depends on the demographics of their family, their age, schooling requirements and interests etc. Nonetheless, one of the principal necessities for most tenants and buyers is ease of access to transport links, including public transport – of which the railways are very important.

Official figures recently released state that, in total, 17,506 people jump on a train each and every day from Cardiff Central Train station. Of those, 6,056 are season ticket holders. That’s a lot of money being spent when a season ticket, standard class, to Bristol is £2,956 a year.

So, if up to £17.9m is being spent on rail season tickets each year from Cardiff Central alone, those commuters must have some impressive jobs and incomes to allow them to afford that season ticket in the first place. That means demand for middle to upper market properties remains strong in Cardiff and the surrounding area and so, in turn, these are the type of people whom are happy to invest in the Cardiff buy to let market – providing homes for the tenants of Cardiff…

The bottom line is that property values in Cardiff would be much lower, by at least 3% to 4%, if it wasn’t for the proximity of the railway stations and the people they serve in the city

And this isn’t a flash in the pan. Rail is becoming increasingly important as the costs associated with car travel continue to rise and roads are becoming more and more congested. This has resulted in a huge surge in rail travel.

Overall usage of the station at Cardiff Central has increased over the last 20 years. In 1997, a total of 5,858,915 people went through the barriers or connected with another train at the station in that 12-month period. However, in 2016, that figure had risen to 12,744,582 people using the station (that’s 35,013 people a day).

The juxtaposition of the property and the train station has an important effect on the value and saleability of a Cardiff property. It is also significant for tenants – so if you are a Cardiff buy to let investor looking for a property – the distance to and from the railway station can be extremely significant.

One of the first things house buyers and tenants do when surfing the web for somewhere to live is find out the proximity of a property to the train station. That is why Rightmove displays the distance to the railway station alongside each and every property on their website.

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Hard Brexit could cause 3,500 properties to be dumped onto the Cardiff Property market

So all cards up in the air! A general election will be on the books, but one thing is for sure … whoever gets the job to deal with Brexit has a hard job on their hands (I’m just glad its not me!) As it currently stands, by not assuring the rights of EU citizens in the UK, Theresa May has squandered an opportunity to give peace of mind to our EU co-workers working and living in Cardiff (and the rest of the UK). No.10 Downing Street’s point of view is that in promising the rights of EU citizens in the UK, it will postpone the same guarantee to the 1.5 million UK citizens living in the other nations of the EU.

Putting aside the politics for one second, the simple fact is now Article 50 has been triggered, we have two years to make a deal with the EU; otherwise it will be a ‘hard Brexit’. Now you might not think a hard Brexit will affect you in your home in Cardiff… but nothing could be further from the truth.

Of the 334,551 people who are resident in the Cardiff City Council area, 290,537 were born in the UK, 7,434 were born in EU countries from West Europe and 4,648 were born in EU countries from the former Soviet States in East Europe (the rest coming from other countries around the world).

The rights of these EU citizens living in the Cardiff area are not guaranteed and will now be part of the negotiation with Europe. It is true a lot of our EU next door neighbours in Cardiff will have acquired rights relating to the right to live, to work, to own a business, to possess a property, the right to access health and education services and the right to remain in a UK after retirement… yet those acquired rights are up for negotiation in the next two years.

So, what would a hard Brexit do to the Cardiff property market?

Well a hard Brexit could mean the nuclear option when it came to the Cardiff Bay housing market. It could mean that every EU citizen would have to leave the UK.

In the Cardiff City area, 3,500 of the 7,434 Western European EU citizens own their own home and (so they would all need to be sold) and 3,652 of the 4,648 Eastern European EU citizens rent a property, so again all those rental properties would all come on the market at the same time.

Hard Brexit and mass EU Migration would mean c. 3,500 properties being dumped onto the housing market in a short period of time, meaning there would be a massive drop in Cardiff property values and rents, causing negative equity for thousands of Cardiff homeowners and many buy-to-let landlords would be out of pocket.

While there is no certainty as to what the future will hold, both UK expats in the EU and EU citizens in the UK rights will no longer be guaranteed and will be subject to bilateral renegotiation.

All I ask is that the politicians are sensible with each other in the negotiations. A lot of the success of the Cardiff (and UK) property market has been built on high levels of homeownership and more recently in the last 10/15 years, a growth of the rental sector with lots of demand from Eastern Europeans coming to Cardiff (and the surrounding area) to get work and provide for their families. Many Cardiff people have invested their life savings into buying a buy to let property.

Much will depend on what is politically realistic. Unilateral knee-jerk reactions and measures caused by a hard Brexit would not only likely cause major disruption or suffering to the 3 million EU citizens living in the UK, but also everyone who owns property in the UK … politics aside – a hard Brexit is in no one’s interests.

 

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